You are on page 1of 123

Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

CONTENTS

UNIT ONE – MARKETING .........................................................................................................5


1. SATISFIED CUSTOMERS ................................................................................................................5
1.1. Lead-in..............................................................................................................................5
1.2. Reading.............................................................................................................................5
1.3. Vocabulary development..................................................................................................7
1.4. Language focus – Conditionals.........................................................................................7
1.5. Language in use................................................................................................................8
1.6. Speaking..........................................................................................................................10
1.7. Writing............................................................................................................................10
2. WHAT IS PEST ANALYSIS? ..........................................................................................................11
2.1. Lead-in............................................................................................................................11
2.2. Reading...........................................................................................................................11
2.3. Vocabulary development................................................................................................12
2.4. Language focus – Question formation............................................................................13
2.5. Language in use..............................................................................................................14
2.6. Speaking..........................................................................................................................15
2.7. Writing............................................................................................................................15
3. WHAT IS SWOT ANALYSIS? .........................................................................................................16
3.3. Lead-in............................................................................................................................16
3.3. Reading...........................................................................................................................16
3.3. Vocabulary development................................................................................................18
3.4. Language focus – Relative clauses.................................................................................18
3.5. Language in use..............................................................................................................19
3.6. Speaking..........................................................................................................................20
3.7. Writing............................................................................................................................20
SUPPLEMENTARY MATERIAL...............................................................................................22
I. PEST analysis template...................................................................................................................22
II. SWOT analysis template................................................................................................................23
UNIT TWO – ADVERTISING ...................................................................................................24
1. HISTORY, OBJECTIVES ................................................................................................................24
1.1. Lead-in............................................................................................................................24
1.2. Reading...........................................................................................................................24
1.3. Vocabulary development................................................................................................25
1.4. Language focus – Clauses of reason...............................................................................26
1.5. Language in use..............................................................................................................26
1.6. Speaking..........................................................................................................................28
1.7. Writing............................................................................................................................28
2. ADVERTISING TECHNIQUES.........................................................................................................28
2.1. Lead-in............................................................................................................................28
2.2. Reading...........................................................................................................................28
2.3. Vocabulary development................................................................................................29
1
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

2.4. Language focus – Clauses of purpose ............................................................................30


2.5. Language in use..............................................................................................................30
2.6. Speaking..........................................................................................................................31
2.7. Writing............................................................................................................................31
3. ADVERTISING MISTAKES..............................................................................................................31
3.1. Lead-in............................................................................................................................31
3.2. Reading...........................................................................................................................32
3.3. Vocabulary development................................................................................................33
3.4. Language focus – Time Clauses.....................................................................................34
3.5. Language in use..............................................................................................................34
3.6. Speaking..........................................................................................................................36
3.7. Writing............................................................................................................................36
UNIT THREE – BANKING .......................................................................................................37
1. MONEY ............................................................................................................................................37
1.1. Lead-in............................................................................................................................37
1.2. Reading...........................................................................................................................37
1.3. Vocabulary development................................................................................................38
1.4. Language focus – The Infinitive.....................................................................................39
1.5. Language in use..............................................................................................................40
1.6. Speaking..........................................................................................................................41
1.7. Writing............................................................................................................................42
2. BANKING ........................................................................................................................................42
2.1. Lead-in............................................................................................................................42
2.2. Reading...........................................................................................................................42
2.3. Vocabulary development................................................................................................44
2.4. Language focus - -ing Forms .........................................................................................45
2.5. Language in use..............................................................................................................45
2.6. Speaking..........................................................................................................................47
2.7. Writing............................................................................................................................47
3. BANKING SERVICES. THE STOCK EXCHANGE .........................................................................47
3.1. Lead-in............................................................................................................................47
3.2. Reading...........................................................................................................................47
3.3. Vocabulary development ...............................................................................................49
3.4. Language focus – Emphatic structures...........................................................................50
3.5. Language in use..............................................................................................................51
3.6. Speaking..........................................................................................................................52
3.7. Writing............................................................................................................................53
UNIT FOUR – FINANCE AND ACCOUNTING ........................................................................54
1. FINANCIAL MATTERS ...................................................................................................................54
1.1. Lead-in............................................................................................................................54
1.2. Reading...........................................................................................................................54
1.3. Vocabulary development................................................................................................55
1.4. Language focus – Reported Speech................................................................................56
1.5. Language in use..............................................................................................................57
1.6. Speaking..........................................................................................................................59
1.7. Writing............................................................................................................................59
2. ACCOUNTING .................................................................................................................................59
2.1. Lead-in............................................................................................................................59
2.2. Reading...........................................................................................................................59
2.3. Vocabulary development................................................................................................61

2
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

2.4. Language focus – Useful language.................................................................................62


2.5. Language in use..............................................................................................................63
2.6. Speaking..........................................................................................................................65
2.7. Writing............................................................................................................................65
3. TAXES AND TAXATION .................................................................................................................65
3.1. Lead-in............................................................................................................................66
3.2. Reading...........................................................................................................................66
3.3. Vocabulary development................................................................................................67
3.4. Language focus – Text features (1)................................................................................68
3.5. Language in use..............................................................................................................69
3.6. Speaking..........................................................................................................................71
3.7. Writing............................................................................................................................71
UNIT FIVE – INSURANCE .......................................................................................................73
1. HEALTH INSURANCE ....................................................................................................................73
1.1. Lead-in............................................................................................................................73
1.2. Reading...........................................................................................................................73
1.3. Vocabulary development................................................................................................74
1.4. Language focus – Noun Clauses ....................................................................................75
1.5. Language in use..............................................................................................................76
1.6. Speaking..........................................................................................................................77
1.7. Writing............................................................................................................................77
2. HOME INSURANCE ........................................................................................................................77
2.1. Lead-in............................................................................................................................77
2.2. Reading...........................................................................................................................78
2.3. Vocabulary development................................................................................................79
2.4. Language focus –Coordinating Conjunctions.................................................................80
2.5. Language in use..............................................................................................................80
2.6. Speaking..........................................................................................................................81
2.7. Writing............................................................................................................................81
3. THE INSURANCE CONTRACT.......................................................................................................82
3.1. Lead-in............................................................................................................................82
3.2. Reading...........................................................................................................................82
3.3. Vocabulary development................................................................................................83
3.4. Language focus – Words commonly mis-spelled...........................................................83
3.5. Language in use..............................................................................................................84
3.6. Speaking..........................................................................................................................85
3.7. Writing............................................................................................................................85
UNIT SIX – SMALL BUSINESS ...............................................................................................86
1. SMALL BUSINESS AND EMPLOYMENT.......................................................................................86
1.1. Lead-in............................................................................................................................86
1.2. Reading...........................................................................................................................86
1.3. Vocabulary development................................................................................................87
1.4. Language focus – Revision: The Passive.......................................................................88
1.5. Language in use..............................................................................................................89
1.6. Speaking..........................................................................................................................91
1.7. Writing............................................................................................................................91
2. STARTING YOUR OWN BUSINESS...............................................................................................91
2.1. Lead-in............................................................................................................................91
2.2. Reading...........................................................................................................................91
2.3. Vocabulary development................................................................................................92

3
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

2.4. Language focus – Revision: modal verbs.......................................................................93


2.5. Language in use..............................................................................................................94
2.6. Speaking..........................................................................................................................95
2.7. Writing............................................................................................................................95
3. THE BUSINESS PLAN.....................................................................................................................95
3.1. Lead-in............................................................................................................................96
3.2. Reading...........................................................................................................................96
3.3. Vocabulary development................................................................................................99
3.4. Language focus – Revision: the tense system..............................................................100
3.5. Language in use............................................................................................................101
3.6. Speaking........................................................................................................................102
3.7. Writing..........................................................................................................................102
UNIT SEVEN – INTERNATIONAL TRADE ............................................................................103
1. INTERNATIONAL TRADE CENTRE..............................................................................................103
1.1. Lead-in..........................................................................................................................103
1.2. Reading.........................................................................................................................103
1.3. Vocabulary development..............................................................................................105
1.4. Language focus – Text features (2)..............................................................................106
1.5. Language in use............................................................................................................107
1.6. Speaking........................................................................................................................109
1.7. Writing..........................................................................................................................109
2. 20TH CENTURY MONEY AND 20TH CENTURY TRADE.............................................................109
2.1. Lead-in..........................................................................................................................109
2.2. Reading.........................................................................................................................109
2.3. Vocabulary development..............................................................................................111
2.4. Language focus – Text features (3)..............................................................................112
2.5. Language in use............................................................................................................113
2.6. Speaking........................................................................................................................115
2.7. Writing..........................................................................................................................115
3. INCOTERMS..................................................................................................................................115
3.1. Lead-in..........................................................................................................................115
3.2. Reading.........................................................................................................................115
3.3. Vocabulary development..............................................................................................116
3.4. Language focus – Text organizers................................................................................117
3.5. Language in use............................................................................................................117
3.6. Speaking........................................................................................................................119
3.7. Writing..........................................................................................................................119

4
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

UNIT ONE – MARKETING

1. SATISFIED CUSTOMERS

Marketing: the activity of deciding how to advertise a product, what price to charge for it etc, or the type
of job in which you do this
(Longman Dictionary of Contemporary English)

1.1. Lead-in

Consider the following questions:

1. What is the role of marketing?


2. What differences can you identify between marketing products and marketing services? Which is
more difficult and why?
3. What makes a customer feel satisfied?

1.2. Reading

Read the following article referring to some simple ways of stimulating customers’ feelings. The
headings of the four main sections have been removed. They are given below. Choose the most
appropriate heading for each paragraph.

Emphasize Good Feelings


Personalize Your Marketing
Eliminate The Need To Make Decisions
Confront Buyer Scepticism

Customers Buy When They Feel Good


by Bob Leduc

Prospective customers will not buy unless they feel good about you, your company and your product or
service. Here are 4 simple ways you can stimulate their good feelings ... and motivate them to buy.

1.

Prospective customers are more likely to buy from you when they feel you are talking directly to them
about their unique needs. Look for ways to make your sales message more specific to the needs of
prospective customers.

For example, subdivide your targeted market into several more narrowly defined niche markets. Then
customize your sales approach so it appeals to the specific interests of prospects in each niche market.

5
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

Tip: You can narrow the appeal of your web site without losing its effectiveness with your broader market.
Just create customized web pages for each niche market you target. Then add a link to each of these
specialized pages on your home page.

2.

Prospective customers usually base their buying decision on how they feel about your product or service.
Get them excited about using it and they won’t hesitate to buy.

One way to get them excited is to convert the benefits provided by your product or service into a vivid
word picture. Put your prospect in the picture by dramatizing what it feels like to be enjoying those
benefits.

For example: If you sell financial products, describe what it feels like to enjoy an affluent lifestyle without
debt.

3.

A prospective customer will not buy if they have any doubt that you will deliver exactly what you promise.
Here are 3 of the many ways you can confront and overcome scepticism in your customer’s mind.

* Use testimonials. They prove you’ve already delivered satisfaction to other customers. To be effective,
they should describe a specific result your customer got by using your product or service. For example,
“In just 2 weeks I lost 9 pounds, felt years younger and still continued to enjoy my favourite foods”.

* Provide specifics. Convert general statements into specific descriptions. Instead of “quick and easy”,
explain exactly how quick and how easy. Also, reduce round numbers like “15 pounds” into specific odd
numbers like “13.7 pounds”. It sounds more authentic.

* Tone down your claims. A bold claim creates doubt in your prospect’s mind and jeopardizes the sale.
Avoid using any claim that sounds exaggerated – even if it is true. Reduce any bold claim to a more
believable statement.

4.

Try to structure your selling process so prospective customers do not have to make decisions. Every
decision they have to make interrupts the buying process. It diverts their attention away from the action of
completing the sale.

This can be especially hazardous when customers have difficulty making a clear choice among several
options. Some will avoid the risk of making a wrong choice by making NO choice ...and you lose a sale
you already had.

That’s why you should promote only one product or service each time you advertise. You can use
separate promotions for each product or service. But limit your prospect’s decision to only “Yes, I will buy”
or “No, I will not buy”. Don’t risk losing them over a “Which One” decision.

Tip: Sometimes you can successfully combine 2 or more related products or services into a special
combination offer. But limit your customer’s decision to “Yes” or “No”. Don’t include an option to buy the
items separately.

Prospective customers must feel good about you, your company and your product or service before they
will buy. Start using these 4 simple tactics to stimulate their good feelings and motivate them to buy.

(Copyright 2003 Bob Leduc, http://BobLeduc.com)

6
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

1.3. Vocabulary development

MARKET

market (n) – marketing (n) – marketer (n) – marketability (n)


marketable (adj.)
market (v)

 the market
 a buyer’s/seller’s market
 be in the market for something
 on the market
 the job/labour market
 bear market (a situation in which the value of stocks is decreasing)
 bull market (a stock market in which the price of shares is going up and people are buying them)
 flea market (a market where old or used goods are sold)
 black market
 market leader
 market research
 market value
 mass-market
 single market

1.3.1. Use words and expressions from above to fill in the blanks in the following sentences:

1. The sector has thrived in a ___ but, as usual, the advertising boom may be coming to an end.
2. The board of directors believes that the ___, not the government, should determine prices.
3. He advised us to reconsider our decision. He says this is a bad time to ___ for a new house.
4. If you don’t strike soon and become the ___, some other company will seize the position.
5. The production manager says that the new device will be ___ by late November.
6. A young woman approached me at the automotive ___, offering me £ 1, 000 in cash, no
questions asked.
7. Do you think we could to gain ___ by lowering prices on popular menu combinations under a new
pricing program?
8. Trying to find a reasonable explanation, they blamed the growth of a ___ in cigarettes for the high
taxes.
9. What are the particular problems in ___ of recording respondent attitudes and opinions?
10. I had no idea that the worst ___ lasted from July 2001 through December 2002, when stocks
plunged about 90 percent.

1.4. Language focus – Conditionals

Have a look at the following sentences, taken from the text entitled Customers Buy When They Feel
Good.

1. Prospective customers will not buy unless they feel good about you, your company and your
product or service.
2. A prospective customer will not buy if they have any doubt that you will deliver exactly what you
promise.
3. Avoid using any claim that sounds exaggerated – even if it is true.
7
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

In examples 1, 2, and 3 unless, if and even if introduce conditional clauses.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Unit 8 – pp. 41-47
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Units 12-13 – pp. 49-55
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
196-205)

1.4.1. Fill in the blanks with the required form of the verb given in brackets:

1. Now we’re lost! If you ___ (take) Mr Leary’s advice, this ___ (not happen).
2. Don’t be afraid! If we ___ (comply with) the terms of the contract, they ___ (not sue) us.
3. Did you enjoy your meal? If you ___ (finish) eating, I ___ (clear away) the plates.
4. If the marketing assistant ___ (not notice) the mistake in the marketing plan, we ___ (not
succeed) in launching the product as planned.
5. Communication skills are essential in this job. All our PR assistants are communicative. If they
___ (not be) friendly we ___ (lose) half our clients.
6. There was no mistake in his report. If there ___ (be) of course I ___ (correct) it.
7. I’m afraid we have to take action. If we ___ (not punish) him this time, he ___ (only make) more
serious mistakes.
8. They can’t lend us any money. But I know that if they ___ (have) it, they___ (lend) it to us.
9. It’s always the same! If you ___ (decide) to leave the office early, the boss ___ (call) you after
you’ve left!
10. Last year we had the lowest turnover in our company’s history; but only because of inflation. If we
___ (take) the inflation rate into account, we ___ (lose) so much money.

1.4.2. Finish the following sentences.

1. If we had to launch a new line of hi-fi equipment …


2. If it hadn’t been for the bank loan …
3. If you don’t fill in the forms …
4. We wouldn’t have missed that great opportunity if …
5. He would be comfortably off now instead of being poor if …
6. They would have attacked us if …
7. Had they left earlier …
8. We won’t sign the contract unless …
9. Unless we take immediate remedial action …
10. But for your excellent market research, we …

1.5. Language in use

1.5.1. Fill in the blanks with ONE suitable word.

10 Tips to Increase Your Sales


by Jill Konrath

Want to take your business 1 ___ the next level? If so, 2 ___ these actions. They’re guaranteed to 3 ___
a difference in your sales results.

Clarify your value proposition


Strong value propositions are essential 4 ___ getting in to see the corporate buyer. Make sure you can
clearly articulate the business outcomes customers get 5 ___ a result of using your product 6 ___ service.

8
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

7 ___ precise – numbers, percentages and time frames make your value proposition even stronger.

Target a specific market segment


Don’t chase 8 ___ available opportunity. Focus. Focus. Focus. Increase your knowledge and expertise 9
___ a particular market segment.
Learn 10 ___ much as you can about their business needs, terminology, issues and marketplace trends.
This significantly increases your client desirability.

1.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Prepare Ad Infinitum
Today’s 11 ___ suffer no fools. Unprepared 12 ___ are quickly escorted out the door. Before you meet 13
___ any new prospect, research their business.

Read their annual report, check 14 ___ their website, interview their clients, review analyst’s reports. Find
out what’s important 15 ___ them, their challenges, goals, and strategic imperatives.

Create Seductive Ideas


Use your brain and think 16 ___ your prospective and existing customers. They’re so busy putting out
fires, they lack time for problem-solving, strategic thinking, creative alternatives or 17 ___ reflection.

A seller who 18 ___ brings business ideas to the relationship becomes 19 ___ - winning contracts with
minimal competition and 20 ___ full dollar value.

11. A clients B customers C buyers D customs


12. A sellers B sales C selling D sealers
13. A with B at C to D in
14. A in B off C out D over
15. A about B for C of D to
16. A about B of C for D at
17. A even B exactly C quite D just
18. A consentingly B consistently C constantly D consensually
19. A discernible B indispensable C dispensable D indiscernible
20. A for B in C of D at

1.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

Slow Down, Lean Back


21. Don’t try (A) rushing sales – even if (B) you’re desperate. Customers (C) feel your push and
immediately erect a wall of resistance. On first (D) sales calls do NOT lean forward.

22. To maintain a (A) consultative approach you must (B) to lean back. The minute you lean forward,
you’re “selling” – trying (C) to get your customer to buy. Lean back. Slow down. And you’ll (D) get the
business sooner.

Pursue Quality, not Quantity


23. Make (A) fewer sales calls – but much better ones. Focus all your efforts (B) on preparing for the call.
Determine the logical next step (C) for each meeting. Then, working backwards, think about (D) that you
need to do to make this outcome a reality.

24. Test every idea you (A) come out with from your customer’s perspective. Think: If I said or did this,
how (B) would my customer interpret it or react? Only (C) their perception is important – not what you
meant. Make your changes (D) before the call to increase your success.

9
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

Minimize Opportunity Leakage


25. Unless customers (A) can explicitly state the business value (B) of your offering in concrete terms (C)
your opportunity can easily evaporate (D) into thick air – even if they appear highly interested.

26. To increase (A) your order rate, ask questions (B) such as: Why would this help you? What value
would you get (C) from this service? What are the primary benefits you would realize (D) of my
product/service? This cements the value in their brain.

Make Follow-up Meetings Concrete


27. Don’t ever leave a meeting (A) without scheduling your next one – or you may (B) never catch on with
your customer again. They’re (C) running from meeting-to-meeting, busy handling (D) way too many
projects.

28. The longer (A) it takes to reschedule, the more (B) their desire for your offering fades. Get the
meeting (C) on both your calendars now – (D) even it’s just to talk on the phone.

Always Debrief Your Sales Calls


29. This (A) is the only way you can get better. Ask (B) yourself: what went well? where (C) did I run
across problems? and what could I do next time (D) to get even better results?

30. This is (A) absolutely the only way you will improve. Sales (B) is a grand experiment – customers
change, markets change, your offerings change, and (C) so does your knowledge base. Unless you’re
continually learning, (D) you’re loosing ground.

1.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

Reframe Your Attitude

Stop blaming the economy or anything else for your problems. There are many things TOTALITY
31___ within your control.
Approach all tough sales situations with a “what’s possible” or “how can I?” mindset. If STORM
you’re stuck, 32 ___ with friends or colleagues.
Accept 100% 33 ___ for your sales success and continually be on the lookout for RESPOND
34___ approaches to take your CREATE
35___ to the next level. BUSY
(http://www.articlepoint.com/articles/sales/10-tips-to-increase-your-sales.php)

1.6. Speaking

Pair work

 Labels are meant to give the consumer essential information about a product. Make a list of the
pieces of information that you consider absolutely necessary, bringing arguments to support your
opinion.

 Packaging is an important part of marketing. Choose an example of what you consider to be


good packaging and bring arguments to support your opinion.

1.7. Writing

Choose a product that you would like to develop. Imagine that you are part of the marketing team
responsible for the development of the product you have chosen. What market research would

10
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

you do before developing it? Mention what sources of information you would use and explain the
usefulness of the information you want to collect.

2. WHAT IS PEST ANALYSIS?

2.1. Lead-in

Consider the following questions:

1. What factors can influence a company’s marketing strategies?


2. What should producers focus on: product or customer? Why?
3. Should producers always ‘spy’ on competitors? How? Why?

2.2. Reading

Read the following text. Then, in pairs, try to answer as many questions under each section as
possible, taking into consideration the Romanian context. Compare your answers with the
answers of another pair.

What is PEST Analysis?

It is very important that an organisation considers its environment before beginning the marketing
process. In fact, environmental analysis should be continuous and feed all aspects of planning. The
organisation's marketing environment is made up from:

1. The internal environment e.g. staff (or internal customers), office technology, wages and
finance, etc.
2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our
competitors, etc.
3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces,
and Technological forces. These are known as PEST factors.

Political Factors

The political arena has a huge influence upon the regulation of businesses, and the spending power of
consumers and other businesses. You must consider issues such as:

1. How stable is the political environment?


2. Will government policy influence laws that regulate or tax your business?
3. What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic Factors

Marketers need to consider the state of a trading economy in the short and long-terms. This is especially
true when planning for international marketing. You need to look at:

1. Interest rates
2. The level of inflation. Employment level per capita
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on

11
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

Sociocultural Factors

The social and cultural influences on business vary from country to country. It is very important that such
factors are considered. Factors include:

1. What is the dominant religion?


2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. How long are the population living? Are the older generations wealthy?
7. Do the population have a strong/weak opinion on green issues?

Technological Factors

Technology is vital for competitive advantage, and is a major driver of globalisation. Consider the
following points:

1. Does technology allow for products and services to be made more cheaply and to a better
standard of quality?
2. Do the technologies offer consumers and businesses more innovative products and services
such as Internet banking, new generation mobile telephones, etc?
3. How is distribution changed by new technologies e.g. books via the Internet, flight tickets,
auctions, etc?
4. Does technology offer companies a new way to communicate with consumers e.g. banners,
Customer Relationship Management (CRM), etc?
(http://www.marketingteacher.com/Lessons/lesson_swot.htm)

2.3. Vocabulary development

 customer someone who buys goods from a particular shop, restaurant, or company
 client someone who pays for services or advice from a professional person or
organisation
 shoppers (plural noun) the people in a shop or town who are buying things
 buyer someone who buys something expensive such as a house, company, or painting,
usually from another person, not a shop or company
 consumer someone who buys and uses goods and services - especially people who buy
things in general
 clientele the people who regularly use a particular shop, restaurant etc, or the services of a
professional person

2.3.1. Fill in the blanks in the following sentences by using one of the words given above:

1. No wonder their hotel is doing so well! Its ___ includes diplomats and Hollywood celebrities.
2. When deciding on your marketing strategies you should not forget that the ___ is interested in
high quality goods, not just low prices.
3. We couldn't find a ___ for our company, so we weren't able to raise capital for our project.
4. I think you need to assure the judge that neither of your ___ has a criminal record.
5. The shopping centre is always crowded with ___ around Christmas.
6. Our main rival has launched a big sales campaign in an effort to bring in new ___.

The political arena has a huge influence upon the regulation of businesses, and the spending power of
consumers and other businesses.

 spend to use money to buy things

12
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

 pay to spend a certain amount of money on something because that is what it costs
 pay out to spend more money on something than you want to spend or more than you
think is fair
 break into to start spending an amount of money that you have saved or that you were
keeping for a particular purpose before you really wanted to

2.3.2. Fill in the blanks in the following sentences by using one of the words given above:

1. I think we need to ___ our savings to pay the lawyer.


2. We ___ about £600 a month on rent. I think it’s high time the company bought its own premises.
3. You have to ___ so much money for advertising campaigns these days.
4. Christmas is the perfect moment for our new line of sportswear. Everyone ___ more at
Christmas.
5. The quality of the services you get mainly depends on how much you're prepared to ___.
6. They suggested we should really avoid having to ___ the money we were saving for the
campaign.
7. They rejected our idea of ___ half our profit on travels.
8. Their new company car looks great - how much did they ___ for it?

2.4. Language focus – Question formation

Have a look at the following questions, taken from the text entitled What is PEST Analysis?

1. What are attitudes to foreign products and services?


2. Does language impact upon the diffusion of products onto markets?
3. How long are the population living? Are the older generations wealthy?
4. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?
5. Will government policy influence laws that regulate or tax your business?

Questions may be classified as follows:


 yes/no questions questions with the answer yes or no
 wh-questions questions with what, where, who, whose, which, why, when, how
 tag questions added at the end of a statement; formed by using auxiliaries; their
meaning depends on whether the statement is positive or negative, and
on intonation

(For details, see suggested bibliography:


Vince, Michael. Intermediate Language Practice, London: Heinemann, 1998, Units 25-26 – pp. 99-104
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp. 71-
74)

2.4.1. Read the following text. Ask ten questions referring to it.

The 'marketing mix' is probably the most famous phrase in marketing. The elements are the marketing
'tactics'. Also known as the 'four Ps', the marketing mix elements are price, place, product and
promotion.
Some commentators will increase the mix to the 'five Ps', to include people. Others will increase the mix
to 'Seven Ps', to include physical evidence (such as uniforms, facilities, or livery) and process (i.e. the
whole customer experience e.g. a visit the Disney World). The term was coined by Neil H. Borden in his
article 'The Concept of the Marketing Mix' in 1965.
The concept is simple. Think about another common mix - a cake mix. All cakes contain eggs, milk, flour,
and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it.
So for a sweet cake add more sugar! It is the same with the marketing mix. The offer you make to your
customer can be altered by varying the mix elements. So for a high profile brand increase the focus on
promotion and desensitise the weight given to price.
13
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

(http://www.marketingteacher.com/Lessons/lesson_swot.htm)

2.4.2. Choose the best sentence in each context.

1. Why did you forget the report? You must be insane!


a) I didn’t tell you to forget it, did I?
b) I told you not to forget it, didn’t I?
2. We might have problems with the language if we go to Germany.
a) You speak German, don’t you?
b) You don’t speak German, do you?
3. Jim told you to keep our plan secret. It’s supposed to take our boss by surprise. So, I just want to
make sure.
a) You didn’t tell him, did you?
b) You told him, didn’t you?
4. I haven’t seen your marketing manager for ages. He is working abroad I think.
a) He’s got a job in Switzerland, hasn’t he?
b) He hasn’t got a job in Switzerland, has he?
5. I think it’s time you told me the truth. I have found your notes hidden in your drawer.
a) You’ve been spying on me ever since you joined our department, haven’t you?
b) You haven’t been spying on me ever since you joined our department, have you?

2.5. Language in use

2.5.1. Fill in the blanks with ONE suitable word.

"Stephen" is trying to 1 ___ a casino bet. It's not a big one by any measure but a gamble 2 ___ the same.
Here's his play. The house is willing to give him $5 — risk free — just to fold. Or he 3 ___ bet even odds
on red and win $15. A blue ball packs him off empty-handed. Stephen swallows, forgoes the sure thing 4
___ bets red. A red gumball drops: he's $15 richer.

Stephen is not in Vegas. He's watching a video monitor 5 ___ Paul Glimcher's neural-science lab 6 ___
New York University. And 7 ___ head is plugged into a high-powered Siemens functional magnetic
resonance imaging scanner fMRI. His 8 ___ is not actually Stephen; he's a composite research subject.
Glimcher is at the frontal lobe 9 ___ an intriguing network of brain researchers and economists 10 ___
are using advanced medical technology to try to figure 11 ___ why people make the decisions they do —
what brand of cereal, which mutual fund — and what part of the brain tells them to do 12 ___. "We're
much further along with monkeys 13 ___ we can use [implanted] electrodes and measure single
neurons," Glimcher says. In experiments, computer data will tell him 14 ___ a monkey is going to do
seconds before the creature does it. Human see, monkey do.
(adapted from TIME, Monday, Mar. 08, 2004)

2.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.
Pioneer "neuroeconomists" 15 ___ the country are ready to knock 16 ___ the centuries-old model of
Homo economicus, or "economic man," the 17 ___ reasonable, largely imaginary being 18 ___ day in
and day out maximizes his utility and 19 ___ and always clearly seeks the right thing to do. It's the
foundation 20 ___ Wall Street's "efficient market," 21 ___ holds that every trade 22 ___ reflects all
available information. In theory, the 23 ___ goes, practice and theory are the same. But in practice, they
are different.

15. A of B around C from D among


16. A off B at C out D in
17. A perfectly B perfect C barely D relative
18. A which B whom C whose D who
19. A gains B wins C earns D gaining
20. A for B at C on D to
21. A what B which C whatever D whichever
22. A untidy B tidy C neat D neatly

14
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

23. A wording B tale C saying D say

2.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

24. (A) The trouble about Homo economicus is that (B) he has really very little to do with his emotional,
dim-witted (C) half brother Homo sapiens, who bought Petsmart.com (D) on a hunch.

25. It's difficult (A) to imagine Homo economicus upset and off to the mall (B) for some "retail therapy." He
doesn't (C) make impulse buys. And he doesn't always know or care what he wants, (D) let him alone
what he can afford.

26. (A) "The bursting of the (B) Internet bubble may have been (C) the final nail in the coffin of the
efficient-market hypothesis," says Richard Thaler, a professor (D) at the University from Chicago.

27. Research from fMRIs and other machines (A) bares all this out. Gerald Zaltman, (B) a professor at
Harvard University, says 95% of (C) consumer decision-making (D) occurs subconsciously.

28. Read Montague, a professor at the Baylor College of Medicine, gave subjects the "Pepsi Challenge"
(A) in an fMRI scanner. Result: (B) the people found Pepsi more pleasing to the palate — their reward
centre lit up — but Coke's branding (C) hit literally at the core of their sense of self, (D) a much stronger
bond.

29. This affirms (A) what we all suspected: (B) brands are so powerful that we (C) are sometimes more
likely to buy something we identify with (D) then something we like better or that is better for us.

30. The researchers are also finding (A) that money makes us nutty. We should treat money (B) like a
mere exchange mechanism (C) that allows us to get stuff. That distinction is lost (D) on our brains.

2.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

The dopamine release that makes a 31___ hamburger so satisfying works the same JUICE
magic even if we simply find the money to buy the burger.
There's not much 32___ yet in neuroeconomics' eyebrow-raising sidekick — UNPROFITABLE
neuromarketing — but that might not be far behind.
In Atlanta, the BrightHouse Neurostrategies Group has been retained by Coca-Cola, CONSULTANT
Delta and Red Lobster for branding 33___ work.
Glimcher says while he can't peer inside a human's brain as he can a monkey's, IMPOSSIBILITY
"stuff like that is rapidly becoming 34___."
35___ we'd torture ourselves much less over a potential impulse buy if we could just UNCERTAINTY
know in advance whether we were going to like it or not.

(adapted from “Theory says we are rational about money. But brain-probing scientists are discovering
otherwise”, by Eric Roston, TIME, Monday, Mar. 08, 2004)

2.6. Speaking

Pair work. Consider the following statement:


You cannot run a successful business without carefully analysing the PEST factors.
One of you should try to bring arguments in favour of the statement, the other against it.

2.7. Writing

15
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

In not more than 200 words explain the usefulness of PEST analysis.

3. WHAT IS SWOT ANALYSIS?

3.3. Lead-in

Consider the following questions:

1. What do you know about SWOT analysis?


2. What information is needed and where can one get it?
3. Should the SWOT analysis precede the PEST analysis? Why?

3.3. Reading

Read the following text.

What is SWOT Analysis?


(Par. 1)
SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for the
development of marketing plans. It accomplishes this by assessing an organisation’s strengths (what an
organisation can do) and weaknesses (what an organisation cannot do) in addition to opportunities
(potential favourable conditions for an organisation) and threats (potential unfavourable conditions for an
organisation). SWOT analysis is an important step in planning and its value is often underestimated
despite the simplicity in creation. The role of SWOT analysis is to take the information from the
environmental analysis and separate it into internal issues (strengths and weaknesses) and external
issues (opportunities and threats). Once this is completed, SWOT analysis determines if the information
indicates something that will assist the firm in accomplishing its objectives (a strength or opportunity), or if
it indicates an obstacle that must be overcome or minimized to achieve desired results (weakness or
threat) (Marketing Strategy, 1998).

Elements of SWOT Analysis

Strengths and Weaknesses


(Par. 2)
Relative to market needs and competitors’ characteristics, a manager must begin to think in terms of what
the firm can do well and where it may have deficiencies. Strengths and weaknesses exist internally within
a firm, or in key relationships between the firm and its customers. SWOT analysis must be customer
focused to gain maximum benefit; a strength is really meaningful only when it is useful in satisfying the
needs of a customer. At this point, the strength becomes a capability (Marketing Strategy, 1998).
(Par. 3)
When writing down strengths, it is imperative that they be considered from both the view of the firm as
well as from the customers that are dealt with. These strengths should be realistic and not modest. A
well-developed listing of strengths should be able to answer a couple of questions. What are the firm’s
advantages? What does the firm do well?
(Par. 4)
A customer-focused SWOT may also uncover a firm’s potential weaknesses. Although some weaknesses
may be harmless, those that relate to specific customer needs should be minimized if at all possible. In
addition, a focus on a firm’s strengths in advertising is important to increase awareness in areas that a
16
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

firm excels in. This method not only evokes a positive response within the minds of the consumer, but
pushes the weaknesses further from the decision making process (Marketing Strategy, 1998).
(Par. 5)
Weaknesses should also be considered from an internal and external viewpoint. It is important that listing
of a firm’s weaknesses is truthful so that they may be overcome as quickly as possible. Delaying the
discovery of weaknesses that already exist within a company will only further hurt the firm. A well-
developed listing of weaknesses should be able to answer a few questions. What can be improved? What
is done poorly? What should be avoided?
(Par. 6)
The role of the internal portion of SWOT is to determine where resources are available or lacking so that
strengths and weaknesses can be identified. From this, the marketing manager can then develop
marketing strategies that match these strengths with opportunities and thereby create new capabilities,
which will then be part of subsequent SWOT analysis. At the same time, the manager can develop
strategies to overcome the firm’s weaknesses, or find ways to minimize the negative effects of these
weaknesses (Marketing Strategy, 1998).

Opportunities and Threats


(Par. 7)
Managers who are caught up in developing strengths and capabilities may ignore the external
environment. A mistake of this magnitude could lead to an efficient organisation that is no longer effective
when changes in the external environment prohibit the firm’s ability to deliver value to its targeted
customer segments. These changes can occur in the rate of overall market growth and in the competitive,
economic, political/legal, technological, or sociocultural environments (Marketing Strategy, 1998).
(Par. 8)
Possible sources of opportunities and threats are the following:
Changes in the Competitive Environment
Changes in the Sociocultural Environment
Changes in the Political/Legal Environment
Changes in the Internal Organisational Environment
(Par. 9)
It is not simply enough to identify the strengths, weaknesses, opportunities, and threats of a company. In
applying the SWOT analysis it is necessary to minimize or avoid both weaknesses and threats.
Weaknesses should be looked at in order to convert them into strengths. Likewise, threats should be
converted into opportunities. Lastly, strengths and opportunities should be matched to optimise the
potential of a firm. Applying SWOT in this fashion can obtain leverage for a company (Marketing Strategy,
1998).
(Par. 10)
As can be seen, SWOT analysis can be extremely beneficial to those who objectively analyse their
company. The marketing manager should have rough outline of potential marketing activities that can be
used to take advantage of capabilities and convert weaknesses and threats. However, at this stage, there
will likely be many potential directions for the managers to pursue. Due to the limited resources that most
firms have, it is difficult to accomplish everything at once. The manager must prioritise all marketing
activities and develop specific goals and objectives for the marketing plan (Contemporary Marketing,
1992).
(adapted from SWOT Analysis, by Anthony C. Danca http://www.bradhuckelco.com.au/swot.htm. 5 Dec.
1999).

