Guillermo Furniture is facing a new era where decisions of change have to be made. Considering this veteran business, it must up hold its reputation while still bringing in profits to keep the business afloat in this competitive business world. The company faces three alternatives to change including distribution, foreign production, and technological advances in equipment. The consensus of recommendation is to remain competitive, keep profits up, and maintain customer rapport while the main concern for recommendation is generating revenues to afford these possible changes.
The following information will describe the available alternatives to Guillermo Furniture and recommend the best fitting choice while giving justification for that recommendation. Alternatives Guillermo has several options for his jeopardizing business. The most obvious choice for Guillermo is to become strictly a distributer for the Norway business that could be a second competitor. Since his manufacturing costs have gone up with increasing labor costs from the improving economy around him, Guillermo can take advantage of the low cost labor coming from Norway.If Guillermo furniture takes advantage of low cost labor from Norway, this will in turn get him furniture to sell at a much lower price since he will now be a distributor. The best case scenario for Guillermo would be to distribute the furniture he sells at rock bottom prices against his new competition while patenting his flame retardant spray. There is a possibility that the flame retardant spray could really take off if he attempts to market it globally. The distribution side can keep steady income coming in for him while he tries to make bigger profits off of his “invention”, and selling this formula to big name furniture retailers.
This option will also give Guillermo the most time with his family because he will only have to worry about the distribution side of the business. This option would also have a much lower financial risk because there would be no investment in high price technology to execute this plan. The priciest part of this plan would be buying the materials from Norway originally and patenting Guillermo’s spray so that he can sell it globally. Another one of Guillermo’s options is to try and take advantage of the low price of manufacturing with new technology that runs 24 hours a day.Though Guillermo will have to take a financial hit when he buys all the new expensive equipment, the technology should help him in the long run. The lathes will run 24 hours a day, and will require much less paid labor. The new technology should keep him more competitive with his new competition while giving him more time with his family since he will not have to manage as big of a workforce.
Guillermo will still have to compete with his competition and their rock bottom prices.He could try and differentiate himself from his competition by making his furniture more specialized to the customers’ needs and in addition to their needs also use his special formula for flame retardant. By specializing his product more, he might be able to hit the new market available to him in his growing city and receive more spending money from the consumer. The last option would be for Guillermo’s furniture to stay with the current situation and possibly move from the existing location to another one in Mexico with much lower labor costs.This could be achieved by selling his existing buildings and equipment and perhaps getting a much lower priced building in a less expensive economy to pay laborers. If Guillermo succeeds at moving his business, then he can start marketing globally to distributors in order to try and make up for the lack of economy for his new location. With this option, Guillermo furniture can also possibly buy the new technology to really cut down on long term costs.
This would not be a good option because of Guillermo’s current situation with his family though.The time to open the new manufacturing plant mixed with the time it would take to get the business back on its feet after buying the new technology would take a heavy toll on his time with his family. The best hope for this option would be if his business took off in the global market and he could continue to expand in this low labor cost area. If he had the best of both worlds of low cost labor and precise equipment that runs 24 hours a day, then he could expand quickly and cost efficiently. This option would also still leave a window for Guillermo to sell his flame retardant globally and make extra money from it.Recommendation Taking the alternatives into consideration and Guillermo’s current problem with the uprising of foreign competition with better technology, one has to wonder where Guillermo will get the capital to support his alternatives.
Guillermo can take advantage of his knowledge of distribution and networking by becoming a representative for one of his possible competitors from Norway but this could also backfire. If Guillermo chooses to be a “middle man” which is what this option sounds like, he could possibly get burnt when the Norway company eventually decides they no longer need him for distribution contacts.The more the alternatives are considered, the more attractive the alternative of buying better equipment becomes. The idea of buying new technology machines is expensive at first but in the long run the business will be much better off. Guillermo will save substantially with labor costs and become much more of a threat to his competition by lowering his costs. The city that Guillermo’s is located in has grown and paying the higher labor costs is just not realistic.
Guillermo needs a good bit of Capital but what are his options?He could borrow from a bank at an extremely high interest rate, try to get a group of investors to loan him money, or he could sell bonds, preferred stock or common stock. The solution that seems most fitting for Guillermo’s best alternative of buying the new technology is to do so by going public. Guillermo can go public and raise up the capital that is needed by selling common stock. An important part of investing is the investors knowing that there is a solid plan put in place by the business and that they have a distinct advantage over the competition.The threatened furniture store has three main advantages if they just have the capital to make it happen. The advantages Guillermo’s has is: Guillermo makes specialized furniture as well as commodity furniture, Guillermo has a patented stain resistant spray, and Guillermo as a network of distributors to get his products out with.
Conclusion No matter what alternative Guillermo Furniture decides to choose, there is one thing that stands clear. Unless they increase their capital to help fund the alternative chosen, then it will be difficult for the company to profit.The prime choice in alternative is the high-tech option unless the capital to fund it is not there which is why the recommendation to Guillermo Furniture was to sell more common stock to increase capital. Becoming a distributor on the side could also help with this recommendation and increase capital while pulling in profits to make up for the loss in cost of the high tech equipment. Guillermo has a great future in profitability and years of success as long as they increase their capital to allow them to re-invent their business and compete in the competitive business world of today.ReferencesBemery, D.
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