Business Portfolio Analysis and Resource Allocation

Introduction

Corporate strategy is concerned not only with how a business competes in an individual market, but also with how a diversified corporation manages a collection of businesses. A corporate portfolio may contain mature cash-generating businesses, rapidly growing businesses requiring investment, uncertain opportunities, and units whose strategic or financial performance no longer justifies continued ownership. The central managerial problem is therefore one of portfolio balance: deciding where to invest, where to maintain commitment, where to harvest cash, and where to divest.

Two influential tools for this purpose are the BCG Growth–Share Matrix and the GE–McKinsey Nine-Cell Model. Both are portfolio-planning frameworks, but they use different assumptions and levels of analysis. The BCG Matrix uses market growth and relative market share as its principal dimensions. The GE–McKinsey model uses industry attractiveness and business-unit competitive strength, allowing managers to incorporate multiple quantitative and qualitative factors.

These models do not make strategic decisions automatically. They organize evidence, reveal portfolio imbalances, and support disciplined discussion about corporate investment priorities. Their value is greatest when combined with cash-flow analysis, competitive analysis, risk assessment, managerial judgment, and explicit resource-allocation criteria.

Learning Objectives

By the end of this chapter, the reader should be able to:

1. Explain the purpose and assumptions of business portfolio analysis.
2. Classify business units using the BCG Growth–Share Matrix.
3. Apply relative market share and market-growth calculations correctly.
4. Evaluate business units using the GE–McKinsey Nine-Cell Model.
5. Compare the strengths and limitations of the two models.
6. Translate portfolio analysis into investment, maintenance, harvesting, and divestment decisions.
7. Construct a resource-allocation recommendation for a diversified corporation.
8. Critically assess the ethical, governance, and practical risks of portfolio-based decisions.

1. Business Portfolio Analysis as a Corporate Strategy Activity

A strategic business unit (SBU) is a relatively distinct business, product group, or division that serves a defined market, faces identifiable competitors, and can be evaluated as a unit for strategic planning. Large corporations may organize SBUs around products, customer segments, geographical markets, technologies, or combinations of these categories.

Portfolio analysis evaluates SBUs collectively rather than in isolation. The analysis asks four linked questions:

• What is the attractiveness of each business and its competitive position?
• What cash, capabilities, and managerial attention does each business require?
• How does each unit contribute to the corporate portfolio?
• Should the corporation invest, hold, harvest, restructure, partner, or divest?

The portfolio perspective is based on several ideas. First, different businesses may be at different stages of market development and may therefore require different strategies. Second, a corporation has finite resources, so investment in one unit creates an opportunity cost elsewhere. Third, diversification can create value when businesses share capabilities, customers, technologies, brands, channels, or knowledge. Conversely, a portfolio can destroy value when corporate ownership adds cost without creating distinctive advantage.

Portfolio analysis is therefore not equivalent to ranking businesses solely by profitability. A mature business with modest growth may generate substantial cash, while a high-growth business may consume cash. A small unit may be strategically important because it provides technology or distribution access. A profitable unit may still be vulnerable if its industry is structurally unattractive or if its profits depend on temporary conditions.

2. The BCG Growth–Share Matrix

The BCG Matrix was developed by the Boston Consulting Group to help corporations analyze businesses according to two dimensions:

1. Market growth rate, representing the attractiveness and resource requirements of the market.
2. Relative market share, representing the business’s competitive position relative to its largest competitor.

The two dimensions create four categories: Stars, Cash Cows, Question Marks, and Dogs.

2.1 Measuring market growth

Market growth rate measures the rate at which the relevant market is expanding or contracting. A basic historical growth calculation is:

Here, M_t is the market size in the current period and M_t−1 is the market size in the previous period. Both values must use the same unit, such as revenue, physical volume, or customers, and the same market definition.

For example, if a market grows from $800 million to $920 million:

The calculation describes past growth; it does not guarantee future growth. Managers must also examine forecasts, technological disruption, regulation, demand quality, and the profitability associated with growth.

2.2 Measuring relative market share

Relative market share compares an SBU’s market share with that of the largest competitor. When the focal business is not the market leader, the conventional calculation is:

If a business has a 24% market share and its largest competitor has 30%:

A value below 1.0 means that the focal business is smaller than the largest competitor. A value above 1.0 generally indicates that the focal business is the leader relative to the next-largest competitor. If the focal business is the leader, some analyses divide its share by the share of the second-largest competitor.