Find a word in the text that means:


(paragraph 1) simple and easy to understand
(paragraph 1) concerning the people and things around you in your life, for example the buildings you
use, the people you live or work with, and the general situation you are in
(paragraph 2) having a meaning that is easy to understand and makes sense
(paragraph 3) extremely important and needing to be done or dealt with immediately
(paragraph 4) unable or unlikely to hurt anyone or cause damage
(paragraph 5) honest
(paragraph 6) happening or coming after something else
(paragraph 7) the great size or importance of something
(paragraph 9) to improve the way that something is done or used so that it is as effective as possible
(paragraph 10) to put several things, problems etc in order of importance, so that you can deal with the
most important ones first

17
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

3.3. Vocabulary development

STRENGTH

 (physical) the physical power and energy that makes someone strong
 (determination) the quality of being brave or determined in dealing with difficult or unpleasant
situations
 (feeling/belief) how strong a feeling, belief, or relationship is
 (organisation, country etc.) the political, military, or economic power of an organisation, country,
or system
 (useful quality or ability) a particular quality or ability that gives someone or something an
advantage
 (object) how strong an object or structure is, especially its ability to last for a long time without
breaking
 (number of people) the number of people in a team, army etc
 (money) the value of a country's money when compared to other countries' money
 (natural force) how strong a natural force is
 (colour, light, flavour etc.) how strong a colour, taste etc is
(Longman Dictionary of Contemporary English)

3.3.1. Fill in the blanks in the following sentences by using the phrases given below.

 strength of mind  on the strength of


 full strength  position of strength
 in strength  find the strength
 below strength  go from strength to strength
 show of strength  not know your own strength

1. I am aware of his lack of loyalty but I can simply not ___ to fire him.
2. Don’t talk like that! It seems to me you do ___!
3. The situation was extremely serious and it required great ___ to overcome it.
4. Our competitors organised a ___ and persuaded half of our customers to buy from their outlets.
5. I am confident that we can win. Our marketing team are now at ___.
6. We may be ___ at the moment but when we launch our new brand everything will change.
7. Security forces were out ___ but could not intervene to help the hostages.
8. We have changed our priorities ___ your recommendation.
9. You cannot win if you don’t negotiate from a ___.
10. Considering your excellent business plan I am sure that your business will ___.

3.4. Language focus – Relative clauses

Have a look at the following sentences taken from the text.

SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for
the development of marketing plans.
When writing down strengths, it is imperative that they be considered from both the view of the
firm as well as from the customers that are dealt with.
Managers who are caught up in developing strengths and capabilities may ignore the external
environment.

The words in bold introduce relative clauses.


Relative clauses can be defining or non-defining. They can be introduced by relative pronouns, or the
relative pronouns can be omitted.

18
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

(For details, see suggested bibliography


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Unit 18 – pp. 101-106
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp. 81-
90)

3.4.1. Put one suitable word in each space.

1. Our negotiations were going very well but the representative of your company started insulting
us, at ___ point we decided to leave the room.
2. None of you deserves any credit. However, there is one person to ___ I owe more than I can say.
3. Do not worry! No one will ever accuse you of anything. After all, it was an accident for ___
nobody was to blame.
4. ___ arrives last should tell the secretary to hold all calls.
5. The boss is late, ___ is unusual for him.
6. We were the first marketing assistants ___ suggestions were not taken into account.
7. The last time we saw a good marketing plan was ___ Jones showed us the one written by his
boss.
8. We decided to have a closer look at his report at 9, ___ was an hour before the meeting.
9. Anyone ___ can understand what he meant is a lot cleverer than I am.
10. Honestly speaking, there was only one paragraph ___ I considered relevant in your report.

3.5. Language in use

3.5.1. For each blank think of ONE word that can best fit in the context.

One of the largest trends in 1___ U.S. economy in recent years 2___ been the rapid decline in the number
of small, independently owned retail businesses. Small mom-and-pop supermarkets and locally owned
bookstores are fading 3___ quickly and will soon 4___ extinct. Likewise, many locally owned restaurants
around the country are experiencing difficulties 5___ to the growth of large, national restaurant chains.
The 6___ recent businesses to face extinction are neighbourhood hardware stores, 7___ have lost
customers to retail giants 8___ as Home Depot and Lowes. 9___ they cannot be competitive with pricing,
hardware retailers such as Ace Hardware and True Value expect to survive 10___ offering outstanding
service and convenient locations Marketing Strategy, 1998.

3.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Social and cultural influences 11___ changes in attitudes, beliefs, norms, customs, and lifestyles. A firm’s
ability to foresee changes in these areas can prove 12___ while 13___ to react to these changes can be
devastating. For example, the 14___ of Mexican-food products have increased at an annual 15___ of
approximately 12 percent. The trend went unnoticed 16___ major food producers for a long time.
However, Heinz Company recognized the existence of a 17___ opportunity and responded by introducing
two versions of salsa-style ketchup. Although Heinz’s strategy was 18___, its salsa ketchup 19___ failed
due to 20___ distribution during the implementation phase Marketing Strategy, 1998.

11. A make B cause C do D provoke


12. A beneficial B benefice C benefits D benefit
13. A success B successful C failure D fail
14. A selling B sails C sales D sold
15. A weight B proportion C figure D rate
16. A of B by C with D about
17. A viable B vital C virtual D various
18. A sanitary B sanity C sounded D sound
19. A initially B eventually C consequently D secondly
20. A power B pour C poor D poorly

19
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

3.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

21. Product modifications (A) are often used to take advantage (B) from market opportunities. However,
(C) these changes can also create (D) potential new competitive threats.
22. (A) When Heinz introduced salsa-flavored ketchup, it (B) added Old El Paso and Pace (C) to its set of
brand competitors that previously (D) has included Hunt’s and Del Monte.

23. Likewise, the action (A) of others companies can also (B) change the competitive set. Failure to re-
evaluate and realign (C) the threats and opportunities in the sociocultural environment (D) can hurt a firm
(Marketing Strategy, 1998).

24. (A) Regulatory actions by government agencies often restrict (B) the activities of companies in
affected industries. The (C) American Disabilities Act from 1990 placed restrictions on the way firms (D)
construct their places of business and design jobs.

25. Companies with (A) significant investment facilities that (B) did not comply to the law viewed its
implementation (C) as a major threat. On the other hand, companies that market products designed to
assist (D) disabled shoppers and employees saw the act as a key opportunity (Marketing Strategy, 1998).

26. Lawsuits (A) for the tobacco industry have lead (B) to dramatic changes in the way cigarette
companies market their product. Today, companies such as Phillip Morris (C) are airing advertisements
illustrating the negative effects (D) of their products.

27. In addition, (A) a proposed settlement agreement between the industry and (B) the general attorney of
several states represent a threat (C) that could result in a ban on some types of (D) cigarette advertising
and the regulation of nicotine by the FDA. As can be seen, it is important to identify political/legal threats
and opportunities in order to keep an edge on the market (Austainer, 1999).
(http://www.bradhuckelco.com.au/swot.htm. 5 Dec. 1999).

3.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

McDonald’s has recently been feeling increased 28___ pressure from Wendy’s and COMPETE
Burger King.
In order to increase market share, McDonald’s created new marketing campaigns FRANCHISE
and new sandwiches. However, McDonald’s failed to get the cooperation of all its
29___.
Changes in the structuring of departments, lines of 30___, top management, or AUTHORITARIAN
internal political climate can all create internal weaknesses that must be considered
during the SWOT analysis as well as in the development of the marketing plan.
It is necessary to 31___ the importance of evaluating specific opportunities and EMPHATIC
threats within your company.

3.6. Speaking

Pair work
Student A. Imagine you want to start a business in the domain of catering. Identify possible
strengths and convince your partner to support you financially.
Student B. Imagine that you want to invest your money in the domain of catering. Identify possible
weaknesses in response to the strengths highlighted by your partner.

3.7. Writing

20
Universitatea “Babeş-Bolyai” – Facultatea de Ştiinţe Economice – Catedra de Limbi Moderne Aplicate în Economie

In not more than 200 words, write a letter to a friend, requesting financial support to start a
business in the domain of catering. You may want to refer to the strengths and weaknesses
identified during the speaking activity.

21
SUPPLEMENTARY MATERIAL

I. PEST analysis template

Other than the four main headings, the questions and issues in the template below are examples and not
exhaustive - add your own and amend these prompts to suit your situation, the experience and skill level
of whoever is completing the analysis, and what you aim to produce from the analysis.

If Environmental is a more relevant heading than Economic, then substitute it. Ensure you consider the
three additional 'PESTELI' headings: Ecological, Legislative, and Industry Analysis.

The analysis can be converted into a more scientific measurement by scoring the items in each of the
sections. There are established good or bad reference points - these are for you to decide. Scoring is
particularly beneficial if more than one market is being analysed, for the purpose of comparing which
market or opportunity holds most potential and/or obstacles. This is useful when considering business
development and investment options, i.e., whether to develop market A or B; whether to concentrate on
local distribution or export; whether to acquire company X or company Y., etc. If helpful when comparing
more than one different market analysis, scoring can also be weighted according to the more or less
significant factors.

Subject of PEST analysis: (define the standpoint and market)

political economic

• ecological/environmental issues • home economy situation


• current legislation home market • home economy trends
• future legislation • overseas economies and trends
• European/international legislation • general taxation issues
• regulatory bodies and processes • taxation specific to product/services
• government policies • seasonality/weather issues
• government term and change • market and trade cycles
• trading policies • specific industry factors
• funding, grants and initiatives • market routes and distribution trends
• home market lobbying/pressure groups • customer/end-user drivers

• international pressure groups • interest and exchange rates


social technological

• lifestyle trends • competing technology development


• demographics • research funding
• consumer attitudes and opinions • associated/dependent technologies
• media views • replacement technology/solutions
• law changes affecting social factors • maturity of technology
• brand, company, technology image • manufacturing maturity and capacity
• consumer buying patterns • information and communications
• fashion and role models • consumer buying mechanisms/technology
• major events and influences • technology legislation
• buying access and trends • innovation potential
• ethnic/religious factors • technology access, licensing, patents

• advertising and publicity • intellectual property issues

(http://www.marketingteacher.com/Lessons/lesson_swot.htm)
II. SWOT analysis template

Subject of SWOT analysis: (define the subject of the analysis)


strengths
weaknesses
• Advantages of proposition?
• Capabilities? • Disadvantages of proposition?
• Competitive advantages? • Gaps in capabilities?
• USP's (unique selling points)? • Lack of competitive strength?
• Resources, Assets, People? • Reputation, presence and reach?
• Experience, knowledge, data? • Financials?
• Financial reserves, likely returns? • Own known vulnerabilities?
• Marketing - reach, distribution, • Timescales, deadlines and pressures?
awareness?
• Cashflow, start-up cash-drain?
• Innovative aspects?
• Continuity, supply chain robustness?
• Location and geographical?
• Effects on core activities, distraction?
• Price, value, quality?
• Reliability of data, plan predictability?
• Accreditations, qualifications,
• Morale, commitment, leadership?
certifications?
• Accreditations, etc?
• Processes, systems, IT,
communications? • Processes and systems, etc?
• Cultural, attitudinal, behavioural?
• Management cover, succession?
• Management cover, succession?
opportunities
threats

• Market developments?
• Political effects?
• Competitors' vulnerabilities?
• Legislative effects?
• Industry or lifestyle trends?
• Environmental effects?
• Technology development and
• IT developments?
innovation?
• Competitor intentions - various?
• Global influences?
• Market demand?
• New markets, vertical, horizontal?
• New technologies, services, ideas?
• Niche target markets?
• Vital contracts and partners?
• Geographical, export, import?
• Sustaining internal capabilities?
• New USP's?
• Obstacles faced?
• Tactics - surprise, major contracts, etc?
• Insurmountable weaknesses?
• Business and product development?
• Loss of key staff?
• Information and research?
• Sustainable financial backing?
• Partnerships, agencies, distribution?
• Economy - home, abroad?
• Volumes, production, economies?

• Seasonality, weather effects?


• Seasonal, weather, fashion influences?

(http://www.businessballs.com/swotanalysisfreetemplate.htm)
UNIT TWO – ADVERTISING

Advertising: the activity or business of advertising things on television, in newspapers etc


(Longman Dictionary of Contemporary English)

Advertising: the paid promotion of goods, services, companies and ideas, by an identified sponsor.
Marketers see advertising as part of an overall promotional strategy. Other components of the
promotional mix include publicity, public relations, personal selling, and sales promotion.
(From Wikipedia, the free encyclopedia.)

1. HISTORY, OBJECTIVES

1.1. Lead-in

Consider the following questions:

1. In what way do commercials influence your buying decisions?


2. What customers can be strongly influenced by advertising? Why? Consider age, gender, wealth,
social status or any other criteria you consider relevant.
3. Name some advertising media and explain which of them is the most effective in your case.

1.2. Reading

Read the following text. Then draw a list of the advertising media mentioned in the text, indicating
the main characteristics. If you know other advertising media, add them to the list.

History of Advertising
In ancient times the most common form of advertising was by word of mouth. However, commercial
messages were found in the ruins of Pompeii. As printing developed in the 15th and 16th century, the first
steps towards modern advertising were taken. In the 17th century advertisements started to appear in
weekly newspapers in England, and a century later advertising had become a popular thing.

As the economy was expanding during the 19th century, the need for advertising grew at the same pace.
In 1843 the first advertising agency was established by Volney Palmer in Philadelphia. At first the
agencies were just brokers for ad space in newspapers, but in the 20th century, advertising agencies
started to take over responsibility for the content as well.

Advertising media
Some commercial advertising media include: billboards, printed flyers, radio, cinema and television ads,
web banners, skywriting, bus stop benches, magazines, newspapers, town criers, sides of buses, taxicab
doors and roof mounts, elastic bands on disposable diapers, stickers on apples in supermarkets, the
opening section of streaming audio and video, and the backs of event tickets. Any place an "identified"
sponsor pays to deliver their message through a medium is advertising. Covert advertising embedded in
other entertainment media is known as product placement.

The TV commercial is generally considered the most effective mass-market advertising format and this is
reflected by the high prices TV networks charge for commercial airtime during popular TV events. The
annual US Super Bowl football game is known as much for its commercial advertisements as for the
game itself, and the average cost of a single thirty-second TV spot during this game has reached $2.3
million (as of 2004).

Advertising on the World Wide Web is a recent phenomenon. Prices of Web-based advertising space are
dependent on the "relevance" of the surrounding Web content. E-mail advertising is another recent
phenomenon. Unsolicited E-mail advertising is known as "spam".

Some companies have proposed to place messages or corporate logos on the side of booster rockets
and the International Space Station. Controversy exists on the effectiveness of subliminal advertising
(mind control), and the pervasiveness of mass messages (propaganda).

Unpaid advertising (also called word of mouth advertising), can provide good exposure at minimal cost.
Personal recommendations ("bring a friend", "sell it by zealot"), the unleashing of memes into the wild, or
achieving the feat of equating a brand with a common noun ("Hoover" = "vacuum cleaner") -- these must
provide the stuff of fantasy to the holder of an advertising budget.

Advertising objectives
The purpose of advertising is to stimulate demand for a product, service, or idea. Other factors influencing
demand are price and substitutability. A major way advertising may stimulate demand is to create a brand
franchise for a product. Kleenex, for example, can distinguish itself as a type of tissue. But, because it
has successfully attained a brand franchise among consumers, it is frequently used as a generic term.
One of the most successful firms to have achieved a brand franchise is Hoover, whose name was for a
very long time synonymous with vacuum cleaner (and Dyson has subsequently managed to achieve
similar status, having moved into the Hoover market with a more sophisticated model of vacuum cleaner).

A brand franchise can be established to a greater or lesser degree depending on product and market. In
Texas, for example, it is common to hear people refer to any soft drink as a Coke, regardless of whether it
is actually produced by Coca-Cola or not (the more accurate term would be 'cola').

A legal risk of the brand franchise is that the name can become so widely accepted that it becomes a
generic term, and loses trademark protection. Examples include "escalator", "aspirin" and "mimeograph".

Other objectives include short or long term increases in sales, market share, awareness, product
information, and image improvement.
(http://en.wikipedia.org/wiki)

1.3. Vocabulary development

meme

A meme (pronounced "meem", and rhymes with "theme" and "dream") is a unit of information that
replicates from brains or retention systems, such as books, to other brains or retention systems. In more
specific terms, a meme is a self-propagating unit of cultural evolution, analogous to the gene (the unit of
genetics). The term was coined by Richard Dawkins in his controversial book The Selfish Gene. The
concept predates the coining of the term, however; for example, William S. Burroughs asserted that
"Language is a virus". Memes can represent parts of ideas, languages, tunes, designs, skills, moral and
aesthetic values and anything else that is commonly learned and passed on to others as a unit.
The study of memes is called memetics.
In casual use, the term meme is sometimes used to mean any piece of information passed from one mind
to another. This is much closer to the analogy of "language as a virus" than it is to Dawkins's analogy of
memes as replicating behaviors.
(http://en.wikipedia.org/wiki)

TV SPOT
a short period of time when someone can speak or perform on radio or television

SPOT
spot (n)
spotted – spotless – spotty - (adj)
spot (v)
spotlessly (adv)

Match the following phrases with their corresponding definitions.

1. on the spot a. put someone in a difficult situation


2. in the spot b. be a lot better than
3. high spot c. at the centre of public attention
4. weak spot d. aspect or situation that can be criticised
5. in the spotlight e. immediately, at the place of action
6. put someone on the spot f. outstanding moment
7. knock spots off g. in a difficult situation, position

Fill in the blanks with the expressions given in the table above.

1. We are ___ because Peterman no longer wants to endorse our product and it is too late to find
another VIP for our campaign.
2. This matter is too important for us to make a decision ___.
3. The ___ of our advertising campaign is the rock concert. Even our competitors are looking forward to
it.
4. He asked me a lot of embarrassing questions. I am sure he wanted to ___ me ___.
5. The software they developed ___ the best on the market.
6. I would like to see the information management system improved. We have to admit it is the ___ in
our company.
7. The scandal over the contract brought the two advertising agencies ___.

1.4. Language focus – Clauses of reason

But, because it has successfully attained a brand franchise among consumers, it is frequently
used as a generic term.

Because in the sentence above introduces a clause of reason.

Other words used to introduce clauses of reason: as, since, seeing that, therefore, (just) in case

(For details, see suggested bibliography:


Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Unit 20 – p. 80
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – p. 298)

Join the following pairs of sentences by using because, as, since, seeing that, therefore, (just) in
case. Give as many variants as possible for each pair.

1. They lost a lot of money. They didn’t focus on the customer profile suggested by our
marketing department.
2. Frank knows French. He’d better do the talking during the meeting with the French partners.
3. We have to postpone the meeting. The President hasn’t arrived yet.
4. Let’s look for another advertising agency. This advertising agency has a really bad reputation.
5. I have brought all our advertising materials. The boss may want to have a look at them.
6. We didn’t have to rush. Our bus didn’t leave for another hour.
7. Our PR assistant is half Dutch. She can speak the language fluently.
8. She didn’t want to upset you. She didn’t say anything.
9. I cannot attend the AGM. I have to be in New York on Monday.
10. Nobody wants to help her. She has been acting very strange lately.

1.5. Language in use

1.5.1. For each blank think of ONE word that can best fit in the context.
In economics, the term economies of scale refers 1 ___ a situation 2 ___ the cost of producing one unit of
a good or service decreases 3 ___ the volume of production increases. The converse situation in 4 ___
the cost of producing a good or service increases as the volume of production increases is known 5 ___
diseconomies of scale. Economies of scale tend to occur in industries 6 ___ high capital costs in which
those costs can 7 ___ distributed across a large number 8 ___ units of production.

The exploitation of economies of scale helps explain 9 ___ companies grow large in some industries, why
marketplaces with many participants are sometimes more efficient, and 10 ___ a natural monopoly can
often occur. It is also a justification 11 ___ free trade policies, under the idea that a large unified market
presents more opportunities 12 ___ economies of scale.

1.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer. On your answer sheet write A or B or C or D.

Network externalities resemble economies of scale, 13 ___ they are not considered such 14 ___ they are
effects of the number of users of a good or service, not of efficiency within a business. On the other 15
___, economies of scale external 16 ___ the firm are not considered examples of network externalities 17
___ the fact that they arise 18 ___ similar non-market interactions with external resources. There is
something arbitrary 19 ___ this, to the extent that 20 ___ approach may be used 21 ___ corresponding
definitions are used. The 22 ___ important thing is being consistent about it, which means respecting the
established convention.

13. A and B but C so D since


14. A because B and C but D so
15. A part B side C way D hand
16. A for B of C to D at
17. A despite B that C though D in spite
18. A about B in C from D of
19. A to B for C about D of
20. A every B either C each D both
21. A unless B because C since D if
22. A much B most C more D least

1.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

23. Economies of scope (A) are conceptually similar to economies of scale. (B) Whereas economies of
scale apply for efficiencies (C) associated with increasing or decreasing the scale of production,
economies of scope refer to efficiencies associated with increasing or deceasing (D) the scope of
marketing and distribution.

24. Whereas economies of scale (A) refer to changes in the output of a single product type, economies of
scope (B) refer to changes in the number of different types of products. Whereas economies of scale (C)
refer primary to supply-side changes (such as level of production), economies of scope (D) refer to
demand-side changes (such as marketing and distribution).

25. Economies of scope are (A) one of the main reason for such marketing strategies (B) as product
bundling, product lining, and family branding. Often, (C) as the number of products promoted is increased
and broader media used, (D) more people can be reached with each dollar spent. This is one example of
economies of scope.

26. These efficiencies (A) do not last however: at some point (B) additionally advertising expenditure on
new products will start (C) to be less effective (an example of diseconomies of scope). If a sales force is
selling several products they can often do so more efficiently (D) than if they are selling only one product.

27. The cost (A) of their travel time is distributed (B) across a greater revenue base, so cost efficiency
improves. There (C) can also be synergies between products such that offering a complete range of
products gives the consumer (D) a more desirable product offering than a single product would.
1.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

Economies of scope can also operate through distribution 28___. INEFFICIENTLY


It can be more efficient to ship a range of products to any given location than to ship a TYPICALLY
single 29___ of product to that location.
Not all 30___ agree on the importance of economies of scope. Some argue that it only ECONOMIC
applies to certain industries, and then only rarely.
(http://en.wikipedia.org/wiki)

1.6. Speaking

Pair work. Each of you should an advertising medium; try to convince your partner that the
medium you have chosen is more effective than the one they have. When bringing arguments to
support your choice, try to use as many clauses of reason as possible.

1.7. Writing

In not more than 200 words, give a written account of the discussion you had with your partner in
the speaking task.

2. ADVERTISING TECHNIQUES

2.1. Lead-in

Consider the following questions:

1. How many times can you stand listening to the same TV commercial?
2. What is the role of the image in an advertisement?
3. What is the role of the slogan in an advertisement?

2.2. Reading

Read the following text.

Advertising techniques
Advertisers use several recognizable techniques in order to better convince the public to buy a product.
These may include:

• Repetition: Some advertisers concentrate on making sure their product is widely recognized. To
that end, they simply attempt to make the name remembered through repetition.
• Bandwagon: By implying that the product is widely used, advertisers hope to convince potential
buyers to "get on the bandwagon."
• Testimonials: Advertisers often attempt to promote the superior quality of their product through
the testimony of ordinary users, experts, or both. "Three out of four dentists recommend..." This
approach often involves an appeal to authority.
• Pressure: By attempting to make people choose quickly and without long consideration, some
advertisers hope to make rapid sales: "Buy now, before they're all gone!"
• Association: Advertisers often attempt to associate their product with desirable things, in order to
make it seem equally desirable. The use of attractive models, picturesque landscapes, and other
similar imagery is common. "Buzzwords" with desired associations are also used.
• Advertising slogans

A popular belief among many segments of society is that subliminal messages are commonly used in
advertising, though this is seen by experts as little more than an urban legend.

Sustainable Competitive Advantage


In marketing, sustainable competitive advantage is an advantage that one firm has relative to competing
firms. It usually originates in a core competency. To be really effective, the advantage must be:

1. difficult to mimic
2. unique
3. sustainable
4. superior to the competition
5. applicable to multiple situations

Examples of company characteristics that could constitute a sustainable competitive advantage include:

• customer focus, customer lifetime value


• superior product quality
• extensive distribution contracts
• accumulated brand equity and positive company reputation
• low cost production techniques
• patents and copyrights
• government protected monopoly
• superior employees and management team

The list of potential sustainable competitive advantage characteristics is very long. However there are
some commentators that claim that in a fast changing competitive world, none of these advantages can
be sustained in the long run. They claim that the only truly sustainable competitive advantage is to build
an organisation that is so alert and so agile that it will always be able to find an advantage, no matter
what changes occur.
(http://en.wikipedia.org.)

Find words in the text which mean:

(paragraph 2) to try to do something, especially something difficult


(paragraph 2) a fact or situation that shows or proves very clearly that something exists or is true; a
formal statement saying that something is true, especially one a witness makes in a court
of law
(paragraph 2) something worth having or doing
(paragraph 3) affecting your mind in a way that you are not conscious of
(paragraph 4) able to continue without causing damage to the environment; able to continue for a long
time
(paragraph 8) later in the future, not immediately

2.3. Vocabulary development

ADVANTAGE

advantage (n) – disadvantage (n)


advantageous (adj) – disadvantageous (adj) – disadvantaged (adj)
advantageously (adv) – disadvantageously (adv)

One of the many advantages of working in a big advertising agency is that you can develop.
The new software version has several advantages over the older one.
 have the advantage of  take advantage of sb take full advantage
 be to your advantage  show sth to (good/great) advantage
 press home your advantage  be at an advantage
 use/turn sth to your/good advantage

Fill in the blanks in the following sentences with expressions from above.

1. Attending this training course might ___.


2. Candidates with marketing experience tend to ___ when applying for this position.
3. How can you still help him! Don’t you realise that he is trying to ___!
4. He is our best expert in marketing. I suggest you should ___ his expertise.
5. Our position is not very good, but we can try to ___.
6. Do you want to know how they managed? As usual: using their family connections ___.
7. I think your advertisement ___ our new car model ___.
8. Will they use the low price of the product to ___?

2.4. Language focus – Clauses of purpose

Advertisers use several recognizable techniques in order to better convince the public to buy a
product.

In order to in the example above introduces a clause of purpose.


Clauses of purpose can be introduced by: so (that), in order to, so as to

(For details, see suggested bibliography:


Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Unit 19 – p. 77
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – p. 298)

Join the following sentences in one to illustrate the given context. Use the connectors given in
capitals.

1. They had to attend a meeting early in the morning. They were afraid not to be late. They went to bed
early. SO THAT
2. The report was not complete. She had to rewrite it. IN ORDER TO
3. The President made a speech. He wanted to explain his policy. INORDER TO
4. I told him the truth when he was alone. I didn’t want to embarrass him. SO AS TO
5. The designers were working hard. They wanted to launch product in two weeks. IN ORDER TO

2.5. Language in use

2.5.1. For each blank think of ONE word that can best fit in the context.
The bandwagon effect is the observation 1 ___ people often do or believe things 2 ___ many other
people do or believe 3 ___ same. Without examining the merits 4 ___ the particular thing, people tend 5
___ "follow the crowd". The bandwagon effect is the reason 6 ___ the bandwagon fallacy’s success.
Literally, a bandwagon is 7 ___ wagon that carries the band in a parade. Riding 8 ___ the bandwagon is
popular since one can enjoy the music, conveniently 9 ___ walking. The phrase "jumping on the
bandwagon" is therefore used in the sense 10 ___ "joining an increasingly popular trend".

2.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is correct and
THERE IS ALWAYS ONE correct answer. On your answer sheet write A or B or C or D.

The bandwagon effect can be observed in voting: some people vote 11___ those candidates or parties
who are 12___ to succeed, thus increasing their chances 13___ being on the 'winner's side' 14___ the
end.
In microeconomics, bandwagon effect is a technical term for 15___ of demand and preference. The
bandwagon effect 16___ when people's preference for a commodity increases 17___ the number of
people buying it increases. This interaction potentially 18___ the normal results of the theory of supply
and demand, which assumes that price and preference are independent.

11. A against B about C for D of


12. A likely B about C prone D possible
13. A of B for C to D as
14. A for B at C by D in
15. A a link B a connection C an interaction D a relation
16. A rises B arises C raises D rise
17. A like B as C such as D while
18. A dispenses B distracts C disturbs D dismisses

2.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer

19. In science, (A) the bandwagon effect is (B) the phenomena of scientists exercising self-censorship
when (C) reporting results that (D) differ considerably from "accepted wisdom".

20. For example, when (A) measuring important values in astronomy, (B) as the distance of the Sun to
the center of the Milky Way, (C) published values tend to agree with the accepted value (D) at the time of
publication, even if completely new measurement procedures are employed.

21. When a measurement (A) yields a result at variance with the then-accepted value, scientists (B) will
check their methods and calculations repeatedly (C) and delay (or even abandon) publication, while
results that agree with (D) the accepted value are published uncritical.

2.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another word that
best fits in the context of that sentence indicated by a blank space (“___”).

Without the bandwagon effect, one would 26___ that published estimates UNEXPECTEDLY
for such a constant initially show a wide range of values and then converge over IMMEASURABLY
time as 27___ precision increases.
In 28___ however, published values often cluster closely together, UNREALISTIC
with the whole cluster moving over time in a 29___ direction. UNCERTAINTY
(http://en.wikipedia.org/wiki)

2.6. Speaking

Choose a product that you would like to advertise. In pairs, discuss what advertising techniques
are suitable for the product you have chosen.

2.7. Writing

Choose an advertisement/commercial that you like and (in not more than 200 words) explain why
you like it and what impact it can have on the target audience.

3. ADVERTISING MISTAKES

3.1. Lead-in
Consider the following questions:

1. What do you understand by ‘bad advertising’?


2. What qualities recommend candidates for a position in the field of advertising?
3. Why do actors accept to endorse products in TV commercials?

3.2. Reading

Read the following text. The headings of the five main sections have been removed. They are
given below. Choose the most appropriate heading for each section.

SCATTER SHOT ADVERTISING


ONE SHOT ADVERTISING
STOP AND GO ADVERTISING
COPYCAT ADVERTISING
SELF FOCUSED ADVERTISING

5 Common Advertising Mistakes You Can Easily Avoid


by Bob Leduc

These 5 common advertising mistakes cause you to lose sales. But you can easily avoid these mistakes
once you become aware of them.

1.

Many businesses reduce their advertising when they are getting plenty of sales. Then they increase their
advertising when sales decline. This pattern creates a repeating cycle of high sales volume and low sales
volume. It also prevents the business from growing.

Develop and follow a plan of regularly scheduled advertising regardless of your sales volume. Continuous
advertising produces steady growth. It also reduces the time you have to spend on making advertising
decisions.

2.

Businesses often devote all of their advertising efforts to attracting new customers. But they devote little
or no effort to cultivating these prospects for future sales.

Most prospective customers will not buy the first time they hear or see your sales message. But many will
buy later if you follow up with them. Your follow up can be as simple as contacting them periodically with
a new offer.

TIP: Customers are prospects too. Stay in contact with them. Find or develop other products or services
you can offer them. It's easier to make a sale to a previous customer than to someone who never bought
from you.

3.

Businesses often copy their competitors’ advertising ideas. This can be effective for a short time. But
results quickly decline as more and more competitors copy the same idea.

Instead of copying your competitors’ advertising ideas, improve on them. Create something better -
something your competitors cannot copy.

For example, give your customers a reason to buy from you instead of from a competitor. This can be as
simple as including a unique bonus only you can offer - or providing the personal attention your
competitors are not willing or able to provide.
4.

Many businesses get poor results from their advertising because they reach too many prospects with little
or no interest in what they are selling. This often occurs because they choose the cheapest advertising
instead of looking for low cost targeted advertising.
Take some time to research and plan your advertising efforts. Look for ways you can reach
concentrations of prospects likely to be interested in your product or service. Then design your message
to appeal specifically to their interests and needs.

TIP: Look for alternative media your competition may be overlooking. For example, many online
marketers have started using direct mail postcards to generate traffic to their web sites. It's a low cost way
to bypass the heavy competition online.

5.

Advertisers often promote facts about themselves or their products in their advertising. But facts don't sell.
Benefits sell. For example, which of the following has more impact?

1. "We provide complete marketing services for starting your own business"
2. "No more time clock. Work when you want. Take long vacations"

The first focuses on the company and describes the service it provides. It's boring and unattractive. The
second focuses on the benefit provided by that service. It attracts attention and creates excitement - and
generates more sales.

These 5 common advertising mistakes cause you to lose sales. How many are you making? Apply the
information revealed in this article to avoid these mistakes - and maximize the results you get from your
advertising efforts.
(http://www.clipps.co.za/articles/5commonadv.htm)

3.3. Vocabulary development

But they devote little or no effort to cultivating these prospects for future sales.
Most prospective customers will not buy the first time they hear or see your sales message.
Look for ways you can reach concentrations of prospects likely to be interested in your product
or service.

prospect
(n) - the possibility that something will happen
- a particular event which will probably or definitely happen in the future - used especially
when you want to talk about how you feel about it
- (pl.) chances of future success
- a person, job, plan etc that has a good chance of success in the future
(v) - to examine an area of land or water, in order to find gold, silver, oil etc
- to look for something, especially business opportunities

Referring to future time

the time after now  in the future


 the future  in the near future
 ahead  in/for the foreseeable future
 to come  some time
 be still/yet/more etc to come  one day/some day
 from now on  one of these days
 in future  the day will come (when)
 in the long/short/medium term at a specific time in the future
 from now
at some time in the future
 then  destiny
 by then  the outlook
 away/off  long-range/short-range outlook
 come July/summer/next year etc  the outlook for
 prospect
what will happen to someone or something in likely to happen in the future
the future  be on the horizon
 somebody's future  be in store
 the future of something likely to be or do something in the future
 fate  future
o decide somebody's/something's fate  potential
o somebody's/something's fate is  prospective
sealed  in the making
o seal the fate of  have a great/bright/brilliant etc future

Write ten sentences referring to future time. Use some of the expressions given above.

3.4. Language focus – Time Clauses

Many businesses reduce their advertising when they are getting plenty of sales.

In the example above, when introduces a time clause.


Time clauses are introduced by conjunctions of time such as: after, as, as soon as, before, hardly…when,
immediately, no sooner…than, since, the sooner, till/until, when, whenever, while.

Remember!
We do not use a future form, or a conditional tense in a time clause.

(For details, see suggested bibliography:


Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Unit 29 Time expressions –
p. 115
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – p. 301)

Use as soon as, till, when, whenever, while or as to fill the gaps in the following sentences:

1. Go on ___ you come to a large square with an old statue in the middle. Then turn right and you’ll
find his house on your left.
2. We’ll be glad ___ everything is over and we can start working.
3. They were writing the report ___ we were discussing the details of our campaign.
4. ___ they were approaching the building, they realised that they had forgotten the contract.
5. You can sign the letters ___ I am out. Let’s agree on this rule..
6. Peter hasn’t arrived yet and I need someone to help me. But you can leave ___ he arrives.

Rewrite the following sentences twice, using no sooner… than and hardly… when.

I had just sat down but the boss called me to his office.
I opened the file and a minute later someone rang the bell.

3.5. Language in use

3.5.1. For each blank think of ONE word that can best fit in the context.

Advertising aimed 1___ young children should be restricted because youngsters 2___ evaluate it
properly, the American Psychological Association said Monday.
Children 3___ age 8 tend to assume advertising is truthful and unbiased, the group said in a report that
blamed youth obesity 4___ eating habits spurred 5___ advertising.
The report "shows young children are uniquely vulnerable 6___ commercial persuasion," said study co-
author Dale Kunkel.
"The most predominant products marketed to children 7___ sugared cereals, candies, sweets, sodas and
snack foods," he added.

