Skip to content

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

Which of the following is a recognised limitation of the BCG matrix?

A recognised limitation is that the BCG matrix assumes relative market share alone determines competitive strength and market growth alone determines attractiveness. It overlooks other factors such as synergies between units, risk and competitor behaviour, so it can oversimplify portfolio decisions.

  1. AIt cannot show the relationship between market share and cash generation
  2. BIt assumes market share is the only driver of profitability and growth rate is the only measure of market attractivenessCorrect
  3. CIt can only be applied to single-business firms
  4. DIt ignores the existence of more than one business unit

Explanation

The BCG matrix reduces attractiveness to market growth and strength to relative share, ignoring factors such as synergies, competitive dynamics and risk. It is designed for multi-business firms, so the single-business and ignoring-units options are wrong. Its core logic does link share to cash generation, so the first option is also wrong.

Did you get it right without looking?

One question tells you little. A timed set on Managing the Multi-Business Firm and Analyzing Strategic Edge shows your real accuracy, how long you take and where you lose marks.

Practise Managing the Multi-Business Firm and Analyzing Strategic EdgeFree diagnostic mock

More Managing the Multi-Business Firm and Analyzing Strategic Edge questions