Guillermo Finance Concepts

Guillermo’s Furniture Store Scenario


Guillermo is a small business man who is trying to research all of his financial options in order to stay competitive in the furniture making world. With the entry of the larger competitor with the high technology technique Guillermo is looking at his options in order to make a decision that will best suit him so that it will keep his overhead costs down and still keep him with a decent profit. Each principle explained below relates to the context of Guillermo’s Scenario.

Signaling Principle

The Signaling Principle is an extension of the Principle of Self-Interested Behavior (Emery, Finnerty & Stowe, 2007). It’s “a firms decision to enter a new line of business may reveal something about the firm’s position and its belief in the venture’s potential” (Emery, Finnerty & Stowe, 2007). This relates to Guillermo’s Furniture business in that he is looking into entering a venture with the company in Norway who wants to enter the North American market. In entering into this venture it could possibly better his position in the market while still making him a profit.

Behavioral Principle

“The Behavioral Principle says, in essence, “let’s try to use such information” (Emery, Finnerty & Stowe, 2007). Basically states “When all else fails, look at what others are doing for guidance” (Emery, Finnerty & Stowe, 2007). Guillermo says the changes in his industry and looked at his competitors to get advice on what they were doing in order to make his decision. He researches their high tech solutions, production, and costs in order to decide the best path for him to take. He is independent and isn’t looking forward to merging with a larger company so he is researching his options in order to avoid this.

Principles of Valuable Ideas

The Principles of Valuable Ideas says “you…might find a way to get rich! New products or service can create value, so if you have a new idea, you might then transform it into...