ELF Strategic thinking

Strategy
A strategy (countabie noun} is a plan or series of
plans for achieving success. Strategy (uncountable
nounf is [he study of the skilis, knowledge, etc.
required to make such plans, Strategic success in a
sommercial organization 1s often measured in
terms of proftability, the amount of money it
makes in relation t6 the amount mvested.
An important part of planning is cesource
allocation. This is the way Änance, people and
asscts equipment, buildings, know-how, etc. are
- -

going to be used ro achieve a particular objective.

A company's senior executives make strategic decisions or formulate strategy. Somerimes
an organisation will publiclv state its main overall abjective or vision in its mission
statement.

Companies sometimes form Strategic partnerships, working together to achieve a specific

strategie goal. For exampie, MG Rover entered a partmership with a Chinese car
manufacturer to enabl: it ro produce and sell cars in Chiria. A company may also make a
strategic move, such as acquiring a competitor, designed to increase their market share.

525503 Companies and markets

uer 1

Market rtfr
B A u
® nn
ER
Company A dominates the marse1
Company BE has 3 toe-hold 1n the market.
Campany © is attacking the market.
Company D is withärawing from the market.

When a company ...

a defends tries to prevent competitors from
being successful in it.
b attacks starts selling 1n it for the first time.
c establishes a foothold/ a market, it occupies a small part of ir first in
toehold in preparation for gaining a larger part
dinvades starts to be very successful in it,
e dominates is the biggest competitor in it.
f withdraws om stops selling in it.

40 Business Vocabulary in Use (advanced

16.1 Look at the questions from shareholders at the annual meeting of Topaz, a car company.
Complete the chief executive's answers wich appropriate forms of expressions from A oppos1m.
1

Why has che company bought This was to

our-its rival, Rivera? broaden our customer base

2
Some of Topaz's plants have We have taken steps to ensure that our
very low prodkctivity. What are used more cffecrively. This is an important part ol
are you doing about this? our strategie process.

3
Why are yau clos1n
one of che plants? > Th1s 15 a7 155116 01 f We
:

don't have 1nfnite financial resources and we want io

soncentrate investment ot The most producnve plants.

4
Was this the only. goal that was We locked ara number of d1fferent .

considered? Did you also look and decided that the hi-tech option was the best
at che possibiliry of being one ta follow.
a mass producer of vehncles?.

16.2 Match che underlined phrases below ro che expressions 1n B opposire that refer tn the same idea.
Coffeeway { CW] is a successful American chain of coffee shops. Ic wanted to {1} 1 T
enter che Chinese coffee shop market,
with shops all over China. CW signed
an agreement w1th a partner, Dragon
Enterprises (DE). CW and DE decided
to {2} start by opening just one coffee
shop in Shanghai in order to test the
marker. This was very successful, so
CWF and DE decided to open shops all
over China. Ir took CW and DE five : :

years to {3} be the biggest in the

market, with a 70 per cerit market
share among coffee shop cha1ns in
China. One of their compenttors, :
:

California Coffee, to [4} protect

its market share by cutting prices, Bur
th1s strategy did not work, and California Coffee later sold its ourlets ca and decided ro
{5} leave the market.

Over to You
Think about yotr organization or one you woufd fike to work for. Loak at its website and
find its mission statement. IF IT doesn't have one, what wowld you suggest?

Business Yocobulary m Use (edranted; 41

 Competition
Competitors
..
The main competitors in particular industry are
a
is key players. Smailer compeditors may be referred
to as minor players.
Competition in an industry can be: :
:
*
cut-ihroat m ferocions
interse m fierce
m keen m low-kcoy
SL m toush
The usual pattern for a new industry is ta have a large numher of competitors: there may
be start-ups - completely new companies -
and there may be companies already
established in urher sectors that also want to get into the indusiry, perhaps by serting up a
new subsidiary or business unit, (See Unir 19

"Competing' and 'campetitive'

Competing and competitive arc adjectives related tor 'vomperitiom'. Two companies may
produce compering products products thar compere wirh each other. A competitive
-

prodnct is one thar has real and specihr henehts in relanon 14 orhers nf che same
"Competing' alsc occurs in these combinations;

bids price offers for a company in a takeover

competing ufferings produers from dikfereur eompanies

suppliers companies offering similar prouusts or services
technologies technical ways of doing something

"Competitive' also occurs in these cambinations:

position where a company is In relation to Its competitors im terms

of size, growth, etc.

pressure the force rhar one competitor van bring to bear in relation
to anc1ther

prices, prices that are similar to or lower than those for

similar products
cörmpetitived
threat something, that one competitor may do to weaken
anotker's position

advantage superior produce, performance, er, {har a compentor

edge can offer in relation to others

Strategy a plan or plans for success in relanion to competitors,

and the study of this in business schools

42 Business Vocabulary in Use {advanced}

17.1 Look at the adjectives describing compention in A oppnsite. Which is the add one out,
and why?

17.2 Look at Bopposite, March the turn parts of these extracts containing expressions wich
'compering'.
3
Inc Lid
1

What is to stop suppusedly compeling bids [rom mining Kants

and Falconbridge I,td

2 b
Commtouch can position itself in su ppliers from secreily agreeing to
the middle of the competing keep prices high'?

