University of Phoenix Material
Guillermo Furniture Scenario
Sonora, Mexico, is a beautiful vacation spot, but it is also a large furniture manufacturing location in North America. Guillermo Navallez made furniture for years near his Sonoran home. The area had a good supply of timber for the variety of tables and chairs produced by his company. Labor was also relatively inexpensive. In addition, he priced his handcrafted products at a slight premium for the quality they represented.
In the 1990s, two forces combined to cause a large dent in Guillermo’s business. First, a new competitor from overseas entered the furniture market. Using a high-tech approach, this foreign competitor provided furniture to exact specifications and did so with rock-bottom prices. Second, the sleepy communities in Sonora woke up. One of the largest retailers in the nation’s headquarters was just a few ...view middle of the document...
Guillermo is not looking to expand his management responsibilities by acquiring another organization either; that could affect his time with his family in negative ways.
Guillermo spent some time looking at the foreign competition and their high-tech solution. The competition’s production essentially utilizes a computer-controlled laser lathe to produce exact cuts in the wood. Highly automated, the plant in Norway utilizes very little labor as robots perform the precise movement and assembly functions. The cost of the technology is immense, as is the reduction in the labor needed for production. In addition, the production may move between products quickly, and it runs on a 24-hour basis as the shift differentials are more than offset by the reduction in labor. Converting his production to this model would be expensive, but Guillermo saw how he could dramatically decrease his production costs.
When talking to some of his distributors about their wants, Guillermo had another idea that appealed to him. A second competitor, currently operating only in Norway, has been looking for channels to distribute in North America. This second potential rival, however, does not operate furniture outlets; instead, the company relies on chain distributors. Perhaps Guillermo could coordinate his existing distributor network and essentially become a representative for this other manufacturer. Although he may retain some of the high-end custom work, Guillermo could move his company from primarily manufacturing to primarily distribution.
Guillermo also has a patented process for creating a coating for his furniture. The process first creates a common flame-retardant coating, and after further processing, the coating is stain resistant. There is a market for the flame-retardant coating, but not as much of a market for the finished coating. There is another product that Guillermo could buy to apply to his furniture, and that would add the same amount of value for the furniture.