CHAPTER 1. MANAGEMENTMotto:

„Management – an activity or art where those who have not yet succeeded and those who have proved unsuccessful

are led by those who have not yet failed.” PAULSSON FRENCKNER

You want me to explain what

management is? Well, I guess I can

manage that! Actually, management as

we understand it today is a fairly recent

idea. Most economists in the eighteenth

and nineteenth centuries, for example,

wrote about factors of production such

as land, labour, and capital, and about

supply and demand, as if there were

impersonal and objective economic

forces which left no room for human

action. An exception was Jean-Baptiste

Say, who invented the term

“entrepreneur”, the person who sees

opportunities to use resources in more

productive ways.

Entrepreneurs are people who

are alert to so-far undiscovered profit

opportunities. They perceive

opportunities to commercialise new

technologies and products that will

serve the market better than it is

currently being served by their

competitors. They are happy to risk

their own or other people’s capital.

They are frequently unconventional,

innovative people. But

entrepreneurship isn’t the same as

management, and most managers

aren’t entrepreneurs.

So, what’s management? Well,

it’s essentially a matter of organizing

people. Managers, especially senior

managers, have to set objectives for

their organisation, and then work out

how to achieve them. This is true of the

managers of business enterprises,

government departments, educational

institutions, and sports teams, although

for government services, universities

and so on we usually talk about

administrators and administration

rather than managers and

management. Managers analyse the

activities of the organisation and the

relations among them. They divide the

work into distinct activities and then

into individual jobs. They select people

to manage these activities and perform

the job. And they often need to make

the people responsible for performing

individual jobs form effective teams.

Managers have to be good at

communication and motivation. They

need to communicate the

organisation’s objectives to the people

responsible for attaining them. They

have to motivate their staff to work

well, to be productive, and to contribute

something to the organisation. They

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make decisions about pay and

promotion.

Managers also have to measure

the performance of their staff, and to

ensure that the objectives and

performance targets set for the whole

organisation and for individual

employees are reached. Furthermore,

they have to train and develop their

staff, so that their performance

continues to improve.

Some managers obviously

perform these tasks better than others.

Most achievements and failures in

business are the achievements or

failures of individual managers.

Translate the expressions in italics into your own language.

1.1. Management Styles

Do men and women bring different qualities to business or is it nonsense to talk about male and female management styles?Mark the following management qualities: M, W or M/ W according to whether you think are more typical of men, more typical of women or shared by both.

1. Being able to take the initiative.2. Being a good listener.3. Staying calm under pressure.4. Being prepared to take risks.5. Being conscientious and thorough.6. Having good communication skills.7. Being energetic and assertive.8. Getting the best out of people.9. Being independent and authoritative.10. Being supportive towards colleagues.11. Being able to delegate.12. Motivating by example.13. Having a co-operative approach.14. Being single-minded and determined.15. Being a good time-manager.

Then select what you consider to be the five most important qualities in any manager and put them in order of importance.

1. …………………………2. …………………………3. …………………………4. …………………………5. …………………………

Read the article below:

Business was invented by men and to a certain extent it is still ‘a boy’s game’. Less than 20% of the managers in most European companies are women, with fewer still in senior positions.

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In Britain one in three new businesses are started up by women and according to John Naisbitt and Patricia Auberdene, authors of ‘Megatrends 2000’, since 1980 the number of self-employed women has increased twice as fast as the number of self-employed men.Is it a case of women whose career progress has been blocked by their male colleagues – the so-called ‘glass ceiling syndrome’ - -being forced to set up their own businesses? Or do women share specific management qualities, which somehow serve them better in self-employment?Anita Roddick, founder of the Body Shop empire, is the perfect example of the female entrepreneur with her company growing from zero to £470 million in its first fifteen years. Perhaps her success was caution. Rather than push ahead with the purchasing of new shops, Roddick got herself into franchising – the cheapest way to expand a business while keeping overheads down. Caution, forward planning and tight budgeting seem to be more female characteristics than male.When women join an existing company, it’s a different story. Less ruthlessly individualistic in their approach to business, women are more sensitive to the feelings of the group or team in which they work. They are generally more cooperative than competitive, less assertive, less prepared to lead from the front. Though they usually manage their time better than men and may even work harder, they are much less likely than their male counterparts to take risks. And, above all, it is risk-taking that makes corporate high fliers. As one male director put it: “I’m not paid to make the right decisions. I’m just paid to make decisions”.It is generally true that men will more readily take the initiative than women. The female style of management leans towards consensus and conciliation. Women seem to be better communicators than men – both more articulate and better listeners. And perhaps it is women’s capacity to listen which makes them particularly effective in people-oriented areas of business. In any mixed group of business people the ones doing most of the talking will almost certainly be the men. But perhaps only the women will really be listening.As companies change from large hierarchical structures to smaller more flexible organisations, the communication skills and supportive approach of women are likely to become more valued.

Which of the following points are true or false?

1. Women are least as entrepreneurial as men.2. Most female managers prefer task-based jobs to people-centred ones?3. Women tend to be more conscientious than men.4. Women who do succeed in business have to become even more ruthless than

men.5. Men aren’t as financially aware as women.6. Women are more likely to be the managers of the future than men are.

Look back at the article and find the expressions meaning:

1. It’s to be expected.2. It’s not the same thing at all.3. It’s not always the case.

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Response

Do you find yourself mostly agreeing or disagreeing with the article? Which is your score on this scale?I totally agree! 10There’s some truth in it. 5It’s rubbish! 0Compare your views with those of your colleagues.

Discrimination

In each of the following situations decide if you would give the applicant the job or not. Tick the appropriate boxes. Be prepared to justify your decision in each case.

1. SYSTEMS ANALYSTThe applicant is a 36 year old woman returning to work after giving up her previous job to start a family three years ago. She is well qualified for the post and much more experienced than any of the other applicants. She is, however, a little out of touch with the latest developments in the industry you work in and would require some retraining. Most of the other applicants are younger women.

2. MARKETING DIRECTOR The applicant is a 29 year old woman. On paper she looks impressive and at interview she came across very well indeed. In terms of experience and expertise, she is clearly the best person for the post. There’s only one problem: the job is in a country where women do not have equal status with men and where very few women hold management positions at all, let alone senior ones such as this.

3. PRODUCTION MANAGERThe applicant is a 44 year old woman. You have recently interviewed 20 people for a very responsible post within your company and she is one of the two on your final shortlist. The other most promising candidate is a 29 year old man. On balance, you think the man would probably be the better choice but, at present, your company has only appointed three female managers out of a total of 32 and you are under a lot of pressure from the personnel dept. to exercise ‘positive discrimination’ in favour of women.

4. MANAGEMENT TRAINERThe applicant is a 31 year old man. The company you represent runs assertiveness training courses for women in management and at the moment you have an all-female staff. While the applicant has an excellent track record in management training with mixed group, you have some doubts about his credibility running seminars exclusively for women, some of whom tend to see male managers more as an obstacle than as aid to their progress. You’re also concerned about how the rest of the staff will react to him.ACCEPT REJEC

T

CALL FOR SECOND INTER-VIEW

REASON

S

REASON

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S

REASON

S

REASON

S

Look at the following list of qualities and say which are the

most important for a manager.

1. being competent and efficient in one’s job2. being friendly and sociable3. being a hard worker4. being persuasive5. having good ideas6. being good at communicating7. being good at motivating people8. being good at taking the initiative and leading other people9. being group oriented10. being individualistic11. being intuitive12. being good at listening and sensitive to other people’s feelings13. being cautious and careful

Use the following words to complete the sentences below.

a. thoroughlyb. be preventedc. proven track recordd. in-housee. incentivesf. sick leaveg. procedureh. human resource management

1. He must…………….from leaving the company.2. What…………..can we use to make them work harder?3. When there are redundancies to be made, there is a correct ……………to

follow.4. We rarely send employees for training outside because we have an excellent

…………….program.5. Before candidates are employed, their references are ………….checked.6. She was given the Sales Manager’s job because of her …………..in selling.7. Our company realizes the importance of people to a firm’s success and has

therefore invested a lot in ………………

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8. I’m afraid MS Duvalier is on …………… at the moment. Can I take a message?

Choose the appropriate word or expression to complete

each sentence.

1. A person who does something in someone else’s name, does it ………..that person.a. to acknowledgeb. on behalf ofc. to be entitled to

2. A graduate is someone who ……………a. has won a prize b. has applied for a jobc. has a degree

3. If you go to another place for your job, you go on a business …………a. travelb. voyagec. trip

4. ‘Income’ is a synonym for…………..a. earningsb. expenditurec. pension fund

5. The Chief Executive Officer is ……………. for his decisions.a. apologiseb. out-of-datec. accountable

6. Her…………….is in human resource management.a. backgroundb. wage claimc. red tape

Match the definitions with the correct words:

a

.

the process of developing a set of goals and

end-states that the organisation is expected to

achieve;

leading

b

.

the process of influencing people to work

towards a common goal;

goal

setting

c

.

providing reasons for people to work in the

best interest of the organisation;

controlling

d

.

evaluating and regulating ongoing activities; decision

making

e identifying the discrepancy between the actual motivating

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. condition and an ideal one, choosing and

implementing solutions.

1.2. How to make a million?

Statistically, your chances of making a fortune will largely depend on how fortunate you are in the first place. Forget about drive, initiative and ingenuity. According to all the surveys, here are four sure-fire ways of getting rich:

Start off rich. It’s depressing but true that half of Britain’s 95,000 millionaires were born into wealthy families, and so were a quarter of those who head the country’s largest corporations. When you are rich already it takes a special kind of person not to get richer.

Do badly at school. Richard Branson, the founder of Virgin, is the classic case, leaving school at 16 to start a mail-order record company and ending up running his own airline, publishing, broadcasting, construction and holiday empire. Almost two thirds of the UK’s top earners finished their education early. And the studious graduate is less likely to be found staying at the Hilton Hotel than applying for a job in its kitchens.

Lose a parent. Amazingly, only 5% of successful entrepreneurs had both parents throughout their childhood. Perhaps a lack of parental control gives you the toughness, resilience and independence you need to make it on your own.

Be beautiful. Silly as it may seem, good looks really do get you places, both in terms of career and marital prospects. If you are too pretty, people may tend to assume that you are nice but stupid and pass you over for promotion.

Discussion

So, what can you do if you are born poor, ugly, pass all your exams and have parents who look as if they’ll make 90…? What do you think is the secret of success?List your ideas.

Quotes

1. Complete the following quotations on success:2. Success is one ………… inspiration and ninety-nine ………… perspiration.3. Many a man owes his success to his ………… wife, and his second

………… to his success.4. There are no rules to success that will work ………… you do.