3 c
Diamend Fields Resources Int was fferings. wib1 prices ranging from
(he tarzel ol competing S300 tn 55450,
A
4
The software 2% ner cent cheuper technalogies by offering "unified
than competing messasing solutions'.

7.3 Complete the sentences with words from B oppusite that can follow "competitive",
1 He was criticiged for being tno Eurocentric and fail1ng t5 pay sufficient artention to the
sompefitive TOT DOUEh Sast Asia.
2 Businesses can sustain their performances over the long term br having some competitive
To.keep them ahead. (? possibilities}
3 For the money-zonseious consumer, alternative retail outlers can offer organic food at more

peritive
4 First Chicago will enhance its competitive ANA Bersst its Anancial growth
through the transacion, which 1s expected to add to earn1ngs immediarely.
5 Mall störes are under more competittive LH3I1 at any time in their 40-year

history, wich new discaunters and supecstores increasingly moving in alongside traditional
malls.
6 Decades of management theorizing around the world have produced maountains of baoks,
many of which promise ro deliver che secrers of success. Bur chere is no consensus on
comperitive .....

Over to you y
Think about yaur organization or one you would like to work for. Wha are its fiercest
competitors? Why are they a threat?

Business Vocdbulary in Use (advanced) 43

18 Companies and their industries
Zanpetitwve forees
in zm1portant strategie thinker is Michael Porter!. He defines the five competitive forcus
= work in any industry.

Potential entrants

Threar of
new encrants

Sepphers. puwer Industry competitors power of Buyers

suppliers Rivalry among existing fire buyers

4
Threat of substirute
products/serrices

Substitutes

05523 SWOT analysis

SWOT stands für strengihs, weakn1essos, opportumties, threats.
In formulating strategy, a company should look ar its strengths and weaknesses in
relation tu ir
competitors. For example, a guud sales team is a strength and poor internal
<ommunlcation is a weaktess.
The company should also look at opportunities
and threats in its environment: the strength of competifors, government regularion, the
way that society 1s changing etc. These are external factors, For example, a change in a
country's legislarior1 on broadeasting n1ighr present an opportunity for a group that wants
tö buy a television company rhere. The change would probably
pose a threat t6 exisiting broadcasters.
The ways that company organizes and cambines its human
a resources, knnw-how,
*
equipment and other assets arc what Hamel and Prahalad call irs core competencies.
These are internal factors. (See Unir 7)

Be good at somelhing
Porter says that compertitive advantage can be based on:
w cost leadership: offering products or services ar the Iowest cost; this is one strategy to
adopt in volume industries where competicors produce large numbers of similar products
differentiation: offering products or services that give added value in terms of quality or
compared to compenitors
m focus: using one of the above twostraregies to concentrate on a niche, a specific part «uf
the marker wirh particular needs,

The danger, says Porter, is when a company does nor follow any of these particular
strategies and 15 stuck im the middle.

Strategy (Simon Ar Schuster 1998)

Cormpeting for the Fafsre (Harvard Business Schock Press 1996}

44 Business Vocabulary 1n Use advanced)

18.1 :

: :

Look ar A opposite and the examples 1 3) below of che expressions 1n the diagram baxes.
March each example to an appropriate form of one of the expressions.
1 Coca-Cola and Persi Cola in soft drinks
2 A company that is thinking of selling computer games when ir has rot sald chem before
3 Digieal photography in relation to 'eraditional' photograrlir
4 Car mantifacturers 1n relation to camp1ment manufacturer
5 Component manufacturers in relation car manufacterers

18.2 Donna is presenting a SWÖT analysis of her travel firm. Complete the table below wich che
expressions in ital1cs. (The first one has been done for you.)
'
"Wo have some very goud locations for aur travel agency shops in cities all over Europe.
"There may be an ecorormie siowdoren next year, and fratel is one of the things people
et back om Hrst.'
"We are big enough io negotiate very good prices with hotels and airlines."
"Internet booking of travel 1s Prcreasing, and we want to ger into this."
"We need to improve staff training -
we have a new computer system but a lor of rhe staff
can't get tie most from it.'
"There are some very good online frauel companies already established, They: may
challenge our position."
"We have high staff turnoger.
"Consumers are looking for more exosie places to go on holiday, and we are planning fo
uffer these destinations.'

