Guillermo Furniture Store Concepts

Guillermo Furniture Store Concepts
Lucille Schendel
University of Phoenix

Guillermo Furniture Store Concepts
After reviewing the Guillermo Furniture Store scenario, the finance concepts that apply are the competitive economic environment with the principles of self-interested behavior, two-sided transactions, the signaling principle, the principle of valuable ideas, and the principle of comparative advantage (Emery, Finnerty, & Stowe, 2007).   One must understand the finance concepts to make informed business decisions and explanations of these concepts and the relationship to the scenario will follow.   Guillermo Furniture has to decide how the company will proceed with the new competition whether to stay independent, acquire another company with more resources, expand production with new technology, or become a distributor for another company overseas.   These decisions need extensive research prior to any decision making.
Self-interested behavior
Self-interested behavior consists of people acting for their best financial interest.   Guillermo Furniture needs to realize their best financial interest through research and acting in their best interest (University of Phoenix, 2012).   Selling the business is an option however; this may not be in the best financial interest for the company.   An important function that they need to realize is the agency theory.   According to Emery, Finnerty, & Stowe, 2007, “Agency theory analyzes conflicts of interest and behavior in a principal-agent relationship” (Emery et al., 2007, p. 20).   This type of relationship the company needs to analyze prior to making a decision about whether to become a distributor, acquiring another company, or expanding the production with the new technology.  
Two-sided transactions
Two-sided transactions consist of a buyer and a seller.   When understanding two-sided transactions this can be a simple task.   However, here hubris comes into play because some companies can be egotistical...