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NEW QUESTION: 1
A. No
B. Yes
Answer: B
NEW QUESTION: 2
A. Option A
B. Option D
C. Option C
D. Option B
Answer: C
NEW QUESTION: 3
A firm has a strategic business unit (SBU) that has a low market share in a high growth market. To maintain even this low share of the market requires the firm to commit a significant amount of cash. The firm might successfully adopt a build strategy for this unit if the:
I. SBU shows a strong potential to grow and obtains a significant share of the market.
II. Firm can finance its growth.
III. Firm expects a short-term increase in cash flow.
IV.
Firm is willing to forgo short-term earnings.
A. II and Ill only.
B. I, II, and IV only.
C. Ill and IV only.
D. I only.
Answer: B
Explanation:
One of the two portfolio models most frequently used for competitive analysis was created by the Boston Consulting Group (BCG). This model, the growth-share matrix, has two variables. The market growth rate (MGR) is on the vertical axis, and the firm's relative market share (RMS) is on the horizontal axis. The growth-share matrix has four quadrants. The firm's SBUs are commonly represented in their appropriate quadrants by circles. The size of a circle is directly proportional to the SBU's sales volume. Question marks (low RMS, high MGR) are weak competitors in high-growth markets. They need large amounts of cash not only to finance growth and keep pace with the market but also to increase RMS, but do poorly in cash generation. If RMS increases significantly, a question mark may become a star. If not, it becomes a dog. A build strategy is necessary for a question mark with the potential to be a star. Consequently, a firm may adopt a build strategy for this type of SBU if it shows a strong potential to grow, if the firm is willing to forgo short- term earnings and cash flow, and if the firm is willing and has the capacity to finance its growth. However, a firm that expects only a short-term increase in cash flow may adopt either a divest or a harvest strategy but not a build strategy. This type of SBU needs a lot of cash flow to finance its growth.
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