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Fourth Edition
Belgrade, 2009.
Silva Mitrovi
Prof. dr Dejan Popovi
Prof. dr Sima Avramovi
Univerzitet Singidunum,
Beograd, Danijelova 32
Prof. dr Milovan Stanii
Novak Njegu
Dizajn korica:
Aleksandar Mihajlovi
Godina izdanja:
250 primeraka
Mladost Grup
ISBN 978-86-7912-213-1
Fourth Edition
FOURTH YEAR ENGLISH is the fourth book of a four-year course in English
language for the students who are learning English language at the Singidunum Unive-
rsity, Belgrade. The aim in writing this coursebook has been to provide students who
are learning essay writing, summary writing and oral presentation with detailed guida-
nce in language and subject matter, but at the same time to leave them with the oppo-
rtunity for personal expression.
The plentiful exercises will help to consolidate what has been learnt in the
fields of study relating to financial management, insurance and audit. Also, it will
help students to further build and enhance writing and oral skills in their respective
fields of study.
There is ample material intended both to encourage students to read with un-
derstanding and enjoyment, and to inspire them to write with zest and open-mind-
edness. In addition to numerous topics suggested for essay writing and summary
writing, there are various subjects for oral self-expression, i.e., oral presentation.
There is strong emphasis on the disciplines necessary for correct writing, including
comprehension, systematic training in grammar, vocabulary, punctuation, dictionary
usage, delivery issues, etc.
However, the text presupposes that the best students have gone well beyond
the requirements of the pro? ciency examinations in English language and should be
found suitable for doing advanced work in the writing and speaking of English as a
foreign language. Care has been taken to make the coursebook interesting to them as
well. The course has been designed with this possibility in view.
I hope you will enjoy reading and studying this coursebook as much as I did
preparing it for you.
i v o r t i M a v l i S
8 0 0 2 e n u J
Communication Module: Part I
ESSAY WRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.3
UNIT 1 Leadership and Trust: Should All Managers Be Leaders? Conversely,
Should All Leaders Be Managers? Is Leadership Always Important? . . . . p.15
Communication Module: Part II
SUMMARY WRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.33
UNIT 2 Understanding Communication and Why It Is Important to Managers . . . p.38
Communication Module: Part III
ORAL PRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.59
UNIT 3 Communication and Interpersonal Skills: Empowerment Skills,
Conict Management, and Negotiations Skills . . . . . . . . . . . . . . . . . . . p.66
UNIT 4 Business Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.77
UNIT 5 About the European Union. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.90
UNIT 6 Outlines On the European Union Legislation . . . . . . . . . . . . . . . . . . . p.101
UNIT 7 Services Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.112
UNIT 8 International Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.122
BIBLIOGRAFY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p.137
Communi cat i on Modul e
Part I
1. TYPES. No matter how many ideas it may contain, a sentence must always
express a complete thought. There are three types of sentences: simple, compound,
and complex.
(a) The Simple Sentence expresses one idea only and has one subject and predicate.
E.g. The rm (subject) asked for a loan (predicate).
(b) The Compound Sentence contains more than one idea. In this type of sentence all
the ideas expressed have an equal value.
E.g. The rm asked for a loan and waited for an answer.
(c) The Complex Sentence contains one main idea (called the main clause) and one
or more secondary ideas (called subordinate clauses).
E.g. As soon as the rm asked for a loan (subordinate clause), the bank approved it. (main clause).
2. JOINING SENTENCES. The words which are used to combine sentences are
called conjunctions.
(a) Compound sentences. The main conjunctions used to form compound sentences
are: and, but, yet, both ... and, either ... or, neither ... nor, not only ... but, etc.
E.g. He learned how to read English. He learned how to write it.
He not only learned how to read English, but also how to write it.
E.g. I bought a new car last year. I am not satised with it.
I bought a new car last year, but I am not satised with it.
(b) Complex sentences. Some of the main ways in which different ideas can be joined
to make complex sentences include, inter alia, which, who, whom, whose, etc.
E.g. The girl is our new secretary. You saw her a moment ago.
The girl who you saw a moment ago is our new secretary.
E.g. The man had to pay a ne. His car was parked on the wrong side of the road.
The man whose car was parked on the wrong side of the road had to pay a ne.
3. CONNECTING AND LINKING WORDS. To further build your vocabu-
lary, you should also know the words of time, condition, cause, reason, purpose
and result, concession and contrast, as well as the words of addition and discourse
markers in writing:
(a) One thing happening before another: formerly, before, earlier on, previously.
E.g. Before going to work I wrote some letters.
(b) Things happening at the same time: while, as, just as, whenever, at the very time/
moment, during, throughout.
E.g. While I waited I read the newspaper.
E.g. Whenever I watch a sad lm I cry.
E.g. During the war I lived in Belgrade. (it does not specify how long within a period of time)
E.g. Throughout the war food was rationed. (from the beginning to the end of a period of time)
(c) One thing happening after another: after, afterwards, following.
E.g. After I had nished my work I went home.
E.g. Following my visit to Paris, I bought several books about France.
(d) Time when: when, as soon as, once, the moment/the minute
E.g. When Im rich and famous Ill buy a house.
E.g. As soon as the rm asked for a loan, the bank approved it.
(e) Connecting two periods of events: till then, since then, by the time, meantime.
E.g. Dinner will be ready in an hour. In the meantime, relax and have a drink.
E.g. By the time I retire will have worked here for 26 years.
(a) In addition to if, there are several other words and phrases for expressing condi-
tion: unless, on condition that, in case of, provided that, in the event of.
E.g. You can borrow the money provided that you return it within 30 days.
(b) The ever sufx means it does not matter much .... The stress is normally on
ever: however, whoever, whenever, whichever.
E.g. However you do it will cost a lot of money. (no matter how you do it)
E.g. Youll get to the station, whichever bus you take. (no matter which bus you take)
(c) Some nouns which express condition: condition, prerequisite, requirement.
E.g. Certain conditions must be met before the negotiations can begin.
E.g. A good standard of English is a prerequisite for studying at a British University.
Cause, reason, purpose and result:
(a) Cause and reason are expressed by: because, since, owing to, due to, arise from,
give rise to.
E.g. Owing to the icy conditions, the two lorries collided.
E.g. The CEOs statement gave rise to/provoked/generated a lot of criticism.
(b) Reasons for and purposes of doing things: reason for, prompt, with the aim of.
E.g. Her reason for not going with us was that she had no money.
E.g. I wonder what prompted him to send that letter. (reason/cause)
E.g. Ive invited you here with the aim of exposing the scandal. (purpose)
(c) Results: as a result, as a consequence, consequently, result in, outcome, upshot,
E.g. He did not work. As a result/as a consequence/consequently, he failed his exams.
E.g. The events had an outcome that no one could have predicted.
E.g. The upshot of all these problems was that we had to star again.
E.g. When the election results were announced, chaos ensued.
Concession and contrast:
(a) Concession means accepting one part of an idea or fact, but putting another, more
important argument or fact against it: although, nevertheless, accept, acknowl-
edge, admit, concede.
E.g. Although they were poor, they were independent.
E.g. He is a bit stupid. Hes very kind nevertheless.
E.g. I acknowledge/accept that he has worked hard but its not enough. (I agree but ... accept)
E.g. I admit I was wrong, but I still think we were right to doubt her. (I admit Im guilty, but ...)
E.g. I concede that you are right about the goal, but not the method. (You have won this point)
(b) Adverbs and other phrases showing contrast: thats all well and good, after all,
E.g. Thats all well and good, but how are you going to pay us back?
E.g. You shouldnt seem so surprised. After all, I warned you.
(c) Collocating phrases for contrast: poles apart, world of difference, yawning gap.
E.g. When it comes to politics, they are poles apart.
E.g. There is a world of difference between being a friend and a lover.
E.g. There is a huge discrepancy between his ideals and his actions.
Words of addition:
(a) Words for linking sentences/clauses: and, also, too, in addition, furthermore,
what is more, besides.
E.g. For this job you need a degree. In addition you need some experience.
(more formal than and, also/too)
E.g. Video cameras are becoming easier to use. Furthermore/moreover, theyre becoming cheaper.
E.g. Itll take ages to get there and itll cost a fortune. Besides, well have to change trains.
(a more emphatic way of adding information; similar in meaning to anyway))
E.g. Itll take ages to get there and itll cost a fortune. Besides, well have to change trains.
(a more emphatic way of adding information; similar in meaning to anyway))
(b) Words at the end of clauses/sentences: and so on, etc., and so on and so forth.
E.g. They sell chairs, tables, beds, and so on/etc. (and so on is more informal than etc.)
E.g. Ill go to my lawyer, then to the court, then to the bank and so on and so forth.
(c) Words that begin, or come in the middle of, clauses/sentences: furthermore, as
well as, along with, apart from.
E.g. Further to my letter of May 12, I am writing to inform you ... (formal opening of a letter)
E.g. He is on the School Board, as well as being a local councillor.
E.g. Apart from having a salary, he has also a private income.
E.g. My CEO was there, along with a few other people I didnt know.
Discourse markers in writing
(a) Certain common words and phrases used to organise formal written texts: rst,
next, nally, turning to, in parenthesis, leaving aside, in summary, in conclusion.
E.g. First/rstly/rst of all, we must consider ... (secondly and thirdly are also used for lists)
E.g. Turning to the question of foreign policy, ... (changing to a new topic)
E.g. In summary/to sum up, we may state that ... (listing/summing up the main points)
E.g. In conclusion/to conclude, I should like to point out that ... (nishing the text)
(b) Markers for explaining, exemplifying, rephrasing, etc.: in other words, that is to
say, for example, for instance, briey, so to speak, as it were.
E.g. Briey, these consist of two main types.
E.g. She is, so to speak/as it were, living in a world of her own.
(c) Signposts around the text, i.e., words and phrases that point the reader to different
parts of a text: the following, the above, below, overleaf, refer to.
E.g. The following points will be covered in this essay ... (used to introduce a list)
E.g. It was stated before/earlier that the history ... (earlier in the text)
E.g. A full list is given overleaf. (turn the page and you will nd the list)
4. SEQUENCE OF TENSES. A sentence can contain a main verb or more
subordinate clauses, i.e., a group of words containing a subject and verb and forming a
part of a sentence. It is important for you to learn to know which is the main verb of a
sentence because of the important rule about the sequence of tenses.
E.g. He gave it to me because he trusted me.
The rule about the sequence of tenses applies also to indirect speech when the
introductory verb is in a past tense:
E.g. He said: I know the bridge is unsafe. (He said that he knew the bridge was unsafe.)
The rule also applies to clauses with if, with its three basic forms:
E.g. (i) If he invites me I shall go.
(ii) If he invited me I would go.
(iii) If he had invited me I would have gone.
5. WORD ORDER. You should keep to the basic pattern: Subject Verb
Object - Qualifying Phrase. Though there are certain exceptions, a subject may only be
separated from its verb by an adverb of frequency.
E.g. He found a ring in his garden yesterday.
6. PUNCTUATION. As you already know it is the the practice or system of
using certain conventional marks or characters in writing or printing in order to sepa-
rate elements and make the meaning clear, as in writing a string of nouns or ending a
sentence or separating clauses.
Below are given the most important uses.
Uses Examples
x for the rst letter of a
Banking is the business of operat-
ing a bank.
x for countries, nation-
alities, languages, reli-
gions, names of people,
places, events, organisa-
tions, trademarks, days,
months, titles
Portugal, Africa, Russian, Moslem
Ann, Peter, Geneva, Belgrade,
The World Trade Fair, Jaguar, the
Internet, Monday, January, Mr./
x for titles of books, lms The Wealth of Nations, Wuthering
x for abbreviations HP, OECD, VAT, CEO, HRM
Uses Examples
Full stop (UK)
Period (US)
x at the end of a sentence He was a successful banker at the
x sometimes after an abbre-
Marton Rd./Mrs. Brown/
Dr. Morton
x as the decimal point in
gures and amounts of
money. This is usually
read out as point.
$5.7 million
x to separate parts of e-mail
and web addresses. This is
read out as dot.
x after a direct question Where do you come from?
x to show doubt P. Morton (1853?-1911) was little
known until after his death.
x at the end of a sentence
in order to show surprise/
shock, etc.
It is impossible!
Wow! It looks delicious!
x to indicate a loud sound Bang! Bang! Youre dead!
said the child, pointing a plastic
gun at me.
x between items in a list Will you buy some bread, butter,
jam and sugar.
x to show a pause in a long
They didnt want to start negotia-
tions before the hed arrived, but
he was an hour late.
x when you want to add ex-
tra information
The manager, who I told you about
before, will be coming.
x before tag questions He does know his job, doesnt he?
Uses Examples

x for missing letters Ill (I will), its (it is), dont (do not)
x for possessives
Toms bank account
1. words ending in s dont
need another s added.
Charles bank account
2. its can only be an abbre-
viation for it is or it has.
There is no apostrophe in
the possessive case.
Its my turn to do something for you.
The company increased its prots.
x to introduce a list or a quo-
tation in a sentence
I want you to buy the following:
bread, butter, jam and sugar.
x in the US following the
greeting in a business
Dear Customer:
Dear Mr. Brown:
Semi Colon
x to separate two parts of a
I spoke to the bank manager on
Friday; the bank cant loan me
money to buy a car.
x to join two words together off-budget fruit-tree, pick-me-up
x to show that the word has
been divided and contin-
ues on the next line
No one knows exactly what hap-
pened but several people have
been hurt.

x to separate parts of sen-

The man the one on your left is
wearing a pinstripe suit.
x to mean to The London Paris train leaves
every morning at nine.
Uses Examples
UK also

