Fay reece oe mPa CN U Pe oe ® EX Business English Hanch . » ® Advanced . os ®@ Q Paul Emmerson x - oe 000-0060 fe) 4 The whole of business in one bo e o am J 5 @e00@Business Paul Emmerson English Handbook Advanced The whole of business in one book FP vane.cian Education Betneen Ts Road, Oxdord OX 37° ‘usin of Marin Publishers ted ‘Compares and representatives thoughout the world Ison 978-14050.8603-5 Text © Foul Emmerson 2007 Design ac station © Macmian Publishers inte 2007 Fist pubshed 2007 lng veered ne 637 ofthis publication may everodied stored ina retrial system, rane any frm or by any mans, elecron, mechanical, photocopying, ecrdng, ar othewse, without the poe ‘aren persion of the pubes Designed by Caron Gibson asated by Gl Goodwin ane Petr Harper Cover cesgn by Dasgners Collective Authors acknowledgements Fst an foremost, avr ig thank you ta Karen pile for combining roles of felance geet manaots, content eotor and copy eo, nd Pewee in an reat tev “Thanks ae abo due fo Anna Compe: Kaen and Bale Koura at Macmin,t Clare show to Caray Gin or er wrk onthe graph dain and 10 Mara Warner for transcribing al he orl inten on which he uo Sct ae Ose. And of couse the book would note the sere without ‘he wonder erwings of Gy Goodin. Frat tam onthe web a wre gngoodin Duk The autor woul ik thane colleagues at Ya International House secute Cente (London) fr channeling sntenenees is way. An especial harks o ena Johnston a ts regard. The usu grated sue toy Deector OF Stues, Maurice Cassy fSSxstating my wring and teehing andthe Elance bette the two ‘Thanks as 10 any students wha acted a Quip or ety vsons ofthese units, & special mention due ote siden fom Campus 0219 Gra Austin Finally | woud to thank Roger Haron for ne time an wroube be tock ta prepare te inere, and for hie very viable comments onthe contents ofthe rele unt The publishers woul he to thank a! he people vino ge up thei ie 1 be nteniewed forthe string rate: Alan Caffe: Andras ener, Anke Hofer, Dave Heyced, Bea Pdlipaina, Fernando Gl, Francsca Ruz, Frances Brouze, lon Gees Kate rng, Lara Pain, vo Russ, Lorenzo Heat, Mea Ferasca CConha, Maran Wig, Michele Obie, Robert Rezansk and Roger Haron. TRarks ao 10 Brome Sec, (+ Thomas Lave, Anette Nolin Hea anova Angelova, OF lna athe, Danuta Koma Lai TK, Sabie Schumer, Keth Hentaand ini Able for ther vauable put Wis: every effort nas been made t locate he comers of copyright mater ints book, there may have been Somme cases whan the putishes have been unable to cont he ners We shoul be gate ta hea rom _aryore who recogni copyright materi and whofe nacknoafedged le shal be ESSE 1 make the recessay amendments in flue ediins ofthe boo Pinte Taian 2011 2010 2009 2008 was7es4a2Contents To the student To the teacher BUSINESS ToPIcs Industries and companies Globalization and economic policy Corporate strategy and structure Managing people Operations management Production ‘Marketing strategy and product development Distribution and promotion 9° Accounting and financial statements 10 Financial markets 11 Human resources 12 Information and communication technology Vounune EFFECTIVE COMMUNICATION 13. Trends, graphs and figures 14 Presentations - structure and key phrases 15 Presentations ~ being lively and persuasive 16 Discussions 17 Social English and cultural awareness 18 Style - clarity and emphasis 19 Style - politeness and softening 20 Developing an argument ~ linking words 1 21 Developing an argument - linking words 2 22 Developing an argument - linking words 3 23 Writing paragraphs 24 €V (resume) / Job interview LISTENING PRACTICE Interviews with business people: exercises 1 Interview with a venture capitalist 2 Interview with a Ce 7 Interview with an auditer 3. Interview with a project manager 4. Interview with a design en: Listening scripts Answer key 6 Interview with a communications consultant 8 Inteniew with a portfolio manager er 9 Interview with an HR director 5 Interview with a marketing director 10 Interview with an IT consultant 10 14 18 2 6 30 34 S&B aR Sesser 96 100 104 109 ratTo the student Who is this book for? his book is for leaeners of English at upper intermediate or advanced level (CEF levels 82 and Cl) who want to consolidate and extend their knowledge of business English. It can be used either by university students studying on a business-related course, or by peaple already working and following a career in business. The book is self-study. That means that you can wse it on your own, without a teacher, You can also use itin class, and atthe end! of each unit there are short speaking ot writing activitios for classroom use Why was this book written? Conventional coursebooks cover some areas of business, not all. They have texts and articles that may be out of date, or that inelucte 3 ft of language that is not relevant. The Business English Mandbook is different: @ Itaims to coverall the main topic areas and all the main communication skills in one book. © Iams to be highly focused, with language Being chosen for maximum usefulness and just the right degree of challenge for high-level learners, © Where there is a difforence betvveen British and American English, the word oF tetm most frequently sel in international business comtexts has been used. The alternative word or term is given in brackets. © It provides interesting and motivating listening, activities, linked to the units. Ie you work through this book from beginning to end, you will have covered the whole of business. You will have studied! all the most important voeabulary and all the most important speaking and writing techniques needed for work or study, How is the book organized? One wnit consists of four pages: © Two pages of input: a text on the left and a mind map on the right. There is a close relationship between the two. © Two pages of practice exercises. These are mostly based on the language in the input pages, but occasionally there is some riew language that is closely related. In the book there are twenty-four units. These are divided Into to sections of twelve units each: © The first half ofthe book covers the major business topics. Look at the contents page. You will see that the book: begins with two units that give an overview of the business world, Following this, there are two units on management. Then there are units covering all the main functional areas of business: production and operations, sales and marketing, finance, human resources ancl information technology. © The second half ofthe book covers business communication skills. This part ofthe book begins with 2 unit on the language of trends. It then has units on presentations, discussions and social English. Following this there are two units that deal with the question of style in speaking and writing ~ frst clarity and directness, then politeness