Question 1

According to the BCG matrix, _____ are often market leaders, but the market they are in is not growing rapidly.
A) stars
B) question marks
C) cash cows
D) dogs

Accepted Answer

Cash cows are often market leaders but in a slow-growth market. They generate significant profits and revenue and require low investment to maintain their position.

Question 2

Which of the following observations is true of the build share objective for a strategic business unit (SBU)?
A) It sacrifices immediate earnings to improve market share and is the appropriate strategy for question marks.
B) It increases a 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.

Accepted Answer

The build share objective involves sacrificing immediate earnings to improve market share, which is appropriate for question marks that have potential for growth. It is not suitable for dogs or SBUs that the firm cannot afford to finance for growth. The objective is focused on the long-term impact on market share rather than short-term cash flow. Divesting or selling the SBU would be the opposite of the build share objective.

Question 3

In 1997, Apex Medicals Inc. sold its chemical products division because the division was showing slow growth in a market that was rapidly expanding. Apex Medicals most likely used a _____ objective with its chemical products division.
A) hold share
B) build share
C) divest
D) harvest

Accepted Answer

The decision to sell the chemical products division indicates that Apex Medicals used a divestment objective, which involves discontinuing or selling a business that is not performing well or is no longer a good fit with the company's overall goals. This aligns with the slow growth and rapidly expanding market mentioned in the scenario. The other options (hold share, build share, and harvest) involve strategies for maintaining or increasing a business's profitability, which would not have been appropriate in this case.

Question 4

In the early 1990s, Dean & Summers Inc. marketed three brands of car fresheners, Coral, White Springs, and Autumn Breeze. The car freshener industry is typically described as a low-growth industry. In 1993, Dean & Summers spent $5.1 million to advertise Coral and was rewarded with sales of over $112 million. In the same year, it spent nearly $5 million marketing White Springs, but the car freshener had disappointing sales of less than $23 million. Autumn Breeze, with hardly any promotion at all, had $1.2 million in sales. According to the BCG Portfolio Model, which of the following statements about these three products best describes them?
A) Coral is a star, White Springs is a cash cow, and Autumn Breeze is a dog.
B) Coral is a cash cow while White Springs and Autumn Breeze are both question marks.
C) Coral and White Springs are cash cows and Autumn Breeze is a dog.
D) Coral is a cash cow while White Springs and Autumn Breeze are both dogs.

Accepted Answer

Coral, with high sales and significant market share, is a cash cow, generating more revenue than the investment it requires. White Springs and Autumn Breeze, with disappointing sales and minimal promotion respectively, are dogs, indicating low market share in a low-growth industry.

Question 5

Hecter & Gable Inc. 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 was typically described as a low-growth industry. In 1993, Hecter & Gable spent $3.1 million to advertise Charms and was rewarded with sales of over $312 million. In that same year, it spent nearly $6 million marketing White Cloud, but the product had disappointing sales of less than $63 million. Lavender Days, with hardly any promotion at all, had $4.6 million in sales. According to the General Electric Portfolio Model, which of the following statements about these three products best describes them?
A) Charms was in the red zone, while White Cloud and Lavender Days were in the green zone.
B) In spite of the difference in sales, both White Cloud and Charms were in the yellow zone.
C) Due to the low market growth in the toilet paper industry, Charms was low in business strength.
D) White Cloud and Lavender Days were low in industry attractiveness and in business strength and were in the red zone.

Accepted Answer

The General Electric Portfolio Model evaluates business units on two dimensions: industry attractiveness and business strength. White Cloud, with high marketing spend but low sales, and Lavender Days, with minimal promotion and sales, both show low business strength. The low-growth industry indicates low industry attractiveness, placing both in the red zone.

Question 6

Which of the following objectives seeks to increase a product's short-term cash flow without concern for the long-run impact?
A) Hold share
B) Harvest
C) Divest
D) Build share

Accepted Answer

The objective of harvesting is to maximize short-term profits and cash flow, often at the expense of long-term growth potential. This involves reducing costs and investments in marketing and research, and focusing on getting as much out of the product as possible before eventually phasing it out. This objective is not concerned with building or maintaining market share, nor with divesting from the product altogether.

Question 7

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 terms best expresses this idea?
A) Perceptual maps
B) Economies of scope
C) Learning curves
D) Vector analysis

Accepted Answer

This concept is expressed by a learning curve, which shows how the labor hours per unit decrease as production experience increases. The other options (perceptual maps, economies of scope, and vector analysis) are unrelated to this specific idea.

Question 8

According to the General Electric Portfolio Model, what should an organization do with its strategic business units (SBUs) that fall into the yellow zone?
A) Hold share
B) Harvest
C) Divert
D) Divest

Accepted Answer

According to the General Electric Portfolio Model, the yellow zone represents SBUs with moderate potential for growth and market share. Therefore, the organization should hold share, meaning they should maintain their current investment and market position in those SBUs. This will allow the organization to generate steady profits and potentially improve the performance of those SBUs over time. Harvesting or diverting would not be appropriate choices as they involve reducing investment or resources in the SBUs, and divesting would only be necessary if the SBUs were in the red zone and had low potential for growth and market share.