x to show that words are
She is revered by stockholders and
reviled by subordinates, he said.
I wish to speak to the bank
manager,she said.
x to show that someone else
originally wrote the words
She had described her boss as a
screaming, combative, ruthless task-
master who always gets her way.
Note: Single quotation
marks are more usual in
UK English, and double
quotation marks are more
usual in US English.
7. ABBREVIATIONS. An abbreviation is shortened form of a word or phrase
used chiey in writing to represent the complete form. Some still clearly show the
alphabetic origin, like FBI from the Federal Bureau of Investigation. Such forms are
the principal ingredient of todays alphabet soup of government agencies and tech-
nological innovations.
Some words, which are read as words, are called acronyms and are not written
all in capital letters: laser (Light Amplication by Stimulated Emission of Radiation),
radar (Radio Detection and Ranging), yuppy (Young Urban Professional), etc.
Within a written text some abbreviations are used as notes to organise the lan-
guage and give extra information to the reader: etc. - and so on [Latin, et cetera]; i.e.
- that is to say [Latin, id est]; e.g. - for example [Latin, exempli gratia]; NB - please
note [Latin, nota bene], etc.
Also, there are clippings, i.e., some words which are normally used in an abbre-
viated form in informal situations: ad/advert (advertisement); exam (examination); rep
(representative); phone (telephone); exec (executive), etc.
Finally, some abbreviations you might see on a letter/fax/envelope: c/o (care of
the letter goes to); enc. (enclosed documents enclosed with a letter, e.g. enc. application
form); RSVP (please reply French: rpondez sil vous plit), etc.
8. USING A DICTIONARY. Everybody knows that the dictionary is for get-
ting quick answers to immediate questions about things like meaning and spelling.
Small bilingual dictionaries often give three or four translations for a word you
look up, without any explanation: e.g. sofa, divan, couch, setee. All the words are pos-
sible. However, some people feel that sofa and couch are a bit lower class, and that
settee is the so-called rened, middle-class word. Divan could also be used, but its
normal British English meaning is a kind of bed with a very thick base. It can also, less
commonly, mean a kind of sofa with no back or arms. Or, take the word hairy in the
following examples: The creature had a very hairy face. It was a really hairy journey
on the mountain road. The exam contained some hairy questions.
English vocabulary has a remarkable range, exibility and adaptability. Owing
to the periods of contact with foreign languages and its readiness to coin new words
out of old elements, English seems to have far more words than other languages. For
example, alongside kingly (from Anglo-Saxon) we nd royal (from French) and regal
(from Latin). They all refer to that which is closely associated with a king, or is suit-
able for one. What is KINGLY may either belong to a king, or be betting, worthy of,
or like a king: a kingly presence, appearance, graciousness. REGAL is especially ap-
plied to the ofce of kingship or the outward manifestations of grandeur and majesty:
regal authority, bearing, splendour, municence. ROYAL is applied especially to what
pertains to or is associated with the person of a monarch: the royal family, word, robes,
salute; a royal residence.
There are many such sets of words which add greatly to our opportunities to
express subtle shades of meaning at various levels of style. It is not enough to know
the meaning or meanings of a word. You also need to know which words it is usually
connected with, its grammatical characteristics, and whether it is formal, informal or
neutral. In other words, in your writing you should use words that commonly go to-
gether, i.e., collocations:
(a) adjectives + nouns, e.g. cost of living, make a living, kingly presence, common
(b) verbs + nouns, e.g. to express an opinion, to take sides.
(c) nouns in phrases, e.g. in touch with, a sense of humour.
(d) words + prepositions, e.g. at a loss of the words, thanks to you.
1. Just as the words that you write are arranged in sentences, so your sentences
should be arranged in paragraphs. Each paragraph represents a stage of the story
you are telling or the description or argument you are writing.
2. Choose a title which interests you if you are not given one.
3. Think carefully about what you are going to say before writing.
4. Always indent the rst sentence of your paragraph.
5. Try to make your story or description interesting from the very rst sentence.
6. The rst sentence should give the reader some idea of what the paragraph is
about. In other words, the rst sentence tells the reader the topic of the paragraph,
and all the other sentences in the paragraph expand that topic.
7. Write short, complete sentences.
8. Keep to the subject.
9. Take great care to connect your sentences so that your work reads smoothly.
Words like however, for, since, although, afterwards, meanwhile, etc., will en-
able you to do this.
10. Save the most interesting part until the end or near the end.
11. Work neatly. Make sure your writing is clear, your spelling and punctuation cor-
rect, and that there are margins to the left and the right of your work.
12. Abbreviations like dont, havent, wouldnt, etc., are not normally used in written
English. These words must be written in full: do not, have not, would not, etc.
13. Never on any account write your paragraph in your mother tongue and then at-
tempt to translate it into English.
14. Avoid using a dictionary. Never use words that are entirely new to you.
1. INTEREST Writing an essay is not simply a matter of getting the required
number of words down on paper. You must do all to make you can to make your essays
interesting so that they will hold readers attention to the very end. To achieve this it is
not necessary to go to absurd lengths to be original. Once you have found something
denite to say, your essay will be interesting to read.
2. UNITY. Just as it is important to connect your sentences within a paragraph,
you should make sure that your paragraphs lead naturally to each other. Answer the
question closely. Do not repeat yourself. Make sure that every paragraph adds some-
thing new to the essay.
3. BALANCE AND PROPORTION. Keep a sense of proportion. The length
of a paragraph will depend on what one has to say; however do not let yourself be car-
ried away by fascinating but unimportant details. Never attempt to write an essay in a
single paragraph.
4. PERSONAL STATEMENT. Do not address the reader or make comments
on the topic like, I do not like this subject and do not know how to begin ... or, ...
and now it is time to nish my essay, etc.
5. TEST FOR QUALITY. If in your effort to reach the word-limit you nd
yourself counting the number of words you have used every time you add another
sentence to your essay, it is a sure sign that there is something basically wrong with
your treatment of the subject. If you are so bored with your own writing that you have
to keep counting the number of words to nd out if you are nearing the end, it is more
than likely that your reader will be equally bored when he or she has to read what you
have written. If your essay gave you pleasure to read, it is quite probable that it will be
enjoyable to read. This is good but not always reliable test for quality.
6. RE-READING. It is absolutely necessary to read your work through when
you have nished writing. While doing so, keep a sharp look out for grammatical mis-
takes especially those connected with word order or the sequence of tenses.
7. TITLES. After you have nished your essay choose a good short title, if
not given. Make sure it has to do with the subject, but it should not give the reader too
much information.
The early model of the manager was the one who had mastered such subjects
as nance, accounting, audit, marketing, production, and so on. Later it was recog-
nized by theoreticians and practicing managers alike that management was a good
deal more than the sum of these specialised functions, and this realisation in turn led
to the conception of the manager as a generalist, who must be able to perform si-
multaneously planning, organizing, leading and control activities if he or she wants
to be successful.
For our purposes, let us consider leadership as one of the four basic activities
and clarify the distinction between managers and leaders. Although they are frequently
used synonymously, they are not necessarily the same. Managers are appointed. They
have legitimate power that allows them to reward and punish. Their ability to inuence
is based on the formal authority inherent in their positions. In contrast, leaders may
either be appointed or emerge from within a group. Leaders can inuence others to
perform beyond the actions dictated by formal authority.
Should all managers be leaders? Conversely, should all leaders be managers?
We can state that all managers should ideally be leaders. However, not all leaders nec-
essarily have capabilities in other managerial functions, and thus not all should hold
managerial positions. The fact that an individual can inuence others does not mean
that he or she can also plan, organise and control. Therefore, by leaders we mean those
who are able to inuence others and who possess managerial authority.
Ask the average person on the street what comes to mind when he or she thinks of
leadership. You are likely to get a list of qualities such as intelligence, charisma, deci-
siveness, enthusiasm, strength, bravery, integrity and self-condence. These responses
represent, in essence, trait theories of leadership, i.e., theories that isolate characteris-
tics that differentiate leaders from non-leaders. Six traits on which leaders are seen to
differ from non-leaders include drive, the desire to lead, honesty and integrity, self-
condence, intelligence, and job-relevant knowledge.
Yet traits alone do not sufciently explain leadership. The inability to explain
leadership solely from the traits led researchers to look at the behaviour of specif-
ic leaders. In their studies, the researchers explored three leadership behaviours or
styles: autocratic, democratic and laissez-faire, the last of which can be further clas-
sied in two ways: consultative and participative. A democratic-consultative leader
hears the concerns and issues of employees, but makes the nal decision himself or
herself. A democratic-participative leader often allows employees to have a say in
what is decided.
However, this review cannot be complete without presenting the two emerging
approaches to the subject: charismatic leadership and visionary leadership. Studies
on key characteristics of charismatic leaders say that they possess self-condence,
vision, ability to articulate the vision, strong convictions about the vision, behaviour
that is out of the ordinary, appearance as a change agent, and environmental sensi-
tivity. On the other hand, visionary leaders exhibit three skills: the ability to explain
(both orally and in writing) the vision to others, in a way that it is clear in terms of
required actions; the ability to express the vision not just verbally but through leaders
behaviour, and the ability to extend the vision to different leadership contexts, gaining
commitment and understanding of organisational members.
One must not forget that there are also gender differences in leadership. Are men
better leaders, or does that honour belong to women? Even asking those questions is
certain to evoke emotions on both sides of the debate. The evidence indicates that the
two sexes are more alike than different in the way they lead. Much of this similarity is
based on the fact that leaders, regardless of gender, perform similar activities in inu-
encing others. That is their job, and the two sexes do it equally well. However, the most
common difference lies in leadership styles. Women use a more democratic style. They
encourage participation of their followers and are willing to share their positional pow-
er with others. In addition, women tend to inuence others best through their charisma,
expertise, contacts, etc. Men, on the other hand, tend to typically use a task centered
leadership style such as directing activities and relying on their positional power to
control the organisations activities. All things considered, when a woman is a leader in
a traditionally male-dominated job (such as that of a police ofcer), she tends to lead in
a manner that is more task centered.
However, as you may have deduced from the foregoing, the concept of leadership
is continually being rened as researchers continue to study leadership in organisa-
tions. Lets take a look at the three of contemporary leadership issues: team leadership,
national culture and trust.
TEAM LEADERSHIP is different from the traditional leadership, i.e., the
role performed by rst-line managers or supervisors. J. D. Bryan, a rst-line
manager at the textile plant. One day he was happily overseeing a staff of 15 as-
sembly-line workers. The next day he was informed that the company was mov-
ing to teams and that he was to become a facilitator. I am supposed to teach
the teams everything I know and then let them make their own decisions, he
said. Confused about his new role, he admitted there was no clear plan on what
I was supposed to do.
Many leaders are not equipped to handle the change to teams. As one prominent
consultant noted, even the most capable managers have trouble making the tran-
sition because everything (command-and-control things) they were encouraged
to do before is no longer appropriate. The challenge for most managers, then, is
to become an effective team leader. And to do that team leaders are liaisons with
external constituencies, troubleshooters, conict managers, and coaches.
NATIONAL CULTURE is an important situational factor determining which
leadership style is most effective. National culture affects leadership style be-
cause leaders cannot choose their styles at will: They are constrained by the cul-
tural conditions that their followers have come to expect. Also, one must not
forget that most leadership theories were developed in the United States, using
U.S. subjects. Therefore, they have an American bias. They emphasize follower
responsibilities rather than rights; assume hedonism rather than commitment to
duty or altruistic motivations, etc.
TRUST, or lack of trust, is an increasingly important issue in todays organisa-
tions. Let us further explore this issue of trust by dening what trust is and show
how trust is a vital component of effective leadership.
What is trust?
It is a POSITIVE EXPECTATION that another will not through words, ac-
tions, or decisions act opportunistically. Most important, trust implies familiar-
ity and risk. The phrase positive expectation assumes knowledge of and familiar-
ity with the other party. Trust takes time to form. Most of us nd it hard, if not
impossible, to trust someone immediately if we do not know anything about him
or her. At the extreme, in case of total ignorance, we can gamble, but we cannot
trust. But as we get to know someone and the relationship matures, we gain con-
dence in our ability to make a positive expectation. The word opportunistically
refers to the inherent risk and vulnerability in any trusting relationship.
Trust involves making oneself vulnerable as when, for example, we disclose in-
timate information or rely on anothers promises. By its very nature, trust provides
the opportunity to be disappointed or to be taken advantage of. But trust is not tak-
ing risk per se; rather it is a willingness to take risk. So when we trust someone, we
expect that they will not take advantage of us. Whence follow the ve dimensions
of trust: integrity, competence, consistency, loyalty and openness.
Why is trust one foundation of leadership?
It appears that trust is a primary attribute of leadership. In fact, if you look
back at our discussion of leadership traits, you will nd that honesty and integrity
are among the six traits consistently associated with leadership. When followers
trust a leader, they are willing to be vulnerable to the leaders actions condent
that their rights and interests will not be abused.
Now, more than ever, managerial and leadership effectiveness depends on the
ability to gain the trust of followers. However, in times of change and instability,
people turn to personal relationship for guidance, and the quality of these rela-
tionships are largely determined by the level of trust.
What are the three types of trust?
There are three types of trust: deterrence-based trust referring to the most
fragile relationship, knowledge-based trust existing when one understands
someone else well enough to be able to accurately predict his or her behaviour,
and identication-based trust being the highest level of trust that is achieved
when there is an emotional connection between the parties.
In keeping with the foregoing, we conclude this text by offering this opinion:
The belief that a particular leadership style will always be effective regardless of
the situation may not be true. Leadership may not always be important. Data from
numerous studies demonstrate that, in many situations, any behaviour a leader ex-
hibits is irrelevant.
For instance, characteristics of employees such as experience, training, profes-
sional orientation, or need for independence can neutralise the effect of leadership.
These characteristics can replace the need for a leaders support. Similarly, jobs that
are unambiguous and routine may place fewer demand on leadership. Finally, such or-
ganisational characteristics as rigid rules and procedures, or cohesive work groups can
act in place of formal leadership.
Answer the below given questions.
1. Dene leader and explain the difference between managers and leaders.
2. Is the possession of six traits on which leaders differ from non-leaders a guaran-
tee of leadership? Discuss this issue.
3. Identify the qualities that characterise charismatic leaders.
4. Do you agree or disagree with the following statement: Charismatic leadership
is always appropriate in organisations. Support your opinion.
4. Describe the skills that visionary leaders exhibit.
5. Explain the four specic roles of effective team leaders.
6. Contrast the three types of trust. Relate them to your experience in personal rela-
7. When might leader be irrelevant?
(a) Match the six traits on the left-hand side with their explanations on the
right-hand side.
1. Drive (a) Leaders need to be intelligent enough to gather, to synthesise,
and interpret large amounts of information and to be able to
create visions, solve problems, and make correct decisions.
2. Desire to lead (b) Followers look to leaders for an absence of self-doubt.
Leaders, therefore, need to show self-assurance in order to
convince followers of the rightness of goals and decisions.
3. Honesty and integrity (c) Effective leaders have a high degree of knowledge about the
company, industry, and technical matters. In-depth knowledge
allows leaders to make well-informed decisions to understand
the implications of those decisions.
4. Self-condence (d) Leaders have a strong desire to inuence and lead others.
They demonstrate the willingness to take responsibility.
5. Intelligence (e) Leaders exhibit a high effort level. They have a relatively
high desire for achievement, they are ambitious, they have a
lot of energy, they are tirelessly persistent in their activities,
and they show initiative.
6. Job-relevant knowledge (f) Leaders build trusting relationships between themselves and
followers, by being truthful or non-deceitful and by showing
high consistency between word and deed.
(b) Match the three leadership behaviours or styles on the left-hand side with
their explanations on the right-hand side.
1. Autocratic style (a) A leader who tends to involve employees in decision-making proc-
ess, to encourage participation in deciding work methods and goals.
2. Democratic style (b) A leader generally gives his or her employees complete freedom to
make decisions and complete their work in whatever way they see t.
3. Laissez-faire (c) A leader who typically tends to centralise authority, dictate work meth-
ods, make unilateral decisions, and limit employee participation.
(c) Match the seven key characteristics of charismatic leaders on the left-hand
side with their explanations on the right-hand side.
1. Self-condence (a) They are able to make realistic assessments of the
environmental constraints and resources needed to
bring about change.
2. Vision (b) Charismatic leaders are perceived as being strongly
committed to and willing to take on high personal
risk, incur high costs, and engage in self-sacrice to
achieve their vision.
3. Ability to articulate the vision (c) They engage in behaviour that is perceived as being
novel, unconventional, and counter to norms. When
successful, these behaviours evoke surprise and ad-
mirations in followers.
4. Strong convictions about the vision (d) Charismatic leaders are perceived as agents of radi-
cal change rather than as caretakers of status quo.
5. Behaviour that is out of the ordinary (e) They are able to clarify and state the vision in terms
that are understandable to others. This articulation
demonstrates an understanding of the followers
needs and, hence, acts as a motivating force.
6. Appearance as a change agent (f) They have an idealised goal that proposes a future
better than the status quo. The greater the disparity
between this idealised goal and the status quo, the
more likely that followers will attribute extraordi-
nary vision to the leader.
7. Environmental sensitivity (g) Charismatic leaders have complete condence in
their judgement and ability.
(d) Match the three skills of visionary leaders on the left-hand side with the
examples, exhibiting their skills respectively on the right-hand side.
1. Ability to explain the vision (a) Herb Kelleher at Southwest Airlines lives and breaths
his commitment to customer service. He is famous
within the company for jumping in, when needed, to
help check in passengers, load baggage, or do anything
else to make the customers experience more pleasant.
2. Ability to express the vision (b) The vision has to be as meaningful to people in account-
ing as to those in marketing and to employees in Prague
as well as in Pittsburgh.
3. Ability to extend the vision (c) Former President Reagan the so-called great com-
municator used his years of acting experience to help
him articulate a simple vision for his presidency: a re-
turn to happier and more prosperous times through less
government, lower taxes, and a strong military.
(e) Match the four specic roles of team leaders on the left-hand side with their
explanations on the right-hand side.
1. Liaison with external (a) The leader helps to process the disagreement that constitu-
encies surface among team members. He has to detect what
the source of conict is, as well as to identify persons in-
volved in it and disputable issues. Also, he has to nd out
what resolution options are available and to determine ad-
vantages and disadvantages of each.
2. Trouble shooters (b) The leader claries expectations and roles, teaches, offers
support, cheerlead, and whatever else is necessary to help
team members improve their work performance.
3. Conict managers (c) The leader sits in on meetings to assist in resolving problems
that arise for team members. This rarely relates to technical
issues because the team members typically know more about
the tasks than does the team leader.
4. Coaches (d) The leader represents the team to other constituencies, both
external (including upper management and other internal
teams) and internal (customers and suppliers) to the organisa-
tion, secures needed resources, claries others expectations
of the team, gathers information from the outside, and shares
this information with the team members.
(f) Match the ve dimensions of trust on the left-hand side with their explana-
tions on the right-hand side.
1. Integrity (a) Willingness to share ideas and information freely. Can you rely on the
person to give you the full truth?
2. Competence (b) Willingness to protect and save face for another person.
3. Consistency (c) Technical and interpersonal knowledge and skills Does the person know
what he or she is talking about? You are unlikely to listen to or depend
upon someone whose abilities you do not respect. You need to believe
that a person has the skills and abilities to carry out what he or she says
they will do.
4. Loyalty (d) Reliability, predictability, and good judgement in handing situations.
This dimension is particularly relevant for managers: Nothing is no-
ticed more quickly than a discrepancy between what executives preach
and what they expect their associates to practice.
5. Openness (e) Honesty, conscientiousness, and truthfulness. Of all ve dimensions
this one seems to be most crucial.
(g) Match the three types of trust on the left-hand side with their explanations on
the right-hand side.
1. Deterrence-based trust (a) Trust based on the behavioural predictability that
comes from a history of interaction. It exists is you
understand someone well enough to be able to predict
his or her behaviour.
2. Knowledge-based trust (b) Trust based on an emotional connection between the
3. Identication-based trust (c) Trust based on fear of reprisal if the trust is violated.
Choose the right preposition from the list below to complete the passage In what
way does national culture affect leadership? Some of the prepositions are used
more than twice.
without in from for to about towards of at
It can help explain, for instance, why executives the highly success-
ful Asia Department Store central China blatantly brag practicing
heartless management, require new employees to undergo two four weeks
military training with units the Peoples Liberation Army
order to increase their obedience and conduct the stores in-house sessions
a public place which employees can openly suffer embarrassment
their mistakes.
Also, consider the following: Korean leaders are expected to be paternalistic
their employees. Arab leaders who show kindness or generosity be-
ing asked to do so are seen by other Arabs as weak. Japanese leaders are expected to
be humble and speak infrequently. And Scandinavian and Dutch leaders who single
out individuals public praise are likely to embarrass those individuals rather
than energise them.
Fill in the blank with the appropriate article or leave it blank to indicate that no
article is necessary.
One Managers Perspective: Betsy Reifsnider, CEO of Friends and River
Betsy Reifsnider, CEO of Friends and River, conservation group
staffed by both paid professionals and unpaid volunteers. Betsy Reifsniders primary
responsibility is setting budget and ensuring it is met as well as working with
conservation director to develop new programmes. She allows her staff to
great deal of autonomy, which she feels contributes to high morale, produc-
tivity and creativity as well as creating team environment of mutual commit-
ment and trust. In her weekly meetings with her more senior managers Betsy discusses
budget, personnel and management issues, but she also encourages all staff
members to come to her with any problems. Trust is enforced with conden-
tiality in which she holds these conversations. She has simple rule: I dont
violate their condences. Reifsnider also stops at peoples desks during day to
chat with them about their work. Keeping up to date also earns trust of employees who
know from her quiet interest that she shares stakes in their success.
Fill in the blank spaces in the text with correct verb forms.
Insights into personality: Linda Wachner, CEO of Warnaco
In todays dynamic organisation, we continue (HEAR) about
managements need to be sensitive to others and (TREAT) employees
with kid gloves, but not all managers (FOLLOW) this model. One such
manager (BE) Linda Wachner, CEO of Warnaco and Authentic Fitness,
makers of sports and intimate apparel.
As a diligent student, after she (GRADUATE) from
High School at 16, she (GO) on to SUNY Buffalo to study econom-
ics and business administration. She (WORK) in a variety of in-
dustry apparel jobs before she (MOVE) to Warnaco, where within
a year, she (BECOME) the rst woman vice president in the rms
100 hundred years history. She (TAKE OVER) Warnaco in
1986 and within a year she (BUILD) the apparel maker into $1.4
billion behemoth, responsible for (MANUFACTURE) and
(DISTRIBUTE) more than a third of all the bras sold in the USA.
If you (ASK) others to describe her, you (HEAR)
less-than-attering descriptions. She (CHARACTERISE) as
a screaming, combative, ruthless taskmaster who always (GET) her
way. She (KNOW) for (HUMILIATE) employees in
front of their peers. She (DISMISS) attacks on how she
(TREAT) organisational members by one simple motto: You cant run a company with
a bunch of babies. If you dont like it, leave. This is not a prison. Her advice to senior
managers (BE) simple: Be tough. She (ADVISE) them
to show employees they (BE) serious. How? By (FIRE)
a few employees to set an example.
In spite of that, she (BE) an efcient manager one
who only (REWARD) work performance. Since she
(BECOME) head of the company, prots and company stock prices
How does she see herself? As effective and good, with an excellent record. When
she (EARN) the title from Fortune magazine as one of the seven
toughest bosses in the United States, she (MAKE) no apologies.
However, for a woman who (USE) to wearing trousers
as well as (MAKE) and (SELL) them, these
must be hard times. On June 11th Linda Wachner had to watch the company, fa-
mous for making Calvin Klein jeans and Speedo swimwear and lingerie, which she
(RUN) for the past 15 years le for bankruptcy with debts of $3.1 bil-
lion, some 30% more than the value of its assets. In November of that year Linda (FIRE).
She (SUE) Warnaco for $25 million in severance, but (SETTLE) for $452,000.
The below given Hiroski Okudas story will tell you something about lead-
ership. On one hand, it is the leaders in organisations who make things happen.
However, the way they do this may vary widely. After reading through the text try to
answer the below given questions.
1. Prior to becoming chairman, Okuda served as Toyotas president the rst non-
family member in over 30 years to head the company. He also sticks out in his
executive circles, because in Japan executives are supposed to be unseen. Okuda
justies his outspoken and aggressive style as necessary to change a company
that has become lethargic and overly bureaucratic.
2. Okuda moved ahead at Toyota by taking jobs that other employees didnt want.
For example, when the company faced difculties in trying to build a plant in
Taiwan, many at Toyota were convinced that the project should be scrapped.
Okuda thought differently. He did not want to give up. He restarted the project
and led it to success. His drive and ability to overcome obstacles were central to
his rise in the company.
3. When Okuda ascended to the presidency in 1995, Toyota was losing market share
in Japan to both Mitsubishi and Honda. Okuda attributed this problem to several
factors. One of them was that Toyota had been losing touch with customers in
Japan for several years. For example, when engineers redesigned the Corlolla in
1991, they made it too big and too expensive for the Japanese tastes. Then four
years later, they stripped out so many of the costs in the car that Corolla looked
too cheap. Toyotas burdensome bureaucracy also bothered Okuda. A decision
that took ve minutes to lter through the company at Suzuki Motor Corporation
took three weeks at Toyota.
4. In his rst 18 months on the job, Okuda implemented some drastic changes. In a
country in which lifetime employment is consistent with the culture, he replaced
nearly one third of Toyotas highest-ranking executives. He revamped Toyotas
long-standing promotion system based on seniority, adding performance as a fac-
tor. Some outstanding performers were moved up several levels in management
at one time something unheard of in the history of company.
5. Okuda also worked with vehicle designers to increase the speed at which a ve-
hicle went from concept to market. What once took 27 months was shortened to
18. Finally, he is using the visibility of his job to address larger societal issues
facing all Japanese businesses. He recently accused Japans Finance Ministry
of trying to destroy the auto industry by driving up the yen. And he has been
an audible voice in the country, condemning the lax lending practices that force
Japanese banks to write off billions of dollars in bad loans and that led, in part, to
the economic crisis in the country.
6. Unfortunately, some of Okudas actions may have backred. Speculations that he
overstepped his boundary by his blunt demands may have offended the found-
ing family leading to his removal as president of the company in June 1999.
However, his strategic leadership and the good he has done for the company did
not go unnoticed they helped him ascend to the chairmans job.

