Final answer:
The claim that businesses in the BCG Matrix's dog quadrant should be sold or closed is true, while cash cows generate steady income and stars provide growth opportunities. Funding options and the role of venture capitalists also impact a company's growth strategy.
Step-by-step explanation:
The BCG (Boston Consulting Group) Matrix is a strategic tool used for portfolio analysis, which classifies a company's business units or products into four categories based on market share and market growth. The statement that businesses in the dog quadrant should be sold or closed is true. These businesses have a low market share in a low-growth market, indicating limited potential. Alternatively, cash cows are products or business units with a high market share in a low-growth market, and they typically generate consistent cash flow which can be used to support other areas of the business. Stars are positioned in a high-growth market with a high market share, suggesting both income and growth potential. Companies strive to transform stars into the next cash cows once the growth stabilizes.
Regarding funding for company growth, if a small company issues bonds or takes on debt, it must make regular interest payments, potentially draining cash reserves. In contrast, issuing stock provides capital without immediate repayment obligations, although companies may pay dividends at their discretion. Venture capitalists can provide funding and expertise to companies, typically in exchange for significant ownership. Their close involvement can mitigate issues of imperfect information about the firm's performance, positioning them differently from average shareholders.
In summary, each quadrant of the BCG matrix offers a strategic recommendation, with some exceptional cases where the typical advice may not apply depending on the company's overall strategy and resources.