Guillermo Furniture company financial decision analysis and recommendation

Guillermo Furniture and its owner are at a difficult crossroads, and the best financial course for both in the coming years is not immediately clear. Though the hand-made furniture business has been doing well, increasing automation in other companies and the rising cost of labor in the Sonora region where the company operates is making it difficult for Guillermo Furniture to compete, and its situation will only become more untenable in the immediate future. The owner could simply sell the company, take a nice payout and retire, but this might not be the best decision personally or financially. If he decides to keep the company going, however, he cannot continue to operate as he has in the past: either he needs to invest heavily in new automation equipment and let the majority of his loyal workforce go, or he could shift to becoming a distributor for foreign furniture companies -- a decision that would require a major business shift and also a change in the workforce, though perhaps a less disruptive one than would occur with a move to automation. Ultimately, Guillermo Furniture and its owner must consider profitability and the financial realities of the current period as well as the costs and potentials involved in each individual choice before deciding if and how the company should move forward.

Running Guillermo Furniture as a distributor rather than a manufacturer would lead to a significantly different financial position than the company currently has, with drastically reduced overhead and, with proper management, the ability to all but guarantee profitability through just-in-time practices and other means of achieving lean operations (Daneshgari & Wilson, 2009). The only major costs that the company would have aside from labor would be warehousing and transportation -- the ability to store the furniture it procures from manufacturers and the ability to deliver this furniture to retailers (or third-party wholesalers, in some cases), eliminating costs for materials, most equipment, the energy needs of the manufacturing process, and more (Daneshgari & Wilson, 2009). Becoming automated would eliminate labor costs and could reduce energy needs for the manufacturing process, but there would still be costs for materials, the manufacturing facility, and of course the equipment which would come at an enormous up-front cost and which would continue to require maintenance and replacement over the years. Either way, Guillermo Furniture will be facing the same level of competition in the increasingly intense furniture industry, and this competition will come not only in the form of vying for greater market shares and sales numbers, but also in terms of price as companies continue to find way to cut costs and deliver their products more efficiently. All of this must impact the decision that Guillermo Furniture's owner is faced with if this decision is to be made effectively.