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UNIT 1 BUSINESS ORGANIZATION
The world is a chain, one links another.
Your vocabulary
Business
- work relating to the production, buying, and selling of goods and services;
- an organization which produces and sells goods, or which provides a service;
- important matters that you have to discuss or deal with.
Business cycle
- process by which investment, output, and employment in an economy tend to fluctuate up and down in a regular pattern causing boom and depression, with recession and recovery as intermediate stages.
Organization
- a large group of people that has particular aims.
Organizer
- the person who makes all the arrangements for something and makes sure that happens as planned.
Ex. 1. Study the following words and word combinations and translate the sentences given below into Russian. Consult a good dictionary if necessary.
mean business, none of one’s business, go out of business, businesslike, be busy with, have no business to do, be in business, like nobody’s business, mind one’s own business
1. Mother has busied herself with our affairs for too long.
2. When traveling on business I take my tiny travel kit.
3. Let’s get down to business.
4. She had no business to publish his letters to her.
5. 50% of these stores were not in business five years ago.
6.They are working away like nobody’s business.
7. Umbrella sellers went out of business.
8. Stop teaching me! It’s none of your business.
9. Listen to me! I mean business!
10.The visit to Copenhagen was brisk and businesslike.
Ex 2. The words given below are the synonyms to the word organization. In what do they differ? Give your own definition to each of them.
Institution, council, body, entity, fund, trust, party, club, society, association, league, federation, union.
Ex.3. Match the words listed below with the dictionary definitions which follow.
accountability, effort, pattern, requirement, accomplish, existence, consumer, foster, affect, establish, benefit, involve
Ex.4. Make the following words negative. Use prefixes -un, -in, -mis, -dis, -ir, and so forth.
Human, existence, enable, realized, regard, responsible, careful, systematic, effective, mature, aware, understand, loyal, formal, direct, continuous.
Ex.5. Give the opposites to the following words. Use each of them in your own sentence.
Flexible, voluntary, to share, to adhere to, enjoy, confidential, consensus, versus.
Ex.6. Be sure you know the meaning of the words given below. Give their derivatives.
Existence, accomplishment, benefit, authority, obligation, responsibility, extend, consider, favour, perception, value, equal, assume, conscious.
Ex.7. Give the synonyms to the following words. Make up your own sentences to show the shades in their meaning.
To handle, to accomplish, goal, benefit, coerce, to achieve, to purchase, output, affect, to establish, to enhance, power.
Ex.8. Translate into Russian. Pay attention to the economic and business terms.
What words and word combinations from ex. 8. do you consider to be economic and business terms? Explain what they mean.
Ex.9. Translate the following text in written form.
Modern societies have been called organizational. Unlike so-called prim itive societies, modern ones produce most of their goods and services through special-purpose organizations that are, in the main, neither famil ial nor tribal. Some of the organizations of a modern society are meant to earn a profit and some are "not-for-profit."
The organizational mode of conducting society's affairs means that virtually everyone in modern societies depends mightily upon how well organizations function. We look to them for goods and services of ade quate quantity, quality, and a low enough price. We look to them for jobs to earn the money to buy what we need. We depend upon them for decent and healthful environments on and off the job.
In turn, organizations depend upon the contributed talent and effort of people who work in them. Every organization must obtain these con tributions and other resources and convert them into some outputs that yield sufficient rewards to keep the organization alive and functioning. In a word, the relationship of society and organizations is one of interdependence. But what kind of interdependence?
Managerialism ( the ideological principle on which the economic, social and political order of advanced industrialized societies is actually based) proclaims that the society is made up of organizations, corporations, associations, and so forth – not individuals. Social decisions are a consequence of the interactions of the managers of the social units – not the will of the people, the demands of consumers, or the needs of workers.
LET’S READ AND TALK
1. Why do people try to «organize» themselves?
“Informal groups develop in order to meet a variety of individual needs which are not met by the formal organization.” Do you share this opinion?
T E X T 1
Read the text. Define the main idea of each paragraph. What are the key sentence(s) of each paragraph?
ORGANIZATION
Early in human existence people learned that their individual efforts often fell short of success. They found that they were unable to accomplish many tasks that require more than individual effort. The result was that only limited goals could be attained. Therefore the necessity of group activity was discovered relatively early in human existence.
Group activity could be aimed at some higher, more complex set of goals and could thus bring greater benefits to all concerned. This quality of group activity must be counted as one of the chief requirements for success. Cooperation is a prime element of a group of people who want to achieve more than they can acting individually. A system of group relationships built upon and fostering cooperation, then, is basically the meaning of an organization.
This system of cooperation consists of several parts: the human element, the physical element, the work element, and the coordination element. All of these elements, taken collectively, can be thought of as an organization. Today, this system of cooperation is much more complex than it was in the first attempts at organization.
Thus, organization is an open, dynamic, purposeful social system of cooperation designed to enhance individual effort aimed at goal accomplishment; consists of the human element, the physical element, the work element, and the coordination element; transforms resources into outputs for users.