1. How would you describe Hiroski Okudas leadership style? Cite specics where
2. When a company is in crisis, do you believe that a radical change in leadership is
required to turn the company around? Support your position.
3. Would you describe Okudas leadership style to be (a) charismatic, (b) visionary,
and (c) culturally consistent with the practices in Japan? Explain.
Building your writing skills:
Essay Writing
Write an essay of between 250 and 350 words on each of the following subjects.
You should spend about an hour and a quarter on your essay. The best way to divide
your time is as follows: plan: 10-15 minutes; writing: 45-50 minutes; re-reading: 10-15
minutes. Where necessary, give your essay a title.
1. Are all t to be managers? To answer this question, it is necessary to be aware
of some links to practices, such as Emotional intelligence (EI), referring to non-
cognitive skills. It differs from intelligence quotient (IQ) and includes awareness
of ones own feelings, awareness of ones own emotions and impulses, the abil-
ity to sense how others feel, and the ability to handle the emotions of others. If
future hires have high EI scores, they will be more successful. The next includes
Machiavellianism (Mach), after Niccolo Machiavelli, who gave the two follow-
ing instructions on how to gain and manipulate power: (a) the maintenance of
emotional distances; and (b) ends justify means. Whether high Machs make good
employees or not depends on the kind of job. If their business requires bargaining
skills (labour negotiations), high Machs are productive. Otherwise, it is difcult
to predict their work performance. On the other hand, self-esteem (SE) refers to
an individuals degree of like or dislike for himself or herself. High SEs believe
that they possess the ability to succeed at work and vice versa. They will take
more risks in job selection. Also, they are more likely to choose unconventional
jobs than are people with low SEs, and are more satised with their jobs than
low SEs. One should not forget charisma either. Are charm and grace all that
is needed to create followers? Should one be sensitive to others feelings and
needs? What about sensitivity to the environment and unconventional behaviour?
What about our country?
2. Differences in international business cultures. Describe in what way national
culture affects leadership, bearing in mind that culture varies from country to
country. It is obviously not enough to categorise Italians as people spending most
of their time in the sun while eating pizza and drinking wine. There is more
to be learned to become a successful manager in a foreign market. Where did
Eurodisney in Paris go wrong? The Disney management denitely ignored many
basic questions before launching this project. One of their mistakes was also re-
lated to a cultural aspect: Did Eurodisney, for example, prohibit drinking alcohol
inside the park? In the rst place, the French visitors were emmbarassed, for
drinking wine to a meal is typically French. Disney has changed the regulation
later on but in the beginning they did not respect or take the foreign culture into
account. What can one do to avoid such mistakes or at least to minimise them?
3. Gender roles. Each culture handles gender roles more or less differently. The
equality in political, private and business issues is dependant on a countrys ju-
risdiction. The rst time in Europe when females got the right to vote was in
the beginning of the 19th century in Finland. Nowadays, the development has
reached nearly equal rights between males and females. In contrast, Chinas rst
law protecting women workers dates only from 1988. Western cultures vary just
in small ranges concerning gender roles in business life: for instance, in France
women are equally treated in certain elds of professions like law and nance,
but there are restrictions against women working in industry sectors. In contrast,
German men show prejudice against women, which is why they have to achieve
better and higher qualications and work harder to get into leading positions.
What about our country? Is gender a universal issue? Does it affect personal
identity and on power-values which are determined by culture?
4. The role of trust. Given the importance trust plays in the leadership equation,
todays leaders seek to build trust with their followers. Give your suggestions for
achieving that goal.
5. Power distance. It refers to the extent to which less powerful members of in-
stitutions and organisations within a country expect and accept that power is dis-
tributed unequally. Power distance describes also the extent to which employees
accept that superiors have more power than they have. Furthermore, the opinions
and decisions are right because of the higher position someone has. Are employ-
ees too afraid to express their doubts and disagreements with the autocratic and
paternalistic bosses in countries with high power distance? What about small
countries? Do bosses and subordinates work together and consult each other?
Given the salary range is low between the top and the bottom in companies, do
subordinates expect to be consulted within the decision-making process? Do sub-
ordinates expect to be told what to do from their superiors because they consider
each other as unequal in companies with higher power distance? Are inequalities
normally expected and privileges seen as desirable by superiors in such compa-
nies? What about our country?
6. Succession to the CEO. Imagine you are the new CEO of a multi-billion dollar
corporation. You are succeeding the founders son-in-law who held the position
for more than 33 years growing it to the company that it is today. Your prede-
cessor was dynamic. You are considered mellow. And he is not really leaving,
just going to the position of the Chairman of the Board to keep an eye on
things. Describe how you would feel and what you should do.
Communi cat i on Modul e
Part II
This module assumes that you have learned how to extract the meaning from a
text and that you are ready to go on to the later stages.
Denition. A summary or prcis is a brief and clear statement in a connected
and readable shape of the substance of a longer passage. It is valuable because it oblig-
es you to read intelligently and then to write simply and economically.
The journalist who is reporting a speech needs to pick out its main points and
omit what was least important in it. Usually the newspaper will only have the space
to print a shortened version of it. The student may need to read a chapter of a text-
book and then make brief notes on what was most important in it. In any examination
you take, the examiners are likely to test your ability to read, to write, and to think,
by asking you to write a summary or prcis. The reasons for managers to learn how
to summarise are rather sensible. To express in your own words somebody elses
ideas, i.e., write the gist of it, even when you do not agree with those ideas, is good
practice both in clear writing and clear thinking. In one way or another you will often
be called upon to give your superior a brief account of the main items in a message
received or a meeting attended, or, if you are an executive, you will have to brief your
subordinates about what the job would entail. It will not always be called a summary
but it will be one all the same.
Brief. In writing a summary a great deal of meaning must be put into as few
words as possible a very desirable thing in all forms of writing, but necessary in
prcis. In an examination it is usual to ask for a summary in not more than a limited
number of words. It is necessary to keep within this limit. All words including a and
the count. If no number is stated, you should aim at a version one-third the length of
the passage for summary.
Clear. It is even more important to be clear than to be brief. The two usually go
together. If they appear to conict, it is always better to be clear.
Connected. In any piece of writing, especially if it is an argument, ideas do not
appear separately one at a time. They come in groups and some are more important
than others, but all are linked to the main point of the text. In summarizing, these links
of thought must be preserved, otherwise the result is a succession of apparently uncon-
nected jerky ideas, the meaning of which is not clear.
Readable. A summary is not a kind of telegram and it must be written in normal
English without any omissions of words or incomplete sentences.
Substance. Making a prcis is excellent discipline for the mind because one has
to say fairly and exactly what the other man said, whether one agrees or not. It is not as
easy as many people think.
First, one must say no more and no less than is said in the original.
Secondly, one must add nothing of ones own to the original
Thirdly, it is necessary to keep to the facts in the same proportion as the original,
not altering the general balance. This alteration of balance is a common trick of news-
papers reporting the political speeches. They take a phrase or a sentence out of the rest
of the speech and comment on that, giving it by so doing an importance different from
that intended by the speaker. When this is done deliberately, it is just as dishonest as
stealing, and more dangerous.
This substance test is the one your summary will be judged by. Does it say what
the original says, and leave the same impression on the mind of the reader though the
words used are yours? If so, it has done its proper work.
Getting rid of idle words. The rst necessity is to learn to notice and avoid all
forms of wordiness, that is, using more words than are necessary to make the reader
understand exactly what is being said. The two commonest kinds of wordiness are
roundabout expressions and repetition.
1. Roundabout expressions. Perhaps the commonest form of roundabout phrase is
that where a single adjective such as unpleasant appears as (of an unpleasant
character) a whole phrase that adds nothing to the meaning. For example:
It was an unpleasant experience.
It was an experience of unpleasant character.
Both express the same thing, but the former, as it wastes no words, is greatly to
be preferred.
Here are some more examples of phrases that would be better expressed in
single words:
of a disagreeable nature disagreeable
of a silly kind silly
of a delightful description delightful
in a brief manner briey
[The only common exception to this is in a friendly way. This is often preferred
to friendly because that is so difcult to say.]
Other similar expressions to be avoided are:
with regard to in the case of
having regard to the fact that with a view to
in reference to in view of
Here are some examples, all taken from the same government circular that will show
you how easy it is to write wordily and also how wordiness might have been avoided:
Original Summarised
Boys whose way of life is cast town boys
in an urban environment ...
together with the addition of ... also
special attention will be paid to activities with an eye special attention will be paid to activities
to the cultivation of the qualities of initiative, etc., ... to cultivate initiative
judged in the light of their results ... judged by their results
In this connection it should be said ... Here it should be said
2. Repetition. People seem sometimes to think that what they say twice is more
impressive than what they say once. A proper attention to the meaning of words
would show such people that repetition makes for weakness not strength. For
Original Text Summarised Text
For three years the economy is in continuous growth; For three years the economy has been
this state of affairs goes on for the whole of that continuously growing.
time without cease.
Other ways of being brief. So far we have only considered getting rid of useless
words, but, if the passage we want to summarise is well written, there will be no useless
words. How then can we shorten it? There are two ways: putting ideas together that are
separate, and generalisation.
1. Putting ideas together. This can be done by subordinating the less to the more
important ideas, reducing sentences to clauses, clauses to phrases, phrases to
words, etc. For example:
Original Text Summarised Text
It was quite dark; for the sun had set an hour An hour after sunset one dark, moonless
before and the moon had not risen yet when the night, the thief crept out of his cottage to
thief carefully opened the door of his cottage go about his business.
and prepared to go about his business.
I am now at liberty to confess that much The critics of my late friends books were
which I have heard objected to my late friends often right.
writings was well-founded.
Twenty-one words instead of thirty-six, i.e., ten instead of twenty-one and the
meaning so little changed as to be almost the same.
2. Generalisation. The second way of shortening is by generalisation. Instead of
giving all the details given in the original you give only the general impression
made by them. For example:
Particular General
Nothing in the ofce was in its place. Books The ofce was in complete disorder.
were piled on chairs, on tables, on the oor,
everywhere except on the shelves. Some sheets
of old newspaper were blowing about the oor.
Cushions were off the chairs, ashtrays off the tables,
and even the carpets were wrinkled and twisted.
This method of shortening has its dangers, because the meaning is changed.
The single word disorder has to call up in the readers imagination all the details
that the original shows him. It is therefore necessary to use exactly the right word
when making the generalisation, i.e., to nd some general word or phrase to sum up
details or particulars.
Particular General
My mother often sent me to buy our, My mother often sent me shopping to the
sugar, coffee and the biscuits at one shop grocers and the adjacent greengrocers.
and potatoes, carrots, apples and oranges
at another near at hand.
Thirteen words instead of twenty-six if you know the exact words for the shops
where groceries and vegetables are bought. The more words you know (e.g. wet is
wetter than damp but no so wet as soaking), the easier it will be for you to write a
shortened form by generalisation.
How to set about writing a summary. In a methodical and businesslike way,
i.e., by adhering to the rule of six steps, which reads as follows:
Step 1. Read and UNDERSTAND the passage. Ninety-nine out of every hun-
dred failures to make a good summary are caused by not understanding the text.
As soon as you have grasped the meaning EXPRESS THE WRITERS MAIN
tence. Write this sentence at the top of your summary.
Step 2. Read the passage again to test whether your sentence really expresses the
writers main idea, and to note and mark the division into which it falls. Give to
each division its appropriate number of words from the total you are allowed.
Step 3. Take a large, clean sheet of rough paper and set to work on divi-
sion one cutting wordiness and shortening as you go. Do NOT COPY OUT
ANY PHRASES FROM THE ORIGINAL. Go on section by section until
you reach the end.
Step 4. Read your summary, keeping in mind the sentence you made rst and
make sure
(a) that your summary says what the original says;
(b) that it reads like normal English;
(c) that you have kept the connections of thought;
(d) that it is perfectly clear;
(e) that it is not wordy.
Step 5. Count the number of words (excluding, of course, the sentence you have
written at the top). If you have too many, shorten still further. If you have a great
many too few, consider whether you have not left out something of importance.
WITH THE ORIGINAL to make sure that nothing important has been left out
and nothing whatever has been added. When you are satised, write the fair copy,
READ IT OVER, and write the number of words it contains in the end.
Communication is the transference and understanding of meaning. The com-
munication process begins with a communication sender (a source) who has a mes-
sage to convey. The message is converted to symbolic form (encoding) and passed by
way of a channel to the receiver, who decodes the message. To ensure accuracy, the
receiver should provide the sender with feedback as a check on whether understanding
has been achieved.
Written communications include memos, letters, e-mail, organisational periodi-
cals, etc., or any other device that transmits written words or symbols. Why would a
sender choose to use written communication? Because they are tangible, veriable, and
more permanent than the oral variety. Also, having to put something in writing forces a
person to think more carefully about what he or she wants to convey. Therefore, written
communications are more likely to be well thought out, logical and clear.
Of course, written messages have their drawbacks. Writing may be more pre-
cise, but it also consumes a great deal of time. The other major disadvantage is feed-
back, or rather, lack of it. Oral communications allow the receivers to respond rapidly
to what they think they hear. However, written communications do not have a built-in
feedback mechanism. Sending a memo is no assurance that it will be received; if it is
received, there is no guarantee that the recipient will interpret it as the sender meant.
It is best in such cases merely to ask the receiver to summarise what you have said.
An accurate summary presents feedback evidence that the message has been received
and understood.
The grapevine is an unofficial channel of communication in an organisation.
It is neither authorised nor supported by the organisation. Rather, information is
spread by word of mouth and even through electronic means. Ironically, this is
a two-way process - good information passes among us rapidly; bad information,
even faster.
The biggest question raised about grapevines, however, focuses on the ac-
curacy of the rumours. Research on this topic has found somewhat mixed results.
In an organisation characterised by openness, the grapevine may be extremely
accurate. In an authoritative culture, the rumour mill may not be accurate. But
even then, although the information flowing is inaccurate, it still contains some
element of truth. Rumours about major lay offs, plant closings, and the like may
be filled with inaccurate information regarding who will be affected or when it
may occur. Nonetheless, the reports that something is about to happen are prob-
ably on target.
Some of the most meaningful communications are neither spoken nor written.
These are non-verbal communications. A red siren or a red light at an intersection
tells you something without words. A college professor does not need words to know
that students are bored; their eyes get glassy or they begin to read papers during class.
Similarly, when papers start to rustle and notebooks begin to close, the message is
clear: Class time is about over. The size of a persons ofce and desk or the clothes he
or she wears also convey messages to others. However, the best known areas of non-
verbal communication are body language and verbal intonation.
Body language refers to gestures, facial congurations, and other movements of
the body. A snarl, for example, says something different from a smile. Hand motions,
facial expressions, and other gestures can communicate emotions or temperaments
such as aggression, fear, shyness, arrogance, joy and anger.
Verbal intonation refers to the emphasis someone gives to words or phrases. To
illustrate how intonations can change the meaning of a message, consider the student
who asks the professor a question. The professor replies, What do you mean by that?
The students reaction will vary, depending on the tone of the professors response. A
soft, smooth tone creates a different meaning from one that is abrasive with a strong
emphasis on the last word. Most of us would view the rst intonation as coming from
someone who sincerely sought clarication, whereas the second suggests that the per-
son is aggressive or defensive.
In other words, every oral communication has a non-verbal message, the im-
pact of which is likely to be the greatest. One researcher found that 55% of an oral
message is derived from facial expression and physical posture, 38% from verbal
intonation, and only 7% from the actual words used. Most of us know that animals
respond to how we say something rather than to what we say. Apparently, people are
not much different.
A number of interpersonal and intrapersonal barriers help to explain why the
message decoded by a receiver is often different than that which the sender intended.
Filtering, selective perception, information overload, emotions, language, and com-
munication apprehension barriers are but some of the more prominent barriers to ef-
fective communication.
Managers can overcome communication barriers by using feedback (ensuring the
fact that the message was received as intended), simplifying language (using language
that is understood by your audience), listening actively (to capture the true meaning of
the message being sent), constraining emotions (not allowing emotions to distort your
ability to properly interpret the message), and watching non-verbal cues (aligning the
non-verbal with the verbal).
Research suggests they do. When men talk they emphasize status and inde-
pendence. Women talk to create intimacy and connections. Men frequently com-
plain that that women talk on and on about their problems. Women, however, criti-
cise men for not listening. When a man hears a woman talking about a problem, he
frequently asserts his desire for independence and control by providing solutions.
Many women, in contrast, view conversing about a problem as a means of promot-
ing closeness. The woman presents the problem to gain support and connection, not
to gain the mans advice.
Therefore, both men and women need to acknowledge that there are differences
in communication styles, that one style is not better than the other, and that it takes real
effort to talk with each other successfully.
The importance of effective communication for managers cannot be overempha-
sized for one specic reason: Everything a manager does involves communicating. Not
some things but everything! A manager cannot make a decision without information.
That information has to be communicated. Once a decision is made, communication
must again take place. Otherwise, no one will know that a decision has been made.
The best idea, the most creative suggestion, or the nest plan cannot take form without
communication skills. Managers therefore need effective communication skills. It is
not suggested that good communication skills alone make a successful manager. We
can say, however, that ineffective communication skills can lead to a continuous stream
of problems for the manager.
Answer the below given questions.
1. Dene communication.
2. Describe the communication process.
3. State the grapevine motto.
4. Is the grapevine an effective way to communicate? Why? Explain your position.
5. What are the best known areas of non-verbal communication?
6. Explain body language and verbal intonation as the two best known areas of non-
verbal communication.
7. List techniques for overcoming communication barriers.
8. Do men and women communicate in the same way? Explain.
9. Explain the importance of communication to managers.
(a) Match the terms referring to the communication process on the left-hand side
with their explanations on the right-hand side.
1. Source (a) A receivers translation of a senders message.
2. Message (b) The degree to which carrying out the work activities required by a job
results in the individuals obtaining direct and clear information about the
effectiveness of his or her performance.
3. Encoding (c) The person to whom the message is directed.
4. Channel (d) The conversion of a message into some symbolic form.
5. Receiver (e) A purpose to be conveyed.
6. Decoding (f) The term refers to a communication sender.
7. Feedback (g) The medium by which a message travels.
(b) Match the terms referring to the barriers to effective communication on the
left-hand side with their explanations on the right-hand side.
1. Filtering (a) Undue anxiety when one is required to interact face to face.
2. Selective perception (b) Words have different meanings to different people. Receivers
will use their denitions of words communicated, which may be
different for what the sender intended.
3. Information overload (c) Messages will often be interpreted differently depending on how
happy or sad one is when the message is being communicated.
4. Emotions (d) When the amount of information one has to work with exceeds
ones processing capacity.
5. Language (e) Receiving communications on the basis of what one selectively
sees and hears depending on his or her needs, motivation, expe-
rience, background, and other personal characteristics.
6. Communication (f) The deliberate manipulation of information to make it
apprehension appear more favourable to the receiver.
(c) Match the terms referring to the overcoming barriers to effective communi-
cation on the left-hand side with their explanations on the right-hand side.
1. Use feedback (a) Listen for the full meaning of the message without making
premature judgements or interpretations or thinking what
you are going to say in response.
2. Simplify language (b) Be aware that your actions speak louder than your words.
Keep the two consistent.
3. Listen actively (c) Recognise when your emotions are running high.
4. Constrain emotions (d) Check the accuracy of what has been communicated or what
you think you heard.
5. Watch non-verbal cues (e) Use words that the intended audience understands.
(d) Match the parts of the memo (1-6) with the descriptions (a-f).

TO Vincent Mills, Human Resources Manager
FROM Philip Groves, Managing Director
SUBJECT Seminars on Japanese culture and management

The trip to Japan has been conrmed for the 15

of this month. Ive decided
to go ahead with the seminars as we discussed.

Could you contact the consultant you mentioned and get back to me about
the following:
- the topics she covers
- short description of each topic
- whether you think we should use her services or look for someone else.

We havent much time, so could you do this a.s.a.p. and also check the avail-
ability of the executives who will be involved in this training.
(a) The body of the memo.
(b) A Short heading which tells you what the memo is about.
(c) When the memo is sent.
(d) The conclusion of the memo, which often recommends the course of action.
(e) Name of the person to whom the memo is sent.
(f) A brief introduction to the memo giving the most important information.
Supply the missing prepositions to complete the passage Why must we listen actively?
When someone talks, we hear. But too often we do not listen. Listening is an ac-
tive search meaning, whereas hearing is passive. listening, two people
are thinking the receiver and the sender.
Many us are poor listeners. Why? Because listening is difcult, and it is
usually more satisfying to be the talker. Listening, in fact, is often more tiring than talk-
ing. It demands intellectual effort. Unlike hearing, active listening demands total con-
centration. The average person speaks a rate about 150 words
minute, whereas we have the capacity to hear and process the rate
nearly 1,000 words minute. The difference obviously leaves idle time
the brain and opportunities the mind to wander.
Active listening is emphasized empathy the sender that is,
placing yourself the senders position. Because senders differ
attitudes interests, needs, and expectations, empathy makes it easier to understand the
actual content of a message.
Fill in the blank spaces in Some of the more prominent barriers to effective com-
munication with correct verb forms.
Filtering (REFER) to the way that a sender
(MANIPULATE) information so that it (SEE) more favourably by the
receiver. For example, when a manger (TELL) his boss what he
(FEEL) that boss (WANT) to hear, he (FILTER) informa-
tion. Does this happen much in the organisation? Sure it (DO), and most
likely it so (HAPPEN) in organisations in which there is emphasis on
status differences and among employees with strong career mobility aspirations. So,
expect (SEE) more ltering taking place in large corporations than in
small business rms.
Individuals cannot assimilate all they (OBSERVE), so they are se-
lective. They (ABSORB) bits and pieces, which are not chosen randomly;
rather they (CHOOSE) depending on the interests, experience, etc. The
receivers in the communication process, therefore, selectively see and hear. Therefore,
selective perception (ALLOW) us to speed read others but not without
the risk of (DRAW) an inaccurate picture.
Individuals have a nite capacity for (PROCESS) data. For instance,
research (INDICATE) that most of us have difculty working with more
than about seven pieces of information at one time. When the information
(EXCEED) our processing capacity, the result is information overload. What
(HAPPEN) when individuals have more information than they can sort out and use?
They (TEND) to select out, ignore, pass over or forget information. In any
case, the result is lost information and less effective communication.
When people feel threatened, they tend (REACT) in ways
that (REDUCE) their ability to achieve mutual understanding. In
other words, if emotions (INVOLVE), messages often
(INTERPRET) differently, depending on how happy or sad one is when the mes-
sage is being communicated.
Words (MEAN) different things to people: The meanings of words
are not in the words; they are in us. Age, education, and cultural background are three
of the more obvious variables that (INFLUENCE) the language a person
(USE) and the denitions he or she (APPLY) to words. In an
organisation, employees usually (COME) from diverse backgrounds, and
therefore have different patterns of speech. Additionally, the grouping of employees
into departments (CREATE) specialists who develop their own jargon or
technical language.
Another roadblock to effective communication (BE) that some peo-
ple an estimated 5% to 20% of the population suffer from
(DEBILITATE) communication apprehension or anxiety. Although lots of people
dread (SPEAK) in front of a group, communication apprehension is a more
serious problem because it (AFFECT) a whole category of communica-
tion techniques. People who suffer from it (EXPERIENCE) undue
tension and anxiety in oral communication, written communication, or both. As a re-
sult, they may rely on memos or faxes to convey messages when a phone call would
not only be faster but more appropriate.
Why the emphasis on non-verbal cues? Well, if actions speak louder than words,
then it is important to watch your actions to make sure that they align with and reinforce
the words that go along with them. Given this fact, the effective communicator watches
his or her non-verbal cues to ensure that they, too, convey, the desired message.
This is why some organisations, such as Doorway Rug Service, Inc., are teaching
many of their employees especially in marketing and sales to make decisions on the
basis of non-verbal communication cues.
For Karen Vesper, vice president of Doorway, focusing on non-verbal commu-
nications has become an important part of her interpersonal dealings. After reading
through Karen Vesper Reads the Signals, try to answer the below given questions.
1. Several years ago, Karen became interested in how body movements and man-
nerisms truly reect what an individual is saying. Continually reading in this area
of study, Vesper has been able to make decisions about potential employees and
potential customers by reading them. For example, Vesper believes that body
language can give a person competitive advantage. It can make the difference
when closing the sale, or in Doorways case, ring new employees.
2. During interviews, for example, Vesper pays constant attention to the job can-
didates eye movements and mannerisms. Vesper believes that she can correctly
predict if the job candidate will be an aggressive salesperson while simultane-
ously being personable and friendly. How does she do that? By looking at their
eyes and the way that they present themselves.
3. In one case a hiring decision came to two people. Candidate 1 was animated and
made constant eye contact. Candidate 2 never looked Karen in the eye, leaned
back in his chair, and crossed both his legs and arms. Candidate 1 demonstrated
the communication skills that Vesper found aligned with successful performance
in her organisation.
4. Vesper believes that non-verbal communication can play a signicant role in
helping her organisation achieve its annual sales goals. Personally she has found
that it has helped her qualify customers. For instance, even though a potential
customer says Yes, crossed arms and legs emphatically state No! Understanding
this, Vesper is in a better position to probe further into the possible objections the
customer has. She has found that, in many cases, she is able to steer conversation
in a direction that ultimately leads to successfully closing a sale. And that is a
major competitive advantage.

1. Describe the communications process that Karen Vesper uses in her dealings with
job candidates and employees.
2. What problems might Karen encounter by her heavy reliance on the non-verbal
3. What communication guidance would you give to Vesper and individuals like her
who place an inordinately high value on body language?
Today we rely on a number of sophisticated electronic devices to carry out in-
terpersonal communications. We have closed-circuit television, voice-activated com-
puters, cellular phones, fax machines, pagers and e-mail. For example, e-mail, which
allows us to instantaneously transmit written messages on computers, is one of todays
most widely used ways for organisational members to communicate. E-mail is fast,
convenient, cheap, and you can send the same message to dozens of people at the same
time. After reading through the text, try to answer the below given questions.
1. E-mail has taken on its own vocabulary and verbal intonation. Acronyms have
found its ways into e-mail to create shortcuts for both the sender and the receiver.
These abbreviations, which consist of the rst letters of each word in a phrase and
are used when writing an e-mail or when discussing a subject in a chat room, are
called netcronyms. Below is given the list of some of them:
Netcronym Denition Usage Example
AAMOF As a matter of fact AAMOF, he happens to be the boss too.
ATM At the moment Im busy ATM.
Before B4 we begin, lets recap yesterdays events.
See you CU you in class tomorrow.
DIY Do it yourself Im not doing your job for you. DIY.
EOD End of discussion You have no facts. EOD.
F2F Face to face We met F2F for the rst time in the courtroom.
GOK God only knows GOK how hard I worked.
HAND Have a nice day Thank you for your help. HAND.
IMO In my opinion IMO, you should take a rest.
LOL Laughing out loud. LOL. That was a great joke.
MYOB Mind your own business Sop bugging me. MYOB.
NP No problem Its NP. I like helping others.
OMG Oh my God OMG. That was scary.
PAW Parents are watching Send me the le later. PAW.
PTMM Please tell me more. PTMM, Im interested.
SITD Still in the dark Im SITD as to what you are talking about.
THX Thanks THX for the help today.
WBS Write back soon Please WBS.
YW Youre welcome YW. Just glad to help.
2. However, one of the problems with communications over the Internet is the lack
of inection and body language which, combined with users geographic and
cultural diversity, increases the chance that humorous or sarcastic messages will
be misunderstood.
3. Interestingly, emotions can also be displayed in e-mails. It is done by way of
emoticons or smileys, i.e., a series of typed characters that, when turned side-
ways, resemble a face and express an emotion. Some common emoticons that are
often encountered on the Internet include:
Symbol Meaning
:-) or :) Im smiling at the joke here (smiley)
:D or :-D Im overjoyed (a big smile)
;-) Im winking and grinning at the joke here (the winkey)
:- Im sad about this
:-7 Im speaking with tongue in cheek
:-O either a yawn of boredom or a mouth open in amazement
:-* a kiss
:-&; tongue-tied, used when you nd it difcult to express yourself
>:-( very angry
&<:-( a dunce (a stupid person)
:-p tongue sticking out, used when you want to be rude to someone
:'-( crying

