Guillermo’s Furniture Store Scenario
Frank L. Mattair
FIN/571
April 1, 2013
Randolph Gray
Guillermo’s Furniture Store Scenario
The Guillermo’s Furniture Store scenario shows a business that had a competitive advantage within its specific sector of business. Guillermo’s newly developed financial decision-making came after a foreign competitor brought innovative technology that allowed for a cost effective means of operation into the local market. This technology allowed for this competitor to sell furniture at severally discounted prices. In order to protect the financial self-interest of the company Guillermo requires a means of reestablishing his company’s position in the market and compete with the challenges presented by foreign competition.
The concept of opportunity cost is important to the Guillermo Store scenario because it addresses the idea of accepting that there are alternatives to the current way that business is being accomplished. Opportunity cost can be useful in differentiating between the value of a certain action and the value of that actions best alternative. One alternative available to Guillermo is to invest in new technology, which would allow for automated furniture production, the successful use of this alternative would have no effect on labor costs. Guillermo would also have the option to continue with his current business layout while implementing the new techniques for coating the furniture, this would give Guillermo a diverse product and allow for reduced risk in market shares and increase the potential for return on his investment.
The time value of money concept also relates to Guillermo’s situation. Until the introduction of a foreign competitor the convenience of local labor at a cheap price, market conditions and brand value gave Guillermo the economic advantage in the area. For the time value of money work...