Question

Fernando was thrilled to find out that his company had just decided to invest a great deal of money in the product he was managing. He knows that even with its recent high rate of growth and the fact that it dominates its market, he would need more money to establish it firmly. Using the BCG portfolio analysis, his product would be classified as a(n) __________.

Answer 1

Answer:

Star.

Explanation:

The BCG Matrix (Boston Consulting Group) can be used to determine what priorities should be given in the product portfolio of a business unit which will further help us to decide which of the business units to fund, how much to fund; and which units to sell.

To ensure long-term value creation, a company should have a portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash.

Classification of products:

-Cows.

-Dogs.

-Question marks.

-Stars. Are leaders in the business. they generate large amounts of cash because of their strong market share, but also consume large amounts of cash because of their high growth rate.

If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation.