Guillermo's Furniture

Guillermo’s Furniture


Guillermo’s Furniture FIN/571-Corporate Finance University of Phoenix 2012

Guillermo’s Furniture


Guillermo’s Furniture The quote by renowned author and speaker, Orvel Ray Wilson, “Customers buy for their reasons, not yours,” exemplifies the finance principle of Self-Interested Behavior and is the reality Guillermo Furniture faces with competition (e-Coach, 2012 & Emery, Finnerty, & Stowe, 2007, p. 20). Explain Relation of Finance Concepts Entry by an international competitor into Sonora’s furniture market threatens stability of the business by providing customization of furniture at lower prices. Guillermo’s higher priced products benefit the competition, presenting a zero-sum situation, whereby one company’s gain is another’s loss. However, not content to risk business failure, Guillermo assessed the competition’s policy choices but chose to maintain independence and forego the opportunity cost of family time versus expansion (UOPX Scenario, 2012 & Emery, et al., 2007, pp. 22-24). Further examination of the technological innovation employed by the competition not only offers the opportunity for maximizing production and decreasing production costs but also presents the risk of implementing a paradigm shift in existing business operations and the associated financial challenges of model conversion. Clearly, a decision to “copy” the other company is not the optimal solution for Guillermo, indicative of the Behavioral Principle’s limitations. Conversely, a move to a combination of manufacturing and distribution for another potential competitor diversifies the business, reducing risks, increasing market share, and maximizing company value, thus realizing the benefit of the Diversification Principle. Moreover, Guillermo’s patented process for the flame-retardant coating grants exclusivity that affords an opportunity to enhance product value, sell the service to the potential partner manufacturer, and build brand loyalty (UOPX...