Guillermo Furniture Store

Guillermo furniture store

Guillermo furniture manufacturing store is located in Sonora, Mexico. Sonora is a large furniture manufacturing location in Mexico (University of Phoenix, 2012). For many years Guillermo Navallez has been making furniture. Sonora has a good supply of cheap but quality timber to make tables and chairs. Labor is also relatively inexpensive. Guillermo furniture priced his handcrafted products cheaply relative to the quality they represented. Recently a new foreign high tech furniture manufacture competitor moved into the area and Guillermo furniture has less of the furniture market now (University of Phoenix, 2012). If Guillermo furniture cannot find another way to make its furniture, it may not survive and it could go into receivership.

While trying to find answers to his business problem Navallez reviewed some of his old college finance books. The first principle he reviewed was the behavior principle. This principle states that Guillermo furniture can benchmark from other companies and learn from their trials and error (Emery, Finnerty, & Stowe, 2007). As Navallez faces a major decision there seems to be no clear correct course of action. An acceptable resolution is to find information in what other identical companies are presently doing and have accomplished. Navallez can imitate the firms that he feels are most likely the best guides for him.

The next principle that Navallez is thinking about using to improve his furniture manufacturing business is the self-interested principle. "Although there may be individual exceptions, we assume that people act in an economically rational way" (Emery, Finnerty, & Stowe, 2007, p. 54). That is, people act in their own financial self-interest. "The 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, p. 51). This principle is a very good approximation of human behavior.

Another principle that Navalez is looking at is the principle of two-sided transaction. This principle states that every financial transaction has at least two sides (Emery, Finnerty, & Stowe, 2007). Understanding financial transactions that we not become self-centered, we need to always understand the other part of the financial equation. We need to understand what the buyer or seller is thinking about and put ourselves in their shoes so we can make the transaction a win-win situation for all. If everybody wins in the business transaction everyone will be happy and Guillermo furniture store will get repeat business and repeat customers.

The last principle Navallez is thinking about is the principle of risk-return trade off. This basically states that in any financial transaction when all else is equal, people prefer a higher rate of return on their investment with the