It is important to examine the various parts or components of organization theory in order to outline its broad scope. These components are: goals, work, power and authority, delegation, structure.
It was stated earlier that organizations were established to enable an individual to accomplish more in a group than he could as an individual. In other words, organizations are devices for pooling talent and ability into an effective whole that can accomplish some desired objective. Every organization is initially built to accomplish some goal. The goal or purpose is an unrealized state or condition that the members do not possess but which they deem desirable. It is imperative that organizational goals be clearly defined and communicated to all organization members who are to be affected by them. Goals are the starting point for the design and maintenance of the organization itself. At the same time, these goals must meet a need that society has defined as important. Thus, consumer needs play a crucial role in organization.
Once the goal of an organization is established, it is time for the members to decide on the type of work activity that will be necessary to accomplish these goals. Basically, any organization must perform two fundamental types of work: primary and secondary. The primary work (it also commonly referred to as line work) consists of production and distribution of goods and services that will satisfy consumer needs. The secondary work (it is often termed staff work) consists of all those activities that support and extend the operations of primary work. For example, in a manufacturing firm, the secondary work would include accounting, personnel and quality control.
No theory of organizations would be complete without a treatment of the roles that power and authority play in organizational activity. These two components of theory help explain the network of relationships that tie the other components of an organization together into some logical pattern.
Power is the ability to influence others successfully. It comes from any single or combination of possible sources. For example, one can have power over others because of one’s intelligence, skill, or money. Regardless of its source, power enables its holder to exercise one’s will over others. Thus, in order to understand the total workings of an organization, one must have an appreciation of the role that power plays in these workings.
Authority can be defined as power that has been given official recognition by the organization. Once an organization legally authorizes an individual to act on its behalf, that person is said to possess authority. Every member of the organization has some amount of authority to take action necessary to carry out his responsibility. The concern of the theorist is to understand how authority comes to be officially recognized by the organization and what considerations should be made regarding its use.
Organizations that enjoy any measure of success find it necessary to increase their membership and to assign duties to these additional members. The process that is used to add members to the organization will result in the necessity to divide the work of the organization into sub-units or groups. Each of these groups will be under the direction of a manager or managers. In order for these managers to perform their managerial duties properly, they must be granted appropriate responsibility and authority. The means for making these assignments is termed delegation. In general, delegation may be defined as the process of transferring an obligation (responsibility) and an accompanying right (authority) from a superior to a subordinate position in the organization. It is this basic process that enables an organization to grow. Without delegation, an organization simply cannot exist and prosper.
The patterns of work divisions and their hierarchical arrangements constitute the basic components of structure. Structure, then, is the hierarchical pattern of authority, responsibility, and accountability relationships designed to provide coordination of the work of the organization. It is basically a managerial tool that aids in guiding the organization towards its goals and can be considered the skeleton of the organizational body. The idea of hierarchy of authority, the division of organization by function, the differentiation of responsibility of the line (doers) and the staff (the advisors) are all inventions of the church and military leaders who were faced with the need to manage large aggregations of human, technical, and material resources. Organizations create an officially sanctioned structure known as the formal organization or de jure organization. This structure is often depicted by a chart as that seen in Fig. 1.
A formal organization is only half the story, for superimposed on these relationships is a whole series of informal or de facto relationships that are not sanctioned by the organization. These include informal work groupings of employees, informal leaders, informal channels of communication and informal power and status differentials. Usually the structure of an organization is rather permanent and stable but in some cases a temporary, ad hoc, organization may be created. The organization exists to reach a certain goal or set of goals and disbands once the goal is achieved.
1.What did people find early in human existence?
2.What is the meaning of the organization?
3.What is an organization?
4.What are the components of organization theory?
5.What role do power and authority play in building every organization?
6.What is the starting point for the design of an organization?
7.What is delegation and why is it necessary in today’s organization?
8.Which is more important: formal or informal structure?
9.Can you give any example of an ad hoc organization?
T E X T 2
Read the text and be ready to answer what theory you would follow as a manager. Give your reasons.
PEOPLE IN ORGANIZATION
If there is any one characteristic of people which is universally valid and important, it is that they differ. To say that all persons are created equal is a statement of human rights under the law. It communicates nothing at all about human nature. As a matter of fact, people differ greatly in intelligence, aptitudes, physical strength, manual dexterity, knowledge, skill, interests, personality traits, motivation, and many other attributes which potentially influence behavior and productivity.
We are rational—but only to a point. We plan, set goals, think, reason, and live by creeds and values. But we also become frustrated and behave in ways that can be perceived as rational only by someone who understands all our deeply embedded, sometimes conflicting needs, aspirations, and perceptions. In many situations our motivation is unconscious so that not even we understand our own actions.
The fact that one’s environment strongly influences behavior is indisputable. A number of prominent psychologists have assumed that human freedom is an illusion. Human choices are thought to be totally determined. This, of course, is an assumption. Many people do not subjectively perceive themselves in this way. It is significant that behavior and expectations are strongly influenced by what a person believes to be true. Individuals feel responsible for their actions. Also, people consciously believe that their choices are real, regardless of any awareness of philosophical arguments to the contrary. Organizations cannot function optimally without these pragmatic assumptions.
