Which managerial tool is focused on best practices in both cost and effectiveness?

The correct answer is benchmarking, which is a process of comparing a company’s performance metrics to industry bests and best practices from other companies. This managerial tool helps organizations identify areas where they can improve efficiency and effectiveness by learning from higher-performing peers. By focusing on both cost and effectiveness, benchmarking encourages organizations to assess how they perform against the best in the industry, thus driving improvements in their operations and strategic initiatives.

While activity-based costing is useful for understanding the true costs of activities and ensuring that pricing strategies cover costs adequately, it doesn't directly focus on comparing effectiveness and best practices across the industry. Similarly, SWOT analysis concentrates on identifying internal strengths and weaknesses as well as external opportunities and threats but does not specifically guide toward best practices or cost-effectiveness. Competitive strength analysis evaluates a company's competitiveness in the market but does not inherently center on learning from the best practices elsewhere. Therefore, benchmarking stands out as the tool specifically aimed at achieving both cost efficiency and effective operational strategies by leveraging insights from industry leaders.