The measure must be interpreted carefully. Market share may be based on revenue or volume, and the result can differ substantially. A corporation should define the relevant market narrowly enough to be strategically meaningful but broadly enough to include genuine substitutes and competitors.

2.3 The four BCG categories

#### Stars

Stars hold strong competitive positions in high-growth markets. Their growth creates opportunities, but expansion often requires heavy spending on capacity, marketing, technology, distribution, and working capital. A Star may have high revenue and strong strategic prospects while producing limited free cash flow in the short term.

The typical corporate decision is to invest selectively to preserve or strengthen the SBU’s position. However, managers should not assume that every Star deserves unlimited investment. If growth is unprofitable, competitors possess superior capabilities, or the market is likely to commoditize, the corporation may choose a more cautious strategy.

#### Cash Cows

Cash Cows have strong relative market positions in slow-growth or mature markets. Because major expansion is less necessary, the SBU may generate cash in excess of its reinvestment requirements. This surplus can fund promising businesses, reduce debt, support dividends, or finance corporate capabilities.

The term does not mean that a Cash Cow should be neglected. Market share can erode through underinvestment, poor service, technological obsolescence, or aggressive competitors. The appropriate strategy is generally to maintain a defensible position while controlling costs and extracting sustainable cash.

#### Question Marks

Question Marks operate in high-growth markets but have weak relative market shares. They present the most difficult resource-allocation decision. A corporation may invest heavily to build share, partner with another firm, acquire capabilities, focus on a niche, or exit before further resources are consumed.

The relevant question is not whether growth is attractive in the abstract, but whether the SBU can achieve a defensible position within the corporation’s risk and resource constraints. A Question Mark should normally receive investment only when there is credible evidence of competitive advantage, scalable economics, strategic fit, and a realistic path to leadership or strong differentiation.

#### Dogs

Dogs have weak relative market positions in low-growth markets. They may generate positive cash, but their strategic potential is often limited. Possible actions include harvesting, selling, closing, or repositioning the business around a profitable niche.

A Dog should not automatically be divested. It may provide shared technology, customer access, brand credibility, or supply-chain benefits. The decision should compare the value of continued ownership with the value obtainable from redeploying assets elsewhere.

2.4 The BCG logic of cash flows

The BCG Matrix is associated with the experience-curve argument that cumulative production experience can reduce unit costs. If market share contributes to lower costs, a leading business may generate stronger margins and cash flows. High-growth markets, however, often require investment faster than internal cash generation can support. This creates a potential flow from Cash Cows to Stars and selected Question Marks.

A simplified portfolio logic is:

This is not a substitute for a full free-cash-flow calculation. The terms must be defined consistently, and taxes, working-capital changes, capital expenditure, restructuring costs, and financing commitments may be material. The expression simply illustrates why mature, strongly positioned businesses may finance growth elsewhere.

2.5 Worked BCG example

Assume a corporation owns four SBUs. Market growth is calculated from the prior year, and relative market share is calculated against the largest competitor.

The calculations are:

• SBU A growth = (($1,200m − $1,000m) ÷ $1,000m) × 100% = 20%; relative share = 42% ÷ 30% = 1.40.
• SBU B growth = (($936m − $900m) ÷ $900m) × 100% = 4%; relative share = 38% ÷ 25% = 1.52.
• SBU C growth = (($650m − $500m) ÷ $500m) × 100% = 30%; relative share = 18% ÷ 32% = 0.56.
• SBU D growth = (($714m − $700m) ÷ $700m) × 100% = 2%; relative share = 12% ÷ 28% = 0.43.

If management defines high growth as above 10% and high relative share as above 1.0, SBU A is a Star, SBU B is a Cash Cow, SBU C is a Question Mark, and SBU D is a Dog. The classification does not by itself determine the budget. It indicates that SBU C should face a demanding test for investment, while SBU D requires a credible rationale for continued ownership.

3. The GE–McKinsey Nine-Cell Model

The GE–McKinsey Nine-Cell Model was developed to address several limitations of the BCG Matrix. Rather than relying on only two relatively narrow variables, it evaluates each business according to two composite dimensions:

• Industry attractiveness: the desirability of the industry or market in which the SBU competes.
• Business-unit competitive strength: the SBU’s ability to compete successfully in that industry.