There are, of course, innumerable statements which one might make about human nature, but they would not all have a direct influence on how people should be dealt within the work environment. The late Douglas McGregor did an excellent job of conceptualizing some of the assumptions about human nature which are relevant to organizational behavior. He labeled these, Theory X, the classical or traditional view, and Theory Y, a progressive view upon which he believed a new model for human relations in organizations could be developed.
Theory X. This theory holds that the average person inherently dislikes work, is innately lazy, irresponsible, self-centered, and security oriented, and consequently is indifferent to the needs of the organization. Because of these characteristics, the average person must be threatened, coerced, and controlled. In fact, most people prefer to be directed and controlled. They seek security above all, prefer to avoid responsibility, and both want and need external control in the work situation. Because people are basically cunning and immature, management should experience little difficulty in using a highly directive and manipulative style of supervision.
Theory Y. Experience has shown that Theory X assumptions result in a great deal of difficulty for management although they remain popular with some managers. McGregor’s Theory Y makes the opposite assumptions. People do not inherently dislike work and are not inherently lazy. Rather they have learned to dislike work, to be lazy, and to be irresponsible because of the nature of their work and supervision. They have a high capacity for developing an intrinsic interest in their work, for committing themselves to organizational objectives, and for working productively with a minimum of external controls.
Two points should be made with reference to these theories. First, the Theory X characteristics are said to be inherent or innate. To be such, they would necessarily apply to everyone, which is obviously absurd. On the other hand, under Theory Y, people are said to have the potential or capacity for the responsible behavior and attitudes described. If anyone possesses these qualities, and a great many people do, then everyone has the potential for them. Second, McGregor speaks of assumptions about the average person, and one must ask, «Average on what dimensions?» Are we talking about intelligence? education? experience? Average is a statistical concept. The average person is nonexistent, hypothetical construct. When we make assumptions about the average person, at best we are referring to most people, and in doing so must recognize that there are exceptions.
T E X T 3
Here is one more text about people in organization. Read it and say whether you can take the information seriously.
When might you need to give blood for a personality test? The answer to that question may puzzle you more than the question itself: when you apply for a job. What’s more, your blood group could seriously influence your career prospects. Some people believe your blood group hides no secrets. It reveals the “real you” – a person who gets things done, a good salesman, a creative person or a problem-solver – that is why you could be asked to state your blood group when completing a job application form. This growing trend was first used in Japan and now management consultant firms in other parts of the world have joined in. Someone, somewhere has spent some time working out statistics regarding who’s who in the blood group system. The owners of certain group tend to be particularly good or bad at certain tasks. In fact, one major Japanese firm is so well informed about blood groups that the company is quite specific about its needs: “We must have 30per cent of blood group A and 15 per cent of AB, 25 per cent of blood group 0, and 30 per cent of blood group B among echelons of our management personnel”. Apparently, if you belong to blood group 0 you get things done and sell the goods. Blood group A are thinkers, while blood group B are highly creative. And if you got problems, ask the Abs to solve them.
T E X T 4
What is meant by «organizational climate»? Why is it important? What part does an organization’s culture play in the daily lives of its members?
Read the text and be ready to discuss each point of cultural values. Can you add any more?
ORGANIZATIONAL CLIMATE
Although the concept of organizational climate is somewhat nebulous, it is valuable in understanding several aspects of organizational behavior. Organizational climate is the overall favourability of member attitudes and perceptions with reference to specific activities and features of an organization.
Organizations tend to have their specific culture: a peculiar mix of values, attitudes, norms, habits, traditions, behaviors and rituals. Some organizations are well aware of their culture and regard it as a powerful strategic tool, used to orient all units and individuals toward common goals, mobilize employee initiative, ensure loyalty, and facilitate communication. They aim at creating a culture of their own and making sure that all employees understand it and adhere to it. The specific cultural values of an organization may concern, for example:
the organization’s mission and image ( high technologies, innovative spirit, superior quality);
seniority and authority (respect for seniority; seniority as a criterion of authority);
the treatment of people ( concern for people and their needs, equitable treatment or favouritism, privileges, respect for individual rights, training and developing opportunities, how people are motivated);
the importance of different management positions and functions (authority of personnel department; importance of different vice-presidents’ positions; respective role and authority of research and development);
work organization and discipline (voluntary versus imposed discipline; punctuality; use of time clocks; flexibility in changing roles at work; use of new forms of work organization);
decision making process (who decides; who has to be consulted; individual or collective decision making; need to reach consensus);
circulation and sharing of information (employees amply or poorly informed; information readily shared or not);
communication pattern (preference for oral or written communication; rigidity or flexibility in using established channels, use of meetings; who is invited to what meeting; established behaviour in the conduct of meeting);
ways of handling the conflicts (desire to avoid conflict; preference for informal or formal ways; involvement of higher management);
ways of handling the conflicts socialization patterns (who socializes with whom during and after work; facilities such as separate dining rooms or reserved clubs);
management and leadership style (paternalism; authoritative, consultative or participative style; flexibility and adaptability);
identification with the organization (manager and stuff adherence to company objectives and policies; enjoying working with organization).
