Week 1 Guillermo Furniture Store
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- Date Submitted: 06/07/2010 12:21 PM
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Introduction
Guillermo Navallez is an entrepreneur in the furniture market within a University of Phoenix business scenario. He faces a shrinking profit margin due to other companies entering the marketplace and a changing local demographic. These two elements have resulted in lower sale prices and higher labor costs. This paper will explore the application of the following financial principle genres to his situation; competition in an economic environment, creating value and economic efficiency, and finally the observation of financial transactions.
Competition in an Economic Environment
The most blatant application of competition is “The Behavioral Principle: When all else fails, look at what others are doing for guidance” (Emery, 2007, Page 23). Guillermo has already accomplished this task in the scenario as he realized the profit loss and researched what the other companies were doing to compete.
The principle of self-interested behavior is evident here as well “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, 2007, Page 20). Guillermo is ultimately attempting to increase his profit margins. Guillermo is also weighing the opportunity cost associated with all of his alternatives available, or the “difference between the value of one action and the value of the best alternative” (Emery, 2007, Page 20).
The principle of two-sided transactions becomes a factor specifically where Guillermo is selling his furniture to a buyer. The give and take in every transaction and usually results in a zero-sum game, one can only gain at the expense of another (Emery, 2007, Page 22). Acting in their own self interest, buyers will benefit if the price goes down while Guillermo will suffer from a lack of profit margin.
Creating Value and Economic Efficiency
The concept of creating value can quickly be realized because of...
Guillermo Navallez is an entrepreneur in the furniture market within a University of Phoenix business scenario. He faces a shrinking profit margin due to other companies entering the marketplace and a changing local demographic. These two elements have resulted in lower sale prices and higher labor costs. This paper will explore the application of the following financial principle genres to his situation; competition in an economic environment, creating value and economic efficiency, and finally the observation of financial transactions.
Competition in an Economic Environment
The most blatant application of competition is “The Behavioral Principle: When all else fails, look at what others are doing for guidance” (Emery, 2007, Page 23). Guillermo has already accomplished this task in the scenario as he realized the profit loss and researched what the other companies were doing to compete.
The principle of self-interested behavior is evident here as well “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, 2007, Page 20). Guillermo is ultimately attempting to increase his profit margins. Guillermo is also weighing the opportunity cost associated with all of his alternatives available, or the “difference between the value of one action and the value of the best alternative” (Emery, 2007, Page 20).
The principle of two-sided transactions becomes a factor specifically where Guillermo is selling his furniture to a buyer. The give and take in every transaction and usually results in a zero-sum game, one can only gain at the expense of another (Emery, 2007, Page 22). Acting in their own self interest, buyers will benefit if the price goes down while Guillermo will suffer from a lack of profit margin.
Creating Value and Economic Efficiency
The concept of creating value can quickly be realized because of...