Ongko_Furniture_Store_Concepts

|FINGM/571 Assignment Feedback Form | |Week 1: Ongko Furniture Store Concepts Paper | |Criterion |Rating |Comments | |Content |  |  | |The paper effectively and appropriately addresses the following concepts from the |  |  | |text: | | | |• The concept of the competitive economic advantage |High Quality |Some confusion of advantage with self interest. | |• The concept of the value and economic efficiency |Average |Rather implicit discussion. | |• The concept of observing financial transactions. |Average |Rather implicit discussion. | |Organization / Development |  |  | |• The paper is 350 to 700 words in length. |Average |  | |• The paper provides sufficient background on the topic and previews major points. | | | |• The content is logical, it flows, and it reviews the major points. | | | |Mechanics |  |  | |• Formatting or layout and graphics are pleasing to the eye (font, colors, |Average |  | |spacing). | | | |• Rules of grammar, usage, and punctuation are followed, and spelling is correct. | | | |• APA formatting is followed. | | | |Other comments |Good effort at the paper. See comments above. | | |Points |9.5 | [Please see comments and grade in the paper and above in the rubric.] Ongko’s Furniture Store Concepts Lynda C. Mitchell FIN/GM571 Dr. Doug Gilbert 16th August 2010 In the field of finance, there are concepts, principles and laws that guide corporations, and assist with understanding routine financial practices and situations that is multifaceted. After reading the Ongko”s Furniture scenario, there are many finance concepts and principles involved. This paper will detail those concepts showing how they relate to Ongko’s Furniture. Briefly, Ongko’s Furniture is a one-owner operation in Bali Indonesia. This location provides Jaya Ongko (the owner) with the timber needed to craft his creations. With inexpensive labor and high quality furniture, Ongko supplies handcrafted premium furniture to the surrounding countries in Southeast Asia, and more than 20 countries globally (Ongko’s Furniture Scenario, University of Phoenix, 2010). Ongko may have missed some golden opportunities to advance the company. The first principle that applies to Ongko’s Furniture is the principle of self-interested behavior. According to Emery, Finnerty, and Stowe, 2007, p. 20, “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.” Therefore, Ongko observed his foreign competitors researching their changes. Ongko wants to keep his piece of the pie. This concludes that Ongko’s Furniture applied the behavioral principle as well which means, “when all else fails, look at what others are doing” (Emery, Finnerty, & Stowe, 2007, p. 23). Ongko is interested in acquiring an acquisition from a former supplier in Brazil. Ongko has some hesitation, because of the lack of performance with the Brazilian company. Despite the political unrest in Brazil, this acquisition will benefit Ongko’s Furniture. On the other hand, Ongko is mindful of opportunity cost. This cost is not beneficial should the company buy in at a below the cost deal. Opportunity cost provides an indication of the relative importance of a decision (Emery, Finnerty, & Stowe, 2007, p. 20). For example, should Ongko acquire this acquisition deal at one price and another company is willing to make a better offer the difference in the cost is the opportunity cost. Ongko has a patented process for creating a coating for his furniture that should attract stronger acquisitions. This acquisition deal refers to the principle of two-sided transactions as each financial transaction is viewed from both sides and may not seem straightforward. This acquisition could also mean a loss or gain in stock prices. Ongko has been a successful company in the countries that its supplies and will take a chance on this acquisition deal. Nonetheless, both parties are acting in their own best interest because for every sale there is buyer and for every buyer there is a seller. Another principle that Ongko should consider is the signaling principle as actions convey information. This principle will address any problems of asymmetric information. Asymmetric information is “one party in a negotiation or relationship is not in the same position as other parties” (London Southeast, 2010, p. 1) assuming self-interest behaviour. For example, if the Brazilian company agrees to the sell this might imply that the company is not performing well. Conclusion: Financial concepts and principles, along with ethics help to form a firm foundation for financial decisions. Managers and owners should apply all principles of finance that describe typical behavior. In the Ongko’s Furniture scenario, this paper pointed out several concepts that relates to this organization. Even though opportunity cost has no exact measurement, the difference between the value of one action and the value of the best alternative will eliminate a loss in profit. Reference: Emery, D.R., Finnerty, J.D., and Stowe, J.D. (2007). Corporate financial management (3rd ed.). New Jersey: Pearson-Prentice Hall. LSE, London Southeast. (2010). Asymmetric Information. Retrieved 16th August 2010. From http://www.lse.co.uk/financeglossary.asp'searchTerm=&iArticleID=1603&definition=asymmetric_information