Guillermo_Furniture_Store

Guillermo Furniture Store Business owners must stay innovative and conduct an S.W.O.T analysis on a yearly basis to have an understanding of internal and external factors that can affect their business. Though location can aid a business from its natural resources he or she must look at other factors that can affect the business; Guillermo’s Furniture Store must use finance concepts to help him achieve success. Guillermo Furniture Store Guillermo has chosen a location where natural resources such as wood are economic though competition has made it difficult experiencing reduced profit margins and increased costs. Because Guillermo is experiencing new competition he must re-assess to stay aggressive and have a competitive advantage over the others. Guillermo’s options are simple purchase high tech equipment; consolidate into a larger organization by a merger or acquisition and becoming a distributor to these competitors. Guillermo Furniture Store needs to find an alternative to be efficient with nominal waste, reduce cost of labor that affects profit margin. Finance Concepts Financial principles, financial markets, and ethics form a foundation for the financial decisions that managers routinely make (Emery, Finnerty and Stowe, 2007). Financial concepts that apply to the scenario are as following: The Principle of Self-Interest Behavior. This principle says that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves (Emery, Finnerty and Stowe, 2007). The principle that demonstrates this in the scenario is that Guillermo Furniture Store must choose the course of action that will financially benefit his store. Value of ideas is another finance concept that is involved with the scenario, this concept declares that new manufactured goods and services can generate or increase value. This concept correlates with the scenario since Guillermo Furniture store have new products that they want to launch to create value for his business. Another major finance concept that is involved with the scenario is risk-return trade-off. This concept states that when everything is equal, people will want higher returns and a lower risk. Guillermo Furniture Store has decided to endeavor his business that will interest elevated return and lower risks. Another concept that correlates to the scenario is The Behavioral Principle. The Behavioral Principle is a direct application of the Signaling Principle. The Signaling Principle says that actions convey information. (Emery,Finnerty and Stowe, 2007). In other words when businesses are failing they will look at the competition to use for guidance and get an idea on how to compete or do things better. In this scenario, Guillermo Furniture Store is looking at what the foreign competition is doing to appeal more to the consumer. Final Thoughts Every business must find alternatives to stay ahead of the competition; finance concepts have to be used to understand and minimize financial risks and increase profitability. The previous concepts stated focused on the scenario will aid identify and analyze and help solve the financial issues that Guillermo Furniture Store has been facing since the opening of other furniture stores that have found methods of decrease productions costs and increased profitability.