ITPEC FE Morning April 2018 Question 68
Which of the following is the purpose of analyzing business plans and competitive advantages through portfolio management that uses the matrix shown in the figure?
Explanation
To evaluate the position of each business as the basis for setting objectives and prioritizing resource allocation — that is what the portfolio matrix is for.
The figure is the product portfolio management (PPM) matrix: market growth rate (attractiveness of the business) on one axis and market share (strength of the business) on the other. Each business is placed in a cell: high growth and high share is a star, low growth and high share a cash cow, high growth and low share a question mark, low growth and low share a dog. The position tells management what to aim for with each business (grow, hold, harvest or withdraw) and where to send cash and other resources first, typically from cash cows to stars and promising question marks.
Answer (d)
Why not others:
- •(a) — improving product quality to keep an edge is a tactic for one product; the matrix compares whole businesses by growth and share
- •(b) — seasonal fluctuation and geographical distribution are market analysis factors that appear on neither axis
- •(c) — watching competitors' moves to measure a promotion's effect is marketing measurement, not positioning businesses for resource allocation
Key rule: A portfolio matrix places every business on two axes, attractiveness and strength, so that resources can be shifted between businesses according to their positions.
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