Words to remember

apply - to make an application or request; to make use of somethingappoint - to give someone a job or position or responsibility

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appraise - to judge, assess, or evaluate a person’s job performanceassets - to estimate or evaluate, to make an assessmentBoard of Directors - a group of people elected by a company’s shareholders to determine the overall policy of a companybonus - something extra, usually a payment, often given as a reward for good work or high productivitybusiness - an organisation that makes or buys and sells goods or provides a service; or trade and commerce in generalbusiness plan - a written report stating a company’s plans regarding sales, product development, financing, etc.buyer or purchaser - either a customer who buys goods or a service, or a person who purchases goods for a company or a shop or storecapital - the money requires to buy the assets of a businesschairman - the person inn charge of the board of directors of a company (in Britain)Chief Executive Officer (CEO) - the person responsible for the running of a company (in the USA)client - a person or organisation that hires professional services (of a lawyer, auditing firm, advertising agency, etc.)commerce - trade: the buying and selling of goods, and all related activitiescompany - an association of people formally registered as a business (partnership, limited company, etc.)corporation - American term for what the British call a company; in Britain, a public sector organisation (e.g. local government, the British Broadcasting Corporation)debt - money owed to other peopledemand - the willingness and ability of customers to purchase goods and services; to ask for something forcefullydirector - a person elected by shareholders to control the management and overall policy of a companyearn - to receive money for work doneearnings - incomeemploy - to use somebody’s labour or services in exchange for moneyenterprise - an informal term for a business organisation; the act of taking risks and setting up businessesentrepreneur - a person who sets up and manages a businessexecutive - a manager with the responsibility to make important decisionsexecutive director - a full-time manager in a company (often in charge of a department or division)franchise - a licence giving an exclusive right to manufacture or sell certain products in a certain areagoods - items for sale (merchandise), or a person’s movable possessionshuman resources - another name for people, and their skills and abilitiesincome or earnings or revenue - all the money received by a person or a company during a given period (wages, salaries, rent, business profits, dividends, etc.)job - a piece of work; a position of regular paid employmentjoint venture - a particular enterprise undertaken together by two individual companieslabour - work that provides goods and services performed in return for moneymanage - to be in charge of, to administer, to succeed in doing somethingmanagement - the technique or practice of managing or controlling an organisation or business

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Managing Director (MD) - the person responsible for the day-to-day running of a company (in Britain)manager - a person who organises and controls a business or the work of other employeesmiddle management - a group of managers below the top management, to whom day-to-day responsibilities are delegatedpersonnel - an organisation’s staff or workforce; the people it employspublic relations (PR) - the creation, promotion and maintenance of a favourable image among the public towards an organisationpurchase - to buy somethingresearch and development (R&D) the department of a company that is responsible for developing new productsretailer - a merchant such as a shopkeeper who sells to the final customershareholder or stockholder - the owner of a company’s equity capital (stocks and shares)staff - the people who work for an organisation (often used only for white-collar workers); to provide an organisation with the employees it needssupply - the willingness and ability to offer goods or services for saletakeover - the process of gaining control of a company by offering to buy its shares at a particular price during a limited periodtask - a specific piece of work that has to be donewages - money paid (per hour or day or week) to manual workerswholesaler - an intermediary between producers and retailers, who stocks goods, and delivers them when ordered

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CHAPTER 2. ORGANISATION OF BUSINESS

2.1. Introduction to Organisations

2.1.1. What is an organisation?

What do we mean by organisation? Here are some examples. Which do you think are organisations?

a. A multinational company making and selling carsb. An accountancy firmc. A charityd. A local authoritye. A trade unionf. An armyg. A political party

These organisations seem, on the surface, to be very different. They do different things and draw their resources from different places, however, all of them could be described using the following definition: ‘an organisation is a social arrangement for the controlled performance of collective goals.’A social arrangement is a collection of people, whose interrelationships are ordered in some way. A business might be split into departments.A goal is some desired ‘end result’ of an activity. People work together to achieve the goal. In business, an important goal is to make a profit.Controlled performance implies that the organisation’s activities are monitored and that corrective action is taken where necessary. In other words, the business monitors what it does, and changes its behaviour if things are not going according to plan.Generally, organisations exist because they achieve results which individuals cannot achieve alone.By grouping together, individuals overcome limitations imposed by both the physical environment and also their own biological limitations.Organisations meet an individual’s need for companionship.Organisations increase productive ability for the following reasons: specialisation (division of labour) and synergy –concept that implies that the whole is greater than the sum of the parts.They accumulate knowledge.They save time.

Types of organisation

There are many ways of classifying organisations.a. Ownership (private sector as opposed to public sector)b. Control (e.g. shareholders, managers)c. What they do (e.g. manufacturing, construction)d. Legal structure (e.g. partnership or limited company)e. Objectives (e.g. profit making or non profit making)f. Accountability

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g. Sources of finance (e.g. borrowing, the state, investments)

Define the term manager without using the word

management in your definition.

You are the owner and only employee of a firm that you started this morning. Your firm is to produce and sell hand-sewn pants to clothing stores. (You, of course, are an expert tailor).

a. Write out your firm’s purpose, its mission and at least two of its objectives.b. Write out your firm’s sales strategy. Make sure the strategy is in keeping

with your goals.

Types of business organisations

There are three basic forms of organisational structure: bureaucratic organic matrix1. The term ‘bureaucracy’ is often used in an unfavourable context and it tends

to suggest rigidity. A bureaucratic structure is a management system based on a formal framework of authority that is carefully outlined and precisely followed.Characteristics: - a high level of job specialisation- departmentalisation by function- a high degree of centralisation- narrow spans of management

e.g. government agencies, colleges, universities2. The Organic structure is a management system founded on cooperation and

knowledge-based authority.Characteristics:- a low level of job specialisation- departmentalisation by product, location, or customer- a high degree of decentralisation- wide spans of management

3. The Matrix structure is an organisational structure that combines vertical and horizontal lines of authority by superimposing product departmentalisation on a functionally departmentalised organisation. It is the newest and most complex organisational structure.

2.1.2. What is a company?

The word ‘company’ is generally used to describe a company formed by registration under the Companies Act 1985.

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Formation of a Company

A company is formed by the issue of a certificate of registration by the registrar. The certificate identifies the company by its name and serial number at the registry and states that it is limited and that is a public company.To obtain the certificate of incorporation it is necessary to deliver to the registrar prescribed documents bearing the name of the proposed company.The documents to be delivered to the registrar are the following:A memorandum of association - This is normally signed by at least two subscribers. The signature(s) must be dated and witnessed. Each subscriber agrees to subscribe for at least one share.The Memorandum generally contains the following clauses stating:

the name of the company, ending with the word Limited (LTD), its logo; the country in which the registered office is situated; the objects for which the company was constituted; the fact that the shareholders’ liabilities are limited; the amount of the authorised capital and its division into shares.

Articles of association - Lodged together with the Memorandum, the Articles of Association are a contract between the company and its members comprising rules and regulations for the internal activity of the company and specifying such things as the voting power of its members, the appointment of directors, the distribution of the profits etc.A registration fee is payable. A private company may do business and exercise its powers from the date of its incorporation. It is normal practice to hold a first meeting of the directors at which the chairman, secretary, and sometimes the auditors are appointed, shares are allotted to raise capital, authority is given to open a bank account. A new public company may not do business or exercise any powers unless it has obtained a trading certificate from the registrar. If it fails to do so the company is liable to a fine. If it fails to do so within one year the company may be wound up.To obtain a trading certificate a public company makes application signed by the director or by the secretary with a statutory declaration.

Discussion

Give a short talk on one of the following topics:Acts required for the constitution of a firmThe contents of the Memorandum

What additional procedures must be followed before a

public company can commerce business?

2.2. How to set up a business?

How would you like to launch your own business? You have to come up with a good idea for a small business enterprise and to convince your financial backers that your venture is the most likely to succeed.

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Step 1Working in small groups, draw up a provisional business plan to present to the rest of the class. Try to anticipate any question about your business venture. The checklist may be helpful when organising the relevant information.Step 2When the other groups present their business plans you should use your list of anticipated questions to ask them to give further details, back up their proposals or explain anything which is not clear.Step 3Hold a short meeting with the rest of the class to decide which business venture will get the financial backing. Put this to vote.What is a business plan? It is a carefully constructed guide for the person starting a business.

BUSINESS PLAN CHECKLIST

The Nature & Objectives of the Business What will be your main business activity? What is your own professional background? Roughly how will the business be structured? Do you have an overall vision for the company?

Personnel

Approximately how many people will the company employ and in what capacity?

The Product/Service in Relation to the Market

What is the state of the market? Growing, static, seasonal? How will your products/services be positioned? Up- or down-market? Who will be your target customers? Who will be your major competitors? How will you market your products or services? Trade press? Mass media?

Word of mouth?

Premises

Where will the company be located? Why? What kind of property will you require? Offices, factories? Leased or

purchased?

Equipment Required

What general trading equipment, if any, will you require? Vehicles, computer hardware?

What manufacturing equipment, if any, will you require? Machinery, tools?

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Sales Forecasts

What are your sales targets for year one? What kind of distribution network, if any, will you require?

Financial Profile

Roughly how much in the way of funds will you need?

2.3. Forms of Business Organisation

In business there are many forms of organisation. The form of organisation means the type of ownership. The main differences between the types of ownership are in the ability to raise capital, the size and continuity of the enterprise, the disposition of profits, and the legal obligations in the event of bankruptcy.

1. Sole TraderThe simplest form of business organisation is the one-man business or sole trader/ proprietor who has control of his capital with almost complete freedom from external interference.The sole proprietor owns all the business assets, makes all the decisions, takes all the risks, and keeps all the profits of the business. He enjoys his freedom but if he suffers a loss, he owes all the debts, and his legal liability to pay them may be more than his investment in the business. Another disadvantage is that the expansion of such a business is limited to the financial resources of the owner.This business can succeed particularly where commodities such as foodstuffs, tobacco, sweets, newspapers are in regular demand and where the market is local.

2. PartnershipA partnership may consist of a small number of persons called partners who contribute the capital for the business. They not only take active part in the management of the business but they share the resulting profit or loss as well. The relations between the partners are regulated by Articles of Partnership specifying the number of partners, the amount the number of partners, the amount of capital to be contributed by each as well as the amount that each partner may take weekly or monthly from the firm, the interest to be paid on capital, the general policy of the firm etc. The partners who play an active part in the management of the business are known as active partners as distinct from the sleeping partners. A partnership usually has more capital than a sole proprietorship. In partnership the personal wealth of all the partners can be used to secure loans and credit. Like the sole proprietorship, the partnership has unlimited financial liability in the event of bankruptcy. Accountants, solicitors, doctors, brokers usually work in partnership.

3. Joint Stock CompaniesA company is a more complex business organisation consisting of an association of people who both contribute capital and agree to share the resulting profit or loss. In the UK, joint stock companies can be set up by Royal Charter (The Bank of England), by a special Act of Parliament (companies which are usually given the monopoly of public utility services such as railways, canal, gas, water and electricity) and by registration.

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Registration is the most usual way and the companies in which the liability of their members is limited to the value of their shares are of two types: private limited companies and public limited companies.

3.1. Private Limited Companies have the letters LTD after their name and consist of a number of shareholders. The shares are held among their members and these companies are not allowed to invite public to subscribe shares or debentures. The right to transfer shares is only with the consent of the directors and this restriction implies a high degree of risk.

3.2. Public Limited Companies have the letters PLC added to their name and consist of a very small number of members and they can offer their shares for sale. Like the private limited companies, the PLCs have limited liability but, unlike the former, the shareholders can sell their shares to people who wish to buy on the Stock Exchange

3.3. Joint Ventures are another form of business, i.e. companies usually constituted with both foreign and domestic capital contribution. The ventures as partners may be either legal or natural persons.

Translate the underlined words in your own language.

Multiple choice - select the word which mostly means the

same as the underlined word:

1. The sole proprietor is liable for all the debts of his enterprise. He owns all the assets, but he owes all the liabilities.a. inventoryb. proprietorshipc. capitald. debts

2. The different forms of organisation are taxed differently on their profits. They also have different legal obligations with regard to their debts in the event of bankruptcy.a. caseb. aspectc. costd. failure

3. His personal assets can be used to settle the debts.a. wealthb. capitalc. freedom dd. inventory

4. The articles of co-partnership explain how the partnership is started and how it should be dissolved.a. initiatedb. soldc. endedd. regulated

5. When the sole proprietor stops doing business, he simply sells his inventory and equipment.a. labour

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b. machines for making goodsc. debtsd. profit

6. In addition to the benefits of running a sole proprietorship, there are also some unfavourable aspects.a. profitsb. disadvantagesc. assetsd. satisfaction

7. He has the freedom to make his own decisions, but he bears sole responsibility for errors when he makes a wrong choice.a. profitsb. losesc. takes all the blamed. does not have freedom

8. His responsibility for debt can be greater than his investment in the business.a. partnershipb. assetsc. profitsd. capital

9. A partnership does not have some of the disadvantages of a sole proprietorship, but it shares some similarities.a. benefitsb. problemsc. agreementd. association

10. The owners of a partnership wished to stop doing business, both managers would have to agree on how to dissolve the partnership.a. partnersb. corporationsc. shopsd. profits

Match the terms on the left with their definitions on the

right.

