Question

Business marketing questions

In the BCG Matrix, Cash Cows differ from Stars in that they...
(A)have less market share
(B)are in smaller categories
(C)are more profitable
(D)have greater market share
(E)are in lower-growth categories

Which of the following is considered part of both the augmented product and the actual product?

Packaging

After-sale service

Product delivery

Payment plans

Product insurance

The launch of Amazon's Echo Dot device was a downward stretching extension of the company's Echo product line, the main hardware for accessing Alexa. Which of the following is NOT a likely benefit of such an extension?

Increasing profit margins compared to other Echo products

Reaching a larger base of customers with the cheaper option

Creating an on-ramp for customers who may later buy a premium Echo product

Plugging a hole to reduce the risk of competitor entry

Answer 1

Cash cows.

Cash cows are the most profitable brands and should be “milked” to provide as much cash as possible. The cash gained from “cows” should be invested into stars to support their further growth. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share. Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating new products or processes, which may become new stars. If there would be no support for cash cows, they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment

Stars.

Stars operate in high growth industries and maintain high market share. Stars are both cash generators and cash users. They are the primary units in which the company should invest its money, because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where new innovative products can soon be outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market penetration, market development, product development

• The augmented product and the actual product are

The augmented product will be

• After-sale service
• Product delivery
• Payment plans
• Product insurance

The Actual product will be

• Packaging

• The following is NOT a likely benefit of such an extension?

• Increasing profit margins compared to other Echo products