T E X T 5
Read the text and be ready to define: 1. what a business entity is and 2. three main types and forms of business organizations.
TYPES AND FORMS OF BUSINESS ORGANIZATION
A business organization is frequently referred to as a business entity. A business entity is any business organization that exists as an economic unit. Business entities can be grouped according to the type of business activity they perform.
The business entity concept applies to all forms of businesses – single proprietorship, a partnership, and a corporation.
A single (sole) proprietorship is business owned by an individual and often managed by that same individual. Single proprietors include physicians, lawyers, electricians, and other people who are ‘in business for themselves’. In a single proprietorship, the owner is responsible for all debts of the business. Operating as a proprietorship is the easiest way to get started in a business activity. Other than the possibility of needing a local license, there are not any prerequisites to beginning operations.
A partnership is a business owned by two or more persons associated as partners. Partnerships are created by an agreement. Included in the agreement are such terms as the initial investment of each partner, the duties of each partner, the means of dividing profits or losses between the partners each year, and the settlement to be made upon the death or withdrawal of a partner. Accountants, attorneys, and other professionals frequently operate their firms as partnerships.
A corporation is a business owned by a few persons or by thousands of persons. The owners of the corporation are called shareholders or stockholders. They buy shares of stock. If the corporation fails, the owners lose only the amount they paid for their stock. The personal assets of the owner are protected from the creditors of the corporation. The stockholders do not directly manage the corporation; they elect a board of directors to represent their interests. The board of directors select the president and vice president, who manage the corporation for the stockholders.
T E X T 6
WHY ARE COMPANIES REFERRED TO AS LTD., INC., GMBH, OR S.A.?
An individual, like Henry Ford, might want to begin a small enterprise and personally retain total responsibility and liability, but once it starts to grow, a partnership or a "company"—such as Ford Motor Company—would need to be formed. The key factor in owning any company is the guarantee called limited liability: the owners of a company never have to pay more than they have invested in the company. Their liabilities are limited. When a company goes bank rupt, the owners can never be required to pay its unpaid bills.
The worst that can happen to investors in a limited liability com pany is losing their initial investment if the company fails. By limiting the downside risk for shareholders, companies are able to attract equity investors and raise large amounts of funds called equity capital through sales of shares rather than by borrowing money at potentially high interest rates.
The names of companies around the world reflect this guarantee of limited liability. The abbreviations "GmbH" in Germany, "Inc." in the United States, or "Ltd." in most other English-speaking coun tries indicate that the firm is a limited liability company and investors have nothing more to lose than the money invested in their shares. The "S.A." in French- and Spanish-speaking countries also refers to limited liability by defining shareholders as "anonymous." Since the identity of shareholders can be kept secret, the creditors of a bankrupt company have no right to pursue them for the company's unpaid debts.
Many countries make a clear distinction between public and pri vate companies, with separate designations, such as AG and GmbH in Germany, or Plc and Ltd. in Britain. Generally, "public" companies are those large enough to have their shares traded on stock exchanges, while smaller unquoted companies are said to be "private," even though their shares can be held by the public at large. In some coun tries, a large company is said to be privately owned if its shares are not available to the general public. In the United States, where little distinction is made between public and private companies, most com panies simply bear the title "Incorporated."
1. What do the names of companies around the world reflect?
T E X T 7
JOB SPECIFICATION
An interesting feature of the labour markets is that many organizations do not specify the type of person they require instead they will give the details of a job in a job specification. The Department of Employment has given the following definitions of a job description and job specification:
Job description: a broad statement of the purpose, scope, duties and responsibilities of a particular job.
Job specification: a detailed statement of the physical and mental activities involved in the job. The specification is usually expressed in terms of behaviour: what the worker does, what knowledge he uses in doing it, the judgments he makes and the factors he takes into account when making them.
The great variety of job specifications which exists in business illustrates the range of specification in occupation. The five categories given below do not cover this wide range, but can become a guide to the role of manpower in organization.
1.Unskilled. Many jobs do not require any training or previous experience, for example manual labour or assembly work. These occupations are often highly repetitive and boring, as well as being poorly paid.
2.Mechanical or motor skills. There are some tasks in business which are performed by machines which require an operator. The more complicated the machine, then generally the more the operator must be.
3.Intelligence and knowledge. Occupations which require a high level of motor skill sometimes also demand a high level of intelligence and aptitude. But there are jobs which do not need mechanical skills but make demand on people’s knowledge.
4.Administrative or managerial skills. The ability to organize other people is a rare skill. It not only requires knowledge and understanding of the functions within an organization, but also the ability to motivate people. In addition managers must be able to organize nonhuman resources using techniques of forecasting, planning, coordinating and controlling. These are techniques which require judgment as well as knowledge.
