Guillermo Furniture, Research Paper Example

As the name suggests, Guillermo furniture is a company that is located Sonora, Mexico dealing with the production and marketing of furniture products. The company is said to have been in existence for quite some time but until the year 1992, the company began to show up in their sales and profits. The company faced competition from some other companies trading with the same products in overseas and other local companies within the region.  According to the historical information about Guillermo, Sonora in Mexico was referred by many as a place of retreat for it was gorgeous. The place was known for the big furniture manufacturing company. It is said to have been on the market or the field for quite a number of years. It was known for making a variety of chairs and tables that were affordable.

In this paper, we will be able to find out how the use of performance reports would have revived the Guillermo Company on time, it will also point out how the company’s budget would have aided in the profitable decision making and the projections for the future of the company and how the multiple valuation would help in the brisk assessment and how it would have been considered in making decisions. The data too showed how budgeting and the performance documents gave directions in the formulation of the prospective strategies of the company’s success. The paper is also purposed in showing how to calculate the NPV flow (Mansfield. & Edwin, 2004.pp.114-120). Therefore any successfully planned performance results to a concise planned budget effective performance in the competitive market. The analysis in this paper will too show how the company resources were actually distributed or assigned to meet the needs of the company and also plans for the useful engagement of the surplus amounts after budgeting.

The company’s management is actually faced with a challenging task in knowing the steps to be considered to achieve greater heights. The Guillermo company managerial team has been reviewing its structure after certain periods. The purpose of the review is to improve on the company’s’ production and marketing of its products. The stiff competition from the other competitors triggers the management to come with strategies that will make them increase their output and because of the seen competition; the home town of the company became the battle ground of all the potential furniture products. The company has experienced increases on yearly basis besides the stiff competition from other competitors. This led to the increase of people within the area thus leading to an increase in the labor cost. This evidenced by the review of their financial records for a period of time. Despite the fact the costs were rising, the Gillmor Company was experiencing a loss on daily basis. Secondly the company would have used its budget and the monthly or annual performance record to come up with solid and productive decisions on the future of the company. For instance if the company would have considered using its management accounting procedures, it would have been able to identify the measures to be put in place and after proper analyzing of the information collected would have helped them fulfill their dreams. From the information on accounting, the company’s top management would have been able to determine whether they were in a profiting business or not at all based on the storekeeping data storage and analysis. The storekeeping data is thus useful for it has income statements of every particular company, the balance sheets o the running business, cash flow statements, and the income tax data in the archives (Horngren, 2009). Their assets as indicated in the financial year book have remained constant on the market in comparison to other company’s; the total current assets have increased while the company’s liabilities are seen to remain down as well as liabilities and the equity of the company. After proper analysis, the company was also supposed to be able to identify challenges or pitfalls that were facing the company and which ones therefore needed immediate attention for the survival of the company including the cost incurred in the revival of the company. Still in the review of the company’s revival, the board members ought to have sat down and drafted leading questions that would easily help the management identify the weaknesses facing their participation on the market. For instance if the questions considered were like the operation problem questions, the inefficiencies and the opportunities they have at hand. The company is said to be looking at considerations on whether it should join other international companies in their product marketing and selling activity that would be seen as a strategy to increase their income. The success of this company can be seen from an aspect of direct labor cost in the furniture stores. The company is ever striving to keep itself on the increased productivity and still working hard to get a place on the market. In another aspect of sensitivity analysis, the company evaluates the cost of debt before the taxes in relation to the rate of taxes and the weight of debt, the company is seen to be using the cost equity to measure the equity of the company. In the need to increase its productivity, an alternative approach in different ways was to be considered as the company faces the severe competition from other product producers. Therefore in this situation the maturing matching was used as an approach to effect its strategy in the production increase. From Horngron’s explanation, any control mechanism in a system is a logical integration of the techniques for collecting and using information to make decisions in planning and control decisions. This can on the other hand motivate employees in the working set up and for the evaluation of performance. Clearly designed management control system is believed to strongly support and control the decisions and conclusions made and this motivates the individuals throughout the organization. Its acts like a bearing for it can be used to project the future of any business. Therefore the company will take new bearing with the business whereby he will decide on what to do and put in place a control system that will be able to define the goals of the financial system in this particular organization. Ensure that the management understands the laid down strategies in the system for effective implementation.

The other factor is slow response to time, isolation of decision makers from results of their decisions, unwillingness to change (inertia) where the employees have the know attitude and they always think that there is no need foe change. The other important factor is cannibalization where small firms try to compete with other firms where in this situation it implies that only larger firm’s products compete with each other leaving the products from small firms to be isolated in the market. Other factors are large market share/portfolio, inelasticity of supply where the companies which depend on resource supply have problems when it comes to increasing production. Public and government opposition can also cause diseconomies of scale since such opposition is a largely function that comprises of the firms size (Mansfield. & Edwin, 2004).

Perfect competition is a market form where neither the consumers nor producers have power to influence the market prices which leads to an efficient outcome. Since in a perfect market competition the consumers and producers have no power to influence prices then indicate that the firms have no reason to advertise their products given the fact that all the goods and prices are the same. With the fact that all prices and goods are the same companies don’t advertise their products as the consumers have a right to buy whatever they like since the firms are price takers, meaning that the market sets the price for all the firms and the consumers must choose without option. In perfect market condition the consumers aim to maximum utility while producers aim to maximize profit (Mansfield. & Edwin, 2004).

In an optional WACC, the valuation techniques are considered to determine the reduction of risks. The technique of valuation is thus profitable to any business. It is to find out the deviations from the values because of the conditions on the market in the future. Relative valuation can be based on the fact that the price of an item will be the same as that one available on the market therefore the value of an item is got from comparing the prices of comparable commodities.

This paper is an analysis focused on the sensitivity of the trend of the business based recommendation for Guillermo’s furniture business. The paper recommends that Capital Company’s budgeting should be screened to ensure that everything is understood and that each option given is well analyzed and thought of correctly. Another recommendation is based on the optimal WACC in its use of multiple valuation method and discussed to guarantee there liability of the financial status.  The third recommendation is given from the view of the sensitivity analysis. Now that Guillermo is taking a new direction with his furniture business, he should be able decide on how the  implementation of  a control system which is to define the level of financial goals that are based on figures and re affirm that the managers and other staffs understand the specific motivations and activities required to achieve the set  goals. The steps considered may include the setting of goals, the planning and execution to be undertaken, measure to be considered, the evaluation strategies and reward or appraisal to the staffs that performed. The setting of goals will therefore move Guillermo towards his greatly desired profitability and because the plan is flexible and is open to any possible amendments within the organizations budget plan implementation.

Another recommendation of the most profitable financial decision has to be modeled where it will identify the business proposal and give the detailed discussions too. The team should first engage in thorough or deep assessment in the identification of the situation on the ground with effect to the business.

In conclusion, the laid plan cannot be effected due to the negative result in the project at the end of the year.

Works cited

Mansfield, S. & Edwin, T. Essential Microeconomics: Principles, Cases, Problems Mansfield, Edwin. Microeconomics: Theory/Applications. Publisher: McGraw-Hill College.9th ed.pp.30-145 (2004)