1. private company a. a company owned by another

2. public company b. a company which produces and/or

sells water, electricity, gas, etc. to

the general public

3. nationalised

company

c. a group of up to 20 people with

unlimited liability for a firm’s debts

4. public utility d. a company which owns and runs

other companies

5. partnership e. a limited company with up to 50

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shareholders, which is not quoted

on the stock exchange

6. holding/parent

company

f. a small or medium-sized

enterprise

7. subsidiary g. a limited company quoted on the

stock exchange

8. SME h. a company owned by the state

Crossword Puzzle

Down: 1. A company consisting of two or more owners who manage it together and

have unlimited liability.Across:

1. You make them when the company does well.2. Checked by specialist accountants.3. A company is highly -… when it has a good deal of bank loans.4. A business where decisions are taken at headquarters rather than at branch

level.5. Losses or expenses are … by someone who has to pay.6. Another name for the capital of share-holders.7. The management committee of the limited liability company is the … of

Directors.8. You make it when the company is not profitable. 9. Shares are traded on the stock …10. The highest position on the Board of Directors.11. A limited liability company where anyone has the possibility to buy shares.

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A

1

2

3

4

5

6

7

8

9

1

0

1

1

B

2.4. An Organisation Chart

Organisation charts, departmentalisation

The organisation chart is a way of setting out in graphical form the various relationships between individuals and groups in an organisation in terms of their functions, responsibilities and the bounds of their authority. It acts as an aid to designing, expressing and understanding the shape and structure of an organisation.I think we have a typical organisation for a manufacturing firm. It is divided into Finance, Production, Marketing and Human Resources departments.The Human resources department is the simplest. It consists of two sections. One is responsible for recruitment and personnel matters, the other is in charge of training.The Marketing department is made up of three sections: Sales, Sales Promotion, and Advertising whose heads are all accountable to the marketing manager.The Production department consists of five sections. The first of these is Production Control, which is in charge of both Scheduling and Materials Control. Then there is Purchasing, Manufacturing, Quality Control, and Engineering Support. Manufacturing contains three sections: Tooling, Assembly, and Fabrication.Finance is composed of two sections: Financial Management, which is responsible for capital requirements, fund control, and credit, and Accounting.

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Which are the four synonyms of to consist of in the text

above?

1……………… 2……………… 3…………………. 4……………………

The Shareholders

The shareholders, or more precisely those who hold ordinary shares, elect the Board of Directors at the Annual General Meeting. Every year, at the AGM, they are apprised of the dividend that they will get, of the company’s performance over the previous fiscal year, and are given the balance sheet.

The Directors

The Directors elect one of their number as Chairman (US: President), and another as Managing Director (US: CEO). Sometimes one and the same person acts simultaneously as Chairman and Managing Director. The Directors lay down the policy of the company. Executive Directors work full-time in the company, and are responsible for carrying out that policy: they are the Managers (the Heads) of the main departments. Non-executive Directors simply attend Board meetings; they are Advisors who give legal, financial or technical advice, but take no active part in the management. Directors also elect the other officers of the company.

The Managing Director

The Managing Director runs the firm: s/he sees to it that all the decisions taken at Board meetings are implemented.

The Company Secretary

he makes sure that all the operations of the company are conducted in accordance with the law.

he is responsible for recording the proceedings (the minutes) of all Board meetings, which are kept in the Minute Book.

he is the link between the company and the shareholders. he also keeps a record of all the company’s financial transactions. he may be in charge of insurance and security matters

The Chief Accountant (US: The Comptroller or Controller)

He is by definition in charge of the Company’s accounts. Every year, the shareholders appoint an Auditor who audits the accounts; the balance sheet can then be drawn up and sent to the Shareholders together with the Auditor’s report on the company’s financial position.

The Chief Buyer

He buys all that the company needs to operate efficiently1. Raw materials and component parts for the production department.

19

2. Machinery3. Office furniture and equipment4. Stationery5. Food for the staff canteen, etc.

He is in charge of stock control (US: inventory management): if the firm runs short of supplies, its output is bound to plunge; on the other hand, idle stock proves expensive.

The Production Manager

He is by definition in charge of the Production department, or in other words, of the factory which manufactures goods.

The Sales Director (Manager)

He heads up the Export, the Home Sales, the Marketing, and the After-Sales Departments, and is a key officer in the firm since the latter’s life hinges upon the volume of goods that he and his collaborators manage to sell, at home and/or abroad: they combine their efforts so that the firm may always have full order book, and work consequently at full capacity.

The Personnel Director (US: The Human Resources Manager)

He is entrusted with tasks of great importance: He takes on (hires, recruits) the workers that the firm needs, after advertising

vacancies for jobs, screening the applicants, and shortlisting those with suitable qualifications.

He ensures the promotion of employees through training and further education, or makes it easier for those who have been laid off or transferred to adapt themselves to another job thanks to retraining courses.

He is entrusted:1. With the unpleasant task of dismissing incompetent employees2. With the no less unpleasant task of laying off such employees as have

been made redundant in the wake of technological or economic upheavals (mergers, takeovers, etc.)

2.5. The Board of Directors

Complete the text using these verbs:

appointed attacked combined defined

constitute

d

reviewed supervised supported

20

Large British companies generally have a chairman of the board of directors who oversees operations, and a managing director (MD) who is responsible for the day-to-day running of the company. In smaller companies, the roles of chairman and managing director are usually (1)……. Americans tend to use the term president rather than chairman, and chief executive officer (CEO) instead of managing director. The CEO or MD is (2) …… by various executive officers or vice-presidents, each with clearly (3) …… authority and responsibility (production, marketing, finance, personnel, and so on).Top managers are (4) …… (and sometimes dismissed) by a company’s board of directors. They are (5) …… and advised and have their decisions and performance (6) …… by the board. The directors of private companies were traditionally major shareholders, but this does not apply to large public companies with wide share ownership. Such companies should have boards (7) …… of experienced people of integrity and with a record of performance in a related business and a willingness to work to make the company successful. In reality, however, companies often appoint people with connections that will impress the financial and political milieu. Yet a board that does not demand high performance and remove inadequate executives will probably eventually find itself (8) …… and displaced by raiders.

Kinds of Managers

Managers can be classified according to:1. the level within the organisation;2. the area of management.

Shareholders

Board of Directors

Chairman or President

Managing Director or Chief Executive Officer

(Executive Directors)

Vice-President for Production

Vice-President for

Finance

Vice-President for Human Resources

Vice-President for Marketing

ProductionDepartment

Finance Department

Human Resources Department

Marketing Department

21

Level of management

TOP MANAGERS – an upper level executive who guides and controls the overall fortunes of the organisation (a small group);MIDDLE MANAGERS – a manager who implements the strategy and policies developed by the top management;LOW-LEVEL MANAGERS – s/he coordinates and supervises the activities of operating employees.

Areas of Management

FINANCIAL MANAGER – s/he is responsible for the organisation’s financial resources;OPERATION MANAGER – s/he creates and manages the systems that convert resources unto goods and services;MARKETING MANAGER – s/he is responsible for facilitating the exchange of products between the organisation and its customers or clients;HUMAN RESOURCES MANAGER - a person in charge with managing the organisation’s formal human resources programs;ADMINISTRATIVE MANAGER – a manager who is not associated with any specific functional area but who provides overall administrative guidance and leadership.

22

CHAPTER 3. MARKETINGMotto:

“Exports are becoming obsolete, because they are too slow.

Marketers today must sell the latest product everywhere at once –

And that means producing locally.”CARLO DE BENEDETTI

Read the following article.

Marketing is a technique that

aims to identify, anticipate and satisfy

consumer demand. It covers quite a

vast field that includes such different

disciplines as R & D, product planning,

marketing research, as well as the

more obvious sales promotion and

advertising. Market research is just one

branch of marketing and must not be

confused with marketing research. The

latter is a term applied to general

research concerning the type of media

used to promote a product, the

economic climate in general, and the

techniques of persuading consumer to

buy a product, just to name a few

aspects. Market research, however,

refers to the study of how a product will

sell before it is launched, as well as its

performance on the market once it has

been launched.

A market survey helps a

manufacturer to find out if a product

sells or not. It usually consists of a

questionnaire that is tried out on a

representative sample of the target

population chosen. This may sound

quite straightforward, but even when a

company has clearly decided its

objectives, experts are needed to draw

up questions that do not influence or

confuse the person answering them.

The notion of target population

is Also, sometimes difficult to define.

Who should your product be aimed and

why? There’s no much point in asking

an 85-year-old man what he thinks of

the design of a trendy sweatshirt, just

as it would be foolish to ask a teenage

girl what sort of disposable nappy she

preferred. For the purposes of research,

the population is divided up into six

categories: A, B, C1, C2, D and E. At the

top of the pile you have the upper

classes, people such as doctors and

lawyers, and those in senior

management positions. B covers

administrative and professional people.

Coming down a little, C1 refers to junior

executives and the lower middle class

in general, and C2 to the skilled

working class. Into category D come

unskilled workers and finally, in

category E, casual workers and, what

may surprise some of you, state

pensioners (because of their low

income level).

Important ideas

Marketing involves making a

good, cheap product and convincing

customers to buy it by way of a good

communications mix.

Marketing involves four basic

elements: advertising, sales promotion,

23

public relations, and personal selling.

Then first three of these are used for

consumer goods, the last for industrial

goods.

Marketing involves producing

the right product, pricing it attractively,

making it available to potential

customers, and promoting it.

Answer the following questions:

1. What is the purpose of marketing?2. What are three disciplines that are included in the concept of marketing?3. What is marketing research?4. How is this different from market research?5. What does a market survey consist of?6. What two basic problems are there in making up questions to the survey?

Crossword puzzle:

All the words below form strong partnership with the word product.1 M

2 A

3 R

4 K

5 E

6 T

7 I

8 N

9 G

Across:

1. A campaign organised by a company that can influence consumers’ buying of its products

2. To buy3. An intermediary between producer and consumer specialised in transferring

goods from manufacturer to consumer4. A method of gambling where participants pay small amounts and name a

horse taking part in a race. The one who names the horse winning the race takes all the money

5. One of the Marketing departments6. The allocation of goods to consumers by means of wholesalers and retailers7. A marketing activity designed to boost the sales of a product or service8. A piece of printed paper that gives you the right to pay less than usual or not

to pay at all for a product9. Design and manufacture of materials for packing goods

24

Read the following text, paying attention to particular

market expressions:

The US market was fairly buoyant when we finally managed to break into it three years ago, even though it was largely dominated by two or three big American players. And over the next two years both the market itself and our market share grew significantly. Since then, as you know, much cheaper products from East Asia of almost equal quality to our own have flooded the market. At first the main threat came from Korea, but now it looks as though Taiwan is set to enter the market too. I’m sure I do not need to tell you that if this trend continues the US market will become completely saturated and may even collapse altogether. I’m afraid the picture in Western Europe is not much better. European trade disputes have further depressed a market which was already suffering from the effects of the recession.The one piece of good news is that going into Central Europe turned out to be the best move we have made for some time. We entered that market in October. At first, it looked as if the competition in Poland and the Czech Republic would squeeze us out of the market before we could establish ourselves, but fortunately that did not happen. And, in spite of currency difficulties, I can assure you that that market at least remains buoyant.

has collapsed has grown break into depressed

Can you match the following words?

collapse prune target launch saturat

e

flood

skim dry up penetrate blitz shrink push

1. …………………. Send a rocket into space or a new ship into water for the first time

2. …………………. Aim at something – when shooting at something3. …………………. Remove something from the surface of something –

cream from milk4. …………………. Go into something – a bullet into a body5. …………………. Cover with water – when a river bursts into banks6. …………………. Move something away from you7. …………………. Drop a lot of bombs on one area8. …………………. When some soft substance is full of water so that it cannot

absorb any more

25

9. …………………. Fall down suddenly - a building during an earthquake10. …………………. When something gets smaller – clothes when they are

washed11. …………………. When all the liquid in something disappears – perhaps

because of too much heat12. …………………. When you cut branches off a tree so that it will grow

better in the future

Work with a partner. Fill in the following chart:

MY COMPANY MY PARTNER’S CO

Name of company

Product/Service

Main customers

Main competitors

General market

trend

Reasons for trend

Match the first parts of the words or expressions on the left

with the other parts on the right:

1. advertising a. release

2. brand b

.

a market

survey

3. market c. image

4. retail d

.

share

5. break into e. campaign

6. public f. customer

7. press g

.

outlet

8. prospective h

.

research

9. market i. relations

1

0.

commission j. a market

26

Complete the text below with the following words:

1. trade fairs 2. range 3. stands 4. field work 5. desk work 6. samples 7. designed 8. break into 9. showrooms 10. market share 11. promote

Before seeking to ……………….. a new ……………………….of products, especially if the firm is trying to ……………………… a new market or increase its ……………….., an advertising campaign must be carefully……………………….., based on the results of the ………………………and…………………………. out in the streets during the initial market survey. The campaign may include pictures on…………………. and demonstrations at international ……………………………or in the company’s existing ………………………, or the distribution of free ……………… to potential customers.

