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Guillermo Furniture Store Concepts - Essay Example
Author : braulioondricka
Finance & Accounting
Pages 3 (753 words)
Guillermo Furniture Store Concepts Paper Introduction Manufacturing units are usually located where raw material supplies are available in abundance and laborers are relatively inexpensive, particularly, when manufacturing process needs plenty of them. Exactly same is the case with Guillermo Navallez in locating its furniture manufacturing unit at Sonora in Mexico where these two conditions are met in a perfect manner…
The labor component in furniture manufacturing, in case of Guillermo, is substantial because all its products are hand-crafted and the company has no way to control its labor cost. On the contrary, it is on increase due to influx of other businesses for the favorable conditions in the region. Financial Concepts Involved Guillermo has to view the whole business scenario from a different perspective. If the company decides to be high-tech just like its competitor to replace its costly labor, then the company needs to estimate the risk-return trade-offs as making the company automated will require huge capital investment. In this process, Guillermo will need to apply numerous financial concepts to arrive at the conclusion whether it is worth investing huge capital to thwart the challenge posed by the competitor. First of all, the company needs to undertake a detailed budgeting exercise to evaluate the viability of high-tech model of manufacturing in its case. ...