5.Decision-making skills and initiative. Decision-making is an everyday occurrence for everyone. We decide what to eat, what to wear, where to go, and so on. Similarly, decisions are part of an organization’s everyday activities. The higher one goes up the hierarchy, the more necessary is the skill of decision. The risks which all organizations face mean that that organizations have to be run by people who have the ability to diagnose and assess the risk, and the capacity to decide on the correct strategy. Business is constantly changing and organizations require people with enterprise and initiative in order to survive.
1. Give your own examples of a trade or profession illustrating each category of the job specification.
T E X T 8
ENTERPRENEURS
Entrepreneur is a person who organizes and managers a business. This is a French word that has been accepted into the English language. Its popularity probably has something to do with its grand sound which befits anyone who has the initiative to create and run a business.
Entrepreneurs are a mystery to some people, especially those who are only comfortable with a nine-to-five existence and assured weekly paychecks and fringe benefits. The entrepreneur is a business person who prefers to take calculated risks in order to be his or her own boss.
Sometimes the entrepreneur is regarded as a business person who takes risks. This is not so. An entrepreneur is a business person who minimizes risks. He or she does this by advance planning, research, and meticulous consideration of all factors that could affect and possibly endanger her or his enterprise. When the entrepreneur forgets to do advance investigation and preparation, then he or she is a gambler at best, and a failure statistic at worst.
Speaking about entrepreneurship, Professor K. Vesper of the University of Washington says that “ Businesses continue to be launched by people who didn’t make it the first time around. A driving force in entrepreneurship… is addictiveness. Once people have a taste of freedom in a business of their own, they like it. They don’t want to go back to working for someone else.”
While the percentage of growth for men entering into business independence could be measured in the teens, women’s increase in a single decade was 69 percent. There is no mystery here. Women go into business for the same reason men do – to make money and to be their own bosses. The rise in female entrepreneurship is reminiscent of what the early-20th-century immigrants did – and the more recent waves of immigrants from different parts of the world. Entrepreneurship is regarded to be the first track to success. Rather than to take low-wage, big-industry job, people opt to use their wits and energy to climb the ladder of independence the entrepreneurial way.
The American magazine Venture attempted to dissect entrepreneurs and to see what makes them tick. They conducted a survey to which 2,740 readers responded. Here is what they had in common:
1) Typically they were firstborn children who had a positive relationship with their father. (2) They held jobs before they were 15 and started their first businesses by the time they reached 20. (3) They borrowed money to launch their enterprises and made themselves personally liable. (4) Most of them are college graduates, consider themselves demanding of others, and start work early in the day (82 percent start work before 9 a.m.). (5) Twenty percent described themselves as successful; another 53 percent claimed moderate success; 27 percent reported the expectation of success.
While these entrepreneurs are intrepid adventurers on the business sea, they still seek the approval of others—often after they have launched an action. Respondent Richard M. Ask, president of the 2000-member National Association of Entrepreneurs, wrote, "I go out and do what I damn well please, and then I look around for approval to reinforce the action."
How old are the people who start new businesses? The majority are 30 to 34, with the biggest segment (70 percent) between 25 and 44.
|
Age of Entrepreneur % Under 20 years |
1 |
|
20 to 24 |
8 |
|
25-29 |
17 |
|
30-34 |
21 |
|
35-39 |
18 |
|
40-44 |
15 |
|
45-49 |
9 |
|
50-59 |
10 |
|
60 and over |
1 |
With what do entrepreneurs start up new businesses? How much money do they invest? Most businesses require between $20,000 and $50,000 in cash. The vast majority of business start-ups (87 percent) are in the range of a few thousand dollars to $100,000.
|
Start-Up Capital |
% |
|
Under $5,000 |
17 |
|
$5/000-$10,000 |
14 |
|
$10,000-$20,000 |
16 |
|
$20,000-$50,000 |
25 |
|
$50,000-$100,000 |
15 |
|
$100,000-$250,000 |
8 |
|
$250,000-$500,000 |
2 |
|
Over $500,000 |
1 |
Which businesses are the most popular? There is no doubt that retailing is number one. Nearly half of all new business start-ups are retail shops. Here is the line-up:
|
Type of Business |
% |
|
Retailing Service Services |
46 19 |
|
Construction |
8 |
|
Manufacturing Finance |
8 5 |
|
Professional |
5 |
|
Wholesale |
4 |
|
Transportation Agriculture Others |
2 2 1 |
T E X T 9
THE FIELD OF INTERNATIONAL BUSINESS
International business includes all business transactions that involve two or more countries. Such business relationships may be private or governmental. In the case of private firms the transactions are for profit. Government-sponsored activities in international business may or may not have a profit orientation.
There are three major motivations for private firms to pursue international business. These are to expand sales, to acquire resources, and to diversify sources of sales and supplies.
Sales expansion. Sales are limited by the number of people interested in a firm's products and services and by customers' capacity to make purchases. Since the number of people and the degree of their purchasing power is higher for the world as a whole than for a single country firms may increase their sales potentials by defining markets in international terms.