3.1. Global Marketing

Logo Image

A logo is the symbol by which we know a company, but what makes a successful logo – one which will be instantly recognized all over the world?Look at the logos on this page. To what do you think they owe their special appeal and memorability? simplicity symbolic design geometric shape style of lettering non-verbal impact

27

Discussion

How visually memorable are logos? Have you thought of your company’s logo? How does a powerful logo help to build up the image of a product or service in the mind of the customer?What is ‘global image’? What do you understand by the term ‘the globalization of markets’?

Compare your ideas with those expressed in the following

article:

GOING GLOBAL

According to experts, the

biggest challenge now facing the

international advertising industry is that

of establishing ‘world brands’ by

appealing to the global consumer in all

of us. Professor Theodore Levitt of

Harvard Business School first put

forward the theory of ‘the globalization

of markets’. But the idea that there are

more similarities between cultures than

differences goes back to the popular

image of the ‘global village’.

It was Coca-Cola who told

people in the 70s that ‘they’d like to

buy the world a Coke’ and British

Airways who announced in the 80s that

they were ‘the world’s favourite airline’.

Their universally recognized TV and

cinema advertisements invented the

global advertising genre and the

agencies that created their

commercials are today widely regarded

as the best in the business.

The secret, according to British

Airways, is that the message should be

straightforward, easily understood and

vividly expressed. And they succeeded

in doing that in their first global

commercial run by Saatchi ε Saatchi

featuring Manhattan Island being flown

across the Atlantic. The commercial

was screened in 29 countries and

28

caused a sensation in the industry. The

effect was ‘breathtaking; words were

hardly needed; the picture said it all’.

So what it makes global

advertising so memorable? The answer

to that consists in reducing the

message to an absolute minimum. A lot

of advertisements pack too much and

end up obscuring their message. The

global commercial gets its message

across succinctly, with great impact

and an emotional intensity which

belongs to the universal languages of

pictures and music. The commercials

reinforce the brand-image

independently of any real consideration

of the product and image outsells

product every time.

The beauty of a good global ad

is that it can be used to great effect

over a period of many years and still

seem fresh. However, global image-

making is a costly business. Though the

world is getting smaller by the day, few

companies have true global status and

since most ‘mass-marketed’ products

actually sell to fewer than five per cent

of the masses, it doesn’t always pay to

think big.

Which of the following

ideas support the opinions

expressed in the article?

1. Global advertising is just

a current trend.

2. Global ads are generally

believed to be superior to other

commercials.

3. A global advertising

policy usually leads to extremely

bland commercials.

4. Good global ads often

rely on their non-verbal impact.

Mass marketing is actually a

contradiction in terms.

Discussion

Is there a TV commercial at

the moment that you particularly like or

dislike?

Is there really any evidence that

adverts have the slightest effect on

consumer buying behaviour?

Has an advertiser ever

persuaded you to buy or put you off

buying a particular product?

Think of a well-known market

leader. To what do you attribute its

market leadership?

a better brand-image

superior marketing

superior production methods

technological superiority

innovative research

something else?

29

Read the following lines paying attention to the words

written in italics:

The total marketing mix includes service or product range, pricing policy, promotional methods and distribution channels, but for ‘world brands’ who aim to be market leaders, a large part of marketing expenditure goes on television advertising. When global companies organize a marketing drive, a concerted effort is made to promote and sell more of their products and this will often involve an expensive advertising campaign.Marketers generally tend to divide markets up into separate groups according to geographical area, income bracket and so on. This is known as market segmentation. But a global marketing policy will obviously take much less account of local market trends and concentrate instead on what different markets have in common.As global commercials are shown on TV in many different countries, the advertising costs tend to be high and obviously only the biggest advertising agencies can produce commercials on such a global scale. Fortunately, global commercials like those for Marlboro cigarettes and British Airways can be run for many years without looking out of date, and advertising slogans. Such as ‘the world’s favourite airline’ and ‘Coke is it’, will always be universally recognized.

Try to arrange the words mentioned with the following

areas, so that they form strong word partnership:

Marketi

ng

- plan Advertisi

ng

- budget Mark

et

- forces

- strategy - - share

- - -

- - -

- - -

One of the quickest ways of

destroying your global image is to give

your product an unattractive name. And

when it comes to brand names that

sound embarrassing in translation, no

one has made as many spectacular

mistakes as the car industry. General

Motors’ Nova (No va means It doesn’t

go in Spanish) has, of course, become a

classic. And the Ford Pinto – in

Portuguese pinto is slang for a small

male organ. Understandably, Brazilians

weren’t queuing up to become the

proud owners of a Pinto.

However, Rolls Royce was

always above such kind of

embarrassments. They chose elegant

names for their cars – Silver Cloud,

Silver Shadow, Silver Spirit and Silver

Ghost.

Here are some well-known brand names you could find in any large British supermarket. What do you think the products are?

30

1. Old Spice 2. Pampers 3. Kleenex 4. Eternity 5. Frish 6. Uncle Ben’s 7. Timotei 8. Blue Dragon 9. Babycham 10. Special Brew 11. Black Magic 12. Imperial Leather 13. Taboo 14. Bold 15. Lynx

3.2. Advertising

Read the following article paying attention to the words

related to advertising:

Advertising informs consumers about the existence and benefits of products and services, and attempts to persuade them to buy them. The best form of advertising is free word-of-mouth advertising, which occurs when satisfied customers recommend products or services to their friends, but very few companies rely on this alone. Large companies could easily set up their own advertising departments, but they tend to hire the services of an advertising agency. A contract to produce the advertisements for a specific company, product, or service is known as an account. The client company generally decides on its advertising budget, the amount of money it plans to spend in developing its advertising and buying media time or space. It also provides a brief, or a statement of the objectives of the advertising, as well as an overall advertising strategy concerning what message is to be communicated.Media for advertising include the following:

i. National newspapers – newspapers have a short life (one day) but a high attraction and value.

ii. Local and regional newspapers – local newspapers reach a concentrated geographical area, and are suitable for advertising to a geographical market segment.

iii. Magazines and trades – the advertiser can select a magazine for advertising according to the content of the magazine which identifies the interests of the audience.

iv. Television – television is a mass medium which can be received by almost everybody and thus reaching every socio-economic group.

v. Direct mail – direct mail is the sending of sales literature direct to the customers. Too often, this is ‘junk mail.’

vi. Commercial radiovii. Posters (billboards in US) and transport advertising.viii. Cinema

The set of customers whose needs a company plans to satisfy, and therefore to expose to an advertisement are known as the target market. The advertising of a particular product or service during a particular period of time is called an advertising campaign. Favourable mentions of a company’s products or services, in any medium read, viewed or heard by a company’s customers or potential customers, that are not paid for, are called publicity.

31

Remembera. Advertising is non-personal communication – the seller does not come face

to face with potential customers.b. It is paid for.c. There is a clear, identifiable sponsor of the advertisements.

In brief, all advertising seeks to generate Awareness of the product, promote Interest, generate Desire to purchase and stimulate Action to purchase (AIDA)

Translate the following sentences into English. You will find

the following vocabulary useful:

hoarding poll to aim at point-of-sale TV commercial break-even point glossy magazine insert peak viewing time

1. Pagina de reclame în culori se adresează unui public tânăr şi dinamic căruiă îi place să se amuze.

2. Un ambalaj bine gândit contribuie enorm la succesul unui produs recent lansat.

3. Panouri publicitare hidoase desfigurează aspectul societăţii secolului al XX-lea.

4. Publicitatea la locul vânzării este o strategie veche şi modernă în acelaşi timp.

5. Studiul de piaţă trebuie să-l informeze pe producător asupra clientelei susceptibile de a-i cumpăra produsul.

6. Pragul de rentabilitate nu trebuie confundat cu rata rentabilităţii.7. Cât de rentabil ar fi pentru dumneavoastră dacă vi s-ar deschide piaţa

spaniolă şi reţeaua de distribuţie a acesteia ?8. Rezultatele sondajului sunt surprinzătoare : se credea că marca e mult mai

cunoscută.9. politică de distribuţie selectivă, axată numai pe supermagazine, va sta la baza

succesului său.10. Vom contracta spaţiu publicitar în mai multe reviste şi poate chiar o reclamă

TV difuzată la ore de maximă audienţă.

Read the following arguments pro and against advertising.

What is your opinion?

Arguments for advertising

1. Advertisemen

ts tell consumers

about the products

that are available,

allowing them to make

a wider and more

informed choice.

2. It encourages

Arguments against advertising

1. Advertisin

g is expensive and

may lead to prices

being higher than

necessary. High

advertising costs

may also prevent

new firms from

32

competition between

firms, who have to

produce cheaper and

better products.

3. By creating a

wider market for

products, advertising

makes large-scale

production and sales

possible. Mass

production also makes

goods and services

cheaper for

consumers.

4. Without

advertising, media

such as newspapers

and television would

be more expensive.

Many sporting clubs

and other

organisations also

benefit form

advertising revenue.

entering the

market because

they cannot afford

the expense.

2. Advertisin

g can be

misleading.

However, there are

substantial

controls upon the

industry.

3. Advertisin

g can put pressure

upon people to buy

products that they

don’t really need

or can’t afford.

4. Advertisin

g is often wasteful,

sometimes

involving the same

firm advertising

virtually identical

products against

each other

(washing powder is

a good example).

33

Table 1.1.

The Twenty Leading American Advertisers

Ran

k

Advertiser Ad

Spending

($

millions)

1 Philip Morris Cos. $2,058.2

2 Procter & Gamble Co. 1,506.9

3 General Motors Corp. 1,294.0

4 Sears, Roebuck & Co. 1,045.2

5 RJR Nabisco 814.5

6 Grand Metropolitan PLC 773.9

7 Eastman Kodak Co. 735.9

8 McDonald’s Corp 728.3

9 PepsiCo Inc. 712.3

10 Kellogg Co. 683.1

11 Anheuser-Busch Cos. 634.5

12 Kmart Corp. 632.0

13 Warner – Lambert Co. 609.2

14 Unilever NV 607.5

15 Nestle SA 573.8

16 Ford Motor Co. 569.8

17 American Telephone & Telegraph 547.5

18 Chrysler Corp. 474.0

19 General Mills 470.1

20 Johnson & Johnson 468.8

Source: Reprinted with permission from AD AGE, 9/27/89. Copyright Crain

Communications, Inc. All rights reserved.