1. Is the wave of communications future in electronic media?
2. Search on the Internet for common communication shortcuts used by e-mail
3. Identify 15 acronyms and describe what they mean.
4. How should these acronyms be used? Describe any barriers these acronyms
may cause a user.
5. Emoticons have been widely played in popular media, and though they are dis-
dained by many writers, they often serve a useful function in on-line communica-
tions. Do you agree or disagree with this statement. Defend your position.
Building your writing skills:
Summary Writing
To test your accuracy and understanding and to enhance your skill in writing
1. Read the below given passages and then answer the questions which follow
them to test your accuracy and understanding.
(a) A man who studies a particular subject may learn a lot about that subject. But
a man who wants to be able to judge what is best for his country must study
more than one subject. An expert mathematician will not necessarily be a bet-
ter judge of foreign policy than a man who cultivates the soil.
Does the writer say:
(a) that no one should study just one subject?
(b) that a mathematician is no use at anything else?
(c) that a politician should study more than one subject?
(d) that cultivators are good judges of foreign policy?
(e) that cultivators are bad judges of foreign policy?
(f) that cultivators are better or worse judges of foreign policy than mathematicians?
(g) that cultivators have only studied one subject?
(h) that a man learned in only one subject is not always the best judge of what is good
for his country?
(i) that an expert biologist is not necessarily a better judge of prison reform than a
(j) that a country needs more people who have studied many subjects than experts in
single subjects?
(b) With more irrigation it would be possible to grow more crops; but it is not
certain that markets could be found for the food produced.
Does the writer say:
(a) that irrigation would increase the amount of food which can be produced?
(b) that this would increase the wealth of the country?
(c) that more irrigation is possible?
(d) that the only way to get more crops is by irrigation?
(e) that markets could not be found for the food produced?
(f) that markets could be found for the food produced?
(g) that if markets could be found the rest would be easy?
(h) that the country could grow more barley?
(i) that it would be foolish to grow more crops if markets could not be found for them?
2. Read the below sentence and then consider how it can be shortened.
A man who travels to foreign countries will see more than a man who stays at
home, but it does not follow that he will be able to talk in an interesting way about what
he has seen, nor that he will be any wiser than the man who stays at home.
3. Read the below given passage and:
(a) Divide it into six paragraphs;
(b) Summarise each paragraph in one sentence;
(c) Think of a title for the passage.
D. L. Rogers Corp., based in Bedford, Texas, owns and operates 54 fran-
chises of Sonic Corp., a chain of fast-food drive-in restaurants. Jack Hartnett,
Rogers president prides himself on knowing everything about his employees
both at work and at home. If they have marital problems or credit-card debt, he
wants to know. And he thinks nothing of using that information if he thinks he
can help. For instance, how many executives you know who counsel employees
on their sex life? When a wife of one of his managers called Hartnett to say her
husband was impotent and did not know what to do, he had an answer. Hartnett
met with the couple in a motel room, where he prodded the fellow to confess to
an affair and beg for forgiveness. Is Hartnetts style intrusive? Yes. But neither
he nor his employees consider it a problem. There are no secrets here, he says.
No subject is too delicate for his ears. And his defence? He is merely doing what
any good friend might do. Also, he believes that the more he knows about his
workers, the more he can help them stay focused at work and happy at home.
Hartnett plays golf with his managers, sends them personally signed birthday
cards, and drops by their homes to take them to dinner. But if you think he is Mr.
Nice Guy, think again. He badmouths academic theories that propose that lead-
ers need to persuade workers to buy in to the leaders vision. Hartnett instructs
his employees to do it the way we tell you to do it. He is perfectly comfortable
using the authority in his position to make rules and dish out punishments. One
of Hartnetts basic rules is I will only tell you something once. Break one of
his rules twice and he will re you. The managers who work for Hartnett are well
compensated for meeting his demanding requirements. His unit managers and
regional managers earn an average of $65,000 and $150,000, respectively. This
compares with industry averages of $30,000 and $52,000. Moreover, Hartnetts
managers are eligible for upwards of a 15% bonus programme as well as an op-
portunity to own 25% of the company. Does Hartnett seem inconsistent? Maybe.
He believes in openness, integrity, and honesty, but he expects as much as he
gives. It is not an option. So he is your best friend, and, at the same time, he is
rigid and autocratic. He admits to purposely keeping everybody slightly off bal-
ance, so they will work harder. Hartnetts approach to leadership seems to be
effective. Moreover, people seem to like working for him. In an industry known
for high turnover, Hartnetts managers stay about nine years, compared with an
industry average of less than two.
4. Write summaries of the below given passages.
(a) It begins with a source, i.e., sender, who has a message to convey. The source
initiates a message by encoding a thought, i.e., the conversion of a message
into some symbolic form. Four conditions affect the encoded message: skill,
attitudes, knowledge, and the social-cultural system. Ones total communica-
tive success includes speaking, reading, writing, listening, and reasoning skills.
Attitudes, on the other hand, affect our behaviour. We hold predisposed ideas
on numerous topics, and our communications are affected by these attitudes.
Furthermore, we are restricted in our communicative activity by the extent of
our knowledge of the particular topic. We cannot communicate what we do not
know, and should our knowledge be too extensive, it is possible that our receiver
will not understand our message. And nally, just as attitudes inuence our be-
haviour, so does our position in social-cultural system in which we exist.
The message is the actual physical product from the source: when we
speak the speech is the message; when we write the writing is the mes-
sage; and when we gesture the movements of our arms, the expressions on
our face are the message.
The channel is the medium through which the message travels. It is se-
lected by the source, who must determine which channel is formal and which
one is informal. Formal channels traditionally follow the authority network
within the organisation, and other forms of messages, such as personal or so-
cial, follow the informal channels.
The receiver is the person to whom the message is directed. However,
before the message can be received, the symbols in it must be translated into a
form that can be understood by the receiver. This is the decoding of the mes-
sage. Just as the encoder was limited by his or her skills, attitudes, knowledge,
etc., the receiver is equally restricted. Accordingly, the source must be skilful
in writing or speaking; the receiver must be skilful in reading or listening, and
both must be able to reason.
To ensure accuracy, the receiver should provide the sender with feed-
back as a check on whether understanding has been achieved.
(b) The ability to listen is too often taken for granted because we often confuse
hearing with listening. Listening requires attention, interpreting, and remem-
bering sound stimuli. Effective listening is active rather than passive. In pas-
sive listening, you resemble a tape recorder. You absorb and remember the
words spoken. If the speaker provides you with a clear message or makes
his or her delivery interesting enough to keep your attention, you will prob-
ably hear most of what the speaker is trying to communicate. Active listening
requires you to get inside the speakers mind to understand the communica-
tion from his or her point of view. Active listening is a hard work. Let us take
students and their instructors as an example. Students who use active listening
techniques for an entire 75-minute lecture are as tired as their instructor when
the lecture is over because they have put as much energy into listening as the
instructor put into speaking.
In order to enhance your active listening skills you should consider de-
veloping appropriate behaviours related to active listening. Let us consider the
following behaviour: How do you feel when somebody does not look at you
when you are speaking? If you are like most people, you are likely to interpret
this behaviour as disinterest. Therefore, you should look the speaker in the eye
to focus your attention and encourage the speaker.
Also, the active listener shows interest in what is being said through
exhibition of afrmative nods and appropriate facial expressions. However,
in addition to showing interest, you must avoid actions that suggest that your
mind is somewhere else, such as looking at your watch, shufing papers, play-
ing with your pencil, etc.
The critical listener analyses what he or she hears and asks questions,
which behaviour provides clarication, ensures understanding, and so forth.
Also, the effective listener uses phrases such as What I hear you saying is
... or Do you mean ...? Let the speaker complete his or her thought be-
fore you try to respond and do not try to second guess where the speakers
thoughts are going.
Further, most of us rather express our own ideas than listen to what some-
one else says. Talking might be more fun and silence might be uncomfortable,
but you cannot talk and listen at the same time. Finally, the effective listener
makes transitions smoothly from speaker to listener and back to speaker. From
a listening perspective, this means concentrating on what a speaker has to say
and practicing not thinking about what you are going to say as soon as you get
your chance.
(c) Prior to becoming chairman, Okuda served as Toyotas president the rst
non-family member in over 30 years to head the company. He also sticks
out in his executive circles, because in Japan executives are supposed to be
unseen. Okuda justies his outspoken and aggressive style as necessary to
change a company that has become lethargic and overly bureaucratic.
Okuda moved ahead at Toyota by taking jobs that other employees didnt
want. For example, when the company faced difculties in trying to build a
plant in Taiwan, many at Toyota were convinced that the project should be
scrapped. Okuda thought differently. He did not want to give up. He restarted
the project and led it to success. His drive and ability to overcome obstacles
were central to his rise in the company.
When Okuda ascended to the presidency in 1995, Toyota was losing
market share in Japan to both Mitsubishi and Honda. Okuda attributed this
problem to several factors. One of them was that Toyota had been losing touch
with customers in Japan for several years. For example, when engineers re-
designed the Corlolla in 1991, they made it too big and too expensive for the
Japanese tastes. Then four years later, they stripped out so many of the costs
in the car that Corolla looked too cheap. Toyotas burdensome bureaucracy
also bothered Okuda. A decision that took ve minutes to lter through the
company at Suzuki Motor Corporation took three weeks at Toyota.
In his rst 18 months on the job, Okuda implemented some drastic
changes. In a country in which lifetime employment is consistent with the
culture, he replaced nearly one third of Toyotas highest-ranking executives.
He revamped Toyotas long-standing promotion system based on seniority,
adding performance as a factor. Some outstanding performers were moved up
several levels in management at one time something unheard of in the his-
tory of company.
Okuda also worked with vehicle designers to increase the speed at which
a vehicle went from concept to market. What once took 27 months was short-
ened to 18. Finally, he is using the visibility of his job to address larger societal
issues facing all Japanese businesses. He recently accused Japans Finance
Ministry of trying to destroy the auto industry by driving up the yen. And he
has been an audible voice in the country, condemning the lax lending practices
that force Japanese banks to write off billions of dollars in bad loans and that
led, in part, to the economic crisis in the country.
Unfortunately, some of Okudas actions may have backred. Speculations
that he overstepped his boundary by his blunt demands may have offended the
founding family leading to his removal as president of the company in June
1999. However, his strategic leadership and the good he has done for the com-
pany did not go unnoticed they helped him ascend to the chairmans job.
(d) Several years ago, Karen became interested in how body movements and
mannerisms truly reect what an individual is saying. Continually reading
in this area of study, Vesper has been able to make decisions about potential
employees and potential customers by reading them. For example, Vesper
believes that body language can give a person competitive advantage. It can
make the difference when closing the sale, or in Doorways case, ring new
During interviews, for example, Vesper pays constant attention to the
job candidates eye movements and mannerisms. Vesper believes that she can
correctly predict if the job candidate will be an aggressive salesperson while
simultaneously being personable and friendly. How does she do that? By look-
ing at their eyes and the way that they present themselves.
In one case a hiring decision came to two people. Candidate 1 was ani-
mated and made constant eye contact. Candidate 2 never looked Karen in the
eye, leaned back in his chair, and crossed both his legs and arms. Candidate
1 demonstrated the communication skills that Vesper found aligned with suc-
cessful performance in her organisation.
Vesper believes that non-verbal communication can play a signicant
role in helping her organisation achieve its annual sales goals. Personally she
has found that it has helped her qualify customers. For instance, even though
a potential customer says Yes, crossed arms and legs emphatically state No!
Understanding this, Vesper is in a better position to probe further into the pos-
sible objections the customer has. She has found that, in many cases, she is
able to steer conversation in a direction that ultimately leads to successfully
closing a sale. And that is a major competitive advantage.
Communi cat i on Modul e
Part III
Any management effort must begin and end with communication, whether it be
a face-to-face contact communication or a non-face-to-face contact communication.
The former is one of the most frequently used ways for managers to run their business.
Managers are due to know how to manage their meetings and presentations. It is a very
important task and this is why speaking anxiety or delivering an effective presentation
is often a problem.
Most of us remember that rst time in speech class when we were required to
give a ve-minute speech. It was typically a time of high anxiety the realisation that
we would have to get up in front of a group of people and talk. The nervousness, the
excuses, the sweat rolling off the brow were all indicators that time was getting near.
And then it was over, and many people hoped that they would never have to get up and
give speech again. Comedian Jerry Seinfeld may have spoken for most of us when he
said that people prefer death over public speech.
The ability to deliver effective presentation is an important skill for career suc-
cess. Unfortunately, organisations have not spent much time helping students or em-
ployees. But that is changing. Upper level courses are frequently requiring students to
make group presentations.
Frightened about making a public speech? You are not alone. Even for the most
skilled speaker podium fright is not unusual. However, research shows that it is one
of the most needed skills for those seeking career advancement. So learn to speak pub-
licly, and practice whenever you can. You will look back one day and be thankful you
developed sound presentation skills.
Your speech anxiety can be reduced by following the below given 10 steps:
Know the room. It is a good idea to become familiar with the room in which you
will speak. Arrive early and walk round the room including the speaking area.
Know the audience. If it is possible, greet some of the audience as they arrive
and chat with them. It is easier to speak to a group of friends than to a group of
Know your material. If you are not familiar with your material or are uncom-
fortable with it, your nervousness will increase. Practice your speech presenta-
tion and revise it until you can present it with ease.
Learn how to relax. You can ease tension by doing exercise. Sit comfortably
with your back straight. Breathe in slowly, hold your breath for 4 to 5 seconds,
and then slowly exhale. To relax your facial muscles, open your mouth and eyes
wide, and then close them tightly.
Visualise yourself speaking. Imagine yourself walking condently to the stage
as the audience applauds. Imagine yourself speaking, your voice loud, clear and
assured. When you visualise yourself as successful, you will be successful.
Realise that people want you to succeed. All audiences want speakers to be
interesting, stimulating, informative and entertaining. They want you to suc-
ceed not fail.
Do not apologise for being nervous. Most of the time your nervousness
does not show at all. If you do not say anything about it, nobody will notice.
If you mention and apologise for your nervousness, you will only be calling
attention to it.
Concentrate on your message. Not the audience!
Turn nervousness into positive energy. The same nervous energy that causes
fright can be transformed into enthusiasm.
Gain experience. Experience brings condence, which is the key to effec-
tive speaking. Most beginning speakers nd their anxieties decrease after each
speech they give.
Your presentation skills can be enhanced by following some of the below given
Prepare for the presentation. Singer Ethel Merman was once asked, just before
a major performance, if she was nervous. Her answer was: Why should I be
nervous? I know what I am going to do! The audience should be nervous. They
do not know what is going to happen.
What the Merman quote tells us is that when preparing for a presentation,
you must identify the key issues you want to express. In essence, why are you
making the presentation? You also need to know who will be in your audience so
you can anticipate their needs and speak their language. The better you prepare
and anticipate questions that may be thrown at you, the more comfortable you
will be in the presentation.
Make your opening comments. The rst few minutes of a presentation should
be spent welcoming your audience, describing what you know about the issues
your audience faces, citing your experience or credentials, and identifying your
presentation agenda. If you want your audience to do something at the end of
your presentation like approve your budget request, buy something, or so forth
tell them in your opening comments what you want them to do. By telling them
ahead of time what you would like at the end of your presentation, you frame the
presentation and assist in having the audience actively listen to you.
Make your points. This is the heart of your presentation. It is where you will
discuss the pertinent elements of presentation. Here you justify why you should
get funds or why your particular product or service should be purchased. In the
discussion, you need to describe why your ideas are important and how they
will benet your listeners. Any supporting data you have should be presented
at that time.
End the presentation. The end of a presentation includes nothing new. Rather,
in the conclusion, you restate what you know about the issues facing your audi-
ence and what you recommended. If you had a request for action in the introduc-
tory part, you now come back to the action and seek closure on it. If the presenta-
tion is simply an information-sharing experience, there may not be a requested
action of the audience.
Answer questions. In many cases, questions will be posed at the end of your
presentation. However, questions may come at any point of the presentation and
may even be invited by you at the beginning. Regardless of where questions are
asked, there a few simple rules to follow. First, clarify the question. This requires
you to actively listen to the question. If you are not sure what the question was,
ask for clarication. Do not assume you know what the questioner is asking.
When you understand the question, answer it. Then go back to the questioner and
make sure your response answered the question. If it did not, you would probably
get another question. Handle it the same way.
The importance of delivering an effective presentation is open to debate. One
side of the debate focuses on having a polished presentation, ashy multimedia sup-
port, and speaking without the irritating mannerisms that distract from a presentation.
There is no doubt that overindulgence in any of these can decrease the effectiveness
of a presentation.
But do not make the assumption that your speech has to be perfect. The other
side of the debate promotes being natural in your presentation but ensuring that you
address what is important. For example, the following passage appeared in an issue
of Forbes magazine:
A Canadian judge threw a case out of court because a witness was too boring.
The case was originally reported in the Forensic Accountant Newsletter. The judge said
the man was beyond doubt the dullest witness Ive ever had in court ... [he] speaks in
a monotonous voice ... and uses language so drab that even the court reporter cannot
stay conscious. The judge said, Ive had it. Three solid days of this steady drone is
enough. I cannot face the prospect of another 14 indictments. It is probably unethical,
but I dont care.
What is the message here? If your audience is interested in what you have to say,
they will listen. They will overlook a casual um or ah and disregard your hand ges-
tures. So put your effort in presenting the material and meeting the audiences needs.
Any quirks in your mannerisms or your delivery will not matter greatly. But your too
formal, dignied and sometimes rhetorical speech will.
The conversation of educated Englishmen is simple and straightforward. It avoids
long or high-sounding expressions. In conversation, they often use striking compari-
sons to give avour and piquancy to their intercourse, the comparisons being expressed
in short pithy phrases. When the words like or as are used, they are called similies.
Take care not to use any lengthy comparisons in your presentation as they
would be, as a rule, out of place. Use words and phrases which by their vividness
arrest attention.
Common comparisons. Short forms in expression and slight exaggerations in
meaning, which would not be admissible in writing, are allowable in your presen-
tation without risk of misunderstanding. These are called idiomatic common com-
parisons, many of which would hardly be met with in high-class essays, but may
generally be found in such writings as reproduce conversation or presentation.
[Take the following sentence as an example: There were fty-seven of us sitting in a
very small meeting room, like sardines in a tin. Why mention sardines? Well, we have
all seen how very tightly sardines are packed together in a tin, and this comparison
makes us realise how close together the people were sitting. Of course, it is an exag-
geration, for if the people had been packed as tightly as sardines they would have been
unable to sit at all. Still, this is a fairly common comparison which serves its purpose.]
The following are instances: as cool as a cucumber (calm and relaxed),
as t as a ddle/a ea (to be very healthy and strong), as clear as a day (very
easy to understand), as clear as mud (very difcult to understand), as hungry
as a hunter (famished); as large as life (in person); as mad as a March hare
(extremely mad), as regular as clockwork (never late), etc.
Notice how often they depend on alliteration: as cool as a cucumber, as hun-
gry as a hunter, as large as life, etc.
To this must be added certain common comparisons which do not take the
shape of the aforementioned. For instance, a lady with a sweet voice is said to
sing like a nightingale, or a thrush; a person is said to be like a sh out of
water when he or she is out of his/her element and therefore ill at ease; a person
is said to sleep like a top/log when he or she sleeps soundly; a person is said to
take like a duck to water when he or she adapts very readily, etc.
And there are several other expressions used in such common comparisons:
to spread like a wildre, to follow like a shadow, as merry/happy as the day is
long, etc.
Conversation-building expressions. There are some common expressions
that help to modify what you are saying. The following are instances: to take
the conversation back to an earlier point - As I was saying, I havent seen such
a good project for years; As I/you say, well have to work hard to win this $3
million worth contract; Talking of investing, whatever happened with their
promises; If you ask me, hes heading for trouble; That reminds me, I havent
asked him yet; Come to think about it, did he give you his phone number? I
think he may have forgotten, etc.
Discourse markers in speech. These are words and phrases which organise,
comment on or in some way frame what you are saying. An example from spoken
language is well: So you think it will turn into a protable business? Well, the
Browns didnt lose any money ... Well here shows that the speaker is aware he
or she is changing the direction of the conversation. Another example is how the
superiors use words like Right/OK: Okay, hes in charge of the accounting de-
partment. Okay is used as a way of showing that you are going to start something
new or take action.
Here are some common markers which organise the different stages of a con-
versation, which, inter alia, include now, ne/great, good, etc. Another example
is how one, who is in control of the conversation, says as follows: Now then, I
want you to look at this plan.
Some markers modify or comment on what is being said: I found it quite
quickly, mind you, it wasnt easy. Mind you is an expression used to qualify the
previous statement. Let me see, listen/look, hang on/hold on, you see, you know,
sort of, anyway, still, at the end of the day, etc., are also included in the list.
The most efcient and powerful tool in non-face-to-face contact is telephone.
Managers should be careful when using telephone because if things start out badly they
may never progress in the future. This is why telephone manners are very important for
a professional image of a manager.
There are few tips that should be obeyed when using telephone:
Smile while you are on the telephone your customer will hear it.
Answer the telephone pleasantly and maintain a pleasant demeanour while on the
Never answer the phone with food in your mouth or try to eat quietly while talking.
Return all phone calls within 48 hours.
When you place a call that you know might be lengthy, ask if it is a good
time to talk.
Know what you want to say before making an important call.
Do not read from the script during the call. Try to memorise it.
Make a telephone appointment when you want to have a longer (15 or more min-
utes) conversation with someone who is normally busy.
Do not do things, such as open mail, flip through the newspaper or do paper-
work while on the telephone. The person you are talking with will know you
are distracted.
Listen and respond to the person on the other end of the line.
When you are doing a lot of telephone work, energise yourself after every hour.
Would it surprise you to know that more managers are probably red because of
poor interpersonal skills than for a lack of technical ability? A comprehensive study
of people who hire students with undergraduate business degrees under the assump-
tion that they will ll future management vacancies shows the importance of interper-
sonal skills. The study found that the areas in which the graduates were most decient
were leadership and interpersonal skills. Because managers ultimately get things done
through others, competences in leadership, management, and other interpersonal skills
are prerequisites to managerial effectiveness. We shall focus on three interpersonal
skills that every manager needs.
Today managers are increasingly leading by empowering their employees.
Millions of employees and teams of employees are making decisions that directly
affect their work. The increased use of empowerment is being driven by two forces:
First is the need for quick decisions by those who are most knowledgeable about the
issues, which requires moving decisions to lower levels. Second is the reality that
the downsizing of organisations during the past two decades left many managers
with considerably larger spans of control than they had previously. In order to cope
with the demands of an increased load, managers had to empower their employees.
To be effective managers need to understand the value of delegating and knowing
how to do that.
Delegation is the assignment of authority to another person to carry out specic ac-
tivity. It should not be confused with participation. In participative decision making there
is sharing of authority. With delegation, employees make decisions on their own.
When done properly, delegation is not abdication. If you as a manager dump
tasks on an employee without clarifying the exact job to be done, the range of the
employees discretion, the expected level of performance, the time frame in which
the tasks are to be completed, and similar concerns, you are abdicating responsibility
and inviting trouble. Do not fall into the trap, however, of assuming that, to avoid the
appearance of abdicating, you should minimise delegation. Unfortunately, that is how
many new and inexperienced managers interpret the situation. Lacking condence in
their employees or fearful that they will be criticised for their employees mistakes,
these managers try to do everything themselves.
Therefore, behaviours related to effective delegating are clarifying the assign-
ment, specifying employees range of discretion, allowing employees to participate,
informing other that delegation has occurred, and establishing feedback channels.
When we use the term conict, we are referring to perceived incompatible dif-
ferences resulting in some interference or opposition. Whether the differences are real
is irrelevant. If people perceive differences, then a conict state exists. The ability
to manage conict is undoubtedly one of the most important skills a manager needs
to possess. A study of middle- and top-level managers of the American Management
Association reveals that the average manager spends approximately 20% of his or her
time dealing with conict.
The steps to be followed in analysing and resolving conict situations begin by
nding out your underlying conict-handling styles, meaning that not every conict
justies your attention. Some are not worth the effort. Some are outside realm of your
inuence. Then select only conicts that are worth the effort and that can be man-
aged. Third, evaluate the conict players. Fourth, assess the source of conict. Finally,
choose the conict-resolution option that best reects your style and situation.
We know more about resolving conict than about stimulating it. For almost all
of us the term conict has a negative connotation, and the idea of purposely creating
conict seems to be the antithesis of good management. However, a manager might
want to stimulate conict if his or her unit suffers from apathy, stagnation, a lack of
new ideas, or unresponsiveness to change. A manager can stimulate conict by chang-
ing the organisations culture through the use of communications, by bringing in out-
siders, by restructuring the organisation, or by appointing a devils advocate, i.e., a
person who purposely presents arguments that run counter to those proposed by the
majority or against current practices.
We know that lawyers spend a signicant amount of time on their jobs negotiat-
ing. But so, too, do managers. They have to negotiate salaries for incoming employees,
make contracts or close orders with others outside their organisations, resolve conicts
with their employees, etc. For our purposes we will dene negotiation as a process of
in which two or more parties who have different preferences must make a joint decision
and come to an agreement.
There are two general approaches to negotiation distributive bargaining and
integrative bargaining.
For instance: you see a used car advertised for sale in the newspaper. It appears to
be just what you have been looking for. You go out to see the car. It is great and you want
it. The owner tells you the asking price. You do no not want to pay that much. The two
of you then negotiate the price. The negotiating process you are engaging in is called
distributive bargaining. Every dollar you can get the seller to cut from the price of the
used car is a dollar you save. Conversely, every dollar more he or she can get from you
comes at your expense. Thus the essence of distributive bargaining is negotiating over
who gets what share of a xed pie. In other words, distributive bargaining refers to
negotiation in which any gain made by one party involves a loss to the other.
When engaged in distributive bargaining, you should try to get your opponent to
agree to your specic target point or to get to it as close as possible. The sales-credit ne-
gotiation is an example of integrative bargaining. A sales representative for a womens
sportswear manufacturer has just closed a $25,000 order from an independent cloth-
ing retailer. The sales rep calls in the order to her rms credit department. She is told
that the rm cannot approve credit to this customer because of a past slow-pay record.
The next day, the sales rep and the rms credit manager meet to discuss the problem.
The sales rep does not want to lose the business. Neither does the credit manager, but
he also does not want to get stuck with an uncollectible debt. The two openly review
their options. After considerable discussion, they agree on a solution that meets both
their needs. The credit manager will approve the sale, the clothing stores owner will
provide a bank guarantee that will assure payment if the bill is not paid within 60 days.
Therefore, integrative bargaining refers to negotiation in which there is at least one
settlement that involves no loss to either party.
The essence of effective negotiation can be summarised in the following six rec-
ommendations: research you opponent; begin with a positive overture; address prob-
lems, not personalities; pay little attention to initial offers; emphasize win-win solu-
tions; and be open to accepting third party solutions.
Answer the below given questions.
1. Why are effective interpersonal skills so important to managers success?
2. The increased use of empowerment is being driven by two forces. Identify and
explain them.
3. Dene delegation and identify behaviours related to effective delegating.
4. What is conict?
5. Describe the steps in analysing and resolving conicts.
6. Explain why a manager might stimulate a conict?
7. Contrast distributive and integrative bargaining.
8. How do you develop effective negotiation skills?
(a) Match the terms referring to contingency factors in delegation on the left-
hand side with their explanations on the right-hand side.
1. The size of the organisation (a) If management has condence and trust in employees,
the culture will support a greater degree of delegation.
However, if top management does not have condence in
the abilities of lower-level managers, it will delegate au-
thority only when absolutely necessary.
2. The importance of the duty (b) The more complex the task, the more difcult it is for top
management to possess current and sufcient technical in-
formation to make decisions. Such tasks should be delegat-
ed to people who have the necessary technical knowledge.
3. Task complexity (c) Delegation requires employees with skills, abilities, and
motivation to accept authority and act on it.
4. Organisational culture (d) The more important a duty or decision, the less likely it
is to be delegated. For instance, a department head may
be delegated authority to make expenditures up to $7,500
and division heads and vice presidents up to $50,000 and
$125,000, respectively.
5. Qualities of employees (e) The larger the organisation, the more dependent top man-
agers are on the lower-level managers. Therefore, manag-
ers in large organisations resort to increased delegation.
(b) Match the strategies used in conict management on the left-hand side with
the situations in which and when they work best on the right-hand side.
1. Avoidance (a) The issue under dispute is not that important to you (as to others) or
when you want to build up credits for later issues.
2. Accommodation (b) Conicting parties are about equal in power, when it is desirable to
achieve a temporary solution to a complex issue, or when time pres-
sures demand an expedient solution.
3. Forcing (c) Time pressures are minimal, when all parties seriously want a win-win
solution, and when the issue is too important to be compromised.
4. Compromise (d) Conict is trivial, when emotions are running high and time is needed
to cool them down.
5. Collaboration (e) You need a quick resolution on important issues that require unpopular
actions to be taken and when commitment by others to your solution is
not critical.
Fill in the blank with the appropriate article or leave it blank to indicate that no
article is necessary in How do we delegate effectively?
Assuming that delegation is in order, how do you delegate? First of all you have
to clarify assignments by determining what is to be delegated and to whom. You
need to identify person who is most capable of doing task and then deter-
mine whether he or she has time and motivation to do job.
Second, you have to specify employees range of discretion. In other words,
you are delegating authority to act but not unlimited authority. You are delegating
authority to act on certain issues within certain parameters.
Third, one of best ways to decide how much authority will be necessary is
to allow employees who will be held accountable for tasks to participate in
that decision. However, allowing such people too much participation in deciding what
tasks they should take on and how much authority they must have to complete those
tasks can undermine effectiveness of delegation process.
Fourth, delegation should not take place in vacuum. It means that not only
people outside organisation, but also the people inside organisation
need to know that what has been delegated and how much authority has been granted.
failure to inform others makes conict likely and decreases chances that
your employees will be able to accomplish delegated act efciently.
And, fth, there is always possibility that employees misuse
discretion they have been given if feedback channels are absent.
Supply the missing prepositions to complete the passage Three views of conict.
the years, three differing views have evolved conict or-
ganisations. The early approach assumed that conict was bad and would always have
a negative impact an organisation. Conict became synonymous vio-
lence, destruction and irrationality. Management had a responsibility to rid the organi-
sation conict. The human relations position argued that conict was a natural
and inevitable occurrence any organisation. It need not be evil, but, rather, has
the potential to be a positive force contributing an organisations per-
formance. The third and most recent perspective proposes encourages conict
the grounds that a harmonious, peaceful, tranquil, and cooperative organisation is prone
to become static, apathetic, and non-responsive change and innovation.
5. BUSINESS SKILLS: - Are you a good negotiator?
Complete the below given questionnaire, then discuss the scores with your part-
ner and suggest areas for improvement.
1 = strongly disagree 10 = strongly agree
1. I can stay cool when I am in the middle of a conict.
2. I am willing to compromise when I have to.
3. I realise that others have needs.
4. I am very patient.
5. I can identify the most important issues very quickly.
6. If necessary, I can remain calm when I am being personally attacked.
7. I am willing to research and analyse issues carefully.
8. I believe in and work towards situations where both sides can win.
9. I can deal with stressful situations.
10. I am a good listener.
If your total score was 80 or above, you are aware of most of the important
issues in negotiation and have the makings of a good negotiator. If you scored
between 60 and 79, you will make a good negotiator but there are some areas
that you need to improve. If your score was below 60, you may want to rethink
some of your attitudes about negotiation and get some additional training.
Being a successful manager depends in part on knowing how to negotiate. For
our purposes let us consider George Cohon who had to negotiate to bring his company
into a new area. George Cohon, a Canadian, made history when he opened the rst
McDonalds restaurant near Moscows Red Square in the former Soviet Union, but it
took him nearly 14 years to pull off his achievement. After reading through the text, try
to answer the below given questions.
1. Getting the McDonalds operating took many years of battling red tape and cul-
tural as well as economic obstacles. Discussions with individuals at several lev-
els of the Soviet government at times appeared to be going in circles. When
an agreement nally appeared within reach, the negotiations became even more
intense. The Soviet delegates, for instance, atly demanded his consent on such
issues as rents for land and the percentage for sales that were to be paid Cohons
Canadian company. Although Cohon found negotiations in a foreign language to
be difcult, it was nothing compared to dealing with a totalitarian government
as a prospective partner. As Cohon state, this was a communication challenge
straight from hell.
2. Once the agreement had been reached, a new set of obstacles had to be overcome.
Suppliers had to be found, and, at the time, the agricultural industry in the former
Soviet Union was dismal, marred by constant crop failures and poor manage-
ment. Moreover, staff had to be hired, trained, introduced to Mc Donalds unique
corporate culture focusing on quality, cleanliness, and consistency.
3. Could this culture be adapted to Russian workers? As Cohon stated, When we
began our training, most of our crew and our Soviet managers had never actu-
ally tasted a hamburger, much less made or served one. So to help facilitate this
training, Soviet managers were own to Toronto and schooled at the Canadian
Institute of Hamburgerology. Taking the information they learned in Toronto, the
Soviet managers began training employees on site.
4. On the rst day of operation, Moscow Mc Donalds served over 30,000 people.
Since then, the chain has expanded throughout Russia. It was a major accom-
plishment that George Cohon pulled off. He managed to create a reliable system
of suppliers, overcome government bureaucracy, and train employees to function
at the high level demanded by McDonalds. And he did all of this in a country that
was going through one of its greatest periods of upheaval. This was a major vic-
tory for Cohon and demonstrated that effective communication is fundamentally
linked to successful performance.