Strengths Weaknesses Opportunities Threats

Good

18.3 L.ook ar the mission statements of three compamies. Which strategy in C opposite does cach
correspond ta?
1 To make sports cars for discerning enthusiasts w1rh good technical knowledge.
2 To sell clothing more cheaply than the department stores.
3 To sell elecrrical goods wich a high level of after-sales service.

Over to you
Analyze your organizatien or one you would like to work for in relation to the industry it is
in, and to the forces in A opposite.

Business Yocabulary in Use (advanced) 45

06 Key strategie issues
raustries and Iheir players
In some industries, like stee] or Tyres, rhere are few companies: these industries are
concentrated. Other industries are fragmented: for example there are millions of
restaurants worldwide, and even the largest chain,. MeDonalds, only has a market sl1are
uf less chan one per cent in terms of all restaurant meals served worldwide.
Some 1ndustries have low entry barriers -
anyone w1ch a small amount of capital van
Open-A restaurant.
If an 1ndustry has low entry barriers and is artractive hecause of 1rs higk potential
there will always be new entrants This was the case far Interner service
providers ar the turn of the century with a lot of companies offering chis serviee,
Orher industries, like stee], require massive investment in equipment, Know-how, etc. -

these are high entry barriers and new entrants 10 the industry are rare.

WEI Mersers and acquisitions {M&A]

Am +
:

:
:

UM
:
:

Same companies are very acqusitive, buying competitors in their industry or companies
in other industries in a series of acquisitions or takeovers, which it may refer to as
strategic acquisitions. Ör a company may merge or combine as an equal wirh another
company of similar size.
A company may also buy its suppliers and customer companies in a proccss of vertical
integrangr
The result af this maybe ari unwieldy conglomerate, a holding company wich a large
number of subsidiaries, which may not be casy to manage proftrabiy as a group.

Make or buy?
Recent strategie thinking holds tbat cunglomerates are not good. Many conglomerates
have disposed of ar divested their nen-core businesses, selling, chem off in order to
eoncentrate on their core business, This is related to the make or buy decision, where
companies decide wherher to produce particular cormpements or perform particular
functions in-house or to buy them in from an outside supplier. (See Umr 4}

Note: The nouns relating to 'dispose* and 'divest' are *disposal" and 'divestment. They can be both
countable and uncountabie nouns, (Compare *divestment" with "investment" )

46 Business Vocabulary in Use (advanced)

 Complete the crossword with appropriate for1ns of expressions from A, Band C opposite.

Across
7 and 4 Things that make it
difhcult to get into an industry.

9 When a company sells a business

actvity. [10)
11 See I0 down.
13 If an industry is difficulr ro ger
into, entiy bartiers ATE [HN

15 A large grnup of different

businesses. 12}
Diem
1 A large industry with not many
COMPANIES IS IN
7 When wo companies join as equal
partners, they 15]
3 A company' most important business
activinyi Its business. (4)
> A company thar buys a lor of other companies is (il
& A large industry wich lots of s1nall competitors is .{19}
# A profitable industry rhat companies want to get into is 10)
IB and 11 across When a company huys its suppliers or customers (8, 11}
1? Ina fragmented industry, each competitor only has a small (3)
14 Ian indusery is easy to ger into, entry barriers 3)

+? An executive in a consumer goods company is talking. Complete what she says wich expressions
from A and B oppusite. (There are two possibilities for onc öf1he gaps.)
"We make a wide range of consumer goods. Over the years we have made a number of
1 kuying companies chat fit 1E1 with our long-term plan nf
being Ihe number (me Consumer powds company in Europe. These
mean that we now own large number
a (3) gach with its own brands
We have beunme an (44... -
and all this is very difficult ro
manage. So we arc nonv re brands from 300 to 100, ancl getting
each unit of the company to concentrare on our long-term goal, which is increased (5}
and therefore hetrer vesults for OUT 5hareholders. And sur increased
will certainty dissunde {6} from eorming into.che industry, so nur
position will be further strengthened."

Over to You u
Think of a recent merger or takeover. What berichits were claimed for it at the time? Have
they materiatized?

Business Vocabulgny in Use (advanced! 47

Wil] Innovation
nnöovation und ihe development process
Frrsque Sanchez 15 head of new product development at a large
sonsumer products company:
"We want to foster creativity and innovation the development
-

or new ideas. Üurs is a Jarge company, bur we want to avord

becoming bureaucratic, wich slow decision making. (See Unit 1}
We encourage corporate ventunng and intrapreneurship, where
employees develop entrepreneurial activities within the
organization, working on their own projects outside the usual
Frameworks; we allow chem to spend 15 per cent of their time on
this. We ser up skumk works, away from the main company sites
and outside the usugl structures. to work on innovations. This is
the way we do our new product development. The most famous
exampleof this was IBM, when ir developed 1rs PÜ away from
the company's ma1r research and development sites.
We Armly believe that companies have only rwo basic functions: Innovation developing -

new products and services and marketing theni. Our marketing people arc heavily
-

involved in new product development. They get the reactions of focus groups groups of -

consumers whr say what they think of che product -

at a very carly stage in the
development process.'