Each dimension is commonly rated as high, medium, or low, producing nine cells. The model is more flexible than the BCG Matrix because the dimensions can incorporate multiple factors and weighted managerial judgments.

3.1 Industry attractiveness

Industry attractiveness should be defined in relation to the corporation’s objectives and time horizon. Possible factors include:

• Market size and expected growth
• Industry profitability and margin potential
• Intensity of rivalry
• Bargaining power of buyers and suppliers
• Barriers to entry and exit
• Technological and regulatory conditions
• Cyclicality and demand stability
• Capital requirements
• Exposure to environmental or social risks
• Strategic fit with corporate capabilities

Attractiveness is not identical to market growth. A fast-growing industry may have poor profitability, severe rivalry, high capital requirements, or unsustainable economics. Conversely, a slow-growth industry may be attractive if it offers stable cash flows, high entry barriers, and strong margins.

3.2 Competitive strength

Competitive strength concerns the SBU’s relative position rather than the industry in general. Factors may include:

• Relative market share
• Brand reputation
• Cost position
• Product or service quality
• Customer loyalty
• Distribution access
• Technological capability
• Sales and marketing effectiveness
• Financial strength
• Speed of innovation
• Management quality
• Ability to exploit corporate synergies

A business can be strong in an unattractive industry or weak in an attractive industry. The model makes this distinction visible.

3.3 Weighted scoring

A common implementation assigns a weight to each factor and a rating to the SBU. For dimension d, the weighted score is:

where S_d is the score for dimension d, w_i is the weight assigned to factor i, r_i is the rating of the SBU on factor i, and n is the number of factors. Weights should sum to 1.0, or 100%:

If ratings use a 1-to-5 scale, the score also lies between 1 and 5, assuming all ratings are within that range. The calculation is an additive scoring model. It assumes that the factors can be combined meaningfully and that the weights reflect managerial priorities. It does not prove that a business is objectively attractive.

3.4 Worked GE–McKinsey example

Suppose an SBU’s industry-attractiveness assessment uses the following factors:

The score is calculated as:

Assume the competitive-strength score is 4.10. If the corporation defines scores of 3.67–5.00 as high, 2.34–3.66 as medium, and 1.00–2.33 as low, the SBU has medium industry attractiveness and high competitive strength. It lies in a selective-investment or growth cell rather than an automatic investment cell.

Thresholds are conventions, not universal truths. They should be tested through sensitivity analysis. If a small change in ratings moves the SBU from one strategic zone to another, management should treat the recommendation as uncertain rather than precise.

3.5 Strategic zones in the nine-cell model

The nine cells are often summarized into three strategic zones:

A high-strength SBU in a highly attractive industry normally deserves priority investment. A weak SBU in an unattractive industry is a likely divestment candidate. Intermediate positions require more nuanced decisions, such as focusing on profitable segments, improving capabilities, forming partnerships, or maintaining the business while limiting capital exposure.

4. Comparing the Two Models

The BCG Matrix is simple, transparent, and relatively easy to communicate. It can quickly reveal whether a portfolio is dominated by mature businesses, contains too many speculative growth businesses, or lacks strong positions. Its simplicity supports senior-level discussion and rapid screening.

The GE–McKinsey model is richer and more adaptable. It allows the corporation to include industry profitability, risk, technology, regulation, brand strength, cost position, and synergy. It is therefore better suited to complex industries in which market growth and market share do not adequately represent strategic value.

The models should not be treated as competing doctrines. A corporation may use the BCG Matrix as a first diagnostic and the GE–McKinsey model for more detailed evaluation. Neither model captures all sources of corporate value. In particular, both may undervalue synergies, shared capabilities, ecosystem position, real options, social obligations, and the value of learning.

5. From Portfolio Position to Resource Allocation

Portfolio analysis becomes strategically useful only when it influences resource allocation. Resource allocation includes capital expenditure, research and development, marketing budgets, talent, managerial attention, acquisitions, working capital, and technology investment.

A practical allocation process contains five stages:

Stage 1: Define the portfolio and decision horizon

Management should determine the boundaries of each SBU, the relevant competitors, the time period, and the decision being made. A business may look attractive over a ten-year horizon but unattractive under a two-year cash constraint. Inconsistent market definitions can invalidate comparisons.