34

Crossword puzzle:

All the words below form strong partnership with the word product.1 A

2 D

3 V

4 E

5 R

6 T

7 I

8 S

9 I

1

0N

1

1G

Across:

1. A phrase that is used by advertisers and which sticks in the minds of the prospective buyers

2. A publicity material which is usually folded3. A stimulus4. An advertising method where a well-known public figure advertises a certain

brand5. To allocate the goods to consumers by means of wholesalers and retailers6. An ad included in newspaper, magazine etc.7. Vehicles for carrying the advertising message to the buyer (pl.)8. A large notice that you stick on a wall or notice board9. A list of companies grouped alphabetically or by their line of business10. The number of times the same people in a target group are exposed11. A short phrase meant to attract the consumer’s attention

Choose the most appropriate word or expression to

complete each sentence:

1. Advertising tries to turn ……………… customers into real customers.a. foreignb. prospectivec. domesticd. overseas

35

2. Posters are displayed on ……………..a. televisionb. computer screensc. hoardingsd. radio

3. Direct advertising in shops is called ……………………… advertising.a. point-of-saleb. retailc. wholesaled. display

4. Market research takes place before a new product is ……………………..a. phased outb. packagedc. launchedd. commissioned

5. A………………… is the general name for different kinds of shops.a. department storeb. wholesalerc. showroomd. retail outlet

6. They work for an advertising ………………………..a. agencyb. campaignc. companyd. society

7. Advertisements on television are called………………………a. spotsb. classified adsc. commercialsd. small ads

8. Rolls Royce is the brand……………….. in car industry.a. imageb. identificationc. leaderd. name

Choose the correct alternative to complete each sentence:

1. In many markets there is a firm with a much larger market share than its competitors, called a …………………………..a. market leaderb. monopolistc. multinational

2. A company that is number two in an industry, but which would like to become number one – think of Pepsi vs. Coca Cola – is known as a ……………………………a. market challengerb. market competitorc. market follower

36

3. A smaller company in an industry, more or less content with its existing market share, is called a …………………………a. market challengerb. market followerc. market sharer

4. Small, specialised companies, which target segments within segments, are called …………………….a. market failuresb. market followersc. market nichers

5. A market in which one single producer can fix an artificially high price is called a/an ………………………. a. homogeneous marketb. monopolyc. undifferentiated market

6. A market dominated by a few large suppliers, and which it is hard for new companies to break into, is called a/an ………………………a. conglomerateb. market concentrationc. oligopoly

3.3. Brand, Packing & Labelling

Read the following text paying attention to notions like

brand, packing or labelling:

Consumers do not buy a product for its own sake, only for the benefits that the product offers them. The consumer who buys a drill does not generally do so for the pleasures of owning a drill but in order to have a facility to make holes in things. Therefore, in thinking about products it is necessary to think in terms of the needs that the product fulfils, and not the product’s features.

A checklist for analysing products is offered below:

a. Quality: materials, workmanship, design, method of manufactureb. Technical characteristics, attributes that may be considered as selling points.c. Models, sizes, styles, ranges, colours etc.d. Essential or non-essential, convenience or specialitye. Similarities with other products supplied by the firmf. Relation of product features to user’s needs, wants, desiresg. Development of branding and brand imageh. Degree of product differentiation, actual and possiblei. Packaging used, functional, promotionalj. Materials, sizes, shapes, construction, closurek. Future trends in technology

Three important features of a product are its brand, package and label. They may be used to associate a product with a successful product line or to distinguish it from

37

existing products.A brand is name, symbol, design or any combination of these that identifies a seller’s products and distinguishes them from the competitor’s products. Branding removes anonymity and gives identification to a company and its goods and services. Branding is actually a very general term covering brand names, designs, trademarks, symbols, a distinctive letterhead, an identifiable shop front or van etc.A brand name is the part of a brand that can be spoken. It may include letters, words, numbers, symbols (that can be pronounced) – Procter& GambleA trade mark is a brand that is registered and whose shape is protected by law – the Coca-Cola bottleA generic product is a product with no brand at all; its plain package carries only the name of the product (peanut butter, potato chips), and they appeal mainly to consumers who are willing to sacrifice quality for a lower price (however, they are not necessarily lower in quality).Branding strategies:

1. individual branding – the strategy in which a firm uses a different brand for each of its products e.g. Procter & Gamble uses individual brands for its line of soaps: ‘Ivory’, ‘Camay’, ‘Safeguard’

2. family branding – the strategy in which a firm uses the same brand for all or most of its productse.g. IBM

Packaging consists of all those activities involved in developing and providing a container for a product. It has both functional and a marketing value (plastic packaging allows the customer to see the product before it is purchased). The package can also be used to inform customers about the product’s contents, uses, advantages, features etc.

a. Packaging has five functions as follows:b. Protection of the contents of the packagec. Distribution. Packaging helps to transfer products from the manufacturer to

the consumerd. Promotion. The design of the package and the words printed on it should

attract buyers to the producte. User convenience, as an aid to sellingf. To conform to general government regulations

Labelling is the presentation of the information on a product or its package. The label is the part that contains the information. This information may include the brand name and mark, the registered trademark symbol (), directions for use, safety precautions, a list of ingredients, the name and address of the manufacturer etc.

Discussion

Think of a product which has been on the market since you were a child. How has it changed? Do you want it to change? For someone growing up in Britain, here are six products which have been on the market for over 30 years:

Mars bars (a kind of sweet with toffee inside and chocolate outside)

Heinz Beans (tins of beans in a tomato sauce)

Y-fronts (men’s underwear)

38

Barbie Doll (an American toy)

Monopoly (a game)

Channel No. 5 (a perfume)

Do you have those in your country? If not, can you name six similar products which have been around for 20 years or more? Why have they lasted for such a long time?The following are all brand names of products available in Britain. Which of them are available in your country?Can you think of one or two products from your country which are available all over the world?Schweppes Tonic Water Wet Ones Cadbury’s Milk Tray

Campbell’s Scott Snickers Pear’s Toilet Soap

Persil Soap Powder Typhoo Tea Rolo

Uncle Ben’s Rice Baxter’s Jam Kleenex Tissues

Polo Mints Head’n Shoulders Andrex

Kodachrome Signal Toothpaste Wilkinson Sword

Harris Tweed Loo-blue Slumberdown

Liquorice Allsorts Black Magic Maclean’s Toothpaste

Fairy Liquid Sellotape Elastoplast

Work in pairs or small groups to develop a competitive new

product to challenge an established brand name:

1. Identify a household name. You should choose a product either in one of the fast-moving consumer goods markets such as food, soft drinks, alcoholic drinks, cigarettes, or cosmetics. Alternatively, choose a product from the luxury branded goods market such as perfume, watches, or fashion.

TARGET BRAND: ………………………………………………………………………2. Investigate the popularity of the brand name. Identify three factors which

contribute to the universal appeal of the product. Is it a unique product? If so, what are its special characteristics? If not, to what does it owe its popularity? Is it quality, image, availability, or price?MAIN SELLING POINTS1. ………………………. 2. …………………… 3. …………………………

3. Come up with an idea for a new product to compete with the brand name. Consider the following: market positioning (upmarket or downmarket?), pricing strategy, main selling points in comparison with the brand name, packaging, advertising.DETAILS & FEATURES:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………NAME OF NEW PRODUCT:………………………………………………………………………………………

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4. Produce a consumer profile of the customer you are trying to attract. You need to take account of age, sex, socio-economic group, and lifestyle.CONSUMER PROFILE:………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

5. Devise a simple slogan to promote the product.SLOGAN:………………………………………………………………………………………

3.4. Marketing and sales

Most contemporary marketing theorists distinguish between the now out-of-date ‘selling concept’ and the modern ‘marketing concept’. The former – the selling concept – assumes that resisting consumers have to be persuaded by vigorous hard-selling techniques to buy non-essential goods or services. In other words, products are sold rather than bought. The marketing concept, on the contrary, assumes that the producer’s task is to find wants and fill them. In other words, you don’t sell what you make; you make what will be bought, so that selling becomes almost superfluous.Of course, this is a little utopian: the existence of competitors offering comparable products will always make some selling necessary. Furthermore, sales departments generally resist the dominance of marketing, as they have different objectives. They are generally interested in the short-term and on achieving current sales targets rather than planning the right products and marketing strategy to meet consumers’ long-term needs.Yet, although marketing tends to dominate in consumer goods companies, there are still industries in which the production and sales departments tend to be as important. In capital intensive industries such as steel or chemicals, for example, it is desirable to keep equipment operating as much as possible. Consequently, senior management tends to set sales goals on the basis of the economic and competitive situation, as well as the need to keep plants running on near capacity, and then tries to find ways to sell the output in the short term.

3.4.1. Planning the Marketing Campaign

The marketer will combine all elements of the mix to attract customers.Any marketing plan will address the following issues.

a. Identify who you are marketing to. You may be trying to win over a hostile pressure group.

b. What are the competitors doing?c. How do marketing objectives translate into a strategy for each element of the

mix? For example, a firm selling a new product will want to ensure the following.- Enough products have been made.- Distributors are stocking the product and are ready for the demand.- Advertisements have been booked to generate demand when distributors

are ready to supply it.

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- The price is such as to make profit or win market share.d. The firm might want to deter competitors, so it might try and flood the

market.- The tactics for each element the mix need to be planned and co-

ordinated. For example, the advertising element of the mix will involve the following decisions.

- Newspaper and/or TV advertising- The frequency of the message- The content of the message- The style (eg. Humorous)

e. How much money is available to be spent?f. Evaluation of the campaign. Did the firm achieve its objectives?

3.4.2. Soft Sell Vs. Hard Sell

Read the following article and notice the differences

between the soft sell and the hard sell.

The Soft Sell

“Are you the kind of person who

won’t take ‘no’ for an answer? So how come

you keep getting ‘no’ for an answer? Has it

ever struck you that you could be doing

something wrong? What if you really can’t

persuade people to do things they don’t

want to? And did it ever cross your mind

that the customer may not actually need

your product? Hard to accept, I know, but

it’s a possibility.”

“Forget conventional wisdom. It’s

not your job to get people to buy but to find

out if there’s basis for doing business.

Manage the demand that’s there. That’s all

you have to do.”

“Once a man of wisdom said:

‘Everyone in the world just wants to be

listened to, but they seldom get what they

want because so does everyone else’. I can

see some of you know what I’m talking

about. Well, so you should, because some of

the worst listeners I know work in sales. Try

shutting up for a change.”

“Listen to everything the customer

says. Give them every opportunity to

disqualify themselves as a serious prospect.

And since that’s all you’re trying to

establish. It needn’t be a blow to your ego

to be told ‘no’. If they say ‘no’, don’t argue

with them. Nobody ever won an argument

with a customer.”

“Don’t make extravagant claims for

your product. And listen when the customer

asks questions – even silly questions. People

ask silly questions for a reason. Remember,

the decision to buy is the buyer’s

responsibility, not yours.”

“What it comes down in the end is

trust. Let’s face it, it’s natural for the

customer to be sceptical. Selling always

causes customer resistance. It’s a fact of

life. But if selling causes customer

resistance, no selling equals no resistance.

And you make more sales when you stop

trying to sell.”

The Hard Sell

“Contrary to popular opinion, selling

is not a dirty word. Selling is what business

is really about – creating and stimulating

demand. Nobody – and I mean nobody –

41

would ever buy anything if somebody else

didn’t go out and sell it to them. And that’s

as true as now as it’s ever been.”

“People cannot make buying

decisions. Not by themselves, they can’t.

The minute they have to say yes, they

panic. It’s the ‘parachute principle’. They’re

up there looking out of the aeroplane and

they can’t jump. They panic. Now, there’s

only one thing you can do if they won’t jump

– push them.”

“Get on the phone and sell. The

telephone is an instrument of power if you

know how to use it. Lesson one: you can’t

sell sitting down. No-one can. Selling is

dynamic. Get up. Get a phone that lets you

move around. Being mobile helps you to be

alert, sound confident and project energy. It

improves your performance. You sell more

on the move.”

“Lesson two: don’t be afraid of

rejection. If one call in ten gets a yes, then a

negative response is just one more no out of

the way. Nine no’s equal yes. So no’s are

OK. No’s are wonderful.”

“Lesson three: are you sure the

customer means No? As any good sales

person will tell you, No is really just an

invitation to keep talking. No hardly ever

means No. No can mean No quite. No can

mean Not yet. No can even mean Not if I

can help it. That’s fine. What would it take

to get you to say Yes?”

“Lesson four: never invite your

buyer to think the matter over. It’s been

statistically proven that if you have to make

a second appointment, you have actually

halved your chance of making the sale.”

Discussion

OUR POLICY

Rule 1

The Customer is

Always Right!

Rule 2

If the Customer is Ever

Wrong, Re-read Rule

1.

The sign on the left is displayed

outside the Connecticut store of

American supermarket king and retail

sales genius, Stew Leonard.

How far do you go along with the idea

that the customer is always right?

And what are the implications for

market research, customer service

and quality management?

