RIASSUNTI ARTICOLI INGLESE: “English for Business Studies”

1 – Management
What is management?
Management is important because the success or failure of companies often depends on the
quality of their managers.
Peter Ducker, an American business professor and consultant, suggested that the work of a
manager can be divided into five tasks:
1) Planning: where senior managers and directors set objective, and decide how their
organization can achieve them; this involves developing strategies, plans and tactics.
2) Organizing: where managers divide the work into individual task and select people to
perform these tasks.
3) Integrating: where manager motivate and communicate with their subordinates
4) Measuring performance: managers have to measure the performance of their staff, in order
to see if the targets are being achieved
5) Developing people: managers develop people, both their subordinates and themselves.

Furthermore, managers have to consider the future, and modify/change the organization’s
objectives when necessary.
Managers, also, have to manage business’s relations with customers, suppliers, public
authorities and so on.
Excellent managers are rare and difficult to find, because not everyone has both a lot of ideas
and management techniques.

2 – Work and motivation

a) Theory X and Theory Y
In “The Human Side of Enterprise”, Douglas McGregor identified two opposing theories of
work and motivation.
Theory X (“ex”) has a pessimist approach, because it considers that people are lazy and will
avoid work and responsibility. Consequently, workers have to be supervised and threatened,
for example with losing their job. This theory has traditionally been applied by managers of
factory workers – in large scale manufacturing.
On the contrary, theory Y (“uai”) assumes that most people have a psychological need to work
and, for this reason, they will be creative, ambitious and self-motivated. This theory is
probably more applicable to skilled professional and knowledge workers, such as managers,
specialists, engineers.
These two theories are based on Abraham Maslow’s “hierarchy of needs”: in which, he claims
that theory X related to “lower order” needs (such as financial security), while theory Y
related to “higher order” needs (such as esteem and self-actualization).

b) “Satisfiers” and “motivators”

Frederick Herzberg, a work psychologist, claims that good working conditions, such as jobs
security, good wages and benefits, are “satisfiers”, but they aren’t sufficient to motivate
workers. On the contrary, the “motivators” include things such as: having a challenging and
interesting job, promotion and so on.
In unskilled jobs, which are boring, repetitive and mechanical, the managers can motivate the
workers adopting some solutions such as giving them some team responsibilities or
encouraging job relation.
In recent years, people give importance to company’s shared values (or corporate culture),
with which all the staff can be identified (for example to being the best hotel chain).
Unfortunately, not all the competing companies in an industry can seriously claim to be the
best.

3 – Company structure
a) Wikinomics and the future of companies
In the future companies will use the Internet and “wikinomics” principle. This means that
companies will collaborate with people that are outside the traditional corporate structure.
Therefore, people around the world can cooperate with businesses to improve their
operations or solve their problems, and companies will pay them for their ideas.
In this way company transfers his internal functions to outside suppliers.
For example, Red Lake, a Canadian gold mine, wasn’t finding enough gold and was in danger
of closing down. Then its chief executive, after heard a talk about Linus, decided to offered
prize money to expert outside the company, who would have suggested where undiscovered
gold might lie (giacere). In this way, the company’s value has risen, because 80% of
recommended target contained gold.

b) Company structure
Organizations have a hierarchal or pyramidal structure, with one person or a group of people
at the top, and other people below them. This is called “line structure”, where all the people in
the organization know what decisions they are able to make, who their line boss is, and who
their subordinates are.
However, the activities of most organizations are too complicate to be organized in a single
hierarchy, and for this reason most large manufacturing companies have a “functional
structure”. The functional structure includes specialized productions, finance, marketing,
sales and human resources departments. This means, for example, that the production and
marketing finance departments cannot take financial decisions without consulting the finance
department. The main disadvantage of functional organization is that people are often more
concerned with the success of their own department than that of the company as a whole.
The main problem of hierarchical organizations is that people at lower levels can’t take
important decisions. However, the modern company tend to reduce the chain of command.
For example, advanced IT system have reduced the need for administrative staff and enabled
companies to remove layers of workers from the structure. In small firms, the owners want to
keep the maximum control of their business, whereas in larger businesses the owners want to
motivate their staff and they often delegate responsibilities to other people.

