Deck 14: Portfolio Models

Question 1

 In the early 1990s,Dean & Summers,Inc.marketed three brands of toilet paper,Coral,White Springs,and Baldwin.The toilet paper industry is typically described as a low growth industry.In 1993,Dean & Summers spent $8.1 million to advertise Coral and was rewarded with sales of over $312 million.In that same year,it spent nearly $8 million marketing White Springs,but the toilet paper had disappointing sales of less than $63 million.Baldwin,with hardly any promotion at all,had $3.6 million in sales.According to the BCG Portfolio Model,which of the following statements about these three products best describes the situation in 1993? 

A) Coral is a star, White Springs is a cash cow, and Baldwin is a dog.
B) Coral is a cash cow while White Springs and Baldwin are both question marks.
C) Coral and White Springs are cash cows and Baldwin is a dog.
D) Coral is a cash cow while White Springs and Baldwin are both dogs.

Answer 1

D
Explanation: The BCG is based on the assumption that profitability and cash flow will be closely related to sales volume. Stars are SBUs with a high share of a high-growth market. Cash cows are often market leaders, but the market they are in is not growing. Dogs are SBUs that have a low share of a low-growth market.

Question 2

 The BCG matrix identifies _____ as SBUs that have a low share of a low-growth market. 

A) cash cows
B) question marks
C) stars
D) dogs

Answer 2

D
Explanation: Dogs are SBUs that have a low share of a low-growth market.

Question 3

 Hecter & Gable marketed three brands of fabric softeners called Charms,White Cloud,and Lavender Days in the early 1990s.The industry for fabric softeners and allied products is typically described as a low growth industry.In 1993,Hecter & Gable,spent $8.1 million to advertise Charms and was rewarded with sales of over $312 million.In that same year,it spent nearly $8 million marketing White Cloud,but the product had disappointing sales of less than $63 million.Lavender Days,with hardly any promotion at all,had $3.6 million in sales.According to the General Electric Portfolio Model,which of the following statements about these three products best describes the situation in 1993? 

A) Charms would be in the red zone, while White Cloud and Lavender Days would be in the green zone.
B) In spite of the difference in sales, both White Cloud and Charms are in the yellow zone.
C) Due to the low market growth in the toilet paper industry, Charms is low in business strength.
D) White Cloud and Lavender Days are low in industry attractiveness and in business strength and are in the red zone.

Answer 3

D
Explanation: SBUS that are low in industry attractiveness and in business strength are in the red zone. The firm will usually decide to harvest or divest these SBUs. 

Question 4

The number of labor hours it takes to produce one unit of a particular product declines in a predictable manner as the number of units produced increases.Which of the following expresses this idea?

A) Learning curves
B) Economies of scope
C) Perceptual maps
D) Vector analysis

Question 5

 According to the BCG matrix,_____ are often market leaders,but the market they are in is not growing rapidly. 

A) cash cows
B) question marks
C) stars
D) dogs

Question 6

 Which objective allows market share to decline in order to maximize earnings and cash flow and is appropriate for weak cash cows,weak question marks,and dogs? 

A) Hold share
B) Harvest
C) Divest
D) Build share

Question 7

 The cellphone market is experiencing rapid growth,but the cellphones made by Broadwing Inc.,have such a low market share that Broadwing is looking to sell its cell phone division.According to the BCG Portfolio Model,the Broadwing cellphone division would be an example of a _____.

A) dog
B) cash cow
C) question mark
D) star

Question 8

 In 1997,Apex Medicals sold its chemical products division because the division was showing slow growth in a market that was rapidly expanding.Apex Medicals used a _____ strategy with its chemical products division.

A) divest
B) build share
C) hold share
D) harvest

Question 9

 According to the General Electric Portfolio Model,what should an organization do with its SBUs that fall into the red zone? 

A) Hold share and build share
B) Harvest or divest
C) Produce and divest
D) Build share and harvest

Question 10

 The biotechnology industry has experienced rapid growth in recent years.One of the companies at the forefront of research on disease and insect-resistant seeds is Biotex's biotech division.The success of this division has led to many economists call it one of the leading firms in the market.In terms of the BCG Portfolio Model,Biotex's biotech division is a _____.

A) dog
B) cash cow
C) question mark
D) star

Question 11

 According to the General Electric Portfolio Model,what should an organization do with its SBUs that fall into the yellow zone? 

A) Hold share
B) Harvest
C) Divert
D) Divest

Question 12

 On what assumption is the BCG Portfolio Model based? 

A) Profitability and cash flow will be closely related to sales volume.
B) ROI will be directly related to sales volume.
C) Cash flow is equal to investment.
D) Investment + Cash flow = Profitability

Question 13

 Which of the following observations is true of the "build share" objective? 

A) It sacrifices immediate earnings to improve market share and is the appropriate strategy for question marks.
B) It increases the product's short-term cash flow without concern for the long-run impact.
C) It involves selling or divesting the SBU because better investment opportunities exist elsewhere.
D) It is very appropriate for dogs and those question marks the firm cannot afford to finance for growth.

Question 14

 Which of the following objectives seeks to increase the product's short-term cash flow without concern for the long run impact? 

A) Hold share
B) Harvest
C) Divest
D) Build share