Chapter 12, Problem 12.31E

Analysis of growth, price-recovery, and productivity components (continuation of 12-29 and 12-30). Suppose that during 2017, the market for architectural jobs increases by 10%. Assume that any increase in market share more than 10% and any decrease in selling price are the result of strategic choices by Compton’s management to implement its strategy.

Calculate how much of the change in operating income from 2016 to 2017 is due to the industry-market-size factor product differentiation, and cost leadership. How successful has Compton been in implementing its strategy? Explain.