Pioreers and followers

'One problem is to know whether es introduce a
+
& produer or service before anyone else, ar to wait for
others to integduce similar products, Some say thar
if you bring a product to market first, you have first
mover advantage you can inf uence the way the
-

marker develops. These companies are trendsetters

or innowators. Others say that ie's better to be a
follower and learn from the mistakes of the
ploneers.

Note: 'Pioneer' is also a verb,

Shakeout and consalidation

A new or ermerging industry, perhaps one based on a new technology, can be attractive
-

the future structure of the industry 1s nor yer established and there is room for many
competitors, But a5 prowth in the new marker stonvs, smaller comperitors higher
costs can no longer connpete. They drop out or are bousht br the larger companies in a
process ol shakeout and consolidation, leaving the larger companies with the resources to
dorminate the industry, which is now mature.

48 Bustress Yocabilory in Use fadvenced)

 This article contains words from A opposite. Complete it by choosing the best phrase {a0}
below ra go in each ofthe Kaps 1- 1

INTRAPRENEURSHIP
Increased global enrmpeisien is 19605, the cuncepz fell ou of inngyvabion is forsing Brikun's unse
forcing large companies din faroue in ihe mid- E580s, Fosteriny wunnpänies br Joak far inechmels co
consider more venturesome ways different cultures in Ihe same »Gmulate for new pendixces.
ol stimularing product ideas orpamizallon Nas praven 10
As 21
theom. intrapreneurship Gbffcui, while rerumerätion has ihrouph eorperae venluong and
where bare established companies also heen a
problem. intrapreneurship may be giveti new
turn in inlernal "entrepeeneurs' for Tnimapreneursbip seems to have Jife 1n Ihe DR. "Ten many UK
bieakthroaseh Innovations, sounds been perceired in be more vompanies used to lack gluhal
like a guod idea. On 1he surface, and pain than it was worth. There is smbilien, bat now. home veho want
nothing can be more effieient than an inereasing recoanibon that to compele intermatenally rear
[3} Most 01 Ihe that th need leo 1nnawale, Says
in things have nof been OIpurale v in the Jim Martin, director of technolory
bat easy, Has Deren centred areond US at 31. the
Dany enmpanies which havc enmpanies, and the cunecpl never capiial group
ventured into the world of really cauehl on in Ihe UK.
intrapreneutship have failed ioscap But increased cumpefition in
any benefits. Alter its h1rh Ihe global markets and 1he pressure for
Finonciaf Times

a The push for innovation among large

b encoursging 1nnavation among employees so chat they come up with mould-breaking
produets and ensure che company's surveval,
© the nature of big companies is to stifle Innovation and entrepreneursbip, hampering their
performance in che global arena.
d Apart from a few examples of success,

20.2 Complete the sentences with appropriate forms af expusssions from B appasite.
1 The alliance put ARM in partnership with Psion, rhe varly ... .. of pocket-sized
SOMPUlers.
2 Freeserve was the Ärst Internet service provider to drop upfront charges and, with this
came to dominate che UTK marker.
3 Bur when Cre company -.
a successful business, competition inevitahly intensifies.
Consumers benefit from the resulting cuts in prices and improvements in quality.
4 50 far Tarwan has always been , making things invented elsewhere mare
cheaply.

20,3 Look ar thr following facts about che develnpment of he market for online back sales. (They
arc nor in chronological order.) Cumplere the facts wich appropriate forms of expressions from
X mpposite.
1 Some smaller companies stopped selling altogerher: they ..
2 There is a trend towards fower and bigger companies in the market, a trend towards ..
3 Amazon and a few örhers lead ehe industry: they it,
4 The market is no longer yuung: It is now...

Over to Kou
Isit always difficult for large organizations to come up with innovative idess and products?
How does your organization, or an organization you would like ta work for, produce
new kleas?

Busmess Yorabulary in Use {advanced} 49

21 Preparing for the future
planning
Larmen Ricardo works on long-term strategy 1n a large.oil company:

Mr joh is to contribure to long-teren plans für our future activities; We have ro antic1pate
gompentors" activities as well as trends in che general soctal and economic environment
-

we have 60 be ready to respond 10 changes in society and changes in the economy as a

whole, This is called sconario planning we imag1nc ways in which the energy industry
-

might change and evolve, and the place of in relarion to alternative fuel 1n 20, 54 or
100 years from now.'

