Guillermo_Furniture_Store_Scenario

Alandra Shamblee Guillermo Furniture Store Concepts Paper Corporate Finance 571 University Of Phoenix Online Course Week 1 Guillermo Navallez has realized that he does not have the competitive economic advantage to the new competitor from overseas who uses a high tech approach. Guillermo also realizes that the largest retailers in the nation’s headquarters enjoy competitive economic advantage and that he has lost that competitive economic advantage because the cost of labor has increased locally. Guillermo’s’ position against the competitors was solid until foreign competition came to Sonora, the largest competitors of Mexico decided to open shop at Sonora and lastly, the cost of labor increased drastically at Sonora (UOP, 2010). Until these events occurred, Guillermo enjoyed the economic advantage by exploiting the local labor, market conditions and relationship to differentiate his firm from the competitors. In order to establish competitive advantage in the future, Guillermo has three options; he can invest in new technology and make furniture automatically with no labor cost, he can become a broker for a Norway firm and coordinate the distribution for that firm or he can continue with his present business and use the new patented technique of coating furniture. The concept of value is when the marketer seeks to increase the benefits and usefulness of the product or service to the customer (Emery, D.R. Finnerty, J.D, & Stowe, J.D 2007). In relation to Guillermo Navallez, the competitor from abroad is able to make and sell furniture to customers that match what the customer inquires and at great prices. At the same time, the largest furniture firms in Mexico are able to provide greater value for money to the customers than what Guillermo is able to do. Guillermo is also looking to increase his customer value by coating furniture with his patented process. The main issue for Guillermo is that the competitor from abroad and Mexico’s largest furniture makers are able to provide a much greater value to the customers than what he can provide. The concept of economic efficiency is the manner in which resources are also allocated across activities that maximizes the value they create (Emery, D.R. Finnerty, J.D. & Stowe, J.D. 2007). In Guillermo’s case the method of the foreign competitor efficiently allocates the resources that are used & leads to greater value. The competitor in Mexico can make use of economies of scales and is achieving greater value than Guillermo can. It is evident that the competitors of the foreign country and the furniture maker in Mexico are having a larger consumer and producer surplus. The concept of observing financial transactions has been used by Guillermo Navallez to assess the activities of his competitors as well as develop and evaluate his alternative. Guillermo has observed the financial transactions of low cost sales by the foreign firm. He has also observed the financial effects of low cost housing and the development of Sonora along with the financial transactions that have raised the cost of labor. Guillermo has also evaluated the effect of acquisition by a larger company, the financial transaction effect of taking over another company, the financial transactions of the foreign competitor and his high tech solution. Guillermo has even taken into consideration the buying of high tech manufacturing facilities, the financial transactions related to twenty-four hour shifts run by the high tech competitor. The most important concept for Guillermo is the concept of observing financial transactions because it helps him develop and make logical selections of alternatives. References UOP (2010). Guillermo Furniture Store Scenario. Corporate Finance 571. Emery, D.R. Finnerty, J.D. & Stowe, J.D (2007). Corporate financial management (3rd Ed) Ch.2 Upper Saddle River, NJ Pearson Prentice Hall.