3.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Kunkel said a 8___ team of psychologists spent 18 months analysing studies of children and their
reaction to advertising.
The basic concept is understanding 9___ intent, and children ages 8 and younger generally do not grasp
that intent," Kunkel explained. Older children and adults recognize the intent to sell and know advertising
can 10___, though they may not apply that knowledge in every case, he added. "What we're saying is
that, because children 8 and 11___ cannot grasp intent ... it is inherently unfair," Kunkel said. American
Advertising Federation 12___ Mary Hilton said she had not seen the report and could not immediately
comment on it. The Psychologists estimated that advertisers spend more than $12 billion per year on
advertising 13___ aimed at the youth market. Additionally, the 14___ child watches more than 40,000
television commercials per year, they said. Kunkel said the group also has concerns about certain
commercial campaigns 15___ adults that pose risks for child-viewers. For example, beer ads are
commonly shown during sports events and seen by millions of children, creating both brand familiarity
and more positive attitudes towards drinking in children as young as 9-10 16___.
They also expressed concern that commercials for violent media products such as movies and video
games could increase the 17___ of youngsters' aggressive behaviour. The report recommended:
• "Governmental action to protect young children from commercial exploitation" through
advertising.
• Making sure 18___ and disclaimers in advertising directed to children are in language easily
understood, such as "you have to put it together," 19___ "some assembly required".
• Investigating how young children comprehend and are influenced by advertising in new
interactive 20___ environments such as the Internet.
• Examining the influence of advertising directed to children in the school and classroom.
(The Associated Press http://www.msnbc.msn.com/id/4340665/)

8. A six-persons B six-person C six-person’s D six-persons’


9. A persuasive B pursuing C pervasive D pervading
10. A exaggerate B exasperate C substantiate D desperate
11. A beneath B below C lower D lesser
12. A speaker-woman B speaking woman C spokeswoman D speech-woman
13. A suggestions B propositions C massages D messages
14. A median B middle C par D average
15. A targeting primarily B primary targeting C primarily targeting D targeting primary
16. A aged B years C years of age D old
17. A likely B likelihood C likeness D likeliness
18. A discards B disclosures C discloses D dismays
19. A rather than B better than C more than D easier than
20. A medium B means C mediation D media

3.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

21. Twenty years ago Donald Trump unveiled (A) a plan to end the cold war. In 2000, (B) he flirted with
running for president, though his distaste (C) for shake hands (he fears germs) posed a problem in
politics. Now "The Donald" is emerging as a Rorschach test (D) for what people think about wealth and
power in an election year.

22. Is the glass (A) half full or half empty for the economy? The cheesy plutocrat and his yuppie acolytes
(B) might have an answer. I don't mean (C) read too much into a TV show, but "The Apprentice" could
offer some guidance in (D charting the slippery politics of 2004.
23. (A) At first glance, the show's popularity suggests that (B) business is cool again, which is (C) a good
news for President Bush. The first M.B.A. president (D) has infused his government with the values of the
boardroom.

24. Corporate interests (A) not only funds his campaign, they help write his legislation and regulations.
Based on their un-P.C. attitude and reverence (B for the laws of the commercial jungle, most of the
contestants look (C) as if they would be as comfortable (D) sleeping over at the White House as they are
at Trump Tower.

25. (A) Because those contestants represent classic American aspirations ((B) we would watching them
otherwise), they (C) pose a problem for Democrats planning (D to run a corporate-bashing campaign.

3.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

So to win over the "Apprentice" audience, Democrats are out to invent something EXAMPLE
new in American history — a friendly, patriotic, positive populism, best 26___ now
by Edwards.
"The Clinton 27___ was not 'Don't argue for equality,' it was 'Don't bash the rich'," SIGHT
says the author Benjamin Barber.
Where populism traditionally was for angry farmers and industrial workers, it's now
directed at the 28___ middle class—at squeezed suburbanites who see that the ASPIRE
threat extends beyond the factory floor into their white-collar world.
They 29___ recognize that their skills might not protect them against ambitious INCREASE
Chinese and Indians who score better in math.
This status 30___— the fear of being fired in an economy that's shedding jobs — ANXIOUS
helps attract 18 million people every Thursday night and potentially threatens Bush.
(Adapted from Newsweek http://www.msnbc.msn.com/id/4340665/)

3.6. Speaking
Pair work. In pairs write a list of products that you remember having bought because of TV
commercials. Try to explain how the TV commercial determined you to buy.

3.7. Writing
In not more than 200 words express your opinion on the statement Subliminal advertising should
be forbidden.
UNIT THREE – BANKING

1. MONEY

Money: anything that is widely used for making payments and accounting for debts and credits.

(Glyn Davies, A History of Money)

1.1. Lead-in

Consider the following questions:

1. What is the importance of money?


2. Would you imagine world’s economy functioning without money?
3. What makes an effective relationship society - money?

1.2. Reading

Read the following article referring to some characteristics of money. The headings of the four
main sections have been removed. They are given below. Choose the most appropriate heading
for each paragraph.

Causes of the Development of Money


Primitive forms of money
Modern forms of money
Functions of money

What is Money?
By Roy Davies

1.

At first sight the answer to this question seems obvious; the man or woman in the street would agree on
coins and banknotes, but would they accept them from any country? What about cheques? They would
probably be less willing to accept them than their own country's coins and notes but bank money (i.e.
anything for which you can write a cheque) actually accounts for by far the greatest proportion by value of
the total supply of money. What about I.O.U.s (I owe you), credit cards and gold? The gold standard
belongs to history but even today in many rich people in different parts of the world would rather keep
some of their wealth in the form of gold than in official, inflation-prone currencies. The attractiveness of
gold, from an aesthetic point of view, and its resistance to corrosion are two of the properties which led to
its use for monetary transactions for thousands of years. In complete contrast, a form of money with
virtually no tangible properties whatsoever - electronic money - seems set to gain rapidly in popularity.

2.

37
All sorts of things have been used as money at different times in different places. The alphabetical list
below, taken from page 27 of A History of Money by Glyn Davies, includes but a minute proportion of the
enormous variety of primitive moneys, and none of the modern forms:
 Amber, beads, cowries, drums, eggs, feathers, gongs, hoes, ivory, jade, kettles, leather, mats,
nails, oxen, pigs, quartz, rice, salt, thimbles, umiacs, vodka, wampum, yarns, and zappozats
(decorated axes).
It is almost impossible to define money in terms of its physical form or properties since these are so
diverse. Therefore any definition must be based on its functions.

3.

Specific functions (mostly micro-economic):


 Unit of account (abstract)
 Common measure of value (abstract)
 Medium of exchange (concrete)
 Means of payment (concrete)
 Standard for deferred payments (abstract)
 Store of value (concrete)

General functions (mostly macro-economic and abstract)


• Liquid asset
• Framework of the market allocative system (prices)
• A causative factor in the economy
• Controller of the economy

4.

In his preface Glyn Davies writes: "Money originated very largely from non-economic causes: from tribute
as well as from trade, from blood-money and bride-money as well as from barter, from ceremonial and
religious rites as well as from commerce, from ostentatious ornamentation as well as from acting as the
common drudge between economic men."

One of the most important improvements over the simplest forms of early barter was the tendency to
select one or two items in preference to others so that the preferred items became partly accepted
because of their qualities in acting as media of exchange. Commodities were chosen as preferred barter
items for a number of reasons - some because they were conveniently and easily stored, some because
they had high value densities and were easily portable, and some because they were durable. These
commodities, being widely desired, would be easy to exchange for others and therefore they came to be
accepted as money.

To the extent that the disadvantages of barter provided an impetus for the development of money that
impetus was purely economic but archaeological, literary and linguistic evidence of the ancient world, and
the tangible evidence of actual types of primitive money from many countries demonstrate that barter was
not the main factor in the origins and earliest development of money.

(www.ex.ac.uk/RDavies)

1.3. Vocabulary development

MONEY – USAGE NOTE

WORD CHOICE: MONEY, CASH, CHANGE, FUNDS


MONEY: is the most general word: How much money do you have?
CASH: usually means money in coins or notes rather than cheques or credit cards: I’m sorry, we only
take cash.
It can also mean money in any form that is available to be spent: We’re going to Australia next year if we
have the cash.
CHANGE: used for the amount of money that is given back to you when you have given more for
something than the amount it costs: three dollars fifty change
It can also mean money in low-value coins or notes: Can you give me change for a ten pound note?

38
FUNDS: money collected for a particular purpose: I need more funds if I’m to study abroad.
(Longman Dictionary of Contemporary English)

 banking  deposit  liquid/illiquid assets


 bankers  coins  cash
 bills of exchange  electronic money  securitization
 safes  to withdraw  to issue (issued)
 currency (withdrawing)  intangible assets
 cheque (BE)/check  break  bonds
(AE)  banknote

1.3.1. Use words and expressions from above to fill in the blanks in the following sentences:

1. With the revival of ___ in western Europe, stimulated by the Crusades, written instructions in the
form of ___, came to be used as a means of transferring large sums of money and the Knights
Templars and Hospitallers functioned as ___.
2. It is possible that the Arabs may have used bills of exchange at a much earlier date, perhaps as
early as the eighth century. The use of paper as ___ came much later.
3. During the English Civil War, 1642-1651, the goldsmith's ___ were secure places for the ___ of
jewels, bullion and ___.
4. Instructions to goldsmiths to pay money to another customer subsequently developed into the
___ (or ___ in American spelling).
5. Similarly goldsmiths' receipts were used not only for deposits but also as evidence of ability to
pay and by about 1660 these had developed into the ___.
6. The ___ with precious metals helped to make money a more elusive entity.
7. Another trend in the same direction is the growing interest in forms of ___ from the 1990s
onwards.
8. The evolution of money has not stopped. ___, the turning of ___ into ___, developed in new
directions in the 1990s.
9. One much publicized development was the invention of ___ backed by ___ such as copyright of
music.
10. The Bowie bonds can be an example of such bonds, named after those ___ by the pop star
David Bowie.
(adapted from www.ex.ac.uk/RDavies)

1.4. Language focus – The Infinitive

Have a look at the following sentences, taken from the text entitled What is Money? by Roy Davies.

1. They would probably be less willing to accept them.


2. In complete contrast, a form of money with virtually no tangible properties whatsoever - electronic
money - seems set to gain rapidly in popularity.
3. These commodities, being widely desired, would be easy to exchange for others and therefore
they came to be accepted as money.

In examples 1, 2, and 3 the infinitive is used.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Unit 19 – pp. 107-114
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Units 38-39 – pp. 157-166
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
212-228)

Finish the following sentences.

1. To spend so much money…

39
2. To make such a suggestion…
3. They can’t afford to…
4. There’s a customer here to…
5. She attends those training courses to…
6. Don’t hesitate to…
7. Dou you really have to…
8. After such a quarrel, it’s likely to…
9. This business is too expensive for me to…
10. Are you strong enough to…

1.5. Language in use

1.5.1. Fill in the blanks with ONE suitable word.

Noteworthy Points Regarding the Origins of Money


by Glyn Davies
• Money did not have a 1 ___ origin 2 ___ developed independently in 3 ___ different parts of the
world.
• Many factors contributed 4 ___ its development and if evidence of 5 ___ anthropologists have
learned 6 ___ primitive money is anything to go by economic 7 ___ were not the most important.
• Money 8 ___ a variety of functions and the 9 ___ performed by the earliest types were probably
fairly restricted initially and would NOT necessarily have 10 ___ the same in all societies.
• Money is fungible: there is a 11 ___ for older forms to take on new roles and for new forms to be
developed which take on old roles.
• For example, on English banknotes such as the 5-pound notes it says "I promise 12 ___ the
bearer on demand the 13 ___ of five pounds" and below that it carries the 14 ___ of the chief
cashier of the 15 ___ of England. This is a reminder that originally banknotes were regarded in
Britain, and in many other countries, as a substitute for money and only later did they come to be
accepted as the real thing.
(Adapted from www.ex.ac.uk/RDavies)

1.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

One of Glyn Davies's main 16 ___ for writing the book was that, as he writes in his preface around the
next 17 ___ there may be lying 18 ___ apparently quite 19 ___ problems which in all probability 20 ___ a
basic similarity to those that have already been 21 ___ with varying degrees of success or failure in other
times and other places. 22 ___ he is of the opinion that economists, especially 23 ___, tend to 24 ___ the
purely economic, narrow and technical functions of money and have placed insufficient 25 ___ on its
wider social, institutional and psychological 26 ___.

These 27 ___ aren't simply of academic interest. Economists still argue 28 ___ how to measure and
control the money 29 ___ and numerous different measures, corresponding to slightly different definitions
have been 30 ___. These disputes have implications for the material well-being of everyone, especially
now that thanks to the development of computer networks, new forms of money are coming 31 ___
existence.

16. A reasons B motives C domains D objectives


17. A corner B step C layer D chapter
18. A in wait B to wait C in expectance D waiting
19. A new B fresh C novel D unexpected
20. A support B have C indicate D bear
21. A approached B discussed C tackled D debated
22. A Furthermore B however C nevertheless D since
23. A accountants B monetarists C money-makers D clerks
24. A exaggerate B overestimate C misjudge D underestimate
25. A stress B accent C importance D emphasis
26. A aspects B issues C problems D fields
27. A topics B issues C subjects D themes
28. A about B with respect to C with D on

40
29. A dividends B funds C supply D offer
30. A proposed B elaborated C stated D accepted
31. A in B for C about D into

(Adapted from www.ex.ac.uk/RDavies)

1.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

32. Gambling involves (A) the creation of a risk for the sole purpose (B) of someone to take it while
trading/speculating (C) deals with risks that are necessarily (D) present in the economy.

33. The (A) only similarity between trading and gambling is that both the trader/speculator and the
gambler are willing (B) to accept the risk (C) in return to the opportunity (D) to gain some money.

34. The risk involved (A) in speculating can be predicted if you have enough information. Nobody (B)
should start trading without studying the stock market first. Important (C) political and economical
information is readily available in newspapers and (D) on the Internet. So why not benefit of all that
information and make the difference between loss and gain.

35. Do you know how to choose a bank? The first criterion is the type of client (A) the bank is working for:
individuals or companies. Individuals act for themselves, and (B) do not establish companies, so that they
can be divided in two categories: residents and non-residents. The companies can be divided (C)
according with the (D) organization type, the social capital, the annual rate or the number of employees.

36. Some clients choose the bank (A) by the quality of the personnel. This has to be professional,
discreet, and honest. The bank worker must also be a good advisor, (B) capable of assuring
confidentiality. (C) Most of the bad services are those (D) provided for poor bank workers.

(Adapted from www.ex.ac.uk/RDavies)

1.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

With the 37 ___of the First World War in 1914 Britain decided to withdraw gold from BREAK
internal circulation and other countries also broke the link with gold.
Germany returned to the gold 38 ___in 1924 when it introduced a new currency, the STANDARDIZE
Reichsmark and Britain did the following year, and France in 1928.
However the British government had fixed the value of sterling at an 39 ___high rate. SUSTAIN
In the 40 ___economic crisis in 1931 Britain, followed by most of the Commonwealth WORLD
except Canada Ireland, Scandinavia, Iraq, Portugal, Thailand, and some South
American countries abandoned gold.
The United States kept the link to gold and after the Second World War the US dollar PLACEMENT
41 ___the pound sterling as the key global currency.
Other countries fixed their exchange rates against the dollar, the value of which DEFINITION
remained 42 ___in terms of gold.
In the early 1970s the system of fixed exchange rates started to break down as a result GROWTH
of 43 ___ international inflation and the United States abandoned the link with gold in
1973.
(Adapted from www.ex.ac.uk/RDavies)

1.6. Speaking

Pair work

 Which is the most important: gold or paper money? Make a list of the advantages and
disadvantages of using each, bringing arguments to support your opinion.

41
 Governments control coin production and hence the money supply. Is this a necessary activity?
Bring arguments to support your opinion.

1.7. Writing

Read carefully the piece of news “Allahabad Bank Revises Rates”. You are a member of the board
in charge of communicating the bank’s decisions to your customers. Write a letter to an imaginary
client and communicate him/her the changes that occurred in the bank’s financial policy.

KOLKATA, JULY 7: The Kolkata-based public sector commercial bank, Allahabad Bank on Wednesday
announced its decision to revise interest rates of foreign currency non-resident (FCNR) deposits and non-
resident (external) (NRE) deposits.

The new rates are effective from July 1, 2004. According to a press statement issued by the bank here on
Wednesday, the revised rates for dollar are 2.21 per cent (2.25 per cent) for one year to less than two
years.

The new rate for deposits having maturity of two years to less than three years is 2.99 per cent (3.09 per
cent) and 3.50 per cent (3.62 per cent) for three years. According to the press statement, in the GB pound
deposits, the revised rates are 5.02 per cent (5.13 per cent), 5.14 per cent (5.30 per cent) and 5.22 per
cent (5.02 per cent) for respective maturities.
“For Euro deposits, the bank has fixed interest rates at 2.22 per cent, 2.69 per cent and 3.04 per cent
respectively,” the press statement said.

According to it, the revised rates for NRE term deposits are 2.46 per cent for one year to less than two
years, 3.24 per cent for two years to less than three years and 3.75 per cent for three years.

2. BANKING

Banking: the business of a bank

2.1. Lead-in

Consider the following questions:

a. What are money markets?


b. What is foreign exchange
c. Who are the operators on the financial markets?
d. Which is the leading money market?

2.2. Reading

Read the following text. Then, in pairs, discuss the problems of risk management in two cases:
a. from the bank’s point of view
b. from the individual’s point of view, as a potential client of the bank
Take also into consideration the Romanian context. Compare your conclusions with the
conclusions of another pair.

Financial Risks Taken by Banks and other Speculators are on the Increase

42
Banks and other gamblers take excessive risks, of course, because higher risk investments bring in
higher returns. This means more profits for shareholders and higher bonuses for the CEO and others.
The disincentive for higher risks is that a risky investment is more likely to fail and you could lose some or
all the money you put in. High risk investing is exactly like gambling – in fact it is gambling. Such
speculation is of concern to the public because the gamblers are playing with the financial system and
currencies upon which all real economies are dependent, and because the public is often called upon to
bail out speculators to avert financial and economic crises.

As income inequality grows, fewer people have more and more money to play with and so financial
activity becomes increasingly about speculation in the markets, through the Alice in Wonderland world of
speculative financial instruments alluded to earlier, rather than purchase of real goods and services.
Hence financial risk increases as income inequality grows. As we shall see, this risk taking then often
leads to devaluation of foreign currencies against the US dollar, and publicly funded bailouts, whose costs
fall disproportionately on the poor (or those who are not major players in the global financial system). This
widens the income and wealth gaps even more, and further increases speculative activity and financial
risks that will later trigger another bailout. And so the cycle continues. This positive feedback loop has set
the world on a very dangerous path – dangerous to everyone.

As a key part of this feedback loop very serious problems have arisen because certain players in the
market know they will always get bailed out if the losses on their risky investments get too big. This is
known as “moral hazard” and many economists and business commentators have noted that the
International Monetary Fund poses such a moral hazard to the world’s largest financial institutions who
are now “too big to fail”.

This problem is compounded further because the big players are getting even bigger through global
mergers and acquisitions in the wake of global financial deregulation. Furthermore, the Asian crisis,
caused by excessive financial speculation in the first place, bankrupted a slew of Asian (including
Japanese) banks. Many of these were then sold off (fully or partially) at fire-sale prices to Western
financial institutions who were just as responsible for the crisis due to their unchecked speculative activity
and who did not go bankrupt because they were key beneficiaries of the IMF bailouts. It is ironic that
these beneficiaries were the very same players who instigated so much of the excessive risk taking that
caused the crisis. This shows you just how much the moral hazard of bailouts can distort what is
supposed to be a “free market”.

As noted, the public should understand how banks and other gamblers increase the risks in the financial
system, since the public always pays the price for excessively risky bets that go wrong through various
bailout mechanisms. This is exactly what happened during the US Savings and Loans crisis of the
1980’s. Also, the public of effected countries pays for the IMF bailouts which always come as a result of
excessive risk taking in the financial markets and the realization that some of the risk takers/gamblers
(generally those on Wall Street) are just too big to fail. Compounding this problem is the fact that
speculators trade against other countries’ currencies and thereby instantly devalue the hard won earnings
of many of the local people.

In what is probably a less understood and less publicized financial crisis, but one that recently almost took
down the entire US banking system, the Federal Reserve had to step in and arrange a bail-out of the
Long Term Capital Management Fund in 1998. While the public did not have to fund this one, it came
very close to this. The LTCM crisis revealed a shocking level of risks taken by the US banks, and worse,
a shocking lack of supervision of their gambling activities. It is not comforting to know that the type of risk
taking prevalent in the LTCM case is increasing, and the supervisory bodies are doing little to stop it.
These types of funds like LTCM, known as “hedge funds”, are the new trendy playthings of the wealthy –
why, even Barbara Streisand is in one! But they are completely unregulated on the premise that they
involve “sophisticated” investors, you see. This is exactly the reason they need regulation – for it’s this
very same sophisticated speculation that later triggers bailouts. And it’s seldom the sophisticated
speculators who pay for the bailout mess they create.

Banks are supposed to manage risks to prevent themselves from going insolvent or losing market
confidence. Regulators and supervisors are supposed to be watching to make sure they actually manage
these risks both in their own interests and to avoid broader financial crises. In this fashion the regulators
should represent the public interest to ensure that banks are not taking such excessive risks that the
public may eventually have to bail them out to avert a financial disaster. But more and more it seems that
crisis prevention and exercise of the precautionary principle are being pushed out the back door in favor
of the wishes of a global finance sector that wants less supervision. It prefers a system of cure (in the
43
form of bailouts) after risk taking gets out of hand, to the publicly preferred system of prevention whereby
financial players take on less risk and accept lower returns.

This preference for cure over prevention is encouraged by the bailout mechanisms.

One “cure” (or bailout) leads to another crisis down the track, leading to another bailout, another crisis
and so on. For every bailout income and wealth gaps increase, because the funding of the bailout must
come from places that are not accounted for in the financial system. This is simply because the financial
system would be put at risk if the full costs of the risk taking were born by it. Then investors would lose
confidence and the whole financial system may collapse. The costs that do not appear on financial
accounts are additional burdens to the poor and excessive natural resource extraction. In effect, that is
what funds bailouts so that the cost of the bailout will not hit the books of the financial system. This is the
mechanism whereby risk takers do not take full responsibility for the risks they assume but rather pass
that responsibility on to those outside the financial system. This system of cure over prevention obviously
provides higher overall returns to the banking system than would a corresponding regulatory regime
focused on prevention.
(www.worldbank.org)

2.3. Vocabulary development

 returns: the amount of profit that you get from something


 to bail out: to provide money to get someone or something out of financial trouble
to leave a large sum of money with a court so that someone can be let out of prison
while waiting for their trial
 devaluation: reduction of the value that the money of one country has when it is exchanged for
the money of another country
 fire-sale prices: low prices
 hedge funds: certain sum of money that gives you protection in case you lose money
 to account for: to be the reason why something happens// to make up a particular amount or part
of something
 overall returns: total amount of profit that you get from something (usually in a year)
(Longman Dictionary of Contemporary English)

2.3.1. Fill in the blanks in the following sentences by using one of the words given above:

1. Many identify the trigger of the crisis as the ___ of the Thai Baht (the Thai currency).
2. You can’t expect the taxpayer ___ the car industry indefinitely.
3. The company ___ over the last five years have been spectacular.
4. The ___ last year didn’t meet his expectations.
5. He got bankrupt because he was forced to sell the company at a ___.
6. Imports from Japan ___ 40% of the total.
7. A strong firm should always have some ___ in case anything happens.

Bail out, play with, trade against, call upon, take on risk, trigger, take down, put at risk

2.3.2. Fill in the blanks in the following sentences by using one of the words given above:

1. The gamblers ___ the financial system and currencies upon which all real economies are
dependent.
2. The public ___ to bail out speculators
3. Certain players in the market know they ___ if the losses on their risky investments get too big.
4. Speculators ___ other countries’ currencies and thereby instantly devalue the hard won earnings
of many of the local people.
5. Financial players ___ less ___ and accept lower returns.
6. The financial system would be ___ if the full costs of the risk taking were not evaluated.
7. The financial crisis recently almost ___ the entire US banking system.
8. Sophisticated speculation often ___ bailouts.

44
2.4. Language focus - -ing Forms

Have a look at the following sentences from the text:

1. High risk investing is exactly like gambling – in fact it is gambling. (noun/gerund)


2. As we shall see, this risk taking then often leads to devaluation of foreign currencies.
(noun/gerund)
3. Compounding this problem is the fact that speculators trade against other countries’ currencies.
4. It is not comforting to know that the type of risk taking prevalent in the LTCM case is increasing.
5. Banks are supposed to manage risks to prevent themselves from going insolvent or losing
market confidence. (verb + - ing form)

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Unit 19 – pp. 107-114
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Units 38-39 – pp. 157-166
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
228-239)

2.4.1. Choose the most suitable words underlined:

1. They made me apply/ to apply for the post of an accountant although I am a very good designer.
2. To take / taking the job will mean a great change in his life.
3. Do you happen to know/ knowing when will the data be processed?
4. I demand seeing/ to see the business plan.
5. The manager appreciates their advertising/ to advertise of those products.
6. We have postponed communicating/ to communicate the bad news till after that meeting.
7. Did you manage to place/ placing that order in time?
8. Have you considered to change/ changing jobs?
9. I don’t mind to write/ writing that report for you. Just give me some time.
10. I regret not to start/ not starting my own small business.

2.4.2. Complete each sentence with a suitable word or phrase.

1. The board of directors ___ twice a month and ___ to solve all the problems that appear in
between the meetings.
2. ___ for this company is a waste of time. I will look for another job.
3. The invited us ___ their new factory. The new equipment is worth being admired.
4. This appears ___ the right solution.
5. They risk ___ their company if they keep on their activity with that unprofessional management
team.
6. It is not allowed ___ one’s products at a dumping price.
7. ___ a new sector so far from the old location was not a professional decision.
8. Do I have ___ extra to use the company car while I’m staying here?
9. All staff ___ to pay for their meals at the canteen.
10. Don’t waste your time ___ that useless report.

2.5. Language in use

2.5.1. Fill in the blanks with ONE suitable word.

Banks have 1 ___ an important role in the development of modern economy 2 ___ the very beginning of
commercial activities. 3 ___ branches have become a familiar sight on 4 ___ city streets, as more and 5
___ people now “bank” with any of the national or local 6 ___.

45
Banks offer their services 7 ___ to individuals and businesses. One can open a current 8 ___ or a deposit
account with them. The 9 ___ will enable a person to use a cheque for payment instead of hard cash,
whereas the latter will bring a small interest. People 10 ___ ask their bank to pay recurring expenses 11
___ them, such 12 ___ subscriptions, rents, telephone, gas or electrical bills. Valuables or deeds can 13
___ left in custody in a bank 14 ___ on payment of a certain charge. The bank will obtain foreign
currencies, issue traveller’s 15 ___ and letters of 16 ___ payable at their branches or at correspondent 17
___.

Besides, bank will operate transactions on the 18 ___ exchange for you and give advice 19 ___
investments. They also lend money, generally on a short 20 ___ basis: thus they can allow overdraft
facilities or personal loans. 21 ___ your credit rating is good and if you can offer some sort of security, the
banks 22 ___ consider longer term credit as well. Most of this applies 23 ___ business discounting of
their bills – Bills 24 ___ Exchange (drafts), or even Promissory Notes. In the field of foreign trade, the
banks can help 25 ___ financing or advising their clients.
(Adapted from www.worldbank.org)

2.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Creating a family 26 ___ fund is a vital part of an investment 27 ___. An emergency fund can provide
much 28 ___ money in a family 29 ___. Many financial 30 ___ indicate a family should 31 ___ at least six
months of 32 ___ into an emergency fund. However, three to four months of income is more realistic for
families with a 33 ___ income. One of the best ways 34 ___ the appropriate 35 ___ of an emergency fund
is 36 ___ your budget. This will indicate how much liquid 37 ___ you may need to supplement your 38
___ in time of need. If you currently don’t have an emergency fund in place, the simplest way to get one
started is add the heading of Emergency Fund to your 39 ___. This new 40 ___ should be funded on a
monthly basis. 41 ___ you have three to six months of income in this account, your emergency fund is in
place.

26. A emergency B rapid C efficiency D saving


27. A schedule B program C scheme D plan
28. A necessary B needed C wanted D required
29. A crisis B event C environment D occasion
30. A specialists B experts C professionals D clerks
31. A gather B put aside C stash away D save
32. A money B wages C salary D income
33. A low B high C constant D steady
34. A to calculate B to evaluate C to assess D to measure
35. A amount B size C sum D rate
36. A to check B to calculate C to review D to appreciate
37. A cash B money C capital D money
38. A lifestyle B expenditure C venue D standard of living
39. A budget B plans C projects D savings
40. A deposit B account C tax D payment
41. A because B once C however D nevertheless
(Adapted from www.worldbank.org)

2.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

42. Banks become more specialized (A) due to the financial education of customers and their increasing
needs. Universal banks (B) tend to become large banks, operate internationally, (C) have close
connections with business (D) and to perform synthetic operations.

43. Banks (A) are not anymore just moneylenders or borrowers. They (B) participate on the financial
market with a wide range of operations: insurance, trading of financial instruments, foreign exchange,
international money transfers, inter-banking borrowing and lending etc. Having (C) such a wide range of
services, universal banks may affect the competition and survival of other financial institutions (D) like the
insurance company banks from other countries.

46
44. The interaction (A) between banks and insurance companies are expected to increase (B) in the
future as (C) part of it is achieved (D) by mergers and acquisitions.

45. Universal banks have (A) more financial power and can be (B) extremely efficient for the economic
(C) development of a country, as they (D) are able of ensuring the required funds when others are not
willing to accept risks.
(Adapted from www.worldbank.org)

2.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

Proposed changes to the banking law, to be approved by the government soon, will SUPERVISOR
see the central bank BNR acquire 46 ___ power over all credit institutions in
Romania, banking as well as non-banking.
The new law introduces the concept of “financial 47 ___” which will allow BNR to HOLD
perform a consolidated supervision.
Banks will need the central bank’s 48 ___ to own shares in other financial institutions. AUTHORIZE
Another change refers to “49 ___ shareholders” in a bank. SIGNIFY
Banks will be 50 ___ to own up to 100 per cent of an insurance company. ALLOWANCE

(Adapted from www.worldbank.org)

2.6. Speaking

Pair work
Try to reach to an agreement upon the following topics:

1. There are both internal and external economic factors that influence international banking.
2. The range of activities the banks develop depend on the demand of the financial markets.

Bring examples to support your opinions.

2.7. Writing

In not more than 200 words try to bring arguments in favour or against the following statement:

The money, foreign exchange and financial markets play a pivotal role in the economic life of the
developed countries.

3. BANKING SERVICES. THE STOCK EXCHANGE

3.1. Lead-in

Consider the following questions:

1. What do you know about the Stock Exchange?


2. What are the main services provided by banks?

3.2. Reading

Read the following article referring to risk transfer.

(Par. 1)
To better understand risk transfer let’s look at some of the aspects and drivers of the Asian financial
crisis. Many identify the trigger of the crisis as the devaluation of the Thai Baht (the Thai currency). This

47
had been pegged to the US dollar, so that the baht would move in parallel with the US dollar. At that time
25 baht was about the same value as 1 USD and the Thai Central bank was trying to keep this exchange
rate constant. Devaluation would mean that the value of 1 baht would be worth less than 1/25 US dollar,
or conversely a USD would buy more than 25 Baht. Prior to this devaluation currency speculators were
having a whale of a time performing what is known as arbitrage in transactions involving the Thai Baht.
Arbitrage means that speculators can make profits without taking risks. For example in this case
arbitrageurs were able to borrow money in US dollars at a low rate of 6%, change them into to Thai Baht
and invest the Baht at a much higher rate of 12%.
(Par. 2)
As noted, the Thai Central Bank was on the other side of all these bets trying to prop up the baht, so that
when the baht finally collapsed, in part due to this massive speculation, the central bank was in very bad
shape. Confidence in Asian markets fell and neighboring economies started falling like dominoes. When I
say that the baht collapsed I mean that its value versus hard currency, like the US dollar, fell dramatically.

(Par. 3)
The US dollar is the hard currency or reserve currency of the world now that the gold standard has
collapsed. Everything is measured in terms of the US dollar. And whereas banks once held gold in their
vaults to back their currencies, now they generally hold US dollars. This US Dollar standard of money
means that if the value of the US dollar ever collapses relative to other currencies, it probably will result in
collapse of the global financial system. This point might be of interest to some anti-globalization activists,
who might want to see if they can think up a clever way to instigate massive trade against the US dollar.
This method is very slick because it's perfectly legal, nobody has to get arrested and it doesn't require
any police beatings. But just a word of warning before you try this - make sure you have another system
of trade ready on the sidelines!

(Par. 4)
Now, Back to the Asian Crisis: The Korean banks got immediately walloped by the devaluation. The
Koreans banks then started dumping a bunch of Brazilian bonds that they’d been holding since one of the
deals that ended a previous speculator induced crisis – the Latin American debt crisis. The cost of
borrowing shot up in Brazil and this stripped Brazil of a quarter of its bank reserves in a single month. So
then Brazil had a financial crisis on its hands. And so on, and so on, the crisis spread. This interesting
little story from the Asian crisis came from the book called "The Fed" written by Martin Mayer and recently
published by Free Press.

(Par. 5)
The western financial institutions were also over extended in loans to Asia because the 1988 Basel
Capital Accord did not adequately set capital requirements for loans to banks in these countries. They
also did not differentiate between various types of commercial borrowers. Hence the banks were incented
to lend extensively to foreign banks where they could get higher returns, and to more risky corporate
ventures. Central banks of these Asian countries were putting their countries financial reserves at risk by
allowing their banks to invest them in high risk, high return investments. In summary the financial risks
taken by banks world over were huge, and the distribution of bank capital could not bear the brunt of the
costs if those risky bets should go bad.
(Par. 6)
As we know the bets went bad and various economies almost collapsed. Many of the financial players did
suffer huge losses and those losses were born by both Western financial institutions and foreign players.
However, as usual, the Western institutions escaped the gambling extravaganza bearing a
disproportionately small share of the costs. While a myriad of Asian banks were allowed to collapse, not a
single Western financial institution went under. At the end of the crisis most major Japanese banks (and
insurance companies) were technically insolvent and later dependent on these western institutions to
inject capital through acquiring ownership rights – something the Japanese never welcomed to their
banking system before.
(Par. 7)
The western institutions were not allowed to fail because if they did, the entire global financial system
would go down with it. To prevent such a collapse the IMF bailouts primarily work to ensure that the
market does not lose confidence in the financial system. Generally this translates into making sure that
the larger financial system players are not hit with large enough losses that could cause them to drop
below minimum capital requirements, go insolvent, or suffer a loss of confidence in them by investors and
depositors. When the press speaks of the bailouts they often say that this country or that got an IMF
bailout package. This really means that they receive funds from, or their debt is consolidated by the IMF
so that they will not default on loans made to them by large western investors. In a true "free market"
those western institutions would bear those defaults and suffer the consequences, which would be
consequences for all of us, because we are dependent on the financial markets they dominate.

48
(Par. 8)
It is at this point that the IMF as loan consolidator, or lender of last resort, steps in with its structural
adjustment programs to somehow make the country generate the hard currency needed to pay back the
western investors who had loaned them hard currency. Because hard currency is needed to repay the
loans the country’s activities get directed toward exports and other things that will bring in hard currency
from those that have some – i.e. western investors and consumers. The things that generate hard
currency the quickest to repay these loans are the exploitative labor and natural resource extraction
practices that we see resulting from IMF policies. These problems are compounded by the fact that the
local currency has dropped in value against the hard currencies.

(Adapted from www.bis.org.)