and indirectness, Then there are three units all with the ttle ‘Developing an argument’ ~ the language in these units is relevant for discussions, presentations and report writing. The theme of writing is explored in niore detail in the next unit, called ‘Writing paragraphs’. This will be useful for both university students (academic writing) and business people (report writing). Finally a unit on ‘CV and job {nierview’ will help those people looking for a job ~ now or inthe Future. Audio CD and listening exercises There is an audio CD attached to this book. It contains ten listening activities. Listen at home, in your car, oF in class Try the exercises (pages 104-108). Finally listen again and read the script Website references You will notice website references at the bottom of the page: in units 1-12. These have been included so that you can follow up the topic on your own, according to your interests. The sites contain a lot of material that will give you good reading practice and also help you with papers and projects if you are a student. We have included the hhome page only, with a few brief hints to help you navigate to the relevant pages. You may have to click around the site a little before you find what you want. Mow should | use this book? You can study any unit in any order (with the exception of units 20-22). ‘The author recommends that you look at the input, try the ‘exercises, and then finally look back at the input again. ‘This will help you to memorize it and will give you the ‘greatest chance of using the language actively sooner rather than laterTo the teacher What is Business English Handbook? ‘Think of it as a super-charged workbook. During a course it will supplement any classroom material that you already use. At the end of a course it will provide follow-up and. review. It allows your students to consolidate what they have already leamed, as well as filling in the gaps for things that you didn’t have time for. Can | use Business English Handbook as my main coursebook? ‘You can use itas your main coursebook in some situations, rnamely those where you want intensive lexical input and practice followed by extended speaking and writing activities. Many students will appreciate the focus and relevance of the language, and find this motivating, Others ‘will want a more conventional main coursebook How can | make the input communicative? ‘There are several ways to turn the double page spread of input into communicative activities: ‘A Students brainstorm mind maps and then compare with the book 11 Pat the central title of the mind map on the board, and then draw the inner lines with their headings. Ask students to work in pairs to copy what is on the board, and then to extend each branch with their own ideas, it an idea or two for each branch to get started. 2 When the students finish, regroup them into new pairs. ‘They explain their maps to their new partners 3 Take whole-class feedback, building up an extended ‘mind map on the board, using the best ideas. 4 Finally, the students look at the version in the book, Let them study it for a few minutes, and then compare with the version on the board. 5. For students in work, a good foliow-up for homework would be to make a personalized mind map (with the same central title) based on their own jobs. In the next class they explain their mind maps ~ either in pairs or as a presentation to the whole class, University students who are not in work can do a similar activity based on what they have studied on the rest of their course. B Students predict topic ideas and then compare with the text on the left-hand page Write up on the board the sub-headings or some key topic words from the text on the left-hand page, Then ask the students to work in pairs to predict what ideas the text will mention. Take whole class feedback, writing ideas on the ‘board. Finally the students read the text in the book to compare and contrast. Teacher-facilitated discussion as preparation for ooking at the text or mind map Begin by simply writing the unit heading on the board. Then you, the teacher, lead a whole-class discussion as a warmer. ‘Stuclents keep their books ciosed but you have it open in front of you as a reference. You carefully strike a balance ‘between a) guiding the discussion so that some of the ideas in the book will be familiar to the students when they open it and b) allowing the discussion to follow the interests of the students, even ifthe ideas are not mentioned in the book. ‘After the discussion the students open their books and read the text and look at the mind map. This will be an easier and. ‘more interesting task following your warmer. D Students prepare half of the input for homework, then peer teach in class Divide the class into A/B pairs at the end of a lesson, with A being given the left-hand page text and B the mind map. ‘Their homework task is to read their own page carefully, checking any unknown words in a dictionary, and thinking about the general ideas in the unit (relating it to heir own jobs or academic studies, doing some internet research, ete) Back in class, put students into the A/B pairs. They begin by silenty reacting the half ofthe input that they did not prepare. Then they take turns to explain what they prepared for homework. Any final discussion can be kept within the same pair or opened out to the whole class. How can | work with the exercises and speaking / writing tasks? Having studied the input pages, ask the students to do the exercises. Usually students do not have to look back in order to complete them. ‘At the end of each unit there are speaking or writing activities. Let the discussions run, Take notes on errors, lacks, pronunciation — whatever will help the students to express, themselves more clearly. Then allow plenty of time atthe end ofthe lesson to deal with these points in a foeiback slot. Use feedback to extend language (catlocations, related words, opposites) as welt as just correct it. Help the process of language acquisition by encouraging, students to re-read the input silently in class: just before speaking/ writing, after a week, after a month, What are the listening activities? (On the audio CD there are ten listening activities fearuring business people being interviewed about their work, They are designed to be used independently. They finish with further opportunities for speaking practice, based on whatever the students found interesting in the scxiptIndustries and companies Going to work fora large company’s like gettingion a train. Are youlgoing sixty miles an hour cris the train going sixty miles an hour and you're just sitting still? 