Guillermo Furniture Store Recommendation Str 581
Guillermo Furniture Store Recommendation
FIN/571
January 14, 2013
Christopher Kubik, DBA
Guillermo Furniture Store Recommendation
The Guillermo Furniture Store success can be credited for the focus on quality and the handcrafted furniture manufactured sold at a premium. In the late 1990s, Guillermo’s business model started to change when two new events brought change to Guillermo’s business environment. The first event came in the form of a competitor from overseas. The new competition brought a high-tech approach to making furniture that used exact specifications and produce products that resulted in rock bottom pricing. The second event that took place resulted from development in the area that brought an influx of people and jobs. This created a rise in labor costs that resulted in a decrease in profit margins for Guillermo Furniture Store. As the new competition took sales away Guillermo’s profits fell and cost started to rise quickly. Guillermo has to choose among alternatives to compete in this new business environment. Choosing the right alternative will return profit levels to optimum levels.
Alternative One
The first alternative Guillermo must face is the current situation or alternative. This basically states that he will not change a thing and continue running his business as usual. The decision Guillermo makes will determine how successful he will be moving forward. Guillermo must choose the best alternative if he wants to continue success in this market. Based on the alternatives, it is quite clear that very little analysis needs to be done to see that the alternative for making no changes will not succeed in such a market. This recommendation can be supported by the existing state of the economy within the market, and the lack of competitive advantage that Guillermo has over his competitors. There is little he can do to change the outcome of the situation by not making any changes. Guillermo must change his focus to another
FIN/571
January 14, 2013
Christopher Kubik, DBA
Guillermo Furniture Store Recommendation
The Guillermo Furniture Store success can be credited for the focus on quality and the handcrafted furniture manufactured sold at a premium. In the late 1990s, Guillermo’s business model started to change when two new events brought change to Guillermo’s business environment. The first event came in the form of a competitor from overseas. The new competition brought a high-tech approach to making furniture that used exact specifications and produce products that resulted in rock bottom pricing. The second event that took place resulted from development in the area that brought an influx of people and jobs. This created a rise in labor costs that resulted in a decrease in profit margins for Guillermo Furniture Store. As the new competition took sales away Guillermo’s profits fell and cost started to rise quickly. Guillermo has to choose among alternatives to compete in this new business environment. Choosing the right alternative will return profit levels to optimum levels.
Alternative One
The first alternative Guillermo must face is the current situation or alternative. This basically states that he will not change a thing and continue running his business as usual. The decision Guillermo makes will determine how successful he will be moving forward. Guillermo must choose the best alternative if he wants to continue success in this market. Based on the alternatives, it is quite clear that very little analysis needs to be done to see that the alternative for making no changes will not succeed in such a market. This recommendation can be supported by the existing state of the economy within the market, and the lack of competitive advantage that Guillermo has over his competitors. There is little he can do to change the outcome of the situation by not making any changes. Guillermo must change his focus to another
References: Emery, D. R., Finnerty, J. D., & Stowe, J. D. (2007). Corporate financial management (3rd ed.). Morristown, NJ Wohl Publishing Inc. Investopedia, (2012). WACC. Retrieved on January 4th, 2012 from http://www.investopedia.com/terms/w/wacc.asp#axzz2Eu3SHrQb