Guillermo Furniture Store Scenario

Guillermo Furniture Store Scenario

Guillermo Furniture Store Scenario

Gulillermo Navallez is a successful entrepreneur who designs and creates furniture. One of the reasons he is so successful is due to the fact that he has a comparative advantage in the supply of timber since he resides in the Sonora area. He has developed an absolute advantage by setting his price at a slight premium in regards to the actual cost. One hardship he currently faces is the development of a new technology-based furniture business. This company can produce increased amounts of furniture with less labor and cost. With the current economic status; in a recession, this method of developing furniture is more appealing cost wise. It is much more affordable, then hand-crafted furniture for the "every day buyer." The second hardship is the increasing development in the town of Sonora. With the boom, this small town's economy prices for resources, as well as labor and cost are continuing to increase. This causes Gulilermo's revenue to be "paper thin." Because of this, Gulilermo has two options to save his business. Option one would be to lower his labor costs, and invest into the laser technology which his competitor is currently utilizing. This ultimately decreases his production costs. Option two would be to merge his company with a Norwegian company that is looking to expand to the North American demographic. Each decision has downfalls associated with them, but the purpose of this paper is to identify the most successful business outcome for Gulilermo (University of Phoenix, 2004).

The best path for making an informed decision would be to develop a performance report, and ultimately focusing on his budget. A performance report shows the activity within a business or a specific production compared to the budgets that was set over a certain amount of time. This report can identify where corrective action needs to be taken as well as unsatisfactory performance. This report can help Gulilermo determine the most beneficial path to take because it measures all overhead costs, as well as determining whether Guillermo's money is spent efficiently in comparison to the budget. This report is a major portion of making an informed decision because it shows what Guillermo's company is able to produce when comparing against his current competitor. Also, when considering merging with a larger company.

When focusing on the company budget and performance report one also must take ethics in consideration for this transition company, especially when involving his accounting decisions. When making his decision he must make it ethically. Guillermo's company is currently running a high labor cost (many people are currently working for him). If he were to switch over to a technology-based