Guillermo Analysis

Guillermo Analysis

  • Submitted By: shanelege
  • Date Submitted: 02/07/2010 9:53 AM
  • Category: Business
  • Words: 680
  • Page: 3
  • Views: 2373

Guillermo's Furniture Store
University of Phoenix
Corporate Finance
FIN 571


Guillermo's Furniture Store
Guillermo’s Furniture Store produced handmade furniture in an area of Mexico in which the raw materials for the furniture was plentiful and the labor to produce the furniture was low. In the beginning, the area in which Guillermo manufactured the handmade furniture was still underdeveloped and allowed Guillermo to make a considerable profit selling the furniture. Year’s later, new business trends arrived in the area of Guillermo’s manufacturing plant that changed the way Guillermo needed to business as Guillermo’s profits began to decline. In an effort to remain in business, Guillermo would have to make new financial decisions to remain in business and succeed within the business world.
Before the competition arrived in the area of Guillermo’s Furniture Store, Guillermo was able to conduct financial transactions that allowed Guillermo to turn a profit. Because of decreased labor rates and increased prices of the handmade furniture, Guillermo’s zero-sum game was in Guillermo’s favor. “A zero-sum game is a situation in which one player can gain only at the expense of another player.” (Emery, Finnerty, & Stowe, 2007, p. 22) Since Guillermo was the only furniture manufacturing business in the area, Guillermo was able to sell products to customers while making a profit.
As new businesses entered the area, such as a new furniture manufacturing store and an International airport, the rates for labor began to increase. The increase in labor made Guillermo pay the employee’s higher rates that cut into the store’s profits. The new furniture manufacturing store sold custom made furniture at lower prices that also cut into Guillermo’s profits. These new changes in the area put the zero-sum game in the buyers favor and if new financial decisions were not made, Guillermo would soon be out of business.
Before a financial decision could be made, Guillermo...

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