Guillermos

Guillermo’s Guillermo has established a custom furniture company in Sonoma, Mexico. His handcrafted furniture has served customers for many years, until the growth of the area due to continued development has increased competition. The reality of the growth for Guillermo is that the cost of labor has increased because of higher salary demands from employees, as well as the ability for these new competitors to manufacture products at a much lower cost with the help of robotics. Although the highly automated technology is very expensive, the costs are offset by a reduction in labor. Shrinking profit margins have forced Guillermo to look at other means of operating. Guillermo is not interested in merging with another company in order to compete, as this could result in his early retirement, and acquiring another company in order to expand is not his desired plan either. After doing a bit of homework, an appealing long term plan could be to re-align his company with a Norwegian company looking for a means of distribution in North America. For Guillermo, this would mean moving from the manufacturing side of the business to utilizing his distributor network, built over years in the industry. He could retain his high-end custom work, and investigate a new process for protecting his furniture, at a cost savings. Assuming Guillermo converts his custom furniture store from manufacturing to distribution for the Norwegian company, he could realize an immediate cost-savings in labor costs as a result of increasing salaries expected by local workers. Acting in his own financial self-interest, he would be able to maintain his self-sufficiency and management, while at the same time aligning his business to compete with the new high-tech businesses that have cropped up in his local market. By analyzing what other methods of continued operation some of the other local businesses have adopted using the behavioral principle, Guillermo would better understand what business model best suits his company. Just as the comparison of tangible vs. intangible assets works in some analytical methods, for Guillermo, looking at this concept from a more personal perspective, he may determine that rather than settling into retirement or expanding to a point of taking on too much responsibility (which may affect quality time with his family) are intangible challenges that he does not want to take on. For him, it is about sustaining the business as it currently operates, not growing to compete in a more advanced and more competitive market. The best scenario to maintain his current level of responsibility with the least effort would be to convert his established method of producing furniture to working with the Norwegian based company, since the need exists for a means to distribute in North America . There is some risk involved with regard to the new competition, as well as having to possibly layoff long-term employees, however when acting in his own self-interest, this may be unavoidable. References Emery, D.R., Finnerty, J.D., Stowe, J.D. (2007). Accounting, Cash Flow, and Taxes. In (3rd Ed.), Corporate  financial management (). Prentice Hall Inc.. doi: ISBN: 9780132278720 Emery, D.R., Finnerty, J.D., Stowe, J.D. (2007). The Financial Environment: Concepts and Principles. In (3rd Ed.), Corporate  financial management (). Prentice Hall Inc.. doi: ISBN: 9780132278720