Another way to reduce hierarchies is to use “matrix management”, in which people report to
more than one superior. The problem of Matrix Management is that it involves several/a lot of
departments and it can become complex; so, it is sometimes necessary to give one department
priority in decision making.
Another way to reduce hierarchies is to create temporary and autonomous groups (or teams),
that are responsible for an entire project. But teams are not always very good at decision
making, and usually require a strong leader.
4 – Managing across cultures
A global multinational company, that want to be successful in foreign markets, have to
consider the local cultural characteristics because they influence the way to do business.
In the “Lewis Model”, Richard Lewis has classified different cultures into three poles, that
represent different types of behavior.
Businesspeople in “linear active” cultures (such as Britain, the USA and Germany) are
characterized by: to act logically – and not emotionally -, to plan in advance, do one thing at
time, to respect rules, regulations and contract, they are not afraid of confrontation, but they
are essentially individualist; they’re called as “universalists”.
Businesspeople in “multi-active” cultures (in Southern Europe, Latin America and Africa) are
characterized by: to act emotionally, do many things at the same time, flexibility, they’re good
at changing plans and happy to improvise; they believe in company hierarchy and they’re
collectivist. They’re call as “particularistic”, because they believe that personal relationship
should take precedence over rules and regulations.
Businesspeople in “reactive” cultures (in Asia) are characterized by: to listen other’s position
and then react to it, to avoid eye contact and confrontation and to try to formulate approaches
which satisfy both parties.
Finally, there are other countries that have cultures which show combined characteristics of
two of these poles.

5 – Recruitment
Filling a vacancy
Professionals must find the right people at work, and place them in the right department.
When an employee gives notice, at first, the company has to discover why the person has
resigned and, secondly, it has to examine the job description for the post, in order to see if it
needs to be changed.
Thirdly, the company decides if there is an internal candidate, who could be moved/promoted
to the work place. If there isn’t an internal candidate, the company hires an “employment
agency” or it advertise the vacancy (posto vacante).
After that, the company receives applications, curricula viatae and makes a shortlist (or
preliminary selection).
The company invites the shortlisted candidates for an interview and follow up their
references.
Lastly, the company makes a final selection and choose one candidate, writing to all the other
candidates to inform them that they have been unsuccessful.

6 – Women in business
You’re fired!
In Norway, the government introduced a law that forces companies to appoint 40% of woman
directors. Netfonds Holding ASA, a Norwegian bank, attracted international attention because
didn’t respect this law. Rolf Dammann, the co-owner of the bank, doesn’t agree with the
government decision, because he thinks that the law forces companies to sack/dismiss
trusted members, who have worked for 20 or 30 years, replacing them with unknow people.
Dammann was forced to appoint/hire two women, but he wasn’t very happy to have them on
the board. He, also, didn’t reach the law quota and he failed to appoint/hire a sufficient
number of female board members. In fact, in 2002, only 7% of non-executive directors of ASAs
were female. Today, Norway has the highest proportion of female directors in the world, but
some business leaders claim that experienced senior women is impossible to find, especially
in the oil, technology and gas industries.

7 - The different sectors of the economy

Another cup of tea
In David Lodge’s novel “Nice Work”, the protagonist Robyn Penrose (a university lecturer),
looking out of the airplane window, explains how many complex operations are required to
allow people to carry out the ordinary actions of their life.
For example, the housewife doesn’t think to the immense complex of operations are required
to use her electric kettle, in order to make a cup of tea.
In fact, this simple action covers all the different sectors of the economy, which are:
Primary sector: which includes the agriculture and the extraction of raw materials.
Secondary sector: which includes manufacturing industries, that makes finished products.
Tertiary sector: which includes the commercial services, healthcare, education and tourism.
There is, also, the quaternary sector, which includes information services, consultancy and
R&D (research and development)