Futtrology
'T1n a kind of futurolegist or forurist. Of course,
futurology is nor an exact science, and snme refer
to ir as gazing into a crystal ball.
But there a1e ways of predieting che future in a
structtured manner There is che Delphi merhod,
where a panel of experts make their forecasts ahont
a subject 1ndependently, and the forecasts are
eirculated to the other members of the group. Each
member rhen comments on the others" ohbservanons
until all che experts reach a consensus: an
agreement about whar is bkety io happen.'

Risk management
'A related arca 15 risk
management. Öperating in
pulitically unstable enuntries is
one of the most extreme
exam1ples of where we have to
manage risk. The dangers there
may include natonalization of
assets by the government,

Elsewhere, we may be accused of

working wirh governments which
people do not approve of. We
have to think abour the impaut of
this in terms of our reputation for social responsibihty. {See Unit 41)
There is always che danger spills from ships transporting, our oil, wech che resulting
pullurion and associased costs Anes, eleaning up etc. In addition, chere is che much
greater long-term cost ofthe neparive effecr chis has on our image the way the cumpany
-

is perceived. A badly-handled oil spill is a public relations disaster.

If our computer systems are damaged, for example in a fire, we have business continuity
plans, mvolving back-up machines on another s1te, so that we can carry on
working normally.'
These are some of the potential erises we face. We 1ry to have contingency plans or crisis
management plans for all the risks we can think of.

Note: singular. crisis; plural: erises

EIN Business Yocabulary 1n Use fadvanced1

Carmen Ricardo is talking about the oil industry.
Alatch che underlined words [1-#} to (he
expressions in A and D opposite Ihat she Is
referring
1 "In studying the trends in the wider pierure, we
may hnd chat there is inereasing consumer
Jemand for alternative fuels such as wind
energy, and we have to take account of this
change 1n consumer expestations.'
2 'Of course, we take into account all the factors
we can in making our forecas1s, but what we
do is ar1 inexact science.' [2 possibilities'
3 "One ofthe problems with this inerhod is that
the members will come up wich the same ideas
.as the other experts. Therc is always a danger
when you have an 1dea char everyone shares
thar you exclude other possibilities.'
4 "When you make these, you can't avanl lonk1ng
in the rear view mirror: you terd to base them
on whar happened 1n the past.'
5 Of course, it is an inexact scienwe che only
-

thing you can say for sure 1s ihat che furare

be like che past, bur different.'
& 'In this area, some of our competitörs are
talk1ng about serniarigs over perinds up to
-340 years!

look ar © oppasits, The questions (1-3) are from shareholders ar a twbacco company's anal

general meeting. The answers {ac} are rom che company's chief executive. March the questions
cn che answers.

1 Are you prepared if the company's
execufives were kielnapped when
working abroad?
2 Du you approve of the gevernnient"
initiative on preventing children under
1% from smoking?
3 What are you doing tn protect rhe
vompany's image in health issues
generaliy?
a Yes, we are fully aware of oursocial
responsibility in this area.
b Protecting the image of any tobacco company
is but we support, for example, the
Furopean Union's plans for stricter healch
warnings on cigarette packets.
We know our image will suffer if we don't
c Yes, we have continpeney plans to deal w1rh
that. A special crisis managernent team would
meer to deal wich che situar1on.

Over to you :

What is the biggest risk for yor organization or one you wauld like to work für?
How has it handied risks in the past? What lessons has it learned?

Business Vocabulary in Use (advanced) SI

The four Ps and the four Cs
Tme four Ps
Susanna Chang is marketing manager at the Yermilion mobile
phone company:
"Of course, marketing is often defined in terms of:
m product: deoding what products and/or
services to sell. The word 'product' for us can
refer to a product or a service, or a
coanbinaoon of these

price: setting prices that are attractve ro

customers and rhar are profitable for the
company
place: hndiny suitable distnbutien channeis
und oudets reach these customer groups

promoton: all the activities, nor just

advertising, used to sepport the produet -

tyching from pre-sales to after-sales service

These are the four Ps of the marketing mix, the factors rhat we use in different
combinations for different products and different pertential buycers.
50 my job is much more than adverosing campaign" I ar ork wich Bineers,
fmance people and orher semor managers to find offerings products, serviwes and
-

combinations of these that will appeal to customers

-

1 u 1r Cs
"But I And helps us more to look at the marketing effort from the point of view of
ie

customers, rather than the company, when we consider the four Cs:
customer solutien: we aim to find a solution to a
customer 'problem' by offering the right
combunation of produces and services to sat1sty
particular customer needs, Pay-as-you-go was a
dream solution for parents worried about children
running up biz phone Kills
customer cost: the price paid hy the austomer for
the product. It inelucles the 'price' relared 10 nur
buring another product of the same or another
type Kar example, SOTDCOIC who A

phisteared mobile nor then have 1he money

to buy a taptop computer that they wanted
the way
thar is most convenient for each type of customer. We have to decide, for instance, how
many new shops to open and where they should be
communication with the customer: customers are informed abour products through
advertising and so on, but the vommunkzatton Is two-way because customers alsc1
communmcate wich us, for example theough telephone helplines. This is a good way for us
to And ouc more about what our customers want, and fo change or improve our offering,
and tu get ideas for tew offerings.