Find a word in the text that means:


(paragraph 1) key-elements
(paragraph 1) to fix prices, wages etc. at a particular level, or fix them in relation to smth. else
(paragraph 1) to enjoy oneself very much
(paragraph 1) the process of buying something such as a commodity or currency in one place and selling
it in another place at the same time
(paragraph 2) an agreement to risk money on a result of the competition, game etc.
(paragraph 2) to prevent something from falling; to help smth. with financial support so that it can continue
to exist
(paragraph 3) a room with thick walls and a strong door where money, jewels etc. are kept to prevent
them from being stolen or damaged
(paragraph 4) to his someone/smth. very hard
(paragraph 4) an official document promising that a government or company will pay back money that it
has borrowed, often with interest bond
(paragraph 5) to encourage someone to do smth.
(paragraph 5) burden; to bear/ take the burden – to receive the worst part of an attack, criticism etc.
(paragraph 6) not having enough money to pay what you owe
(paragraph 7) to make one’s position of power stronger
(paragraph 7) failure to do smth. that you are supposed to do according to the law or because it is your
duty
(paragraph 8) money that will not lose value because it is from a country that has a strong economy and
can be used in other countries to buy things
(paragraph 8) to make a difficult situation even worse by adding more problems
(Longman Dictionary of Contemporary English)

3.3. Vocabulary development

 Arbitrage = profit making by buying a security, currency or commodity at a low price in one
market and simultaneously selling it in another market at a higher price
 Broker = person or firm that acts as intermediary between buyer and seller, charging a
commission or fee; and agent in a transaction that does not buy for his own account
 Financial market = a market not necessarily with a physical presence, where money is either
bought or sold or borrowed and lent
 Dealer = person or firm that acts as a principal, buying or selling from his own account for
position and risk; he expects to make a profit by selling at a higher price or by correctly guessing
future interest rate movements
(See Longman Dictionary of Contemporary English)

3.3.1. Fill in the blanks in the following sentences by using the words and phrases given below.

 An account held
 Local market conditions
 Leverating
 The payments are processed
 Businesses
 Branches

49
 Backing them up
 Payee
 With value date
 Cross-border payments
 Payer
 Payment order

Banking services – “FlashPayment”

1. More and more companies are extending their ___ in the emerging economies from Central and
Eastern Europe. To succeed in their initiative they have to rely on a bank capable of ___. HVB Bank – so-
called “The Bank of the Regions” – has developed a network of ___ in Central and Eastern Europe and
the Baltic States, which will support the development of the bank’s corporate customers in these regions.

2. ‘FlashPayment – this newly introduced service (1 May 2004) enables the bank’s clients to initiate ___.
This product guarantees that payments are executed rapidly and ___ advantage, which means that it
takes only one day for the money to get from the __ to the ___. The service is based on a very simple
system: the ___ is placed on “Online B@nking” or using the form for foreign payments and the
transaction will automatically benefit from the advantages “FlashPayment” service.

3. A number of network products with uniform quality standards and/or accelerated transaction features
have been defined with the objective of ___ the business potential offered by internationally active
corporate customers within the Central and Eastern Europe. Flash Payment – this new Group Payments
product enables cross-border Payments in EURO or the national currency of the payee to be effected
very quickly and with value date advantage. Provided certain conditions are met, ___ automatically as
“FlashPayments” with value date D + 1 (processing date plus one day from payer to payee). A
“FlashPayment” may not involve currency conversion and must be made from ___ at BA-CA (Bank
Austria CreditAnstalt) or HVB Germany to an account at a Central and Eastern Europe HVB Group unit –
or vice versa – i.e. both the payer and the payee must have an account with the HVB Group. Prices are
determined on the basis of ___.
(“Visions” 5/2004, published by Bank Austria CreditAnstalt AG, Pept. Financial Relations and Strategic
Planning, May 2004)

3.4. Language focus – Emphatic structures

Have a look at the following sentences:


1. Never have I met such a manager.
2. Only now do I understand why you helped me.
3. Little do they know about this business!
4. What they want to do is to buy the company tomorrow.
5. Lack of interest is the thing that characterizes his behaviour.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Units 13-14 – pp. 71-84

3.4.1. Fill in the blanks with a suitable word or phrase.


1. Strange ___ seem, this is the second year in which their firm is profitable.
2. I know you are the manager, but you ___ have to solve this problem all alone.
3. It’s by ___ certain that the merger will take place tomorrow, at 10 o’clock.
4. What I like ___ is a short meeting with no minutes to be taken.
5. Such was the ___ that he didn’t buy those shares.
6. Under no ___ is the dividend to be paid.
7. In no ___ can you make an agreement with them.
8. ___ did the advertising department mistake when they chose the actor, but they also gave him
too much money.
9. ___ has the Prime Minister visited our company.
10. ___ before did they try to buy those shares at the Stock Exchange.

50
3.4.2. Finish the following emphatic sentences.
1. On no account…
2. Under no circumstances…
3. At no time…
4. Not only… but also…
5. No sooner….than…
6. Hardly… when…
7. Never….
8. Not a single word…
9. In vain…
10. Only in Romania…
11. So expensive were the services that…
12. Little does he…
13. What they did was…
14. What they want to hear was…

3.5. Language in use

3.5.1. For each blank think of ONE word that can best fit in the context.

The 1 ___ few decades have witnessed a rapid globalization of economic 2 ___. Trade production and
investment 3 ___ become more international 4 ___ ever before. The market facilitates the settlement of
debts 5 ___ from international trade. It also reflects capital 6 ___ between countries. The progressive
abandonment of fixed rates of exchange and exchange controls in many countries 7 ___ led to a greater
movement of 8 ___ internationally. In the 9 ___, foreign exchange trading was chiefly associated 10 ___
the settlement of imports 11 ___ exports. Nowadays, the bulk of turnover 12 ___ foreign exchange
markets is related 13 ___ investment or arbitrage.

The inter-bank foreign exchange market is an over 14 ___ counter market, a 15 ___ of commercial
banks, central banks, brokers and customers 16 ___ communicate with 17 ___ other by telex and
telephone 18 ___ the world’s major financial centres. Foreign exchange traders also make markets or
speculate 19 ___ different currencies, usually anticipating future appreciation of stronger currencies 20
___ weaker ones.
(Adapted from Jake Bernstein, “Basics of the game”, /The Stock Exchange/, biz.yahoo.com)

3.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

The money 21 ___ are the market places for short 22 ___ landing and borrowings, 23 ___ less than 90
days. The money market is an informal network of 24 ___ and institutional 25 ___, rather than an
organized market. New York is the leading money market, followed by London and Tokyo. Dealers in the
important money markets are in 26 ___ communication with each other and with major borrowers and
investors to take 27 ___ of 28 ___ opportunities. The main 29 ___ instruments for operating on the
money markets are negotiable certificates of deposit, commercial papers, treasure bills, banker’s 30 ___.
The 31___ done on the money markets are frequently 32 ___ transactions.

21. A banks B markets C institutions D stocks


22. A term B period C time D distance
23. A typically B formally C compulsory D normally
24. A brokers B merchants C dealers D risk-takers
25. A bankers B business people C partners D investors
26. A steady B uninterrupted C constant D permanent
27. A advantage B the upper hand C the chance D the opportunity
28. A assessment B arbitrage C investment D deposit
29. A accounting B financial C banking D procedural
30. A agreements B operations C endorsements D acceptances
31. A transactions B business C deals D agreements
32. A rapid B overnight C speedy D successful

51
3.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

33. Because the Thai Central Bank (A) tried to peg the Baht to the US dollar, after (B) a certain time, the
Western gamblers (C) could take their proceeds from the 12% investment, and (D) exchange them back
at the original exchange rate into US dollars.
34. Then (A) they paid in the lower 6% loan and (B) pocketed the profits. I say that no risk was taken to
get this return because (C) no money was put at risk, it was all borrowed and then guaranteed (D) to be
returned in full dollars by the Thai Central Bank.

35. (A) This type of speculation (B) puts pressure on, and drains, the reserves of the central bank (C)
which currency is being "attacked" and (D) increases pressure for devaluation.

36. It is the local people of Thailand (A) who then got hammered by the subsequent devaluation. Their (B)
hard earned money (C) were worth less when (D) it came to any goods or services made from imports.

37. Banks want to hold as little capital as possible, (A) so that they can create a maximum amount of
loans (or money) that (B) can bring about higher profits. From their perspective (C) a safety net has an
"opportunity cost" (D) which limits the profits they can make.

38."But (A) aren’t they worried about (B) not having enough of a safety net if their bets go bad?", you
might ask. Well, not if they are "too big to fail" and (C) the public will be called about to bail them out if
their (D) bets go bad.

39. (A) This is where a growing danger (B) lurks for all of us. (C) From a public interest perspective
conservative (higher) (D) capitals levels are a good thing.

40. They help (A) to prevent banks in taking excessive risks (B) which often lead to (C) publicly funded
bailouts to rescue them (D) from insolvency.
(Adapted from Jake Bernstein, “Basics of the game”, /The Stock Exchange/, biz.yahoo.com)

3.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

The specific motivation or combination of motivations of all the millions of speculators RELY
could not be discussed here in any detail even if 41 ___ data were available.
The broad incentives that 42 ___ most speculators are quite clear, however, and can ATTRACTION
be summarized briefly.
43 ___ the greatest is the opportunity to make an important amount of money in CERTAINTY
relation to the capital base used.
Most 44 ___ are well aware of the risks that they take in return for the large and quick INVESTMENT
profits.
Other 45 ___ are attracted by the 46 ___ itself, this being the sheer excitement of the SPECULATE
game.
(Adapted from Jake Bernstein, “Basics of the game”, /The Stock Exchange/, biz.yahoo.com)

3.6. Speaking

Pair work
Student A. Imagine you need a loan from the bank to build a house/ to pay for an expensive
vacation abroad. You have several not very important debts and bills to pay. Convince the banker
to give you the loan.
Student B. Imagine you are the person in charge to check the loan requirements addressed to
your bank. You are very much in doubt whether to give your client the money he asks for. Ask him
as many questions as you consider necessary.

52
3.7. Writing

a. In not more than 200 words write a letter to a bank asking for a loan. Describe the motive
you need the money.
b. In not more than 100 words give an answer to the previous letter (a) accepting or declining
the request.
c. Read the text Universal Banking and summarize it in not more than 70 words.

Universal Banking

Nowadays, banking is seen to become more and more international under the impact of a number of
changing factors as deregulation, development of data processing, mergers, takeovers and acquisitions
in the banking sector.

Most banks tend to be universal and compete in offering financial services both in the domestic and
international market. Thus, the universal banking undergoes an expansion stage worldwide. Besides
retail and corporate banking, multinational banks are involved in activities such as:
 sale of insurance to organizations, companies and individuals
 underwriting of securities
 trading of securities on behalf of other entities
 equity acquisition interest in companies
 participation in Board of Directors with expected benefits

The specific international banking operations which the universal banks carry out mainly include:
 financial intermediation in both domestic and foreign currency – deposit taking and loan granting
 foreign exchange transactions
 international money transfers
 design of international trade and project finance packages
 trading of financial instruments
 inter-bank lending and borrowing
 foreign exchange dealing
 trade financing

Both the universal and international banks offer their international banking services through specialized
departments in the banks located in the country of origin, branches abroad and representative offices.
The correspondent banks may be also used whenever the customers of one bank need assistance to do
business with the customers of other banks.

(www.worldbank.org)

53
UNIT FOUR – FINANCE AND ACCOUNTING

1. FINANCIAL MATTERS

Finance: the management of money, especially money controlled by a government, company, or large
organization
(Longman Dictionary of Contemporary English)

1.1. Lead-in

Consider the following questions:


1. Can you define financial matters?
2. What would you take into consideration when financing a company?

1.2. Reading

Read the following article referring to Social Security problems. The headings of the four main
sections have been removed. They are given below. Choose the most appropriate heading for
each paragraph.
Tax collection and its problems
Pessimistic conclusion
Tax changes will meet resistance
Taxability

Social Security: Five Changes on the Horizon


By Al Jacobs

July 2004 — For those of you who tune in, even sporadically, to media reports that discuss
governmental financial matters, you're aware that Social Security is experiencing some difficulties. If
you're not exactly certain what troubles exist, it's understandable. Apparently our nation's leaders are
equally mystified as to the nature of the problems and what must be done to correct them.

1.

The program's concept is fairly basic. In essence, the federal government collects a portion of all working
persons' income and distributes it to the nation's retirees. At the heart of the system is the Federal
Insurance Contributions Act (FICA). When started in 1935 it appeared to work nicely. The small sums
taken, never more than $300 per year from any salaried employee, seemed a meagre price to pay to
ensure that the nation's elderly could rely on a modest income to help with their living expenses.
However, somewhere along the way strange things happened. Beginning in the 1970s, sums taken from
the contributors rapidly escalated so to cover the ever-increasing amounts paid out. Coupled with this,
imposition of a succession of complex rules began twisting the system into an unintelligible labyrinth.
Currently, a tax of 7.65 percent is accessed on both employer and employee, imposed on earned income
up to $87,900. For self-employed individuals, the tax is the sum of these amounts for a total of 15.3
percent. As for distributions, monthly payments are in some way tied to income received during each
retiree's working life. Rules are periodically enacted for such things as age eligibility for receipt, taxability
of benefits, and various other parameters.

2.

And where are we today? Accusations of impropriety abound from every quarter. Claims of coming
insolvency are issued regularly. The arena is so thoroughly politicized that any predictions are suspect.
Nonetheless, I will now list five changes that you may expect.
Taxability of benefits will increase. The first change likely to occur will be full, rather than the current 85
percent, taxability of Social Security benefits for those above the total income threshold. This amount is
presently $25,000 for an individual and $32,000 for a married couple filing jointly.
Reduction of the taxability limits on benefits. The next alteration will probably be a systematic
reduction of the threshold limits just described. Eventually you may expect that provision to be eliminated
so that all Social Security benefits become fully taxable to all recipients.
Reimposition of an age ceiling for earned income. Until recently, a rule existed that limited benefit
eligibility for recipients in the 65 to 69 age group that received earned income. Although this penalty no
longer exists, it will probably be one of the provisions reinstituted in the future. Along with it, the exclusion
cutoff age of 70 will be raised and eventually eliminated altogether.

3.

Introduction of means testing. The three changes just described should not meet with much organized
resistance. The reason is clear: none initially affect many recipients. The next change, means testing, will
be a different story. At its simplest, this will eliminate eligibility to receive benefits for persons with annual
income above some predesignated amount from all sources, rather than just earned income. It will
naturally start with the highest incomes, but over time the limit will decline.
Imposition of assets testing. Finally, as the situation becomes more aggravated, assets testing will
develop, where an individual's net worth determines entitlement. This might be patterned after the
Medicaid program to the extent that if Social Security benefits are paid, for example, to the owner of a
home with equity, a lien for those payments attaches to the property following the death of the recipient.
Once again the threshold begins high and declines over time.

4.

I give no guarantee in what order the changes might occur, but one thing is certain: Expect the final result
to be limited only by the imagination and desperation of our nation's leaders.
© 2004 A.B. Jacobs. www.onthemoneytrail.com. Printed with permission.

1.3. Vocabulary development

FINANCE

Finance (n) – financier (n)


Financial (adj.)

 retired
 living expenses
 escalate (about a situation – it becomes much worse; about prices/ costs – they become much
higher
 provision (a condition in an agreement or law)
 recipient
 eligibility (the state of being able or allowed to do smth.)
 net worth (actual value in money)
 lien – the legal right to keep something that belongs to someone who owes you money, until the
debt has been paid
 insolvency (the state of not having enough money to pay what you owe)
 wages
 assets (the things that a company owns, that can be sold to pay debts)
 creditors
 debtors
 bankruptcy
 overheads (pl. money spent regularly on rent, insurance, electricity and other things that are
needed to keep a business operating)
 liabilities (pl. the amount of debt that must be paid; legal responsibility for smth. especially for
paying money that is owed or for damage or injury)
 expenditure (the total amount of money that a government, organization, or person spends during
a particular period of time)
 fixtures (pl. a piece of equipment that is fixed inside a house or building and is sold as part of the
house)

1.3.1. Use words and expressions from above to fill in the blanks in the following sentences:

1. You must always read in detail the___ of the contract.


2. He has ___ although he is not very old.
3. Tenants have legal ___ for any damage they cause.
4. The total ___ on defence has dropped since 1999.
5. I cannot cover the ___ with only one salary.
6. They don’t want the misunderstandings ___ into a full-scale fight.
7. Their offices are in London, so the ___ are very high.
8. The fixtures and fittings were more expensive than the ground on which the house was built.
9. The balance sheet will not show the ___ of the company.
10. His ___ is obvious: he sold too many of his assets.
11. If they go bankrupt, they will have to sell all their ___.

1.4. Language focus – Reported Speech

Have a look at the following sentences:


1. They said they had bought a new car.
2. I told you I would be at the meeting.
3. They asked if we wanted to sell the business.
4. He wanted to know why he had to pay so many taxes.
5. The Chief Accountant suggested we finish the paperwork as soon as possible.
6. Tom advised travelling by plane.
These sentences report what someone said/ asked/ ordered etc.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Unit 16 – pp. 89-95
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Units 10-11 – pp. 41-47
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
269-288)

1.4.1. Report the following commands, requests and suggestions:

1. Type these letters and post them till tomorrow.


2. Don’t forget to pay the telephone bill.
3. Don’t leave before you finish your work!
4. Will you arrange a meeting for tomorrow?
5. Speak more quietly, please.
6. Would you mind waiting for a minute?
7. Please, work more carefully.
8. Will all those in favour raise their hands?
9. Let’s visit the car Trade Fair tomorrow, shall we?
10. You must attend that interview.

1.4.2. Read the list containing reporting verbs, choose ten and build sentences.

Add Decide Mention State


Admit Deny Observe Suggest
Agree Doubt Persuade Suppose
Announce Estimate Promise Swear
Answer Expect Propose Tell
Argue Explain Remark Think
Boast Fear Remember Threaten
Claim Feel Repeat Understand
Comment Find Reply Warn
Complain Guarantee Report
Confirm Hope Reveal
Consider Insist Say

(from Sue O’Connell, Advanced English CAE, Longman, 1999, p. 155)

1.5. Language in use

1.5.1. Fill in the blanks with ONE suitable word.

Similar 1 ___ a mall, people 2 ___ buy and sell a unique product 3 ___ a stock market. That product is
stock, 4 ___ is a share of ownership in a company. Potential 5 ___ get to choose 6 ___ many companies
that sell a 7 ___ of goods, from clothing to medicine and from sports equipment to toys. When a person
buys a company’s 8 ___, that person becomes a 9 ___ in that company. (A “stockholder” is another name
for shareholder.) A shareholder is 10 ___ considered an investor in the company. When that company
makes money, 11 ___ can also be called ‘earned income or profit’, the value of the company’s stock often
increases. That’s 12 ___ more people may become interested 13___ investing in the company.
Sometimes, shareholders 14 ___ a dividend, which is a portion of the companies earned income in the
form of a 15 ___ payment. 16 ___ people try to make money by 17 ___ and selling stocks. Stock prices
can 18 ___ up and down. Shareholders may make money or lose money by selling stocks that they 19
___, depending on whether the price has gone up or down since they bought their shares. A company’s
stock price may be affected by market or economic 20 ___. The hundreds or thousands of people who
invest in a company’s stock also have an effect on the stock’s 21 ___. 22 ___ more people want to buy
shares, the stock’s price usually goes up because more people want to own it. On the other 23 ___, if
more people want to sell their shares and there is 24 ___ demand for them, then the price of the stock
may go 25 ___.
(Adapted from A Primer to the Stock Market, www.younginvestor.com)

1.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

A member in public practice should observe the Principles of the Code of Professional Conduct in
determining the scope and nature of services to be provided.

The public interest aspect of 26 ___ public accountants' services requires that such services be
consistent with acceptable professional 27 ___ for certified public accountants. Integrity requires that
service and the public trust not be subordinated to personal gain and 28 ___. Objectivity and
independence require that members be free from conflicts of interest in discharging professional
responsibilities. Due care requires that services be 29 ___ with competence and diligence.

Each of these Principles should be considered by members in 30 ___ whether or not to provide specific
services in individual circumstances. In some instances, they may represent an overall constraint on the
nonaudit services that might be offered to a specific client. No hard-and-fast rules can be 31 ___ to help
members reach these judgments, but they must be satisfied that they are meeting the spirit of the
Principles in this regard.
In order to accomplish this, members should:
 Practice in firms that have in place internal quality-control 32 ___ to ensure that services are
competently delivered and adequately supervised.
 Determine, in their individual judgments, whether the 33 ___ and nature of other services
provided to an audit client would create a conflict of 34 ___ in the performance of the audit
function for that client.
 Assess, in their 35 ___ judgments, whether an activity is consistent with their role as
professionals.
(adapted from www.nysscpa.org/)

26. A certified B recognised C testified D considered


27. A habit B behaviour C comportment D activity
28. A benefit B interest C advantage D target
29. A assured B ensured C offered D provided
30. A determining B establishing C deciding D proposing
31. A developed B stated C provided D created
32. A policies B procedures C activities D tasks
33. A aim B scope C target D objective
34. A parties B policy C interest D rules
35. A personal B public C corporate D individual

1.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

Financial Accounting Standards Board (FASB)


36. Since 1973, the Financial Accounting Standards Board (FASB) (A) was (B) the designated
organization in the private sector (C) for establishing (D)standards of financial accounting and reporting.

37. Those standards govern the preparation (A) of financial reports. They are (B) official recognized (C)
as authoritative by the Securities and Exchange Commission (Financial Reporting Release No. 1, Section
101) and the American Institute of Certified Public Accountants (Rule 203, Rules of Professional Conduct,
(D) as amended May 1973 and May 1979).

38. (A) Such standards are (B) essential for the (C) efficient functioning of the economy because
investors, creditors, auditors and others (D) rely on credible, transparent and comparable financial
information.

39. The Securities and Exchange Commission (SEC) has statutory authority (A) of establishing (B)
financial accounting and (C) reporting standards for publicly held companies (D) under the Securities
Exchange Act of 1934.

40. (A)Throughout its history, however, the Commission’s policy has been to rely on the private sector for
this function (B) in the extent that the private sector demonstrates (C) ability to fulfil the responsibility (D)
in the public interest.

41. Although (A) the function of establishing financial accounting and reporting standards (B) legally
resides on the Securities and Exchange Commission for public companies, the SEC (C) has traditionally
provided the private sector with (D) the opportunity for self-regulation.

42. The mission of the FASB is (A) to establish and improve standards of financial accounting and
reporting (B) for the guidance and education of the public, including issuers, auditors, and (C) users of
financial information. Accounting standards are important (D) in all.

43. They (A) are critical to the free enterprise system and the deep and liquid capital markets that (B) we
enjoy in the United States. The information (C) that results when the standards are applied (D) is used to
helping allocate scarce capital resources and to provide a basis of corporate accountability.
(adapted from www.nysscpa.org/)

1.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

Companies may be successful in making 44 ___ or they may be failing to do so. PROFITABLE
There are a number of 45 ___ why most businesses fail. REASONABLE
One certainly refers to lack of 46 ___ systems. MANAGERIAL
Then, lack of vision, purpose or principle may be 47 ___ reason. OTHER
Lack of 48 ___ planning and review may also conduct to failure. FINANCE
Other reasons relate to over dependence on specific goals in the business, poor SEGMENT
market 49 ___ and strategy, competition, lack of market knowledge.
Moreover, inadequate 50 ___, the absence of standard quality programmes and CAPITAL
owners concentration on technical, rather than the strategic planning at hand may
cause serious trouble.
(adapted from www.nysscpa.org/)

1.6. Speaking

Pair work

 Why is finance important? Make a list of the advantages and disadvantages of being a specialist
in finance, bringing arguments to support your opinion.

 Governments must develop a financial policy. Is this necessary? Bring arguments to support your
opinion.

1.7. Writing

Use the words given below in a short text. Try to find a link between them and their financial
implications.

Active trading = an investment strategy involving ongoing buying and selling actions of the investor.
Passive investing = an investment strategy involving limited ongoing buying and selling actions.
Gearing ratio = a term given to leverage ratios that express the capital for a firm.
Down round = a name for a round of financing where investors purchase stock from a company at a lower
valuation than the valuation placed upon the company by earlier investors.

2. ACCOUNTING

2.1. Lead-in

Consider the following questions:


1. What are the advantages and disadvantages of being an accountant?
2. What are the most commonly used accounting documents? Make a list.
3. What are in your opinion the qualities of a good accountant?

2.2. Reading

Read the following text.

The Mission of the Financial Accounting Standards Board

(Par. 1)
Accounting standards are essential to the efficient functioning of the economy because decisions about
the allocation of resources rely heavily on credible, concise, transparent and understandable financial
information. Financial information about the operations and financial position of individual entities also is
used by the public in making various other kinds of decisions.
(Par. 2)
To accomplish its mission, the FASB acts to:
 Improve the usefulness of financial reporting by focusing on the primary characteristics of
relevance and reliability and on the qualities of comparability and consistency;
 Keep standards current to reflect changes in methods of doing business and changes in the
economic environment;
 Consider promptly any significant areas of deficiency in financial reporting that might be improved
through the standard-setting process;
 Promote the international convergence of accounting standards concurrent with improving the
quality of financial reporting; and
 Improve the common understanding of the nature and purposes of information contained in
financial reports.

(Par. 3)
The FASB develops broad accounting concepts as well as standards for financial reporting. It also
provides guidance on implementation of standards. Concepts are useful in guiding the Board in
establishing standards and in providing a frame of reference, or conceptual framework, for resolving
accounting issues. The framework will help to establish reasonable bounds for judgment in preparing
financial information and to increase understanding of, and confidence in, financial information on the part
of users of financial reports. It also will help the public to understand the nature and limitations of
information supplied by financial reporting.

(Par. 4)
The Board’s work on both concepts and standards is based on research aimed at gaining new insights
and ideas. Research is conducted by the FASB staff and others, including foreign national and
international accounting standard-setting bodies. The Board’s activities are open to public participation
and observation under the "due process" mandated by formal Rules of Procedure. The FASB actively
solicits the views of its various constituencies on accounting issues.
(Par. 5)
The Board follows certain precepts in the conduct of its activities. They are:
 To be objective in its decision making and to ensure, insofar as possible, the neutrality of
information resulting from its standards. To be neutral, information must report economic activity
as faithfully as possible without coloring the image it communicates for the purpose of influencing
behaviour in any particular direction.
 To weigh carefully the views of its constituents in developing concepts and standards. However,
the ultimate determinant of concepts and standards must be the Board’s judgment, based on
research, public input and careful deliberation about the usefulness of the resulting information.
 To promulgate standards only when the expected benefits exceed the perceived costs. While
reliable, quantitative cost-benefit calculations are seldom possible, the Board strives to determine
that a proposed standard will meet a significant need and that the costs it imposes, compared
with possible alternatives, are justified in relation to the overall benefits.
 To bring about needed changes in ways that minimize disruption to the continuity of reporting
practice. Reasonable effective dates and transition provisions are established when new
standards are introduced. The Board considers it desirable that change be evolutionary to the
extent that it can be accommodated by the need for relevance, reliability, comparability and
consistency.
 To review the effects of past decisions and interpret, amend or replace standards in a timely
fashion when such action is indicated.

(Par. 6)
The FASB is committed to following an open, orderly process for standard setting that precludes placing
any particular interest above the interests of the many who rely on financial information. The Board
believes that this broad public interest is best served by developing neutral standards that result in
accounting for similar transactions and circumstances in a like manner and different transactions and
circumstances should be accounted for in a different manner.

(Par. 7)
Financial Accounting Standards Board (FASB)
The FASB is part of a structure that is independent of all other business and professional organizations.
Before the present structure was created, financial accounting and reporting standards were established
first by the Committee on Accounting Procedure of the American Institute of Certified Public Accountants
(1936–1959) and then by the Accounting Principles Board, also a part of the AICPA (1959–73).
Pronouncements of those predecessor bodies remain in force unless amended or superseded by the
FASB.

Financial Accounting Standards Advisory Council (FASAC)

FASAC has responsibility for consulting with the FASB as to technical issues on the Board’s agenda,
project priorities, matters likely to require the attention of the FASB, selection and organization of task
forces and such other matters as may be requested by the FASB or its Chairman. At present, the Council
has more than 30 members who are broadly representative of preparers, auditors and users of financial
information.

Financial Accounting Foundation (FAF)

The FAF, which was incorporated to operate exclusively for charitable, educational, scientific and literary
purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, is responsible for
selecting the members of the FASB and its advisory council, ensuring adequate funding of their activities
and for exercising general oversight with the exception of the FASB’s resolution of technical issues.

Governmental Accounting Standards Board

In 1984, the Foundation established a Governmental Accounting Standards Board (GASB) to set
standards of financial accounting and reporting for state and local governmental units. As with the FASB,
the Foundation is responsible for selecting its members, ensuring adequate funding and exercising
general oversight.

Trustees
The Foundation is separate from all other organizations. However, its Board of Trustees is made up of
members from constituent organizations having interest in financial reporting. Nominees from constituent
organizations are approved by the Trustees. There also are Trustees-at-large who are not nominated by
those organizations, but are chosen by the sitting Trustees. The constituent organizations are:
FAF Constituent Organizations
American Accounting Association
American Institute of Certified Public Accountants
Association for Investment Management and Research
Financial Executives International
Government Finance Officers Association
Institute of Management Accountants
National Association of State Auditors, Comptrollers and Treasurers Securities Industry Association
(Adapted from www.accountingweb.com)

Find a word in the text that means:


(paragraph 1) the profession or work of keeping or checking financial accounts
(paragraph 1) the amount or share of something that has been allocated to a person or organization
(paragraph 2) the state of being trusted or depended on
(paragraph 2) to make sure people know about smth.
(paragraph 3) help and advice given to someone about their work, education etc.
(paragraph 3) connected with money or the management of money
(paragraph 4) group of people who work together or who are together for a particular purpose
(paragraph 4) to be place under control
(paragraph 5) to spread an idea or belief; to make a new law come into effect by announcing it officially
(paragraph 5) a situation in which smth. is prevented from continuing in its normal way because of
problems and difficulties
(paragraph 6) to prevent smth. or make smth. impossible
(paragraph 6) business deals
(paragraph 7) a level of quality, skill, ability by which someone or smth. is judged
(paragraph 7) someone/ smth. officially recognised as being correct or true, usually after a test

2.3. Vocabulary development


ACCOUNTING

Account (n) –accountancy (n) – accountant (n) - accounting (n)


accountable (adj.)
account (v)

 Accountants’ report
 Agreed-upon procedures
 Audit (to officially examine a company’s financial records in order to check that they are correct)
 financial statements (lists showing amounts of money paid, received, owing etc. and their total)
 annual report
 cash flows (the movement of money coming into a business as income and going out as wages,
materials etc.)
 balance sheet (2) (a statement of how much money a business has earned and how much
money it has paid for goods and services)
 statements
 certified public accountant (CPA)
 auditing standards
 equity (the value of a piece of property or of a company’s shares after debts have been paid; pl.
business shares that give you some of the company’s profits rather than a fixed regular payment)
 liabilities
 assets

2.3.1. Use words and expressions from above to fill in the blanks in the following sentences:

The 1___ is a formal document that communicates an independent accountant's: (a) expression of limited
assurance on FINANCIAL STATEMENTS as a result of performing inquiry and analytic procedures
(Review Report); (b) results of procedures performed 2 ___ Report); (c) non-expression of opinion or any
form of assurance on a presentation in the form of 3 ___ information that is the representation of
management (Compilation Report); or (d) an opinion on an assertion made by management in
accordance with the Statements on Standards for Attestation Engagements (Attestation Report). An
accountants' report does not result from the performance of an 4 ___.
The 5 ___ is the report to the stockholders of a company which includes the company's annual, audited 6
___ and related 7___ of earnings, stockholders' or owners' equity and 8 ___, as well as other financial
and business information.

The 9 ___ are guidelines to which an AUDITOR adheres. Auditing standards encompass the auditor's
professional qualities, as well as his or her judgment in performing an AUDIT and in preparing the
AUDITORS' REPORT. Audits conducted by independent 10 ___ (CPA) usually in accordance with
GENERALLY ACCEPTED AUDITING STANDARDS (GAAS), which consist of standards approved and
adopted by the membership of the AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
(AICPA).

The 11 ___ is the basic FINANCIAL STATEMENT, usually accompanied by appropriate DISCLOSURES
that describe the basis of ACCOUNTING used in its preparation and presentation of a specified date the
entity's 12 ___, 13 ___ and the 14 ___ of its owners. Also known as a STATEMENT OF FINANCIAL
CONDITION.
(Adapted from www.nysscpa.org/)

2.4. Language focus – Useful language

If you work in the Accounting Department you will be asked to write reports about the financial condition
of the organization. Definitely, the report should contain not only figures, but also clear, logically
connected sentences. The following expressions might help you write a good report.

Introduction: The aim of this report is to… It uses…


This report is intended to… It draws on…
This report looks at/describes… It is based on…
Reporting an observation: It seems/ appears that… It was found that…
A/the majority/ minority of… It was felt that…
Quoting: According to…
As X said…
In the words of…
Speculating: It may/ could/ might (well) be that…
Generalising: In general
On the whole
In the main
Commenting: Interestingly
Curiously
Oddly
Strangely
Surprisingly
Predictably
As might be (have been) expected…
It is interesting that…
Making a recommendation: It is recommended that….
It is/ would be advisable for X to…
X might/ should consider + -ing
Summing up: To sum up/ summarise
On balance
In short

(from Sue O’Connell, Advanced English CAE, Longman, 1999, p. 167)

2.4.1. Make an oral presentation of the activity of an imaginary firm/ company you run. Use the
expressions above.

2.4.2. Write a report using the expressions from the table above.

2.5. Language in use

2.5.1. Fill in the blanks with ONE suitable word.

What is GAO?
The U.S. General 1 ___ Office (GAO) is 2 ___ agency 3 ___ works for Congress and the American
people. Congress asks GAO to study the programs and expenditures of the federal government. GAO,
commonly 4 ___ the investigative arm of Congress 5 ___ the congressional watchdog, is independent
and nonpartisan. 6 ___ studies 7 ___ the federal government 8 ___ taxpayer dollars. GAO advises
Congress and the heads of executive 9 ___ 10 ___ as Environmental Protection Agency, EPA,
Department of Defense, DOD, and Health and Human Services, HHS) 11 ___ ways 12 ___ make
government more effective and responsive. GAO evaluates federal programs, audits federal
expenditures, 13 ___ issues legal opinions. When GAO reports its findings 14 ___ Congress, it
recommends actions. 15 ___ work leads to laws and acts that improve government operations, and save
billions 16 ___ dollars.
(Adapted from www.accountingweb.com)

2.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

As 17___, certified public accountants 18 ___ an essential role in society. Consistent with that role,
members of the New York State Society of Certified Public Accountants have 19 ___ to all those who use
their professional services. Members also have a 20 ___ responsibility to cooperate with each other to 21
___ the art of accounting, maintain the public's 22 ___, and carry out the profession's special
responsibilities for self-governance. The 23 ___ efforts of all members are required to 24 ___ and
enhance the traditions of the profession.
A distinguishing mark of a profession is 25 ___ of its responsibility to the public. The accounting
profession's public consists of 26 ___, credit grantors, governments, employers, investors, the business
and financial community, and 27 ___ who rely on the objectivity and integrity of 28 ___ public accountants
to maintain the orderly functioning of 29 ___. This reliance imposes a public interest responsibility on
certified public accountants. The public 30 ___ is defined as the collective well-being of the community of
people and institutions the profession serves.
(Adapted from www.nysscpa.org/)

17. A professionals B specialists C experts D managers


18. A realize B perform C detain D act
19. A duties B responsibilities C objectives D tasks
20. A steady B incessant C continuing D lasting
21. A settle B build C update D improve
22. A confidence B interest C attention D trust
23. A collective B common C overall D maintained
24. A keep B preserve C improve D maintain
25. A recognition B acceptance C approval D declining
26. A customers B businessmen C accountants D clients
27. A others B the rest C these D group
28. A known B certified C recognized D accepted
29. A trade B commerce C relations D merchandise
30. A concern B care C interest D duty

2.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

31. (A) From discharging their professional responsibilities, members (B) may encounter (C)conflicting
pressures from among (D) each of those groups.

32. In resolving those conflicts, (A) members should act with integrity, (B) guided by the precept that
when members fulfil their responsibility (C) for the public, clients' and employers' interests (D) are best
served.

33. (A) Those who rely on certified public accountants (B) expect from them to discharge their
responsibilities with integrity, objectivity, (C) due professional care, and a genuine (D) interest in serving
the public.
34. (A) They are expected to provide quality services, (B) enter for fee arrangements, and offer (C) a
range of services–all in a manner that demonstrates a level of (D) professionalism consistent with these
Principles of the Code of Professional Conduct.