Ordinarily higher sales mean higher profits. If, for example, each sales unit has the same mark-up, more volume translates to more profits. Lucas film, for example, receives a percentage of the sales made by companies marketing Star Wars merchandise; thus Lucas film's revenues increase with each addi tional toy that Parker Kenner sells in the United Kingdom. In fact, profits per unit of sales may increase as sales increase. Star Wars cost approximately $10 million to produce; as more people see the film, the average production cost per viewer decreases.
International sales are thus a major motive for firms' expansion into international business. A United Nations study indicated that among the largest industrial firms in the world, about 40 percent of their sales come from outside their home markets.
Resource acquisition. Manufacturers and distributors seek out products and services as well as components and finished goods produced in foreign countries. Sometimes this is to reduce their costs: for example, Lucas film used studios in the United Kingdom in the filming of Star Wars and Kenner manufactures its Laser Pistol in Hong Kong. The potential effects on profits are obvious. The profit margin may be increased, or cost savings may be passed on to consumers, thereby permitting more people to buy the prod ucts.
Diversification. Companies usually prefer to avoid wild swings in their sales and profits; so they seek out foreign markets and procurement as a means to this end. Lucas film has been able to smooth its yearlong sales somewhat because the summer vacation period (the main season for children's film attendance) varies between the northern and southern hemispheres. It has also been able to make large television contracts during different years for different countries. Many other firms take advantage of the fact that the timing of business cycles differs among countries. Thus while sales decrease in one country that is experiencing a recession, they increase in another that is undergoing recovery. Finally by depending on supplies of the same product or component from different countries, a company may be able to avoid the full impact of price swings or shortages in any one country that might be brought about, for example, by a strike.
1.How would you define the concept ‘international business’?
2.What are the main motives for a firm to join international business?
.
T E X T 10
Read the text and be ready to speak about the main types of international business. Explain the meanings of the words and word combinations which have been highlighted.
TYPES OF INTERNATIONAL BUSINESS
Merchandise exports are goods sent out of a country whereas merchan dise imports are goods brought in. Since these are tangible goods that visibly leave and enter countries, they are sometimes referred to as visible exports and imports. The terms exports or imports are used frequently yet in reality the reference is only to the merchandise exports or imports.
Exporting and importing of goods are the major sources of international revenue and expenditure for most countries. Among companies engaged in some form of international business, more are involved in importing and exporting than in any other type of transaction.
Importing and/or exporting is usually but not always, the first type of foreign operations in which a firm gets involved. This is because at an early stage of international involvement these operations usually take the least commitment and least risk of a firm's resources Exporting or importing are not typically abandoned when firms adopt other international business forms. Although this may sometimes occur, exporting and importing usually continue, either by business with other markets or to complement the new types of business activities.
Service exports and imports refer to international earnings other than those from goods sent to another country. Receipt of these earnings is considered a service export, whereas payment is considered a service import. Services are also referred to as invisibles. International business comprises many different types of services.
Travel, tourism, and transportation. Earnings from transportation and from foreign travel can be an important source of revenue for international airlines, shipping companies, reservations agencies, and hotels. On a national level, such countries as Greece and Norway depend heavily on revenue collected from carrying foreign cargo on their ships. The Bahamas earns much more from foreign tourists than it earns from exporting merchandise.
Performance of activities abroad. Fees are payments for the performance of certain activities abroad, such services as banking, insurance, rentals (e.g., the Star Wars film), engineering, and management. Engineering services are often handled through turn-key operations, contracts for the construction of operating facilities that are transferred to the owner when the facilities are ready to begin operations. Fees for management services are often the result of management contracts, arrangements through which one firm provides management personnel to perform general or specialized management func tions for another firm.
Use of assets from abroad. Royalties are the payment for use of assets from abroad, such as for trademarks, patents, copyrights, or other expertise under contracts known as licensing agreements. Royalties are also paid for franchising, a way of doing business in which one party (the franchisor) sells an independent party (the franchisee) the use of a trademark that is an essential asset for the franchisee's business. In addition, the franchisor assists on a continuing basis in the operation of the business, such as by providing components, managerial services, or technology.
Firms often move to foreign licensing or franchising after successfully building exports to a market. This move usually involves a greater interna tional commitment than in the early stages of exporting. The greater involve ment occurs because the firm commonly has to send technicians to the foreign country to assist the licensee or franchisee in establishing and adapting its production facilities for the new product.
Direct investments. Direct investment takes place when control follows the investment. This can amount to a small percentage of the equity of the company being acquired, perhaps even as little as 10 percent. The ownership of a controlling interest in a foreign operation is the highest type of commitment to foreign operations in the given country. Direct investment operations may be set up in order to gain access to certain resources or access to a market for the firm’s product.
When two or more organizations share in the ownership of a direct investment, the operation is known as a joint venture. In a special type of joint venture, a mixed venture, a government is in partnership with a private company.