Thinking of the marketing mix in these terms helps us ma1ntain a true customer
orientarion or customer focus.'

Business Yocabulary 1n Use (odrancedt

 Susanna Chang continuss to talk about her örganizar1on, Find wluch 'P' ofthe marketing mix in
A opposite she is referring t6 1n £auh of her statements.
1

We want to offer calls ar a We don't put brand on muhile

luwer cos than
D
campericors. phones, bur we sell phones I1r Let
different call plans: buch pre-paid and
\
monthir-billed zustomers. ;

We advertsc Dom television We have nur NE high-street outlets,

and in the national press. d we also through the big
l

goods stores

We phone existing tustomers tu

>
try to persuade them to huy mare
sophisricared phunes which have
a higher profit margin.

22.2 A mobile phone customer is talking abour a recent mobile phone purchase. Find which rm B :

appösige he is referring to in cach of bis staremente.

1

I was looking for a phone that \ 2

I wanted tie phone to be
Jehvered to my door.

3; had some questions abour how My budgers limited -

I had the
USE the phone so Tphone the To huya
CUSTOMER helpline Thev were «omputer, hur nor borh.
y

VETW helpful

5 f
I kove
che mendern design f (he j like the TY aulvertisements -
I only
phone. I was looking for notced then after bought the phone,
sctmerhing tar locks fashionable bur chey persuäded me char I'd made
and up-to-dare. the right chriee.

22.3 Look ar the vxpressions in A and B upposite and say if these staternents are true or falsc.
1 Another word for a shop is a Ster-out",
2 Diseributen channels.are used ro ger goods from prochicers tu vonsumers.
3 A product or service, or a combination sfthese sold together, is an offering.
4 The four Ps are also geferred to as the.mmarketing mixture.
5 Sellers with 2 customer focus are aulv congerned wich the technical excellence of (heir
products as an end in itself.

Over to Kot
Think sf something that your bought recently. Describe your purchase in terms of the four Cs.
Tken deseribe it from the sellor's point of view in ferms of the faur Ps.

Bustriess Vocabulory in Use tadvanced) 53

 Customer satisfaction
NEN I" vustomer
From the point of view of sellers ...
:

iS wher CUSEOHICIS ...

satisfaction are happy wirh your
products

delight are extremely happy

wich your presducts
CUISLOHIIET
allepiance continue to bur fram You
:

dissatisfacrion are nor happy with your

products
Jefecnon stop buying your products :

Customer edelight
When you ger whar you hapel for as a customer, your expectations are mer and rhere is
customer satisfaction. Products, sadly, often fall below expectations.
When expectations are exeeeded, there may even be delight, extreme sarisfaction, but this
party depends on how involved you are in the purchase, There 15 1 difference IN VOUT

degree of imyolvement when you huy different prodeecrs. For example, there is low
nyolvernent when you buy something ordinary like petrol, and lügh involvement when
purchase somerhing emotionally portant has a family © 1

Customer eissaftsfartion
Research shows that 95 per zent of dissatished custumers dow't complain, bur just change
suppliers, Sanshed customers create new business by telling up to 12 other people.
Dissatisfied ones will tell up to 24 people. Word-nf-mauch is a powerful form of advertising.
Sörne say that encouraging eustonier lovalty 1s important for prahrability. They say that
customer rerendion, keeping existing customers, is key. repear business is hve
mesheaper than Anding new customers. (For Arch,her view, ser the article pposite.)
Customer defection must be reduced as much as possible of course, bur a cumpany can
learn from its mistakes by asking those who da leave why they defected; this is lost
customer analysis.
Services like mobile phone and cable TV companies have 14 reduce churn, the percentage
uf customers who change suppliers or who stop using che service altoperher vach year.
This is very costly che compames would preter, of course, 10 Keep existing.custormers
-

and add more in order to build their customer base.

