Question

QUESTION 1 30 points You are in charge of corporate investments at K&S (a fictitious company), a company whose business portfolio is well-diversified. The company currently has five major products-which constitute as many SBUS-Fansi (oeline fashion retailing), Homi (housekeeping), Gole (organic supermarket chain), FF (fast food restaurant chain), and EZ (hotel chain) Fansi has known a modest but consistent sales volume makingg this SBUS self-sufficient when it comes to investment. However, the rise of protectionism across to the globe has led to a disappointing market growth recently (0.6 % a year since 2016). Fansi has been and continue to be the leader of onlines fashion retailing with a market share three times as important as its first rival in the market. Homi is the newest addition to the business portfolio of K & S. While the housekeeping business has been uneventful for many years, the growing use of environment-friendly products has helped boost demand. The latest statistics one the housekeeping industry suggest a market growth of 15% compared to last year. As Homi is a late comer on the market, its market share is about a quarter of the leading competitor Gole has great potential considering that the demand for organic product is growing rapidly (19% a year). Gole owns 50% market shares but has to account for two competitors, OrgaFood and WholeGoods, who are currently battling for the second place. OrgaFood ouns 30% market shares and WholeGoods owns 20% market shares. Gole's marketing department recommended to keep selling prices constant despite a recent increase in baying prices. As such, Gole is not currently capable of producing enough cash flow to sustain its expansion. FF is the leader of the restaurant chain market with 40% market share while the leading challenger controls only 10% FF can pride itself on a large sales volume and on producing about $4,000,000 in cash flow which represents as much money that can be used right now for anything. However, fast food has become less and less popular as the market decreased by 7% compared to last year EZ, while having a modest sales volume, is in a market that is not growing at all due to the rise of online service such as Airbnb enabling people to rent their own place for a short period. Furthermore, EZ owns 20% of the hotel market, which is 2 times less than its main competitor. EZ has negfigible cash flow While all SBUS could beneficiate from investments, corporate management has an amount of about 6 million dollars is available but cannot be split among several SBUS. You think that using a grow-share matrix will help you make a sound decision as to which of the five SBUS vou should choose to invest in. Questions: star, a question mark, or a dog, and systematically cxplain your answer in terms 1. Use a grow-share matrix to categorize cach of the SBUS as a cash cow, of market growth rate and relative market share. (5 points SBU) 2. Then, decide which onefs) should receive the investment and explain your choice. (5 points) Save and Subemit Cose iWokoes Sve Al Anvwers Click Save and Submit to aave and sdmit. Click Sue AlL Ansuers to sace all anncers.

Answer 1

A) Looking at the data above, the following can be derived for all SBUs:

1. Fansi - Market Share - leader , Growth - on a declining side

2. Homi - Market share - low, Growth - on a upward side

3. Gole - Market share - leader, growth - High

4. FF- Market Share - leader , growth - declining

5. EZ - Market Share - bad, Growth - Bad

Hence, as per the matrix given by BCG, the following SBUs classification should be:

1. FANSI - Cash Cows

2. Homi - Question Marks

3. Gole - Stars

4. FF- cash cows

5. EZ - Dogs

B) Since the amount available for investment is limit, the amount should be invested in such a way, that the overall company benefits, EZ business performance and market share has been declining due to coming up of new startups. Hence, business requires a complete revamping or selling of would be one more idea.

Secondly, Fansi as a division, seems self sufficient with a high market share and growth. FF division should also be taken out as om option, since it is already producing good cash flows which can be reinvested to get higher growths.

The Gole division is the star SBU of the company showing a high groth potential followed by the Homi division where optimum investment could results in overall betterment.