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CA Intermediate · Financial Management and Strategic Management · Strategic Choices

A diversified Indian group has a business unit making feature phones. Its market share is low relative to the leader, the market is growing slowly, and the unit needs funds just to keep going without generating surplus. Which BCG matrix category does it belong to, and what is the usual advice?

The unit is a dog in the BCG matrix because it has low relative market share in a slow-growing market. Dogs generally trap cash without producing surplus, so the usual advice is divestment or liquidation, unless the unit offers some strategic benefit to the group.

  1. ADog; divest or liquidate unless it has strategic valueCorrect
  2. BQuestion mark; invest heavily to build share
  3. CCash cow; harvest and use the cash elsewhere
  4. DStar; invest to hold the leading position

Explanation

Low relative market share combined with low market growth defines a dog. Such units typically consume more than they generate, so divestment or liquidation is the usual suggestion. A question mark would have high market growth, and a cash cow would have high relative share.

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