CA Intermediate · Financial Management and Strategic Management · Strategic Choices
A cement company with a large market share in a slow-growing market uses a BCG matrix. One of its product lines has high relative market share but the industry growth rate is low. The recommended strategic stance for this business is generally to:
A business with high relative market share in a low-growth market is a Cash Cow in the BCG matrix. It generates more cash than it needs, so the firm should hold or harvest it and use the surplus to fund Stars or promising Question Marks.
- AInvest heavily to build share rapidly
- BHarvest or hold to generate cash for other businessesCorrect
- CDivest immediately because it drains cash
- DRestructure it into a question mark
Explanation
High relative share with low market growth is a Cash Cow. Cash cows need little investment and generate surplus cash, so the firm holds or harvests them to fund Stars and selected Question Marks. Divesting immediately is advised for Dogs, not cash cows.
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