Question

Blink Dream has four strategic business units (SBUs)—accommodation, insurance, music, and publishing. Its publishing unit has always made large profits and holds a large market share in its slow-growing market. In the context of the BCG matrix, which of the following categories of SBUs best describes the publishing unit?

Answer 1

Answer: The options are given below:

A) Dogs

B) Question marks

C) Stars

D) Cash cows

The correct option is D. Cash cows.

Explanation:

Products that are in slow-growing markets, but for which the company has a relatively large market share are considered Cash Cows, and it is expected of the company to milk the cash cow for as long as it can.

Cash cows, are typically leading products in markets that are mature.

Generally, a product that is designated as a Cash Cow will generate returns that are higher than the market's growth rate and sustain itself from a cash flow perspective.

The product should be taken advantage of for as long as possible. The value of cash cows can be calculated easily because their cash flow patterns are highly predictable.

In summary therefore, low-growth, high-share Cash Cows should be continuously milked for cash in order to reinvest in high-growth, high-share Stars that have a high future potential.