In the portfolio matrix, what is a 'problem child'?

A 'problem child' in the portfolio matrix refers to a business unit that is experiencing rapid growth within a market but has poor profit margins. This situation indicates that while the unit is gaining traction and increasing its market share, it is not yet profitable, which poses a significant challenge for management. The term suggests that the business has potential but requires careful attention and strategic focus to convert that growth into profitability.

In the context of strategic management, such units often need to be analyzed closely for potential investment or restructuring to improve profitability. The 'problem child' categorizes these units based on their position in the growth-share matrix, where high growth signifies a promising future while low profitability signals immediate concerns that need to be addressed. This dynamic presents a classic dilemma for management teams regarding resource allocation and strategic direction.

The other choices describe different scenarios that do not align with the definition of a 'problem child.' For instance, a business unit with high market share and profitability represents a 'star' in the portfolio matrix, while a product considered obsolete does not fit within this framework since it typically would not be actively managed for growth. A strategy to minimize liabilities pertains more to financial management than to evaluating a business unit's performance or market positioning.