4 Paul Getty (1892-1976), American industrialist Industry groups ‘Annational economy can be deseribed in terms of its main sectors and industries. (See the mind map opposite.) This mind map is a simplified version of the ‘Global Industry ‘Classification Standard’, developest by Morgan Stanley and Standard and Poor’s and used in publications like Business Week. Another way to classify an economy is: © Primary industries, which include agriculture, forestry and mining © Secondary industries, which include construction and ‘manufacturing. Manufacturing itself is often divided into capital goods (eg equipment and machinery used to produce other goo), durable goods (eg cars, washing, machines) and non-durable goods (eg food, cloth ng) © Service industries, which include banking, entertainment, tourism ‘An economy can aiso be divided into: © The private sector, which includes large corporations, ‘SMEs (= small and medium-sized enterprises) and individuals working on a selttemployed basis. © The public sector, where there are schools and hospitals as well as SOBs (= state-owned enterprises) such as railways and the post office Types of business Within each industry there can be a variety of types of ‘business organization, cach with their own legal stricture ‘A business can be: © Asole trader (US: sole proprietorship). Here the business is owned by one person, who is ‘self-employed’. That individual has unlimited lability — they are personally responsible for any debts. A selt-employed professional ‘will refer fo themselves as a ‘freelancer’. © A partnership. Here two or more people run the business together. Lawyers, architeets and auditing firms are typical partnerships © A limited liability company. Here there is a legal distinetion between the company and the owners, so the company is responsible for any debts, not the owners ‘The owners therefore have ‘limited liability’. This type of company is often quite small, anc includes many family- run businesses, The company is referred to as a ‘private company because shares cannot be sold 10 members of the public. In official documents, the company name is followed by Ltd (UK) meaning ‘limited’, or Lic (US) meaning ‘limited lability company’. © A public limited company (US: 2 corporation). Here the company is owned by shareholders (US: stackholders), ‘who might be: ~ lange financial institutions (eg pension funds or investment banks). = other companies, ~ members of the public (and for this reason the company is called a ‘public’ company), ‘The shareholders receive a shate of the profits every year (paid as dividends), and will eiso get a capital gain or loss when they sell their shares (because the price can go up or down on the stock market), These ave large ‘companies, and are run by managers under the supervision of a Board, In official documents, the company name is followed by PLC (UK) or Inc or Corp (Us). © A franchise. This type of company includes McDonald's and the Body Shop. Here the business ovner allows other people (franchisees) to set up in business using the company’s brand name, products and reputation. The franchisee has varying degrees of control over how products are marketed and sold Business expansion ‘There are various ways that a company can grow: 4 Internal growth: stay private, The company increases iis sales, number of employees, etc, but stays as a private company, perhaps run by the original founders of the business (often family members) 2 Internal growth: IPO. The company moves from being a small, family-owned firm to being « large corporation with a stock-market listing, The process of issuing shares forthe first time is called an IPO (initial public offering). 3. Internal growth: ‘trade sale’ to a much larger company in the same sector. In this case the original small company is absorbed and its name often disappears Many start-ups in the IT and biotechnology areas sell themselves in this way. (Microsoft, Intel and Google all ‘grew by buying start-ups.) 4 Merger Two established companies join to form one (es Mercedes and Chrysler). 5 Acquisition (= takeover). One established company buys another. The firs step in an acquisition is often to take a controlling stake inthe other company — buying a large number of shares but without complete ewvnership. The acquired company often keeps its original trading name, ‘becoming a subsidiary ofthe larger ‘parent company” 5 Further information www stanéardandpoors.com ® www businessnameusa.com ® wwvesba.govimanaging| INDUSTRIES AND COMPANIES Automobiles And components Household durables Consumer electronics, homebuilding, household appliances, etc) Leisure equipment and products “Textiles, apearel and Wxury goods Consumer services Chotels and restaurants, leisure Facilities, education services? Media Cadvertising, broadcasting, movies And entertainment, pblishing> Retailing Gdistributars, Internet and log retail, general merchandise stores, Soecialty retail) Cleaning, auditing, humsan resources ard employment, office supplies, security, Construction and) engineering Electrical equipment Industrial conglomerates Food, bevers wd “tabasco raeieon Machinery su Food and drug retating bing conga Tesing conaies INDUSTRY Menthol and arto grout Heaith care equipment as aa Pharmaceuticals, ‘i won tle Ain alge go otc Seer aria Road and rail Transportation Diversified financial services: aes Capital markets Casset management, wvestuent banking and brokerage? Electric utilities Gas utilities Water utilities Multi-utilities IT Services Cconsutting, data processing, etc) Software Capplication, systems, home extertainuant™ Diversified telecommunicacion services CFined-line, Fibremoptic and wireless) Wireless teleconmunication services Commaanications equipment Computers and peripherals Electronic equipment and instrament © wan corporateinformation.com © www businessnameusa.com = wwacbusinessink goxuk (> Grow Your Business)Industries and companies: Exerc 1.4 Fillin the missing letters. 1 Goods that are carried by ship, tain or aircraft are called fot 2A product used in the home is a "ho Id product’ 3 Pieces of electrical equipment used in geople’s homes are app. s 4 The words ‘thing’ and ‘drinks’ ate conversational. in a business context you often see the words ‘app___I' and ‘bev. 5 Rooms, equioment or services that are provided for a particular purpose are ‘fac_____s' 6 Another term for ‘property is "___ e__ 7 The business of buying and sling shares is called br___ age! & Public services used by everyone are ‘u_ 4.2 The words appliance, device, equipment and machinery are similar. Complete the collocations by choosing the best one, 1 kitchen / office / standard 2 heavy / agricultural / construction 3. ahhandheld / laboursaving / safety — 4 a household / domestic / electrical equip 1.3 Underline the correct words. 1 Goods that are needed and used all the time are in the consumer discretionary / consumer staples sector. 