Fin571 Week 1

Guillermo Furniture Store Concepts Paper
LaKesia Johnson
July 19, 2011
Frank Olivieri

Guillermo Furniture Store Concepts Paper
Guillermo Navallez built a furniture empire from the ground up that ran into issues in the 1900’s. Even with his company being the largest furniture manufacturing location in North America, it was no match competition through high technology.   During this tough economic time for his company, he investigated certain financial principles in an effort in keeping his company afloat.   The principles investigated where:
  * The Behavioral Principle: When All Else Falls, Look at What Others Are Doing for Guidance
  * The Principle of Comparative Advantage: Expertise Can Create Value
  * The Options Principles: Options Are Valuable
The Behavioral Principle is a direct application of the Signaling Principle (Emery, Finnerty, & Stowe, 2007). The Signaling Principle says that actions convey information (Emery, Finnerty, & Stowe, 2007).   With competitors knocking at his back door, Guillermo had to look into what was making the company so profitable. After his investigation he found that the company was able to cut labor cost by the use of technology. By using robots, production can continue on a 24 hour basis and the wood will be cut to exact measurement.   The implementation of this kind of technology would be too costly for him and at this point would not be an option.
The Principle of Comparative Advantage is the basis for foreign trade (Emery, Finnerty, & Stowe, 2007). Since investing in robots was not an option, he looked into being a distributor in North America for his Norway competitor.   By doing this Guillermo would be able to coordinate his existing distributor network and essentially becoming a representative for the other manufacturer. This would allow his company to go through a transformation from primarily manufacturing to primary distribution.
The last principle is of Options. Through this whole...