1. George Cohon pulled off his achievement through his effective negotiation skills.
What is Cohons trick? Explain.
2. How do you develop effective negotiation skills?
3. Assume that you have found an apartment that you wanted to rent and the ad had
said: $750/month, negotiable. What could you do to improve the likelihood
that you would negotiate the lowest possible price?
4. Give your opinion on the following statement: Heres the rule for bargains: Do
other men, for they would do you. Thats the true business precept.
Building your speaking skills:
1. Develop a 10-minute response to the following statement: Not all leaders are
managers, nor are all managers leaders. Present both sides of the argument and
include supporting data. Conclude your presentation by defending and support-
ing one of the two arguments presented.
2. Are companies run by bosses or leaders? After reading the below given text (i.e.,
a poster on a wall of a government ofce in Harare) give your opinion on whether
a company should be run by a boss or a leader? Time allowed is 15 minutes.
The Boss Drives His Men
The Leader Inspires Them
The Boss Depends on Authority
The Leader depends On Goodwill
The Boss Evokes Fear
The Leader Radiates Love
The Boss Says I
The Leader Says We
The Boss Shows Who Is Wrong
The Leader Shows What Is Wrong
The Boss Knows How It Is Done
The Leader Knows How To Do It
The Boss Demands Respect
The Leader Commands Respect
So Be a Leader
Not a Boss
3. In a 10-minute speech contrast the three types of trust and relate them to your
experience in personal relationships.
4. How much authority should a manager delegate? Should he or she keep authority
centralised, delegating only the minimal amount to complete the delegated duties?
After considering the mentioned questions prepare a 10-minute presentation.
5. Ineffective communication is the fault of the sender/receiver. Build a case that
presents both sides of this argument. Provide specic examples. Time allowed for
your speech is 10 minutes.
6. Do some research on male versus female communication styles. Do they commu-
nicate differently? If so, what are the implications of your ndings for managers?
Give a speech on this topic in not more than 15 minutes.
7. A nancial analyst is an expert on a specic business sector, whose opinion is
used by investors to decide whether to invest in a particular business at a given
time. Give a short presentation (maximum 10 minutes) of a companys results,
based on the nancial highlights section of an annual report. The objective of the
presentation is both to report on the companys performance in its sector and to
explain the different terms used.
8. After reading the problems below, give your opinion on what you would do in
each situation. Time allowed for your presentation is 10 minutes each.
(a) You are a new manager. Your predecessor, who was very popular and who is
still with your rm, concealed from your team how far behind they are on their
goals this quarter. As a result, your team members are looking forward to a
promised day off that they are not entitled to and will not be getting. It is your
job to tell them the bad news. How will you do it?
(b) You have spent the last month preparing a report for the head ofce. You have
just learned that your boss has taken all the credit for the work.
(c) Your boss gave you a highly condential report to read over the weekend.
Now you cannot nd it and you think you may have left it on the train.
(d) You have been sent to negotiate an important new contract for your rm.
During the negotiations your counterpart makes it clear that he expects a
personal cash contribution (a bribe) from you if your company is to win
the contract.
(e) Two years ago your company signed an agreement to become the exclu-
sive importer of kitchen equipment from Swedish supplier. You have just
received conrmation that another company is selling the same product at a
lower price.
Business ethics is no longer concerned solely with the criticism of business and
business practices. Prots are no longer condemned along with avarice in moralizing
sermons, and corporations are no longer envisioned as faceless, soulless, amoral mono-
liths. The new concern is just how the prot should be thought of in the larger context
of productivity and social responsibility and how corporations can best serve both their
own employees and the surrounding society. Business ethics has evolved from a wholly
critical attack on capitalism and the prot motive to a more productive and construc-
tive examination of the underlying rules and practices of business.
The central concept of much of recent business ethics is the idea of social re-
sponsibility. It is also a concept that has irritated many traditional free market enthu-
siasts and prompted a number of bad arguments, amongst which the most famous is
the diatribe by Nobel-winning economist Milton Friedman entitled The social re-
sponsibility of business is to increase its prots. Friedmans argument is, in essence,
that managers of a corporation are employees of the stockholders and, as such, have a
responsibility to maximise their prots. Giving money to charity or other social causes
(except as public relations aimed at increasing business) and getting involved in com-
munity projects (which do not increase the companys business) is akin to stealing
from the stockholders.
The overall rejoinder to Friedmanesque arguments of this sort that has recently
become popular in business ethics can be summarised in a modest pun: instead of the
stockholder, the beneciaries of corporate social responsibilities are stakeholders, of
whom the stockholders are but a single sub-class. The stakeholders in a company in-
clude the employees, the consumers and the suppliers as well as the surrounding com-
munity and the society at large.
The managers of corporations have obligations to their shareholders, but they
have obligations to other stakeholders as well. In particular, they have obligations to
consumers and the surrounding community as well as to their employees. The purpose
of the corporation is, after all, to serve the public, both by way of providing desired
and desirable products and services and by not harming the community and its citizens.
For example, a corporation is hardly serving its purpose if it is polluting the air or the
water supply, if it is destroying the natural beauty of the environment or threatening
the nancial or social well-being of the local citizens. To consumers, the corporation
has the obligation to provide quality products and services. It has the obligation to
make sure that these are safe, through research and through appropriate instructions
and, where appropriate, warnings against possible misuse. However, before 1960s,
few people asked if large corporations were irresponsible because they discriminated
against women and minorities as shown by the obvious absence of female and minority
managers at the time, or if a company like Dow Corning was ignoring its social respon-
sibility by marketing breast implants when data indicated that leaking silicone could
be a health hazard, or if tobacco companies were ignoring health risks associated with
nicotine and its addictive properties, etc. Even today, good arguments can be made for
both sides of the social responsibility issue.
Arguments aside, times have changed. Managers are now regularly confronted
with decisions that have a dimension of social responsibility; philanthropy, pricing,
employee relations, resource conservation, product quality, etc., in countries with op-
pressive governments are some of the more obvious factors. They are addressing these
areas by re-assessing forms of packaging, recyclability of products, environmental
safety practices, and the like. The idea of being environmentally friendly or green
will have an effect on all aspects of business from the conception of products and
services to use and subsequent disposal by customers. In a globally competitive world,
few organisations can afford the bad press or potential ramications of being seen as
socially irresponsible.
Social responsibility is a rms obligation, beyond that required by the law and
economics, to pursue long-term goals that are good for society. Note that this denition
assumes that business obeys the law and pursues economic interests. It is taken as a
given that all business rms - those that are socially responsible and those that are not
will obey all laws that society imposes.
Social responsibility also adds an ethical imperative to do those things that
make society better and not to do those that could make it worse. Social responsibil-
ity requires business to determine what is right or wrong and thus seek fundamental
ethical truths.
Ethics commonly refers to a set of rules or principles that dene right and wrong
conduct. Understanding ethics may be difcult, depending on the view that one holds
of the topic. Regardless of ones own view, whether a manager acts ethically or unethi-
cally will depend on several factors. These factors include the individuals morality,
values, personality, and experiences; the organisations culture; and the issue in ques-
tion. People who lack a strong moral sense are much less likely to do the wrong things
if they are constrained by rules, policies, job descriptions, or strong cultural norms that
discourage such behaviours.
For example, someone in your class has stolen the nal exam and is selling a
copy for $50. You need to do well on this exam or risk failing the course. You ex-
pect some classmates have bought copies. Do you buy a copy because you fear that
without it you will be disadvantaged, or do you refuse to buy a copy and try to do
your best?
The example of the nal exam illustrates how ambiguity about what is ethical
can be a problem for managers. Codes of ethics are an increasingly popular tool
for reducing that ambiguity. A code of ethics is a formal document that states an
organisations primary values and the ethical rules it expects managers and opera-
tive employees to follow. Ideally, these codes should be specic enough to guide
organisational personnel in what they are supposed to do yet loose enough to allow
for freedom of judgement.
In isolation, ethics codes are not likely to be much more than window dressing.
Their effectiveness depends heavily on whether management supports them and how
employees who break the code are treated. If management considers them to be impor-
tant, regularly conrms its content, and publicly reprimand rule breakers, ethics codes
can supply a strong foundation for effective corporate ethics programme.
Answer the below given questions.
1. State the new concern of business ethics.
2. Do you agree or disagree with the diatribe by Nobel-winning economist Milton
Friedman entitled The social responsibility of business is to increase its prots.
Discuss this issue.
3. Differentiate stockholders from stakeholders.
4. Identify the purpose of the corporation. Illustrate it with appropriate examples.
4. Dene social responsibility.
5. How do managers become more socially responsible?
Match the three levels of business or business ethics on the left-hand side with
their explanations on the right-hand side.
1. Micro-ethics (a) The institutional or cultural rules of commerce for an entire
society the business world.
2. Macro-ethics (b) It concerns the basic unit of commerce today the corpora-
3. Molar-ethics (c) The rules for fair exchange between two individuals.
Supply the missing prepositions to complete the below given text.
Manufacturers are and should be liable dangerous effects and predict-
able abuse their products, e.g., the likelihood a young child swallowing a
small readily detachable piece a toy made specially that age group, and it
is now suggested some consumer advocate group that such liability should not
be excessively qualied the excuse that these were mature adults and knew or
should have known the risks what they were doing. This last demand, how-
ever, points a number currently problematic concerns, notably, the con-
sumer and the question reasonable limits liability the part the
producer. what extent should the manufacturer take precautions clearly
idiotic uses of their products? What restrictions should there be manufacturers
who sell and distribute provably dangerous products, e.g., cigarettes and rearms
even when there is considerable consumer demand such items and should
the producer be liable what is clearly a foreseeable risk the part the
consumer? Indeed, it is increasingly being asked whether and what extent we
should reinstate that now ancient warning, Buyer beware, to counteract the runa-
way trend consumer irresponsibility and unqualied corporate liability.
Fill in the blank spaces in the text with correct verb forms.
We sometimes (HEAR) employees (and even high level execs)
(COMPLAIN) that their corporate values conict with their per-
sonal values. What this usually (MEAN), I suggest, (BE)
that certain demands that (MAKE) by their companies
(BE) unethical or immoral. What most people (CALL)
their personal values are in fact the deepest and broadest values of their culture. And
it (BE) in this context that we (UNDERSTAND) that
now-familiar tragic gure of contemporary corporate life the whistle-blower. The
whistle-blower (BE) not just some eccentric that cannot t into the or-
ganisation he or she (THREATEN) with disclosure. The whistle-blower
(RECOGNISE) that he or she cannot tolerate the violation of mo-
rality or the public trust and (FEEL) obliged to do something about
it. The biographies of most whistle-blowers (NOT/MAKE) happy
reading, but their very existence and occasional success (BE) ample
testimony to the interlocking obligations of the corporation, the individual and soci-
ety. Indeed, perhaps the most singularly important result of the emergence of busi-
ness ethics in the public forum (BE) to highlight such individuals
and (GIVE) renewed respectability to what their employers wrongly
(PERCEIVE) as nothing but a breach of loyalty.
Ethical Dilemma In Management
Making ethical choices can often be difcult for managers. Obeying the law
is mandatory, but acting ethically goes beyond mere compliance with the law. It
means acting responsibly in those grey areas, where right and wrong are not de-
ned. After reading through the texts, try to answer the questions relating to ethical
dilemmas in management.
I Intentional Distortion of Information
1. Incident 1: You have just seen your divisions sales report for last month. Sales
are down considerably. Your boss, who works 2,000 miles away in another city,
is unlikely to see last months sales gures. You are optimistic that sales will pick
up this month and next so that your overall quarterly numbers will be right on
target. You also know that your boss is the type of person who hates to hear bad
news. You are having a phone conversation today with your boss. He happens to
ask in passing, how last months sales went. What do you tell him?
2. Incident 2: An employee asks you about a rumour she has heard that your de-
partment and all its employees will be transferred from New York to Baltimore.
You know the rumour to be true, but you would rather not let the information out
just yet. You are fearful that it could hurt department morale and lead to prema-
ture resignations. What do you say to your employees?
3. These two incidents illustrate dilemmas that managers face related to evading
the truth, distorting facts, or lying to others. And here is something else that
makes the situation even more problematic: It might not always be in a manag-
ers best interest or those of his or her unit to provide full and complete informa-
tion. Keeping communications fuzzy can cut down on questions, permit faster
decision making, minimise objections, reduce opposition, make it easier to deny
ones earlier statements, preserve the freedom to change ones mind, permit one
to say no diplomatically, help to avoid confrontation and anxiety, and provide
other benets to the manager.
Dilemma: Is it unethical to purposely distort communications to get a favourable
outcome? What about little white lies that really do not hurt anybody? Are these ethi-
cal? What guidelines could you suggest for managers who want guidance in deciding
whether distorting information is ethical or unethical?
II When Is Competitive Intelligence Unethical?
Knowing as much as you can about your competition is simply good business
sense, but how far can you go to obtain that information. It is clear that over the past
few years, competitive intelligence activities have increased but sometimes these
same well-intended actions have crossed the line to corporate spying. For example,
when a company pays for information that was obtained by someone who hacked a
companys computer system, receiving that data, is illegal. By the late 1990s, nearly
1,500 U.S. companies were victims of some type of corporate espionage, resulting in
more than $300 billion in losses for these organisations.
Most individuals understand the difference between what is legal and what is not.
That is not the issue. Although some competitive intelligence activities may be legal,
they may not be ethical. Consider the following scenario:
1. You obtain copies of lawsuits and civil cases that have been led against a com-
petitor. Although the information is public, you use some of the surprising nd-
ings against your competitor in bidding for a job.
2. You pretend to be a journalist who is writing a story about the company. You call
company ofcials and seek responses to some specic questions regarding the
companys plans for the future. You use this information in designing a strategy
to compete better with this company.
3. You apply for a job at one of your competitors. During the interview, you ask spe-
cic questions about the company and its directions. You report what you have
learned back to your employer.
4. You dig through a competitors trash and nd some sensitive correspondence
about a new product release. You use this information to launch your competing
product before your competitors.
5. You purchase some stock in your competitors company in order to get the annual
report and other company information that is sent out. You use this information to
your advantage in developing your marketing plan.
Dilemma: Which if any of these events are unethical? Defend your position.
What ethical guidelines would you suggest for competitive intelligence activities?
III Is Sharing Software Okay?
1. Duplicating software programmes for friends and co-workers has become a
widespread practice. It has been estimated that nearly $250 billion worldwide
is lost each year due to the theft of intellectual property including software
piracy. It affects all software companies such as Microsoft, Adobe Lotus, etc. Yet
almost all of these duplicated programmes are protected by international copy-
rights law, and being caught for pirating software subjects the offender to nes up
to $100,000 and ve years in jail. How, then, has making illegal copies become
such a common and accepted practice in peoples homes as well as at their places
of employment?
2. Part of the answer revolves around the issue that software is not like other intel-
lectual property. In other words, software is different from a book in that anyone
can easily copy it, and an exact replication is achievable. Cultural differences are
also a factor. A lot of piracy occurs in places such as Brazil, Malaysia, Hong Kong,
Pakistan, Mexico and Singapore, where copyright laws do not apply. Moreover,
only seven countries have agreed to sign an agreement with the United States for
protecting intellectual property rights.
3. But do not think that software piracy is just an overseas phenomenon. It has been
estimated that in the United States, about 27% of all software used is pirated. In
Canada, it is nearly 40%. This is cheating these software developers out of bil-
lions of dollars, reducing employment levels by more than 22,000 employees,
and lessening tax collections by nearly a billion dollars.
4. In the United States, employees and managers who pirate software defend their
conduct with such answers as: Everybody does it, I wont get caught, The
law isnt enforced, No one really loses, or Our department budget isnt large
enough to handle buying dozens of copies of the same programme.
5. Ask the same employees who copy software if it is acceptable to steal a book
from the library or a tape from a video store. Most are quick to condemn such
practices, but it seems as if they do not see copying as stealing. Some think that
there is nothing wrong with making a copy of the tape and returning it despite
the copyright statement and the Interpol warning at the beginning of the tape that
specically states that the act of copying is that tape is in violation of the law.
Still, if they copy it, they can return the original to the store, no harm done.
Dilemma: Do you believe that reproducing copyright software is ever an ac-
ceptable practice? As a manager, what guidelines could you establish to direct your
employees behaviours regarding copying software?
IV Must Attitudes and Behaviours Align?
1. You work for a large international organisation that manufactures and sells com-
puter hard drives. In your position as a recruiter, you have the primary respon-
sibility to hire individuals to ll entry-level positions in your company. Your
organisation prefers to hire recent college graduates for these entry-level manu-
facturing and marketing positions. It gets an opportunity to hire individuals who
have the latest knowledge in their elds at a discounted price.
2. Your job requires you to travel extensively. In fact, over the past several years,
you have averaged visits to 35 colleges on three different continents during a
semester. Your performance evaluation rests primarily on one factor how many
people you have hired.
3. Over the past several months, you have noticed a surge in open positions. These are
not new positions but replacements for employees who have quit. A little investi-
gating on your part nds that, after about three years with your rm, entry-level em-
ployees quit. There is no upward mobility for them, and they burn out after working
up to 12 hours a day, 6 days a week. Furthermore, you know that the benets for
entry-level employees especially vacation and sick leave are not competitive
with those offered by similar rms in your industry. So you think you know why
these employees quit. On the other hand, almost everyone who has quit has gone
on to a bigger, better paid job with more responsibility and greater pay. To get the
most productivity out of these employees, your company invested heavily in their
training. Almost all workers in these positions receive over 40 hours of specialised
training each year and have jobs that offer excellent learning experiences but little
advancement opportunity. Top management believes it is better to hire new people
than to pay the higher salaries that seniority and experience demand. Although you
do not totally agree with managements treatment of these employees, you recog-
nise that the company is giving many of them a great start in their career.
Dilemma: Should you disclose to college recruits during interviews that the jobs
they are considered for are dead-end jobs in their organisation? Why or why not? Would
your response change if you were evaluated not only on how many people you hired
but also on how long they stay with the organisation? Defend your position.
V Rewarding Appropriate Behaviour
1. You have just been hired as a customer service representative at the Barnett
World Travel Agency in San Diego, California. Customers call you to arrange
travel plans. You look up airline ights, times and fares on your computer and
help them make travel reservations that work best for them. You also provide
assistance in reserving rental cars, nding suitable hotel accommodations, and
booking tours and cruises.
2. Most car rental agencies and hotels frequently run contests for the customer ser-
vice representative who reserves the most cars for a particular rm or books the
most clients for a specic hotel chain. The rewards for doing so are very attrac-
tive. For instance, one car rental rm offers to place your name in a monthly
drawing if you book just 20 reservations. Book 100 in the same amount of time,
and you will be eligible for a $100,000 prize. And if you book 200 clients, you
will receive an all-expense paid, four-day Caribbean vacation for two.
3. So the incentives are attractive enough for you to steer customers towards these
companies even though it might not be the best arrangement or the cheapest
for them. Your supervisor does not discourage your participation in these pro-
grammes. In fact, the programmes are viewed as a bonus for your hard work.
Dilemma: Is there anything wrong with doing business those car rental and hotel
rms that offer kickbacks to you? How could your organisation design a performance
reward system that would encourage you to high levels of bookings if it could not be
certain that you gave highest priority to customer satisfaction?
VI Stress Interviews
1. Your interview day has nally arrived. You are all dressed up to make that lasting
rst impression. You nally meet Mr. Bedford: He shakes your hand rmly and
invites you to get comfortable. Your interview has started. This is the moment
you have waited for.
2. The rst few moments appear mundane enough. The questions, in fact, seem
easy. Your condence is growing. That little voice in your head keeps telling you
that you are doing ne just keep on going. Suddenly, the questions get tougher.
Mr. Bedford leans backs and asks why you want to leave your current job the
one you have been in for only 18 months. As you begin to explain that you wish
to leave for professional reasons, he starts to probe. His smile is gone. His body
language is different. All right, you think, be honest. So you tell Mr. Bedford that
you want to leave because your boss is unethical and you do not want your repu-
tation tarnished by being associated with this individual. This situation has lead
to a number of public disagreements with your boss, and you are tired of dealing
with the problem. Mr. Bedford looks at you and replies, If you ask me, that is
not a valid reason for wanting to leave. It appears to me that you should be more
assertive about the situation. Are you sure you are condent enough and have
what it takes to make it in this company?
3. How dare he talk to you that way! Who does he think he is? You respond in an
angry tone. And guess what, you have just fallen victim to the one of the tricks of
the interviewing business the stress interview.
4. Stress interviews are becoming more commonplace. Every job produces stress,
and at some point, every worker has a horrendous day. So these types of interviews
predict how you may react under less-than-favourable conditions. Interviewers
want to observe how you will react when you are put under pressure.
5. Applicants who demonstrate the resolve and strength to handle stress indicate a
level of professionalism and condence. It is those characteristics that are being
assessed. Individuals who react to the pressure interview in a positive manner
indicate that they should be able to handle the day-day-to-day irritations at work.
Those who do not, well ...
6. On the other hand, these interviews are staged events. Interviewers deliberately
lead applicants into false sense of security the comfortable interaction. Then
suddenly and drastically, they change. They go on the attack. And it is usually
a personal assault on a weakness they have uncovered about the applicant. It is
possibly humiliating; at the very least, it is the demeaning.
Dilemma: Should stress interviewers be used? Should interviewers be permit-
ted to assess professionalism and condence and how one reacts to the every day
nuisance of work by putting applicants into a confrontational scenario? Should human
resources advocate the use of an activity that could possibly get out of control? What
is your opinion?
Enhancing your communication skills
1. Write an essay (and where necessary give your essay a title) of between 250-350
words on each of the following subjects:
(a) A good business should be a part of society, and you have to take pride in what
you do. There is no pride in making millions of dollars, but there is pride in
helping people and the environment. Do you agree or disagree? Support your
(b) The idea now is global responsibility. Businesses are the true planetary citi-
zens, they can push frontiers, they can change society? State your opinion.
(c) In the next decade, environmentalism will be the most prominent issue for
(d) The Code of Ethics and audit
(e) Business ethics and insurance business
2. Write a summary of one of the below given texts. You can nd them in the Review
and Discussion Questions section.
(a) When Is Competitive Intelligence Unethical?
(b) Is Sharing Software Okay?
(c) Must Attitudes and Behaviours Align?
(d) Rewarding Appropriate Behaviour
(e) Stress Interviews
3. After reading the below given text, give your opinion on whether proven en-
vironmental commitment helps create committed customers. Are consumers in
your country concerned about the environmental policies of business? Would you
yourself pay more for things produced in an environmental-friendly manner? If
so, how much more? Time allowed for your presentation s 15 minutes.
Thanks to the California-based retail rms outdoor clothing catalogue and
its exemplary method of communicating its corporate environmentalism, cus-
tomers are not only knowledgeable about the companys environmental prog-
ress, but also loyal. It is strongly committed to environmental causes. It sells its
products through retail outlets and by mail order. Patagonia is renowned for its
spectacular catalogues which are lled with its unusual and dramatic photos (all
taken by customers) displaying the clothing in exciting ways. They also contain
detailed product descriptions which include denitions of materials and explana-
tions of manufacturing process.
The company makes jackets from recycled plastic bottles and produces
clothing from organic materials. It offers courses to its employees on non-violent
demonstrations and even pays bail for employees who get arrested. It also do-
nates money to environmental groups and generally supports efforts that empow-
er consumers to take action. Patagonias strategy isnt just to give away money to
good causes but to pioneer new, long-term practices of sustainability in business
prove their economic viability and persuade other businesses to follow.
4. After reading the problems below, give your opinion on what you would do in
each situation. Time allowed for your presentation is 10 minutes.
(a) You have been sent to negotiate an important new contract for your rm. During
the negotiations your counterpart makes it clear that he expects a personal cash
contribution (a bribe) from you if your company is to win the contract.
(b) In your CV you lied about your qualications in order to get the job you
wanted. You have just been offered the job, but your new employer asks you
to see your certifcates.
(c) You have just seen in your bank statement that your employer has paid you
$500 more than your monthly salary.
The European Union was known as the European Community (EC) - the col-
lective designation of three organisations with common membership: the European
Economic Community (Common Market), the European Coal and Steel Community,
and the European Atomic Energy Community. The European Union was established in
1993, when the Maastricht Treaty, or Treaty on European Union, was ratied by the 12
members of the European Community - Belgium, Denmark, France, Germany, Great
Britain, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain. Upon
ratication of the treaty, the countries of the EC became members of the EU, and the
EC became the policy-making body of the EU.
Under the Maastricht Treaty, European citizenship was granted to citizens of
each member state. Customs and immigration agreements were enhanced to allow
European citizens greater freedom to live, work, or study in any of the member states,
and border controls were relaxed. A goal of establishing a common European currency
was set for 1997.
The Council of Ministers, European Commission, European Parliament, and
European Court of Justice comprise the permanent structure. Decision making in the
EU is divided between supranational European institutions (the European Commission
and the European Parliament, both administered by the EU) and governments of the
member states, which send representatives to the Council of Ministers (main law-
making body of the EU). The European Commission serves as the executive branch
of the EU. It makes policy proposals and presents them to the Council of Ministers.
The European Commission also represents the EU in economic relations with other
countries or international organisations. Members of the commission are appointed by
agreement between the member governments.
The Council of Ministers is composed of a single representative from each of
the member states. The council cannot draft legislation, but it can accept, reject, or
request proposals from the commission. Summit meetings among the top leaders of
the member states are called at least once every six months by the country holding the
presidency of the Council of Ministers.
The European Parliament is the only body of the EU whose members are di-
rectly elected by the citizens of member states. It also works with the Council of
Ministers on the EU budget and can reject a budget plan if agreement cannot be
reached within the council.
The nal arbiter in all matters of EU law is the Court of Justice. The court
deals with disputes between member governments and EU institutions and among
EU institutions, and with appeals against rulings by the commission. Courts within
EU member states often refer cases involving an unclear point of EU law to the
Court of Justice. The court makes binding rulings on EU law to help guide the rul-
ings of national courts. The Court of Auditors, which consists of one member from
each of the member nations, is responsible for the external audit of the expenditures
and revenue of the Union.
While the Maastricht Treaty increased the political powers of the European
Council, other bodies took on advisory roles similar to those once held by the parlia-
ment. The Economic and Social Committee (ESC) is one of the most important of these
bodies. Its members represent employer and employee groups, as well as other inter-
est groups. Another important group is the Committee of the Regions, created by the
Maastricht Treaty to bring the EU closer to its citizens and to give regional and local
authorities a voice in government. Its members are allocated in proportion to the popu-
lation of each country. The European Investment Bank (EIB) has the task of providing
loans to help nance public and private investment in industry and infrastructure, and
the European Central Bank is, inter alia, responsible for the denition and implementa-
tion of the economic and monetary policy, the conduct of foreign exchange operations,
smooth operation of payment, etc.
The European Union is a living organism in a constant process of evolution.
From the initial six members, it has grown to 9, 10, 12, and then to the current 15
through a series of enlargements. And the process is still continuing. The EU is now
negotiating with 12 more candidates for membership, and preparing for negotiations
with Turkey. When this phase of enlargement is complete, EU citizens will be able
to live, move and work across a territory that stretches from the Baltic to the Black
Sea, and from Nicosia to Sweden. The new century offers the chance to make a truly
Europe-wide European Union that fully reects the values of peace, democracy,
the rule of law, respect for human rights, shared prosperity, and celebrates the rich
diversity of the continent.
So, while the EU is inviting new members to join, it is insisting at the same time
that they respect the EUs values and adopt the full range of EU rules, practices and
presumptions what is usually referred to by the French expression the acquis (rough-
ly, what has been achieved). Since 1998, the EU has been conducting a detailed as-
sessment of their progress, constantly checking how far the candidates preparations
have advanced on areas as diverse as telecommunications and taxation, sheries and
nancial control, energy and economic and monetary union.
The candidates have entered into negotiations with the EU to seek agreements as
to when and how each of them can join. The negotiations are based on the principle that
each candidate must adopt the entire set of existing rules and legislation: the acquis is
not negotiable.
It is not possible to estimate the length of each negotiation in advance, but the
Nice summit looked forward to the EU being in a position to welcome those new
Member States which are ready as from the end of 2002, and in time for the new mem-
bers to join before the European Parliament elections in June 2004.
Answer the below given questions.
1. Identify the main concern which brought together the countries of Western Europe
in the 1950s to form what eventually became the EU.
2. State the importance of the Maastricht Treaty.
3. Identify and explain the permanent structure of the EU.
4. List some other major bodies of the EU, and identify their responsibilities.
5. Identify the values on which the European Union is built.
(a) Match the principal institutions and other major bodies of the EU on the left-
hand side with their explanations on the right-hand side.
1. Court of Auditors (a) Its membership is made up of one representative from
each of the member national governments. It has the real
power of decision in the EU.
2. European Economic and (b) It is charged with the formal and practical implementation
Social Committee of the various treaties of the Union and the various rules
issued by the Council of Ministers.
3. Committee of the Regions (c) It contributes to the EU objectives by nancing public
and private long-term investments.
4. European Central Bank (d) It expresses the opinions of organised civil society on
economic and social issues.
5. Council of Ministers (e) The legislative branch of the EU, which is directly elected
by the citizens of its member states.
6. Court of Justice (f) It is responsible for the sound and lawful management of
the EU budget.
7. European Investment Bank (g) It expresses the opinions of regional and local authorities
on regional policy, environment and education.
8. European Commission (h) It hears cases involving disputes between member states
over trade, antitrust, and environmental issues, as well as
issues raised by private parties, compensations for dam-
ages, and so on.
9. European Parliament (i) It is responsible for monetary policy and foreign exchange
(b) Match the institutions of the EU on the left-hand side with the appropriate
branch on the right-hand side.
1. European Parliament (a) It serves as the executive branch of the EU.
2. European Court of Justice (b) It serves as the legislative branch of the EU.
3. European Commission (c) It serves as the judicial branch of the EU.
Fill in the blank with the appropriate article or leave it blank to indicate that no
article is necessary.
It was concern about their security that brought countries of Western
Europe together in 1950s to form what eventually became European Union
(EU). so-called Schuman Declaration (May 9, 1950) laid out principles
of democratic European integration underpinning present EU. After signing
Treaty of Paris (1951), by which European Coal and Steel Community
(ESCS) was established, founding members, Belgium, France, Germany, Italy,
Luxemburg, and Netherlands, signed Treaty of Rome (1957) and estab-
lished European Economic Community (EEC), and European Atomic
Energy Community.
According to EEC 1957 Treaty, purpose of new Community
was to promote harmonious development of economic affairs, increased
stability, accelerated raising of living standard, and closer relations between
six states belonging to it. This was to be achieved by establishing common
market and approximating economic policies of member states. Treaty also
postulated Four freedoms: free movement of goods, persons, services and capi-
tal, as well as providing for common agriculture and transport policies, customs
union, free competition, and legal machinery to resolve disputes and to harmonise
legislation of member states.
Supply the missing prepositions.
The 15 full members 1996 were Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,
Sweden, and United Kingdom. Austria, Finland, and Sweden entered the EU
Jan. 1, 1995; Norway was scheduled to join the same time, but Norwegian
citizens a November 1994 referendum voted membership. Some
70 nations Africa, the Caribbean, and the Pacic are afliated the
Lom Convention.
Fill in the blank spaces in the text with correct verb forms.
A negotiated enlargement
The candidates (ENTER) into the negotiations with the EU
(SEEK) agreement as to when and how each of them can join. The nego-
tiations (TAKE PLACE) between ministers from the EU member states
and the candidate countries, and they (EXPECT) to lead to accession trea-
ties. As each treaty (DRAW UP), it will be submitted to the EU Council
of Ministers for approval and to the European Parliament for assent, and then to the
Member States and to the candidate countries for national ratication in line with na-
tional procedures.
Accession negotiations (OPEN) on 31 March 1998 with six coun-
tries: Cyprus, the Czech Republic, Estonia, Hungary, Poland and Slovenia. In December
1999, at its summit in Helsinki, the European Council (DECIDE) to open
accession negotiations with six further candidates: Bulgaria, Latvia, Lithuania, Malta,
Romania, and the Slovak Republic; they (BEGIN) on 15 February 2000.
Negotiations (CONDUCT) individually, and the pace of each nego-
tiation (DEPEND) on the degree of preparation by each candidate coun-
try and the complexity of issue to be solved. Each candidate (JUDGE) on
its own merits.
There (BE) no automatic acceptance of candidates into the negoti-
ating process. For instance, the Helsinki Council (MAKE) the opening of
negotiations with Bulgaria conditional upon a decision by the Bulgarian authorities,
before the end of 1999, on acceptable closure dates for units 1-4 in the Kozloduy nu-
clear power plant, and upon a conrmation of the signicant progress accomplished in
the economic reform process.
In order (HELP) the candidate countries prepare for EU mem-
bership, the EU (PROVIDE) assistance and (PROMOTE)
investment in the candidate countries to stimulate change so that the candidates can
adapt more rapidly to EU requirements. Some examples of EU assistance projects
(INCLUDE): improving safety at the Kozloduy nuclear power plant,
with training and with studies on how to detect leaks early or on the triggering of
alarms; establishing environmental management and warning systems along the
Danube, (COORDINATE) the ght against the pollution across the doz-
en countries it (FLOW) through; training customs staff at Tallinn port
so they can speed handling while raising the quality of controls; supporting women in
business in the rural areas of Lithuania, cutting unemployment and setting up contacts
and training, etc.
The EU also (PROMOTE) large-scale infrastructure projects,
through co-nancing arrangements with the European Investment Bank. For instance,
the EIBs loans in central and eastern Europe amounted to 2.17 billion euro in 1999
alone, and it (HAVE) a loan potential of 16 billion euro for 2000-07 in
these countries.
The success of the EU and the values it is based on have attracted successive
waves of new members from countries with a wide variety of economic and political
backgrounds. Each successive enlargement has brought benets to Europes citizens,
new opportunities for European businesses, and wider acceptance of European norms
in elds ranging from consumer and environmental protection to political rights and
social provision. In the coming years, other countries may be expected to submit ap-
plications for membership of the EU. The EU intends to be ready to welcome the rst
new Member States as from the end of the 2002. But it is too early to say when this
phase of enlargement, with the 13 current candidate countries will be completed, or
when negotiations with others may commence.
The EU is now in the process of signing stability and association agreements with
the countries of the western Balkans too, and it has held out to them the prospect of pos-
sible EU accession at a future date under certain conditions. In consideration of the fore-
going, give your opinion on when and how our country can join the EU. To answer this
question you will need to know more facts about the issue. Some are offered below. More
information on the subject can be found on the web site of the European Commissions
Directorate General for Enlargement:
1. The most important elements of the Stabilisation and Association Process (SAP) are:
- trade liberalisation,
- political dialogue,
- stabilisation and association agreement (SAA), and
- nancial assistance.
2. Economic and Monetary Union (EMU) criteria are as follows:
- public debt must not exceed 60% of GDP,
- public decit must not exceed 3% of GDP
- ination must not exceed the average of ination of the three best performing
countries plus 1.5%,
- long-term interest rates must not exceed the average of the three best ination
performers plus 2%,
- central bank independence,
- currency stability.
3. The Acquis: For the purposes of the negotiations for membership, the body of EU
rules is divided into 31 chapters:
1. Free movement of goods
2. Freedom of movement for per-
3. Freedom to provide services
4. Free movement of capital
5. Company law
6. Competition policy
7. Agriculture
8. Fisheries
9. Transport policy
10. Taxation
11. Economic and monetary union
12. Statistics
13. Social and policy employment
14. Energy
15. Industrial policy
16. Small and medium-sized under-
17. Science and research
18. Education and training
19. Telecommunications and infor-
mation technologies
20. Culture and audiovisual policy
21. Regional policy and coordination
of structural instruments
22. Environment
23. Consumers and health protection
24. Cooperation in the elds of jus-
tice and home affairs
25. Customs union
26. External relations
27. Common foreign and security
28. Financial control
29. Financial and budgetary provi-
30. Institutions
31. Other
Enhancing your communication skills
To test your understanding and to enhance your thinking and communication skills:
1. Write an essay of between 250 and 350 words on each of the subjects after an-
swering the below given questions. Where necessary, give your essay a title.
1. Which country has the largest area?
2. Which country has the largest population?
3. Which country has the highest birth rate?
4. Which country is the most densely populated?
5. To which country does France export the most?
6. To which country does Sweden export the most?
7. Which country exports the most
(a) crude oil?
(b) cereals?
(c) iron and steal?
(d) citrus fruits?
8. Per inhabitant, which country consumes the most and the least
(a) cheese?
(b) sugar?
(c) wine?
(d) cigarettes?
9. Which country uses the most nuclear power as a source of energy?
10. Which country has the most forested areas?
11. Which country has the most magazines?
12. In which country do women play the most active role in the workforce?
13. Which country offers the longest paid holidays?
14. In which country are the HQs of the European company with the highest turnover?
(a) The EU enlargement. Bear in mind that the enlargement to so many coun-
tries, with such diverse backgrounds presents challenges and raises questions,
such as the potential risks of mass migration, increased crime, lower environ-
mental standards, consumer protection or cultural identity.
(b) Our country on its way to the EU. There are certain criteria which denom-
inate the countrys development level and are divided into four categories,
which, inter alia, include political elements, economic and business elements,
and nancial elements. What about our country? Is our country a developed
or underdeveloped or developing country? What are the conditions that our
country has to fulll in order to join the EU?
2. Write a summary on each of the below given texts:
(a) While the euros launch went smoothly and carried the EU through January in
an optimistic mood, serious problems were developing at the Commission in
Brussels. The trouble began when a junior internal auditor leaked documents
to Green deputies of the European Parliament that showed that the appoint-
ment of friends to high ofce in the Commission and even, in some cases,
corruption were being tolerated by members of the EUs ofcial civil service.
At rst, the reaction from the Commission was a typical one of complacency
mixed with savage denunciation of the whistle-blower himself. So arrogantly
did it handle the case that members of the democratically elected European
Parliament, preparing for elections in June, sensed an opportunity for a
high-prole battle in which they could bring the unaccountable Commission
to book. In mid-January the Parliament came close to exercising what was
known as its nuclear option, the power to dismiss the entire 20-person team
of commissioners, which was appointed by heads of national governments to
lead the administration in Brussels. The Parliament drew back only after the
commissioners agreed to establish an independent inquiry into all the allega-
tions by a team of former judges and auditors.
In March this team published a devastating report conrming much of
what the whistle-blower had alleged. It also uncovered a culture in which
commissioners were not prepared to accept any sense of responsibility for
what was going wrong inside the organisation they ran. The report was par-
ticularly critical of Edith Cresson, the former French prime minister and one
of Frances two appointments to the Commission. She was accused of having
appointed cronies to well-paid jobs inside the Commission even though they
had little or nothing to bring to her area of responsibility - research and educa-
tion. On the night the report was published, President Jacques Santer and his
19 fellow commissioners were left with no option but to resign, leaving a huge
hole at the heart of Europes institutional structure.
Reaction was sharply divided. Euroskeptics argued that the collapse of
the Commission was proof that the ramming together of 15 different political
and cultural systems simply did not work. Others saw the crisis as an opportu-
nity to promote a long overdue shake-up of the EUs organisational structures
that would strengthen the system.
As most of the member states of the EU were determined to see greater
integration, it was not long before the disaster in Brussels had been turned to
the Unions advantage. Within two weeks of the Commissions resignation,
EU leaders, meeting in Berlin, agreed to appoint Prodi, a former Italian prime
minister, as Commission president. He was seen by many as an ideal choice.
(b) Passage on the Negotiated enlargement (p. 95)
5. Prepare a 15-minute presentation concerning the following statement:
(a) Since business will be able to operate on the basis of standard procedures
across the worlds largest frontier-free market, it will truly be a eld in which
the early bird does catch the worm.
(b) Eventually the EU is likely to become a federal superstate as more of the
economic decision-making is centralised.
The removal of internal borders and the creation of a common external frontier
are central to the creation of a single market between members of the European Union.
The harmonisation of the laws regulating the market is another such element.
Harmonisation of laws has not been achieved in all areas and there is continuing
debate as to the extent to which local rules for business may remain, without disturbing
the single market. However, that being said, the regulatory framework for doing busi-
ness in the single market is nearly always set by the Community, and where the gaps
exist the underlying principles on the free movement of goods, services, capital and
people seem to allow the European Court of Justice to ll those gaps. Moreover, the
court has also the power to invalidate the laws of EU member nations when those laws
conict with Union law.
Doing business in the Union requires not only the knowledge of different com-
mercial traditions, different languages, different consumer tastes, but also the knowl-
edge of laws and regulations governing commercial activity. For the purposes of this
unit, we shall briey deal only with Community law on the subject of companies and
nancial services, as well as Community legislation relating to banking and capital
movements, insurance, and securities.
Among the fundamental freedoms accorded to citizens under the EC Treaty are
the rights freely to establish and provide services in other Member States. These free-
doms apply not only to individuals, but also to all European Union companies which
pursue an economic objective. The adoption of Community company legislation is
designed to achieve the necessary harmonisation or co-ordination of Member States
company laws to allow for the effective exercise of these rights. The rationale behind
the legislation is to establish an equivalent degree of protection of interests of share-
holders, employees, creditors and third parties to ensure that divergent national laws do
not distort competition between Member States.
The European Commission has secured the adoption of several Directives in this
eld, dealing mostly with specic aspects of company law such as disclosure of infor-
mation (regulated by the First Company Law Directive), formation of public compa-
nies (regulated by the Second Company Law Second), mergers of public companies
(regulated by the Third Company Law Directive), company accounts (regulated by the
Fourth Company Law Directive), etc.
However, it has encountered serious political opposition to legislation which
seeks widespread harmonisation or which touches on such thorny issues as the par-
ticipation of employees in the management of companies. Proposals of this nature
have almost reached a stalemate. For instance, the proposal for a Fifth Company law
Directive which seeks to harmonise the structure of public limited companies was rst
put forward in 1972. More than twenty years later, Member States remain as divided as
ever on issues such as the one share, one vote principle and employee participation
in management, which is one of the main stumbling blocks in negotiations.
Similar issues have also impeded progress on the proposal for a European
Company, which would create a supranational European Company subject mainly to
Community law. While many current problems in the area of company law seem beset
with difculties, this should not detract from the progress which has been achieved to
date in developing harmonised company law rules.
There is no generally accepted denition of a nancial service. For the purpose
of this section, a nancial service is understood to mean a service whereby persons
are able either to invest their funds or, alternatively, to obtain funds temporarily for
a particular general use. Here we shall briey examine the Community regulation
of but a few institutions or companies: credit institutions, nancial institutions and
investment rms.
Credit institutions. The essential feature of a credit institutions activities is
that the funds it collects are not earmarked as belonging to the investor; they are assets
of the bank to deal with as it wishes. The regulation of credit institutions is primarily
directed to ensuring that an institution will always have the liquidity to meet requests
by investors for the withdrawal of funds, and will always have adequate own funds
to protect against the possible loss of asset value due to the default of its borrowers or
the fall in the market value of investments in securities.
Financial institutions. A typical example would be an institution which bor-
rows money on the interbank market in order to lend such funds to companies. Such
institutions make their prot on the margin between the borrowing rate and the lending
rate. Financial institutions are also regulated in areas which affect the nancial system
generally (e.g. protection against money laundering).
Investment rms. They differ from credit institutions in that they do not receive
funds from the public or grant loans except for the execution of a specic mandate (e.g.
to invest in certain securities). As long as funds and securities of the investment rm
are kept separate from funds and securities of clients, the solvency risks which a bank
has to provide for do not arise. However, investment rms also invest in securities on
their own account, and this exposes them to market position risk. It is, therefore, neces-
sary to ensure that they, and also credit institutions which carry on investment business,
have adequate capital to provide a buffer against sudden swings in market values of
Community regulation is not concerned with regulating every detail of nancial
activity this is a matter for the Member States. Community regulation is concerned
to ensure that essential minimum standards of protection are respected in all Member
States so that nancial services can be provided through the Community on the basis of
a single licence, which does not prevent the host state, namely the state in which the
service is received, from regulating the relevant activity on a non-discriminatory basis
to the extent necessary for the protection of the general good.
One of the principles of the Community is that there should be freedom of
establishment and freedom to provide services throughout the Community. The
European Commission is now concentrating efforts on the standards of nancial sta-
bility which credit institutions must maintain and the management principles which
it is obliged to apply.
Capital movements legislation provides that Member States shall progressively
abolish between themselves all restrictions on the movement of capital to persons resi-
dent in Member states, obliging, on the other hand, each Member State to authorise,
in the currency of the Member State in which the creditor or the beneciary resides, any
payments connected with the movements of goods, services or capital, and any transfer
of capital earnings, to the extent that movement of goods, services, capital, and persons
between Member States has been liberalised pursuant to this Treaty.
Future developments in the nancial sector will be focused on the question of
economic and monetary union. The nal objective is to arrive at a stage where exchange
rates are locked irrevocably and European Central Bank and the European System of
Central Banks take up their monetary functions.
The legislation in the area of insurance and pension sector provides for the free-
dom of establishment, services and movement of capital. The legislation harmon-
ises the existing national regulations to the extent necessary to allow insurance un-
dertakings established in one Member State (the home Member State) to establish
a branch or provide services across borders in the other Member States (the host
Member State). At the same time, it seeks to protect the consumer from abuses, and,
in particular, to ensure that those offering insurance services have sufcient nancial
reserves to meet the claims.
There are still some barriers to conducting cross-border insurance business.
One of the main reasons is taxation and the refusal by some Member States to al-
low tax deductions for premiums paid to insurance companies in other Member
States. So far the following categories of insurance are covered: re-insurance, co-
insurance, non-life insurance (including credit insurance and tourist insurance),
motor vehicle insurance, life insurance and insurance agents and brokers. Any
future insurance legislation is likely to be directed at specific areas of problems
(e.g. property insurance), while developments in other sectors (e.g. consumer pro-
tection and liability for environment) will affect the direction of insurance activity
in the Community.
The role of Community legislation in the securities markets is two-fold: to
ensure the proper working and inter-penetration of securities markets in order to
create a common market for capital; and to provide adequate supervision of the
operations of the markets, and, thereby, provide minimum standards of protection
of investors. To serve this end Council Recommendation concerning a European
code of conduct relating to transactions in transferable securities was notied in
1977. Although it is not binding and does not have the force of law, it has been
taken seriously and professional bodies have adopted its rules. It lays down a series
of ethical and practical guidelines designed to improve and harmonise operations
and the disclosure of information relating to transactions on the securities markets.
Council Directive of March 5, 1979, is aimed at harmonizing the conditions for the
admission of securities to ofcial stock exchange listing. These conditions are set
out in Schedule A to the Directive and cover the status of the company, the minimum
size of the company, the companys period of existence, adequate distribution of
the shares, etc. The conditions for admission of debt securities to ofcial stock ex-
change listing are set out in Schedule B to the Directive. The obligations in relation
to listed shares are set out in Schedule C to the Directive and, in relation to listed
securities, in Schedule D to the Directive.
Answer the below given questions.
1. Explain the importance of harmonisation of laws and the role of the European
Court of Justice.
2. Identify the fundamental freedoms that apply both to individuals and to EU com-
3. Explain the rationale behind the legislation.
4. What do Company Law Directives regulate?
5. Identify the impediments to progress in developing harmonised company law
6. Dene the term nancial service and list some of the institutions relating to nan-
cial activity.
7. What is Community regulation concerned with?
8. What does capital movements legislation provides for and obliges each Member
9. Identify some barriers to conducting cross-border insurance business.
10. List categories of insurance covered so far.
11. Dene the role of Community legislation in the securities markets.
Match the institutions or companies on the left-hand side with explanations of
their activities on the right-hand side.
1. Financial institutions (a) Institutions which take deposits from the public and
re-invest funds collected for their own account.
2. Direct non-life insurance Co. (b) They provide a variety of services as intermediaries
in the securities eld.
3. UCITS (c) Institutions which, in return for the payment of pre-
mium, cover risks linked to survival or death of the
person paying the premium or a third party. A life
insurance policy is a sort of investment, so ques-
tions of investor protection arise.
4. Direct life assurance companies (d) Institutions which make loans and provide guaran-
tees without taking deposits from the public.
5. Investment rms (e) Undertakings for collective investment in transfer-
able securities raise funds from public and invest
them in a fund which operates on the principle of
6. Credit institutions (f) Institutions which, in return for the payment of pre-
mium, cover risks other than those linked to surviv-
al and death. Non-life policies are not investments
in the ordinary sense because they are a means of
making nancial provision against loss caused by
the possible realisation of a risk.
Supply the missing prepositions.
Lobbying a legitimate activity?
The word lobbying conjures up many ideas the minds of the public. It
is as well to address these ideas because lobbying has many negative connotations.
Lobbying is a right of all citizens in a democracy. All those a special in-
terest are entitled to lobby to obtain support that interest. Whether to lobby as an
individual or as a group will depend the circumstances and resources. Whether
to lobby a professional agency or not will depend circumstances, but
the advice a professional person this eld should always be sought.
Information is the basis of any lobbying. The interested party needs to know
what is going on, who is doing what, why and when. Information needs to be obtained
good time so as to allow reection and proper response.
Analysis is the second basic element lobbying. Next is a clear and sim-
ple strategy, which is essential successful lobbying. More cannot be obtained
the Community than the Community is capable giving. Presentation
is very important all phases of the lobbying process. the information
side no one company, group or individual can hope to cover all the institutions or the
individuals the Community Institutions.
Therefore, lobbying is a legitimate activity and one that becomes increasingly
important as the management of economic and social issues a pan-European
scale. Lobbying is thus a part of the democratic process. This is especially the case
the European Community, which maintains its democratic legitimacy
the democratic nature of the Member States and their elected parliaments.
Lobbying is not using corrupt, immoral or unfair means to attempt to
inuence public ofcials or elected representatives; it is fair presentation of
a case. As one of the rst steps future developments this eld, the
Commission called the drawing of their own rules of conduct
the lobbyists. The minimum requirements a code of conduct, recommended
the Commission, are proper representation of the special interest group
the public; behaviour according the highest possible professional standards;
the avoidance of situations where conicts of interest are likely to arise; disclosure of
the name of the client whom the work is done; and disclosure of Commission
ofcials contacted the same issue.
Fill in the blank spaces in the text with correct verb forms.
The European Court of Justice
Because the Union is a legally based concept, the European Court of Justice
(PLAY) an ever-increasing role, as the Supreme Court (DO)
in the United States. In recent years, some member states (OBJECT)
strongly to what they regard as judge-made law and attempts (MAKE)
to restrict the powers and activities of the European Court. Nevertheless, the position
(BE) and will remain that much judge-made law (BE)
inevitable in a developing society. In the UK, the common law (BE) itself
judge-made and so was equity. Now, despite the vast increase in statutory law, or pos-
sibly because of it, no inclination on the part of the judiciary (TO STAND
ASIDE) is seen. Indeed, the more statute law there is, the greater the scope there is for
the judiciary (TO PLAY) a signicant role. So far as the Community, or
Union, (CONCERN), these developments (MEAN) that it
is essential (TO KEEP ABREAST) not only of the legislative provisions,
but also of the jurisprudence of the European Court of Justice.
For this reason it (BE) essential for every businessman wishing,
not simply (TO UNDERSTAND) what (GO)
on in the European Union and how the Union (DEVELOP), but also
(BE) in a position to take informed decisions about his own business
strategy in order to maximise the opportunities now (OPEN UP) in what
fast (BECOME) the worlds greatest trading area. This, indeed, is a eld
in which knowledge is the pre-requisite of success.
According to The Economist (October 7
1995), community law, notably the di-
rectives, regulations and decisions agreed upon by ministers of member states, is su-
preme throughout the European Union. As the European Court of Justice (ECJ) rules in
1963, The Community constitutes a new legal order of international law, in favour of
which the States within certain areas have limited their sovereign rights.
Add judgement in 1964, and the priority is set: where national and European law
conict, the national must give way which is why Germans now accept beer from
Belgium, Britons import long-life milk from France, and the French (some of the time)
take mutton from Britain. It is also why Europes footballers, thanks to preliminary
opinion last month, should now have more freedom to move from club to club. Without
community law, Europes single market, with the free ow of people, goods, services
and capital, could not be expected to work.
But community law spreads further, for example into labour and pension laws. If
the ECJ rules that a national law is decient or wrong, it may cost a member govern-
ment or its industrials dearly. In 1990, for example, the court ruled that the retirement
age for men and women in pension schemes must be the same. Alarmed by the poten-
tial claims, the Unions governments limited any retroactive effect by adding a special
protocol to the Maastricht treaty.
After reading the below given cases illustrating the approach of the European
Court of Justice to this legislation, try to answer the below given questions.
1. In this case the Hoge Raad der Nederlanden (Dutch Supreme Court) requested
the ECJ to give a preliminary ruling under Article 177 of the EC Treaty on the in-
terpretation of the rules on nullity laid down in the First Company Law Directive.
The question was whether the First Company Law Directive rules governing
nullity are applicable when acts have been carried out in the name of a limited li-
ability company, which has not been constituted under national law due to failure
to complete the national law formalities on company formation. The Court came
to the conclusion that the rules on nullity do not apply where the incorporation
formalities have not been completed. (Case 136/87 Ubbink Isolatie BV v Dak-
en Wandtechniek BV [1988] ECR 4665)
2. A Greek national court requested the European Court of Justice to rule on wheth-
er Article 25(1) of the Second Company Law Directive has direct effect. In other
words, whether where it has not been implemented in national law, an individual
can, nonetheless, rely on it against the administration in national court proceed-
ings. The national court also asked whether Article 25(1) is applicable to rules
which govern the exceptional cases of undertakings of economic and social
importance for society and which are undergoing serious nancial difculties.
Article 25(1) requires that any increase in capital must be decided on by the
general meeting. The Court decided that Article 25(1) has direct effect and that,
in the absence of a derogation provided for by Community law, Article 25(1)
of the Second Directive must be interpreted as precluding the Member States
from maintaining in force rules incompatible with the principle set forth in that
article, even if those rules cover only exceptional situations. (Case C-19/90 and
C-20/90 Karella and Karellas v Minister of Industry, Energy and Technology,
and Organismos Anasygkrotiseos Epischeiriseon AE [1991] ECR 2691; see
also Case C-381/89 Sindesmos Melon Tis Elefthearas Evangelikis Ekklisias and
Others v Greek State and Others [1992] ECR 2111)
3. Still, the Unions courts do need improvement. In the past 25 years, the number
of cases brought before the court has risen from 70 a year to about 400. A prelimi-
nary ECJ ruling, sought out by a national court to ensure that its decisions (say
on taxes or employment) will not conict with community law, takes around 18
months to be delivered; a full case takes two years.