2 Goods that are not basic to people’ lives are in the consumer discretionary J consumer staples sector. 4.4 First match the company names in the box to the descriptions below. Then write the industry group from the mind map (see first example). sco Giigroup Bexontfabil. GE (General Electric) inte) Pfizer Proctor & Gamble WalMart Pw (PriceWaterhouseCoapers) UPS (United Parcels Service) 1 The world’s largest oil praducer and distributor onMobil Oil 2 Provides auditing, tax and consulting services to other businesses I 3 An international company, its services include current accounts (AmE checking accounts), insurance, stock brokerage, investment banking and consumer finance =t 4 Designs and manufactures microprocessors and specialized integrated circuits, ——! 5 The world’s #1 maker of household and personal products; more than twenty of its brands are billion-dollar sellers (including Aviel, Fairy, Gillette, Pampers and Pantene) aa ses 6 One of America largest and most diverse corporations, its products cover power generation, jet engines, financial services, medical imaging, etc. The name of its industry group reflects the wide range of activities. —— i 7 B.global health care company, famous for making Viagra: its competitors include Glaxosmithkline and Novartis - a 8 The largest private employer in the US; $9 out of every $100 that Americans spend on shopping is spent in their stows, gf 9 A worldwide delivery company; it aso offers customs handling, international trade management and supply chain design, —— fh 10. Manufactures hardware such as switches and routers that, allow the Internet to function and computers to talk 0 each other = 4.5 Complete the definitions using the words in the box. household appliances business solutions ‘consumer durables fabrication finished goods food and beverages non-durable goods raw materials 1. Manufacturing is the transformation of into ___— . Some industries, ike semiconductors and steel, use the term —— in place of ‘manufacturing are manufactured goods that are not destroyed by use, such as automobiles, — or furniture. 3 _— generally last for only a short time, Cornmen examples are apparel, office stationery and gasoline. 4 Sometimes a manufacturing company positions itself as a service company. Microsoft, 18M and SAP are good examples. They offer not just products, but 1.6 Complete each explanation with a pair of words from the box. The words may not be in the correct order. acquisition / merger debt ability enterprise / venture firm / partnership freelancer seltemployed senior management team / 80ard 1 The is elected by the shareholders and is resoonsible to them. It can hire and fire the CEO, but the (including the CEO} un the company on a day-to-day basis,2A_ is a new business activity, and itcolocates with the word ‘capital’ to mean money avaliable to expand a successful start-up. An _____ is either a company, or any large important project. Used without the article it collocates with ‘ree’ and ‘private’ to give a syrianym for ‘capitalism eats 2 is simoly money that somebody owes, A__________ refers to ‘an amount of money that a company owes, but it can also mean the legal responsiblity for paying for something. Many people werk for themselves, with the legal status of sole trader. If they area plumber or a shop-keeper, they are likely to refer to themselves as — __ if they are a professional who works for several companies (2g a journalist or independent consultant), they are likely to refer to themselves a5 @ —__ The word — — can just be a synonym for ‘company’. But it is more often used for a small company providing a professional service, such as a of accountants, lawyers or architects A __.'s when two companies join to farm one. The suggestion is that the process is welcomed by both sides. An ‘when one company buys another, The process could be unwelcome by the smaller company, who might feel that they are being taken over. 1 is 1 2 a 2.7 The text below explains the process of becoming a public company. Fill in each gap with a word from the 4 box. 5 constraints reinvested 29p0int issue guarantee hekd fun underwriting 7 8 ‘hen a privately-owned company reaches a certain size, It may decide to ‘go public’ and _________ shares on the stock markt. This process is called an Iniias Public Ctfering (IPO), oF a Slotation, oF a listing’ on the exchange. ‘The process is complicated, and months of planning, are involved, The business is probably being a by just a few key people wo ‘were the founding members. Beiave the IPO, they have to 1 In five years! time, the industry group I'd most lke to work ini... , because 2 One day ! want to be a freelancer working for myself ~ it'll be much more rewarding than being the CEO of a large corporation. ‘Agree © Disagree 3 4 a d el ) 9 h 3 4 1 INDUSTRIES AND COMPANIES ‘assemble an independent oard, and one of the frst tasks cof the board is 108 auditors who will check the accounts for acouracy. ‘The fiem also needs specialist advice about the best time to sell, the inital offer price of the shares, andl who to sell them to. This is all handled by an investment bank, ‘also appointed by the board. The investment bank takes some risk as they ¢ that all the shares wil be purchased ~ refered to in legal terms as «th istue. ‘The flotation will bring a huge amount of new capital into the business. Most ofthis is and used for expansion, bul some wi go tothe people with privately 7 shares who started the original company. Nearly always these people then continue as part ofthe management team, although they may find it dficuit to adjust tothe red tape, shareholder pressure, and other of alisted company, © Complete the reasons for a merger or acquisition by matching the beginnings of sentences 1-8 with the best ending a}-h). To expand the business quickly, particularly [] To expand more cheaply than by internal growth, although 0 To meet the needs of customers who are demanding additional products and services |] To gain economies of scale, ie have lower costs and. [—] To gain contrat of [] To gain market power: the larger, merged company will make the whole market less competitive [_| To gain entry into a foreign market, ot avoid To become and be [_] ) a key supplier of am materials or components. | and therefore prices and margins will increase. seen as a global company. 