Optimum interplay of price, sales staff and advertising to maximize expected return on investment given a budget constraint over discrete points in time

• Main Authors: Cheung, Amparo, Ong, Dianne Karem
• Format: text
• Language: English
• Published: Animo Repository 1997
• Subjects: Rate of return; Advertising—Rate of return; Corporations—Finance; Industrial Engineering
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/4099
• Institution: De La Salle University

Corporate financial planning models act as a dynamic model of the firm. It correctly represents the different parameters affecting its over-all profitability. Such an abstraction is useful for exploring the full financial effect of a given action. Definition of parameters are needed to help the firm decide how these parameters act in relation to the fulfillment of the objective. The different parameters that are taken into consideration are price, sales staff and advertising level. The primary objective of the firm is to maximize its return on investment by having an optimum interplay of price, sales staff and advertising level given a budgetary constraint over discrete points in time. This study based its premise on the growing need for a solid base strategic planning of the firm. The development of new products is central to the continued profitability and indeed ultimately the survival of any company. The whole project life is taken into consideration in evaluating the cost allocation of a product. The continued support given to the product is central to the continued profitability of the firm and indeed ultimately to the survival of any company. The study would encourage a global or overall viewpoint in the analysis of the demand patterns and enhances the likelihood of capturing the full financial impact of a proposed course of action. Budgetary constraints are important parameters to be considered to give focus on a more realistic representation of the model developed. The interplay of these disciplines would reflect a full-range financial plan necessary for the entire planning horizon. A hypothetical situation was developed and from there, the formulated model was applied to test the validity of the model formulated. The formulated model was validated using the software SolverQ and the optimum price and advertising units were obtained. A sensitivity analysis was done to determine the behavior of the different parameters considered.