Guillermo Furniture Analysis

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Running head: GUILLERMO FURNITURE ANALYSIS Guillermo Furniture Analysis FIN/571 NAME 17 July 2011 Professor Guillermo Furniture Analysis Guillermo’s Furniture Store Scenario shows that there is a competitive advantage when it comes to specific retailers within the furniture industry; unfortunately, Guillermo is currently not experiencing such an advantage because of fresh overseas competitors who are able to sell products at a lower price than Guillermo. At one period, Guillermo did possess a competitive edge; however, because of new entrants, the utilization of high-technology methodologies, product pricing and positioning, and the rising costs of labor Guillermo is not experiencing the profits he once did. Guillermo has several options to consider such as manufacturing automation, outsourcing, or maintaining his current business platform with the addition of a new coating technique for his furniture. Regardless of Guillermo’s decision, it is essential for Guillermo to add value to his furniture. Guillermo must consider all alternatives and integrate a new strategy to reestablish his once-held competitive advantage. In an effort to help Guillermo accomplish this task, Guillermo has hired a consultant to list each alternative, conduct a sensitivity analysis of each alternative, provide the net present value (NPV) of each alternative, and determine the optimal weighted average cost of capital. The consultant has analyzed each available alternative and has outlined all findings in this paper. Guillermo’s Alternatives Merger The first alternative for Guillermo is to consider merging with another organization. If Guillermo decides to pursue this alternative, it may lead to less overhead cost, less risk, but also less profit for Guillermo as Guillermo will have to share. Merging with another organization will instantly increase
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