The multinational enterprise, or MNE, has a worldwide approach to foreign markets and production and an integrated global philosophy encompassing both domestic and overseas operations. The term multinational corporation, or MNC, is also quite common in the literature of international business. Another term sometimes used interchangeably with MNE, especially by the United Nations, is transnational corporation, or TNC.
Ex.10. Translate the following into English.
Индивидуальные усилия; не достигают успеха; достичь цели; неспособные выполнить; относительно рано; первичный элемент; в своей первой попытке; отвечать потребностям; деятельность, которая поддерживает; сеть отношений; способствовать сотрудничеству; официальное признание; от своего имени; обладать властью; выполнять обязанности; официально признан; необходимость разделить работу; обозначается термином; процесс передачи обязательств; от выше стоящего к подчиненному; не может существовать и процветать; иерархическая организация; составляют основные компоненты; управленческий инструмент; разделение по функциям; которые сталкивались с необходимостью; большие скопления ресурсов.
Ex.11. Add an appropriate preposition to each of the following sentences where indicated.
Organizational controls
An organization can best achieve its objectives when its members require a minimum ... supervision because they are competent and goal-oriented. Nevertheless, even ... optimal conditions of individual commitment and self-control, organizations need formal controls. The control function of organizations consists ... the following:
1.Establishing standards ... which all aspects of organizational life are evaluated.
Most organizations have formal standards relating ... spending, production, sales, product quality, safety, inventory, personnel selection, acceptable employee behavior, and so forth.
2. Establishing feedback system by which actual performance is compared ... predetermined standards.
These are best exemplified ... management reports which show, often ... a daily basis, expected and actual performance.
3. Taking appropriate action to ensure that substandard performance is improved and that standards will be met ... the future.
It is common practice to refer ... the standards and feedback systems as controls although it should be obvious that they serve a control function only if managerial action is involved. They are not a substitute ... supervision, but they minimize requirements for personal supervision.
Read the text once again and answer the following question: What are the control functions of organization?
Ex.12. Read the text. Fill in the gaps with the missing words given below.
Monitor, interrelate, integral, report, exaggerate, law, impact, flow of cash, resources, customers, stock, range, information, activity, prerequisite, process, subject, nervous.
Communication in organization
Effective communication is a ... for the achievement of organizational objectives. The importance of communication problems has at times been ... —there are, after all, other types of problems—but the ... of poor communication can be enormous.
The … of communication is illusive because it is intertwined with so many other subjects. Effective communication is, for example, an … part of effective leadership, decision making, motivation, the management organizational conflict, etc.
Communication in organization is here defined as the process by which … is transmitted from one person to another.
Money is the lifeblood of an organization: if organizations do not receive a ... ... they go out of business. Information plays a similar role. The flow of facts, figures and words through an organization’s administration is its … system.
The nature and flow of information determines how «sensitive» an organization to its ..., employees, changes in the market, and so on. The purpose in ... information is to plan, record, control and report the activities of the organization.
Planning. Managers need information to be able to plan how an organization’s … are to be used. This can be a complex process since each department’s plan must ... with the other departments.
Recording. Firms are obliged to keep financial information under the … .
Controlling. There are many activities in business where immediate or «real time» information is necessary so that the … can be controlled directly. These activities include ... control, quality control, and budgetary control.
Reporting. Many different kinds of … exist in business. They ... from weekly sales reports to financial reports at an Annual General Meeting. Every function within an organization is constantly ... and reported on.
Read the text once again and summarize it in 5-7 sentences.
Ex. 13. Open the brackets.
Economic Individualism – Laissez-Faire
In the late seventeenth century, Louis XIV (to reign) as King of France. His finance minister, Jean Baptiste Colbert, (to ask) a manufacturer by the name of Legendre how the government might (to help) business. Legendre’s reply (to be) “laissez nous faire” (leave us alone). The expression (to become) a watchword and motto of market economy.
Today we (to interpret) laissez-faire (to mean) that absence of government intervention (to lead) to economic individualism and economic freedom. Under laissez-faire conditions, people’s economic activities (to be) their own private affairs. As consumers, they (to be) free (to spend) their incomes as they (to choose). As producers, they (to be) free (to purchase) the economic resources they (to desire) and (to use) these resources as they (to wish).
In reality, economic freedom (to be subject) almost always to restraints imposed by society for the protection and general welfare of its citizens. Prohibitions against force and fraud (to be) examples. Can you (to give) some others? Can you (to explain) why such restraints (to be) necessary?
Read the text once again and answer the questions at the end of the text.
Ex.14. Insert the missing words given below. Don’t forget about Grammar.
organization, to adopt, carefully, change, input, condition, service, decision making, harmony, turbulent, adapt, output.
In order to be successful the organization must ... with the environment because it supplies the organization with ... (in the form of resources, information, and so forth) that are necessary for the determination of the kinds of the products and ... to be produced. It also receives the ... (product and services) produced by the organization. To maintain this ... with the environment, the organization must ... define and maintain a boundary system capable of gathering the necessary inputs for effective ... ... and ... and for distributing organizational outputs.
