Unit 11. The Structure of the World Economy. International Integration and Trade.

Unit 11. The Structure of the World Economy. International Integration and Trade.

I. Anticipating the Issue

Discuss your answers to the following questions.

1. What is the world economy? What are its main concepts?

2. What are the benefits of international integration and trade?

3. What countries does Belarus trade with? What are its imports and exports?

II. Background Reading

Read the following text. Focus on the meaning of the boldfaced words. Determine whether what you anticipated coincides with the text.

III. Vocabulary Reinforcement

A. Vocabulary

Match the words with their definitions.

source, v the act of reducing the strength of something
dilution, n any uninterrupted stream
framework, n constituting a separate entity or part
abundance, n to place (a tax, fine, task etc) on someone or something
flow, n a person who pleads for an idea
fragment, v get something from another country /business
discrete, adj the gradual beginning or coming forth
emergence, n the property of a more than adequate quantity or supply
impose, v break or cause to break into pieces
conduct, v decrease in size, range, or extent
advocate, n direct the course of manage or control
shrink, v the underlying structure

B. Word Families

Complete the chart.

Verb Adjective Noun
    emergence
  abundant  
  discrete  
flow    
    advocate
fragment    
    shrink
framework    

C. Word Groups

Match the words having similar meanings.

integrated conduct
run advance
broaden global
improve arise
emerge weaken
dilute expand

Match the words having opposite meanings.

global abundance
discrete dramatically
lack domestic
smoothly distribution
procurement ongoing

C. Word Fields

Which of the phrases below are associated with the world economy?

To impose tariffs; to negotiate non-tariff measures; the WTO; dilution of culture; domestic trade; global integration; free trade; supply-chain management; wage-price spiral; borderless world; ongoing decline in transportation costs; foreign reserves; input costs.

Find in the text words associated with international integration.

D. Word Usage

Complete: use an appropriate preposition where necessary.

through (2), to, for, of (3), on, among, in

1. Governments … some countries impose restrictions … international competition … its measures.

2. China, Japan and South Korea have come … an agreement to manage the crisis … international cooperation.

3. The Prime Minister … India admits that India needs to be engaged … management … world economy as it has a lot to contribute.

4. International marketing continues to grow directly contributing to increased and freer trade … nations.

5. The WTO is entitled to impose … sanctions … breaking international trade rules.

Complete: finish the following sentences.

1. The world economy can be presented as … .

2. Global economic integration began … .

3. International trade has emerged for the purpose of … .

4. International trade appears to be more costly than domestic trade due to … .

5. A decrease in tariff levels leads to … .

6. The global marketplace seems to be expanding because … .

Translate: give the English equivalents for the following.

Мировая экономика/национальная экономика; способствовать международной интеграции; возникновение свободной торговли; региональные рамки; проводить финансовые операции; отдел снабжения; нетарифный барьер; сближение вкусов и предпочтений; изобилие товаров; сторонники государственных ограничений; постоянное снижение стоимости транспортировки; уменьшить значение расстояний между странами в развитии международной торговли; внешняя/внутренняя торговля; отдельные (состоящие из разрозненных частей) шаги; производственный процесс, состоящий из отдельных (разрозненных по месту расположения) частей.

A. Reading for the Main Idea

Read the text for the main idea it and try the following tasks.

Explain the difference between “international trade” and “domestic trade”.

Answer the following questions.

1. What is the structure of the world economy?

2. How is international trade regulated?

B. Reading for Details

Read the text again to understand details and try the following tasks.

C. How the text is organised

V. Additional Reading

VI. Speaking

A. Giving your opinion

1. Explain why global integration is dependent on telecommunications.

2. Suppose you have been asked to make a speech about global integration. Try to focus on the emergence of global integration. Give examples of technological developments that have made global interdependency possible.

B. Discussion

Work in pairs. List your arguments for and against free trade.

The group should be divided into two teams: one gives reasons for and the other against free trade. Get ready to choose a person who would speak on behalf of each team and answer the opponent’s questions.

VII. Writing

Unit 12 BANKING

I. Anticipating the Issue

II. Background Reading

Banking

1. Without financial markets, borrowers would have difficulty finding lenders themselves. Intermediaries such as banks help in this process.