42

Cultural Awareness

Most Americans will insist on the hard sell. It’s not enough that you want to buy their products, you must let them sell them to you. They have to report back to superiors who will be as interested in how the deal was struck as the result. Systems and procedures matter to Americans.The Spanish, on the other hand, are unimpressed by the most meticulously prepared meeting and pay much more attention to people. In this they are more like the Arabs or the Japanese. In the Middle and Far East business is built on trust over a long period of time. Spaniards may come to a decision about whether they trust you a little sooner.

Match a word from each column:

1. product a. increase

2. sales b. check

3. percentage c. products

4. launch d. range

5. stock e. figures

6. maintenance f. up

7. retail g. customer

8. hidden h. service

9. dissatisfied i. agreement

1

0.

after-sales j. Period

1

1.

comply k. agent

1

2.

guarantee l. with

1

3.

penalty m

.

outlet

1

4.

sole n. defect

1

5.

follow o. Clause

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Choose the correct word or expression to complete each

sentence:

1. Orders are written down on an ……………………………a. authorised dealerb. order formc. assessment

2. An ………………………. price includes VAT.a. inclusiveb. exclusivec. expiry

3. A …................................... is a period when prices cannot be increased.a. price freezeb. hold-upc. price-fixing

4. A ……………………….. is a reduction in price.a. mark upb. profit marginc. mark down

5. We have just received a ……………………… for a quotation.a. requirementb. demandc. request

6. After an initial deposit, you pay…………………………a. remittancesb. instalmentsc. shipments

7. A payment which is overdue is one which is ……………………..a. earlyb. on timec. late

8. A ……………………………….. is one that is controlled by Customs.a. warehouseb. trade fairc. bonded warehouse

9. If you have …………………. goods, you don’t have any left.a. out of stockb. overchargedc. run out of

10. A ……………………… is where a company displays its products.a. retail outletb. showroomc. warehouse

Discussion

Do you have any experience of selling goods to other countries? If you have, what problems have you come across?The export of animals is a very difficult problem in some countries. For example, when British farmers export sheep to Europe, sometimes the animals can be in the lorries for

44

over 24 hours. What do you think of this? Is it cruel? Which of the following two opinions do you agree with?‘Animals should be treated with respect. It is cruel to transport live sheep without stopping every 6 hours to let them eat, drink, and run around. Any society which is cruel to animals is not a civilised place to live in.’‘People should stop worrying about animals and start worrying more about other people. Think of all the children and old people who don’t have enough to live on. We kill animals to eat them. So why worry!’

Test your knowledge.

1. Define marketing.

2. What is the real purpose of a

product?

3. List the elements of the marketing

mix.

4. Why are ‘people’ included in the

marketing mix for services?

5. Why do firms ‘brand’ their

product/services?

6. What are the objectives of

advertising?

7. By what criteria would you choose

an advertising medium?

8. What issues would be addressed in

a marketing plan?

WORDS TO REMEMBER

advertise – to make something known to the public, by placing notices or messages in various media (newspapers, television etc.)advertisement (often abbreviated to ad or advert) – a paid communication in the media designed to inform and persuade people about products or servicesadvertiser – a person or organisation that advertisesadvertising – the business of creating and placing advertisementsadvertising agency – a company that handles advertising and sales promotion for clientsadvertising brief – a statement of the objectives of an advertising campaign that a client works out with an advertising agencyadvertising budget – the amount of money a company plans to spend in developing its advertising and buying media time and space

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advertising campaign – the advertising of a particular product during a particular period of timeadvertising copy – the words or text of an advertisementafter-sales service - the maintenance of a product after it has been boughtAIDA – a word made up of the first letters of the steps to successful communication in marketing: get Attention, hold Interest, arouse Desire, and obtain Actionallocate – to assign fixed resources for a particular purposebillboard (US) or hoarding (GB) – a large board or other surface on which advertising posters are displayedbrand – a product that is distinguished from those of competitors by a name, symbol, sign, design etc.brand image – the public’s beliefs and perceptions about a particular productbrand loyalty – consumers’ commitment to a particular brand, which they regularly buybrand management – responsibility for a particular brand in a multi-brand companybrand mark – a symbol or design or particular form of lettering, that is used to identify a brandbranding – the process of establishing in customers’ minds a knowledge of and a loyalty to a product, focusing on the brand namebrochure – a small booklet or magazine containing pictures and information about a product or companyconsumer – a person who buys and uses goods or services; a person whose needs are satisfied by producersconsumer market – the individuals and households that buy products for their own personal consumptionconversional marketing – converting people’s attitudes so that they buy something they previously dislikedcorporate image – the face that a company wishes to present to the public, by way of advertising, public relations etc.counter-cyclical advertising – advertising during periods or seasons when sales are normally relatively poorcounter marketing or unselling – the attempt to destroy demand for something considered to be harmfulcoupon – a certificate giving consumers a price reduction on a particular productcustomer – a person (organisation) that buys a product or service from a shop or a producerdemarketing – reducing excess demand by temporarily or permanently discouraging certain customersdepartment store – a large shop or store selling a wide range of products, e.g. clothing, household goods, food etc.developmental marketing – the transformation of latent demand into actual demand, when a product or service first appearsdifferentiated marketing – providing products to meet the needs of different consumer groups in different market segmentsdirect mail – advertising and promotional material sent directly to consumersdirect marketing – reaching consumers without any intermediaries by sending them catalogues, telephoning themdirect selling – when manufacturers sell directly to retailers, without using wholesalers, or when wholesalers sell directly to the public without using retailers

46

distribution – the process of getting products to consumers, usually by way of middlemen such as wholesalersdistribution channel – all the companies or individuals involved in moving particular goods or services form the producer to consumerdistributor – someone (generally a wholesaler) who stocks and resells components or goods to manufacturers or retailersfree gift – a present given to consumers, usually when they purchase another product, as a sales promotion (also called a freebie)free sample – a form of sales promotion in which a product is given to consumers (usually in a small size) to encourage them to try it.industrial market or producer market or business market – all the people or organisations that buy goods and services used in the production or supply of other goods or servicesinstitutional advertising or prestige advertising – advertising designed to build up a company’s name or image rather than sell specific productsjunk mail – advertising an promotional material that is delivered to people who didn’t ask for itknocking copy or comparative advertising – advertising that criticises rival products by nameleaflet – a printed piece of paper giving information or advertising somethingmail order – purchasing goods by post, from a cataloguemaintenance marketing – the attempt to keep up full demandmarket – the set of all actual and potential buyers of a good or service; the place where people buy and sell; the people who trade in a particular good; to make goods available to buyers and to encourage them to buy themmarket demand – the total volume that will be bought in a particular area, period of time, and marketing environment, with a given marketing programmemarket forces – supply and demandmarket leader – the company with the largest market sharemarket penetration – the attempt to increase or maximise sales, rather than current profits, by selling at a low pricemarket potential – the limit approached by demand in a given market and marketing environment as marketing expenditure increases market research – the collection, analysis and reporting of data relevant to a specific marketing situation (e.g. a proposed new product)market segment – part of a market; a group of customers with specific needs, defined in terms of geography, age, sex, income, occupation, life-stylemarket segmentation – the act of dividing a market into distinct groups of buyers who have different requirements or buying habitsmarket share – the sales of a company (or brand or product) expressed as a percentage of total sales in a given marketmarketer – someone who works in marketingmarketing – the process of identifying and satisfying consumers’ needs and desiresmarketing mix – the set of all the various elements in a marketing programme, and the way a company integrates themmarketing programme – a company’s plans regarding the marketing mix, including product features, price, promotion expenses, resource allocationmarketing strategy – a plan or principle designed to achieve marketing objectivesmid-market – medium priced products (and their buyers)

47

multi-brand-strategy – producing several brands of the same product category, each positioned differently in consumers’ mindsnon-business marketing – marketing by non-commercial organisations such as colleges, churches, clubs, political partiesoutlet – a place where goods are sold to the public: shops, stores, kiosks, market stallspackaging – wrappers (pieces of paper or plastic) and containers (boxes) in which products are soldpoint-of-purchase (or point-of-dale) display – a sign, poster, stand advertising and showing a product, supplied by a manufacturer to retailersposters – large door advertisements on hoardings pre-testing – a way of predicting or measuring the effectiveness of an advertisement before it is generally released, by interviewing selected viewers product – something made, manufactured by a mechanical or industrial process; anything capable of satisfying a want or a need promotion – raising someone to a higher grade job; informing customers about products and services and trying to persuade them to buy them (to promote someone or something)promotional tools – different ways of informing potential customers about productspublicity – mention of a company or its products in the media, which is not paid for by the companyquestionnaire – a list of questions sent to target customers in market researchrecall tests – a way of measuring how much consumers remember about advertisementsretailer – a merchant such as shopkeeper who sells to the final customerrolling launch – introducing a new product in one region at a timesales promotion – the use of temporary incentives to make customers buy immediatelysales representative or sales rep or salesman or salesperson – someone who contacts existing and potential customers, and tries to persuade them to buy goods or servicessales revenue – the amount of money a company receives from its salessample – a group chosen out of a large number for a surveysampling – taking a limited number from a large group for statistical inquiry, the results of which are then applied to the whole groupshowroom – a large shop in which goods are displayed for customerssponsorship – the subsidising of a sporting or artistic event by a company for advertising purposesstimulational marketing – creating demand for products or services about which consumers are uninterested or indifferentsurvey – the collection of information about people’s tastes and opinions, from a sample of the populationtarget marketing – selecting particular market segment and developing and positioning products for themtrade mark – a brand name that is legally protected and cannot be used by other producerstrade marketing – concentrating marketing effort on distributors and retailers rather than customers

48

CHAPTER 4. BANKINGSon "What is a debtor, Pa?"

Papa " A man who owes money "Son "And what is a creditor?"

Papa "A man who thinks he is goingto get it back"

4.1. Money

4.1.1. What is money?

Money is anything used by a society to purchase goods and services or resources. The members of the society receive money for their products or resources. They can either hold that money or use it to purchase other products or resources.The members of primitive societies used to exchange goods and services through barter without using money. A barter system is a system of exchange in which goods or services are traded directly for other goods or services, e g a family may raise vegetables and herbs and another may wave cloth. To obtain food, the family of weavers trades cloth for vegetables if the farming family needs cloth. The only trouble is that they had to need each other's product at the same time. This kind of exchange went especially with products considered to be the necessities of life.Different groups of people have used all kind of objects as money whale's teeth, stones, gold, and silver.Today the most commonly used objects are metal coins and paper bills which together are called currency.

4.1.2. Functions of money

Besides being an aid in the exchange of goods and services for resources, there are three specific functions of money in any society.Serves as a Medium of Exchange It is the primary function of money. A medium of exchange is anything that is accepted for products and resources. As long as the owners of products and resources accept money in an exchange, it is performing this function. This eliminates the problems associated with the barter system.Serves as a Measure of Value Money serves as a measure of value because the prices of all products and resources are stated in terms of money. A measure of value is a single standard or “yardstick” that is used to assign values to, and compare the values of products and resources. Imagine the difficulty you would have in deciding whether you could afford a pair of shoes if it were priced in terms of yards of cloths or pounds of vegetables if your employer happened to pay you in toothbrushes.Represents a Store of Value Money received by an individual or firm need not be used immediately. It may be held and spent later. Thus money serves as a store of value, a means for retaining and accumulating wealth.

49

4.1.3. Characteristics of Money

To be acceptable as a medium of exchange, money must be easy to use, it must be trusted, and it must be capable of performing its functions. There are, thus, five essential characteristics of money.Divisibility The standard unit of money must be divisible into smaller units to accommodate small purchases as well as large ones.Portability Money must be small enough and light enough to be carried easily. That is why paper currency is issued in larger denominations.Stability Money should retain its value over time. When it does not (during periods of inflation), people tend to lose faith in their money. They may then return to other means of storing value (such as gold and jewels, works of art, and real estate).Durability The objects that serve as money should be strong enough to last through reasonable usage. No one would appreciate or use paper bills that disintegrated as they were handled or coins that melted in the sun.Difficulty of Counterfeiting If a nation’s currency were easy to counterfeit, its citizens would be uneasy about accepting it as payment.

Choose the right answer.

