Fin571_Week_1

Guillermo Furniture Store Concepts Paper LaKesia Johnson FIN/571 July 19, 2011 Frank Olivieri Guillermo Furniture Store Concepts Paper Guillermo Navallez built a furniture empire from the ground up that ran into issues in the 1900’s. Even with his company being the largest furniture manufacturing location in North America, it was no match competition through high technology. During this tough economic time for his company, he investigated certain financial principles in an effort in keeping his company afloat. The principles investigated where: * The Behavioral Principle: When All Else Falls, Look at What Others Are Doing for Guidance * The Principle of Comparative Advantage: Expertise Can Create Value * The Options Principles: Options Are Valuable The Behavioral Principle is a direct application of the Signaling Principle (Emery, Finnerty, & Stowe, 2007). The Signaling Principle says that actions convey information (Emery, Finnerty, & Stowe, 2007). With competitors knocking at his back door, Guillermo had to look into what was making the company so profitable. After his investigation he found that the company was able to cut labor cost by the use of technology. By using robots, production can continue on a 24 hour basis and the wood will be cut to exact measurement. The implementation of this kind of technology would be too costly for him and at this point would not be an option. The Principle of Comparative Advantage is the basis for foreign trade (Emery, Finnerty, & Stowe, 2007). Since investing in robots was not an option, he looked into being a distributor in North America for his Norway competitor. By doing this Guillermo would be able to coordinate his existing distributor network and essentially becoming a representative for the other manufacturer. This would allow his company to go through a transformation from primarily manufacturing to primary distribution. The last principle is of Options. Through this whole process, he has had options whether or not he to advantage of them. The option to merge or sale was on the table and he did neither per the simulation. He also had the option of trying to transform his company into a distributor. Last he has to make a choice on whether to sale his flame resistant product which is only one process in the patented coating he has created. There is a market for the flame resistant formula but not one for the finish coating. So does he sale the flame resistant or does he complete the process and try to find a market for his coating' The only person that knows that answer is Guillermo. Guillermo used all these principles and other to determine the fate of his company. No one wants to see their life’s work go down the drain because of a bad decision. The point of starting a business is to make money and by evaluating his financial situation will help guide his company into the future. Some companies go out of business because they have no options, but Guillermo has them. Because he has options, he may be able to save his company and be profitable for years to come. Reference Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2007). Corporate financial management (3rd ed.). Morristown, NJ: Wohl Publishing Inc.