The following table illustrates where financial markets fit in the relationship between lenders and borrowers:

Relationship between lenders and borrowers
Lenders Financial Intermediaries Financial Markets Borrowers
Individuals Companies Banks Insurance Companies Pension Funds Mutual Funds Interbank Stock Exchange Money Market Bond Market Foreign Exchange Individuals Companies Central Government Municipalities Public Corporations

Banks take deposits from those who have money to save. They can then lend money from this pool of deposited money to those who seek to borrow.

2. Commercial or retail banks are businesses that trade in money. They receive and hold deposits, pay money according to customers' instructions, lend money, offer investment advice, exchange foreign currencies, and so on. They make a profit from the difference (known as a spread or margin) between the interest rates they pay to lenders or depositors and those they charge to borrowers. Banks also credit because the money they lend, from their deposits, is generally spent (either on goods or services, or to settle debts), and in this way transferred to another bank account – often by way of a bank transfer or a cheque (check) rather than the use of notes or coins – from where it can be lent to another borrower, and so on. When lending money, bankers have to find a balance between yield and risk, and between liquidity and different maturities.

Merchant banks in Britain raise funds for industry on various financial markets, finance international trade, issueand underwrite securities, deal with takeovers and mergers, and issue government bonds. They also generally offer stockbroking and portfolio management services to rich corporate and individual clients.

Investment banks in the USA are similar, but they can only act as intermediaries offering advisory services, and do not offer loans themselves. Investment banks make their profits from the fees and commissions they charge for their services.

In the USA, the Glass-Steagall Act of 1934 enforced a strict separation between commercial banks and investment banks or stockbroking firms. Yet the distinction between commercial and investment banking has become less clear in recent years.

3. Deregulation in the USA and Britain is leading to the creation of 'financial supermarkets': conglomerates combining the services previously offered by banks, stockbrokers, insurance companies, and so on. In some European countries (notably Germany, Austria and Switzerland) there have always been universal banks combining deposit and loan banking with share and bond dealing and investment services.

4. A country's minimum interest rate is usually fixed by the central bank. This is the discount rate, at which the central bank makes secured loans to commercial banks. Banks lend to blue chip borrowers (very safe large companies) at the base rate or the prime rate; all other borrowers pay more, depending on their credit standing (or credit rating, or creditworthiness): the lender's estimation of their present and future solvency. Borrowers can usually get a lower interest rate if the loan is secured or guaranteed by some kind of asset, known as collateral.

5. The National Bank of the Republic of Belarus is the central bank and a government agency of the Republic of Belarus operating exclusively in the interests of the Republic of Belarus. Among others, it performs the following functions: develops the Republic of Belarus Monetary Policy Guidelines and pursues, in concert with the Government of the Republic of Belarus, common monetary policy of the Republic of Belarus, following the manner prescribed by legislative acts of the Republic of Belarus; issues money; carries out foreign exchange regulation; acts as a central depositary of Government and National Bank securities, carries out state registration of banks and non–bank financial institutions; prescribes procedures for cash and non–cash settlements in the Republic of Belarus; in consultation with the President of the Republic of Belarus, establishes gold and foreign exchange reserves and manages them within the scope of its authority; sets prices for purchasing/selling precious metals and precious stones in carrying out banking operations.

6. Unfortunately, the key terms of finance have been recently associated with the word “crisis”. The global financial crisis of 2008–2009 emerged in September 2008 with the failure, merger, or conservatorship of several large United States-based financial firms and spread with the insolvency of additional companies, governments in Europe, recession, and declining stock market prices around the globe. The causes leading to the crisis had been reported in business journals for many months before September 2008, with commentary about the financial stability of leading U.S. and European investment banks, insurance firms and mortgage banks consequent to the subprime mortgage crisis.

Beginning with failures caused by misapplication of risk controls for bad debts, collateralization of debt insurance and fraud, large financial institutions in the United States and Europe faced a credit crisis and a slowdown in economic activity. The impacts rapidly developed and spread into a global shock resulting in a number of European bank failures and declines in various stock indexes, and large reductions in the market value of stock and commodities. World political leaders, national ministers of finance and central bank directors coordinated their efforts to reduce fears, but the crisis continued. At the end of October 2008, a currency crisis developed, with investors transferring vast capital resources into stronger currencies such as the yen, the dollar and the Swiss franc, leading many new independent economies to seek aid from the International Monetary Fund.

