Strategic Management: Product Portfolio Matrix

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Questions and Answers

What happens to Stars in the long run when the growth rate slows down?

They disappear from the market

They become Cash Cows (correct)

They become Question Marks

They become Dogs

What is the primary characteristic of Stars in the BCG Growth-Share Matrix?

High market growth rate and high market share (correct)

Low market growth rate and high market share

High market growth rate and low market share

Low market growth rate and low market share

What is the characteristic of Cash Cows in the BCG Growth-Share Matrix?

Low market growth rate and high market share (correct)

High market growth rate and low market share

High market growth rate and high market share

Low market growth rate and low market share

What is the main challenge of Question Marks?

Heavy investment with low potential to generate cash Signup and view all the answers

What is the ultimate goal for business organisations with regard to Question Marks?

To turn them into Stars and then Cash Cows Signup and view all the answers

Why do Question Marks require heavy investment?

To hold their share in high-growth markets Signup and view all the answers

What can Question Marks become if left unattended?

Cash Traps Signup and view all the answers

What is the main advantage of Stars in the BCG Growth-Share Matrix?

They represent the best opportunities for expansion Signup and view all the answers

What is the primary focus of top management in an organization while making strategic decisions?

Setting objectives for the firm and its shareholders Signup and view all the answers

What are Grand Strategies also known as?

Directional Strategies Signup and view all the answers

According to Michael E. Porter, what is the primary objective of a Focus Differentiation strategy?

To differentiate products or services in a specific market segment Signup and view all the answers

What is the primary purpose of Functional Strategies?

To manage distinct functions such as Marketing, Finance, and HR Signup and view all the answers

What is the role of middle management in the strategic decision-making process?

To receive delegated tasks from top management Signup and view all the answers

What are the four generic strategies discussed by William F. Glueck and Lawrence R. Jauch?

Stability, Growth, Retrenchment, and Combination Signup and view all the answers

How can strategies be classified?

Based on levels of the organization, stages of business life cycle, and competition Signup and view all the answers

What is the primary objective of a Cost Leadership strategy?

To achieve the lowest cost position in the industry Signup and view all the answers

What is the primary purpose of the BCG growth-share matrix?

To analyze the portfolio of a company having invested in diverse businesses Signup and view all the answers

What does the vertical axis of the BCG matrix represent?

Market growth rate Signup and view all the answers

What are the primary characteristics of 'Cash Cows' in the BCG matrix?

Mature businesses with low costs and high cash generation Signup and view all the answers

What is the purpose of classifying businesses or products using the BCG matrix?

To prioritize investments in the product portfolio of a business unit Signup and view all the answers

What is represented by the horizontal axis of the BCG matrix?

Relative market share Signup and view all the answers

What type of businesses or products are represented by 'Question Marks' in the BCG matrix?

High-growth, low market share products or SBUs Signup and view all the answers

What is the benefit of using the BCG matrix in portfolio analysis?

It provides a framework for prioritizing investments in the product portfolio Signup and view all the answers

Study Notes

Strategic Management

The BCG Growth-Share Matrix is a tool for portfolio analysis of a company having invested in diverse businesses with varying scope of profits and growth.
The matrix classifies businesses on a two-dimensional growth share matrix with market share and market growth rate as the two dimensions.
The vertical axis represents market growth rate, providing a measure of market attractiveness.
The horizontal axis represents relative market share, serving as a measure of company’s strength in the market.

Types of Products or SBUs

Stars: Products or SBUs that are growing rapidly, needing heavy investment to maintain their position and finance their rapid growth potential, representing best opportunities for expansion.
Cash Cows: Low-growth, high market share businesses or products that generate cash and have low costs, established and successful, needing less investment to maintain their market share.
Question Marks: Low market share businesses in high-growth markets, requiring a lot of cash to hold their share, needing heavy investments with low potential to generate cash.
Dogs: Low-growth, low market share businesses or products.

Strategic Choice

Businesses follow different types of strategies to enter the market, stay relevant, and grow in the market.
Strategies can be classified based on levels of the organisation, stages of business life cycle, and competition.
Grand Strategies/Directional Strategies include stability, growth, retrenchment, and combination.
Competitive Strategies include Cost Leadership, Differentiation, Focus Cost Leadership, and Focus Differentiation.
Functional Strategies are meant for strategic management of distinct functions such as Marketing, Financial, Human Resource, Logistics, and Production.

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Description

This quiz is about the product portfolio matrix in strategic management, which helps organisations identify four types of products or Strategic Business Units (SBUs).