1. When you retire at the age of 65, you receive a(n) ……… from the government.a. allowanceb. alimonyc. grantd. pension

2. If production in a factory exceeds the target, the workers get a ………a. bonusb. donationc. gratuityd. premium

3. The ……… of living has risen by 25% in the last six months.a. costb. expenditurec. expensed. price

4. The kidnappers demanded a ……… of $ 1,000,000.a. fineb. penaltyc. ransomd. reward

5. The World Bank has criticised the US for not giving enough financial ……… to the East European countries.a. aidb. allowancec. loand. premium

6. The President admitted taking ……… and had to resign.a. bribesb. fees

50

c. finesd. premiums

7. In our country ………of $ 250 is paid weekly to a family with more than three children.a. an allowanceb. a feec. an incomed. a wage

8. Mr. Rich earns $ 8,000 a month ……… and $ 5,000 a month net.a. bulkb. grossc. massd. wholesale

9. If they are not more careful with their accounts, they will go ………a. bankruptb. brokenc. pennilessd. poor

10. While you are away from the office on business trips, you will be given a daily ……… of $50 towards meals and accommodation.a. allowanceb. finec. permitd. reward

Give the names for the defined money expressions.

1. an amount of money you receive, usually weekly, in return for labour or servicew _ _ _

2. tax on imported articles paid to the customsd _ _ _

3. a fixed amount which is paid, usually monthly, to workers of higher ranks _ _ _ _ _

4. money which is in the form of coins and notes, not chequesc _ _ _

5. an amount of money which you lend to someonel _ _ _

6. money paid by divorced father to his former wife to upkeep his childrena _ _ _ _ _ y

7. money paid for professional services, e.g. to a doctor, a lawyerf _ _

8. paid as a punishment for breaking the lawf _ _ _

51

Put each of the following words or phrases into its correct

place in the text below.

banks beads earn paper

bills

currency exchange

rate

money coins

goods sell shells change

Money is what people use to purchase things. People spend money on ……… and services. Many people save part of their money by depositing it in a bank. People ……… money by performing services. ……… can be anything that people agree to accept in exchange for the things they …… or the work they do. Ancient peoples used such varied things as ………, ………, and cattle as money. Today, most nations use metal coins and ………. Different countries’ ……… and bills look different and have different names.A person can ……… his money for the money of any country according to the ……… . Usually, such rates are set by the central ……… of a country. The value of a country’s ……… may change, depending on the economic and political conditions in that country.

4.2. Banks

Read the following text:

Historically speaking, banks can be traced back to the days when religious people lent their assets (often in the shape of perishable goods) to the people who needed them in return for a promise to be ‘paid’ back the goods along with a slight increase in the amount lent; also, religious people used to collect deposits from the public who thought that their belongings would be safest in temples or shrines.Today, the banking sector still performs such tasks but no longer does it in the name of a god or divinity. Still, in the same way that the exchange of goods was central in religion, bankers have now become key participants in the economic activity.Banks are financial organisations acting as intermediaries between borrowers and lenders. Banks essentially deal with collecting funds, making credit judgements and assuming credit risks.Nowadays banking is more and more referred to as a service industry. A bank looks like a financial services conglomerate able to carry out basic services such as:

acceptance of deposits lendings foreign exchange transactions and bill finance investment management

As a bank is not an isolated organisation, it is expected to do business within an environment determining its operation, interest rates, exchange rates, profit and

52

expansion opportunities as well as the resources it needs to properly function (e.g. staff, customers or clients, buildings etc.). This environment is made up from political, economic, social, technological, legal and international factors.

State which of the following are true or false:

1. Banks deal with collecting data and information about governments.2. Banks are financial organisations acting as intermediaries between borrowers

and lenders.3. The main goal of a bank is to operate within insurance and pension funds

areas.4. Banks are not vulnerable to any changes in international politics as they have

branches and subsidiaries abroad.5. The basic services which banks offer relate to lendings, deposit-taking,

foreign exchange transactions, investments.6. The services of banks should meet the customers’ demands.7. Changes in national governments affect the activities of banks.

Discussion

The bank is expected to do business within an environment.Any social changes may affect both the attitude of customers and quality of staff.Why do most people want to work in the banking business?

Translate into English:

Mediul în care băncile îşi realizează funcţiile determină modul de lucru, ratele dobânzii, ratele de schimb, oportunităţile de dezvoltare şi resursele necesare desfăşurării unei activităţi corespunzătoare.Deoarece clienţii doresc servicii la standarde tot mai înalte, este de aşteptat ca băncile să studieze piaţa în mod continuu. Aproape fiecare ţară din lume îşi are propria monedă. Cele mai obişnuite categorii de bănci sunt cele de accept şi de investiţii, de compensare etc.Principalele segmente de piaţă pentru activitatea bancară sunt cele referitoare la sectorul agricol, zootehnic şi de pescuit, industrii şi servicii tradiţionale, construcţii şi sector imobiliar, spitale, şcoli, industria modernă, hoteluri şi aprovizionare cu alimente şi băuturi, magazine, turism etc.

Choose the correct answer:

1. Every Friday Fred ………. money out of the bank.a. cashedb. drewc. robbedd. stole

2. The ………….of the pound has fallen recently.a. expenseb. pricec. value

53

d. worth3. In order to buy his house Mr. White had to obtain a large …………..from his

bank.a. capitalb. debtc. financed. loan

4. The accounts show a ………….of $ 500 this month.a. decreaseb. deficitc. deteriorationd. devaluation

5. The bank will require three …………signatures when you open an account.a. naturalb. samplec. specimend. trial

6. Mr. Roger had to ……….all his savings from the bank to pay for a new car.a. exchangeb. retirec. substract d. withdraw

7. The ………...of the bank where I work is in the suburbs.a. branchb. housec. quarterd. seat

8. At this bank you can get 14% ………….on your savings.a. interestb. ratec. rentd. salary

4.4.1. Types of Banks

The way in which a bank is organised and operates is determined by its objectives and by the type of economy in which it conducts its business.According to the type of business performed, the following categories of banks are the most common:

central banks investment or merchant banks commercial banks clearing banks saving banks national and state banks industrial banks

A bank may or may not necessarily be in business to make a profit. Central banks, for example, provide a country with a number of services, while development banks exist to increase the economic growth of a country and raise the living standard of its

54

population. On the other hand, the aim of commercial banks is to earn profits. Therefore they provide and develop services that can be sold at a price that will yield a profit.A commercial bank, which provides the same range of services year after year, is less likely to be successful than one which assesses changes in the demand for its products and which tries to match products to its customers’ needs. New services are constantly being introduced and developed by commercial banks, and the full-service philosophy of many banks means that they are like financial supermarkets, offering a wide variety of services. However, not every bank may want to offer every kind of financial service.Many banks offer a combination of wholesale and retail banking. The former provides large-scale services to companies, government agencies and other banks. The latter mainly provides smaller-scale services to the general public. Both types of banking, however, have three essential functions, which are:

deposits payments credits

These three functions are the basis of the services offered by banks. They make it possible for banks to generate profits and to achieve their operating aims.

Which of the following banking services does the customer

normally have to pay for?

³ a cheque book³ an overdraft³ home banking³ clearing a cheque³ a loan³ a fund transfer

Match the words on the left with the appropriate ones on

the right:

1. withdraw a. interest

2. have b. a loan

3. be in c. a balance

4. carry forward d. funds

5. earn e. cash

6. open f. debt

7. endorse g. an overdraft

8. repay h. an account

9. transfer i. an agreement

1

0.

sign j. a bill of

exchange

55

Translate the following Romanian words so as to fill in the

crossword and find the vertical word.

1

2

3

.

4

5

6

7

8

9

1

0

1

1

1

2

1

3

1

4

1. venit2. cost3. dezvoltare4. bani5. a căştiga6. transfer7. comerţ8. filială9. cont10. împrumut11. a lua cu împrumut12. bancomat13. a da cu împrumut14. bancă

56

Translate into English:

Există două categorii importante de bănci: bănci care oferă servicii persoanelor fizice şi bănci care oferă servicii exclusiv marilor firme. Termenii “cu ridicata” şi “cu amănuntul” au fost iniţial folosiţi în legătură cu comerţul, unde primul se referă la vânzarea detailiştilor, iar cel de-al doilea la vânzarea în cantităţi mici cumpărătorilor individuali.Cel mai clar exemplu de bancă care oferă servicii persoanelor fizice este banca comercială. Băncile comerciale acceptă deposite, plătesc bani conform instrucţiunilor clienţilor, negociază împrumuturi, cumpără şi vând valută. Băncile comerciale obţin profit din ecart, adică diferenţa dintre rata dobânzii plătită deţinătorilor de aconturi şi rata dobânzii plătită celor care împrumută.Există mai multe feluri de conturi deschise la băncile comerciale: conturi curente, conturi de depozit la termen etc.

Central Banks

The Bank of England

It occupies a central position in

the UK financial system in terms of its

main activities and areas of activity.

The Bank of England is the

central bank of the United Kingdom,

and carries out a variety of traditional

central bank functions. The Bank is a

nationalised corporation.

The Bank’s balance sheet has

traditionally been divided into two

separate sections – the issue

department and the banking

department. The former is concerned

with the issue of notes by the Bank, and

is classified as part of the public sector

in the national account. The latter deals

with all the other banking business, is

classified as part of the banking sector,

and falls within the UK monetary sector.

The main areas of activity of the

Bank of England can be grouped under

the following categories:

a. Banking Role

The Bank of England acts as

banker to a variety of customers:

banker to banks and other financial

institutions, banker to the Government,

banker for a small number of private

customers, as well as holding accounts

for a variety of international

organisations, including the World

Bank, The Bank for International

Settlements (BIS) and the International

Monetary Fund (IMF).

b. Lender of Last

Resort

The Bank of England acts as

lender of the last resort to the domestic

banking system, in that it will provide

funds to the banking sector when it is

short in cash. Lender of last resort

facilities are provided through direct

loans to the banking sector, or by

purchasing Treasury bills or commercial

bills from the banking system.

c. National Debt

Management

Complementary to its role as

banker to the Government is the

57

responsibility for administrating the

public sector debt. This includes

financing any public sector borrowing

requirements, or at times managing the

public sector debt repayment.

d. Monetary Policy

Role

The most crucial function of the

Bank of England is the responsibility of

carrying out monetary policy

operations. Specific policy objectives

are set by the government and put into

action by the bank, though the Bank

has an important role as adviser to the

government on monetary policy

matters.

e. Note Issue

The Bank is responsible for

printing and issuing bank notes and

coins in the UK. Banks withdraw new

notes and coins from their accounts

held in the Banking Department of the

Bank of England.

f. Foreign Currency

Exchange Market

Intervention – the management

of the Treasury’s Exchange Equalisation

Account (EEA) is carried out by the

Bank of England. The EEA contains the

deposits of the UK’s gold and

convertible foreign currency reserves

that are used to intervene in the

exchange markets to stabilise the

exchange rate of sterling or to raise it

or lower it relative to other currencies.

g. Supervision

The Bank of England is

responsible for the supervision of all

banks under the Banking Act 1987.

The Bank evolved as the

regulator of banks largely through its

operations in the financial markets. The

institutions preferred to be regulated by

‘one of their own’.

The Bank of Romania

It is the central bank of

Romania, and carries out a variety of

traditional central bank functions. The

National Bank of Romania (BNR) is the

only authorised institution to issue

money as legal means of payment in

Romania.

The national currency is leul, its

subdivision was banul.

The BNR was founded in 1880

and it assumed and carried out its role

and attributions successfully, proving to

be one of the most important pillars of

the Romanian modern society.

Nowadays the BNR is a modern,

independent central bank just like the

other central banks in the states with

advanced market economies.

The main objective of the BNR is

to take care of the stability of the

national currency so as to keep prices

in balance. In order to accomplish that,

the BNR creates, applies, and is

responsible for the monetary and

foreign currency policy as well as the

credit and payment one.

As monetary authority of the

country, the Bank of Romania has a set

of distinctive functions:

Bank of banks. The Bank of

Romania acts as banker to a variety of

customers: banker to banks and other

58

financial institutions, banker to the

Government.