8 – Production
The Dell Theory of Conflict Prevention
In “The World is Flat”, Thomas Friedman, an American author, claimed that outsourcing and
global supply chains have very positive international consequences.
The Dell Theory stipulated that two countries that are both part of a major global supply chain
will never fight a war against each other, because these people (who belong in major global
supply chains), don’t want to fight wars anymore, but they want to make just-in-time
deliveries of goods and services, and enjoy the rising standards of living.
Michael Dell, the founder and chairman of Dell, an Asian supply chain, claims that these
countries understand the risk they have and they are careful to protect the equity.
The countries of a major global supply chain know that a war will disrupt industries and
economies around the world. Therefore, they risk to loss their place in their supply chain for a
long time, which could be extremely costly.
For a country with no natural resources, being part of global supply chain is very important
because in its evolution you can see the prosperity and stability promoted first in Japan, and
then in Korea and Taiwan and now in Malaysia, Singapore, the Philippines, Thailand and
Indonesia.
11 – Products
Products and brands
A product is anything that can be offered to a market that might satisfy a need; this means that
services, people (ex. Actors), places and organizations can be considered as products.
Most manufacturers divide their products into product line - that are groups of related
products, sold to the same customers groups and marketed through the same outlets –
because customers’ needs are constantly evolving and because different products are at
different stages of their life cycles.
So, companies are always looking to the future and re-evaluating their product mix.
Most products are branded. A brand is a name, or symbol, or logo, create by a company to
distinguish their products and services. The objective of branding is to create a relationship of
trust, because consumers who remember the company product or service have a good image
of the brand in their minds.
Some brands are more successful than others because they have done an extensive
advertising, for example Nike, Starbucks, Apple Computer and so on.
Branding is used both for B2B (Business-to-business), in which the company markets
materials and components, and for B2C (Business-to-consumer), in which the company
markets its final goods.
Companies can use its brand in two ways:
-corporate branding, in which the company includes their name in all their products (for
example Philips and Yamaha).
-individual branding, in which the company gives each product its own brand name (for
example Procter & Gamble, with its individual brand names Pringles, Duracell and Gillette).
Some companies, such as the major producers of soap powders, have a multi-brand strategy
which allows them to fill up (riempire) space on supermarket shelves, leaving less space for
competitors.
Brand value comes from customer loyalty, who will continue to buy company products.
A company’s market value (the combined price of all its shares) can be much greater than its
book value (the recorded value of its tangible assets such as buildings and machinery).
In fact, Interbrand, a brand consultant, published an annual list of the Best Global Brands, and
in the first place there was Coca-Cola, which had a brand value of $70 billion (dollars), which
was much higher than the worth of company’s physical assets.

12 - MARKETING
a) The product life cycle
Company’s standard products follow a life cycle, which is characterized by 4 steps, that are:
1) Introduction stage, where: -the sales are low because costumers have to be
persuaded / influenced to try the product
-the costs are high
-the price is chosen by the company according to the strategy, if it is a
market penetration strategy, there will be low price because the company try to sell a
large volume of products and increase market share, if it is a skimming penetration
strategy, there will be high price for a new product because the company want to recover
development costs and make maximum revenue
-the promotion is aimed at educating potential consumer
(innovators and early adopter) about the product

2) Growth stage, where: -the sales volume rises because the product awareness increases
-the costs are reduced due to economies of scale
-the price can remain unchanged because demand is increasing, but
competitors aren’t well established
-the promotion emphasizes product differentiation

3) Maturity stage, where: -the sales volume peaks

-the costs are new because the product’s features may have to be
changed
-the price may have to be reduced because competitors are
established in the market, but company try to defend their market share
-the promotion is aimed at increasing the product’s users

