INVESTMENT, PRICE AND QUALITY STRATEGIES-DETERMINANTS FOR FIRMS VIABILITY UNDER ECONOMIC CRISIS

Low interest rates and easy access to credit for a number of years prior to the crisis fueled the real estate market boom and encouraged debt-financed consumption. That led to a significant percentage of indebted population that, in turn, had to resize and restructure consumption. This reduction in aggregate consumption that manifests both quantitatively and qualitatively is also reflected in fewer jobs, higher unemployment and reduced liquidity in the banking system. As a result, demand dynamics varies both quantitatively and structurally and companies are challenged to anticipate these changes. The main decision-making tools available to firms are: investments, prices of goods produced and output structure. By using these two categories of decision-making tools, companies can optimize various economic and financial objectives (firm's value maximization, profit maximization, market share maximization, etc). In order to model these aspects, a computer program was developed to test certain assumptions about different business decisions and their impact on firm's objectives. The simulation highlights the importance of decisions on company's business objectives on a discontinuous horizon held over several periods of time.