Portfolio Analysis and Price Cutting

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Questions and Answers

What is the primary objective of a 'Build' strategy in portfolio analysis?

To increase the SBU's market share (correct)

To maintain the SBU's market share

To decrease the SBU's market share

To liquidate the SBU

What are the two criteria used in the Boston Consulting Group's growth-share model?

Gross profit and market share

Net profit and market growth

Market growth and market share (correct)

Market size and market share

What is the purpose of the Boston Consulting Group's growth-share model?

To forecast market growth

To evaluate the product portfolio (correct)

To determine the SBU's competitive position

To identify the annual growth rate

What is the outcome of using a 'Build' strategy in portfolio analysis?

The SBU's market share increases Signup and view all the answers

What is the term used to describe the rate of market growth in the Boston Consulting Group's growth-share model?

Growth potential Signup and view all the answers

What is the purpose of plotting SBUs on a matrix according to the rate of market growth and their market share relative to that of the largest competitor?

To evaluate the product portfolio Signup and view all the answers

What is the name of the model used for portfolio analysis that involves plotting SBUs on a matrix according to the rate of market growth and their market share relative to that of the largest competitor?

The Boston Consulting Group (BCG) model Signup and view all the answers

What is the outcome of Freddie Laker's price cutting on the North Atlantic routes?

Freddie Laker's company was forced into liquidation Signup and view all the answers

What is the primary objective of the Hold strategy in portfolio analysis?

To maintain the current share of the market Signup and view all the answers

What is the main goal of the Harvest strategy in portfolio analysis?

To increase short-term cash flows as far as possible, even at the expense of the SBU's longer-term future Signup and view all the answers

What is the purpose of the Divest or terminate strategy in portfolio analysis?

To rid the organization of SBUs that act as a drain on profits or to realize resources that can be used to greater effect elsewhere Signup and view all the answers

What is the main limitation of portfolio analysis, according to the text?

The quality of the basic data inputs significantly influences its practical value Signup and view all the answers

Which strategy is best suited for cash cows that are weak or are in a market with limited future life?

Harvest Signup and view all the answers

What is the main objective of the Invest strategy in portfolio analysis?

To turn question marks into stars Signup and view all the answers

Which strategy is often used for question marks when there appear to be few real opportunities to turn them into stars?

Harvest Signup and view all the answers

What is the essential objective of the Divest or terminate strategy in portfolio analysis?

To rid the organization of SBUs that act as a drain on profits or to realize resources that can be used to greater effect elsewhere Signup and view all the answers

What is the limitation of using BCG matrices in making investment decisions?

All of the above Signup and view all the answers

What do Abell and Hammond highlight as the shortcomings of relying on growth-share analysis?

All of the above, including other factors influencing cash flow Signup and view all the answers

What do portfolio charts lack in terms of comparing business units?

Insight into how one business unit compares to another in terms of investment opportunity. Signup and view all the answers

What is the significance of other approaches to portfolio analysis?

They consider a broader spectrum of factors. Signup and view all the answers

What is the primary concern in using the BCG matrix?

Insufficient information for investment decisions. Signup and view all the answers

What does Abell and Hammond's 3 X 3 relative investment opportunity chart consider?

Market attractiveness and business position. Signup and view all the answers

What is the limitation of using BCG matrices in comparing business units?

It lacks insight into comparing business units in terms of investment opportunity. Signup and view all the answers

What is the primary purpose of other approaches to portfolio analysis?

To provide a more comprehensive analysis. Signup and view all the answers

Study Notes