RE: Disappointing end to the year :o(31 Dec 2021 16:55
Problem Child sums it up quite nicely actually:
Problem child is a quadrant in the BCG Matrix and is the triage category among the cash cows, stars, and dogs.
A problem child is a business line that has good growth potential but a small share of the growing market.
Making a problem child into a star requires heavy capital investment, so a management mis judgment of the growth prospects can be a costly mistake.
Dealing With a Problem Child
Problem children are particularly challenging, as they consume more cash than they generate. The question that management faces is whether investing in a problem child's business will increase market share enough to turn it into a star. A problem child could still turn into a dog, even after burning cash on marketing and sales. The technology sector, for example, has lots of problem children, because it is so competitive and dynamic.
As the name suggests, problem children require management attention. Problem children should not be invested in unless there is real potential for growth, and it is management's responsibility to judge those prospects. If the prospects look good, then management may need to invest heavily to raise the problem child to star status. If, however, management misjudges this, then they may be left with a dog in the end that will sell for less than they could have realized if they divested early.