1. Explain the following statement: Because the Union is a legally based concept,
the European Court of Justice will play an ever-increasing role, as the Supreme
Court has done in the United States.
2. Dene the term judge-made law.
3. Judge-made law is inevitable in a developing society. Do you agree or disagree
with this statement? Support your position.
Enhancing your communication skills
1. Write an essay based on the following statements:
(a) Case law and EU law can both affect business, and are harder to predict since
they are independent of national governments.
(b) The powers of the EU Institutions are expanding and contracting.
2. Write a summary of one of the bellow given passages:
(a) Lobbying a legitimate activity? (p. 106).
(b) The EU and the Non-European Nations. Relations between the EU and the
non-European industrialized countries, especially the United States and Japan,
have been both rewarding and frustrating. The EU follows a protectionist poli-
cy, especially with respect to agriculture, which on occasion has led the United
States in particular to adopt retaliatory measures. In general, however, relations
have been positive. The United States and Japan are the largest markets outside
Europe for EU products and are also the largest non-European suppliers. By
the mid-1990s, all underdeveloped countries could export industrial products
to EU nations duty free; many agricultural products that competed directly with
those of the EU could also enter duty free. In addition, the EU has reached spe-
cial agreements with many countries in Africa, the Caribbean, and the Pacic
(the so-called ACP countries). In 1963, it signed a convention in Cameroon of-
fering commercial, technical, and nancial cooperation to 18 African countries,
mostly former French and Belgian colonies. In 1975 it signed a convention in
Togo, with 46 ACP countries, granting them free access to the EU for virtu-
ally all of their products, as well as providing industrial and nancial aid. The
EU has concluded similar agreements with all the Mediterranean states except
Libya, as well as other countries in Latin America and Asia.
3. Prepare a 10-minute presentation on each of the below given topics:
(a) The European Investment Bank;
(b) The European Monetary Institute;
(c) The European Central Bank; and
(d) The European System of Central Banks.
Products can be divided into physical products and services. For many marketers,
the difference between services marketing and the marketing of physical goods is neg-
ligible. Why is this so? Firstly, the marketer denes a product as a bundle of benets: a
person seeking to be cheered up may do this either by going to a good movie (a service)
or by buying a new shirt (a physical product). For the marketer, the benet is basically
the same. Secondly, most physical goods contain a service aspect, and more services
contain a physical product. And thirdly, consumer orientation means that we should be
looking at what the consumer thinks, needs and wants, not at dening our product in
terms of its characteristics.
Having said that, there are clearly products where the service element is the ma-
jor part of the cost of the product; for example, a restaurant meal. Here the cost of the
raw materials (ingredients of the food served) is only a tiny part of the overall cost of
the meal. The diner is also paying for the skill of the chef, the time and efforts of the
waiters, and the pleasure of dining in a luxurious surroundings, not to mention not hav-
ing to do the washing-up.
The main differences between service products and physical goods lie in a
number of factors. First, services are intangible: an insurance policy is more than a pa-
per written on; the key benet (peace of mind) cannot be touched. Second, production
and consumption often occur at virtually the same time: a stage play is acted out at the
same time as the consumer enjoys the performance. Third, services are perishable: an
airline seat is extremely perishable; once the airplane takes off, the seat cannot be sold
(services cannot be produced in advance and stockpiled). Fourth, services cannot be
tried: it is not usually possible to try a haircut before agreeing to have it done, nor will
most restaurants allow customers to eat the meal before deciding whether to order it.
Fifth, services are variable, even from the same supplier: sometimes the chef has a bad
day, or the waiter is in a bad mood; on the other hand, sometimes the hairdresser has a
ash of inspiration that transforms the clients appearance.
From the consumers viewpoint, the risk attached to buying a service will in-
evitably be higher than is the risk of buying a physical product. Physical products
are easily returned if they fail to satisfy; it is impossible to return a poor haircut. The
result of this is that consumers are likely to spend more time on information-gather-
ing, and will rely more heavily on word-of-mouth recommendations than they would
when buying a physical product. For example, a consumer looking for a doctor may
want to know what experience and qualications the doctor has to treat a particular
complaint; few car buyers would be interested in the qualications and experience of
Fords chief design engineer.
While most of the risk attached to buying a physical product is limited to the
purchase price (though no doubt there will be exceptions to this general rule), service
purchasing carries additional risks. First, there are consequential losses, which arise
when a service goes wrong and causes loss to the customer. For example, a poorly
handled legal case could result in the loss of thousands of pounds. Service providers
are usually careful to explain the risks beforehand, use disclaimers in contracts, and
carry professional liability insurance. Consumers can sue for consequential losses.
Next has to do with the purchase price risk, which is the possible loss of the purchase
price when the consumer buys a service that does not work. The usual consumer re-
sponse is to refuse to pay for the service, so it is advisable for the supplier to check
during the service process that everything is satisfactory. This is why waiters will
check that the food is satisfactory during a meal out, and why service stations call
customers when they nd something serious is wrong with the car. Third is misun-
derstanding, which is common in service provision because of the lack of trying out
services (trialability).
Because customers are buying a promise, they are more likely to use indirect
measures of quality such as price. Diners tend to assume that more expensive restau-
rants will provide better food and/or service; that expensive hairdressers will provide
better hairdos; and that expensive lawyers are more likely to win cases. Having made a
purchasing decision, the consumer is more likely to become involved with the service
provider. Consumers therefore tend to have favourite restaurants, hairdressers, family
solicitors, bank managers, brokers, etc., with whom the relationship might continue for
a lifetime. Customers are reluctant to switch bank accounts, even when problems have
become apparent; even though customers will readily change brand of canned tuna in
order to save a few pence, they will still buy the tuna from the same supermarket as
usual. This is because the customer knows where everything is kept in the supermarket,
understands the stores policy on returned goods, knows which credit cards are accept-
able, and perhaps even knows some of the staff on the tills.
Since most services involve direct contact between the producer and the consum-
er, the attitude and behaviour of the people involved is an integral part of the product; a
bank managers personality affects trade in a way that personality of a production-line
worker does not.
Because the consumer is usually present during all or part of the process of pro-
viding the service, the process becomes as important as outcomes in a service market.
Lufthansas improved method of seating passengers (boarding window-seat passengers
rst and aisle-seat passengers last) makes the airline more pleasurable to y with.
In many ways services can be marketed in similar ways to physical products. In
most cases there is no clear demarcation between products and services, so the tech-
niques for marketing them will not differ greatly.
This is why the decisions of the, one of the most successful rms,
are perhaps closest to the product. Or, more precisely to the service, because Lastminute.
com sells services such as theatre tickets, hotel rooms, ights, restaurant booking and
even hairdressing appointments over the Internet. The essence of is
that customers can book the service of their choice instantly, right up to the last minute
due to the rapid communicating and processing powers of computers and the Internet.
Part of the reason for the companys success is its care over choosing suppliers, for it
intends to ensure that the nal consumers always have a good experience.
Answer the below given questions.
1. Why is the difference between services marketing and the marketing of physical
goods negligible for many marketers?
2. Is the diner paying only for the ingredients of the food served in a restaurant?
3. State factors distinguishing services. Illustrate by examples.
4. Will the risk attached to buying a service be inevitably higher than is the risk of
buying a physical product? Give your reasons.
5. Identify risks attached to service purchasing. Illustrate.
6. Can services be marketed in similar ways to physical products? Support your
position by examples of some of the most successful rms.
Match (1) physical product purchasing and (2) service purchasing on the left-
hand side with their sequences on the right-hand side.
(a) Commitment to supplier.
(b) Payment for goods.
1. Physical product purchasing (c) Evaluation of service: satisfaction or otherwise.
(d) Use of goods.
(e) Decision to buy service.
2. Service purchasing (f) Pay for service.
(g) Receipt for goods.
(h) Delivery and consumption of service.
(i) Decision to buy goods.
(j) Post-purchase evaluation: satisfaction or otherwise.
Supply the missing prepositions.
Marketing in different sectors
Services can be distinguished products because they are intangible, in-
separable from the production process, variable, and perishable. Services are intangible
because they can often not be seen, tasted, felt, heard, or smelled before they are pur-
chased. A person purchasing plastic surgery cannot see the results the purchase,
and a lawyers client cannot anticipate the outcome a case before the lawyers
work is presented court. To reduce the uncertainty that results this
intangibility, marketers may strive to make their service tangible emphasizing
the place, people, equipment, communications, symbols, or price of the service.
Services are inseparable their production because they are typically pro-
duced and consumed simultaneously. This is not true physical products, which
are often consumed long the product has been manufactured, inventoried, dis-
tributed, and placed a retail store. Inseparability is especially evident in enter-
tainment services or professional services. many cases, inseparability limits
the production of services because they are so directly tied the individuals who
perform them. This problem can be alleviated if a service provider learns to work faster
or if the service expertise can be standardised and performed a number of in-
dividuals (as H&R Block, Inc., has done its network of trained tax consultants
the United States).
The variability of services comes their signicant human component. Not
only do humans differ one another, but their performance any given
time may differ their performance another time. The mechanics
a particular auto service garage, for example, may differ terms their
knowledge and expertise, and each mechanic will have good days and bad days.
Finally, services are perishable because they cannot be stored. Because of this,
it is difcult service providers to manage anything other than steady demand.
When demand increases dramatically, service organisations face the problem of produc-
ing enough output to meet customer needs. When a large tour bus unexpectedly arrives
a restaurant, its staff must rush to meet the demand, because the food services
(taking orders, making food, taking money, etc.) cannot be warehoused such
an occasion. To manage such instances, companies may hire part-time employees, de-
velop efciency routines for peak demand occasions, or ask consumers to participate
the service-delivery process. the other hand, when demand drops off
precipitously, service organisations are often burdened a staff of service pro-
viders who are not performing. Organisations can maintain steady demand
offering differential pricing during off-peak times, anticipating off-peak hours
requiring reservations, and giving employees more exible work shifts.
Fill in the blank with the appropriate article or leave it blank to indicate that no
article is necessary.
Correcting complaints
If complaint is about physical product simple replacement of
faulty product will usually be sufcient, but it is always better to go step
further and provide some further recompense if possible. Services fall into fol-
lowing categories, for purpose of correcting complaints.
Services where it is appropriate to offer repeat service. Examples are
vacuum cleaners, domestic appliances, etc.
Services where giving money back will usually be sufcient. Examples are
retail shops, cinema and theatres, video rental companies, etc.
Services where consequential losses may have to be compensated for. Examples
are medical services, solicitors, etc.
above mentioned categories are not necessarily comprehensive or exclu-
sive; sometimes it may be necessary to give back consumers money and also
make some other redress. It is important that dissatised customers are allowed
to voice their complaints fully and that appropriate compensation is negotiated
in light of strength of complaint; degree of blame attaching to
supplier, from consumers viewpoint; and legal and moral relationship
between supplier and consumer.
failure to solve problems raised by post-purchase dissonance will, ultimate-
ly, lead to irreparable damage to rms reputation. evidence from
research carried out by Coca-Cola Corporation is that consumers whose
complaints are resolved satisfactorily tend to become more loyal than those consumers
who did not have complaint in rst place. In last analysis, it is always
cheaper to keep an existing customer than it is to attract new one.
Fill in the blank spaces in the text with correct verb forms.
Business marketing
Business marketing, sometimes (CALL) business-to-business market-
ing or industrial marketing, (INVOLVE) those marketing activities and
functions that (TARGET) toward organisational customers. This type of
marketing involves (SELL) goods and services to both public and private
organisations (USE) directly or indirectly in their own production or serv-
ice-delivery operations. Some of the major industries that (COMPRISE)
the business market are construction, manufacturing, mining, transportation, public util-
ities, communications, and distribution. One of the key points that
(DIFFERENTIATE) business from consumer marketing is the magnitude of the transac-
tions. For example, in the mid-1990s, a Boeing 747 airliner, selling for about $155 mil-
lion, (CAN TAKE UP) to four years to manufacture and deliver once the
order (PLACE). Often, a major airline company (ORDER)
several aircraft at one time, making the purchase price as high as a billion dollars.
Service industry is one of the fastest growing sectors of economy in developed
countries. It now accounts for more than 60% of their economy in terms of GDP and
employment. Service industries, while producing no tangible goods, provide services
or intangible gains or generate wealth. In free market this sector generally has a mix
of private and government enterprise. The industries of this sector include banking, -
nance, insurance, investment, and real estate services; wholesale and retail trade; trans-
portation, information, and communications services; professional, consulting, legal,
and personal services; tourism, hotels, restaurants, and entertainment; repair and main-
tenance services; education and teaching; and health, social welfare, administrative,
police, security, and defense services.
The below given Boston Aquarium text shows some of the problems that services
marketing creates. They are different from those of goods marketing. Marketing prob-
lems arise from the very nature of services. After reading through the text try to answer
the below given questions.
1. Robert Sharp, the Director of the Boston Aquarium has just received a memo
from Ms. Flounden, the Educational Programmes Co-ordinator. She has pro-
posed that, starting autumn, the Boston Aquarium restrict weekday admissions
to school tours during the hours from 10:00 a.m. to 03:00 p.m. and exclude the
general public during these hours.
2. During the last school year, the Boston Aquarium offered 6 formal educational
programmes for children from kindergarten and primary school. Children were
also given guided tours by volunteer guides. The tours included various perfor-
mances offered to general public. Although the tours were successful, both in-
dividual visitors and teachers complained. Some members of the general public
found it irritating to walk the galleries with all the screaming kinds around.
The teachers, on the other hand, expressed disappointment in their inability to
book their pupils into the aquarium programmes. Since the school market is very
important to the aquarium and, besides, the weekday attendance by the general
public was low the previous school year, Mr. Sharp thought he should give the
proposal some serious consideration.
3. Closing the galleries to the general public on school days would have several affects:
(a) The conict between the general public and the school tours would be eliminat-
ed, since the public would not be ghting the crowds of schoolchildren. However,
the annoyance with the school children may turn into anger at not being admitted
at all, especially with the members, who see the aquarium as theirs.
(b) The Clam Gift Shop would not need to be open during the hours of school
tours which would result in one less paid position during these hours.
(c) General public accounted for 70% of visitors during weekdays last year.
Therefore, revenues from the school programme would have to be increased
to cover at least part of the loss in general admissions revenues. The loss could
not be made up by opening the aquarium admission after 03:00 p.m. since few
visitors came at that time during winter.

