Guillermo Furniture Essay

Guillermo Furniture store is a located in Sonora, Mexico.   Currently, Guillermo manufactures all of its furniture in house.   The resources in Sonora, Mexico are plentiful as well as low labor cost.   Entering into the 90’s, Guillermo faces the threat of heavy competition that provides the same quality merchandise as he, at an even larger cost.   The emergence of a new airport, new businesses and a low cost of living brought about new jobs and a host of newcomers to the Sonora area.   The increase in jobs and population increased labor costs.   Guillermo Navallez “watched his profit margins shrink as prices fell and costs rose” (FIN 571 Guillermo Furniture).

      With new competition in the area, Guillermo now has to make some strategic business decisions to be able to compete in a competitive economic environment.   With newer business and resources bringing in new jobs, the once low labor cost has now increased.   During research, Guillermo learned that most of his competitors are surviving in the new market by merger or acquisition, an idea that currently isn’t an option for Guillermo as he wishes to remain independent.   The principle of self-interested behavior suggests that people act in their own financial self-interest, which is why Guillermo would like to remain independent.   Before making a quick decision, Guillermo must first consider his opportunity cost, which is the difference between the value of one action and the value of the best alternative (Emery 2007).   Guillermo would like to keep the time that he has with his family and an acquisition would mean more management responsibility for him, which would cut down on his personal and family time.   Although Guillermo may lose some family time, he would still be able to remain a competitive force and merging or acquiring will make it affordable to have more employees as well as offer the same quality merchandise at a competitive price.   The Principle of Two-Sided Transactions, for...