4) Decline stage, where: - the sales volume goes down, because demand is decreasing
 -the costs are too high compared to sales, so the company continues
to offer the product to loyal customers, while it tries to reduce cost to a minimum
-the price is reduced to finish stock of the products
-there is no promotion of the product

b) Marketing is everything
Demands on the company have changed: from controlling costs, to competing on products,
to serving customers.
In fact, several decades ago, there were “sales-driven companies”, organizations created to
change customers’ minds to adapted them to companies’ products, because in the past
companies produced goods without considering customers’ requests.
A few years later, companies transformed their approach and they become customer driven,
because they changed their products to adapt them to costumers’ request.
Subsequently, companies are becoming market driven, adapting their products to fit their
customer’s strategies.
The old approach was slow because it provided a lot of steps, which are: getting an idea,
conducting traditional market research, developing a product, testing the market,
and finally going to market.
The center of gravity in the company has changed from finance, to engineering and now to
marketing. Marketing today is not a function, but it is a way of doing business.
Marketing is not a new advertising campaign, but marketing has to be part of everyone’s job
description, from the receptionists to the board of directors.
Marketing job isn’t to fool the customer or to falsify the company’s image, but it is to integrate
the customer into the design of product.
US companies typically make two type of mistake that could prove fatal to a business:
Firstly, some companies are driven of making things, particularly new creations.
Secondly, some companies become absorbed in the competition of selling things.
But the objective of marketing is to own the market – not just to make or sell products - and
smart marketing means defining the whole pie as yours.

13 – Advertising
Advertising and viral marketing
Advertising informs consumers about the existence and benefits of new products, and try to
influence potential costumer to buy them.
Most companies hire advertising agencies to make their advertising campaign.
Companies communicate the agency the objectives, the budget and the message to be
communicated to the target customers.
Then, the agency creates advertisements and develops a media plan, specifying which media
will be used – such as newspapers, the Internet, radio, television, cinema, mail and so on -
and in which proportions.
For a company is always difficult to know how much to spend on advertising, because a lot of
creative and expensive advertising campaigns don’t always lead to increase sales.
On advertising, many companies just spend a fixed percentage of current sales revenue, or
spend as much as their competitors.
Traditional advertising is expensive, but it doesn’t always reach the target customers.
Furthermore, advertising isn’t always welcome by customers because many ads interrupt
people when they’re trying to do something else – like reading a webpage, or watching a film.
The best form of advertising has always been word-of-mouth advertising, in which people tell
their friends about good products and services.
Today, word-of-mouth has developed into viral marketing, in which people spread
commercial messages on the internet (for example via networks).
A lot of companies are trying new strategies like online forum, where people comment other
people’s social network website, to hope for the people will use the “share” function to send a
link to all their contacts.
Viral marketing allows companies to inform and influence, and create a “buzz”, so that an idea
spreads very quickly, at very little cost.

14 – Banking
a) Banks and financial institutions
Retails banks, often called High Street banks in Britain, make loans to individuals and small
companies.
Investment bank work with big companies, giving financial advice, raising capital by issuing
shares and bonds, offering portfolio management services and so on.
Wealthy individuals can use stockbrokers, who provide them banking and investment
services. They also can use hedge funds, which are private investment funds for wealthy
investors, that use a variety of risky investing strategies, in order to achieve higher returns.
In the USA, after the Wall Street Crash in 1929, passed a law in 1934 called the Glass-Steagall
Act, that separated commercial and investment banks, in order to prevent commercial banks
from doing investment banking business.
In 1999 the law was abrogated and large banks became international conglomerate offering a
complete financial service.
In Islamic countries, banks offer interest-free banking where people don’t pay interest to
borrowers.
There are also non-bank financial intermediaries like car manufactures, food retailers and
departments stores, which offer their products like personal loans, credit cards and insurance.