1. Having in mind the nature of services, and referring to the previous services mar-
keting texts: (a) what ways of increasing revenue would you suggest; and (b) how
would you promote the Boston Aquarium in the next winter season?
2. High quality service cannot be offered without well-trained and motivated people,
especially those who contact the customers. Since having more children groups
would mean more effort on the part of the staff, how would you promote the new
strategy to them?
3. The appearance and manners of rst-line employees are extremely important.
What should an ideal bank manager, stockbroker, insurance agent, customer sup-
port engineer, etc. be like?
Enhancing your communication skills
1. Write an essay based on the following statements:
(a) For many marketers, the difference between services marketing and the mar-
keting of physical goods is negligible.
(b) Complaints should be encouraged because they give the opportunity to cure
post-purchase dissonance and create loyal customers.
2. Write a summary of one of the below given passages:
(a) Marketing in Different sectors (p. 115)
(b) Services marketing:
Products can be divided into physical products and services. For many
marketers, the difference between services marketing and the marketing of
physical goods is negligible. Why is this so? Firstly, the marketer denes a
product as a bundle of benets: a person seeking to be cheered up may do this
either by going to a good movie (a service) or by buying a new shirt (a physi-
cal product). For the marketer, the benet is basically the same. Secondly,
most physical goods contain a service aspect, and more services contain a
physical product. And thirdly, consumer orientation means that we should be
looking at what the consumer thinks, needs and wants, not at dening our
product in terms of its characteristics.
Having said that, there are clearly products where the service element is
the major part of the cost of the product; for example, a restaurant meal. Here
the cost of the raw materials (ingredients of the food served) is only a tiny part
of the overall cost of the meal. From the consumers viewpoint, the risk at-
tached to buying a service will inevitably be higher than is the risk of buying
a physical product. Physical products are easily returned if they fail to satisfy;
it is impossible to return a poor haircut. The result of this is that consumers are
likely to spend more time on information-gathering, and will rely more heavily
on word-of-mouth recommendations than they would when buying a physical
product. For example, a consumer looking for a doctor may want to know what
experience and qualications the doctor has to treat a particular complaint; few
car buyers would be interested in the qualications and experience of Fords
chief design engineer.
This is why the decisions of the, one of the most suc-
cessful rms, are perhaps closest to the product. Or, more precisely to the
service, because sells services such as theatre tickets, hotel
rooms, ights, restaurant booking and even hairdressing appointments over
the Internet. The essence of is that customers can book the
service of their choice instantly, right up to the last minute due to the rapid
communicating and processing powers of computers and the Internet. Part of
the reason for the companys success is its care over choosing suppliers, for it
intends to ensure that the nal consumers always have a good experience.
3. Prepare a 15-minute presentation on one of the below given topics:
(a) Customer support is a service that adds a lot to the value a product has for
the consumer. However, sometimes things go wrong. Can you give at least
three rules for handling difcult customers? Anticipate questions that may be
thrown at you.
(b) Discuss similarities and differences between marketing goods and services.
As business becomes increasingly global marketers nd themselves more and
more in the position of doing business across cultural divides, and across national
boundaries. International marketing differs from domestic marketing in many ways.
First, cultural differences mean that communication tools will need to be adapted, and
sometimes changed radically. Second, market segmentation issues are likely to be more
geographically based. Third, remoteness of the markets makes monitoring and control
more difcult. And fourth, both physical distribution (logistics) and place decisions
will be affected by infrastructure differences in some overseas markets.
International marketing is important because of the economic theory of compara-
tive advantage. This theory states that each country has natural advantages over oth-
ers in the production of certain goods, and therefore specialisation and the trading of
surpluses will benet everybody. For example, although it is possible to grow tomato
under glass in the Netherlands, they can be grown more easily and cheaply in Spain, so
it makes economic sense for the Dutch to buy Spanish tomatoes and sell Spain chemi-
cal products that are produced more readily in the Netherlands.
Comparative advantage does not explain all of the thrust behind internationali-
sation; Japanese, US and UK multinationals have all made major impacts in overseas
markets without having an apparent natural advantage over their overseas competitors.
In some cases this can be explained by economies of scale; in others by the develop-
ment of expertise within the rms; in others the reasons are historical.
Although governments encourage rms to internationalise (and in particular to ex-
port), this is not in itself enough reason to seek markets overseas. In addition to the ration-
ale for international marketing, such as small or saturated domestic markets, economies
of scale, international production, customer relationships, market diversication and in-
ternational competitiveness, there are also some further reasons. One is that the product
life cycle will vary from one country to another. What is a mature product in one country
may be at the introduction stage in another, so that the rm gains all the advantages of
introducing new products to the market without the costs of research and development
that would result from developing new products for the domestic market.
When dealing with foreign markets, marketers will meet barriers that would not
be present in domestic markets. One of them refers to culture, which affects more than
just communication issues. It is as well for marketers to take the advice of natives of the
countries in which they hope to do business, since other peoples cultural differences
are not always obvious.
From a marketers viewpoint, cultural differences are probably reducing as con-
sumers become more globally minded; foreign travel, the widespread globalisation of
the entertainment media, and existing availability of foreign products in most econo-
mies have all served to erode cultural differences.
The entry decision will also be affected by the political factors of the target coun-
try. Some of them are as follows: level of protectionism, degree of instability and rela-
tionship between the marketers government and the foreign government.
The economic environment of the target country is more than the issue of whether
the residents can afford to buy our goods. In some cases the wealth concentration is
such that, although the average per capita income of the country is low, there are a large
number of millionaires; India is an example of this, as is Brazil. Economic issues also
encompass the public prosperity of the country: is there a well-developed road system,
for example? Are telecommunications facilities adequate? Is the population sufciently
well-educated to be able to use the products effectively?
The crucial issue is that of foreign exchange currency availability. If the target
country does not have a substantial export market for its own products, it will not be
able to import foreign products because potential importers will not be able to pay for
the goods in the appropriate currency. This has certainly been the problem in some
countries in Eastern Europe since the collapse of communism, and there has as a result
been a return to barter and countertrading. Countertrading is the export of goods on the
condition that the rm will import an equal value of other goods from the same market,
and in the international context can be complex; for example, a rm may export mining
machinery to China, be paid in coal, and then need to sell the coal on the commodities
market to obtain cash (a buy-back deal).
Although cultural variance and differences in consumer behaviour are still ma-
jor issues for international marketers, transnational segments are still identiable. The
main bases for segmentation are by country and by individual characteristics (in much
the same way as segmentation within ones own country.
Countries can be grouped according to economic development criteria, by cul-
tural variables, or by a combination of factors such as economic, political and R&D
factors. Transnational consumer segmentation looks at lifestyle, behaviour and situa-
tion-specic behaviour. An example of lifestyle segmentation is the transnational teen-
age market; there is also evidence of an elite market. An example of situation-spe-
cic segmentation is the attitudes to gift-giving, which seem to be common to many
Therefore, the main difculty with seeking transnational consumer segments lies
in generating adequate research within target countries. The basic problem for compa-
nies seeking to internationalise is that nothing can be granted in a foreign country. It
follows that a rms internationalisation strategy decisions will depend on the follow-
ing factors: the size of the rm in its domestic market; the rms strengths compared
with overseas competitors; management experience of dealing in other countries; and
the rms objectives for a long-term growth.
For many small rms, the psychological and organisational barriers to interna-
tionalisation seem too great for the rm to cope with. Recent research has indicated that
use of the Internet can help small rms overcome these problems. Another research,
which was conducted among UK website owners, showed that signicant barriers still
exist. One of them refers to psychic distance, i.e., the cultural distance between coun-
tries involved. This includes lack of ability to speak or understand foreign languages.
Practical export problems include shipping goods, handling paperwork, and lack of ex-
perience in dealing with overseas customers. Third has to do with resource constraints,
i.e., lack of nance to offer credit, lack of transportation, etc. Next relates to trade re-
strictions. Some countries impose restrictions on imports, which can limit trade. Fifth
refers to market risk. The credit risks associated with dealing with customers in other
countries, and difculties of dealing with foreign exchange.
Current thinking is that the effect of increased use of the Net for marketing pur-
poses will eventually lead to a new environment for marketing. The spread of infor-
mation ow within rms, especially those operating globally, will mean greater pos-
sibilities for real-time negotiations between rms. The rapid growth of virtual shopping
(accessing catalogues on the Internet) means that consumers may buy goods anywhere
in the world and have them shipped or, in the case of computer software, simply
downloaded which means that global competition will reach unprecedented levels. A
recent development is webcasting; the automatic delivery of items of interest direct to
the individuals PC.
However, there are several mitigating factors that are likely to impede progress
towards a virtual marketplace. They include technophobia, cost of connection and use,
pressure on the system and cost of hardware.
Globalisation is a business philosophy under which rms regard the entire planet
as their marketplace and source of supply. The truly global rm identies competitors,
suppliers, customers, employees, threats and opportunities throughout the world re-
gardless of national boundaries.
Obviously, it is not always possible to take a completely global view. Even rms
such as McDonalds have to adapt their product somewhat for local markets. For ex-
ample, in India McDonalds burgers are made from mutton, since the cow is sacred to
Hindus; in Japan the company offers teriyaki burgers; in Russia the main drink offered
is tea rather than coffee.
Globalisation is becoming increasingly important for all rms, even those that
are not themselves planning to expand into the international arena; those rms will still
be affected directly or indirectly by foreign competition and by the growing strength of
domestic competitors who have themselves expanded overseas.
Answer the below given questions.
1. State the difference between international marketing and domestic marketing.
2. Explain the advantages of international marketing.
3. Describe the main barriers to doing business across national borders, bearing
in mind cultural differences and political environment, as well as economic
issues. (Economic issues also encompass the public prosperity of the country:
is there a well-developed road system, for example? Are telecommunications
facilities adequate? Is the population sufciently well-educated to be able to
use the products effectively?
4. What are the specic problems attaching to internationalising a service industry?
5. Explain the following statement: The Internet appears to offer cheap and easy
access to global markets.
6. Explain some of the issues surrounding the globalisation of business.
7. What is the importance of international business to a rm that is not itself plan-
ning to internationalise?
(a) Match the six reasons for international marketing on the left-hand side with
their explanations on the right-hand side.
1. Small or saturated
domestic market
(a) For many industries, notably the electronic industry and the
chemical industry, the cost of initiating a new product is so huge
that it needs to be spread across a very large production run.
Automation of production lines is making this more of an issue
for more and more rms; recouping the capital cost of automation
almost forces the rm into world markets.
2. International
(b) The capacity to source components and assemble nished prod-
ucts on a global scale means that a rm can take advantage of the
most competitive prices worldwide. Shipping costs are relatively
low compared with the savings made.
3. Economies of scale (c) No rm is immune from competitors coming in from outside. If a
rm is to remain viable in the long run, it may be forced to meet
foreign competition on their own ground before having to meet
them in the domestic market.
4. Market
(d) Manufacturers who supply multinational rms must themselves
be able to deliver worldwide and price in any currency in order to
supply assembly plants in different countries.
5. International
(e) If the rm cannot expand any further in its home market, further
growth can only occur by internationalising. The USA trades rela-
tively little of its production; the home market is large enough so
that most rms do not need to consider exporting.
6. Customer
(f) The broader the markets served, the less likely that the rm will
suffer if one market fails. For example, recessions do not happen in
all countries at the same time; a truly multinational company will
be able to make up losses in one market with gains in another.
(b) Match political factors in international marketing on the left-hand side with
their explanations and implications on the right-hand side.
1. Level of
(a) Sometimes disputes between governments may result in em-
bargoes or other restrictions. Obviously, this is particularly
prevalent in the arms trade, but trade restrictions can be ap-
plied to unfriendly countries. For example, trade with Iraq is
limited following the invasion of Kuwait; the USA still has a
trade ban with Cuba for many items; Greece and Turkey have
restrictions on travel and trade.
2. Degree of
(b) Some governments need to protect their own industries
from foreign competition, either because the country is
trying to industrialise and the fledgling companies can-
not compete (as in some developing nations), or because
lack of investment has resulted in a run-down of industry
(as in much of Eastern Europe). Sometimes this can be
overcome by offering inward investment (to create jobs)
or by agreeing to limit exports to the country until the
new industries have caught up.
3. Relationship
between marketers
government and the for-
eign government
(c) Some countries are less politically stable than others, and
may be subject to military takeover or civil war. Usually
the exporters government diplomatic service can advise on
the level of risk attached to doing business in a particular
(c) Match the factors limiting growth of the Internet on the left-hand side with
their explanations and examples on the right-hand side.
1. Technophobia (a) Most of the predictions of growth have been based on research
in the USA and to a lesser extent in Australia. In the USA tel-
ephone calls are free, so the connection to the Net costs the
subscription fee paid to the Net server. In Australia, local calls
are charged at a at rate irrespective of the time the call takes.
In most of the rest of the world, calls to the server are charged
by the minute, and thus a lengthy session surng the Net can
prove very expensive for the average consumer.
2. Cost of connection
and use
(b) Although costs of computer equipment are dropping dramati-
cally, and WebTV devices (for accessing Net via an ordinary
TV screen) are being developed, the cost is still high enough to
deter many potential users in lower socio-economic groupings,
and certainly high enough to prevent access by most of the Third
World. This means that Net is still likely to be the virtual world
of the relatively rich for some considerable time to come.
3. Pressure on
the system
(c) Substantial numbers of people have considerable resistance to the
technology. Currently use of the Net requires a degree of com-
puter literacy that is not present in the majority of population,
although voice-operated computers will reduce this problem.
4. Cost of hardware (d) The number of subscribers is growing at a rate far greater than
the ability of the technology to keep up. This means that many
subscribers are faced with extremely long delays in accessing in-
formation (some say that www stands for wait, wait, wait.
This means that it is sometimes quicker and less frustrating to go
to the High Street shops and buy the item in a conventional way.
(d) Match the stages in globalisation on the left-hand side with their explanations
on the right-hand side.
1. Ethnocentrism
(a) The rm only identies the difference in each market. The rm
treats each market as being unique, with its own marketing strat-
egies; the products are modied to suit the local market, and tac-
tical issues such as price and promotion are decided locally.
2. Polycentrism
(b) The firm sees the world as a single market and seeks to iden-
tify market segments within that market. This results in devel-
oping uniform policies for approaching segments which have
been identified, so that promotions and products are similar
across globe.
3. Geocentrism
(c) Home-country orientation. The foreign country is seen as sec-
ondary, perhaps as a place to dispose of excess production. The
assumption is that the foreign market is basically the same as the
domestic market, so marketing strategies are hardly adapted at
all for the overseas market.
(e) Match the names of the six major initiatives undertaken in recent years
to encourage world trade on the left-hand side with their descriptions on the
right-hand side.
1. General agreement
on Tariffs and
Trade (GATT)
(a) This is an agreement on world agriculture, production and pric-
es; compliance with it has been patchy, but the signatories to the
Agreement continue to negotiate.
2. European Union
(b) A six-member group that has agreed to establish a free trade area
in South-East Asia in the early part of the 21st century.
3. North American
Free Trade
(c) A customs union between the nations of South America, this
has already resulted in passports travel throughout the continent
(citizens need only carry identity cards) and the in removal of
tariff barriers on most items.
4. Mercosur
(d) This is a trading group of 15 countries that have virtually elimi-
nated customs duties between the member states. This has caused
some complications, and will continue to do for some time, but
border controls are minimal (and in some cases non-existent).
Eventually, the EU is likely to become a federal superstate as
more of the economic decision-making is centralised.
5. Cairns Agreement
(e) Creating a customs union between the USA, Canada and Mexico,
this agreement seeks to cancel all tariffs (customs duties) between
the member states by 2010.
6. Association of
South-East Asian
Nations (ASEAN)
(f) An ongoing set of international negotiations to reduce customs
duties, which act as a barrier to trade. Almost 65 nations are in-
volved in the talks, which were initiated after the Second World
War. Tariffs among industrialised nations fell from an average
40% to approximately 5% in 1990.
Supply the missing prepositions to complete the below given text.
Internet marketing
Nobody owns the Net; it is a communications medium spread thousands
(even millions) computers worldwide, which operates independently
the telephone companies that supply its cable connections, the governments
whose countries it resides, and even the computer owners
whose machines data are stored.
The Net therefore operates its own rules; there is little or no international
law to govern its use (or abuse) so Net users have established laws and punishments
their own. For example, an early attempt to use the Net marketing
communications was to send out indiscriminate e-mails to large number of subscrib-
ers. This practice, known as spamming, quickly led to retaliation kind,
the offended subscribers sending very large messages back ......... the offending rm.
This is known as mail-bombing; subscribers would send very large les (manuscripts
of textbooks, complex software programmes, telephone directories) the rm,
resulting the breakdown of the rms systems, and some cases a break-
down of the rms net server. A further type of response is called aming insulting
messages sent e-mail. This type of response means that marketers are now
extremely careful sending unsolicited communications the Net.
Another way which Net subscribes have registered objections
what they see as unfair marketing practices is to use bulletin boards to blacklist
companies or to give offensive messages companies. Some of these have
bordered the libellous, but there is no way of nding out who has put the
notices the board, and since the libeller might be halfway the planet
there is very little prospect successfully suing damages. Most ma-
jor companies sites are shadowed anonymous counter-culture sites, such as
McSpotlight site which shadows McDonalds and which carries derogatory stories
McDonalds products and restaurants. All in all, the consumer has most of
the real power the Web.
Fill in the blank with the appropriate article or leave it blank to indicate that no
article is necessary.
Cultural differences
Classic examples of errors arising from language differences abound;
General Motors Nova brand name translates as no go in Spanish. Gerber means to
throw away in colloquial French, creating problems for baby foods manufac-
turer of same name, and Irish Mist liqueur had to be re-named for German
market since mist means excrement in German. Many cultural problems are sub-
tler, and have to do with way things are said rather than actual words used.
In Japanese, yes can mean yes, I understand but not necessarily yes, I agree.
Portuguese has total of seven different words for you, depending on status
and number of people being addressed.
body language is also universal. American sign for OK, with
thumb and forenger making circle, is rude gesture in Brazil (equivalent
to sticking up extended middle nger in USA and most of Europe). While
American are usually very happy to hear about individuals personal wealth and
success, Australians are less likely to take kindly to somebody acting like tall
poppy in this way.
In general, marketers need to be wary of ethnocentrism, which is tendency
to believe that ones own culture is right one and that everybody elses is at
best poor imitation. It can be easier to aim for countries where there
is some psychological proximity. For example, English-speaking countries have psy-
chological proximity with each other; Spain has psychological proximity with most of
Latin America; and former Communist countries of Eastern Europe
are close. Increasingly, marketers are able to identify distinct subcultures that
transcend national boundaries, for example world youth culture fuelled by media
such as MTV.
Fill in the blank spaces in the text with correct verb forms.
The Internet and commercial on-line services
The Internet and commercial on-line services (RELATE). In some
ways they (BECOME) intertwined. But they (BE/NOT)
the same thing.
Consider how you connect to the Internet. You can access the Internet by
(USE) an Internet service provider, or (USE) a commercial
online service, such as America On-line or Prodigy. Internet service providers do one
thing; they (GIVE) you a pipeline to the Internet, but usually
(BE/NOT) in the business of (CREATE) content. You can think of an
Internet service provider as a phone company: They (PROVIDE) a ser-
vice, a gateway to information, but they (CREATE/NOT) much informa-
tion themselves.
On the other hand, commercial on-line services may provide their own content.
You can use these services (DO) things that (BE/NOT) neces-
sarily available on the Internet - (SEARCH) an encyclopedia,
(READ) todays news headlines, and (GET) stock market information.
On-line services also (DO) the job of an Internet service provider,
(GIVE) users access to the Internet. Their customised content is not
available to Internet users who (SUBSCRIBE/NOT) to that on-
line service.
The line between what a commercial on-line service and the Internet can of-
fer rapidly (DIMINISH). Only a few months ago, you
(CAN/NOT FIND) an encyclopedia, todays news headlines, or reliable stock market
information on the Net. If you (WANT) that information on-line, you
needed to use an on-line service. Today, all of these services (BE) avail-
able on the Internet - sometimes at a price, often for free.
It can be difcult for on-line service users to tell when they (USE)
the Internet rather than (USE) features of the service itself, unless the on-
line service (MAKE) the source of the information clear.
On-line services do have advantages. Since they (CONTROL) by a
single company, on-line services generally much better (ORGANISE)
than the Internet. A single directory can usually provide access to all features of an
on-line service.
What Internet tools commercial on-line services (OFFER)? Each
service (HAVE) its own features, but it (BE) safe to say that
all on-line services now (OFFER) nearly full access to the Internets re-
sources - including e-mail, newsgroups, and the World Wide Web. Differences between
them (BE) primarily the interface and pricing structures.
Nestl has own into another storm concerning its approach to marketing in the
Third World.
Bottled water has been one of the success stories of the past 20 years. Always
popular in some European countries such as France and Italy, fears about contamina-
tion of water supplies coupled with rising afuence has resulted in exponential growth
in the market in countries where previously people were perfectly happy to drink tap
water. The growth in the world population, and consequently increasing pressure on
freshwater supplies, means that tap water in many countries is either contaminated or
(at best) tastes unpleasant owing to residues from the purication systems.
The problem for many of the rms in the industry has been the cost of purifying
and bottling the water; traditional sources of mineral water, such as the Perrier springs,
are inadequate to cope with the potential world supply. Nestls answer to the problem
is to source the water in China, where bottling costs are low, and rather than use expen-
sive spring water, to purify tap water.
After reading through the below given Nestl Pure Life passage try to answer the
below given questions.
1. Nestl initially entered the Asian market by buying out local brands. The com-
pany now owns over 50 local brands in Asia, and is lobbying governments in
Pakistan, Ghana and the Philippines to allow to foreign ownership of local com-
panies. In some Asian countries, notably Thailand, the market has developed to
the point where only the very poorest people would drink tap water; Nestl hopes
to achieve a similar success in countries such as Pakistan, where the companys
Pure Life was launched in 1999.
2. Two months into the launch of the product, Nestl had won 60% of the Pakistani
market for bottled water. Although the current projections for the market are low
(Nestl estimates that Pakistani will drink an average 0.2 litres per annum of bot-
tled water, compared with Italys average 154 litres per person), the potential for
growth is correspondingly huge. In particular, Nestl has not been slow to notice
that the market growth in next-door India was 400% between 1993 and 1997.
3. The companys publicity campaign emphasizes the purity and safety aspects of
the water. Store banners reading Pure Safety. Pure Trust. The ideal water, from
Nestl with love are seen throughout the country, and billboards urge people to
Drink only Nestl Pure Life.
4. Nestl expects that most customers will come from afuent, urban classes, and
this poses a problem from the viewpoint of Third World pressure groups such as
Oxfam. Oxfam points out that much of the tap water in Pakistan is of debatable
quality; about 80% of diseases in the Third World and one-third of the deaths are
caused by the contaminated water, and some commentators believe that Nestls
action in bottling water will actually worsen the situation, because it might re-
duce the political will to act in bringing all drinking water up to safe standards.
5. Nestl has also been criticized for some of the PR exercises undertaken on their
behalf by their advertising agents; seminars were run explaining the health risks
attached to drinking tap water, and health education campaigns run in the
Pakistani press also heightened fears about drinking any other water but Pure
Life. Some of these activities were undertaken without Nestls knowledge or
approval. The managing director of Lahore Water Supply Company is reported
as saying These foreign companies are misleading people to make money.
6. Despite these problems, Nestl is planning to spend up to $250m on bottling
and marketing the water in Asia between 2000 and 2004. This includes spending
$150m on a new bottling plant in China. In the longer term, if the Asian mar-
ket reaches the same levels of consumption as most Western European markets,
Nestl stands to be in the forefront of the world bottled water market.