Phulip Kosler: Agrketing Managerren (Prentice Hall 20n0, Chapter 1

Et Business Vocabulary in Use (odvonced)

; Match tbe parts ot these sentences containing exrpressions [rom A oppnsite
ewer

1 There is
a any existing borrower who move»
overwhelming wridence that
111 d continues Kir burrow wir 115
15

2 Wich our customer schere, is entitled to a one per cor1t discount,

3 The financial services industry is
b with employee satisfaction.

Prices to STOp
strugeling, partly because
lefectiorns
4 The Internet service provider has
introddured Nat-ranc d of customer dissatistaction wich high
5 Excellent product quality hiiS helped charges
them to bund strong vustomer e than just satisfaction.
allegiance and f market share.
6 Customer delight is more

2
*

Dispensing with loyaliy

The ernten hat 1ed are more i» gompanten
-

neeel ro [oeus on muulual hunefit. Wil we over gut to grips with the congepe of
layalty. or would it be Beiter in disperse with 1raltogeiher"
[es nanch 10 serve loyal vustomers. They provide the best opperlanties Lo sell tuore.
Bull as companies erperinent wch foraltly märkefing. doubts are coming Lo (hi
y1l Mac In most sutegenies, Ave bin pendoss temal als to be buyers
different products. L the amall spenders ha buy the sume brand asain an1l aga1n,
but only verw infregaentls. This [007 koval wustemer is wörth hard, amsihing
rule rules
3.. .Ehienhure's weptictem was Mache yo eaperienced business-br-
husines» mlarkerers vho quickly pointedourtbat the most Änaneralby stenificant oral
aucnunis are offen Ihe lest profilahle, [41

Brand Strategy

This art1cle contains words from B and C oppusire. Complete ir by chans1ng the best sentence
[a-d} to ga in each of the gaps 11H).
2 Don't go for loyalty per se, go tar rhe 24%% of customers who really count, no matter how
Joyal' hey might be.
b One of the earliest doubters was Professor Andrew Ehrenburg of sourk Bank Universiry,
whose long experience with pucchasing data led hin tr1 argue (har aften che mast
customers zre Ihe least profitable.
The big idea behind loyaley 1s thar loval customers are more profitahle, Keeping existing
Zustomers 1s cheaper than finding new ones.
d They're the product of big, powerful customers getting such goud deals thar there's hardiy any
margin left fur the seller,

Sow say which of these senterzes better sums up the article.

1 Lowal customers are not necessarily the most profitable.
7 Cuseomners who spend the most are the most loyal.

Over To You N
Look again at the article above. Which view of customer loyalty does your organization, ur
one you woukt like to work for, take?

Business Vocdbulery 1n Use fadvorced) 55

33 Measuring performance
Fssneial reporting

Maria Malone is the chief finance officer of a large international media company, based in
the UK, wich activities in television and publishing. She talking to new trainees in the
finance department:
"As. wich all eompanies, investors and amalysts want tn how the cornpany is being
run and how their money is heing used, Each year we.pruduee an annyal report wirh
three key sets of figures:

proht and loss accnunt m balancc sheet m cashflow state1nent

These arc he tliree key fmanctal statements in financial reporting. They give the basic
1nformanon about our financial results.' (They are covered in Units 34-37.)

The financhal year

'Our financial year en1, on March Alst, ocher companies chouse uther dates.
Soon after chis, we publ1sh preisminary results, or prelims, The full report and accounts
are published a few months later. Asa UK company, we also publish interim results or
interims after the Ärst six months of our Anandial year

Note: US companies puhlish their results every quarter.

Shäareholders, bondholders and lenders

"We use shareholders' money t6 operate and invest in the business. Some uf the profit we
make is paid our ro them, usually in the form of dividends in relation to che number of
shares that rhey each hold. Our shares are traded on the Lundon stock market.
We also borraw money in the form of bonds. We pay percentage interest or those hands
and then later repay the prineipal, the amount of money originally to us. Our bonds
are traded om bond markers.
And we borrow money from banks in che form of Ioan1s, or which we also pay interest.
Of course, our shareholders, bondholders and lenders all cakz a keen interest in our
dccounts!
The results we publish san affect share prices: enod results. cause prices ta rise, IF che
market beheves the company is undervalued. However, poor results ofrer canse a drop in
share price, a5 Investors feel the company is overvalued.'
Br£: shareholder:
AmE; shareholder } stackholder

74 Business Yocadulary in Use (advanced)

33.1 Complete the erossword with approptiare forms of expressiuns fram A, B and U opposite.

Across
3 Reports rhat are nor for che full E

year 8
T and 6 down What investors are
basically interested in. (9,7)
ofthe three key financ1al
$ One
Statements. 18,9)
11 Money lent Iy a bank. {4}
12 People and institutions rhar
own bonds. {11}
13 The money you paynna
loar1. 18]
14 Sce 2 down.

Down
| Another of the chree key
1+
Ananc1al statements. (7,5)
7
and 14 across Another of the
three key financial staternenzs. (6,3,4,7}
4 Together, these peopleand institurions are the owners of che company. (12}
5 Period af 1hree months. (7)
6 See 7 across,
9 The publicarion of results Anancial . . . (91
1 Banks and others char Ioan money. {7}

33.2 Complöte the table with words from B and C opposite and related forms. Mur a siress mark in
Fonr of the stressed syllable in each word of more than one syllable. (The first one has been
Jane for you.)

