Guillermo_Furniture_Store_Scenario

Guillermo Furniture Store Scenario Kevin L. Waters University of Phoenix Accounting ACC/561 Kymberly A. Polser, CPA June 06, 2010 Guillermo Furniture Store Scenario Over the years, Guillermo Furniture Store has enjoyed many advantages. Sonora, Mexico had inexpensive labor, materials and is widely regarded as a beautiful vacation spot with an excellent quality of life. These factors helped enable Guillermo to charge a reasonable premium for his handcrafted furniture. Over the last several years, his market share has dwindled because of stiff overseas competition. Now he needs to explore other alternatives to keep is business viable and vibrant. Guillermo Furniture Store is at a pivotal point in its existence and the owner must decide what performance and budget reports that he will make good use of to facilitate his decision- making process. Determining how much to spend on various expenses is only half the battle. The other half is for a company to be able to effectively judge its spending performance. Regardless of the type of business, the ability to gauge performance using budgets is a matter of life and death in the business world. (Elmerraji, 2010, para. 2) First, Guillermo must decide what he wants his company to accomplish. He knows that he doesn’t want to be bought out by a competitor or to take on the added burden of acquiring an additional company. That would have a negative effect on the enjoyment of his family life. Guillermo needs to have reports generated on important issues such as how his business is currently performing, information on how his competitors are eroding his market share, the cost for changing his production schedule and what type of investment, if any, that he needs to make in capital equipment. Information on the market conditions is crucial to making a valid decision. Market research is any organized effort to gather information about markets or customers. It is a very important component of business strategy. The term is commonly interchanged with marketing research; however, expert practitioners may wish to draw a distinction, in that marketing research is concerned specifically about marketing processes, while market research is concerned specifically with markets. (“Market Research“, 2010, para. 1) After reviewing his information, Guillermo may believe that in order for his business to survive that the best option would be to move the majority of his manufacturing operation to Norway. Based on the information in the scenario, he may not be comfortable doing that. Some of his employees may have been with him for years and he may not want to terminate those workers. He might not want to impact the employment of his workers and his community in a negative fashion. Guillermo has built hand-made furniture for years. He may simply think that no machine can really duplicate the results of a dedicated craftsman. Ethical behavior in business is critical. When business firms are charged with infractions, and when employees of those firms come under legal investigation, there is a concern raised about moral behavior in business. Hence, the level of mutual trust, which is the foundation of our free-market economy, is threatened. (Conley, 2010, para. 7) For Guillermo to make the most informed decision, he will need to know what his current costs are for labor, materials, and fixed costs. He will need information on his present sales and how much his sales will increase if he chooses to invest in computerized machinery. If he decides to farm out the majority of his furniture and to have the least complex items made in Norway, will the estimated savings be worth the disruption of his workforce' He will also need to investigate whether his patented flame retardant, stain resistant coating has a tangible value and if it does, what is that value' With accurate information, Guillermo will make the best decision for his company and Guillermo Furniture Store will arrive back on track for continued success. References Conley, J. H. (2010). Ethics. Reference for Business. Retrieved from www.encyclopediaforbusiness.com Elmerraji, J. (2010). How Budgeting Works For Companies. Investopidia. Retrieved from www.investopidia.com Market Research. (2010). In Market Research. Retrieved from www.wikipedia.com