Stage 2: Diagnose position and economics

The corporation should map the portfolio using the BCG Matrix and/or GE–McKinsey model, then examine revenues, margins, cash conversion, capital intensity, risk, and strategic fit. The analysis should distinguish accounting profit from cash generation and growth from value creation.

Stage 3: Establish strategic intent

Each SBU should receive a clearly stated intent, such as:

• Invest and grow: commit resources to build capabilities and position.
• Maintain or protect: defend the position while funding only necessary investment.
• Selectively build: concentrate on segments or capabilities with superior returns.
• Harvest: minimize new investment and maximize near-term cash generation.
• Restructure: change the cost base, business model, or market focus.
• Divest or exit: transfer assets and resources to higher-value uses.

Stage 4: Allocate resources conditionally

Instead of assigning a permanent budget, management should link funding to milestones. For example, a Question Mark might receive a development budget only if customer acquisition costs fall below a specified level, retention improves, or a technology milestone is achieved. This approach reduces escalation of commitment.

Stage 5: Review and reallocate

Portfolio positions change. Growth slows, competitors improve, regulation changes, and technologies become obsolete. Reviews should therefore be periodic and should include leading indicators, not merely historical financial results.

6. Divestment and Harvesting Decisions

Divestment is the sale or closure of a business, asset, or strategic activity. Harvesting is the deliberate reduction of new investment while seeking to maximize short- to medium-term cash flows. Divestment is an ownership decision; harvesting is an operating and investment posture. A harvested business may later be sold, but it may also remain in the portfolio if it provides useful cash or strategic support.

A divestment decision should consider:

• Expected future cash flows under continued ownership
• Sale proceeds and transaction costs
• Tax consequences and separation costs
• Debt, pensions, contracts, and employee obligations
• Corporate synergies that would be lost
• The buyer’s ability to create more value
• Effects on customers, suppliers, communities, and reputation
• Opportunity cost of management attention and capital

A simplified comparison is:

The corporation should prefer divestment when the value of divesting exceeds the value of retaining, after considering risks and obligations. These expressions are conceptual unless a complete discounted-cash-flow analysis is performed. The discount rate, forecast period, terminal value, taxes, and separation costs must be internally consistent.

Divestment should not be used merely to improve short-term reported performance. Selling a business at the bottom of a cycle, transferring risks to vulnerable stakeholders, or abandoning essential services without responsible transition planning may create ethical and reputational harm.

7. Integrated Applied Case: Meridian Consumer Group

The following is an illustrative case.

Background

Meridian Consumer Group owns four SBUs:

• Home beverages
• Smart kitchen devices
• Personal wellness products
• Legacy packaged foods

The corporation has limited investment capacity because debt increased after several acquisitions. The chief executive asks the strategy team to recommend priorities for the next three years.

Analysis

The Home Beverages unit has a relative market share of 1.6 in a market growing at 3%. It generates reliable cash and benefits from strong retail relationships. It is classified as a Cash Cow.

Smart Kitchen Devices operates in a market growing at 22%, but Meridian’s relative market share is 0.5. The business has promising technology but high customer-acquisition costs and inconsistent product reliability. It is a Question Mark.

Personal Wellness Products operates in a market growing at 14% and has a relative market share of 1.2. Its margins are strong, but competitors are investing heavily in digital health platforms. It is a Star.

Legacy Packaged Foods operates in a market growing at 1% and has a relative market share of 0.4. It occupies manufacturing capacity and receives substantial managerial attention. It is a Dog unless a profitable niche can be demonstrated.

A GE–McKinsey assessment changes the initial interpretation. The smart-device industry is attractive, but Meridian’s competitive strength is medium-low because of reliability problems and weak software capabilities. The wellness industry is attractive and Meridian’s strength is high. Packaged foods has low attractiveness and low strength, while Home Beverages has medium attractiveness and high strength.

Approach and solution

The recommended allocation is as follows:

1. Personal Wellness Products—invest and protect. Allocate priority funding to product development, digital capabilities, regulatory compliance, and customer retention. Investment should be tied to measurable milestones.
2. Home Beverages—maintain and selectively harvest. Preserve distribution strength and brand quality while releasing surplus cash for higher-priority opportunities.
3. Smart Kitchen Devices—selective investment, not open-ended funding. Fund a focused reliability program and a partnership for software capability. Establish a twelve-month review based on defect rates, repeat purchase, contribution margin, and customer retention. If milestones fail, Meridian should seek a sale or orderly exit.
4. Legacy Packaged Foods—divest or restructure rapidly. First test whether a profitable premium or regional niche exists. If not, sell the unit or close facilities responsibly, including employee transition and supplier obligations.

