The purpose of business portfolio analysis is to Multiple Choice
add or delete product line and brand extensions.
search for growth opportunities from among current and new markets as well as current and new products.
alter a product’s characteristic, such as its quality, performance, or appearance, to increase its value to customers and increase sales.
determine which strategic business unit or offering generates cash and which one requires cash to fund the organization’s growth opportunities.
seek opportunities by finding the optimum balance between marketing efficiencies versus R&D-manufacturing efficiencies.
The Correct Answer and Explanation is :
Correct Answer:
determine which strategic business unit or offering generates cash and which one requires cash to fund the organization’s growth opportunities.
Explanation:
Business portfolio analysis is a strategic management tool used by organizations to evaluate their various business units, products, or services in terms of profitability, market potential, and resource allocation. The primary goal is to determine which units generate cash and which ones need investment for growth. This evaluation helps businesses make informed decisions about allocating resources effectively to maximize profitability and ensure sustainable growth.
One of the most widely used models for portfolio analysis is the Boston Consulting Group (BCG) Matrix, which categorizes strategic business units (SBUs) or products into four quadrants based on their relative market share and market growth rate:
- Stars: High market share in high-growth markets. These require significant investment to maintain growth but also have the potential to become cash cows in the future.
- Cash Cows: High market share in low-growth markets. These generate more cash than they consume, making them the primary source of funding for other units.
- Question Marks: Low market share in high-growth markets. These are potential opportunities that require investment to grow market share but carry a high level of risk.
- Dogs: Low market share in low-growth markets. These typically generate little profit and may be candidates for divestment.
By analyzing its portfolio, a business can identify areas for growth, assess which units or offerings should receive further investment, and decide which to phase out or restructure. This process ensures that the organization maintains a balanced and profitable portfolio, aligning resources with strategic goals.