May 28, 2013
Guillermo Furniture Store Concepts Paper
Guillermo’s large Manufacturing Company is located in Sonora, Mexico. During late 1990’s. Guillermo profit margins started shrinking and cost start to go up. Guillermo started to look at make some changes to his company in order to stay in business.
The Behavioral Principle
The behavioral principle states if a person is unsure of what to do look at what everyone else is doing for guidance. Guillermo needs to determine what would be best for his business to be just as successful as or better than his competitors would. Guillermo should consider making changes to his business, as coordinating his existing distributor network and essentially becoming a representative for another manufacturer (University of Phoenix, 2013). Guillermo should also reconstruct his company from a manufacturing company to a distribution company. When applying the behavioral principle the first step is to decide whether the company you want to imitate is the best company to follow. The second step is to “determine from their action what your best course of action would be” (Emery, Finnerty, & Stowe, 2007).
The Principle of Valuable Ideas
The principle of valuable ideas is to have a new products or services that is unique from competitors and will add value to the business. Guillermo has a unique patented method for constructing a coating for the furniture. Guillermo should consider expanding his business by making other wood products.
The Options Principle
The option principle is, “The right to buy is a call option, and the right to sell is a put option (Emery, Finnerty, & Stowe, 2007). Guillermo has the option to expand his business to make more money or do nothing. Guillermo knows he want to make changes to the business to increase revenue but he is not aware of his options.
The Principle of Incremental Benefits
The principle of incremental benefits is determining what net extra cost use to improve a business. Guillermo is not willing to sacrifice one option for the other. Guillermo knows his competitors are consolidating their smaller businesses into larger organizations, but he is not willing to invest the money he has to expand his management responsibilities. By reinvesting the money from his business, will increase profitability. Guillermo is worried about incurring additional sunk cost. The sunk cost has already occurred and not matter what he does this will not change that fact. Guillermo has an emotional attachment to sunk cost. This emotional attachment causes him to continue to incur an opportunity cost. He does not want all his time taken up by the business. Then he would not have time to spend with his family.
The Principle of Risk-Return Trade-off
The principle of risk-return trade off says that if you want to have a chance at some great outcomes, you have to take a chance on having a bad outcome (Emery, Finnerty, & Stowe, 2007). No matter what decision or choice you make