Additional videos: growth-share matrix and Heartland matrix

Question 1

What is the growth-share matrix?

Answer 1

provides insight into a firm’s product portfolio by representing it in a scatter graph based on products’ relative market shares and growth rates. Helps multi-business companies decide on how to prioritize their businesses to guide capital and talent allocation, and divestment decisions
The growth-share matrix is a corporate strategy tool as it applies to the diversified firm.

Question 2

What is the purpose of the growth-share matrix?

Answer 2

arriving at a more balanced set of cash flows and more effective talent allocation within the multi-business firm.

Question 3

Name the two components of the growth share matrix?

Answer 3

• Relative market share: product or brand’s share relative to its largest competitor.
• Market growth rate: annual rate of growth in terms of total turnover in a market category

Question 4

What does the market growth rate say about investment- and divestment decisions?

Answer 4

 More than 10% = Invest
 0-10% = Hold
 <0% = Divest

Question 5

Name the four categories in the growth-share matrix?

Answer 5

1. Stars
2. Cash cows
3. Question marks
4. Pets

Question 6

What are stars in the growth-share matrix?

Answer 6

high market shares in high-growth industry.
- Require high funding due to intense competition. Front runners due to strong unique selling point

Question 7

What are cash cows in the growth-share matrix?

Answer 7

products with high market shares in slow-growing industries.
- Milk for cash as investments are wasted on slow-growth industries

Question 8

What are question marks in the growth-share matrix?

Answer 8

low market shares in fast-growing industries.
- Starting point for most businesses.
- Careful policies can make them market leaders, but the greatest risk is escalating commitment

Question 9

What are pets in the growth-share matrix?

Answer 9

Low market share in slow-growth industries.
- Diverts managerial attention and depressing ROA.

Question 10

What is the success sequence of the growth-share matrix?

Answer 10

1. Reinvest profits from cash cows into question marks
2. This makes the question marks stars
3. Once growth in industry wanes, stars become cash cows and the cash cycle begins again.

Question 11

What is the disaster sequence in the growth-share matrix?

Answer 11

1. Companies use cash of cash cows to directly fund low Pets projects
2. Cash from star products will be appropriated, which makes them lose market shares, and turn into costly pets when the market growth rate declines