Guillermo Furniture Store - Essay Example

Rapid globalization and fast advancing technology are vital ingredients that considerably influence performance outcome of organizations. In such an environment of competitive business, the decision making power of managerial leadership is often determined by the changing socio-cultural and economic paradigms of the region. Guillermo Furniture is also faced by such challenges where it becomes essential for the managers to evolve new strategy not only for survival but also for maintaining a competitive advantage.

Guillermo Furniture, a leading store of premium brand of furniture in Sonora, Mexico, is also facing huge problems due to fast changing external environment. Changing cost relationship and behaviour of customers in the fast transforming format of society have become critical elements for making decisions by the managers. In the recent times, the emerging new environment of high competition from overseas businesses has significantly challenged the successful running of Guillermo’s Furniture Store in Sonora, Mexico.

The advent of overseas businesses with their hi-tech gadgets and low cost goods has hugely impacted Guillermo’s business. It has not only suffered financial loss but the low cost furniture from its competitors has also resulted in loss of customers who increasingly prefer the new stores as it meets their requirements for inexpensive furniture. The low cost furniture of the competitor has necessitated priority decision making by the manager of Guillermo so it could compete effectively against them.

Another important issue that influences managerial decision making is the increasing higher cost of labor which has emerged as a result of large influx of people due to the development of nation’s headquarter in the neighborhood. The development in and around Sonora with new international airport, inexpensive housing etc., has made it highly attractive for myriad businesses and tourists. Thus, job opportunities have increased which has raised labor costs. This has compounded the problems of Guillermo, especially in the recessive environment of global economy.

Guillermo also does not want to increase its managerial responsibilities through mergers and acquisitions which have become popular way of surviving in the tough times. With increased cost of production and low profit margin, the organizational decision must be motivated by cost relationship that could help it to expand business without incurring huge expenditure. While the difference between the production cost of mid-grade and high grade furniture is relatively low, the selling price of the high grade furniture is considerably higher to the mid grade furniture.

Hence, the company should only retain high end customized furniture and use its existing network of distributors for representing foreign manufacturers. As a distributor for other major global players, Guillermo could expand its business interests which would reflect in increased profit margin. At the same time, Guillermo can divert the budget and expenses earmarked for mid grade furniture to upgrade the production facilities which would significantly reduce the production cost. Thus, Guillermo can further gain leverage in deciding the cost structure of its high end furniture and make it premium range more attractive to the customers.

Thus, cost relationships and behavior at Guillermo become important paradigms for decision making.