1) if there is cash available on the balance sheet. }) increased efficiency through larger size. legal restrictions imposed on foreign-owned companies in that market ) thatthe company can't supply ) the market thinks a company i a takeover target, its share srice will go up and it will become more expensive to buy twas an entrepreneur with a lot of money, Id create @ startup company making / supplying / offering Most merges fall to produce the expected benefits (fac) Why?Globalization and economic policy Ita recession when\your neighbour loses Job: it a depréssiomwhen you los= Your own, ‘Harry 5. Truman (1884-1972), thirty-third president of the United States: Forces driving globalization The main drivers of globalization are: © Cost factors. Companies are looking, for cheaper labour and manufacturing costs to enabie them to stay competitive, so they outsource to other countries. The country receiving the inward investment benefits from the creation of jobs, skills development and technology transfer Its low costs give it a major competitive advantage. © Market factors. As domestic markets become saturated, so emerging markets offer new opportunities. The BRICs Grazil, Russia, India, China) could dominate world trade in the 21st century, as the US dil in the 20th and. the UK in the 19th. In any case, companies nee to establish a global presence because customers are also plobal, [tis dangerous to stand aside as competitors serge and make alliances, © Technology factors. The Internet makes comparison of supply chain costs easy for manufacturers, and ‘comparison of final price easy for the end-user. Mobile ‘communications allow employees to keep in touch sll over the warld. Software tools on company intranets allow managers to access information an © Global business cycle. The ‘business eye below ~ used! to happen separately in different national economies. With the integrated global economy, its now international = growth (= expansion / boom) ~ recession (= contraction / downturn) ~ depression (= slump) In every turn of the cycle, the pace of globatization is likely to increase — particularly during the ‘recovery’ and ‘growth’ phases Rememier that not all recessions lead to a depression ~ there might just be a mild showdown in the economy (seen as a reduction in GDP ~ gross domestic product). Company strategy in the face of globalization Ifa company wants to trade outside its own national orders, it has three basic strategies, depending on the level of involvement in the foreign market, These three ane not mutually exclusive, and one can often lead to another: 1 Import / Export. This is the lowest risk but also gives the lowest profit potential. Related options include franchising and foreign licensing. 2 Outsourcing, If companies want a deeper level of involvement, with a long-term contractual agceement, they can outsource (= subcontract) some or all of theit manufacturing. Increasingly, service jobs are also being outiourced, 3. Forwign direct investment (FD!). Ths is the highest risk but gives the most control and shows the most commitment to the global market, Here companies buy property and businesses in the foreign nation. FDI includes acquisitions to create overseas divisions ibsidiaries}, joint ventures and strategic aliances. A joint venture is where two oF more companies share the costs and profits ina particular market, but keep their separate identicies. ical strategy in the face of globalization Politicians can make two basic sponses 41 Being in favour of market forees and deregulation. In this case, politicians will try to make their labour markets more flexible, for example by making it easier to hire and fire people. They will lower taxes to encourage private investment and private spending, They will cut red tape (= bureaucracy) to make it easier to start a new business. They will encourage free trade. 2 Being in favour of subsidies and protectionism. In this case, politicians will try to protect the job security and social benefits of people who already have a job. They will support high taxes in order to pay for social prograins and other government spending. They will try to protect national businesses and jobs with measures such as tariffs (= taxes) and quotas (= limits) on imports Measuring ard analysing global trade When analysing trade, important concepts are © Balance of trade, This is the difference between a nation’s imports and exports. Ifa country exports moze to its trading partners than it imports, then it has a ‘trade surplus’. Otherwise it has a ‘trade deficit. © Balance of payments, This is a much wider measure —it includes imports and exports of goods as above, but also Includes services and investments. (© Exchange rates. Currencies (dollars, euros, yen, etc) fluctuate against each other according to supply and demand. Ifthe value of a currency falls, exports increase oecause they become cheaper for overseas customers) and foreign investivent is stimulated (because domestic assets are cheaper for foreigners). On the other hand, imported goods become more expensive, and consumers feel this as a drop in their living standards, 1) Further information vewwto.org © waw;cecd.org » wrwheagov © wawsbagov © wwii: gawk2 GLOBALIZATION AND ECONOMIC POLICY In developed countries: Job losses; destruction of Seal local businesses; destruction of local culture, In chesp-labour countries: looser regulations casi tavronsetial nage and aman rights abuses such ‘as thie ‘ateur ) q WTO CWorid Trade Organization; works towards reducing tariffs and quotas, mediates in trade disputes IMF international Monetary Fund): atees shor tterss loins 4 countries that cannot tay debts World Banks lends money ‘to developing countries, particulatly for infrastructure rejects NAFTA, Eu, ASEAN: regional blacks that promote economic integration Joie venture? | Stractegic alliance? Geddy Multinational stock ounershi National ct olicies Sanding decsiond Taxation decisions Manufacturing ceerstion? Back-office services G24, accounts? Frontline services Central Bank monetary policy Control over interest rates Control over conuereial banks” reserve requirements Who makes decisions about targets, Ineort / Eipart? meee Oren mareet operations : ranchising Ths Othe er Ta the bond market availability? ‘ceasing local statFé ‘aie? Rises: payeent problems exchange rate fluctuations, political problens Close to key markets? © wwyacctd org (> Startunkit > Exporting Bascis) » werw.businesslink gov uk wnweunzco.conbascquide 1Globalization and economic policy: Exercises 2.1 Fillin the missing letters. 