Porter Recommends That a Division with Tight Cost Control, Frequent

question 12

Multiple Choice

Porter recommends that a division with tight cost control, frequent detailed control reports, a well structured organization, and quantitatively based incentives is required for which of the following generic competitive strategies?

• A) focus
• B) differentiation
• C) cost leadership
• D) focus differentiation
• E) concentration

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Definitions:

Cost of Capital

The rate of return a company must earn on its investment projects to maintain its market value and attract funds.

Profitability Index

A financial tool used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Hurdle Rate

The minimum acceptable rate of return on an investment that a company or investor expects to achieve.

After-Tax Savings

The amount of money saved after all applicable taxes have been deducted, reflecting true savings available to an individual or entity.