I don't know who decided (between Perez and Ancelotti), but Real Madrid made a mistake by being stingy with their spending last season, and they underestimated the conditions they are facing. They have the opportunity to bring in new players in the January transfer window, but they didn't take advantage of it, though they still have enough budget to spend.
Real Madrid management is very conscious about spending money. Madrid management does not spend money unnecessarily. Madrid did not spend much money to add new players to the squad last season. There were enough reasons for this.
Yeh this is the biggest mistake of real madrid and even due to that mistake they were unable to won La Liga, UCL or Copa del rey. They already knew it that so many players were injured and couldn't play for end of the season so why didn't they sign any players. Already real madrid have fair enough budget to sign few player to replace with injuries players, but they didn't sign any single player in winter transfer window. The management should have bothered a little and signed some players and removed the weaknesses. But the management staff showed great weakness and forced the team to perform poorly by not making any signings. The blame for real madrid poor quality goes to the management system. They had a good budget but did not sign any players.