Outcome

The recommendation creates a more balanced portfolio: a strong cash generator funds a high-potential Star, while conditional investment limits downside exposure in the Question Mark. Divestment of the weak unit releases capital and managerial attention. The outcome depends on execution; the matrices support the decision but do not replace operational improvement or market validation.

Learning points

The case demonstrates five principles. First, growth alone does not justify investment. Second, market leadership is valuable only when it produces defensible economics. Third, the GE–McKinsey model can reveal weaknesses hidden by a simple BCG classification. Fourth, resource allocation should include milestones and exit conditions. Fifth, divestment must account for stakeholders, liabilities, and corporate synergies rather than relying on a single cell in a matrix.

8. Limitations, Governance, and Contemporary Use

Portfolio models have several limitations. Their categories can imply more precision than the evidence supports. Growth rates may be forecast incorrectly, market boundaries may be disputed, and relative market share may not reflect profitability or innovation. Weighted scores may encode executive bias, and teams may manipulate ratings to protect favored businesses. The models are also generally static, whereas competitive advantage may depend on dynamic capabilities and speed of learning.

Governance can improve quality by requiring documented assumptions, independent challenge, sensitivity analysis, and post-decision review. Senior managers should ask which factors are measured, which are judgmental, who benefits from the classification, and what evidence would cause the recommendation to change.

Technology and AI can support portfolio analysis by processing market data, tracking competitor signals, modeling scenarios, and identifying patterns in customer behavior. However, AI-generated recommendations may reproduce biased data, confuse correlation with causation, or obscure accountability. Human leaders remain responsible for strategic judgment, legal compliance, explainability, and stakeholder consequences.

Best practice is therefore to use portfolio matrices as decision-support instruments, not mechanical decision rules. A robust portfolio review combines the matrices with competitive analysis, financial modeling, capability assessment, scenario planning, risk analysis, and explicit ethical safeguards.

Chapter Summary

Business portfolio analysis helps diversified corporations compare strategic business units and allocate scarce resources. The BCG Growth–Share Matrix classifies businesses as Stars, Cash Cows, Question Marks, or Dogs using market growth and relative market share. Its simplicity makes it useful for initial diagnosis, but it can oversimplify competitive and financial realities.

The GE–McKinsey Nine-Cell Model evaluates industry attractiveness and business-unit competitive strength. By using weighted factors, it provides a more flexible assessment of industry conditions, competitive capabilities, risk, and strategic fit. Its greater richness is accompanied by subjectivity and the danger of false precision.

Portfolio analysis should lead to explicit actions: invest and grow, maintain, selectively build, harvest, restructure, or divest. Resource allocation should be conditional, milestone-based, and reviewed as conditions change. Divestment requires comparison of retention value with sale and redeployment value, while also considering synergies, liabilities, employees, communities, and reputation. Ultimately, portfolio models improve strategic discipline only when combined with sound evidence, critical judgment, governance, and responsible implementation.

Key Terms

Business portfolio analysis: Evaluation of a corporation’s collection of businesses for strategic balance and resource allocation.

Strategic business unit: A distinct business or product group with identifiable markets, competitors, and strategic decisions.

BCG Growth–Share Matrix: A portfolio framework based on market growth and relative market share.

Market growth rate: The percentage change in market size over a specified period.

Relative market share: A focal business’s market share divided by the largest competitor’s share.

Star: A high-growth business with a strong relative market position.

Cash Cow: A strong-position business in a low-growth market that commonly generates surplus cash.

Question Mark: A weak-position business in a high-growth market requiring a selective investment decision.

Dog: A weak-position business in a low-growth market with limited strategic potential.

Industry attractiveness: The overall desirability of an industry or market for investment.

Competitive strength: The relative ability of an SBU to compete successfully.

GE–McKinsey Nine-Cell Model: A nine-cell portfolio framework combining industry attractiveness and competitive strength.

Weighted score: A composite value calculated by multiplying factor weights by ratings and summing the results.

Invest and grow: A strategic posture involving substantial resource commitment to build position and capabilities.

