Guillermo Furniture Store Scenario

Topics: Weighted average cost of capital, Net present value, Corporate finance Pages: 5 (1463 words) Published: January 5, 2013
Guillermo Furniture Store Scenario

December 24, 201

Guillermo furniture store scenario examines the study of different alternatives available to Guillermo, which includes a sensitivity analysis. This will illustrate concepts found in Corporate Financial Management by Emery, Finnerty, & Stowe, and how it relates to the Guillermo’s Furniture Store Scenario (Emery, Finnerty, & Stowe, Chapter Accounting, Cash Flows, and Taxes, 2007). It is not uncommon for commercial businesses’ to become comfortable with another competitor that shares a geographical location, and many times, the same markets. Competition is a given concept that each business will become familiar with eventually. Changing the manufacturing process, cutting excessive costs, and changing the practice of business will benefit an organization to become more competitive within its market. Changing the business plan is a common theme when faced with enormous business challenges. This is one technique that may assist, grow, and keep the Guillermo Furniture Store in business for many years to come (Emery, Finnerty, & Stowe, Chapter Accounting, Cash Flows, and Taxes, 2007).

Guillermo Furniture Store Scenario
Guillermo Furniture Store is one of several businesses that recently required changing its business plan to remain in business because of new competition, environmental changes to his community, and the rising cost of labor and supplies. It is imperative for businesses’ to change when the existing outside and core costs change and modify the economic balance within the organization. Without change when the existing environment changes, businesses would be lost because of failure to change and keep updated. Research and Options

The research completed by Guillermo shows the competition is functioning as a lean, well-oiled organization and is not easy to copy. Therefore, attempting to recreate the same business framing will be insistently expensive. When every other action fails in business, look at what others are doing for guidance. Guillermo notices the current business set-up and focus ways to trim the total average costs per month in the manufacturing process. The concepts Guillermo is contemplating will save the business for future generations. Changing the focus from a large manufacturer of furniture to a stronger distributorship would save enormously. This would cut costs in manufacturing as the competitors already built their factories’ to do. With a new airport, new homes, and new worldwide headquarters in the same geographical location as the Guillermo family business, costs have increased dramatically (University of Phoenix, 2011). Different Alternatives

The Guillermo Furniture has a valued method of fireproofing furniture, and another process that protects the furniture from staining. Each process is worth a substantial amount that displays the principal of useful ideas that large returns are within reach with ideas that trademarked by other companies (University of Phoenix, 2011). The expertise of a process to create value and observes the principal of comparative advantage. Each option can and will show different scenarios to change the business and create new revenues. The financial decisions’ made because of incremental benefits as Guillermo works out the different scenarios of trade offs, and how much change will happen to relate to each reward (Emery, Finnerty, & Stowe, Chapter Accounting, Cash Flows, and Taxes, 2007). Guillermo works out the trade off aspect as he decides to be taken over by a large corporation or if he decides to expand his management responsibilities to manage another company. Although he works on the principal of diversification and the benefits it brings. Manufacturing only high quality furniture, distribute the less quality furniture, and charge for fireproofing and stain-proofing furniture is the efficient way to diversify. It is essential to know the cost of...
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