Skip to content

CA Intermediate · Financial Management and Strategic Management · Strategic Analysis: Internal Environment

Rohan Foods, a packaged snacks maker, has one product that sells well in a market growing slowly, and where it holds a large relative market share. It generates surplus cash but needs little reinvestment. In the BCG matrix, how is this product classified and what is the usual strategic stance?

The product is a cash cow because it has a high relative market share in a low-growth market. It generates surplus cash with little reinvestment, so the usual stance is to maintain or harvest it and use the cash to fund stars or promising question marks.

  1. AStar: invest heavily to maintain share
  2. BQuestion mark: invest selectively or divest
  3. CCash cow: harvest or maintain and use cash elsewhereCorrect
  4. DDog: divest or liquidate

Explanation

High relative market share with low market growth defines a cash cow. Such businesses generate more cash than they need, so the usual stance is to maintain position and use the surplus to fund stars or question marks. A star would need high market growth, which is absent here.

Did you get it right without looking?

One question tells you little. A timed set on Strategic Analysis: Internal Environment shows your real accuracy, how long you take and where you lose marks.

Practise Strategic Analysis: Internal EnvironmentFree diagnostic mock

More Strategic Analysis: Internal Environment questions