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In: Operations Management

this is the question 1.      How would you classify each of AHI’s business portfolios using the...

this is the question

1.      How would you classify each of AHI’s business portfolios using the BCG matrix?

2.      How would you allocate the $250m investment across the SBUs?

3.      How useful did you find the BCG matrix in helping allocate the $250m investment?

4.      Are there circumstances where the BCG matrix could be misleading (that is, suggest an investment in a low potential SBU for instance)?

Solutions

Expert Solution

1. How would you classify each of AHI’s business portfolios using the BCG matrix?

Clive’s business would be considered a low high because they are putting moneyinto their restaurants and they are creating a profit. Kristi’s business is considered a low growth business because they aren’t making money in their business. Therese is considered a high or star because they are still growing as a company and they are consulting throughout the world and are considered to be one of the market leaders withour innovative practices. Jamie’s business is like a question mark. They don’t know where they will go but they can either go up or down.

2.How would you allocate the $250m investment across the SBUs?

I would allocate the $250m investment by giving Clive’s business $100m, Kristi’s and Therese’s business each $62.5m, and $25m to Jamie’s business.

3.How useful did you find the BCG matrix in helping allocate the $250m investment?

It was useful because you can identify what businesses are making a profit and which ones are not and invest in your money in the profiting businesses to grow.

4.Are there circumstances where the BCG matrix could be misleading (that is, suggest an investment in a low potential SBU for instance)?

The BCG matrix could be misleading. For example, the term dog tends to suggest something undesirable that should be divested from the firm’s business portfolio. The reality is a dog is still likely to be quite profitable to the organization and maybe a significant player in a niche position.

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