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Zentra Group owns a regional bakery chain with a high relative market share in a market growing at 2% a year. The business generates strong surplus cash with little need for reinvestment. Under the BCG matrix, how should the business be classified and what is the usual implied strategy?

The bakery chain is a cash cow because it has high relative market share in a low-growth market. It generates surplus cash with little reinvestment need, so the usual strategy is to hold or harvest it and use the cash to fund other units in the portfolio.

  1. ACash cow; hold or harvest and use its surplus cash to fund other unitsCorrect
  2. BStar; invest heavily to maintain share in a growing market
  3. CQuestion mark; decide between investing selectively or divesting
  4. DDog; divest or close because it earns low returns

Explanation

High relative share combined with low market growth defines a cash cow. It generates more cash than it needs, so the usual strategy is to maintain it efficiently and use the cash elsewhere. A star would need high market growth, so option B is wrong because growth here is only 2%.

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