CA Intermediate · Financial Management and Strategic Management · Strategic Choices
A Bengaluru software services firm has a business unit that holds a low relative market share in a high-growth market and needs heavy cash investment, though its future is uncertain. In the BCG matrix, how is this unit classified and what is the usual strategic option?
The unit is a question mark. It has low relative market share in a high-growth market, absorbs cash and has an uncertain future, so management must either invest to build share and turn it into a star or divest it. Dogs operate in low-growth markets.
- AStar; hold and invest to maintain share
- BCash cow; harvest and milk cash
- CQuestion mark; either invest to build share or divestCorrect
- DDog; divest or liquidate immediately
Explanation
Low relative market share with high market growth defines a question mark. Such units consume cash and the choice is to invest heavily to turn them into stars or to divest. Dogs have low share and low growth, which does not match the high-growth market described.
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