B. Word Families

Complete the chart.

Verb Adjective Noun
  depositary  
  intermediary  
    margin
yield    
    solvency
  secure  
    lender
  retail  
insure    
  liquid  
account    
  mature  
    issue

C. Word Groups

D. Word Fields

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

VI. Speaking

A. Giving your opinion

B. Discussion

Work in pairs.

1. Are there any ways in which bank transactions are beneficial to both, clients and banks?

2. What are the reasons for which people deposit money in banks?

C. Role play

‘Starting a bank”

You are supposed “to run a bank”. Outline what kind of a bank it will be. Consider the following questions:

What services would you provide? How would your bank make a profit? What challenges might you face in making your bank profitable?

Include a section in your business plan dealing with what you would do to make your bank more attractive to customers than other banks “run” by your classmates.

D. Project work. Draw charts for the financial system of 1) the republic of Belarus; 2) any country of CIS; 3) any European country; 4) the USA

VII. Writing

Unit 13. Globalisation.

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart:

Verb Adjective Noun
    outcome
accelerate    
  perceived  
erode    
acknowledge    
  vulnerable  
penalise    
undertake    
contribute    

C. Word Groups

D. Word Fields

1. Which of the phrases below are associated with opportunities globalisation provides?

Direct foreign investment; to improve living standards; sharing of goods and services; global institutions; international migration; reduction of barriers; trade liberalisation; access to health care; to increase life expectancy; spread of diseases.

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

VI. Speaking

A. Giving your opinion

1. Do you share the following point of view: ‘Today we have started hearing about globalisation and the economic issues that are a major component of it much more than ever before?’ Why?/Why not?

2. What would happen if Belarus decided to go alone and withdrew from the global economy, limiting its consumption to goods and services now produced within the country’s borders?

3. Is this saying connected with globalisation: ‘And if the grass looks greener on the other side of the fence, or on the other side of the border, is it any wonder that more and more people go there to graze?’ How?

B. Discussion

C. Case Study

Globalisation: South Korea

http://www.kewpid.net/notes/globalisation_sk.pdf

Since World War II, a number of East-Asian nations have experienced significant economic growth, and the rapid nature of this growth rate has allowed them to be classified as Newly Industrialised Countries (NICs). South Korea is a prime example, and major NIC, as since the 1960s, Korea has experienced per annum GDP growth of well over 9%. This exceptional performance is attributable mainly the high-quality labour supply and careful government planning, has resulted from the emergence of globalisation.

Gross world production, the total output by every nation, totals each individual nation’s GDP figures, and currently, South Korea is the 14th largest economy in the world, at almost US$600 billion, accounting for 1.6% of total world output, which highlights the phenomenal turn around for South Korea, from an underdeveloped third-world nation, to becoming a high-tech and rich manufacturing economy.

A key factor that has propelled South Korea’s growth has been its strong export emphasis since the 1960’s, where growth of exports climbed 21% annually. Emphasis has been placed upon the more skill-intensive, high-quality industries such as the motor vehicle industry and electronics manufactures. This has translated into South Korea presently having the sixth largest motor vehicle industry in the world, and is now also the fourth largest manufacturer of electronics goods.

Korea’s emphasis towards stronger education has directly contributed to its strong growth period by resulting in an extremely highly educated workforce. Currently, Korea devotes 14% of GDP towards educating the young. Another key factor in Korea’s growth has been the rise of transnational business conglomerates or “Chaebol” in Korea. During 1998, the four largest Chaebol – LG, Daewoo, Samsung, and Hyundai – constituted a massive 60% of total GDP, proving their significance towards an expanding Korean economy. As a result of the globalisation of these firms, names such as LG and Hyundai are commonly known throughout the world. These firms attempt to reduce costs of production by, ironically, using cheap foreign labour from its Southeast Asian neighbours, and using the foreign raw materials of the host country.

The pervasive influence of the government is one of the trademarks of the Korean economy. Since Korea is poor in natural resources, the government direction was inevitable for growth to occur. Prior to 1960, Korea was an impoverished nation, yet today, it is one of the most urbanised nations in the world, with rates of over 75%, compared with 35% urbanisation prior to 1960.

