Skip to content

CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge

Under Porter's value chain, the margin is best described as:

Margin in the value chain is the difference between the total value buyers are willing to pay and the collective cost of performing all the value activities. It reflects the surplus the firm retains, not a return ratio or a comparison of activity categories.

  1. ATotal cost of all primary activities only
  2. BDifference between total value created and the total cost of performing the value activitiesCorrect
  3. CProfit after tax divided by capital employed
  4. DCost of support activities less cost of primary activities

Explanation

Porter defines total value as what buyers are willing to pay. Margin is the difference between that total value and the collective cost of performing the value activities. It is not a return ratio, and it is not a comparison of primary versus support costs.

Did you get it right without looking?

One question tells you little. A timed set on Managing the Multi-Business Firm and Analyzing Strategic Edge shows your real accuracy, how long you take and where you lose marks.

Practise Managing the Multi-Business Firm and Analyzing Strategic EdgeFree diagnostic mock

More Managing the Multi-Business Firm and Analyzing Strategic Edge questions