Guillermo Furniture Store case study analysis

¶ … Relationships and Control Systems

The Guillermo Furniture Store, owned and managed by Guillermo Navallez, is facing a drastic change in his business due to outside pressures from foreign competitors, as well as internal tensions from rising labor costs brought on by expansion in the region's population and economy. The owner has several choices available that would seem to make his business more successful in the long-term, each with their own advantages and disadvantages in terms of initial cost, ongoing costs, delays, and profit potential. The varying cost effects of these options will necessarily have a major impact on the decision-making process and the ultimate trajectory of the Guillermo Furniture Store, and the use of a cost control system will also be a necessary element of the long-term plan for any change made.

Guillermo's decision making prerogatives must take into account long-term sustainability of the company in addition to short-term increases in his profit margin. Shifting to a primarily distribution-focused business for foreign manufacturers would greatly reduce the costs of running the business, but would lead to major and largely unpredictable changes in profit potential and cash flow for the business. Shifting to a robotic production line presents enormous up-front costs to the Guillermo Furniture Store, but greatly reduces long-term productions costs and increases the profit margin for the business. The final price of the sale item is of less importance in the cost relationships and decision-making processes than the cost of production, which is the major cause of the firm's current financial straits as even the competition is driven by cheaper production methods.

Implementing a control system that is resource-focused, then, will be most effective for the Guillermo Furniture Store's continued success. An exacting and precise account of capital and other resources and their profit-generating potential in various applications is of vital importance during the change process that this firm is facing, and in the ongoing operations of the organization if it hopes to achieve the level of success it held in previous years. Especially if the owner/manager decides to keep the company focused on production rather than distribution, the control system utilized will need to be coupled with sufficient operational adaptability in the day-to-day functioning of the organization in order to shift production to most efficiently and effectively utilize resources. As the Guillermo Furniture Store is not aiming at a unique niche in the market, its patented finishing process not being hugely in demand, price is very much at the mercy of the market. Thus, production cost controls more than pricing controls must be the most salient and prominent feature of the control system adopted by the Guillermo Furniture Store for its continued success.