1 this dangerous for a company to stand aside while competitors m,__e (= join together), for jt ven___e5, or create overseas divisions 2 A'sub y' (© company owned by another company) is not the same as a 'sub___y" (= money paid by a governmert to support a business) 3 Alless formal synonym for ‘bureaucracy’ 1S 7. t__* 4 A technical word for taxes on imported goods is ta___s'. Aword for limits on the quantity of goods that can be imported is ‘qu. 5 The euro against the dollar’ (€/S) is currently 1.28. ‘The dollar against the yen’ ($/¥) is currently 115, These are ‘examples of ‘ex ___ge 1s’ 6 fa currency falls in value, domestic a. for foreigners to buy _ts are cheaper 2.2 Find words with a similar meaning and then put ‘them in order to show the business cycle. ‘boom — contraction depression downtum expansion growth -rocossige recovery slovidown slump upswing + 1 orey $2 goth 1 = S 3 recession; i; ———, ta 1 2.3 Make collocations using one item from each box. ‘Then use the collocations to complete the sentences. competitive contractual deeper oward mobile trade trading advantage agreement communications —-ievestinont invohement partners surplus 1 National governments encourage vr stent because It brings beets sch as the creation af jobs, skills development and technology transfer 2 Low labour and manufacturing costs are a major in the global market 3 import / export is low-risk, but has a low profit potential. 1F a company wants 2 — inthe Global market they wil look at outsourcing 4 Outsourcing involves a long-term wath a low-cost provider of goods or services 5 make it easy for managers to stay in touch with colleagues and Head Office 6 Ifa country exports more to its —___ than it imports it has a = positive balance of trade). 2.4 Match the company responses to globalization to ‘their descriptions 1-7 below. foreign subsidiary import/export joint venture Tranchising outsourcing strategic allance licensing 1 ® company gives the right to manutacture its product to a foreign company for a fee (= royalty). This has been dane successfully by Coca-Cola and Disneywarid, although in other cases the local producer may choose to use a different brand name. —— 2 Similar to 7, but the term is usually used for small businesses in the retail and service sector like McDonalds and The Body Shop. Head Office has tighter control of the local business operation than in 1, and the name and brand image are always retained 3. Accompany (usualy small or medium sized) trades diectly with another separate company in the foreign market Sometimes an intermediary (eg a ocal agent) matches buyers and sellers and provides services like dealing wath customs and documentation. Retailers often use this strategy for supplies of clothing, furniture, toys, etc 4A partnership in which two or more companies (often from different countries join to undertake a major project Cr Start a business activity Volkswagen and General Motors entered the Chinese market through this route 5 Along-term partnership similar to 4, but it may be between two companies of very different sizes, such as a large manufacturer and one of its suppliers. The relationship is not as close as 4, so there is usually no sharing of costs, risks, management or profits, Motorola and Oracle have both used this approach (with suppliers and customers respectively). 6 An international company uses a low-cost manufacturer in, another country, and then sels the products under its own brand name in other markets. Also calied ‘contract manufacturing’. This has been done by many firms in the IT atea (for software development as well as hardvvare) and in the automobile industry 7 A parent conipany directly owns a company in another country, Business operations are under the control of local management, although Head Office is responsible for global strategy. Examples include Nestle, Toyota and Siemens. Some people think that the ten ‘multinational corporation’ (WNC) should only be used for this type of organization.2.5 There are a variety of policy responses to changes in the economic climate. Read the texts and then answer the questions below, is0@l policy refers to the government’ efforts to keep the ‘economy stable by increasing or decreasing taxes and government spending. High tax rates slow the economy because they take money out of the private sector and put it into the hands of government. They also discourage small businesses by decreasing profit margins and making effort lass rewarding. But high taxes also mean that more money is available to, ‘spend on education, health, defense, highways and social programs. In practice, most governments spend more than, they collect in taxes, creating a national debt, Reducing ihis, elicit is poltically unpopular as It involves cutting public, benefits Monetary policy refers to the role that central banks have in controling the money supply. If there is more money in circulation, demand in the economy increases, but 50 does, inflation, Central banks (the Fed’ in the US; "the ECB’ in the EU) can actin three main ways: 4) Ralsing and lowering interest rates ‘The central bark controls the ‘base rate’ (AME discount rate) — how much commercial banks have to pay to boraw ‘money from then. This rate is passed on {with some addtional percentage as profit) o any customer who needs a loan. At this point is referred to as the interest rate. When the economy is booming, the certral bank raises rates, This makes borrowing more expersive. So businesses borrow less, and the economy stows as companies spend less on labour, plant, equipment, ete. The opposite is true when the Central bank lowers rates: businesses borrow mote and the economy takes oft 2 Reserve requirements ‘The central bank tells commercial banks what percentage of their customer accounts must be physically kept in the bank 18 cash, When reserve requirements are raised, barks have less money available to make loans and the economy cools, 5 Open-market operations The ental bank buys and sels Gords. To cool the economy (decrease the mosey supp) they sel bonds to the public. The maney received in payment i no longer in cirelaton for the purchase of goods and services. To ‘stimulate the economy {increase the money supply) they buy back bonds from the pubic, and the money they pay enters cirulation With these three tools central banks can operate either an ‘expansionary’ or a ‘restrictive’ monetary policy. 2 GLOBALIZATION AND ECONOMIC POLICY ‘According to the texts, are these statements true (T) or false (F). 1 Fiscal policy consists of taxation and spending decisions, ands under the control of governments. Monetary policy consists of interest rate and other money supply decisions, and is under the contro of central banks. T/ F 2 Government spending resulting from high taxes gives a stimulus to small businesses, T/ F 3 High taxes can give new opportunities for certain businesses (eg in the defense or medica supplies sectors). T/F 4 Raising interest rates is @ way of stimulating the economy. TE Underline the correct words. 5 Having an ‘expansionary monetary policy’ is the same thing as increasing / decreasing the amount of money in ‘irculation, which will provide a stimulus to / coal the ‘economy, which over the long term rurs the risk of creating inflation / dation Now underline all the measures that can be taken - according to the text ~ if fighting inflation Cie slowing the economy) is the only consideration of policy. 