Lender of Last Resort. The

Bank of Romania acts as lender of the

last resort to the domestic banking

system, in that it will provide funds to

the banking sector when it is short in

cash – it is a kind of cashier and banker

of the state.

The Board of Directors of the

BNR is appointed by the Parliament for

a 6 year period of time. Its main

functions are: the design of the national

and foreign currency policy, credit and

payment policy and it also takes care of

the necessary measures to authorise

and supervise the whole banking

system.

The BNR network is made up of

22 branches and subsidiaries beside

the headquarters.

59

State which of the following sentences are

true and which of them are false:

1. One of the functions of central banks is the implementation of monetary policy.

2. It is not only the Bank of England that issues notes in the UK.

3. The Bank of England controls the credit system and money supply.

4. The Bank is responsible for the supervision of all banks.5. The Bank of England as lender of last resort cannot

provide facilities by means of direct loans, only by purchasing Treasury bills or commercial bills.

Match the following expressions with the

suitable definitions on the right:

a. legal tender 1. operations by a central bank

performed in the open market

such as buying securities on a

large scale;

b. lender of last resort 2. the speed at which a bank can

raise cash from its assets;

c. open market

operations

3. money that must be accepted in

discharge of a debt (in the UK

Bank of England notes);

d. liquidity 4. a function of a national bank

which consists in making money

available to commercial banks

in case of emergency.

4.4.2. Bank Organisation

Several factors have combined to make banking an international business. These include the growth of multinational companies and of

international capital markets, the increased competition between the banks themselves, and important improvements in communications and transportation. The major banks of the world have established extensive international operations by acquiring banks in other countries, by extending their own branch network abroad and by establishing correspondent relationships with foreign banks.

1 B

2 A

3 N

4 K

5 I

6 N

7 G

ACROSS:

1. It deals with money.2. They provide a country with a number of services. (2

words)3. They exist to increase the economic growth of a country

and raise the living standard of its population. (2 words)4. A person working in a bank.5. The aim of these banks is to earn profits. (2 words)6. Documents promising to pay sums of money at specified

times.7. The bank offers a wide variety of services. (3 words)

Match the words to others with similar

meaning:

1. to assess a. it provides large-scale services,

companies, government agencies

and other banks

2. deposits,

payments,

credits

b. money overdrawn on bank accounts

to agreed limits

3. savings banks c. guarantee for a loan

4. mortgage d. a bank mainly concerned with the

financing of international trade

5. retail bank e. the beneficiary of a draft

6. wholesale bank f. the maker of a draft

7. overdraft g. deposit accounts

8. clearing bank h. an arrangement with a bank which

pays the customer’s regular bills

charging them to his account

9. merchant bank i. they have no restrictions as

concerns the withdrawal of funds

1

0.

current accounts j. banks set up to accept deposits

from members of the public

1

1.

time or notice

accounts

k. set of shares and bonds and other

securities owned by a bank’s

customer

1

2.

drawer l. the three essential functions of a

bank

1

3.

standing order m

.

a bank which is a member of a

central organisation through which

checks are presented for payment

1

4.

portfolio n. it provides smaller-scale services to

the general public

1

5.

payee o. to evaluate

THE STRUCTURE OF AN AMERICAN BANK

Banking Division - Group 1 – The Americas- Group 2 – Europe- Group 3 – Africa

- Asia- Middle East

Private Banking Division - domestic and international marketsTreasurer’s Division - investment portfolio management

- commercial paper- foreign exchange- bullion- public finance

Administration Division - personnel- premises- economic analysis

Financial and Informational Systems Division - Comptroller’s Department

- Corporate Tax Department- Systems and Data- Processing Department

Corporate Planning Division – strategic planning- credit policy and administration

Comptroller (US) = Controller (B)

Headquarters

Banking Division

Private Banking Division

Treasurer’s Division

Administration Division

Financial and Informational Systems Division

CorporatePlanning Division

THE STRUCTURE OF A BRITISH BANK

Crossword puzzle

A

1

2

3

4

5

6

7

8

B

DOWN: A bank mainly concerned with the financing of international trade

Headquarters

Administration Division

Banking Division

Dealing Division

Corporate

Finance Division

Investment Management Division

Leasing Division

- planning- group financial control- accounting and audit- computer services- personnel- premises

- loans-syndicated loans- project finance-overdrafts-documentary credits- correspondent banking

- foreign exchange- currency options- money market transactions- bonds- floating rate notes- CDs (Certificates of Deposit)

- mergers- takeovers-acquisitions-divestments- stock market- capital raising

- pension funds- investment trust- offshore funds- unit-trusts

- leasing packages for lessers and lessees

ACROSS:

1. This division looks after all administrative matters2. This division covers foreign exchange, currency options,

money market transactions, bonds, floating rate notes etc.3. It deals with mergers, takeovers, acquisitions and

divestments, stock market and USM flotations in London4. A(n) ………….. is 5. Subsidiary6. It organises leasing packages for lessors and lessees7. It deals with loans, syndicated loans, project finance,

overdrafts, correspondent banking8. Investment……….. Division provides services to

companies: pension funds, investment trusts, unit trusts and offshore funds.

Match the words in column A with the

words/definitions in column B;

A B

1. syndicated loans a. the selling-off of interests

2. merger b. money placed in countries with very low

taxes

3. divestment c. an organisation where one bank acts as

an agent for another bank

4. currency option d. note on which interest rates are fixed

periodically, and which can be traded on

the market

5. takeover e. the starting of a new limited company,

where the shares are not included in the

official list on the Stock Exchange

6. USM flotation f. activities where one bank acts as an

agent for another bank

7. offshore funds g. a very large loan for one borrower,

arranged by several banks

8. correspondent

banking

h. the joining of two or more companies

into one

9. investment trusts i. a contract where the buyer has the right

to demand purchase or sale of a

specified currency, but no obligation to

do so

1

0.

floating rate note j. an organisation collecting and pooling

money and invests it in securities.

THE STRUCTURE OF A SCANDINAVIAN BANK

Board of Trustees

Board of Directors

Managing Director

Deputy Managing Manager

Deputy Managing Director

Corporate Business Division

Northern Regional Manager

Central Regional Manager

Southern Regional Manager

- pool resources- gain access to the lucrative markets dominated by the commercial banks

Crossword puzzle

A

1

2

3

4

5

6

7

B

DOWN: Bank set up top accept deposits from members of the public

ACROSS:

1. Board of people responsible for administering money or property for the benefit of others (3 words)

2. This board is elected by the …….. (see 1; 3 words)3. The bank is organized in…….. (singular)4. President (2 words)5. Person responsible for the branch network of

offices (3 words)6. Person responsible for different regions (2 words)7. This division’s role is to pool resources and gain

access to the lucrative markets dominated by the commercial banks

Match the words to others with similar

meaning:

1. lucrative markets a. loan of money at a fixed rate of interest,

involving a certificate of the debt

2. personnel b. system of local offices over the whole

country

3. debenture loan c. banks which offer a wide range of

services to the public, to companies and

to other organisations

4. commercial banks d. markets in which there are good profits

5. network of

branches

e. people who work here

4.5. The Stock Exchange

New York – Stock Exchange

Read the text paying attention to the words

written in italics:

The transactions and trading concerning shares and other securities take place in the Stock Exchange and are governed by strict rules. The administration of the Stock Exchange is vested in a Board of Governors.

Stockbrokers are individuals who buy and sell securities for clients. Most also provide securities information and advise their clients regarding investments. Once an investor has decided on a particular transaction, the investor gives the stockbroker an order for that transaction. The stockbroker will try to get the best possible price and the trade will be completed as soon as possible.Each stock is traded at only one post. Members interested in this stock congregate around post. Some bid for the stock, others offer it for sale. Transactions are carried out in this manner. When some particular stock is in great demand, its price rises. On the contrary, when the offers for sale are very numerous, the price for the stock falls.Since stock varies in price from one minute to the next, the Stock Exchange offers opportunities for speculation. A ‘bull’ is a man who acts in expectation of a rise in the price of some stock. On the contrary, the dealings of a ‘bear’ are based upon the expectation of a drop in the price of shares.

Choose the right word or expression to fill in

the empty spaces:

1. …………are paid to shareholders.a. profitsb. interestc. dividends

2. A ………is when one company offers to buy another.a. mergerb. takeoverc. bidd. share

3. A ………..is when two companies join together to create a third, separate company.a. mergerb. takeoverc. joint venture

4. ………….capital is risk capital.a. equityb. venturec. authorized

5. The management of stocks and shares is called ……….a. shareb. debenturec. portfolio

Translate into English:

Multe firme au fost nevoite să fuzioneze pentru a deveni mai competitive, în timp ce altele au fost adesea preluate împotriva voinţei lor. Nici o companie nu este suficient de mare pentru a nu se simţi ameninţată de tentative de preluare. Preţurile relativ scăzute ale acţiunilor precum şi ratele scăzute ale dobânzilor fac ca tentativele de preluare să fie mai uşoare.

Choose the appropriate words from the box

so as to complete the sentences:

Stock Exchange shares FT bear Dow Jones VAT

Nikkei Dow bull

1. The units of ownership of a company, allowing the holder to receive a proportion of the company’s profits are the……….

2. If a company is publicly quoted, its shares are sold on the …………

3. The rate of the tax added to the price of an article, paid by the buyer to the seller, and by the seller to the government is the ………..rate.

4. If the market is thought to be good and prices on the Stock Exchange are likely to rise, the market is called a ………market.

5. The index of share prices in America is the ……….index.

6. The index of share prices in Britain is the …………index.

7. The index of share prices in Japan is the …………..index.

8. If the market is thought to be poor and the prices on the Stock Exchange are likely to fall, the market is called a …………market.

All of the following expressions mean go

bankrupt, except for one. Which one?

1. go bust

2. go like a bomb

3. go to the wall

5. go under

6. go broke

7. go down the pan

4. go down the tubes

Complete the following dialogues using the

words below. What do the money expressions mean?

tight waste throw channellin

g

tied liquid bad made

1. What do you think of the plan to install an executive gym? To be honest, I think it’s a complete ……………

of money.2. Why don’t we just inject some more cash into the

project if it’s still underfunded? Because there’s no point throwing good money

after ……………….3. Can’t we pay off the loan with the money that’s

coming in from our subsidiaries in the Gulf? Well, most of that money is …………….up, I’m

afraid.4. So why aren’t we investing in new plant?

Because I’m afraid money’s a bit …………at the moment.

5. How much of that money’s ………………? Very little. In fact, hardly any of it can be

turned into cash for over a year.6. Look, we can’t just …………..money at the

problem. No, but it wouldn’t hurt to spend a bit more on

advertising, would it?7. We’ve made a pretty good profit for the last three

years running. In that case, shouldn’t we be …………….some

of the money into R&D?8. I don’t suppose you could lend me a couple of

hundred pounds, could you? What do you think I am: …………of money?

Words to remember

bid - an offer to buy something at a particular price; to make an offerbribery - giving people in official positions money or other presents to try to get them to do something for you

broker - an agent in a particular market, such as securities, commodities, insurance, etc.bureaucracy - a disapproving term for an organisational system employing a lot of people following a lot of rulescapital - the money in the form of coins and bank-notescash - money in the form of coins and bank-notescash flow - a company’s ability to earn cash; the amount of cash made during a specified period that can be used for investmentcommodity - any goods that can be bought; a raw material or primary product traded on special marketscosts - the expenses involved in doing or making somethingcurrency - money in usefee - sum payable for professional services, or for a privilegefine - a sum of money to be paid as a penaltyincome - money received as wages, interest, etcinterest - money paid for use of money borrowedmoney - current coins; coins and banknotes; wealth, any kind of currencypension - a regular sum of money paid to a retired worker in return for past services or contributionspolicy - a plan of action or a statement of ideals, determined by the top management, that guides the activities of a companyransom - a price demanded or paid for the release of a captivesalary - a fixed regular payment made by employers, usually monthly, for professional or office worksecurity - a certificate showing ownership of financial stocks, etc.stock exchange - the stock market: an institution for buying and selling stocks and shares; the transactions of thiswages - money paid (per hour, or day or week) to manual workers