35. (A) All who accept membership in the New York State Society of Certified Public Accountants (B)
commit themselves to honour the public trust. (C) In return for the faith that (D) the public reposes for
them, members should seek continually to demonstrate their dedication to professional excellence.

36 To maintain (A) and broaden public confidence, members (B) should perform all professional
responsibilities with (C) the highest sense of integrity. Integrity is an element of character (D) fundamental
in professional recognition.

37. It is (A) the quality from which the public trust derives and (B) the benchmark for which a member
must ultimately test all decisions. Integrity requires a member to be, (C) among other things, honest and
candid (D) within the constraints of client confidentiality.

38. Service (A) and the public trust should not be (B) subordinated to personal gain and advantage.
Integrity can accommodate (C) the inadvertent error and the honest (D) difference in opinion.

39. It cannot accommodate deceit or (A) subordination of principle. Integrity (B) is measured by terms of
what is right and just. In the absence of specific rules, standards, or guidance, or (C) in the face of
conflicting opinions, a member should test decisions and deeds by asking: (D)"Am I doing what a person
of integrity would do? Have I retained my integrity?"
40. Integrity requires a member to observe (A) both the form and the spirit of technical and ethical
standards; (B) circumvention of that standards constitutes subordination of judgment. Integrity (C) also
requires a member to observe the principles of objectivity and independence and (D) of due care.
(Adapted from www.nysscpa.org/)

2.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

41 ___is a state of mind, a quality that lends value to a member's services. OBJECTIFY
Honesty is a 42 ___feature of the profession. DISTINGUISHER
The principle of objectivity imposes the obligation to be impartial, intellectually INTERESTING
honest, and free of conflicts of 43 ___.
Independence 44 ___ relationships that may appear to impair a member's PRECLUSION
objectivity in rendering attestation services.
Members often serve 45 ___ interests in many different capacities and must MULTIPLICATION
demonstrate their objectivity in varying circumstances.
Members in public practice render attest, tax, and management 46 ___ services. ADVICE
Other members prepare financial 47 ___ in the employment of others, perform STATING
internal auditing services, and serve in financial and management capacities in
industry, education, and government.
They also educate and 48 ___ those who aspire to admission into the profession. TRAINEE
49 ___ of service or capacity, members should protect the integrity of their work, REGARDS
maintain objectivity, and avoid any subordination of their judgment.
For a member in public 50 ___, the maintenance of objectivity and independence PRACTITIONER
requires a continuing assessment of client relationships and public responsibility.
Such a member who 51 ___ auditing and other attestation services should be PROVISION
independent in fact and appearance. In providing all other services, a member
should maintain objectivity and avoid conflicts of interest.

(adapted from www.nysscpa.org/)

2.6. Speaking

Pair work. Consider the following statement:

An accountant should maintain objectivity and be free of conflicts of interest in discharging professional
responsibilities. A member in public practice should be independent in fact and appearance when
providing auditing and other attestation services.

One of you should bring arguments in favour of the statement, the other against it.

2.7. Writing

In not more than 200 words explain the need and importance of the accounting for the business
environment.

3. TAXES AND TAXATION


Tax: an amount of money that you must pay to the government according to your income, property,
goods etc. that is used to pay for public services.

3.1. Lead-in

Consider the following questions:

1. Why does economy need a tax system?


2. Why do countries/governments need taxation?
3. What do you know about taxation in your country?

3.2. Reading

Read the following article referring to the present American tax system and draft a presentation
with its strengths and weaknesses. Try to compare it, if possible, with the Romanian tax system.
Bring concrete examples into your presentation.

How do we cure the evils of our present tax system (IRS & Income Tax)?
By John McDaniel

(Par. 1)
America is currently plagued by the problem of joblessness, and in spite of the best efforts of those in
charge of remedying it, little, if any, progress is being made. Other countries such as China, Japan,
Korea, and others seem not to have this problem to the great extent that the U.S.A. does. America’s retail
shelves are stacked with cheaper foreign goods that have driven American manufactured goods out of
the market. Americans no longer provide many services in the U.S.A. because they have been
outsourced to foreign countries such as India because labor costs are much cheaper there.

(Par. 2)
Methods of taxation in other countries also contribute to the American unemployment problem. Most
Americans do not realize the Europeans, Australians, and Canadians (with their GST–Goods and Sales
tax), and countless others with a VAT (Value Added Tax) have had a discriminatory tax on American
goods and services for decades! This discriminatory tax is 15 to 25% in Europe. It works like this: every
business has many costs, one of which is taxes (payroll taxes, profits taxes, etc.). In the U.S.A., these
costs, like all other costs, are included in the prices of our products, but we don’t itemize (clearly showing)
the specific increment that is taxes. When we ship that product to Europe, etc., they add the VAT to the
already tax-laden American product.

(Par. 3)
Companies in the VAT countries, like American companies, have to pay taxes, but they keep track of the
taxes as the product proceeds along the production process. They call the incremental taxes VAT. When
the product is put on the retail shelf in Europe, etc., it includes the VAT, and the VAT is revealed to the
customer. Now it gets interesting: when a tax-laden American product (about 22% on average) is put on
the shelf next to the EU product, in Europe, the VAT is added to the American product. Now the American
product is 20+% more expensive than the comparable EU product! Guess which one sells? Conversely,
when the EU product is exported, they remove the VAT! When that EU product is exported to the US, it
sits on the retail shelf in the US with no taxes included right next to the American product with all the
taxes included! So, once again, the American product is 20+% more expensive than the comparable EU
product, and on our own shores! Guess which one sells?
(Par. 4)
We have put up with this nonsense for decades, while we debate tariffs on foreign steel and other like
products produced domestically in the U.S.A. that must be protected from foreign competition if our
domestic industry is to survive. Tariffs and other protectionism measures have not proven to be a
satisfactory solution in protecting our domestic job market. The Smoot-Hawley tariff of 1930 was enacted
to protect the American farmer from competition from much cheaper imported farm products. It represents
the high-water mark of U.S. protectionism in the twentieth century, and it precipitated negative results
(retaliation by other countries).
(par. 5)
There is a plan all ready to go that, if enacted into law now, will produce the kind of super-rapid economic
growth and new job-creation that is sorely needed, plus generate many additional good results for our
nation! It is H.R. 25, the Fair Tax Act of 2003. This bill has bi-partisan sponsorship, widespread support
among the hard-working taxpayers/voters, and fast growing support within the House of Representatives
(over 40 co-sponsors) and Senate. The Fair Tax will produce these highly desirable results:
• Our nation will enter a period of many years of sustained economic growth with new job-creation
unequalled by anything in our past history.
• The Fair Tax plan will bring back a measure of fairness and freedom to America that has been
sorely trampled-upon by the Income Tax System (and IRS) for many, many years.
• Receipts from the Fair Tax will be more than sufficient to fund the Social Security System and
Medicare, plus enable the government to meet its needs and steadily pay-down the national debt.

(Par. 6)
The Fair Tax draws on a much larger tax base (our GNP, gross national product each year, when it is
sold) than does the income tax; virtually no one will be able to evade paying at the "check-out" register.
This will lighten the load for all of us. Under the Fair Tax the "sticker price" of all that you buy will fall 20-
30%. So, even with the 23% Fair Tax added on, the cost of living would be no more than it is now, more
likely it would be less. The Fair Tax will:
• Replace the current complex and unfair federal tax system with a simple sales tax.
• Eliminate personal and corporate income taxes and Social Security, Medicare, gift and estate
taxes.
• Save taxpayers $250-$600 billion now being wasted in complying with the current tax code.
• Lower "sticker" prices 20-30% by removing the cost of business compliance with the current tax
code.
• Make American products more competitive with foreign products. Thus, hurling American
manufacturing levels to dizzying heights not seen within recent memory.
• Provide a more stable revenue source and raise the same amount of money for the federal
government with the imposition of a 23% sales tax with no loopholes.
• Dramatically lower tax rates for lower and middle-income Americans by pre-bate payments to
households to offset the sales tax on necessities.
• Protect and ensure the funding of Social Security and Medicare.
• Repeal the 16th Amendment and eliminate the Internal Revenue Service as we know it. Taxes on
income will no longer be constitutional.
• Bring capital investment flooding onto American shores. Business, no longer being taxed, will
enjoy America as the most “business-friendly” nation on earth.

(Par. 7)
House Resolution #25–the Fair Tax reform proposal is seen as a curative solution to relieve the American
people of the tyranny of our present tax system (income tax IRS) and to put Americans back to work. That
would be a great legacy to leave the American people.

(Adapted from AccountingWEB.com - June 25, 2004)

Find a word in the text that means:

(paragraph 1) the practice of preferring cheaper workers or products from another country
(paragraph 2) a tax added to the price of goods and services in Britain and the EU
(paragraph 3) to continue to do smth. that has already been started
(paragraph 3) the quality of increasing in number, value or amount (adj.)
(paragraph 4) a tax on goods coming into a country or going out of a country
(paragraph 4) the system of helping your country’s trade, especially by taxing foreign goods
(paragraph 5) despised, disconsidered (adj.)
(paragraph 6) the total value of all the goods and services produced in a country, usually in a single year
Gross National Product
(paragraph 6) fixed prices
(paragraph 7) money or property that you receive from someone after they die; a situation that exists as a
result of things that happened at an earlier time

3.3. Vocabulary development

TAX

tax (n) – taxation (n) –


taxable (adj.)
tax (v)

 Taxes money paid to the government


 Tariffs list of items to be taxed, import taxes
 Quotas a limit, especially an official limit, on the number or amount of smth. that
is allowed on a particular period
 cost
 tax-free
 regulations
 checks (pl) orders in writing to a bank to pay someone
 reimbursement
 tax compliance obedience to taxes
 fill out
 dwarf to minimize
 forms (pl) official documents

3.3.1. Use words and expressions from above to fill in the blanks in the following sentences (three
of them will not be used):

1. The current 7-million-word tax code requires 1,168 pages (2 volumes) to publish, and an
additional 6,439 pages of Federal Tax ___ that apply to income taxes.
2. The IRS has created 480 tax ___ with an additional 280 to explain how to __ the 480.
3. More Americans work in ___ occupations (CPAs, tax attorneys, etc.) than serve in the entire U.S.
Armed Forces. The IRS is twice as big as the CIA and five times the size of the FBI.
4. The compliance costs ___ the amount of the tax collected. In addition to that, the IRS spends a
yearly $9 billion budget.
5. The total national ___ of compliance (not counting the taxes paid) is $250 billion yearly. That's
$850 per capita of U.S. population.
6. The individual person is allowed to spend the first $8,860 of his yearly income ___.
7. He will get monthly ___ refund ___ for taxes paid on that amount, $17,720 (for a couple), $20,800
(household of 3), $23,880 (h.h. of 4), $26,960 (h.h. of 5), $30,040 (h.h. of 6), $33,120 (h.h. of 7),
$36, 200 (h.h. of 8).
(Adapted from AccountingWEB.com - June 25, 2004)

3.4. Language focus – Text features (1)

Have a look at the following sentences from the text:

1. So, once again, the American product is 20+% more expensive.


2. This will lighten the load for all of us.
3. That would be a great legacy to leave the American people.
In the sentences above “so” is a text organizer while “this/ that” are reference words.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Units 27-29 – pp. 152-168
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Unit 43 – pp. 178-183

3.4.1. Put one word in each space:


1 ___ paper money obviously had no intrinsic value 2 ___ acceptability originally depended on 3 ___
being backed by some commodity, normally precious metals. 4 ___, during the Napoleonic Wars
convertibility of Bank of England notes was suspended and there was some inflation 5 ___, 6 ___ quite
mild compared to 7 ___ which has occurred in other wars, was worrying to contemporary observers who
were used to stable prices and, 8 ___ the recommendations of an official enquiry Britain adopted the gold
standard for the pound in 1816. For centuries earlier silver had been the standard of value. 9 ___, the
pound was originally an amount of silver weighing a pound. 10 ___ the UK used the pound, France and
the United States were in favour of a bimetallic standard. 11 ___ when the various German states merged
into a single country in 1871 they chose the gold standard. 12 ___, the Scandinavian countries adopted
the gold standard shortly afterwards. 13 ___ France made the switch from bimetallism to gold in 1878 and
Japan, which had been on a silver standard, changed in 1897. In 1900, the United States 14 ___ officially
adopted the gold standard.
(www.wizardsofmoney.org)

3.4.2. Put one word in each space.


We will 15 ___ look at 16 ___ and 17 ___ bodies 18 ___ the International Monetary Fund IMF facilitate 19
___ risk transfer, a timely issue given the upcoming protests set to take place at the IMF/World Bank
meeting in Washington, DC soon. Then we’ll see that 20 ___ two bodies are simply a necessary evil of a
much bigger financial infrastructure.
Presently the big financial players are merrily increasing the financial risk to be transferred to the public
and the public is not noticing all that much. 21 ___, 22 ___ many are noticing are the consequences of
risk transfers that have happened in the past and materialized through 23 ___ things 24 ___ the IMF
bailouts. 25 ___, not too many concerned citizens are noticing the risk transfers that are being set up right
now 26 ___ the public to digest 27 ___ the future. 28 ___, this is not really their fault as the mechanisms
through 29 ___ all 30 ___ is done is not only shrouded in wizard secrecy, it is 31 ___ something of an
Alice in Wonderland world 32 ___ you get past the hurdles and pop in for a visit 33 ___.
(www.wizardsofmoney.org)

3.5. Language in use

3.5.1. Fill in the blanks with ONE suitable word.

Now more than 1 ___, an accountant is indispensable 2 ___ the success of 3 ___ business. But there's a
daunting array 4 ___ accountants and firms to choose 5 ___– from sole practitioners 6 ___ huge national
firms, from generalists to highly specialized CPAs. And today, new 7 ___ different entities are clamoring 8
___ your business – companies 9 ___ as American Express, 10 ___ have recently added the accounting
and tax services once the exclusive provinces of the CPA. 11 ___ Industry itself is changing rapidly. Tax
returns, financial statements, and other compliance items 12 ___ become mature services – they have
become commodities. Quality, timeliness and the physical end product 13 ___ given.

Check 14 ___ for appropriate educational background and membership 15 ___ the American Institute of
Certified Public Accountants AICPA and the New York State Society of CPA's. 16 ___ organizations
require continuing professional education of members 17 ___ their careers – approved courses to stay
current 18 ___ the latest accounting and tax changes. Certain industries also require compliance 19 ___
further accounting standards and additional industry specific CPE.

Firms belonging 20 ___ key practice sections of the AICPA also go 21 ___ peer review to maintain
membership 22 ___ those sections. Peer review requires a firm to submit 23 ___ an inspection
periodically, where other firms check 24 ___ work and verify adherence 25 ___ standards. Look 26 ___ a
firm with a history of "unqualified" peer reviews, indicating full compliance 27___ quality standards and
practices.
(Adapted from “How to Choose An Accountant” by Cynthia J. Nagle, in www.nysscpa.org)

3.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

So how do you choose the right accountant? Start by considering your needs and preferences:
Size: Is the 28 ___ contact typical of a smaller firm important to you? Or will you feel more comfortable
dealing with a team dedicated to your account, which is more common at mid- to large-size firms? Larger
firms may 29 ___ out your work or assign it to junior staff. You may not be getting what – and who – you
think you're paying for.

Specialization: Small firms may not have access to the 30 ___ you need. Accounting is a wide
profession, so most accountants narrow their range of specialty. It is nearly impossible to handle all areas
well. Find out which areas a firm concentrates in or has access to. Some firms belong to nationwide
networks of similar firms, to whom they can turn for help on specialized issues.

Complexity: Do you need a firm just to prepare a tax 31 ___ and year-end financial statements? Perhaps
you also need tax and financial planning advice, help with your business plan, or retirement 32 ___. Do
you need employee benefit plan design, computer system installation and support, advice on re-
engineering your operations for maximum efficiency and tax advantage?

The big picture: 33 ___ a picture of your needs to ensure that your accountant cannot only meet those
needs but also expected – and unforeseen – future needs. Accountants able to deal with only one piece
of your financial picture may fail to see the forest for the trees.

Reputation: Talk to your friends and business associates. Does their accountant contact them
throughout the year, not just at tax time, with 34 ___ advice and recommendations? Real value from an
accounting firm means superior service, a forward-thinking attitude and a relationship you can rely on. If
your friends and business associates had to choose another accountant, whom would they choose? A
firm's reputation among non-clients is almost as important as its 35 ___ with existing clients. Finally,
consider the "relationship fit" – do you get along with the individual? Do you share a similar outlook and
philosophy? Does he or she show a real interest in your business?

Qualifications: It's uncommon, but some people who offer "accounting services" are 36 ___. They are
unlikely to carry any liability insurance, nor is there any supervisory body you can complain to if things go
wrong. The apparent savings in fees, if any, could prove costly. Accountants who have the certified public
accountant CPA designation must adhere to certain accounting 37 ___.
(Adapted from How to Choose An Accountant by Cynthia J. Nagle, in www.nysscpa.org)

28. A one-on-one B direct C mutual D team


29. A lease B subcontract C over-contract D hire
30. A specialization B handicraft C expertise D know-how
31. A refund B pay back C return D payment
32. A scheme B policy C project D planning
33. A draw B draft C plan D develop
34. A proactive B further C effective D constant
35. A track record B file C documents D specialization
36. A qualified B unqualified C disqualified D specialists
37. A rules B standards C regulations D requirements

3.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

38. (A) In this system, "sticker" prices would fall 20-30%, (B) thus, giving our exports (C) a much better
competitive edge (D) when sold abroad.

39. This would "kick" the economy (A) into high gear. Businesses (no longer having to send the IRS any
money (B) for good) would simply (C) pass the savings on to the consumer, their shareholders, and their
employees (D) as higher wages.

40. Forty-five (A) from the fifty states use a sales tax (B) to generate revenue because they know that it is
the fairest, simplest, easiest, (C) most cost-effective, most (D) problem-free method of taxation.
41. The state taxing authority (A) in each state would assume (B) the duty of collecting the national sales
tax for the U. S. government. Only the retailers (C) files a tax return stating the amount (D) of their sales
for the year.

42. Each taxpayer (A) gets a month refund check (B) in the amount taxed on his spending up to the
poverty line. So, (C) in effect, he is only taxed on his (D) spending above the poverty line.

43. (A) In no case (B) anyone will sacrifice more than 23% of his total income (C) to the sales tax, even if
he spends all his income (D) on retail purchases.

44. Unspent income remains tax-free and available for investment or education expenses. Compliance
cost (A) in administering the Fair Tax is only $8 billion yearly. That is (B) a big savings compared to the
$250 billion (C) we now pay. The IRS, with all the taxpayer support services that it has made necessary,
is (D) intolerably burdensome and expensive.

45. At the Fair Tax website, (A) don't stop with the first frame. Click on each of the major headings (B) for
more complete information. It (C) will take awhile to do all this, but (D) it is well worth. You will learn
everything you've always wanted to know about the economy and taxation, but were afraid to ask!
(Adapted from AccountingWEB.com - June 25, 2004)

3.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

The Fair Tax reform proposal is the best 46 ___ to replace the IRS. ALTERNATE
It is a 47 ___ retail only national sales tax. SIMPLIFICATION
It is not a VAT value added tax–applied at every level of the 48 ___ process. PRODUCE
Business-to-business transactions, not being 49 ___, are not taxed. RETAILING
Nothing is 50 ___ from the employee’s paycheck. DEDUCTION
He has to 51 ___ it on new goods only, not used goods, for it to be taxed. EXPENDITURE
Thus, one is in charge of one’s 52 ___ "tax destiny.” OWNER

3.6. Speaking

Pair work

 Student A: You are a skilful accountant applying for the position of Chief Accountant in a
company having problems with taxation. You don’t know anything about the company’s
financial problems.
 Student B: You are the MD of that firm. You badly need Student A’s expertise, so you try to
convince him that the job you are offering is attractive.

3.7. Writing

In not more than 200 words write a report about a firm’s annual activity. Use the data you will find in the
balance sheet below:

Trading and Profit and Loss Account for year ending 31st December 2003

First year Second year


Sales 82, 340 91, 215
Less cost of sales 52, 300 55, 213
Opening stock for year - 14, 321
69, 534
Closing stock (end of year) 14, 321 37, 979 17, 345 32,189
Gross Profit for year 44, 361 59, 026
Wages 16, 200 18, 321
Depreciation 820 820
Other outgoings 2, 900 19, 920 1, 720 20, 861
Net profit for year 21, 224 19, 769
UNIT FIVE – INSURANCE

1. HEALTH INSURANCE

Insurance: an arrangement with a company in which you pay them money, especially regularly, and they
pay the costs if something bad happens, for example if you become ill or your car is
damaged
(Longman Dictionary of Contemporary English)

1.1. Lead-in

Consider the following questions:

1. What types of insurance do you know?


2. Which type of insurance do you consider the most useful? Why?
3. How do insurance companies sell their products?

1.2. Reading

Read the following text.

Health Insurance is a type of insurance whereby the insurer pays the medical costs of the insured if the
insured becomes sick due to covered causes, or due to accidents. The insurer may be a private
organisation or a government agency.

Private health insurance

Health insurance is one of the most controversial forms of insurance because of the conflict between the
need for the insurance company to remain solvent versus the need of its customers to remain healthy,
which many view as a basic human right. This conflict exists in a liberal healthcare system because of the
unpredictability of how patients respond to medical treatment. Suppose a large number of customers of a
particular insurance company were to contract a rare disease costing 100 million dollars to fight for each
patient. The insurance company would be faced with the choice of either charging all its future customers
astronomical premiums (thus losing customers and going out of business), paying all claims without
complaint (thus going out of business) or fighting the customers in an attempt to deny the costly treatment
(thus outraging patients and their families, and becoming a target for lawsuits and legislation).

Publicly funded medicine

Many countries have made the societal choice to avoid this important conflict by nationalising the health
industry so that doctors, nurses, and other medical workers become state employees, all funded by taxes;
or setting up a national health insurance plan that all citizens pay into with tax payments, and which pays
private doctors for healthcare. These national healthcare systems also have their problems. Many
countries have citizen groups which protest bureaucracy and cost-cutting measures that unduly delay
medical treatment.
Medicare/Medicaid
In the United States, health insurance is made more complicated by Federal Medicare/Medicaid
programs, which have had the unintended consequence of determining the price of medical procedures.
Many suspect that these prices are set independently of medical necessity or actual cost. A physician
who refuses to accept a Medicare/Medicaid payment will be banned from accepting any such payments
for a number of years, regardless of the reason for rejecting the payment or the amount offered. In either
case, this means that private insurers have little incentive to pay more than the government does.

Common complaints of private insurance

Some common complaints about private health insurance companies include:

Insurance companies do not normally announce their health insurance premiums more than a year in
advance. This means that, if you get sick, you may find your premiums greatly increased. This defeats the
purpose of having insurance in the first place.

If insurance companies try to charge different people different amounts based on your health, people will
feel they are unfairly treated. Some states require that insurance companies cover all who apply at the
same cost; this rule has the effect (called adverse selection) that healthy people subsidise sick ones, and
thus only really sick people buy insurance and the premiums are very expensive.

When a claim is made, it is in the best interest of the insurance company to use paperwork and
bureaucracy to attempt to deny the claim. Some percentage of people will give up, leading to lower costs
for the insurance company.

Health insurance is only available at a reasonable cost through an employer-sponsored group plan. This
means that unemployed individuals and self-employed individuals are at a disadvantage.

Employers can write some or all of their employee health insurance premiums off of their taxable income
whereas individuals have to pay taxes on income used to fund health insurance. This reduces the
employee's bargaining power in negotiating service with the insurance provider and also increases their
dependence on the employer. In the US, COBRA was passed in an attempt to address the latter concern.
Experimental treatments are generally not covered. This practice is especially criticised by those who
have already tried, and not benefited from, all "normal" medical treatments for their condition.

The Health maintenance organisation ("HMO") type of health insurance plan has been criticised for
excessive cost-cutting policies. The least popular of these policies is having accountants or other
administrators essentially making medical decisions for customers by deciding which types of medical
treatment will be covered and which will not.

Common complaints of publicly funded medicine

Price no longer influences the allocation of resources, and healthcare worker's pay is often not related to
quality or speed of care. Thus very long waits can be had before care is received.

Find words in the text which mean:

(paragraph 2) causing a lot of disagreement, because many people have strong opinions about
the subject being discussed
(paragraph 2) situation in which someone changes their behaviour or ideas suddenly, so that
you never know what they are going to do or think
(paragraph 3) more than is normal or reasonable
(paragraph 4) not officially allowed to meet, exist, or be used
(paragraph 4) something that encourages you to work harder, start a new activity etc
(paragraph 7) not good or favourable
(paragraph 10) discussion in order to reach an agreement about a sale, contract etc

1.3. Vocabulary development

- expressing annoyance or dissatisfaction  complain (about, that, to,


bitterly)
o make a complaint  go on and on about
o lodge a complaint (with,  nag (about, at)
against)  whinge (about)
 protest (about, to, that)  whine
 object (to, if)
 take it up with/take the matter up complaint formal complaint
with letters of complaint
 air your grievances protest in protest
protest against
- to complain a lot in an annoying way outcry public outcry
 moan (about) outcry about/over
 grumble (about) outcry against
 make a fuss (about) grievance file a grievance
air a grievance
 go on about

Using words from above, fill in the blanks in the following sentences.

1. If the accommodation is not satisfactory, I suggest you should ___ to the travel agency.
2. The company decided to ___ with the International Trade Commission.
3. Ms Petersen was blocked from promotion after ___ against Mr Jones.
4. Workers ___ angrily about the closing down of the factory.
5. Local authorities cannot solve our problem. However, we are prepared ___ with the Ministry of
Health if necessary.
6. I understand that she is tired but I’ve had enough of her ___ about having to work so late.
7. Everybody considered the prices too high, but there is no need to make ___ about the bill.
8. I understand you are angry with me for keeping you waiting, but there's no need to go ___ it.
9. When two of our colleagues were dismissed, the rest of us walked out ___.
10. The increase in fuel tax determined a widespread ___.

1.4. Language focus – Noun Clauses

Many suspect that these prices are set independently of medical necessity or actual cost.

Some states require that insurance companies cover all who apply at the same cost; this rule has
the effect (called adverse selection) that healthy people subsidise sick ones, and thus only really
sick people buy insurance and the premiums are very expensive.

Noun clauses are often introduced by that and are therefore called that-clauses. Not all noun clauses are
introduced by that.

(For details, see suggested bibliography:


Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
303-306)

In that-clauses following such verbs as demand, suggest, insist, require and after expressions such as it
is necessary/essential/important… the subjunctive may be used in formal style.
e.g. He demanded that the insurance company pay at once.
It is essential that he arrive before ten.

In less formal contexts, should can be used.

e.g. He demanded that the insurance company should pay at once.


It is essential that he should arrive before ten.

Situation: your colleague has had an accident but his car insurance policy has expired. Advise
him what to do, using the following expressions: it is necessary, it is essential, it is important, I
suggest that.
1.5. Language in use

1.5.1. Fill in the blanks with ONE suitable word.

The role of business information systems 1 ___ changed and expanded over the last four decades. In the
incipient decade 1950s and '60s, “electronic data processing systems” could 2 ___ afforded by only 3 ___
largest organizations. They were 4 ___ to record and store bookkeeping data 5 ___ as journal entries,
specialized journals, and ledger accounts. This was strictly an operations support role.

By the 1960s “management information systems” were used 6 ___ generate a limited range of predefined
reports, including income statements they were called P & L’s back then, balance sheets and sales
reports. They were trying to perform a decision making support role, 7 ___ they were not up to the task.

1.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

By the 1970s “decision support systems” 8 ___. They were interactive 9 ___ that they allowed the user to
choose 10 ___ numerous options and configurations. 11 ___ was the user allowed to customize outputs,
they 12 ___ the programs to their specific needs. There was a cost 13 ___. As part of your mainframe
leasing agreement, you typically had to pay to have an IBM system 14 ___ permanently on site.

The main development in the 1980s was the introduction of decentralized computing. 15 ___ having one
large 16 ___ computer for the entire enterprise, numerous PC’s were spread around the organization.
This meant that instead of submitting a job 17 ___ the computer department for batch processing and
waiting for the experts to perform the procedure, each user had 18 ___ own computer that they could
customize for their own purposes. Many 19 ___ fought with the vagaries of DOS protocols, BIOS
functions, and DOS batch programming.

As people became 20 ___ with their new skills, they discovered all the things their system was capable
of. Computers, instead of creating a 21 ___ society, as was expected, produced mountains of paper, 22
___ of it valueless. Mounds of reports were generated just because it was possible to do so. This
information 23 ___ was mitigated somewhat in the 1980s with the introduction of “executive information
systems”. They streamlined the process, giving the 24 ___ exactly what they wanted, and only 25 ___
they wanted.

8. A were introduced B have been introduced C had been introduced D will have introduced
9. A in the meaning B by meaning C in the sense D by the sense
10. A only B among C between D some
11. A If B Not only C Only not D Hardly
12. A also could configure B also would configure C would also configure D could configure
13. A though B however C nevertheless D although
14. A development B developer C developing D development
15. A But for B Instead of C Not that D In place of
16. A desktop B laptop C framework D mainframe
17. A to B for C towards D at
18. A his B her C their D hers
19. A pour souls B poor soles C pore souls D poor souls
20. A uncomfortable B comfortable C comfortably D uncomfortably
21. A paperfree B paperless C paperwork D papery
22. A many B more C the more D most
23. A load B download C upload D overload
24. A executive B execution C executioner D executor
25. A that B what C which D those

1.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.
26. (A) The 1980s also saw the first commercial application (B) for artificial intelligence techniques in the
form of “expert systems”. These programs could give (C) advice within a very limited subject area. The
promise of decision making support, (D) first attempted in management information systems back in the
1960s, had step-by-step, come to fruition.

27. The 1990s saw (A) the introduction of “strategic information systems”. This was (B) large because of
developments in the subject of strategic management (C) by scholars like M. Porter, T Peters, J. Reise,
C. Markides, and J. Barney in the 1980s. Competitive advantage became (D) a hot management topic
and software developers were happy to provide the tools.

28. (A) The role of business information systems had now expanded (B) to include strategic support. (C)
The last step was the commercialisation of the Internet, and (D) the growth of intranets and extranets at
the turn of the century.

29. In the next decade, (A) it is likely that M. Hammer’s reengineering principles (B) will be incorporated
further into business information systems. Hammer said (C) that rather then organizing a firm into
functional specialties (like production, accounting, marketing, etc.) and (D) looking at the tasks that each
function performs, we should be looking at complete processes from materials acquisition, to production,
to marketing and distribution.

30. The firm (A) should be re-engineered into a series of processes. (B) More and more software will
utilize this approach. Ultimately (C) there will be a fully integrated business information system in which all
types of business information (D) are seamlessly moved throughout the firm.

1.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

In his book Agenda, he expanded the idea to include 31___ and distributors. SUPPLY
The whole supply chain, from raw materials to final customer, should be seen as
a single process.
This is not unlike M. Porters theory of a “value chain” two decades earlier. The PROCEED
difference is that Hammer provides implementation 32___ and these can be
better translated into software algorithms that will drive extranets.
More and more, business information systems will take on the role of 33___ INVALUABLE
chain support, rather than company support.
The model of software tool representing this new 34___ is the platform of suites TENDENTIOUSNESS
"Business management systems p2p" also called "business workflow
management" or still "Oberon BWA".
In the future, a time could come when these systems are moved from extranets ACCUSTOMED
to the internet. 35___ will become a fully integrated participant in the value chain
and will have the same information system access as manufacturers, suppliers,
distributors, or facilitators.

1.6. Speaking

In pairs, make a list of possible sources of complaint referring to the Romanian healthcare system. You
may refer to specific cases that you have heard of.

1.7. Writing

In not more than 200 words, make suggestions to improve publicly funded healthcare.

2. HOME INSURANCE

2.1. Lead-in
Consider the following questions:

1. What possible risks does home insurance take into consideration?


2. Why should people insure their homes against very unlikely situations?
3. Which the most frequent risk that home insurance covers?

2.2. Reading

Read the following text.

Home insurance, or homeowners insurance, is an insurance policy that combines insurance on the
home, its contents, and, often, the other personal possessions of the homeowner, as well as liability
insurance for accidents that may happen at the home.

The cost of homeowners insurance scales upward depending on what it would cost to replace the house,
and which additional "riders", meaning additional items to be insured, are attached to the policy. The
insurance policy itself is a lengthy contract, and names what will and what will not be paid in the case of
various events. Typically, claims are not paid due to earthquakes, floods, "Acts of God", or war (whose
definition typically includes a nuclear explosion from any source). Special insurance can be purchased for
these possibilities.

Most insurers charge less if it appears less likely the home will be damaged or destroyed: for example, if
the house is situated next to a fire station, or if the house is equipped with fire sprinklers and fire alarms.
In the United States, most home buyers borrow money in the form of a mortgage, and the mortgage
lender always requires that the buyer purchase homeowners insurance as a condition of the loan, in order
to protect the bank if the home were to be destroyed. In most mortgage agreements, the lender
"impounds" the homeowners insurance payments, meaning that although the insurance payments are
due every six months, the homeowner must send the lender one-sixth of the money every month along
with his mortgage payment. Then every six months, the lender pays the premium to the insurance
company. This "impounding" is a scheme to ensure that the homeowner never misses a premium
payment, and therefore will be sure to have insurance for the length of the mortgage.

Life insurance

Life insurance policies, including pensions and life annuity policies, provide payments depending on the
life or the death of a particular person or persons.

Life insurance policies are issued in two basic types: term life and permanent life

Term life insurance, in a level term form, requires fixed, regular premiums and pays the death benefit,
also called the principle sum, only if the insured dies during the policy's term. There are no cash values
built under these policies.

Whole life insurance also requires fixed, regular premiums and pays the death benefit when the insured
dies. Because the level premium in the early years of such a policy exceeds the average cost of claims
and expenses there are moneys available to be invested. The policy owner has access to these invested
amounts via the policy's surrender value. Surrender values are not usually available in the first few years
of the policy because of high initial expenses. In this sense a whole-life policy has an investment
component. Therefore, whole-life insurance is more expensive than term life.

Annuity policies are issued by insurance companies in two ways: deferred and immediate. A deferred
annuity, as the name implies, includes a period of premium payment before the normal payments to the
beneficiary (usually monthly) commence. If the beneficiary dies during this period, then the accumulated
premiums (with or without interest) are paid as a benefit. An immediate annuity requires a single (lump-
sum) payment and payments to the beneficiary start immediately.

Under both types of annuity it is possible to include guaranteed periods for payments e.g. 5 or 10 years.
Both the commencement of benefit payments and the effect of the death of the annuitant (the beneficiary
after payments start) may depend on the survival of another life (lives) or the death of another life (lives).
Such annuities are called contingent annuities and are common under pension plans and estate
settlements e.g. when the pensioner dies his benefit will continue at 60% of its level to a surviving
spouse.

Find words in the text which mean:

(paragraph 1) legal responsibility for something, especially for paying money that is owed, or for
damage or injury
(paragraph 2) events that are caused by natural forces, such as a storm, flood, or fire, which
you cannot prevent or control
(paragraph 3) to officially take private property away from someone, usually as a punishment

(paragraph 3) a legal arrangement by which you borrow money from a bank or similar
organization in order to buy a house, and pay back the money over a period of
years
(paragraph 4) a fixed amount of money that is paid each year to someone, usually until they die

(paragraph 6) the cost of insurance, especially the amount that you pay each year
(paragraph 8) to begin or to start something
(paragraph 9) a husband or wife

2.3. Vocabulary development

to make certain that something will happen a promise


 make sure/make certain  promise
 make sure/make certain (that)  assurance
 insure/ensure  guarantee
 see that/see to it that  commitment
 pledge
to promise something  oath
 promise  undertaking
 assure
 give somebody your word what you say when you promise something
 vow  I promise
 guarantee  I promise
 commit to  I give you my word/you have my
 pledge word
 cross my heart
 I swear

Fill in the blanks in the following sentences with one of the words or expressions given in the box
below.

oath assurance given him my word assured promised


commitment pledges guarantee swear guaranteed

1. The police department had ___ to investigate the cause of the accident.
2. We will be leaving soon. The railways company has ___ us there will be no further delays.
3. I've ___ that I’ll take care of the car like it was mine.
4. I hope you know that during the ceremony you have to ___ that you will serve the country loyally.
5. This is my opinion. I can't ___ the plan will work, but I'll give it a try.
6. The TV set is ___ for one year. The producer promises to repair or replace it if it breaks within a
year.
7. I need a(n) ___ that you will support me, otherwise I won’t start doing anything.
8. The talks on the merger ended with smiles and handshakes, but no ___.
9. The Government has fulfilled at least 25% of its election ___.
10. You cannot blame him after all. He admitted that he had lied under ___.
2.4. Language focus –Coordinating Conjunctions

Co-ordinating conjunctions join pairs of parts of sentences or sentences.