6 increasing / decreasing taxation 7 increasing / decreasing interest rates 8 increasing / decreasing the reserve requirements of banks 9 increasing / decreasing the sale of bonds by the central bank 1 Globalization is great! Everyone benefits. | don't see workers in poor counties complaining — they prefer to work for international companies. agree — © Disagree 2 Look out! Your job is at risk from outsourcing, Retrain now as a hairdresser, cleaner, chef or taxi driver to avoid future unemployment agree © Disagree 3 No-one can contro! the economy. DAgree © Disagree 4. How strong is the economy in your country? Is it going, to grow or decline over the next few years?Corporate strategy and structure Ifene deesiiot knoe Which Rortone paling) no wind \efaveurable. Seneca (ca BC-AD|65), oman philosopher, statesman ond dramatist. Strategy and planning Strategy and planting begins with analysis, and a well- known tool to do this is a SWOT analysis (looking at the internal Strengths and Weaknesses of the company, and the external Opportunities and Threats). Planning itself can be cotegorized into two main types depending on the time- seale and purpose of the planning. «© Strategic planning is concerned with the longer term and. “the big picture’, It is the process of defining the company's mission, determining the overall goals of the organization and allocating resources to reach those ‘goals. It is done by top and middle managers. ‘© Operational planning is concerned with translating the general, long-term goals into more spocic, concrete objectives. involves monitoring the day-to-day work of departments. It is done by middle and supervisory ‘managers. Company structure Having decided on its strategy, a business needs to ‘organize itself into a structure that best suits its objectives. This can be done in several ways. © Organization by function, The company is divided into departments such as production, finance, marketing, human resources © Organization by product. The company brings together staff who are involved in the same product line © Organization by customer type. The company é ‘organized around different sectors of the market. Large ‘customers are called ‘key accounts’. © Organization by geographical ares. The company is organized acconiing to regions. A large multinational may use several of the above: for example a functional division intially (at an intemational level), then a national structure for each country, and within this some level of division according to customer types. The business must also decide on the best way to organize its management hierarchy (= chain of command). The iscun by top (= senior) managers with jb titles ef Executive Officer (CEO), Chief Operating Officer (COO), and a series of Vice-Presiclents oF Directors of different departments, Top management set a direction for the organization and aim to inspire employees with their vision for the company’s future, This visfon is often written down in a mission statesnent, ‘The next level is middle management, whee managers are in charge of (AmE head up) a department, division, branch, etc, Middle managers develop detailed plans end procedures based on the firm’s overall strategy. Finally there is supervisory (AmE first-line) management, and typical job titles are: Supervisor, Team Leacier, Section Chief. Supervisory managers are responsible for assigning ‘non-managerial employees to specific jobs and evaluating ‘heir performance. They have to implement plans developed higher up the hieraschy. In some companies ~or for specific projects — there can bea matrix structure with cross-functional teams, Here ‘employees from different parts of the organization work together and bureaucracy is reduced Above everything there is the Board, chaired by a ‘Chairman or President, which gets involved in big picture’ strategic planning and meets perhaps once a month The ‘CEO will be on the Board, but most Board members are not involved in running the company ~ they are clected by and responsible to the shareholders, Their main interest is shareholder value: getting a good return on investment in terms of both dividend payments and a rising share price. Centralization vs Decentralization A key issue for the compary is to decide on the degree of centralization. Should authority be kept at Head Difice (centralization)? If 0, this would mesn: © A strong corporate image. © Decisions made by experienced managers wha see the whole picture, not just one part of the business © Standardized procedures which could lead to economies of scale (lower costs) and simpler distribution channels, But decentralization also has advantages: © Lower-level managers are more familiar with local conditions and can therefore give a stronger customer focus (© The delegation of decision-making is tikely to lead to a higher level of morale at the grassroots. There are other closely-related questions, Should the structure be ‘vertical, with many layers of maragement, or ‘fla’, with fewer layers? And how many subordinates should each manager supervise? LL Further information http:tnomledge.wharton upenn edu (> Strategic Management) » voww1000ventures.com(> Strategies)=. Monitoring and adanting plans Comparing actual data with forecasts, acting Fron customers and supelis, Acting on reports prepared by first-line managers? Controlling budgets relating lan, procedures and projects Ensuring that objectives are SMART Cepecific, neasurate, agreed, realistic and ‘time specific) Wentitying customer vans, eg through mareet research Nentifying ways te leer conts lace waste Detervining. staffing needs Setting overatt sales ‘and revenne goals ere, eee Inegroving distribution channels Ieentifying mens markets Identifying opportunities ee ates Pricing policy: quality 7 premiues price Building brand loyalty Integrating on-line and off wwnetutor2u net (> Revision NotesStrategy) value-for-money products v5 high Investing in technology, plant and equipment procedures ed for Sales and for customer service) : \www.quickmba.com (> Strategy) 3 CORPORATE STRATEGY AND STRUCTURE ae ae wnat ace Analysing the product portfolio, including 4 pete ed oF main products Analysing figures for profit centres Cthatt add value) and cost centres that spend budgets? Evabacting current markets development, consolidation, or withdrawal? Prioritizing sales gromth and market share, earn ‘growth and grofitabiity? Business development: looking at eetible takeover target, mergers, alliances; entering new nattets Citoee tere? bani local company? joint venture?) Prodhet diarsfiction or focus on core business? nackesing leer verti or pattidecletiet Identifying major cost savings: looking For internal efficiencies, setting up production in low-cost countries Contsourcing) Increasing sharsholder values share price and dividends Images reputation and Secial responsibility ‘woweznetmba.com (>The Strategic Planning Process)‘Corporate strategy and structure: Exercises 3.1 Fill in the missing letters. 