Guillermo Furniture Store Concepts
In the business environment owners and managers are often confronted with many options and difficult decisions. In this report we will analyze a scenario and present concepts and principles that can assist the owner in developing success, these are the behavioral principle, the principle of valuable ideas, opportunity cost, the principle of incremental benefit, and the options principle.
In the scenario, Guillermo’s business was doing well until labor cost began to rise and foreign competitor’s sold similar products at lower costs. If Guillermo does not react soon he might lose his company.
The behavioral principle
Managers and owners are often confronted with many different and difficult decisions. The behavioral principle says that when a person is not sure what to do look at what others are doing for guidance (Emery, Finnerty, & Stowe, Chapter 2, 2007). Guillermo applies this principal by researching these foreign competitors and to determine if he should make changes in his company. One rival uses a sophisticated technology, with lasers that work on a 24-hour basis. Even though this technology cost is very expensive it would lower production costs and might be a good option. By comparing the pros and cons of the technology and production process the competitor uses he, might have similar or better ideas for his company.
The principle of valuable ideas
Guillermo has a patented unique process of coating the furniture. The principle of valuable idea states that extraordinary profits are possible with innovative ideas (Emery, Finnerty, & Stowe, Chapter 2, 2007). He has to decide whether it is in his best interest to use his unique process or sell the patent and use a similar product for his furniture.
Opportunity cost and the principle of incremental benefit
The decisions Guillermo makes...