Guillermo Furniture Decision Fin 571

Guillermo Furniture Decision
      March 14th, 2011

Guillermo is forced to make decisions on whether to continue business as usual or change his business model.   He considers opportunity cost, sunk costs, depreciation, and mergers.   Guillermo does not want to make his life more complex and this is the biggest hurdle he will overcome when stating his final decisions.

Guillermo’s Conundrum
Guillermo owns a furniture store in Sonora, Mexico.   This area is staring to grow in popularity and as a result new businesses, and new competition is popping up in the area.   With the inflow of people and resources labor has become more expensive and is affecting Guillermo’s bottom line.   Many of his competitors are selling out or consolidating.   However, Guillermo enjoys his life style and does not want to sell out nor does he want to expand via merger and acquisitions.   After some research he lays out his options next to each other so he can compare and make a final decision on what will benefit him the most.
High Tech Approach
A new competitor swooped into Sonora using a high-tech laser that makes precise cuts.   Guillermo looked into this scenario and it seems although this would be a great benefit the cost of the machine is pricey and he would have to hire an additional employee with expertise to operate the machinery.   This will cost Guillermo a lot of money and has the potential to be a huge disaster.   Guillermo has never operated on this level before and he desperately wants to keep his life as close to normalcy as possible.   When looking at all the changes he would have to make for the high-tech approach to running a furniture store, Guillermo decides he is too risk averse for this type of change and decides to look at his other alternatives (Emery, 2007)
Distribution Approach
After further investigation Guillermo uncovered a much more interesting piece of fact.   A second competitor from Norway actually wants to use chains like...