Guillermo's Furniture Store Scenario

702 Words3 Pages
Introduction Guillermo Navallez has been in the furniture making business for several years in Sonora, Mexico. This once quiet town was notorious for vacationing and has a great supply of timber for the furniture that Guillermo produces. Consumers pay a higher premium for the well-crafted furniture and his labor is inexpensive. In Guillermo’s Furniture Store scenario, there are various financial concepts that are found. Location For 13 years Guillermo’s furniture business was at a prime location partially due to materials being available, after the competition had moved in creating numerous changes, the location has declined. In one year from 12/31/09 to 12/31/10 Guillermo’s assets, liabilities and equity, and overall total…show more content…
Competition & Technology For years, the only local business was Guillermo’s furniture store, until an overseas competitor came into the furniture market introducing a technology allowing precise specifications to their furniture at a much lower cost. More retailers began moving into the area creating an increase to the cost of labor, more people and more jobs while Guillermo’s profit margins began to decrease due to reduced prices and increase cost. Foreign competitors’ using automated technology has allowed production to increase with a reduction in labor time and cost. Implementing such features for Guillermo’s business may reduce his labor cost per unit which he has budgeted for $987,300; however exceed that amount with $1,077,222. By investing in higher technology, Guillermo could increase sales growth, reduce labor cost and be ready for rising inflation. Patents An advantage that Guillermo has that it doesn’t appear his competitors have is his patented process for coating furniture. The multi process used increases the value to his furniture. Options such as this could increase value and add to his comparative advantage as well as add to his Net Revenue.

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