b) The subprime crisis and the credit crunch

American house prices began to fall in 2007, when many “subprime” borrowers stopped
paying their mortgages because their debt was greater than the value of their house.
Unfortunately, the institutions – which had issued the mortgages – had created financial
products called “mortgages-backed security” (MBS) and “collateralized debt obligations”
(CDO), which had been bought by many financial institutions including investment banks,
insurance companies, pension funds and so on.
This process is called “securitization”, where financial assets are grouped together, and
converted into securities (titoli), that are then sold to investors.
Banks bought them because they believed that house prices would continue to rise, and
households would continue to pay their mortgages, but the value of subprime fell dramatically
when subprime borrowers stopped to pay.
Many banks in the USA, Britain and elsewhere lost billions of dollars on their MBSs, and some
went bankrupt, and others had to be helped by governments.
The losses, estimated to 1,5$ trillion, destroyed the world banking system, leading to a credit
crisis (or a credit crunch), where the amount of credit available for banks was drastically
reduced and so was very difficult for other banks, businesses and household obtain a loan.
16 – Bonds
Companies can finance their activities by different ways: by internally generated cash flow, or
- if they need money - can issue new shares or borrow money, usually by issuing bonds.
Companies usually use an investment bank to issue their bonds, and to find buyer – which are
often insurance companies, mutual funds and pension funds - .
Bondholders (obbligazionisti) receive their investment on a fixed maturity date, and receive
interest payments at regular intervals. Most bonds have fixed interest rates.
Bonds have the main advantage of security because the investors are creditors and if an
insolvent or bankrupt company sells its assets, they might get some of their money back.
On the other hand, in the medium or long term, shares pay a higher return than bonds.
For a company, the advantage of bond is that the interest is tax deductible, but its increases
the financial risk.
Governments may issue bonds when tax revenue is insufficient. In the USA, there are
“Treasury notes” (with a maturity of 10 years) and “Treasury bonds” (with a maturity of 30
years), while in Britain there are “Gilts” bonds.
The bonds price varies inversely with interest rates. If interest rates rise, bonds lose their
value; if interest rates fall, bonds increase their value.

17 - Stocks and shares

a) Stock and shares
Stocks and shares are certificates that represent part of the company’s ownership, and issued
by the company to raise their capital. Offering these stocks for sale to financial institutions,
the business changes from a private to a public company. When these stocks are sold for the
first time, they’re called “IPO” (Initial public offering) in the USA, and a “flotation” in Britain.
Companies use an investment banks to find buyers and to be guaranteed: if there aren’t
enough buyers, the investment bank buy the stocks.
Shares are also known as equities and the most common forms are: “common stock” in the
USA, and “ordinary shares” in Britain.
After shares have been issued, company is listed/quoted at the stock exchange, on which
people can trade shares.
Stock exchanges have automatic computerized trading system and market makers, who quote
bid and offer prices, to determine the stock prices.
Consequently, the nominal value of a share is not the same of market price.
Companies either distribute part of their profits to shareholder, or keep the profits in the
company. There are two stocks periods: bull market, in which most stocks rise; and bear
market, in which most of them fall in value.

b) Hedge funds (fondi di copertura)

Hedge funds are private investment funds for wealthy investors that trade in securities and
try to get high returns, whether markets move up or down.
The rise of hedge funds began in 2001, after the bursting of the tech bubble. (scoppio della bolla
tecnologica)
Hedge funds became popular since/because they can short shares.
(I fondi di copertura sono diventati popolari poiché possono avere azioni brevi)
That means, they can sell shares they don’t own by borrowing them off a conventional fund,
so that, when the share price falls, they make a profit by buying them back at a cheaper price.
(Ciò significa che loro possono vendere azioni che non posseggono prendendole in prestito da un fondo convenzionale, in modo che, quando
il prezzo delle azioni cade, essi ottengono un profitto riacquistandoli a un prezzo più conveniente)
Hedge funds make these operations during the day, buying shares in the morning and selling
them in the afternoon.
One of the biggest hedge funds, GLG (Gerson Lehrman Group), is behind five per cent of all the
traders in the FTSE 100 (Financial Times Stock Exchange – One hundred).

