Interpreting Financial Results
Guillermo Furniture Store Analysis
Guillermo Furniture manufacturing, located in Senora, Mexico, has been a popular furniture manufacturing company in the area for years until the late 1990s when new competitors from overseas entered the market and an influx of people and jobs raised the cost of labor substantially. Although Guillermo was well established in his business and the work was reliable, he was unable to keep up with the competitors and their high-tech approach to furniture making. “Firms can overcome resource constraints and achieve superior innovative performance not only by using internal resources but also by acquiring knowledge-based capabilities from alliance partners” (Zhang, Shu, & Jiang, 2010, p. 74). Guillermo must look at the different alternatives available to him. The purpose of this paper is to discuss the different alternatives available to Guillermo. This paper will also present a financial analysis, including a sensitivity analysis, determine the WACC, and calculate NPVs for the base case and sensitivities.
There are three alternatives available for Guillermo to consider. The three alternatives available are to continue with his current operations, go high-tech, or become a broker. Over the years Guillermo furniture manufacturing company has been built on his craftsmanship and quality of his products. Using the timber that has available in the area to make table and chairs for his company and relatively cheap labor, Guillermo was able to price his products at a slight premium. Guillermo also has a process that has been patented for creating a coating for his furniture. If Guillermo continues to operate his business the same he will be able to maintain the same standards but will also continue to see the effects that the competition has on his company. If Guillermo decides to take his company high-tech he will see growth and as technology continues to advance so will his company. Guillermo will assets will increase, even
Guillermo Furniture manufacturing, located in Senora, Mexico, has been a popular furniture manufacturing company in the area for years until the late 1990s when new competitors from overseas entered the market and an influx of people and jobs raised the cost of labor substantially. Although Guillermo was well established in his business and the work was reliable, he was unable to keep up with the competitors and their high-tech approach to furniture making. “Firms can overcome resource constraints and achieve superior innovative performance not only by using internal resources but also by acquiring knowledge-based capabilities from alliance partners” (Zhang, Shu, & Jiang, 2010, p. 74). Guillermo must look at the different alternatives available to him. The purpose of this paper is to discuss the different alternatives available to Guillermo. This paper will also present a financial analysis, including a sensitivity analysis, determine the WACC, and calculate NPVs for the base case and sensitivities.
There are three alternatives available for Guillermo to consider. The three alternatives available are to continue with his current operations, go high-tech, or become a broker. Over the years Guillermo furniture manufacturing company has been built on his craftsmanship and quality of his products. Using the timber that has available in the area to make table and chairs for his company and relatively cheap labor, Guillermo was able to price his products at a slight premium. Guillermo also has a process that has been patented for creating a coating for his furniture. If Guillermo continues to operate his business the same he will be able to maintain the same standards but will also continue to see the effects that the competition has on his company. If Guillermo decides to take his company high-tech he will see growth and as technology continues to advance so will his company. Guillermo will assets will increase, even