In the United States, most home buyers borrow money in the form of a mortgage, and the
mortgage lender always requires that the buyer purchase homeowners insurance as a condition
of the loan, in order to protect the bank if the home were to be destroyed.

The most frequently used co-ordinating conjunctions are: and, but, both… and, either… or, neither… nor,
not only… but also.

Other co-ordinating conjunctions: besides, however, nevertheless, otherwise, so, therefore, still, yet,
though. With the exception of nevertheless and therefore, these can be used in other ways and
sometimes as other parts of speech and their position will vary according to how they are used.

(For details, see suggested bibliography:


Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
288-289)

Use the above-mentioned conjunctions in examples of your own.

2.5. Language in use

2.5.1. Fill in the blanks with ONE suitable word.

The September 11, 2001 terrorist attack resulted 1 ___ an estimated $32.5 billion in insured losses.
Those losses occurred across many types of coverage, including commercial property, business
interruption, workers compensation, aviation, life and disability insurance. Future attacks 2 ___ U.S. soil
are also likely to trigger a wide range 3 ___ insurance coverages, depending 4 ___ the type of event and
whether policyholders 5 ___ purchased terrorism insurance.

Terrorism insurance: what it is and what it covers


Terrorism insurance provides coverage 6 ___ individuals and businesses 7 ___ potential losses due 8
___ acts of terrorism.

2.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Businesses
9 ___ to 9/11, standard commercial insurance policies included terrorism coverage 10 ___ part of the
package, effectively 11 ___ charge. Today, terrorism coverage is generally offered separately 12 ___ a
price that more adequately reflects the current risk. Insurance losses attributable to terrorist acts 13 ___
these commercial policies are insured by private insurers and reinsured or “backstopped” by the federal
government 14 ___ to the Terrorism Risk and Insurance Act of 2002 TRIA. Under TRIA, owners of
commercial property, such as office buildings, factories, shop malls and apartment buildings, 15 ___ the
opportunity to purchase terrorism coverage. A June 2004 report 16 ___ insurance broker Marsh, Inc.,
found that the proportion of U.S. businesses that purchased terrorism during the first quarter of 2004 17
___ to its highest level since the 18 ___ of TRIA in November 2002. According to Marsh, 44.2 percent of
U.S. businesses obtained coverage in the first quarter of 2004, up from 32.7 percent in the fourth quarter
of 2003.

9. A Before B After C Prior D Preceding


10. A being B for C like D as
11. A free of B on C without D with
12. A on B at C for D with
13. A according B under C against D for
14. A resulting B following C pursuing D pursuant
15. A should be offered B must be offered C would be offered D needs to be offered
16. A from B of C about D on
17. A raise B rise C rose D arose
18. A enactment B enabling C ensuring D ensuing

2.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

Individuals
19. Standard homeowners insurance policies (A) include coverage for damage to property and personal
possessions (B) resulting in acts of terrorism. Terrorism is not (C) specifically referenced in homeowners
policies. However, the policy does cover the homeowner for damage due to explosion, fire and smoke —
(D) the likely causes of damage in a terrorist attack.

20. Condominium or co-op owner policies (A) also provide coverage for damage to personal possessions
resulting from acts of terrorism. (B) Damage on the common areas of a building like the roof, basement,
elevator, boiler and walkways (C) would only be covered if the condo/co-op board (D) has purchased
terrorism coverage.

21. (A) Standard renters policies include coverage for (B) damage to personal possessions due to a
terrorist attack. Again, (C) coverage for the apartment complex itself must be purchased (D) from the
property owner or landlord.

22. Auto insurance policies (A) will cover a car that is damaged or destroyed in a terrorist attack (B) if only
the policyholder has purchased “comprehensive” coverage. Most people who have (C) loans on their cars
or lease are required by lenders and leasing companies (D) to carry this optional form of coverage.

23. (A) Peoples who buy liability coverage only are not covered (B) in the event their vehicle is damaged
or destroyed (C) as the result of a terrorist attack. Life insurance policies do not contain terrorism
exclusions. Proceeds (D) will be paid to the beneficiary as designated on the policy.

2.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

Under what circumstances is there coverage?

For the terrorism 24___ to be triggered under TRIA for commercial policies, a terrorist DISCOVER
attack has to be declared a “certified act” by the Secretary of the Treasury.
No such declaration is needed to trigger coverage under home and auto policies APPLICANT
because there are no exclusions for terrorism. In some states a doctrine know as “fire
following” 25 ___.
This means that in the event of a terrorist-caused explosion followed by fire, insurers ATTRIBUTE
could be liable to pay out losses 26 ___ to the fire but not the explosion even if a
commercial property owner had not purchased terrorism coverage.
Insurers are now seeking to limit fire coverage resulting from a terrorist attack, because COMMERCE
27___ policyholders that choose to reject TRIA or other terrorism coverage are
effectively paying no premium for the protection offered by fire-following coverage.
So far, seven states have amended their standard fire policy 28___ to exclude acts of LAWYERS
terrorism.

2.6. Speaking

Student A. You wish to make a life insurance, but you do not know which form is more profitable: term
life or permanent life insurance. You address an insurance agent to spell it out for you.

Student B. You are an insurance agent and you have to explain to Student A the difference between the
two forms of life insurance. You want to persuade Student A to make a permanent life insurance, so you
will have to highlight the advantages of this form of life insurance.

2.7. Writing
Find statistics (source: books, reports, newspapers, magazines, the Internet) referring to life insurance
companies in Romania. In approximately 200 words give a written account of your findings. Your report
should try to answer such questions as:
To what extent are Romanians willing to insure their lives as compared with other nations?
What factors can influence their decision?
How profitable can an insurance company be in Romania?

3. THE INSURANCE CONTRACT

3.1. Lead-in

Consider the following questions:

1. What possible risks does home insurance take into consideration?


2. Why should people insure their homes against very unlikely situations?
3. Which the most frequent risk that home insurance covers?

3.2. Reading

Read the following text.


(Par. 1)
An Insurance contract determines the legal framework under which the features of an insurance policy
are enforced. Insurance contracts are designed to meet very specific needs and thus have many features
not found in many other types of contracts. Many features are similar across a wide variety of different
types of insurance policies.

(Par. 2)

General Features
The insurance contract is a contract whereby the insurer will pay the insured (the person whom benefits
would be paid to, or on the behalf of), if certain defined events occur.
• Insurance contracts are generally considered contracts of adhesion because the insurer draws
up the contract and the insured has little or no ability to make material changes to it. This is
interpreted to mean that the insurer bears the burden if there is any ambiguity in any terms of the
contract.
• Insurance contracts are arbitrary in that the amounts exchanged by the insured and insurer are
unequal and depend upon uncertain future events.
• Insurance contracts are unilateral, meaning that only the insurer makes legally enforceable
promises in the contract. The insured is not required to pay the premiums, but the insurer is
required to pay the benefits under the contract if the insured has paid the premiums and met
certain other basic provisions.
(Par. 3)

Parts of an insurance contract


• Definitions
• Insuring agreement - the part of the contract where the insurer agrees to pay the insured for
covered losses
• Declarations - section that notes the identifying information about the insured and/or the insured
property, such as name, address, etc.
• Exclusions - section where certain perils that are not covered under the policy are enumerated.

(Par. 4)

Life insurance specific features


• Incontestability - in the United States, life insurance contracts may not be contested by the
insurer at any point after the contract has been in force for two years. The insurer has the burden
to investigate fully anything they wish to make sure the insured is an acceptable risk within those
two years. Any material misstatements on the insurance application (which generally forms a part
of the contract) cannot be used as a reason for the insurer not to pay the death benefit, as long
as it does not constitute fraud on the part of the insured. The insurer's only recourse if there is no
fraud is they can adjust the death benefit to correct for the correct age or sex of the insured if they
are different from what the application noted.

Find words in the text which mean:


(Paragraph 1) a set of ideas, rules, or beliefs from which something is developed, or on which decisions
are based
(Paragraph 2) the ability to stick
(Paragraph 2) something difficult or worrying that you are responsible for
(Paragraph 2) decided or arranged without any reason or plan, often unfairly
(Paragraph 3) great danger, especially of being harmed or killed
(Paragraph 3) the crime of deceiving people in order to gain something such as money or goods

3.3. Vocabulary development


“Time is money!”
Other phrases with money

Match the phrases (1 to 10) with their corresponding definition (a to j).

1. I'm not made of money a) used to say that a particular person or thing is
likely to do something or be successful
2. put your money where your mouth is b) you cannot afford something when someone
asks you to pay for it
3. money is no object c) used to say that you should not waste money
4. a fool and his money are soon parted d) used to say that stupid people spend money
quickly without thinking about it
5. give sb a (good) run for their money e) to try to solve a problem by spending a lot of
money but without really thinking about the
problem
6. money doesn't grow on trees f) used to show by your actions that you really
believe what you say
7. see the colour of sb's money g) to have definite proof that someone has enough
money to pay for something
8. spending money like it's going out of h) used to emphasize that someone spends a lot of
fashion money
9. the smart money is on sb/sth i) to say that someone can spend as much money
as they want to on something
10. throw money at sth j) to make your opponent in a competition use all
their skill and effort to defeat you

3.4. Language focus – Words commonly mis-spelled

Choose the correct spelling of the words below:

accomodation – accommodation embarassed – embarrassed


address – adress independent – independant
advertisement – advertisment prefered – preferred
alltogether – altogether pronounciation – pronunciation
committee – commitee responsibility – responsability
curiosity – curiousity seperate – separate
dissappear – disappear trully – truly
divide – devide writing – writting
3.5. Language in use

3.5.1. Fill in the blanks with ONE suitable word.

There are long-standing restrictions regarding war coverage and nuclear, biological, chemical and
radiological NBCR events in 1 ___ personal and commercial insurance policies.
War-risk exclusions reflect the realization 2 ___ damage from acts of war is fundamentally uninsurable.
No formal declaration of war 3 ___ Congress is required for the war risk exclusion to apply. Nuclear,
biological, chemical and radiological attacks 4 ___ another example of catastrophic events that are
fundamentally uninsurable due to the nature of the risk. Under the Terrorism Risk Insurance Act (see
below), 5 ___ some NBCR exclusions are permitted by a state, an insurer does not have to make
available the excluded coverage.

Business Interruption Insurance


Property damage 6 ___ commercial buildings from a terrorist attack also may include claims 7 ___
business interruption. Business interruption insurance sometimes referred 8 ___ as business income
coverage covers financial losses that occur 9 ___ a firm is forced to suspend business operations 10 ___
due to direct damage to its premises or because civil authorities limit access to an area after the attack
and those actions prevent entry to the business premises.

3.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Coverage 11 ___ the individual policy, but typically begins after a waiting period or “time deductible” of
two to three days and 12 ___ a period of two weeks to several months.
Business interruption losses 13 ___ with acts of civil authority e.g., closure of certain area around the
disaster can only be 14 ___ when there is physical loss or damage to the insured premises by a covered
15 ___ e.g., explosion, fire, smoke, etc. Reductions in business income associated with fear 16 ___
travelling to a location, in addition to closure to areas by authorities 17 ___ a heightened state of alert,
would not be covered 18 ___ business interruption policies.
Bottom line: If there is no physical damage caused by a covered peril, business interruption coverage
does not apply.

11. A consists in B depends on C consists of D relies on


12. A lasts for B lasts since C endures for D endures over
13. A linked B connected C related D associated
14. A determined B unleashed C triggered D caused
15. A peril B menace C threat D accident
16. A about B of C for D against
17. A due to B according to C in view of D because of
18. A for B over C by D from

3.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

Workers compensation and other coverages


19. Workers compensation – (A) a compulsory line of insurance for all businesses – covers (B)
employees injured or killed in the job and therefore (C) automatically includes coverage for (D) acts of
terrorism.

20. Workers compensation (A) is also the only line of insurance (B) that does not exclude coverage for
acts of war. (C) Coverage for terrorist acts cannot be (D) excluded for workers compensation policies in
any state.

21. (A) There are essentially three types of workers compensation benefits. The first (B) reimburses
workers on lost wages while they (C) recover from their injuries. The second covers workers for all
medical expenses (D) incurred as a result of the injuries they sustain. The third type of benefit provides
payments to the families of workers killed on the job.
22. (A) Life/health and disability insurance policies may provide (B) coverage for loss of life, injury or
sickness (C) to individuals (D) for the event of a terrorist attack.

3.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“___”).

What is the Terrorism Risk Insurance Act (TRIA)?

TRIA is a public/private risk-sharing 23___ between the federal government and the PARTNER
insurance industry. The program is designed to ensure that adequate resources are
available for businesses to recover and rebuild if they become the victims of a
terrorist attack.
Specific provisions of the legislation are: CASUAL
• An event must cause at least $5 million in aggregate property and 24___ insurance
losses to be certified by the Secretary of the Treasury as an act of terrorism.
• The bill is limited to international terrorism committed on behalf of any foreign MISCARRIAGE
person or foreign interest on U.S. soil. (Damage to an air 25___ or vessel outside the
U.S., or to the premises of a U.S. mission is covered by TRIA, however).
• Each participating insurer is responsible for paying out a certain amount in claims – DEDUCT
a 26___– before Federal assistance becomes available.
• For losses above a company’s deductible, the 27___ government will cover 90 FEDERATION
percent, while the insurer contributes 10 percent.
• The aggregate insurance industry 28___ in 2004 is $12.5 billion in 2004 and $15 RETAIN
billion in 2005.
• Losses covered by the program are capped at $100 billion. PRACTICE
• Lines excluded from the program are: personal lines (auto and home), assumed
reinsurance, federal crop, mortgage guarantee, financial guarantee, medical 29___,
flood insurance and life & health.
• The Act 30___ after three years on December 31, 2005. SUN

3.6. Speaking

Pair work
You are business partners and you have decided that you need a terrorism risk insurance to protect your
business. Draw a list of the provisions that you consider appropriate to appear in such a document.

3.7. Writing

Some time ago businesspeople used to run their businesses on the basis of “gentleman’s agreement” (an
agreement that is not written down, made between people who trust each other). Today the written
contract has replaced it. What has changed? Answer the question in not more than 150 words.
UNIT SIX – SMALL BUSINESS

1. SMALL BUSINESS AND EMPLOYMENT

1.1. Lead-in

Consider the following questions:

1. Why are small businesses important for the economy of a country?


2. Can small business prevent unemployment?

1.2. Reading

Read the following article referring to small business in America. The headings of the three main
sections have been removed. They are given below. Choose the most appropriate heading for
each paragraph.

Small business job undercounted?


The American dream and small business
Small business and employment

Small business having


a big impact on jobs
Entrepreneurs seen driving
new employment growth

By Martin Wolk
Chief economics correspondent

1.

There is something magical, almost mythical, about small business in America. While big business often
is seen as a faceless model of corporate efficiency, small businesses stand in for the noble American
values of hard work and self-reliance. And to top it off, small business is the engine of U.S. economic
growth, responsible for 75 percent of all net new jobs, we are frequently told.

President Bush, who rarely sings the praises of big business in his speeches and public appearances,
waxes positively poetic in his frequent meetings with small-business owners. “You're welcome to the
American Dream, no matter who you are or where you're from,” he said in one such session in October.
“The entrepreneurial spirit is strong, and that's what's going to lead this recovery. The people are going to
be able to find work because the small business owners of America are risk takers, bold thinkers, and
love their country, and are willing to expand the job base.“

2.

If small business is supposed to be leading the recovery, it is doing a pretty lousy job in terms of job
growth. Over the past five months the economy has added a mere 278,000 jobs, including a barely
measurable 1,000 jobs in December, according to the Bureau of Labor Statistics. That is certainly an
improvement after the economy shed 2.3 million jobs over the previous two and a half years, but the five-
month total is just a bit more than the average monthly gain in the last two expansions.

That may be about to change. According to a monthly survey by the National Federation of Independent
Business, member firms expanded their payrolls in each of the final three months of last year on average.
That was the first time in three years the group’s payroll figure grew for three straight months. And an
index of small business hiring plans rose to its highest level in 39 months, said William Dunkelberg, chief
economist for the NFIB, which represents 600,000 businesses, the vast majority of which have fewer than
40 employees. “We had a huge surge in the percent of firms planning to increase hiring,” Dunkelberg
said. “I think we’ve beaten everything we can out of the existing labor force.”

3.

Dunkelberg is among a number of analysts who believe recent Labor Department figures may be
understating the contribution of small business. The government’s closely watched payroll survey does
not count self-employed people, he noted. “Obviously the payroll survey misses new firm formation,” he
said. “So there are a lot of pieces that get missed, and most often they get missed when the economy is
moving in one way or another.”

Self-employment is tracked in the government's separate household survey, but those figures are
considered less reliable than the payroll survey, Labor Department officials said. Chad Moutray, chief
economist for the Small Business Administration’s advocacy office, said the government actually knows
very little about these smallest businesses. In 2001, the latest year for which information is available, the
government listed nearly 23 million firms doing business, but only 5.7 million had employees. The
remaining 17 million were one-person firms, which could be anything from a retired person selling
collectibles on eBay (and declaring the income) to a full-time independent business consultant.
“Unfortunately we know very little about them,” Moutray said of the non-employer firms. He speculated
that the economic downturn may have led to a surge in formation of one-person firms because of the
increased “opportunity” created by corporate layoffs and cutbacks. “If you are working for a company
making six figures you might want to go out and work for a small business, but you don’t do it,” he said.
“With the recession comes increased opportunity for a lot of people, especially in the tech area. There are
a lot of very smart people with a lot of high-tech consulting skills.”

Data that breaks down employment by firm size is closely guarded by the Census Bureau and Internal
Revenue Service, dribbled out to researchers only with a lag of several years. But several studies have
shown that in recent years small businesses have accounted for 60 to 80 percent of net new jobs added
to the economy. This is not immediately obvious. Small businesses, defined as those that employ fewer
than 500 people, account for 99.7 percent of all employers but only 50 percent of private-sector
employees. The other 50 percent are employed by the nation’s 17,000 large businesses.
(MSNBC, Updated: 6:25 p.m. ET Feb. 03, 2004)

1.3. Vocabulary development

PARTNER
ENTREPREUR
Partner (n) – partnership (n)
Entrepreneur (n)
Entrepreneurial (adj.)
 small business/ large business  niche (to create/gain/lose a niche)
 lay off workers = cut employment  entrepreneurs
 job losses  entrepreneurial
 net job growth  entrepreneurship
 job creation  career option
 manufacturer  to start a business
 boost productivity

1.3.1. Use words and expressions from above to fill in the blanks in the following sentences (some
changes are required, i.e. sg-pl etc):

The joys of youth


1. A study of ___ in 1996 suggested why small can be beautiful. Firms that were at least two years old
that year ___ by 7 to 36 percent overall, with the biggest ___ coming at the oldest firms. Meanwhile, job
growth of nearly 150 percent was seen both at small firms that were less than two years old and at new
branch offices and stores opened by larger firms.
2. “For employment growth, it looks as if the more important factor is age and not size,” said the study by
economists John Haltiwanger and C.J. Krizan. “One clear pattern that emerges is that net ___ rates
decline with plant age.”
3.This is not to say that ___ never create jobs, or that ___ never ___ workers.
4.But large businesses, which by definition can take better advantage of economies of scale, may have
more to gain by ___, particularly when demand drops off.
5. Small ___, to take one example, are unlikely to ship production work overseas because they simply do
not have the resources to assure quality control and quickly adjust run rates.
6. “I think what small businesses do is they continue to innovate,” said Moutray. “In order to gain their ___
in the global economy they need to find something that nobody is doing and innovate on it.”
7.Paul Reynolds, a professor at the London Business School and Babson College who studies ___,
draws a distinction between those who start businesses out of necessity and those who do so because of
opportunity.
8.Countries like Uganda and Venezuela have a higher rate of ___ activity than the United States, but only
because people there have a much harder time finding traditional employment.
9. “The thing that makes (___) special in the United States is that it is not special,” he said. 10.“If
someone wants __ we say fine, go to it. … No matter what happens, as long as you’re not a thief, it’s
considered an honorable ___.”
(MSNBC, Updated: 6:25 p.m. ET Feb. 03, 2004)

1.4. Language focus – Revision: The Passive

Have a look at the following sentences:

1. Self-employment is tracked in the government's separate household survey, but those figures
are considered less reliable than the payroll survey.
2. Data that breaks down employment by firm size is closely guarded by the Census Bureau and
Internal Revenue Service.

In the examples above the verb has a passive form.

For details, see suggested bibliography:

Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Units 6-7 – pp. 30-41
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Units 15-16 – pp. 58-64
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
263-269)

1.4.1. Fill in the blanks with the required form of the verb given in brackets:
Nonautomatic licensing interferes where approval (1) ___(grant freely). This (2) ___ (use) as a restriction
itself, or it (3) ___ (use) to administer a quota. The license may be subject to certain conditions (4) ___
(meet): for example, a requirement to export; the use to which the imported good is to be put; the
purchase of a specified quantity of the domestically produced like product; or the availability on the
domestic market of the domestically produced like product.

Mercantilism is an economic philosophy of the 16th and 17th centuries that international commerce
should primarily serve to increase a country's financial wealth, especially of gold and foreign currency. To
that end, exports (5) ___ (view) as desirable and imports as undesirable unless they lead to even greater
exports. In WTO context the term (6) ___ (use often) to describe the quid pro quo nature of bargaining
over trade policies.

Parallel imports refer to trade that (7) ___ (make) possible when a good that (8) ___ (protect) under
intellectual property provisions (patents, copyrights) (9) ___ (sell) in different countries for different prices.
A parallel import comprises arbitrage activity and occurs when the good (10) ___ (import) from a lower-
price market into a higher-price country.
(www.nysscpa.org)

1.4.2. Change the following sentences from the active voice into the passive. Make all the
necessary changes.

1. The government has announced that the inflation will rise till the end of the year.
2. It’s time the authorities solved the pollution problems.
3. We always deliver our goods on time.
4. Yesterday they sold all the shares our company is trading on the Sock Exchange.
5. A computer operator will find a solution for our problem.
6. His legal advisers told him not to say anything else till the police come to a conclusion.
7. If I wasn’t so busy I would type and post the letter in due time.
8. The prime minister agreed with the report and so they could start a new business.
9. The board has been discussing his declaration for five hours and they haven’t reached to a
conclusion yet.
10. We will deal with your complaint as soon as we solve our own problems with the firm.

1.5. Language in use

1.5.1. Fill in the blanks with ONE suitable word.

The same cannot be 1 ___ in many 2 ___ of Europe, where a business failure is considered 3 ___ of a
disgrace and self-made millionaires more suspect. While the economy technically has 4 ___ expanding
for more 5 ___ two years, the 6 ___ of job expansion 7 ___ slow acceleration of growth lead many
economists 8 ___ suspect we are 9 ___ at the turning 10 ___ of the business cycle. 11 ___ small
business start-ups, this decade is looking 12 ___ different 13 ___ the 1990s, when the Internet bubble
drove an explosive wave 14 ___ job growth.
“If you look at this 15 ___ decade of the 21st century, it is not clear 16 ___ is going to be the
entrepreneurial driver of the decade,” said Zoltan Acs, a professor 17 ___ finance at the University of
Baltimore. “It’s not the PC, not 18 ___ Internet, not the semiconductor. It 19 ___ be wireless, it could be
biotech or health. … People are 20 ___ not sure 21 ___ the real growth in this decade is going to come
22 ___.”
(MSNBC, Updated: 6:25 p.m. ET Feb. 03, 2004)

1.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Small Business Advisory Committee. Objective and Background


The Financial Accounting Standards 23 ___ FASB 24 ___ the Small Business Advisory Committee SBAC
in an 25 ___ to obtain more active involvement 26 ___ the small business community in the development
of financial accounting and 27 ___ standards. 28 ___ the FASB has met with representatives of small
businesses in the past as part of its 29 ___ process procedures, establishment of a 30 ___ committee
that provides the 31 ___ of this group will offer greater 32 ___ to share ideas, knowledge, and experience
with the Board as well as with the other group members.
(www.sba.gov)

23. A committee B Board C association D organization


24. A appointed B established C named D delegated
25. A effort B strain C attempt D intention
26. A by B from C with D of
27. A reporting B registering C evaluating D obeying
28. A when B for C While D where
29. A own B normal C due D characteristic
30. A official B informal C unofficial D formal
31. A objectives B views C scope D perspectives
32. A occasion B opportunity C instance D grounds

1.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

33. (A) From early 2004, the FASB sent letters to organizations (B) in the small business community to
obtain names (C) of prospective members (D) of the SBAC.

34. (A) From those recommendations, the FASB identified (B) over 20 individuals (C)representing users,
preparers, and auditors in the small business community (D) to serve in the SBAC.

35. Those individuals will be (A) standing Board resource to provide an additional and (B) ongoing source
of input (C) on issues before the Board, including issues (D) raised in the development of FASB
proposals.

36. The committee will meet (A) minimum (B) of twice a year at public meetings. (C)The establishment of
the committee was announced (D) on March 18, 2004.

37. The first meeting of the FASB’s Small Business (A) Advisory Committee will take place on Tuesday,
May 11, 2004 (B) at the FASB offices. (C) At that meeting, the committee (D) will be provided with an
orientation to the Board and its history and process, and will discuss various specific topics on the
Board’s technical agenda.
(www.sba.gov)

1.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

A franchise is a legal and commercial 38 ___ between the owner of a trademark, RELATE
service mark, trade name, or advertising symbol and an individual or group wishing
to use that identification in a business.
The franchise 39 ___ the method of conducting business between the two parties. GOVERNMENT
Generally, a 40 ___ sells goods or services supplied by the franchiser or that meet FRANCHISE
the franchiser’s quality standards.
Franchising is based on 41 ___ trust between the franchiser and franchisee. MUTE
The franchiser provides the business 42 ___ (marketing plans, management EXPERT
guidance, financing assistance, site location, training, etc.) that otherwise would not
be available to the franchisee.
The franchisees bring to the franchise 43 ___ the entrepreneurial spirit and drive OPERATIONAL
necessary to make the franchise a success.
There are 44 ___ two forms of franchising: Product/trade name franchising and PRIME
Business format franchising.
(www.sba.gov)
1.6. Speaking

Pair work

Discuss in pairs about the advantages and disadvantages of setting up your own business while still
being a student at the University. Present your conclusions to another pair.

1.7. Writing

In not more than 150 words write a letter to a friend asking him to start a small business with you.
Make suggestions about the type of business you have in mind. Try to convince him it will be a
successful investment.

2. STARTING YOUR OWN BUSINESS

2.1. Lead-in

Consider the following questions:

1. Would you like to set up your own business?


2. In what field of activity?
3. Do you nee special training for that?
4. Make a list with the key points you have to consider before starting your own business. Compare
the list you have drafted with the elements mentioned in the following text.

2.2. Reading

Read the following article referring to the main elements, which are vital for the successful start of
a business. Choose one you consider the most important and bring arguments in favour of your
opinion.

Are you ready? Is Entrepreneurship For You?


In business, there are no guarantees. There is simply no way to eliminate all the risks associated with
starting a small business - but you can improve your chances of success with good planning, preparation,
and insight. Start by evaluating your strengths and weaknesses as a potential owner and manager of a
small business. Carefully consider each of the following questions:
Are you a self-starter? It will be entirely up to you to develop projects, organize your time, and follow
through on details.
How well do you get along with different personalities? Business owners need to develop working
relationships with a variety of people including customers, vendors, staff, bankers, and professionals such
as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor, or a
cranky receptionist if your business interests demand it?
How good are you at making decisions? Small business owners are required to make decisions
constantly - often quickly, independently, and under pressure.
Do you have the physical and emotional stamina to run a business? Business ownership can be
exciting, but it's also a lot of work. Can you face six or seven 12-hour workdays every week?
How well do you plan and organize? Research indicates that poor planning is responsible for most
business failures. Good organization of financials, inventory, schedules, and production can help you
avoid many pitfalls.
Is your drive strong enough? Running a business can wear you down emotionally. Some business
owners burn out quickly from having to carry all the responsibility for the success of their business on
their own shoulders. Strong motivation will help you survive slowdowns and periods of burnout.
How will the business affect your family? The first few years of business startup can be hard on family
life. It's important for family members to know what to expect and for you to be able to trust that they will
support you during this time. There also may be financial difficulties until the business becomes profitable,
which could take months or years. You may have to adjust to a lower standard of living or put family
assets at risk in the short-term.

Here is a list that came up after careful thinking and honest answering the questions above:

 Planning is one of the most important aspects of starting a business. Proper planning is needed
for success in business and, for that matter, anything you do in life. Business planning implies
writing and using the business plan.

 All businesses require some form of financing. Learn about raising capital, borrowing money and
managing the financial operations of your business. This comprises: estimating costs, finding
capital, applying for a loan, knowing about small business lenders, filling in financial statements.

 Marketing is all about satisfying customer needs. Learn how to better understand customer needs
and ways to satisfy those needs. You will have to be informed on marketing research, competitive
analysis, marketing plan, advertisements and PR, trade shows or e-marketing

 The employees of a business are its most important asset. Learn how to find and manage your
employees successfully. This means not only finding employees but also get familiar with
employment taxes, employment law, employees’ benefits.

 Understanding tax requirements is a necessary aspect of all businesses. Learn about payroll
taxes, employee identification numbers (EIN), Federal income taxes, and other required taxes
(self-employment taxes, state taxes, local taxes, sales and use taxes).

 Following the conceptual stage of starting a business, a prospective owner will move towards the
actual legal formation of the business. There is much that needs to be known about forms of
ownership, required licenses and business law.

 SBA (Small Business Agency) offers many special programs and supports many special
interests, such as women entrepreneurs, veterans, native Americans, minorities, young
entrepreneurs). Within its mission to assist the development and growth of small businesses, the
SBA has a vast menu of focused initiatives.
(www.sba.gov)

2.3. Vocabulary development

CREDIT
Credit (n) – creditor (n)
Creditable (adj.)
Credit (v)
Creditworthy (adj.) – creditworthiness (n)

 Guarantees
 Failure
 Foresight
 Low sales
 Credit
 Fixed assets
 Poor location
 Poor inventory
2.3.1. Use words and expressions from above to fill in the blanks in the following sentences (some
changes are required, i.e. sg-pl etc):

Success in business is never automatic. It isn't strictly based on luck - although a little never hurts. It
depends primarily on the owner's ___ and organization. Even then, of course, there are no ___.
Starting a small business is always risky, and the chance of success is slim. According to the U.S. Small
Business Administration, over 50% of small businesses fail in the first year and 95% fail within the first
five years.
In his book Small Business Management, Michael Ames gives the following reasons for small business
___:

1: Lack of experience
2: Insufficient capital (money)
3: ___
4: ___ management
5: Over-investment in ___
6: Poor ___ arrangements
7: Personal use of business funds
8: Unexpected growth

Gustav Berle adds two more reasons in the Do It Yourself Business Book:

9: Competition
10: ___
(www.sba.gov)

2.4. Language focus – Revision: modal verbs

Have a look at the following sentences:

1. I will draft the presentation for you. Would you compile the data I need?
2. Their plans might change if you tell them the news.
3. Can I take two days off?
4. In our new headquarters employees must not smoke.
The words written in bold are modal verbs.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Units 11-12 – pp. 59-71
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Units 17-18 – pp. 64-77
Thomson, A.J., Martinet, A.V. A Practical English Grammar. Fourth Edition, London: OUP, 1986 – pp.
128-153)

2.4.1. Write appropriate sentences using the following prompts. Use different modals where
appropriate and explain your choice.

1. Ask someone to help you write the report for the next meeting of the Board.
2. Tell your customers that they have to send you the order till the end of the month.
3. Inform your manager that it is possible that prices rise till next month.
4. There is a slight possibility not to get the loan from the bank because the papers were not
correctly filled in.
5. They are unable to keep their temper when meeting with their supplier.
6. It is impossible that they discussed the terms of their partnership yesterday.
7. It is not necessary for you to complete the application form right now.
8. The production costs are too high and we have to take action.
9. They sent the letter yesterday. Has it arrived?
10. It wasn’t a good idea to travel by train.

2.4.2. Use modal verbs in the following situations:


1. make predictions about unemployment
2. refuse to stay late hours; comment your refusal
3. speak about your plans for tomorrow (there are things you will possibly do, and problems there is
a smaller possibility to be solved tomorrow)
4. express logical deduction
5. imagine you work in a multinational; tell a friend what you are and are not permitted to do at your
place of work
6. since he attends an interview for a job, help your friend with suggestions of how to behave
7. talk about past habits you managed to get rid of or to improve

2.5. Language in use

2.5.1. Fill in the blanks with ONE suitable word.

Taxes. Because tax laws 1 ___ be extremely complex, small business 2 ___ are strongly encouraged 3
___ seek professional 4 ___. A good accountant or CPA Certified Public Accountant will help navigate 5
___ local, state and laws and also explain 6 ___ to minimize future 7 ___ obligations. Even 8 ___ you
retain professional tax assistance, 9 ___ tax responsibilities are still 10 ___ your obligation. You 11 ___
understand how the various tax systems impact your business. 12 ___ the following information is 13 ___
comprehensive, it does provide an overview of the 14 ___ common business 15 ___ requirements.
(www.sba.gov)

2.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

These figures aren't 16 ___ to scare you, but to prepare you for the 17 ___ path 18 ___. Underestimating
the difficulty of starting a business is one of the biggest obstacles entrepreneurs face. 19 ___, success
can be yours if you are 20 ___, willing to work hard, and take all the necessary 21 ___.
It's true that there are many reasons not to start your own business. But for the 22 ___ person, the
advantages of business ownership far 23 ___ the risks. You will be your own boss. Hard work and 24 ___
hours directly benefit you, rather than increasing profits for someone else. 25 ___ and growth potential
are far greater. A new 26 ___ is as exciting as it is risky.

(www.sba.gov)

16. A meant B planned C devised D subjected


17. A abrupt B rocky C steep D difficult
18. A away B ahead C in front D before
19. A However B anytime C subsequently D nevertheless
20. A patient B calm C condescendent D mild
21. A stages B levels C steps D layers
22. A fit B appropriate C right D chosen
23. A overweigh B underweigh C upweigh D outweigh
24. A late B evening C full D long
25. A winning B Earning C gaining D wages
26. A adventure B business C venture D agreement

2.5.3.In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

27. A market (A) on its entirety is (B) too broad in scope for (C) any but the largest companies (D) to
tackle successfully.

28.The best strategy for a smaller business is (A) to divide demand into manageable (B) market niches.
Small operations (C) can offer then specialized goods and services (D) attractive to a specific group of
prospective buyers.
29. (A) There are undoubted some particular products or services you are especially (B) suited to
provide. Study the (C) market carefully and you (D) will find opportunities. .

30. (A) As an example, surgical instruments (B) used to be sold (C)on bulk (D) to both small medical
practices and large hospitals.

31. One firm realized that (A) the smaller practices could not (B) afford to sterilize instruments (C) after
every use like hospitals did, but instead simply (D) disposed of them.

32. The firm's (A) sales representatives talked (B) with surgeons and hospital workers (C) to learn what
would be more (D) suitable for them.

33. (A) Based on this information, the company (B) developed disposable instruments which (C) could be
sold in larger quantities (D) for a lower cost.

