Strategic Management Chapter 6

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QUESTION 1
In a BCG Matrix, all divisions are called question marks, stars, cash cows or dogs. Define each of these terms.
Question Marks division is Quadrant I have a low relative market share position, yet they compete in a high-growth industry. Generally these firms’ cash needs are high and their cash generation is low. These businesses are called question marks because the organization must decide whether to strengthen them by pursuing an intensive strategy (market penetration, market development, or product development).

Stars division is Quadrant II businesses (star) represent the organization’s best long-run opportunities for growth and profitability. Division with high relative market share and a high industry growth rate should receive substantial investment to maintain or strengthen their dominant positions. Forward, backward and horizontal integration: market penetration; market development; and product development are appropriate strategies for these division to consider.

Cash Cows division is Quadrant III have a high relative market share position but compete in a low-growth industry. Called cash cow because they generate cash in excess of their needs they are often milked. Many of today’s cash cow were yesterday’s stars. Cash cow division should be manage to maintain their strong position for as long as possible. Product development or diversification maybe attractive strategies for strong cash cows. However as a cash cows division becomes weak, retrenchment or divestiture can become more appropriate.

Dogs division is Quadrant IV have a low relative market share position and compete in a slow- or no-market-growth industry; there are dogs in a firm portfolio. Because of their weak internal and external position, these business are often liquidated, divested, or trimmed down through retrenchment. When division first becomes dogs, retrenchment can be the best strategy to pursue because many dogs have bounced back, after strenuous asset and cash reduction to become viable, profitable divisions. Stars II

Backward, forward, or horizontal integration
Market penetration
Market development
Product developmentQuestion marks I
Market penetration
Market development
Product development divestiture
Cash cows III
Product development
Diversification
Retrenchment
DivestitureDogs IV
Retrenchment
Divestiture
Liquidation

QUESTION 2
Explain the benefits and limitations of developing a Boston Consulting Group Matrix.

The BCG Matrix has one major benefit: draws attention to the cash flow, investment characteristics and needs of an organization’s various divisions. The division of many firms evolve over time: Dogs become Question Marks, Question Marks become Stars, Stars become Cash Cows, and Cash Cows become Dogs.

The BCG Matrix has some limitations:
1) Viewing every business as either a star, cash cow, dog or question mark is an oversimplification; many businesses fall right in the middle of the BCG Matrix and thus are not easily classified.

2) The BCG Matrix does not reflect whether or not various divisions or their industries are growing over time; that is, the matrix has no temporal qualities, but rather it is a snapshot of an organization as any given point in time.

3) Other variables besides relative market share position and industry growth rate in sales are important in making strategic decisions about various divisions.

QUESTION 3
Explain how to develop a SWOT Matrix.
Visualize your business’s strengths, weakness, opportunities and threats (SWOT) using a SWOT matrix. It can help you to understand your internal capabilities and external market conditions.
Step 1
List the firm’s key external opportunities. Draw a square containing four equal boxes. Label the boxes “Strengths,” “Weaknesses,” “Opportunities” and “Threats.” For example;
1.Population of city growing 10%
2.Rival computer store opening 1 mile away
3....
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