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

Kaveri Industries has four units. Unit P has relative share 0.4 and growth 15%; Unit Q has relative share 2.0 and growth 12%; Unit R has relative share 1.8 and growth 3%; Unit S has relative share 0.3 and growth 2%. Cut-offs are 1.0 for share and 10% for growth. Which strategy is most consistent with BCG prescriptions for the whole portfolio?

Use cash from R to fund selected investment in P and Q, and consider divesting S. R is a Cash Cow, Q a Star, P a Question Mark and S a Dog. BCG logic funds growth units from the Cash Cow and exits Dogs.

  1. AUse cash from Q to fund P and R, and divest S
  2. BUse cash from R to fund selected investment in P and Q, and consider divesting SCorrect
  3. CUse cash from S to fund R and Q, and harvest P
  4. DUse cash from P to fund Q, and expand S

Explanation

P is a Question Mark, Q a Star, R a Cash Cow and S a Dog. BCG logic is to milk the Cash Cow (R) to finance Question Marks with potential (P) and Stars (Q), and to divest or harvest Dogs (S). The other options reverse the cash flow direction or put money into a Dog.

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