Today’s organization exists in a ... environment characterized by what has been termed as discontinuous ... .If it is to survive and prosper, the organization must be capable of adjusting all of its component parts to ... for this change. Additionally, it must ... a philosophy and strategy to support the process of adaptation and change.
Ex.15. Make up the sentences. Put them down into notebooks. The beginning of each sentence is given to you.
When negotiations fail, impartial, third, are, often, however, parties, brought, to help, the dispute, settle, in. This may be, arbitration, or, mediation, the form, conciliation, in, of. Conciliation, try, their, means, a third, disagreement, together, will, party, that, to bring, to work out, on their own, management, and, labour. Mediation, it, setting, for, suggestions, make, and, the dispute, of, who, listen to, will, both, sides, by, party, requires, the third, involvement, greater. The suggestions, will, management, or, on, either, labour, binding, not, however, be. Under arbitration, binding, and, a third, hand down, that, is, party, final, listen to, will, both, (an arbitrator), a decision, sides, and.
Ex. 16. Give the English equivalents to the following.
Неспособны выполнить задания, которые требуют не только индивидуальных усилий; групповая деятельность может быть направлена на более высокие, более сложные цели; все эти элементы, взятые вместе, рассматриваются как организация; организации были созданы для того, чтобы помочь индивиду достичь больше; цели должны отвечать потребностям, которые общество определило как важные; организации могут быть сгруппированы по типу деловой активности; партнерство создается по соглашению; владельцы корпораций называются акционерами; эффективная коммуникация – предпосылка успеха в бизнесе; информация помогает быть чувствительными к покупателям, служащим, изменениям на рынке; каждая организация стремится иметь собственный, особенный климат; культурные ценности – это мощный стратегический инструмент; среднестатистический работник имеет высокий потенциал развития; прежде всего работник ищет безопасности и избегает ответственности.
Ex 17. Render the following text into English.
СЕМЬ ЗАПОВЕДЕЙ БИЗНЕСМЕНА
Давать обещания и не выполнять их стало у нас просто нормой жизни. В этой связи полезно вспомнить 1912 год, когда российскими предпринимателями было выработано семь основных принципов ведения дел:
Первый принцип – «Уважай власть». Власть – необходимое условие для эффективного ведения дел. Во всем должен быть порядок. В связи с этим проявляй уважение к блюстителям порядка в узаконенных эшелонах власти.
Второй принцип – «Будь честен и правдив». Это – фундамент предпринимательства, предпосылка здоровой прибыли и нормальных отношений в делах. Российский предприниматель должен быть безупречным носителем добродетелей, честности и правдивости.
Третий принцип – «Уважай право частной собственности». Свободное предпринимательство – основа благополучия государства. Российский предприниматель обязан в поте лица своего трудиться на благо свой Отчизны. Такое рвение можно проявить только при опоре на частную собственность.
Четвертый принцип – «Люби и уважай человека». Любовь и уважение к человеку труда со стороны предпринимателя порождает ответную любовь и уважение. В таких условиях возникает гармония интересов, что создает атмосферу для развития у людей самых разнообразных способностей, побуждает их проявлять себя во всем блеске.
Пятый принцип – «Будь верен своему слову». Успех в деле во многом зависит от того, в какой степени окружающие доверяют тебе.
Шестой принцип – «Живи по средствам». Не зарывайся. Выбирай дело по плечу. Всегда оценивай свои возможности. Действуй сообразно своим средствам.
Седьмой принцип – « Будь целеустремленным». Всегда имей перед собой ясную цель. Предпринимателю такая цель нужна как воздух. Не отвлекайся на другие цели. Служение двум господам противоестественно. В стремлении заветной достичь цели не переходи грани дозволенного. Никакая цель не может затмить моральные ценности.
Ex.18. Translate the text in written form.
Business is the exchange of goods and services, and money, on an arm’s length (objective) basis, that results in mutual benefit or profit for both parties involved. An individual engages in business because he or she believes that the rewards, or possible future benefits, of business are greater than risks, or possible future sacrifices, of business.
Business activities are events that involve making and carrying out the operating, investing, and financing decisions that deal with business assets or obligations.
In a profit-seeking business, there are three types of business activities that correspond to the three types of business decisions. Operating activities are the profit-making activities of the enterprise. They include those business activities that generate revenues, such as selling merchandise for cash or on credit or providing services for a fee. They also include activities that result in increased expenses, such as purchasing goods for manufacture or resale, paying wages, or combining goods and labour to manufacture products.
Investing activities include the purchase and a sale of long-term assets in addition to other major items used in a business’ operations.
Financing activities are activities that involve obtaining the cash or using other non-cash means to pay for investments in long-term assets, and to repay money borrowed from creditors, and to provide a return to owners.
SPEAK AND WRITE
14. Summarize the information of the Unit to be ready to speak on the topic “Organization”. The first step to be done is to write the plan of your future report.
15. Choose any question (problem, topic) relating to Organization and make a 7-10 minute report in class. Refer to different additional sources to make your report instructive, interesting and informative.