1 Inside a company, large customers are often referred to as, ‘koa s 2 CO stands for 'C___f 0. 90. r 3 A matrix structure brings together people from different parts of the organization to work asc. - a Its 4. The delegation of decision-making is likely to lead to a higher level of morale at ‘the gra__ _o0ts’ (= the ordinary people in an organization rather than its leaders) 5 Each manager supervises @ number of sub... 6 inrelation to an existing market, the ‘big picture’ strategy «an be one of dev int (growth), conso_____ion (making the existing situation stronger). or wi _wal (leaving the market completely) 3.2. Complete each phrase 1-10 with an ending a)-). 1 Operational planning translates general goals 2 tis usual to dvide an organization [| 3. Some companies are organized according ["] 4 The Board gets involved] 5 Senior menagers set | 6 Middle managers deveiop detailed plans based [—) 7 Firstline managers implement plans [_) 8 Fisstline managers are aso responsible 9. A crossunctional team brings 10 Subordinates work | ala direction for the company, b) developed higher up the hierarchy for assigning employees to spectfc jobs in major strategy issues into functional departments, 4) into more concrete objectives 9) on the overall strategy. 1} to geographical regions ') together staf from different parts of the company j) under the supervision of a first-line manager 3.3. The mixed-up letters make words that describe departments or functional areas inside a company. Put the letters in the right order. 1 hawnn rruoeecss 9 pdroctoiun 2 cmossuts scrieevs 10 ‘gael 3 qluialy crotnot 11 sihmppg 4 saceeth and duncipmeeet 12. facnine 5. pbiluc motiizes 13 metakrnig 6 pejcrot mmeegnnaat_ 4. atnccous 7 alisattrnmaon 15. pasuirchng (= buying, Bré) 8 bollig 16 pcroenremut (= buying, Ame) 3.4 Pairs of words in bold have been switched - one | from each column. Put them back in their correct places. 1+ market (channel) ——__7_ core growth | 2 cost value 8 distribution (research) 3 earnings business 3 mmission needs 4 management loyalty 10. market portfolio 5 customer statement 11 shareholder centre 6 product share 12 brand hierarchy 3.5 Which of the collocations in exercise 3.4 refer to: 1 using a questionnaire to carry out a survey Tnarket research 2 the main activity of a company that generates most of its, profits | 3 financial benefits (= increase in share price and divicends) for the owners of the companny 4 the whole range of products that a company sells, 5 when customers are faithful to a particular product 6 a business unit that spends money but does not generate revenue 7 a continuing increase in profits 8 what is shown in an organigram organization chart) 9 senior management's vision for the company | | 10 howa product gets from the manufacturer to the end- user 3,6 Match the verbs in the box with their definitions below. Be careful - some are very simi control coordinate implement monitor adept assign check determine ensure evaluate 1 make sue that eventing score or the way you expect it isc 2 organize people so that they work together effectively 3. give someone a job to do 4 camry out; make a plan start to work 5. have the power to make decisions; make something operate in the way that you want 6 make certain that something happens 7 change something to fit anew situation 8 watch or measure something carefully for a period of time to see how it changes - 9 (formal think about or test something before deciding its value, sutablity or effectiveness 10 (formal) control what something willbe; officially decide something; find out3 CORPORATE STRATEGY AND STRUCTURE 3.7 Use the words in the box to complete the SWOT 3.8 Look back at the completed SWOT analysis in analysis below. ‘exercise 3.7 and find @ word that means: ‘allance barriers climate debt depth one-stop | asituation in which you do not have enough of something outdated overhead range shortage startup jr state-of-the-art —tallormade transfer workflow | 2 depending too much on something 3 ‘sales staff’ (the answer is a short form of a longer word ‘Strengths (strong points, internal) 4 a building used for a particular purpose (especially for ‘sa large market share manufacturing) ‘© a well-structured distribution network 5. when everyone who wants the product already has it © motivated and well-trained staff et (= cutting edge) products =? _____(m eustomized / personalized) 3.9 Tick (V) the one statement that is true. produets 1 Targets and goals tend to be more general. Objectives and s all services provided in one place: a aims tend to be more speafic, with aims being the most eee concrete and measurable a well-known, high-value brand 2 Aims and goals tend to be more general. Objectives and ‘Weaknesses (weak points, ineernal) targets tend to be more specific, with targets being the wietertey pedach ‘most concrete and measurable. [-] ‘ Pe , SS 3.10 Managers should make sure that business Pe; Beams ea sd 'plodtston ‘objectives are SMART. Can you remember what these Saar A letters stand for? Don't look back at the mind map until f= high levels of “__ (= money owed to ‘you hayertred te sink banks and other creditors) Sp____¢ Mea Je, Ag. id. ® slow? __ (= progress of work done) Rea____ie, end Ti -specific due to inflexible procedures © an over-eliance on a limited ® _ of products = high direct costs (= production costs) and high indirect costs °__ g utility bills) Opportunities (furore chances in the market) new foreign markets 2 tmaprovirw economic ' ouesourcing a key supplier who might want to make a strategie = new product ideas: either from market research oF from sales reps talking directly to customers | Discussion topics restau gee 1 Bosses just take the credit for the work of lower-level Presse (ue dees the aarkee) employees. Who needs them? 1 low-cost puction in Southeast Asia Seat 2 A aaa a ected nw Sotteeen 2 The continual emphasis on shareholder value in (Go that low-cqet sobesen pare aes es ‘American-style companies produces high levels of stess equipment) amongst employees and an inability to think about the m= high ¥—___ costs of a new facility longer term. © political risk: regulation, taxes, trade Sages (SO Desgree i (eg quotas and tariff) 3. Think of two companies operatina in the same market 1 the marker approaching saturation (eg Coke and Pepsi, Yahoo and Google, Audi and w= possible © ___ of components or raw BMW, Gucci and Armani). Compare ther strategies. bee 4. Make a quick SWOT analysis for a company / country / = reduced pricing power due to merger of two city / educational institution that you know. Present it to important customers some colleagues and ask for questions