Maintain or protect: A posture focused on defending a position while controlling investment.

Harvesting: Reducing new investment while seeking to maximize cash generation.

Divestment: Sale or closure of a business or strategic activity.

Resource redeployment: Transfer of capital, talent, assets, or managerial attention to higher-value uses.

Portfolio balance: A condition in which businesses collectively provide an appropriate combination of growth, cash, risk, and capabilities.

Review Questions

Short Answer Questions

1. What are the two dimensions of the BCG Growth–Share Matrix?
2. Define a Cash Cow and explain its typical role in a corporate portfolio.
3. How is relative market share calculated?
4. What is meant by industry attractiveness in the GE–McKinsey model?
5. Distinguish between harvesting and divestment.

Long Answer Questions

1. Explain the four categories of the BCG Matrix and discuss the typical resource-allocation implications of each.
2. Describe how a corporation can construct a GE–McKinsey Nine-Cell assessment using weighted factors.
3. Compare the BCG Matrix and GE–McKinsey model in terms of assumptions, usefulness, and limitations.
4. Explain why a high-growth business may not deserve automatic investment.
5. Discuss the governance and ethical issues that should accompany portfolio-based divestment decisions.

Analytical / Application Questions

1. An SBU operates in a market that grew from $2.0 billion to $2.4 billion. Its market share is 20%, while the largest competitor has 25%. Calculate market growth and relative market share, then classify the SBU using clearly stated thresholds.
2. Design a weighted GE–McKinsey assessment for a technology business. Select at least five factors, assign weights summing to 1.0, rate the business, and justify the resulting strategic recommendation.
3. A diversified corporation has one high-growth but weak-position business, one mature market leader, and one low-growth weak-position business. Recommend an integrated investment and divestment policy, including milestones and stakeholder safeguards.

Multiple Choice Questions with Answers

Question 1

Which two dimensions form the traditional BCG Growth–Share Matrix?

A. Industry profitability and technological intensity

B. Market growth rate and relative market share

C. Customer loyalty and operating margin

D. Capital intensity and regulatory risk

Correct Answer: B. Market growth rate and relative market share

Question 2

A business has a 30% market share and its largest competitor has a 20% share. What is the business’s relative market share?

A. 0.67

B. 1.00

C. 1.50

D. 50%

Correct Answer: C. 1.50

Question 3

Which BCG category describes a strong competitive position in a low-growth market?

A. Star

B. Question Mark

C. Dog

D. Cash Cow

Correct Answer: D. Cash Cow

Question 4

What is the central investment challenge associated with a Question Mark?

A. It requires no further investment

B. It requires a choice between selective investment and exit

C. It is already a dominant cash generator

D. It operates only in a declining market

Correct Answer: B. It requires a choice between selective investment and exit

Question 5

Which statement best describes the GE–McKinsey Nine-Cell Model?

A. It uses only market growth and market share

B. It evaluates industry attractiveness and business-unit competitive strength

C. It ranks employees according to performance

D. It calculates shareholder dividends

Correct Answer: B. It evaluates industry attractiveness and business-unit competitive strength

Question 6

In a weighted scoring model, what should the factor weights normally sum to?

A. 0.10

B. 0.50

C. 1.00

D. 10.00

Correct Answer: C. 1.00

Question 7

A market grows from $500 million to $600 million. What is its growth rate?

A. 10%

B. 16.7%

C. 20%

D. 25%

Correct Answer: C. 20%

Question 8

Which action is most consistent with harvesting?

A. Maximizing new capacity investment

B. Reducing new investment while seeking near-term cash generation

C. Acquiring every major competitor

D. Entering an unrelated industry immediately

Correct Answer: B. Reducing new investment while seeking near-term cash generation

Question 9

Why might a BCG Dog not be automatically divested?

A. Dogs always have the highest growth rates

B. It may provide synergies, capabilities, or access to important customers

C. Dogs are always market leaders

D. Divestment never has transaction costs

Correct Answer: B. It may provide synergies, capabilities, or access to important customers

Question 10

What is a major risk of using weighted GE–McKinsey scores mechanically?

A. They eliminate all managerial judgment

B. They may create false precision from subjective ratings and weights

C. They cannot include qualitative factors

D. They always classify every business as a Star

Correct Answer: B. They may create false precision from subjective ratings and weights