Latin American Company Strategies in the Financial Crisis

Abstract

This article presents a conceptual basis for developing a corporate strategy to respond to a financial crisis, and an empirical examination of strategic moves undertaken by a number of large Latin American (Mexican) firms during the crisis and subsequent recession. A framework for thinking about this problem is the Cost–Revenue–Risk (CRR) view,¹ which focuses on the firm’s costs, revenues, and risks. This framework is elaborated in the article, and then applied empirically to six companies in Mexico, looking at their responses to the crisis initially and after one year. In addition, the firms listed on the Mexican stock exchange are examined to see if the strategies used by the interview sample also contribute to performance of the larger group of firms—which they do. In the sample of listed Mexican firms, both sectoral diversification and cross-country diversification turned out to be significant contributors to explaining relative firm performance during the crisis.