Why might an analyst incorporate the$$ industry$-$market$-$size factor and the interrelationships among the$$ growth, price$-$recovery, and productivity components into a strategic analysis of operating$$ income?

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Part $1$

A$.$

An analyst can incorporate other factors such as the growth in the overall market and reductions in selling prices resulting from productivity gains into a strategic analysis of operating income. By doing$$ so$,$ the analyst can attribute the sources of operating income changes to particular factors of interests. For$$ example, the analyst will combine the operating income effects of strategic price reductions and any resulting growth with the productivity component to evaluate a$$ company's cost leadership strategy.

B$.$

An analyst could analyze the effects of growth in industry market size and any change in prices of inputs to evaluate a$$ company's product differentiation strategy.$$ But, this is an internal measurement strategy and will not have an impact on the overall operating income.

C$.$

An analyst would not incorporate the$$ industry$-$market$-$size factor and the interrelationships among the$$ growth, price$-$recovery, and productivity components into a strategic analysis of operating income. There is no reasonable and reliable way to measure each of the components.

D$.$

An analyst would not incorporate the$$ industry$-$market$-$size factor and the interrelationships among the$$ growth, price$-$recovery, and productivity components into a strategic analysis of operating income. There is no relationship between the$$ industry$-$market$-$size factor and the other components.