Discuss the corporate portfolio matrix and the Boston Consulting Group (BCG) matrix
What will be an ideal response?
Answer: When an organization's corporate strategy encompasses a number of businesses, managers can manage this collection, or portfolio, of businesses using a tool called a corporate portfolio matrix. This matrix provides a framework for understanding diverse businesses and helps managers establish priorities for allocating resources.
The first portfolio matrix–the BCG matrix–was developed by the Boston Consulting Group and introduced the idea that an organization's various businesses could be evaluated and plotted using a 2 × 2 matrix to identify which ones offered high potential and which were a drain on organizational resources. The horizontal axis represents market share (low or high) and the vertical axis indicates anticipated market growth (low or high). A business unit is evaluated using a SWOT analysis and placed in one of the four categories: dogs, cash cows, stars, and question marks.
a. Dogs - They should be sold off or liquidated as they have low market share in markets with low growth potential.
b. Cash Cows - These have low anticipated growth rate but high market share. Managers should "milk" them for as much as they can, limit any new investment in them, and use the large amounts of cash generated to invest in stars and question marks with strong potential to improve market share.
c. Stars - These have high anticipated growth rate and high market share. Heavy investment in stars will help take advantage of the market's growth and help maintain high market share. The stars eventually develop into cash cows as their markets mature and sales growth slows.
d. Question Marks - These have high anticipated growth rate but low market share. The hardest decision for managers relates to the question marks. After careful analysis, some will be sold off
and others strategically nurtured into stars.
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The best example of a firm following a cost-leadership business strategy is
A) Mercedes Benz. B) Macy's. C) Ryanair. D) Rolls Royce.
Billy Bob's swamp racers are the fastest swamp mud racing machines in the country. Unfortunately drivers have to be careful because they are easily tipped over due to their high center of gravity
This is unfortunate because most swamp mud racers consider stability an important quality in their racers. Billy Bob has installed numerous decals in prominent places that state, "This sucker turns over easily but goes really fast." Still, Billy Bob could be sued for product liability under: A) negligent manufacturing. B) failure to warn. C) implied warranty to perform. D) negligent design.