Guillermo Furniture Store Concepts Essay

648 Words3 Pages
Every field of industry uses certain tenets or principles to help people understand that field. In finance there are some basic but very important principles that guide business people through seemingly complex situations. Guillermo Navallez owns a furniture manufacturing business in Sonora, Mexico. Sonora is an excellent place to operate such an enterprise because Sonoma was a large hub of manufacturing, had a good supply of timber, and relatively inexpensive labor. Until the late 1990’s Guillermo’s business was thriving. Then a new competitor arrived on the scene. The new competitor was from overseas. The competitor used high-tech equipment to produce furniture faster, to exact specifications, and at much cheaper prices. Secondly the sleepy little town of Sonora experienced a population boom. New inexpensive housing, a new airport, and uncongested roads drew people and jobs into the community raising labor costs. The result was shrinking profit margins and rising costs. These two events caused Guillermo to rethink his business strategy using some of the aforementioned principles or tenets of finance. Initially Guillermo demonstrated the Principle of Self-Interested Behavior. That is he acted in his own self-interest. This principle says that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves (Emery, Finnerty, & Stowe, 2007). Guillermo researched the competition to discover how they were managing the changing economic environment. He discovered that through merger and acquisition, some of them were uniting to form larger corporations. Guillermo did not like the idea of merging with a large company. There was a possibility one day he would be forced to retire and have to watch everything he built disappear. Guillermo enjoyed the time he was able to spend
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