1. What trends in global market are Nestl addressing?
2. How might the company overcome the negative publicity surrounding its cam-
paign in Pakistan?
3. How does Nestls success in the market relate to globalisation drivers?
4. What future trends would help Nestl?
5. Bottled water is usually promoted in terms of its purity; why should this be a
problem in Pakistan?
Enhancing your communication skills
1. Write an essay on one of the below given topics:
(a) Internet marketing. Bear in mind the characteristics, such as communication
style, social presence, consumer control of contact, consumer control of con-
tent, etc., of the Internet as a marketing tool.
(b) Marketing ethics. What role does marketing ethics play in business?
Consider Coca Cola or McDonalds, which has been accused of misus-
ing children for advertising, unhealthy food promotion, exploitation of its
employees, environmental issues, bad treatment of animals, etc. Do these
examples show that Machiavellis motto The aim justies the end is more
often than not applied in business?
2. Write a summary of one of the below given passages:
(a) The Internet and commercial on-line services (p. 132);
(b) Nestl Pure Life (p. 134);
3. Prepare a 15-minute presentation on one of the below given topics:
(a) Brands as friends, or, in other words, can people fall in love with products?
(b) Give your suggestions as to what banks might do to improve the relationship
they have with their customers.
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4th ed. - Beograd : Univerzitet Singidunum,
2009 (Loznica : Mladost Grup). - V, 139 str. ; 24 cm
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ISBN 948-86-7912-213-1
) -
COBISS.SR - ID 169532684
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