Question 9

The biotechnology industry has experienced rapid growth in recent years. One of the companies at the forefront of research on diseases and insect-resistant seeds is Biocore's biotech division. The success of this division has led to many economists calling it one of the leading firms in the market. In terms of the BCG Portfolio Model, Biocore's biotech division is a _____.
A) dog
B) cash cow
C) question mark
D) star

Accepted Answer

According to the BCG Portfolio Model, a star represents a fast-growing market leader with a high market share, which accurately describes Biocore's biotech division, given its rapid growth and leading position in the market. A cash cow is a mature, high market share business with slow growth, while a question mark is a business with low market share in a high-growth market, and a dog is a business with a low market share in a low-growth market.

Question 10

A company has to take a decision on what should be done with one of its strategic business units (SBUs). The business strength of the SBU is medium and the industry attractiveness is medium. According to the General Electric Portfolio Model, it would be ideal for the company to _____.
A) hold share
B) harvest
C) build share
D) divest

Accepted Answer

In the General Electric (GE) Portfolio Matrix, a business unit with medium business strength and medium industry attractiveness is typically positioned in the "hold" category. This suggests that the company should aim to maintain its current market share without aggressively investing to grow or reduce its presence. This strategy is considered appropriate for sustaining the SBU's position in the market without significant investment.

Question 11

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

Accepted Answer

The objective of harvesting involves reducing investments in a business or product line to maximize earnings and cash flows. This may involve allowing market share to decline in order to cut costs and increase profitability. This objective is appropriate for weak cash cows, weak question marks, and dogs, which may not have the potential to generate significant market share growth or future profits. Therefore, the best choice is option B, Harvest.

Question 12

According to the General Electric Portfolio Model, what should an organization do with its strategic business units (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

Accepted Answer

According to the General Electric Portfolio Model, SBUs that fall into the red zone have low market share and low market growth. Therefore, the best option for the organization is to either harvest (reduce investment) or divest (sell off) these SBUs to minimize losses and allocate resources to higher potential areas. Holding share and building share may not be effective strategies for these SBUs as they are not in a position to generate significant returns. Building share may also require additional investment that the organization may not want to risk on low potential areas. Producing and divesting is not a clear strategy in this model.

Question 13

The BCG matrix identifies _____ as strategic business units (SBUs) that have a low share of a low-growth market.
A) cash cows
B) question marks
C) stars
D) dogs

Accepted Answer

According to the BCG matrix, dogs are SBUs that have a low market share in a low-growth market. Therefore, the best choice is D, which refers to dogs.

Question 14

According to the General Electric Portfolio Model, strategic business units (SBUs) that are high in both industry attractiveness and business strength are included in the _____.
A) yellow zone
B) blue zone
C) green zone
D) red zone

Accepted Answer

The General Electric Portfolio Model includes four zones: the green zone for SBUs with high business strength and high industry attractiveness, the yellow zone for SBUs with medium business strength and industry attractiveness, the blue zone for SBUs with high business strength but low industry attractiveness, and the red zone for SBUs with low business strength and low industry attractiveness. Therefore, the best choice is C because high industry attractiveness and business strength are included in the green zone.

Question 15

On what assumption is the BCG Portfolio Model based?
A) Profitability and cash flow will be closely related to sales volume.
B) Return on investment (ROI) will be directly related to sales volume.
C) Cash flow is equal to investment.
D) Investment + Cash flow = Profitability.

Accepted Answer

The BCG Portfolio Model is based on the assumption that profitability and cash flow will be closely related to sales volume. This is because as sales volume increases, so does the potential for profit and cash flow. The model uses market growth rate and market share to categorize a company's products or services into four categories: stars, cash cows, question marks, and dogs. The model helps companies analyze their portfolio of products or services and make strategic decisions about how to allocate resources.

Question 16

The cell phone market is experiencing rapid growth, but the cell phones made by Broadwing Inc. have such a small market share that Broadwing is looking to sell its cell phone division. According to the BCG Portfolio Model, the cell phone division of Broadwing Inc. is an example of a _____.
A) dog
B) cash cow
C) question mark
D) star

Accepted Answer

The BCG Portfolio Model categorizes businesses into Dogs, Cash Cows, Question Marks, and Stars based on their market share and market growth rate. A Question Mark is a business with low market share in a rapidly growing market, which describes Broadwing Inc.'s cell phone division. This suggests that the division has potential for growth but requires significant investment to compete with existing market leaders.

Quiz 14: Portfolio Models

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

Which of the following observations is true of the build share objective for a strategic business unit (SBU) ?

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

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

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 terms best expresses this idea?

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

A company has to take a decision on what should be done with one of its strategic business units (SBUs) . The business strength of the SBU is medium and the industry attractiveness is medium. According to the General Electric Portfolio Model, it would be ideal for the company to _____.

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?

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

The BCG matrix identifies _____ as strategic business units (SBUs) that have a low share of a low-growth market.

According to the General Electric Portfolio Model, strategic business units (SBUs) that are high in both industry attractiveness and business strength are included in the _____.

On what assumption is the BCG Portfolio Model based?

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