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CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge

A group has four business units with the following BCG data: Unit A: relative market share 1.8, industry growth 15%. Unit B: relative market share 0.4, industry growth 14%. Unit C: relative market share 2.0, industry growth 3%. Unit D: relative market share 0.3, industry growth 2%. Using a cut-off of 1.0 for relative share and 10% for growth, which unit is the main source of surplus cash to fund the others?

Unit C is the cash cow, with relative share of 2.0 above the 1.0 cut-off and growth of 3% below the 10% cut-off. It earns strong surplus cash with little reinvestment need, so it funds question marks and stars, which consume cash.

  1. AUnit A
  2. BUnit B
  3. CUnit CCorrect
  4. DUnit D

Explanation

Unit A (share 1.8 above 1.0, growth 15% above 10%) is a Star. Unit B is a Question mark (low share, high growth). Unit C (share 2.0, growth 3%) is a Cash cow, generating surplus cash with little reinvestment need. Unit D is a Dog. Choosing Unit A confuses Star with Cash cow, as Stars usually consume their own cash for growth.

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