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ACCA Strategic Professional · Strategic Business Leader · Strategic choices

Halvorsen plc, a diversified group, has a business unit with low relative market share in a fast-growing market. It currently consumes more cash than it produces. The board believes the unit could become a market leader only with major investment that the group cannot afford alongside other priorities. Which BCG-based recommendation is most consistent with this analysis?

The unit is a question mark, with low relative share in a high-growth market and negative cash flow. BCG logic says to invest heavily to build share or divest. Since the group cannot fund the investment needed, divestment or only selective investment is the consistent recommendation.

  1. ATreat it as a cash cow and reduce investment to harvest cash
  2. BTreat it as a star and keep funding it with cash from the cash cows
  3. CTreat it as a question mark and divest it, or invest selectively if the group can fund share gainCorrect
  4. DTreat it as a dog and withdraw immediately because market growth is irrelevant

Explanation

Low share in a high-growth market is a question mark. The BCG choice is to invest to build share or to divest. As the group cannot afford the large investment, divestment is consistent. Option D misclassifies it as a dog, which sits in a low-growth market.

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