Guillermo Furniture Store Essay

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Guillermo Furniture Store Concepts Guillermo Navallez has run a successful furniture company based in Sonora, Mexico for years. His business situation had been ideal for him due the close physical location near his home and local resources, such as the timber that is used for constructing products, and the availability of inexpensive labor. Unfortunately, with the influx of new comers to Sonora due to development in the area and a new competitor from overseas entering the furniture market the company is being adversely affected and is seeing a decline in profits. Guillermo is working to problem solve this situation in a manner that will make the company financially sustainable and align with his ethical values. The decision on how to move forward must be weighed heavily because Guillermo is in a position of sole proprietorship which puts him in a precarious situation. A benefit of being the sole proprietor being able to take whatever course is deemed appropriate, without needing approval. The down side is that any funding or losses incurred will be his sole responsibility (Horngren, et. al, 2008). As with most businesses he will display self-interest behavior. Upon research, Mr. Navallez has learned that the new competition uses a high-tech approach to building furniture which has enabled them to produce furniture with exact specifications and deliver them at a very low price. Due to a lack of competing technology, he is not able to match this. Guillermo has also learned that other competitors that are in situations similar to his own have handled it by either merging with or being acquired by other companies. The idea of consolidating the company is unappealing to Guillermo. He has always run the company independently and has no desire to retire due to selling the company and is not willing to pay the opportunity cost of spending less time with his family due to increased managerial responsibilities that may be added as a result of a merger. By continuing to operate the company independently Mr. Navallez is also able to ensure that the manner in which the company is run is aligned with his ethical beliefs which in will in turn help the company maintain its good reputation among both the community and its employees. Since consolidating the company is not Guillermo’s ideal solution other options must be explored. When taking into consideration upgrading the company with high-tech machinery Mr. Navallez must consider the amount that is needed for the initial investment. While this may seem, high he must weigh this against that benefits that the company will receive by making this investment. With the addition of the more modern technology, Guillermo’s furniture company will be able to produce at a faster rate, a more specific and higher quality product, while reducing labor costs. The incremental costs will decrease over time and the Return on Investment (ROI) will outweigh the initial investment (Emery et. al 2007).
By upgrading the company’s technology the company will be able to compete with the new
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