In the context of the portfolio matrix, what is a cash cow?

A cash cow is defined as a business unit that generates more cash than is needed to maintain its market share. In the context of the portfolio matrix, this concept is significant because cash cows are typically established products that have a strong market presence. They usually operate in a mature market where growth is slower, but they continue to generate high revenues due to their established customer base.

The excess cash generated by a cash cow can be used to fund other business units that might require additional investment, particularly those in growth or startup phases, known as stars or question marks, respectively. This ability to fund other areas while maintaining a stable revenue stream makes cash cows essential for the overall financial health of the organization.

In contrast, the other choices describe different types of business units within the portfolio matrix. For instance, a business unit that generates equal revenue and costs does not fall into the cash cow category since it does not represent excess cash generation. A unit that requires additional investment does not align with the cash cow's primary characteristic of generating surplus cash, while a unit specializing in new product development is typically associated with growth and innovation risks, rather than the stability and reliability intrinsic to cash cows.