34. Another firm (A) capitalized about the fact that hospital operating rooms (B) must carefully count the
instruments used before and after surgery. This firm (C) met that particular need (D) by packaging their
instruments in pre-counted, customized sets for different forms of surgery.
(www.sba.gov)

2.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

While researching your own company's niche, consider the results of your market SURVEYANCE
35 ___ and the areas in which your competitors are already firmly situated.
Put this information into a table or a graph to illustrate where an 36 ___ might exist OPEN
for your product or service.
Try to find the right 37 ___ of products, services, quality, and price that will ensure FIGURE
the least direct competition.
38 ___, there is no universally effective way to make these comparisons. FORTUNE
Not only will the desired attributes vary from industry to industry, but there is also IMAGE
an 39 ___ element that cannot be formalized.
For example, only someone who had already thought of developing pre-packaged ACTUAL
surgical instruments could use a survey to determine whether or not a market 40
___ existed for them.
If you do target a new niche market, make sure that this niche does not conflict with ALL
your 41 ___ business plan.
For example, a small bakery that makes cookies by hand cannot go after a market REGARD
for inexpensive, mass-produced cookies, 42 ___ of the demand.
(www.sba.gov)

2.6. Speaking

Pair work

Choose one of the elements mentioned in the text as important in setting one’s own small business and
discuss it in detail with a colleague. Make then a three-minute presentation for the rest of your colleagues.

2.7. Writing

In not more than 200 words write about the domain you consider the most attractive for setting up
a business in Romania.

3. THE BUSINESS PLAN


3.1. Lead-in

Consider the following questions:

1. What is a business plan?


2. When and why do we need to draft a business plan?
3. What does a business plan contain?

3.2. Reading

Read the introductory comments about the importance of business plans.

A business plan is a tool with three basic purposes:


 communication
 management
 planning

As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire
on, and assist in attracting strategic business partners. The development of a comprehensive business
plan shows whether or not a business has the potential to make a profit. It requires a realistic look at
almost every phase of business and allows you to show that you have worked out all the problems and
decided on potential alternatives before actually launching your business.

As a management tool, the business plan helps you track, monitor and evaluate your progress. The
business plan is a living document that you will modify as you gain knowledge and experience. By using
your business plan to establish timelines and milestones, you can gauge your progress and compare your
projections to actual accomplishments.

As a planning tool, the business plan guides you through the various phases of your business. A
thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish
alternatives. Many business owners share their business plans with their employees to foster a broader
understanding of where the business is going.
(www.sba.gov)

Read some fragments of the business plan of AMT Computers and try to match its components
with the headings below (the business plan is not complete, some of the headings being not
treated in detail):
AMT Computers
Company Summary Financial Plan
Highlights Executive Summary
Products and Services Objectives
Strategy and Implementation Summary Management Summary
Mission Market Analysis Summary
Keys to Success

1.

(Section 1)
By focusing on its strengths, its key customers, and the underlying values they need, American
Management Technology will increase sales to more than $9 million in three years, while improving the
gross margin on sales and cash management and working capital.

This business plan leads the way. It renews our vision and strategic focus: adding value to our target
market segments, the small business and high-end home office users, in our local market. It also provides
the step-by-step plan for improving our sales, gross margin, and profitability. In order to implement these
changes and improve profitability, we plan to borrow another $100,000 long-term this year. The amount
seems in-line with the balance sheet capabilities.

AMT is built on the assumption that the management of information technology for business is like legal
advice, accounting, graphic arts, and other bodies of knowledge, in that it is not inherently a do-it-yourself
prospect. Smart business people who aren't computer hobbyists need to find quality vendors of reliable
hardware, software, service, and support. They need to use these quality vendors as they use their other
professional service suppliers, as trusted allies. AMT seeks to fulfil these needs and become the leader in
business information technology for its region.

AMT provides both computer products and services to make them useful to small businesses. We are
especially focused on providing network systems and services to small and medium business. The
systems include both PC-based LAN systems and minicomputer server-based systems. Our services
include design and installation of network systems, training, and support.

In order to accomplish our objectives, our keys to success over the next three years are:
 Differentiate from box-pushing, price-oriented businesses by offering and delivering service and
support–and charging for it.
 Increase gross margin to more than 30%.
 Increase our non-hardware sales to 20% of the total sales by the third year.

AMT was founded as a consulting-oriented value added reseller (VAR), became a reseller to fill the
market need for personal computers, and is emphasizing service and support to differentiate itself
from price-oriented competitors.

We have one location–a 7,000 square foot store in a suburban shopping centre located conveniently
close to the downtown area. It includes a training area, service department, offices, and showroom area.
AMT is a privately-held C corporation owned in majority by its founder and president, Ralph Jones. There
are six part owners, including four investors and two past employees. The firm includes 21 employees,
under the president and four managers. Our main management divisions are sales, marketing, service,
and administration. The service department handles service requests, support, training, and
development. At present, we are weakest in the area of technical capabilities to manage the database
marketing programs and upgraded service and support, particularly with cross-platform networks. We
also need to find a training manager.

Recent changes in the computer reseller market have adversely affected AMT. These include margin
squeezes, longer collection periods, and lower inventory turnovers. All of these concerns are part of the
general trend affecting computer resellers. The margin squeeze is happening throughout the computer
industry worldwide.

The only way we can hope to differentiate well is to define the vision of the company to be an information
technology ally to our clients. We will not be able to compete in any effective way with the chains using
boxes or products as appliances. We need to offer a real alliance that includes such intangibles as
confidence, reliability, and knowing that somebody will be there to answer questions and help at the
important times.

Our support services, with which we hope to capture market share will include such services as; training,
upgrade offers, installation services, network configuration services, etc. The company will seek to
aggressively pursue new opportunities.

AMT focuses on local markets, small business and home office, with special focus on the high-end home
office and the 5-20 unit small business office. The last study we saw published has retail sales growing at
5% per year, while Web sales and direct sales are growing at 25% or 30%.

There are several different kinds of computer retailers within the industry including:
 Computer dealers: often focused on a few main brands of hardware, usually offering only a
minimum of software, and variable amounts of service and support. Their service and support is
not usually very good and their prices are usually higher than the larger stores.
 Chain stores and computer superstores: usually offer decent walk-in service, with very
aggressive pricing, and little support.
 Mail order: offer aggressive pricing of boxed product. For the purely price-driven buyer, who buys
boxes and expects no service, these are very good options.
None of these direct competitors provides the customization and service that small businesses such as
our clients truly need.

Small business buyers are accustomed to buying from vendors who visit their offices. They expect the
copy machine vendors, office products vendors, and office furniture vendors, as well as the local graphic
artists, freelance writers, or whomever, to visit their office to make their sales. Many small companies turn
immediately to the superstores (office equipment, office supplies, and electronics) and mail order to look
for the best price, without realizing that there is a better option for them at only a little bit more.
We need to effectively compete against the idea that businesses should buy computers as plug-in
appliances that don't need ongoing service, support, and training. Our focus group sessions indicated that
our target home office markets think about price but would buy based on quality service if the offering
were properly presented. They think about price because that's all they ever see. We have very good
indications that many would rather pay 10-20% more for a relationship with a long-term vendor providing
back-up and quality service and support; they end up in the box-pusher channels because they aren't
aware of the alternatives.

We currently depend on newspaper advertising as our main way to reach new buyers. As we change
strategies, however, we need to change the way we promote ourselves. We will be refocusing on our
core message of service through radio, cable TV, sales brochures, direct mailers and newspapers. We
need to sell the company, not the product. We sell AMT, not Apple, IBM, Hewlett-Packard, or Compaq, or
any of our software brand names.

The Yearly Total Sales chart summarizes our ambitious sales forecast. We expect sales to increase from
$5.3 million last year to more than $6 million next year and to more than $9 million in the last year of this
plan.

Highlights

(Section 2)

2.

1. Sales increasing to more than $9 million by the third year.


2. Bring gross margin back up to above 30%, and maintain that level.
3. Sell $1.5 million of service, support, and training by 1998.
4. Improve inventory turnover to 6 turns by 1998.

(Section 3)
3.

AMT is built on the assumption that the management of information technology for business is like legal
advice, accounting, graphic arts, and other bodies of knowledge, in that it is not inherently a do-it-yourself
prospect. Smart business people who aren't computer hobbyists need to find quality vendors of reliable
hardware, software, service, and support. They need to use these quality vendors as they use their other
professional service suppliers, as trusted allies.
AMT is such a vendor. It serves its clients as a trusted ally, providing them with the loyalty of a business
partner and the economics of an outside vendor. We make sure that our clients have what they need to
run their businesses as well as possible, with maximum efficiency and reliability. Many of our information
applications are mission critical, so we give our clients the assurance that we will be there when they
need us.
(Section 4)

4.

1. Differentiate from box-pushing, price-oriented businesses by offering and delivering service and
support – and charging for it.
2. Increase gross margin to more than 30%.
3. Increase our non-hardware sales to 20% of the total sales by the third year.

(www.sba.gov)

3.3. Vocabulary development

CAPITAL
Capital (n), (adj.) – capitalist (n) – capitalism (n)- capitalisation (n)
Capitalist (adj.) – capitalistic (adj.)
Capitalise (v)/ capitalize

 Price-oriented business
 Sales forecast
 Key customer
 Reseller
 Working capital (the money that is available to be used for the costs of a business)
 Local market
 Target market (segments)
 Gross margin (on sales)- financial difference between what smth. costs to produce and what it is
sold for
 Margin squeezes (limitation/ reduction of margin indicator)
 Capture market share
 Inventory turnovers
 Adversely
 ally (someone who helps and supports you)

3.3.1. Use words and expressions from above to fill in the blanks in the following sentences (The
sentences are taken, slightly modified, from the text above, sections 1-4).

(Section 1)
1. By focusing on its strengths and ___ they need, American Management Technology will improve the
___ and ___.
2. This business plan adds value to our ___, the small business and high-end home office users, in our
___.
3. AMT was founded as a consulting-oriented value added reseller (VAR) and became a ___ to fill the
market need for personal computers.
4. Recent changes in the computer reseller market that have ___ affected AMT include ___, longer
collection periods, and lower ___.
5. Our support services, with which we hope ___ will include training, upgrade offers, installation services,
and network configuration services.
6. The Yearly Total Sales chart summarizes our ambitious ___.

(Section 3)
7. AMT is a vendor that serves its clients as a trusted ___, providing them with the loyalty of a business
partner and the economics of an outside vendor

(Section 4)
8. Our target is to differentiate from box-pushing, ___ by offering and delivering service and support – and
charging for it.

3.4. Language focus – Revision: the tense system

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Units 1-4 – pp. 1-25
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Units 1-11 – pp. 1-49

3.4.1. Fill in the blanks with the required form of the verb given in brackets:

But how much money can a bank (1) ___ (create) through the lending process? A lot of that (2) ___
(depend) on how risky its loans (3) ___ (be). Banks can create new loans (or bank money) up to a certain
maximum multiple of their shareholder capital – that is, the amount shareholders (4) ___ (invest) in the
bank, which is also the excess of the bank’s assets over its liabilities. Remember a banks assets (5) ___
(be) its loans to the public, and its liabilities (6) ___ (be) deposits of the public. Capital for a bank can (7)
___ (think of) as a safety net – the more capital a bank (8) ___ (have), the safer it (9) ___ (be). That
multiple of shareholder capital that banks (10) ___ (create) as money (11) ___ (depend) on how risky the
loans they (12) ___ (choose) make (13) ___ (be). If they (14) ___ (be) very risky the multiple (15) ___
(be) lower. Put another way, a bank that (16) ___ (make) risky loans (17) ___ (have) to hold more capital
(i.e. more of a safety net) as a percentage of total loans than a bank that (18) ___ (make) less risky loans.

Risky loans in this context (19) ___ (mean) loans that are more likely (20) ___ (not to pay back) in full,
and this is the financial risk "created out of thin air" we (21) ___ (speak) about in another chapter. If lots of
risky loans (22) ___ (end up) in default (that is, not paid back) then the bank (23) ___ (report) this as a
loss and people (24) ___ (start) to lose confidence in the financial system, which can ultimately lead to
financial crises and sometimes collapse. So, although these risks (25) ___ (create) "out of thin air" they
can create very real consequences because our whole global economy (26) ___ (be) tied to the financial
system and therefore (27) ___ (be) completely dependant on continued confidence in it.
(www.smartmoney.com)

3.4.2. Fill in the blanks with the required form of the verb given in brackets:

The "Oil-Standard" Kicks Out the Gold-Link of Money To understand this point about the monetary
attacks let us first understand how the original Bretton Woods system (28) ___ (collapse). Throughout the
1960s the United States (29) ___ (spend) massive amounts of money (US dollars) abroad to fund various
military operations that, while under the guise of the "war against communism", (30) ___ (buy) ultimately
insurance on investments and economic interests abroad. While certain capital controls (31) ___ (exist) to
prevent speculative pressure on currencies US investors still (32) ___ (have) many economic interests
throughout these regions. A rise in democracy may (33) ___ (nationalize) natural resources, (34) ___
(create) land reforms and otherwise (35) ___ (collapse) the value of US investments. In turn this (36) ___
(have) serious ramifications on the US stock exchanges and (37) ___ (reverberate) throughout the whole
financial system. This big military spending abroad on Vietnam and other adventures (38) ___ (cause)
America to have a big and rather permanent trade deficit and greatly (39) ___ (increase) the supply of US
dollars abroad relative to US gold reserves at home. President Nixon (40) ___ (force) to break the peg of
the US dollar to the fixed price for gold in 1971 and then the US dollar kept decreasing in value with
respect to gold as the US (41) ___ (increase) its military activities abroad. This (42) ___ (cause) a huge
disturbance in the international monetary system and soon the whole adjustable peg system (43) ___
(break down). The IMF (44) ___ (disband) at this time because its founding mission (45) ___ (not exist)
anymore now that the Adjustable Peg (46) ___ (break down).

(www.smartmoney.com)

3.5. Language in use

3.5.1. Fill in the blanks with ONE suitable word.

Once you have identified the skills 1 ___ for the positions you want to fill, 2 ___ are many sources that 3
___ help you recruit job 4 ___. Each State has 5 ___ employment 6 ___ often called Job Service, Public
Employment, Unemployment Bureau, or Employment Security Agency. All are affiliated 7 ___ the United
States Employment Service, and local offices 8 ___ ready to help businesses recruit employees. 9 ___
employment service will screen applicants 10 ___ aptitude tests 11 ___ they are available for the skills
you specify.
Employment agencies specialize 12 ___ finding industry or skill-specific employees. 13 ___ primary
advantages are the professional screening services provided 14 ___ such agencies, including
background checks and aptitude 15 ___. Employers typically 16 ___ a considerable fee to the agency for
17 ___ services.
(www.sba.gov)

3.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Online job 18 ___ such as Monster.com are still the fastest 19 ___ method for employer-employee 20
___. These specialized sites, along with the online classified sections from major newspapers, often
provide the largest 21 ___ of prospective employees. However, most online sites do not 22 ___ the
professional screening services offered by employment agencies. Additionally, businesses advertising on
such sites are often inundated with 23 ___.
Colleges and universities 24 ___ have a distributive education program in which students work for you
part-time or volunteer as interns while they learn about your business. Interns typically expect to learn
skills or useful information 25 ___ to their chosen field of study. 26 ___ to contacting a school regarding
interns, make sure that you have a clear idea of how an intern will 27 ___ working with you. If you're
looking for someone to do 28 ___ work with little or no opportunity for learning on the job, it's generally
best to hire low cost help instead.
(www.sba.gov)

18. A sites B offers C places D resources


19. A developing B growing C accessed D applicable
20. A relationship B matchmaking C interviewing D meeting
21. A pool B database C source D databank
22. A assure B ensure C offer D give
23. A students B unemployed C job-seekers D applicants
24. A normally B commonly C usually D finally
25. A relevant B important C useful D acquired
26. A before B Prior C anterior D beforehand
27. A take advantage B profit C depend D benefit from
28. A staff B office C clerical D stuff

3.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

29. If you have a (A) traditional storefront and are seeking generalists, (B) one of the oldest and (C) the
most reliable recruitment tools is a simple (D) sign in your window.
30.The most obvious (A) advantage for this recruitment method is that (B) it is free. There are serious
disadvantages, however, (C) including attracting unqualified applicants with a vast variety of skill sets,
and the difficulty (D) of talking to prospective applicants while conducting business.

31. How (A) do you cope with unexpected personnel shortages? Many businesses (B) face this question
because of (C) seasonal peaking, inventory, special projects, several employees simultaneously (D) with
sick leave, or an unexpected increase in business.

32. Entrepreneurs must also cope with (A) the rising costs of employee benefits, as well as (B) all the
payroll record keeping required by local, state, and federal government. This section discusses
alternatives (C) available to meet these (D) staff about challenges. Options include temporary help
services, employee leasing, and service contracting.
(www.sba.gov)

3.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

Most businesses need extra help 33 ___, and temporary 34 ___ are especially TIME
difficult for smaller businesses. SHORT
A temporary 35 ___ service hires employees and assigns them to companies PERSON
requesting help.
The service is responsible for payroll, bookkeeping, tax deductions, workers' 36 COMPENSATE
___, fringe benefits, and all other employee costs.
Most national temporary personnel companies also offer performance guarantees ADDITIONAL
and fidelity bonding at no 37 ___ cost.
Workers supplied by a temporary service firm are quickly available. Usually they SAMENESS
can start the day after a request is made, and sometimes the 38 ___ day.
Although the rate paid to a temporary service firm is higher than that paid to a TIME
permanent employee, the costs of recruiting, record-keeping, training, 39 ___, and
idle periods are much less.
Evaluate temporary personnel services using these factors: Reliability: Is the STABLE
service well established, with a history of success and financial 40 ___? and
Recruiting: The firm with an aggressive recruiting program is more likely to have
the most skilled and reliable employees.
(www.sba.gov)

3.6. Speaking

Pair work

Student A: You need one more investor to start a business in catering. Unfortunately the sum of
money necessary for the acquisition of a location is $20, 000. Convince your friend that it’s worth
investing in your idea.

Student B: You have the money your friend needs but your are not convinced that the business
will be profitable. Tell him your opinion and refuse him politely, bringing your realistic arguments.

3.7. Writing

You need a loan to start your own business. Write a business plan for the bank official who will
support your application in the Board.
UNIT SEVEN – INTERNATIONAL TRADE

1. INTERNATIONAL TRADE CENTRE

International trade: the activity of buying, selling or exchanging goods and services between countries.

1.1. Lead-in

Consider the following questions:

1. Is there any international organization that co-ordinates the activity of worldwide trade?
2. Is such an organization/organism needed?
3. How do you imagine the evolution of international trade in the years to come – in about fifty
years, for example?

1.2. Reading

Read the following presentation of the International Trade Centre. The headings of the seven main
sections have been removed. They are given below. Choose the most appropriate heading for
each paragraph.

Areas of activity
Global programmes
The scope of ITC
Partners
Support for developing and transition economies
Technical assistance
Approach to trade development

1.

The International Trade Centre (ITC) is the technical cooperation agency of the United Nations
Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO) for
operational, enterprise-oriented aspects of trade development. ITC supports developing and transition
economies, and particularly their business sector, in their efforts to realize their full potential for
developing exports and improving import operations.

2.

ITC works in six areas:


 Product and market development
 Development of trade support services
 Trade information
 Human resource development
 International purchasing and supply management
 Needs assessment, programme design for trade promotion
3.

ITC’s technical assistance concentrates on the three issues for which it believes the need for national
capacity-building is most critical: helping businesses understand WTO rules; strengthening enterprise
competitiveness and offering high expertise in international trade relations.
ITC understands that businesses, particularly small and medium-sized enterprises, that are striving to
achieve and maintain a competitive edge in the global market need to be backed by efficient and strong
national trade support institutions. This is vital for their sustained and improved access to trade-related
services such as financing, help in maintaining quality standards, advice on export packaging and ready
information on legal requirements of international business.
ITC also assists countries in purchasing the goods required to meet their population's basic needs, and in
improving the effectiveness of their government procurement. ITC works with national institutions to
improve their ability to provide consultancy support, information and training covering the whole
purchasing and supply chain. This involves diagnosing supply bottlenecks and problems, monitoring
supply markets, implementing effective purchasing strategies, optimizing the quality of goods, managing
the inbound logistics process and protecting imported goods against damage, loss and inefficient
utilization.

4.

ITC works in partnership with the following organizations at the national and regional levels; enterprises,
trade-related government departments, trade and industry associations, national trade promotion
agencies, chambers of commerce, commodity organizations, small enterprise development agencies,
commercial banks and other trade financing institutions, standards boards, packaging institutes,
management institutes for training trade managers, tender boards and central purchasing institutions,
state-owned corporations, purchasing and supply management associations and regional organizations
specialized in selected trade and marketing functions.

5.

ITC advocates an integrated and comprehensive approach to trade development, seeking to avoid
duplication, maximizing synergy and choosing the best ideas.
To this end, in addition to its parent bodies, the World Trade Organization (WTO) and the United Nations
Conference on Trade and Development (UNCTAD), it cooperates with other relevant agencies inside and
outside the UN system, building upon each other’s comparative advantages and “best practices”.
The country approach offers an overview of ITC's technical cooperation activities at the country and
regional levels. It provides links to national trade support institutions and country-specific business
information. In addition, it presents trade and market profiles based on trade statistics which benchmark
national trade performance and provide indicators on export supply and import demand.

6.

The International Trade Centre (ITC) supports the business sectors of developing and transition
economies, helping them to realize their trade potential by sharpening their ability to compete in the
international marketplace, thus making a difference to the lives of their people
ITC’s activities aim to:

- Facilitate the integration of its clients into the world trading system;
- Support national efforts to implement trade development strategies;
- Strengthen key trade support services, both public and private;
- Improve export performance in sectors of critical importance and opportunity;
- Foster international competitiveness of SMEs.

7.

To achieve these five goals, ITC offers a range of global programmes, advisory and training services,
information sources, tools and products.
Global programmes respond to the needs of partners in all regions. They are based on proven ITC
methodologies, and incorporate advisory services, tools and products. Global programmes are replicable
and adaptable, and have a perceptible time-proven impact. ITC also participates in major trade-related
Multi Agency Programmes.

Advisory and training services are offered in key areas of international trade. Needs assessment,
tailor-made advisory activities and customized training are designed and delivered to build capacity in
partner countries in close cooperation with trade support institutions.

Information sources for international trade and business development are largely accessible through the
Internet.

Tools and products support, sustain and improve the delivery of trade support services through partner
institutions. They include practical guides which can be adapted to local requirements, methodologies and
approaches for the development or review of trade support services, training materials, benchmarking
and assessment tools.
(Adapted from www.intracen.org/menus/itc.htm)

1.3. Vocabulary development

TRADE

trade (n) – trader (n) –


trading (adj.)
trade (v)

 Procurement (2) the act of obtaining  Purchasing


smth.  Regulatory
 Priority sectors  Supply chain
 E-trade  Packaging
 Trade support  Key-players
 Trading  Trade law
 Agreements  Commercial arbitration
 Trade performance

1.3.1. Use words and expressions from above to fill in the blanks in the following sentences:

Assistance provided by ITC:

1. ITC analyses the Business Implications of the ___ System by helping the business community to
address the changes in the evolving trading system and to promote business-government
dialogue, at a country level, on the implications of the WTO-related ___ for business.
2. It supports the analysis of business issues, trains ___, and provides opportunities for sharing
information and experiences.
3. Export ___ is a service provided by ITC to strengthen support to SMEs on packaging-related
issues.
4. It assists institutions to provide information on commercial, technical and ___ aspects of
packaging. It helps the staff of export promotion organizations and industry associations to advise
and train SMES in the use of appropriate export packaging.
5. International ___ and ___ Management is a service that helps organizations to strengthen
purchasing and supply management capabilities in the private and public sectors.
6. It supports governments, business communities and institutions in applying best practices in ___
and supply chain management to promote enterprise competitiveness, improve overall ___ and
ensure cost-effective use of resources.
7. Legal Aspects of International Trade is a service meant to provide a better understanding of, and
access to, international ___ and practice. It provides training and advice on legal instruments,
contract negotiation and ___ to trade lawyers, arbitration centres and legal entities servicing
SMEs.
8. Market Analysis and Strategic Market Research is a service on market research and trade
analysis for exporters, importers and ___ institutions. Upon request, tailored studies are
conducted for governments, trade support institutions, international organizations, research
institutions and the business community.
9. National E-Trade Strategy Development is a service designed to assist national trade strategy
makers position ___ strategies within overall export development strategies and to help design
and implement coordinated programmes.
10. Product and Market Development by Sector provide tailor-made advice and support for product
development and adaptation, promotion and market development. It covers ___ such as textiles
and garments, wood and wood products, artisanal products, coffee, leather, organic products,
fruit juices and spices.
11. Public ___ represent a set of advisory services focusing on government procurement operations,
practices and policies.
(Adapted from: www.intracen.org/ipsms)

1.4. Language focus – Text features (2)

Have a look at the following sentences:

1. There are a number of activities specific for the ITC. First, it facilitates the integration of its
clients into the world trading system. Next, it supports national efforts to implement trade
development strategies. Finally, it strengthens key trade support services, both public and
private.

2. The information sources for international trade and business development are largely accessible
through the Internet.

A number of, first, next, finally are ‘organizers’ of the text and largely is a modifier.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Units 27-29 – pp. 152-168
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Unit 43 – pp. 178-183

1.4.1. Fill in the blanks with the most suitable word or phrase for each space:

(1) ___, history shows that stocks will rise given the fullness of time, but there are (2) ___ no guarantees
– (3) ___ when it comes to individual stocks. Unlike a bond, which (4) ___ promises a payout at the end
of a specified period plus interest along the way, the only assured return from a stock is if it appreciates
on the open market. (While many companies pay shareholders dividends out of their earnings, they are
under no obligation to do so.) (5) ___, the worst-case scenario is that a company goes bankrupt and the
value of your investment evaporates (6) ___. (7) ___, that's rare. More often, a company will run into
short-term problems that depress the price of its stock for what seems an (8) ___ long period of time.

For all the risk, however, there are ways to manage your exposure. (9) ___ is the attempt to diversify by
owning a variety of stocks. That way, no single company can harm you. (Check out our Risk vs. Reward
section for more on diversification strategies.) (10) ___, it's also important to remember that investors are
well compensated for rolling the dice with equities. Historically, the long-term return from stocks is about
11% annually, while bonds – which are less risky – return just 5.2%. Over time, that spread can make a
huge difference in the earning power of your savings. (11) ___: along with ownership, a share of stock
gives you the right to vote on management issues.
(www.SmartMoney.com)

1. A For example B like C what D just as


2. A almost B merely C anyway D hardly
3. A merely B especially C whenever D thoroughly
4. A literally B undoubtedly C utterly D finally
5. A last of all B at the end C moreover D All in all
6. A at all B more and more C in any case D altogether
7. A Happily B merely C extremely D really
8. A hardly B utterly C agonizingly D thoroughly
9. A nevertheless B First of all C in many respects D the best
10. A similarly B besides C another problem D Second
11. A in the end B although C Finally D last of all

1.4.2. Choose the most suitable word or phrase for each space.

(12) ___, money market funds are mutual funds. (13) ___, they don't invest (14) ___ in stocks – (15) ___
they (16) ___ invest in U.S. treasury bills (notes and bonds with less than 13 months until maturity), top-
rated commercial paper, bank notes, and other high-quality, short-term debt instruments. They are (17)
___ impossible to be confused with money market accounts, or money market deposit accounts and this
(18) ___ because these are FDIC-insured and pay much lower rates on average.

(19) ___ to be known is that money market funds attempt to maintain a stable $1.00 per share NAV (net
asset value). (20) ___ their risk exposure is non-existent when compared with stock and bond funds. (21)
___, money market funds are not insured or guaranteed by the government (or anyone else), but the
Securities and Exchange Commission heavily regulates them; they have a number of restrictions on the
quality, maturity and diversity of the securities they may invest in.

(22) ___, we should point out that no retail investor has ever lost money in a money market fund. There
has been just one case of a money market fund "breaking-the-buck," or dropping below its $1.00 share
price. In 1994 an institutional money fund, Community Bankers U.S. Government Money Market Fund,
liquidated at 94 cents (23) ___ a share due to extensive derivatives-related holdings.
(www.SmartMoney.com)

12. A nevertheless B consequently C first D In many respects


13. A However B anyway C moreover D in the end
14. A only B all in all C merely D just
15. A only B but C while D even
16. A also B so C often D similarly
17. A slightly B almost C just D merely
18. A similarly B hardly C mainly D utterly
19. A first of all B it is C in any case D The first point
20. A in some respects B in the end C despite the fact D these are
21. A often B Besides that C in fact D in the case
22. A what remains B last of all C Last but not least D unlike
23. A about B down C even D or so

1.5. Language in use

1.5.1. Fill in the blanks with ONE suitable word.

ITC supports export- 1___ managers and analysts 2 ___ developing and transition economies 3 ___
conducting effective market analysis, 4 ___ of the foundations of successful export strategies. Training
programmes cover 5 ___ use of ITC’s market analysis tools and data 6 ___. Capacity building 7 ___ also
be customized to a partner’s specific needs.

ITC 8 ___ develops activities to strengthen national institutions supporting trade development 9 ___ as
trade promotion organizations, chambers 10 ___ commerce, industry/exporters associations and 11 ___
trade support institutions. 12 ___ provides expert advice on national export strategy formulation,
institutional infrastructure and 13 ___ design and delivery of trade services 14 ___ SMEs.
(Adapted from: www.intracen.org/etradebridge)

1.5.2. For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is
correct and THERE IS ALWAYS ONE correct answer.

Services provided by ITC try to build national training and 14 ___ capacities to assist SMEs to improve
their international 15 ___ by effectively and efficiently managing information and communication
technologies.
These services 16 ___ support to SMEs on quality-related issues.
ITC helps 17 ___ to meet standards, technical regulations and sanitary and phytosanitary measures in
their export 18 ___.
It strengthens the capacities of organizations dealing with 19 ___, quality assurance, accreditation and
metrology to provide improved services to enterprises.
Trade Competitiveness represents a 20 ___ training that augments the capacity of trainers and
counselors to design, 21___ and manage programmes on trade competitiveness.
Based on ITC’s business management system (BMS) the training 22 ___ SMEs to design strategies,
build business 23 ___ and manage exports.
(Adapted from: www.intracen.org/etradebridge)

14. A Counseling B advising C monetary D checking


15. A competition B competitiveness C recognition D acknowledgement
16. A reinforce B assure C strengthen D harden
17. A businesses B dealings C enterprises D joint ventures
18. A actions B plans C policies D Markets
19. A Standardization B standardizing C regulation D Legalization
20. A constant B modular C monthly D regular
21. A send B spread C Communicate D Deliver
22. A facilitates B causes C Enables D makes
23. A features B characteristics C plans D capabilities

1.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

24. Trade Finance is an advisory service (A) to facilitate access of trade finance for SMEs. It strengthens
the (B) ability of private and public financial institutions, (C) dealing with export finance, credit insurance
and guarantees to provide better services to SMEs. (D) It builds up the capacity of entrepreneurs and
credit officers to deal with trade credits and manage financial risk.

25. Technical assistance programmes (A) promote exports of services (B) aimed to trade support
institutions, governments and firms (C) in the services sector. Includes studies, (D) train-the-trainer kits,
workshops and networks.

26. Trade Information Management provides (A) services aimed at strengthening business information
management capabilities of TSIs (B) to enable them to provide efficient information services (C) to the
business community. Advisory (D) inputs are supported by a range of methodologies and tools as well as
by training programmes, through national or regional workshops.

27. Value chain approach is a service (A) provided by the ITC which is (B) based on the analysis of value
chains extending from (C) supply of inputs by to the delivery of finished goods and services (D) to
consumers. It enables the formulation of national export strategies, trade support services and enhances
sector trade performance.

28. The Executive Forum is a corporate initiative (A) to share best practice in national export strategy
design and management and to support global and regional networking (B) between public sector
strategy-makers and leading (C) representatives of the export community. The Executive Forum provides
field-level (D) assistance in strategy design at the national and regional levels.

29. The Export-led Poverty Reduction is (A) a programme to integrate poor communities (B) into the
export value chain. It supports the development of (C) export production capabilities in identified sectors
and (D) links them with export opportunities. It also addresses quality, financing, human resource
development and other support services while taking into account gender and environmental
considerations.

30. South-South trade promotion is (A) a programme that promotes intra- and inter-regional trade
transactions. (B) It methodical identifies and quantifies missed trade opportunities, and (C) helps realize
their potential by organizing buyers–sellers meetings (D) to bring together potential business partners in
identified sectors.
(Adapted from: www.intracen.org/etradebridge)

1.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

World Tr@de Net is a programme to 31 ___ the business community’s effective STRONG
participation in the world trading system.
It 32 ___ private-public sector consultations on WTO-related issues and provides FORCE
training and information on the business implications of the WTO Agreements.
JITAP (Joint Integrated Technical Assistance Programme) implemented jointly by ITC, LATERAL
UNCTAD and WTO, aims at strengthening the capacity of selected African countries to
integrate into the 33 ___ trading system (MTS).
Its primary objective is to build capacity to understand and 34 ___ economic benefits DERIVATIVE
from the MTS.
ITC has the 35 ___ role to ensure a smooth and effective delivery of the programme. ORDINATOR
TC, in partnership with the other five IF (Integrated Framework) core agencies (IMF, STREAM
UNCTAD, UNDP, World Bank and WTO), participates actively in the implementation of
the Integrated Framework initiative which aims at both the 36 ___ of trade and linking it
to poverty reduction.
37 ___ subsidy is a type of subsidy that is not prohibited under WTO rules but against ACTION
which a member may respond by imposing a countervailing duty.
(Adapted from: www.intracen.org/etradebridge)

1.6. Speaking

Pair work

 Make a list containing differences between domestic and international trade.


 Bring arguments in favour of working in the area of international trade. Present them to a
colleague of yours who is not convinced that international economic relations are profitable for the
economy of a country.

1.7. Writing

In not more than 200 words explain the usefulness of the International Trade Centre.

2. 20TH CENTURY MONEY AND 20TH CENTURY TRADE

2.1. Lead-in

Consider the following questions:


1. How does the international monetary system influence the activity of the international trade?
2. What are the factors that influence the growth of the international trade?
3. Is international trade connected with politics? In what respect?

2.2. Reading

Read the following text.


