Case Study Of Guillermo Navallez

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Guillermo

* Finance Concepts * Guillermo Navallez made his own furniture to sell on the open market from Sonora Mexico. He did so with a small-scale operation, utilizing low overhead costs, and a minimal labor force. In the scenario presented Guillermo was faced with a challenge of global competitors offering similar products at very low costs in comparison to his pricing. This foreign company used state of the art technology to cut labor costs and speed up efficiency in production allowing for the lower overall cost to the consumer. Because Guillermo does not want to take on any added responsibilities or be pushed out of his own company he is not looking to merge with or acquire other furniture companies in order to compete with the large-scale competitor. Guillermo has, however, found an organization new to the market that is looking to compete with the large scale operation but does not have the necessary networking with distributors to do so, so Guillermo has contemplated acting as sort of a liaison to these organizations, which in turn would allow him to still create his more high-end merchandise. * The principle of self-interested behavior is exhibited by his actions of not wanting to take the added responsibilities because they would take away from his family time and also add to his level of stress associated with working. He wants to maintain his financial independence by maintaining control of his own organization and not allowing others from big business to push him out of what he once created. He is struggling with the new competition but does not want to take on the added responsibilities in his own self-interest. * The second principle in which is displayed in the scenario presented is the behavioral principle of finance. This principle can be defined as to looking to see what others who are succeeding where you are filtering and see what they do and how they do it. It is a research and apply type of principle. Guillermo sought out to see what his new found competitor was doing so that he may be able to catch up or compete on the same level. Through his research he found that they were operating with machinery and robotics to not only cut but also assemble the pieces of furniture. This cut down on the number of personnel needed for manual labor as well as opened a channel for 24hr production. Because the cost of labor was offset significantly by the
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