Verb Noun -

thing Naur -

person/organization
g
Fnance
kend

33.3 Complete the sentences wich appropriate forms "Rnance", (There are two possihilities for one
afthe gaps.}
1 A millionatre denated a karge sum to the charity.

2 The for the project 1s coming from two different sotieces: bank Ioans and a new
share Issue.

3 The company must keep a careful control on it8 [his year in order to avoid
making a Ioss.

Over to You
Obtain the annual report of an organization you are interested in. (Many are available on
the Internet at www.carol.co.uk. You can also use this source for other units on Company
France.) Identify the profit and loss account (or the ineome statement), the balance sheet
and tne cashfiow statement. What other information does the report contain?

Busiress Verabulary in Use [wdvancen) 75

 Profit and loss account
S arceountng
Mara Malone sontinues:
"The acervals principle means that events in a particular reporting period, for example
of goods or purchases of supplies, are recorded in that period, rarher than when
money is actually received or paid out; tius 1nay happen ina later period.

Profit and Inss

"The profit and loss (P&L) accommt records the money we make tor lose!} during a
particular reporting period, using, the accruals principle. In our case, nur accounts record
sales from books, magazines, television advertising, etc. during the perxacl = this is the
money received from sales, minus the labour and cost of materials used to produce them,
which is called the cost of goods sold (COGS).
Then we take away selling and general expenses the costs related to mak1ng these sales
-
einplovees' salaries, rent for huildings, ec. There is also che zost of depreciation this is
-

not an actual sum of money paid out, but is shown in the aceounts tn allow für the way
that machinery wears out and dexlines in value over ume and will have to be replaced.
(See Unit 35) Fhis leaves us wid our operating pröht.
Then we subtraet the interest payable on money we have borrowed in the form of bonds
and bank loans. This grves the profit on ordinary activinies before tax, or pre-tax proßi.
Sometimes there are exceptional iterms to report, for example the cost of elasmg a

particular operation, but fortunately this does not happen very often.
Of course, we pay tax on our and in the UJK this 15 called corporation tax.

Note: Sales are also referred to as turnover in BrE. The profit and loss account 1s called the Income
statement in the USA.

Earnings
'From the profit after tax, also referred to as carnings, we usually pay dividends to
shareholders, and you can see the hgure for dividends per share. However, when business
is bad, we may not do this we may omit, pass or skip the dividend.
-

Narurallv, we don't pay out all vur proht in dividends, We keep some ro Invest in our
future activities these are retained earmings, or reserves.
-

You look at profitabilipy in terms of earnings per share (EP$}, even if some of these
car1

varrungs are reta1ned and not paid out in dividends."

76 Business Yocabulary in Use fadvanced)

34,1 March the words in the hox.to make expressions from A, BandC opposite. {The Arst one has.
heen done for you.}

periods exceptlonal varn1ngs items

payabie operating P&L profit

reporting rerauned expenscs principle) selling and general

Now cormplete each sentence with the vorrect expression.

1 Our financial year runs from 1

April to 31 March and is made up of two s1x-month

2 The company" has increased by 14 per gent this year.

3 Wehave decke keep 025,000 from our profits as and net

disrribure his to che shareholders.

4 One ofthe 111 THE profir and loss account rhis year related to the
restructuring costs of our operations in Korea.

14.2 Read the proht and loss account for a UK wompany, Then look ar A, BandC opposite and say
if rhe staremenrs below are true or false. All figures are pounds sterling.

& Profit and loss account far

ysar ended 31 March 20

Sales 900,000
Cost af goods sold 560,000
Selling and general 120.000
18,000
Operating profi 202,000
15,200
Pre-tax profit 187,000
Exceptional items" 5,000
tax 60.000
Profit after tax 7,000
Dividende
eamings 45,000
There are 100,000 ordinary shares, Eamings per share FO pence. Diaderde per ange: 25 pence.
This 9 for costs related to Ihe oosune of our offesa Stockholm

1 The £120000 for selling and general expenses includes the salaries of the salesforce.
2 The £18,000 for Jeprecianon represenrs ar acm1al amount of money paid our to supphers.
3 The company has a bank loan and/or is paring interest to halders of 1rs bands.
4 £57,000 for exceptional iterns is probably paid our every year.
5 The company has paid out more to shareholders this year than Ir has kept. for future
investrnent and/or funure payouts.

you
Foverthe annual
to
OÜbtain repert of ar organization yau1 are interested in. Relate what you find in
the profit and lo55 account or incame slatement with the items in Ihe table above. Then
comparc the figures with those for fie previsus year. What differences cas you ser?

Busitass Vocabulary in Use (advance! 77