20 – Market structure and competition

Market structure
Market structure is composed by the market leader, which is often formed by the first
company to have entered in the sector, that have the largest market share.
There is, also, the market challenger, with the second-largest market share, that try to attack
the leader, or to increase its market share by attacking various market follower.
Smaller companies aren’t a threat for the leader, and some of them concentrate their
strategies on market segmentation, in order to sell their differentiated products to a profitable
niche. A smaller competitor, which doesn’t differentiate its product must have a unique
selling proposition (proposta di vendita unica), to not to be in a dangerous position.
This is especially true in recessions when distributors, retailers and costumer all prefer to buy
from big and well-known suppliers.
22 – Government and taxation
The role of government
The American economist Milton Friedman, in his “Free to Choose”, talk about the expansion of
the role of Government in the economy in the last 50 years. He claims/says/thinks that the
limitations imposed by Government will lead to the end of economic progress.
He criticized the government intervention because it is costly and has limited our human
freedom.
In his opinion, economic freedom means have the freedom to choose how to use and spend
our income, but currently more than 40% of our income is taken by the government and,
furthermore, our doctor isn’t free to prescribe many medicines for us.
For Friedman, another essential part of economic freedom is freedom to use the resources we
possess, but today we are not free to offer our services, without first getting a permit/license
from a government official.
For the American economist, the freedom cannot be absolute, but there are too restrictions,
that must be eliminated.

23 – The business cycle

a) What causes the business cycle?
The business cycle is a permanent feature of market economies, that is influenced by the
GDP (Gross Domestic Production).
During an upturn, the economy works at full capacity because production, employment,
business investments, profits, prices, and interest rates all tend to rise. A long period of
expansion is called a “boom”.
During a downturn, the economy works at below its potential, because demand for goods and
services decline, so employment, investments, profits, prices, and interest rates tend to fall.
A period of six months of downturn is called a “recession”; if the duration of downturn is one
or two years is called a “depression” or a “slump”.
The internal theory claims that the business cycle is caused by the people’s consumptions,
which are based on expectations.
When economic times are good, people tend to spend money because they’re optimistic about
the future. Similarly, when people are worried about the possibility of losing their jobs, they
tend to start saving money and consuming less, which lead to a fall in demand, and
consequently a fall in production and employment.
When demand is growing, businesses invest for consumption, but if demand stop growing,
investment fall, which lead to the downturn. But if supply exceeds demand, prices should fall,
and encourage people to start buying again, which lead to an upturn.
There are also external theories, which look for causes outside economic activity, such as
scientific advances, natural disasters, demographic change and so on. For example, the
economist Schumpeter/one of them, believed that the business cycle is caused by
technological inventions, which lead to periods of “creative destruction” during which
innovation destroy important companies or industries.

b) Keynesianism and monetarism

The great depression of 1930s favored the John Maynard Keynes argument, in which he
claimed that market system doesn’t automatically lead to full employment.
He recommended governmental intervention in the economy, to counteract the business
cycle. During an inflationary boom, governments could decrease their spending or increase
taxation; whereas, during a recession, governments could increase their expenditure, or
decrease taxation, in order to increase the economy.
Monetarist economists, such as Milton Friedman, argued that Keynesian fiscal policy had
negative effective in the long term, leading to inflation. They argued that governments should
abandon the attempt to manage the level of demand in economy.
By the beginning of the 21st century, was dominant the free market and competition
argument, in which there was the minimum government intervention in economy.
But after the subprime crisis in 2008, Keynesianism came back into fashion, because when a
lot of financial institutions and large companies went on bankrupt, governments around the
world started to give a lot of money into the economy.

26 – Exchange rates
An exchange rate is the price at which one currency can be exchanged for another.
After World War II, there was the “gold convertibility system”, in which Federal Reserve
evaluated one dollar as 1/35 of an ounce of gold. But in 1971, after inflation in the USA, this
system ended because Federal Reserve did not have enough gold to guarantee its currency.
Milton Friedman, proposed the “floating exchange system”, in which exchange rates are
determined by supply and demand. If there are more buyers of a currency than sellers, its
price will rise; if there are more sellers than buyers, it will fall.
However, this system has some problems, because only 5% of the world’s currency
transactions are related to trade, while the remaining 95% are purely speculative.
Speculation cause problems for industry and, for this reason, was established the euro:
the common currency in much Europe countries.
Governments and central banks, to counteract/combat the speculation, sometimes try to
change the value of their currency, but speculators have much more money than a
government, so their attempts to manage a floating exchange have limited success.