CA Intermediate · Financial Management and Strategic Management · Strategic Choices
A BCG matrix analysis shows that Product Z of Lakshmi Foods has a low relative market share in a market growing at a very high rate, and it consumes large cash. Management is unsure whether it will become a leader. How is Product Z classified and what is the usual advice?
Product Z is a question mark. Low relative market share combined with high market growth means it absorbs a lot of cash with an uncertain future, so management should either invest selectively to build share or divest it.
- AStar; hold and invest to maintain share
- BQuestion mark; invest selectively to build share or divestCorrect
- CCash cow; milk for cash with minimal investment
- DDog; harvest or divest immediately
Explanation
Low relative share with high market growth is a question mark (problem child). It needs heavy cash, so the choice is to invest to build share or divest. A star has high share, a cash cow has high share in low growth, and a dog has low share in low growth.
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