Money and International Trade
(Par. 1)
World War II and the events leading up to it saw profound changes to the international monetary system
and the mechanisms that countries would use to co-ordinate cross-border trade and financing. The most
famous of these changes came in the form of the Bretton Woods agreements (named after the meeting
place in the US where the agreements were drafted) which created the International Monetary Fund and
the World Bank. We shall just focus here on the IMF because this has more to do with contemporary
monetary attacks than does the World Bank.
(Par. 2)
To understand what the IMF was really created for lets just take a peak at monetary arrangements before
the Great Depression. Up until this time many countries were on the gold standard, whereby their own
currency was backed by gold reserves at their central bank (The Central Bank is the creator of base
money for any currency.), and paper currency could be converted to gold. Just as in Roman times this
system meant that whoever had access to the most gold could do the most investing and acquire
extensive ownership in foreign resources, and this was usually perfectly correlated with whoever had the
most firepower and willingness to use it. This made Britain both the primary military and financial power in
the 19th and early 20th century with a late boost coming from its discovery of gold in South Africa.
(Par. 3)
One of the main complexities of the international monetary system, which is the mechanism through
which all international trade and investing happens, is the determination of the value of one country's
currency against another, known as the exchange rate. For example the value of today's Australian dollar
to the US dollar could be expressed as an exchange rate of almost 2 Australian dollars to 1 US dollar, or
1 Australian dollar is worth 0.5 USD. Before the Asian financial crisis the exchange rate was closer to 1
Australian dollar for 0.7 USD. So we say the Australian dollar has since been devalued relative to the
USD - it now buys LESS US dollars. This means that it is now more expensive for Australians to buy US
products, and Australian products are cheaper for US consumers. The problem of managing exchange
rates has troubled international relations for the past 2 centuries and so far none of the
management regimes have worked out very well for the majority of people living outside the
United States or Western Europe.
(Par. 4)
Any country involved in international trade would like their exchange rate relative to the currency of
trading partners to remain fairly stable and predictable and not to suffer sudden shocks. For if their money
suddenly loses value relative to other money their imports cost more and if it gains value their exports are
less competitive. The gold standard provided a way to stabilize exchange rates because every currency
was convertible into a single common commodity - gold. Up until the Great Depression and under the
gold standard there was allowed a fairly free flow of capital between countries and this is what kept
exchange rates stable. However, on the downside, the central bank or the government of a country
weren't easily able to change their own money supply to deal with pressing domestic problems such as
unemployment and price inflation, because this supply was already fixed by gold movement. Also,
financial panics were more likely to collapse the whole system because everyone would rush to change
their money into gold and the whole banking system would start to break down. It was recognized that
some international agreement was needed to create a more stable international monetary system, and
one that was to exist in the absence of a gold standard backing each individual currency. This is what
gave birth to the IMF.
(Par. 5)
For these and other reasons the gold standard for domestic money holders was abandoned by most
countries after the Great Depression. But this meant that there was no longer any natural way to ensure
stability of the exchange rates between countries. In the aftermath of World War II the United States was
the dominant economic power. With the gold-standard gone it seemed to make sense to the powers-that-
be for the world to move on to a US Dollar standard, where the value of every currency would be set
against the value of the US dollar. In turn the US dollar was fixed against the value of real goods by
settings its value against gold as US $35 for an ounce of gold. This was called the Adjustable Peg system
and the IMF was created to administer this system and put out fires as needed.
(Par. 6)
Under the Adjustable Peg system then, many countries might hold US dollars, US government bonds and
gold to back their own national currency and keep their exchange rate fixed against the US dollar. Central
banks could redeem their US dollars for gold at the fixed price, and this gold was stored at the famous
Fort Knox. Exchange rates would be stable as long as demand for US dollars remained fairly stable
relative to demand for other currencies. Relative demand for any country's currency versus others
depends on relative flows of imports versus exports and desire for investment domestically versus
abroad. To keep things fairly stable, under the original Bretton Woods agreement, there were restrictions
on cross-border capital flows or investments to help reduce sudden jumps in supply or demand for a
currency that come with speculative capital flows.
(Par. 7)
The capital controls were necessary otherwise speculators could have had a field day by betting that a
certain currency would go down by selling it off against the US dollar and thereby forcing it to go down
purely from their speculative activity. Large financial firms with access to lots of US dollars could therefore
force a foreign currency of a weaker country to collapse as they desired. The earlier restriction on capital
flows is a key point so please remember it because this is a fundamental difference between the original
Bretton Woods system and the commonly named post-Vietnam "non-system" that allowed the sudden
attacks on, and collapse of, Mexican, Asian and Latin American currencies over the past decade. If a
currency collapses people of the effected country become a lot poorer very quickly and things are much
worse if the country has lots of debt denominated in, say USD. We have seen that when this happens
economic policies then introduced normally lead to increased poverty and unemployment, or employment
at below poverty wages, as well as a selling off of natural resources to the west at fire-sale prices. It is
interesting to note that the two things that brought down the stabilizing mechanisms of the original Bretton
Woods system were America's extensive cold-war military adventures and the world's lust for oil (through
the 1970s oil shocks).
(Par. 8)
Under the original Bretton Woods system with capital flow controls, the only thing that could change the
relative demand for a currency against the US dollar peg, was a serious trade imbalance. That means a
large imbalance between a country's imports and exports. For example, if a non-US country's imports
from the US exceeded its exports to the US by a lot then its demand for US dollars exceeded the US
demand for its currency. To make things balance it could either devalue its currency or get US dollars
somehow, say by selling gold or borrowing US dollars. If a large temporary trade deficit came about the
IMF could lend US dollars to the country to stabilize its currency value while the deficit existed. But if it
was permanent the IMF would recommend a currency devaluation.
(Adapted from www.wizardsofmoney.org)

Find a word in the text that means:


(paragraph 1) international trade
(paragraph 1) an organization that is part of the UN (United Nations), which lends money to poorer
countries so that they can develop their farming, industry, and health and education systems. Its official
name is the International Bank for Reconstruction and Development
(paragraph 2) to increase smth. such as production, sales etc. ; to advertise smth. by praising it
(paragraph 3) the value of the money of one country compared to the money of another country
(paragraph 4) the process or business of bringing goods into one country from another
(paragraph 4) the sale of goods to another country
(paragraph 4) a product that can be sold to make a profit
(paragraph 4) circulation of money
(paragraph 5) to consider smth. in relation to another thing, especially when that other thing is very
important
(paragraph 5) the action of setting dollar value against gold as US $35 for an ounce of gold
(paragraph 6) to support, to sustain
(paragraph 6) to improve
(paragraph 7) denominated
(paragraph 7) the action of selling an industry, especially one that the government owns to private buyers
(paragraph 7) prices set under the value of the product
(paragraph 8) a lack of a fair or correct balance between two things which results in problems or
unfairness
(paragraph 8) to reduce the value that the money of one country has when it is exchanged for the money
of another country

2.3. Vocabulary development

EXPORT/IMPORT

export (n) – exporter (n) – exportation (n)


export (v)
import (n) – importer (n) – importation (n)
import (v)

 Quota
 Guilder (the standard unit of money in the Netherlands)
 Frankness (honesty, truthfulness)
 Favourable balance of payments
 Visible (exports)
 Invisible (exports)
 unfavourable balance of payments = adverse ~
 customs duties (taxes paid on goods coming into the country)
 bill of exchange (a signed document ordering someone to pay someone else a particular amount
of money)
 overseas
 multinationals
 encashed (paid, discounted)

2.3.1. Use words and expressions from above to fill in the blanks in the following sentences:

1. When exports exceed imports the economy is said to have a ___ and vice versa, when imports exceed
exports the balance of payments is said to be ___ or ___.
2. The exports are known as ___ and ___ merchandise, that is goods and services.
3. Many countries impose ___ and other restrictions on imports.
4. Selling ___ raises a lot of problems.
5. International trade can be financed by documentary credit: a ___ (a cheque payable at a future date,
not immediately) is drawn by the importer in favour of the exporter.
6. The exporter can get the bill of exchange discounted (___) immediately at his bank.
7. Companies operating in different countries are called ___.
8. A ___ is a person who can help you to find markets in a foreign country.
9. It is vital to understand the methods of conducting business in exporting; their most important quality is
___
10. In international trade there is often used an additional tax on imports to reduce a balance of payment
deficit. Its name is ___.

2.4. Language focus – Text features (3)

There are exercises in which you will be required to pay attention to common spelling errors or to
punctuation and to give your own, correct solution. You may also be asked to check whether words have
been omitted or extra words included.
The exercises below will help you to practice proof-reading activities.
(For details, see suggested bibliography:
Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Units 27-29 – pp. 152-168
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Unit 4 – pp. 178-183

2.4.1. In most lines of this text, there is either a spelling or punctuation error. For each line, write
the correctly spelled word, or show the correct punctuation, in the space beside the text. Indicate
correct lines with a tick.

An ad valorem duty (tarif, charge, and so on) is based on the value of the dutiable item and expressed in
percentage terms: for example, a duty of 20 procent on the value of automobiles.
Advisory Centre on WTO Law is an Entity based in Geneva that provides legal counselling on WTO law
and dispute settlement to developing and transition countries that are WTO members on a subsidized
basis, depending on the income level of the requesting government.
AGOA (African Growth and Opportunities Act): U.S. legislation providing duty-free access for a large
number of products for 35 African economyes.
Aggregate Measure of Support is a measure of the total suport given to an activity as a result of policies
such as production subsidies and market price support policies.
Anti dumping: is a trade policy used by importing governements to counteract dumping, for example by
imposing duties or negotiating price increases.
Appellate Body is the: WTO body that hears appeals against the findings of dispute settlement pannels.
Border Tax Adjustment is a fiscal measure compensating, in whole or in part, for the different treatment
either beetween imports and similar domestic products or between exports and similar products sold on
the domestic market. For example, refunds, of domestic indirect taxes on goods destined for export; or
changes on imports simmilar to the taxes levied on like domestic products.
In trade context, activities supported by the donor community aimed at strenghening the ability of
stakeholders in developing countries to develop national trade policy, undertake analysis and identify
theire interests in international trade negotiations.
The Cartel:- is an arrangement between firms to control a market – for example, to fix prices or limit
competition between members of the cartel.
Ceiling binding is often used to describe a situation where there is a lardge difference between the tariff
that is actually applied: and the level at wich the tariff is bound in GATT (the ‘ceiling’).
C.I.F.: Cost, insurance and freight. The cost of a good delivered to the importing country’s port.
(www.nysscpa.org)

2.4.2. In most lines of this text there is one unnecessary word. It is either incorrect grammatically,
or does not fit the sense of the text. For each line write the unnecessary word in the space beside
the text. Tick each correct line.

1. Dumping is a form of price of discrimination by which the export price of the product
exported from the one country to another is less than the comparable price, in the
ordinary course of trade—that it is, including transport and related costs—for the like
product when destined for consumption in the one exporting country (GATT Art. VI). Also
defined as sales below the estimated every cost of production. The margin of dumping is
the difference apeared between the two prices.
2. Export Processing Zone (EPZ): A designated area or region in which each firms can
import duty-free as so long as the imports are used as inputs into the production of the
exports. Traditional EPZs are fenced-in industrial estates of specializing in manufacturing
for exports. Modern ones have flexible rules that may permit domestic sales upon which
payment of duties when leaving in the zone. EPZs generally also provide a liberal
regulatory environment for the firms involved as well as infrastructure services.
3. Export promotion: A strategy for economic development that emphasizes support for
exports through removal out of anti-export biases created by policy. May be associated
with policies as such as duty drawbacks, export subsidies, marketing support or matching
about grants for exporters.
4. Licensing (of imports or exports): Practice requiring approval of to be granted by the
relevant government authority, or by a body which designated by such the authority, as a
prior condition to importing or exporting.

(www.iccwbo.org)

2.5. Language in use

2.5.1. Fill in the blanks with ONE suitable word.

For informational purposes I should just say 1 ___ this issue 2 ___ management of trade deficits and
barriers 3 ___ trade, and associated demand 4 ___ currency, provides the link 5 ___ the IMF and the
original GATT or General Agreement on Tariffs and Trade, 6 ___ later metamorphosed 7 __ the World
Trade Organization or WTO. It is interesting that 8 ___ agreements and institutions jointly deviated
drastically from 9 ___ original post-WWII mission in the late 20th century 10 ___ the collapse of the
original Bretton Woods system.
Under 11 ___ original Bretton Woods system countries 12 ___ some control over their 13 ___ domestic
monetary policy so long 14 ___ it didn't effect their balance of payments 15 ___ much, and under capital
controls they were protected 16 ___ excessive speculation. But then America's increasing military activity
throughout Latin America, Asia, and Africa in the 1960's and 1970's followed closely 17 ___ the OPEC oil
price shocks radically altered 18 ___ fundamentals of the monetary system 19 ___ the rest of the 20th
century. This culminated 20 ___ severe currency attacks on 21 ___ of the nations already wounded by
the military apparatus several decades earlier. In 22 ___ it is almost as if the earlier military efforts laid the
groundwork 23 ___ the later monetary attacks.
(adapted from www.wizardsofmoney.org)

2.5.2.For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is correct
and THERE IS ALWAYS ONE correct answer.
Then OPEC 24 ___ and presented the world with its oil 25 ___ shocks and a lot of large nations 26 ___
running significant trade deficits with the Middle-East because the price of oil was now so high. This might
have been oil's 27 ___ of saying that now that the gold 28 ___ was completely dead it would take over as
the real 29 ___ against which currency value should be 30 ___, which was 31 ___ since much of the
human fighting 32 ___ being about gold and became about oil. The oil shocks and America's military
spending seem to have created 33 ___ to break down the system of earlier capital flow 34 ___ so that the
Western countries could 35 ___ their currency 36 ___ from trade deficits with some inflow of capital from
the OPEC countries who were making the big oil profits.
(Adapted from www.wizardsofmoney.org)

24. A appeared B came along C was created D came


25. A tax B price C fee D rise
26. A started B began C settled D set forth
27. A way B means C manner D form
28. A status B rule C standard D supremacy
29. A product B merchandise C produce D good
30. A valued B evaluated C assessed D controlled
31. A correct B appropriate C close D fit
32. A stopped B ceised C ended D declined
33. A tension B conflict C tendency D pressure
34. A controls B checks C tests D assessments
35. A arrange B balance C protect D estimate
36. A inflow B overflow C outflow D underflow

2.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

37. This (A) threat of default marked the rebirth of the IMF, (B) who had lost its founding mission (C) upon
the collapse of the Bretton Woods system during the Vietnam War, (D) from a wholly new entity
governing today's monster of an international monetary non-system.

38. (A) To prevent financial panic spreading to the West (B) upon such defaults (C) the IMF stepped
about as (C) lender of last resort to protect the Western creditors (D) from getting hit by defaults.

39. (A) In giving such a blessing (B) to the reckless behavior of international banks the IMF (C) introduced
serious distortions favorable to these banks (D) in the form of "moral hazard" that is still with us today.

40. Moral hazard (A) comes forth when (B) large investors are enticed (C) into excessive speculation by
the knowledge they will (D) get bailed-out if their bets go bad.

41. (A) In today's international monetary non-system we have (B) free flow of capital and persistent (C)
speculative attacks against (D) economically weaker countries.

42. (A) To make matters worse these countries have large amounts of US dollar denominated debt, (B)
most of which originated as the petro-dollars, and the (C) IMF has made itself understood to be there to
back up the big Western (D) banks who get in trouble while speculating on these countries.

43. This Moral Hazard (A) combined with the loss of the original (B) capitals flow controls has created (C)
a very bad situation for the majority of (D) people in the developing world.
(Adapted from www.wizardsofmoney.org)

2.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).
So much money then 44 ___ in to the West as so-called petro-dollars. RUSH
Many financial institutions then turned around, in the absence of capital controls, and NOMINAL
lent the money as US dollar 45 ___ debt to many Latin American countries to earn
some higher returns.
46 ___ a lot of this debt incurred in Latin America was being used to fund the purchase INTEREST
of military equipment by the US favored regimes to assist in the "war on communism".
But the 47 ___ of the US money supply and the oil-shocks led to such bad inflation EXPAND
problems that by the end of the 1970's the US Federal Reserve decided to reign them
in by spiking up interest rates
Many Latin American borrowers were on 48 ___ interest rates and this spike in interest VARY
rates forced them to be about to default on their US dollar loans.
(Adapted from www.wizardsofmoney.org)

2.6. Speaking

Pair work

 In pairs, try to state clearly how is IMF involved in the international trade activity. By discussing
the text you have just read, draft a list with IMF functions which influence or have an impact upon the
overseas trade.

2.7. Writing

In not more than 200 words express your opinion on the following statement:

The problem of managing exchange rates has troubled international relations for the past 2
centuries and so far none of the management regimes have worked out very well for the majority
of people living outside the United States or Western Europe.

3. INCOTERMS

3.1. Lead-in

Consider the following questions:


1. What are Incoterms?
2. What is the scope of Incoterms?
3. What are the advantages and disadvantages of using them?

3.2. Reading

Read the definition and the text.

Incoterms
Trade terms in coded form as established by the International Chamber of Commerce in 1953, whereafter
they have been regularly updated. (Last update 2000).
The terms represent a set of international rules for the interpretation of the principal terms of delivery
used in trade contracts.
(www.ponl.com)

The purpose of Incoterms is to provide a set of international rules for the interpretation of the most
commonly used trade terms in foreign trade. Thus, the uncertainties of different interpretations of such
terms in different countries can be avoided or at least reduced to a considerable degree. The scope of
Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale
with respect to the delivery of goods. Incoterms deal with a number of identified obligations imposed on
the parties and the distribution of risk between the parties. In total 13 Incoterms have been defined which
are grouped into four basically different categories, applicable for sea and inland waterway transport or
for all modes of transport:
Applicable for sea Applicable for all modes of transport
transport only (including water)
Departure term EXW (Ex Works)
Shipment term, main FAS (Free Alongside FCA (Free Carrier)
carriage unpaid Ship)
FOB (Free On Board)
Shipment term, main CFR (Cost and Freight) CPT (Carriage Paid To)
carriage paid CIF (Cost, Insurance and CIP (Carriage and Insurance Paid to)
Freight)
Delivery term DES (Delivered Ex Ship) DAF (Delivered At Frontier)
DEQ (Delivered Ex Quay) DDU (Delivered Duty Unpaid)
DDP (Delivered Duty Paid)

From top (EXW) to bottom (DDP) the point of transfer in the transport chain moves from the sellers
premises to the buyers place. The second and third group specify the shipment conditions, with freight
and insurance unpaid or paid. For the first 3 groups the risk of loss or damage during (sea) transportation
are with the buyer of the goods, whereas for the fourth group all risks up to delivery are with the seller of
the goods.

(http://www.ponl.com)

Which of the abbreviations present in the list above refer to:

1. (factory, mill, warehouse: your door) Title and risk pass to buyer including payment of all transportation
and insurance cost from the seller's door. Used for any mode of transportation.

2. (pick a place after your origin to start) Title and risk pass to buyer including transportation and
insurance cost when the seller delivers goods cleared for export to the carrier. Seller is obligated to load
the goods on the Buyer's collecting vehicle; it is the Buyer's obligation to receive the Seller's arriving
vehicle unloaded.

3. (port, after all origin port charges) Title and risk pass to buyer including payment of all transportation
and insurance cost once delivered alongside ship by the seller. Used for sea or inland waterway
transportation. The export clearance obligation rests with the seller.

4. (port-same as FAS) Risk pass to buyer including payment of all transportation and insurance cost once
delivered on board the ship by the seller. Used for sea or inland waterway transportation.

5. (destination port-paid to arrival at destination port) Title, risk and insurance cost pass to buyer when
delivered on board the ship by seller who pays the transportation cost to the destination port. Used for
sea or inland waterway transportation.

6. (destination port-same as CFR, but includes insurance) Title and risk pass to buyer when delivered on
board the ship by seller who pays transportation and insurance cost to destination port. Used for sea or
inland waterway transportation.

3.3. Vocabulary development

CONSIGNMENT

consignment (n) – consigner (n)/ consignor (n) – consignee (n)


consign (v)

 commercial terms  merchandise


 transportation  payment details
 transacting  consignee
 sales agreement  shipper
3.3.1. Use words and expressions from above to fill in the blanks in the following sentences:
1. INCO Terms are internationally accepted ___ defining the respective roles of the buyer and
seller in the arrangement of ___ and other responsibilities.
2. INCO Terms clarify when the ownership of the ___ takes place.
3. They are used in conjunction with a ___ or other method of ___ the sale.
4. One has to pay close attention to the location listed for each term, as this indicates where ___
change from ___ to ___.

3.4. Language focus – Text organizers

Have a look at the following sentences:

1. He arranged the meeting and wrote the report for the MD.
2. They are both skilled businessmen and famous doctors.
3. You can either sell your business or declare bankruptcy.
4. Inco terms are used in many countries. In the USA, for example, business people don’t even
imagine trading without their help.
5. I couldn’t come to the meeting, since I was ill.

In these examples the words written in bold are used to organize speaking and writing.

(For details, see suggested bibliography:


Vince, Michael. Advanced Language Practice, London: Heinemann, 1994, Unit 28 – pp. 157-162
Vince, Michael. Intermediate Language Practice, London: Heinemann, 1994, Unit 43 – pp. 178-183

3.4.1. Decide which answer (A, B, C or D) best fits the space:

Nowadays business people prefer travelling by plane (1) ___ driving the car. (2) ___ of all planes are
more rapid (3) ___ very safe (4) ___. At the same time, they are (5) ___ comfortable (6) ___ not very
expensive. However, the plane is a means of transportation preferred not only by business people, but (7)
___ by the tourists. (8) ___ the number of tourists increases during summer, the number of flights is
supplemented (9) ___. (10) ___, there is a high demand of small and very rapid planes that are hired by
wealthy people for personal entertainment. (11) ___ air traffic controllers should be very careful.

1. A instead of B except for C such D but


2. A First B as well C of all D in fact
3. A while B and C also D too
4. A both B as well C also D yet
5. A too B as well C both D while
6. A secondly B too C and D for
7. A or B such as C both D also
8. A why B while C for D Since
9. A too B as well C also D for
10. A in conclusion B Besides this C instead of D as well as
11. A besides this B either C final D In conclusion

3.4.2. Use the words below in sentences of your own:

Even, yet, as well, except for, first of all, in conclusion, also, personally, both, instead of

3.5. Language in use

3.5.1. Fill in the blanks with ONE suitable word.


Understanding Incoterms
Incoterms are standard trade definitions 1 ___ commonly used in international 2 ___ contracts. Devised
and published 3 ___ the International Chamber of Commerce, they are 4 ___ the heart of world trade.
5 ___ the best known Incoterms 6 ___ EXW Ex works, FOB Free on Board, CIF Cost, Insurance and
Freight, DDU Delivered Duty Unpaid, and CPT Carriage Paid To.
ICC introduced the 7 ___ version of Incoterms – short 8 ___ "International Commercial Terms" – 9 ___
1936. Since 10 ___, ICC expert lawyers and trade practitioners 11 ___ updated them six 12 ___ to keep
pace 13 ___ the development of international trade.
Most contracts made 14 ___ 1 January 2000 will refer to the 15 ___ edition of Incoterms, which came 16
___ force 17 ___ that date. The correct reference is to "Incoterms 2000". 18 ___ the parties decide
otherwise, earlier 19 ___ of Incoterms - like Incoterms 1990 – are 20 ___ binding if incorporated 21 ___
contracts 22 ___ are unfulfilled and date from 23 ___ 1 January 2000.
(adapted from: www.iccwbo.org/)

3.5.2.For each blank decide which of the options A, B, C or D is best. ONLY ONE answer is correct
and THERE IS ALWAYS ONE correct answer.

The site 24 ___ for the first time the 25 ___ to each 26 ___, in 27 ___ format. The Preambles explain the
28 ___ the terms cover but do not 29 ___ the obligations of buyer and seller - information that can be
obtained only by 30 ___ the full published texts of the 13 Incoterms.
As the 31 ___ and originator of Incoterms, ICC has a responsibility to consult 32 ___ 33 ___ parties
interested in international trade to keep Incoterms 34 ___, efficient and 35 ___. This is a long and 36 ___
process for ICC, which is a non-governmental, self-financed 37 ___. The work is financed 38 ___ sales of
Incoterms 2000 and 39 ___ publications, which are protected 40 ___ copyright.
(Adapted from: www.iccwbo.org/)

24. A includes B contains C comprises D compiles


25. A Preambles B prerequisite C introduction D instructions
26. A notion B term C word D definition
27. A only-read B read-only C ready-made D composed
28. A fields B branches C areas D domains
29. A explain B state C spell out D indicate
30. A compiling B accessing C reading D consulting
31. A keeper B owner C user D guardian
32. A constantly B regularly C definitely D timely
33. A all B every C each D any
34. A important B relevant C outstanding D useful
35. A up-dated B informed C up-to-date D functional
36. A costly B costing C cost-wide D costful
37. A institution B department C association D organization
38. A by B out of C for D from
39. A similar B collateral C related D minor
40. A by B from C against D for

3.5.3. In some of the following sentences there are four parts underlined and lettered A, B, C and
D. For each sentence, find the underlined part, A or B or C or D that makes the sentence
INCORRECT. Only ONE answer is possible for each sentence. THERE IS ALWAYS ONE possible
answer.

Other Incoterms

41. CPT (Carriage Paid To) – ((A) place to destination-includes all destination (B) port charges) Title, risk
and insurance cost (C) pass to buyer when delivered to carrier or seller who pays transportation and (D)
insurance cost to destination. Used for any mode of transportation.

42. CIP (Carriage and Insurance Paid To) - (place at destination- (A) same like CPT, but (B) includes
insurance) (C) Title and risk pass to buyer when delivered to carrier (D) by seller who pays transportation
and insurance cost to destination. Used for any mode of transportation.
43. DAF (Delivered to Frontier) – ((A) border of country-same as paid by seller to border- (B) all the
other charges to buyer) Title, risk and responsibility for (C) import clearance pass to buyer when delivered
(D) to named border point by seller. Used for any mode of transportation.

44. DES (Delivered Ex Ship) - (on board ship to (A) destination port) Title, risk, responsibility (B) for
vessel discharge and import clearance pass to buyer when (C) sellers delivers goods (D)on board the
ship to destination port. Used for sea or inland waterway transportation.
(www. Ponl.com/)

3.5.4. Starting from the word in CAPITAL LETTERS at the end of each sentence, derive another
word that best fits in the context of that sentence indicated by a blank space (“____”).

The English text is the (45) ___ and official version of Incoterms 2000. ORIGINATE
It has been (46) ___ by the United Nations Commission on International Trade Law ENDORSEMENT
(UNCITRAL).
The Incoterms are available from ICC (47) ___ committees. NATIONWIDE
(48) ___ use of Incoterms goes a long way to providing the legal certainty upon INCORRECT
which mutual confidence between business partners must be (49) ___. BASEMENT
To be sure of using them correctly, trade (50) ___ need to consult the full ICC texts. PRACTICE
They have to beware of the many (51) ___ summaries and approximate versions AUTHORIZATION
that abound on the web.
ICC now publishes a brief introduction to Incoterms on a new special section of its ORGANIZATION
website. The section does not provide all the answers but will help understanding of
what Incoterms are for and how they are (52) ___.
We describe how to order Incoterms in the original English version and many of the PUBLISHER
world's main languages from ICC (53) ___ in Paris and New York, or ICC national
committees around the world.
(Adapted from: www.intracen.org/etradebridge)

3.6. Speaking

Pair work

 Think of specific situations one can encounter in the international trade activity. Make a list
containing imaginary Incoterms (not more that three) matching those situations. Convince your
colleague that your terms are necessary.

3.7. Writing

In not more than 100 words write a funny letter to a business partner. Your letter must contain as
many Incoterms as you could possibly include.
SUPPLEMENTARY MATERIAL

I. FOREIGN TRADE AGENCY SERVICES


METHODS OF DELIVERY IN INTERNATIONAL TRADE
"INCO TERMS 2000"

means that the seller delivers when he places the goods at the disposal of
the buyer at the seller's premises or another named place (i.e. works,
Ex Works factory, warehouse, etc.) not cleared for export and not loaded on any
EXW
(... named place) collecting vehicle. This term thus represents the minimum obligation for the
seller, and the buyer has to bear all costs and risks involved in taking the
goods from the seller's premises
means that the seller delivers the goods, cleared for export, to the carrier
nominated by the buyer at the named place. It should be noted that the
chosen place of delivery has an impact on the obligations of loading and
Free Carrier
FCA unloading the goods at that place. If delivery occurs at the seller's premises,
(... named place)
the seller is responsible for loading. If delivery occurs at any other place, the
seller is not responsible for unloading. This term may be used irrespective
of the mode of transport, including multimodal transport.
means that the seller delivers when the goods are placed alongside the
Free Alongside Ship
vessel at the named port of shipment. This means that the buyer has to
FAS (... named port of
bear all costs and risks of loss of or damage to the goods from that moment.
shipment)
The FAS term requires the seller to clear the goods for export.
means that the seller delivers when the goods pass the ship's rail at the
named port of shipment. This means that the buyer has to bear all costs
Free On Board
and risks of loss of or damage to the goods from that point. The FOB term
FOB (... named port of
requires the seller to clear the goods for export. This term can be used only
shipment)
for sea or inland waterway transport. If the parties do not intend to deliver
the goods across the ship's rail, the FCA term should be used.
means that the seller delivers when the goods pass the ship's rail in the port
of shipment. The seller must pay the costs and freight necessary to bring
the goods to the named port of destination BUT the risk of loss of or
Cost and Freight damage to the goods, as well as any additional costs due to events
CFR (... named port of occurring after the time of delivery, are transferred from the seller to the
destination) buyer. The CFR term requires the seller to clear the goods for export. This
term can be used only for sea and inland waterway transport. If the parties
do not intend to deliver the goods across the ship's rail, the CPT term
should be used.
means that the seller delivers when the goods pass the ship's rail in the port
Cost, Insurance and of shipment. The seller must pay the costs and freight necessary to bring
Freight the goods to the named port of destination .The CIF term requires the seller
CIF
(... named port of to clear the goods for export. This term can be used only for sea and inland
destination) waterway transport. If the parties do not intend to deliver the goods across
the ship's rail, the CIP term should be used.
means that the seller delivers the goods to the carrier nominated by him but
the seller must in addition pay the cost of carriage necessary to bring the
goods to the named destination. This means that the buyer bears all risks
Carriage Paid To
and any other costs occurring after the goods have been so delivered. If
CPT (... named place of
subsequent carriers are used for the carriage to the agreed destination, the
destination)
risk passes when the goods have been delivered to the first carrier. The
CPT term requires the seller to clear the goods for export. This term may be
used irrespective of the mode of transport including multimodal transport.
CIP Carriage and means that the seller delivers the goods to the carrier nominated by him but
Insurance Paid To the seller must in addition pay the cost of carriage necessary to bring the
(... named place of goods to the named destination. This means that the buyer bears all risks
and any additional costs occurring after the goods have been so delivered.
However, in CIP the seller also has to procure insurance against the buyer's
risk of loss of or damage to the goods during the carriage. Consequently,
the seller contracts for insurance and pays the insurance premium. If
destination)
subsequent carriers are used for the carriage to the agreed destination, the
risk passes when the goods have been delivered to the first carrier. The CIP
term requires the seller to clear the goods for export. This term may be used
irrespective of the mode of transport including multimodal transport.
means that the seller delivers when the goods are placed at the disposal of
the buyer on the arriving means of transport not unloaded, cleared for
export, but not cleared for import at the named point and place at the
frontier, but before the customs border of the adjoining country. The term
Delivered At Frontier «frontier» may be used for any frontier including that of the country of
DAF export. Therefore, it is of vital importance that the frontier in question be
(... named place) defined precisely by always naming the point and place in the term. This
term may be used irrespective of the mode of transport when goods are to
be delivered at a land frontier. When delivery is to take place in the port of
destination, on board a vessel or on the quay (wharf), the DES or DEQ
terms should be used.
means that the seller delivers when the goods are placed at the disposal of
the buyer on board the ship not cleared for import at the named port of
destination. The seller has to bear all the costs and risks involved in
Delivered Ex Ship
bringing the goods to the named port of destination before discharging. If
DES (... named port of
the parties wish the seller to bear the costs and risks of discharging the
destination)
goods, then the DEQ term should be used. This term can be used only
when the goods are to be delivered by sea or inland waterway or
multimodal transport on a vessel in the port of destination.
means that the seller delivers when the goods are placed at the disposal of
the buyer not cleared for import on the quay (wharf) at the named port of
destination. The seller has to bear costs and risks involved in bringing the
goods to the named port of destination and discharging the goods on the
quay (wharf). The DEQ term requires the buyer to clear the goods for import
Delivered Ex Quay
and to pay for all formalities, duties, taxes and other charges upon import.
DEQ (... named port of
This term can be used only when the goods are to be delivered by sea or
destination)
inland waterway or multimodal transport on discharging from a vessel onto
the quay (wharf) in the port of destination. However if the parties wish to
include in the seller's obligations the risks and costs of the handling of the
goods from the quay to another place (warehouse, terminal, etc.) in or
outside the port, the DDU or DDP terms should be used.
means that the seller delivers the goods to the buyer, not cleared for import,
and not unloaded from any arriving means of transport at the named place
of destination. The seller has to bear the costs and risks involved in bringing
Delivered Duty the goods thereto, other than, where applicable, any «duty» (which term
Unpaid includes the responsibility for and the risks of the carrying out of customs
DDU
(... named place of formalities, and the payment of formalities, customs duties, taxes and other
destination) charges) for import in the country of destination. This term may be used
irrespective of the mode of transport but when delivery is to take place in
the port of destination on board the vessel or on the quay (wharf), the DES
or DEQ terms should be used.
DDP Delivered Duty Paid means that the seller delivers the goods to the buyer, cleared for import,
(... named place of and not unloaded from any arriving means of transport at the named place
destination) of destination. The seller has to bear all the costs and risks involved in
bringing the goods thereto including, where applicable, any «duty» (which
term includes the responsibility for and the risk of the carrying out of
customs formalities and the payment of formalities, customs duties, taxes
and other charges) for import in the country of destination. If the parties
wish the buyer to bear all risks and costs of the import, the DDU term
should be used. This term may be used irrespective of the mode of
transport but when delivery is to take place in the port of destination on
board the vessel or on the quay (wharf), the DES or DEQ terms should be
used.

NB: The implications and the interpretations of Incoterms which have been revised/published in different
years may differ from one another. Therefore the year of the revised publication of the Incoterms has to
be stated along with the Incoterm used in the offers/ quotations in order to clarify the seller's and buyer's
responsibilities and for this reason the reader is recommended to read carefully the seller's and buyer's
responsibilities of each term before using it and then state the revised publication year of the Incoterm
along with the term in their offer/quotations, e.g. Delivery Term: FOB Istanbul Inco Terms 2000.
(www.iccwbo.org)

II. GATT: General Agreement on Tariffs and Trade. Major Articles:

I General MFN requirement.


II Tariff schedules (bindings).
III National treatment. […]
V Freedom of transit of goods.
VI Allows antidumping and countervailing duties. Superseded by the GATT 1994 Agreement on
Antidumping, and the Agreement on Subsidies and Countervailing Measures.
VII Requires that valuation of goods for customs purposes be based on actual value. Superseded by the
GATT 1994 Agreement on the Implementation of Article VII.
VIII Requires that fees connected with import and export formalities be cost-based.
IX Reaffirms MFN for labeling requirements and calls for cooperation to prevent abuse of trade names.
X Obligation to publish trade laws and regulations; complemented by the WTO’s Trade Policy Review
Mechanism and numerous notification requirements in specific WTO agreements.
XI Requires the general elimination of quantitative restrictions.
XII Permits trade restrictions if necessary to safeguard the balance of payments.
XIII Requires that quotas be administered in a nondiscriminatory manner. […]
XVI Established GATT 1947 rules on subsidies. Complemented by the WTO Agreement on Subsidies
and Countervailing Measures.
XVII Requires that state trading enterprises follow MFN.
XVIII Allows developing countries to restrict trade to promote infant industries and to protect the balance-
of-payments (imposing weaker conditionality than Article XII).
XIX Allows for emergency action to restrict imports of particular products if these cause serious injury to
the domestic industry. Complemented by the WTO Agreement on Safeguards.
XX General exceptions provision—allows trade restrictions if necessary to attain non-economic objectives
(health, safety).
XXI Allows trade to be restricted if necessary for national security reasons.
XXII Requires consultations between parties involved in trade disputes.
XXIII GATT’s main dispute settlement provision, providing for violation and non-violation complaints.
Complemented by the WTO Understanding on Rules and Procedures Governing the Settlement of
Disputes.
XXIV Sets out the conditions under which the formation of free trade areas or customs unions is
permitted. […]
XXVIII Allows for renegotiation of tariff concessions.
XXVIIIbis Calls for periodic rounds of negotiations to reduce tariffs. […]
XXXIII Allows for accession

Part IV Calls for more favorable and differential treatment of developing countries. Entered into force in
June 1966.

GATS : General Agreement on Trade in Services. Major Articles :

I Definition. Trade in services covers all four modes of supply.


II MFN obligation. Option to invoke exemptions on a one-time basis.
III Notification and publication. Obligation to create an enquiry point.
IV Increasing participation of developing countries. High income countries to take measures to facilitate
trade of developing nations.
V Economic integration. Allows for free trade and similar agreements.
VI Allows for domestic regulation. Requirements concerning the design and implementation of service
sector regulation, including in particular qualification requirements.
VII Recognition of qualifications, standards and certification of suppliers.
VIII Monopolies and exclusive suppliers. Requires that such entities abide by MFN and specific
commitments (Articles XVI and XVII) and do not abuse their dominant position.
IX Business practices. Recognition that business practices may restrict trade. Call for consultations
between members on request. […]
XIV General exceptions. Allows measures to achieve non-economic objectives. […]
XVI Market access. Defines a set of policies that may only be used to restrict market access for a
scheduled sector if they are listed in a member’s specific commitments.
XVII National treatment. Applies in a sector if a commitment to that effect is made and no limitations or
exceptions are listed in a member’s schedule. […]
XIX Calls for successive negotiations to expand coverage of specific commitments (Articles XVI and
XVII).
(www.iccwbo.org)