As South Korea has risen as an NIC, it has become actively involved in most of the world’s important trade blocs and agreements. Korea has been a member of APEC, and it has with the other “Asian Tiger” economies, remained one of the fastest growing economies in the world despite the Asian financial crisis in 1997/98.

However, at the height of the Asian financial crisis, Korea was hit hard, where, after long periods of sustained economic growth, the economy came to an abrupt halt. In November of 1997, Korea’s economic situation deteriorated to the point where the Korean government requested a US$ 50 billion loan from the International Monetary Fund (IMF) to bail out its ailing economy out of recession, while forcing continual deregulation and relaxing its tight laws on foreign takeovers. Nevertheless, the Asian recovery of 1999 saw the South Korean economy come roaring back, due to a surge in private consumption expenditure and net foreign exports. Statistics show that Korea has recovered faster than any of the crisis-hit nations, and the sure sign of economic revival was that major firms resumed investment within Korea, with figures indicating a 13% increase in the first quarter of 1999, compared with a 27% plunge the previous quarter.

In relation to South Korea, economic growth has led to a general degradation of its natural environment, especially with the pollution of its major rivers of Han and Nakdong. As little priority is currently being given to the Korean environment, the inevitable outcome is that global pollution levels would increase and quality of life would decrease as a result. In order to maintain ecologically sustainable development for the future, governments must accept some trade off of growth to accommodate environmental protection.

The globalisation of nations has become the forefront of economic discussion and planning. The move towards market-based systems characterised by open market trade, financial transfers and technological advancements has become increasingly significant as organisations such as the WTO become more influential.

South Korea is a perfect example of a globalised nation through it shifting emphasis towards rapid industrialisation, technological innovation and aggressive exporting through comparative advantage, along with a more relaxed government influence are the keys toward South Korea’s maximisation of sustainable economic growth.

Task: this text gives a vivid example of the country which is strongly involved in globalisation. Using the material from www.wikipedia.org, www.google.com.by, demonstrate all pros and cons of globalisation for Belarus.

VII. Writing

Unit 14 NATIONAL ECONOMY

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

Verb Adjective Noun
  massive  
substitute    
    shift
deposit    
subsidize    
  innovative  
    affect
devastate    
  contaminated  
    purification
  fertile  
reduce    
    competitor

C. Word Groups

D. Word Fields

1. Which of the words and phrases below are associated with the following: 1) heavy engineering industry? 2) forestry and agriculture? 3) light industry? 4) banking?

Trailer tracks; optical instruments and devices; leather; lowlands hollows; dump trucks; ornithology routes; garment; timber; yarn; private plot; oil and gas basin; kitchen stoves; furniture; lumbering; livestock and crop; earthmovers; the tariff system; knitting; fur; chemical fibers; fertilizers; textiles; curtain and lace products; garment; optical instruments and devices; accounts; contamination; loans; currency budget; radioactive fallout; deposit; credit; interest rate.

E. Word Usage

1. Put the following words into correct order: e.g.: Increasingly difficult market conditions. Consult the text after you have tried it.

tested routinely exports milk
payments government advanced credit
run farms privately Belarusian
interest strongly negative rates
production complex multisectoral
textile novel materials raw
hygienic improved exceptionally properties
clean regions environmentally
industrial well-developed base relatively

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

The Foreign Investment Law

A joint venture created by pooling the capitals of Belarusian and foreign persons is among the most popular forms of cooperation with foreign partners in business in Belarus. A foreign legal person is also entitled to establish a business with 100% participation of foreign capital. Business conditions for enterprises with/without participation of foreign capital are basically the same. The Foreign Investment Law establishes certain preferences and advantages for enterprises with foreign capital. The major of them are granted to enterprises where the foreign investor(s) contribution amounts to 30%. These enterprises need no license to import/export their own products and they are not bound to sell part of the foreign currency earnings on the interbank currency market. They are exempt from income tax for the initial 3-year period of their activity (should their produce is of special importance for the Republic of Belarus, the Council of Ministers might reduce the tax rate for them by half for the maximum period of three years).

Any enterprise with participation of foreign capital is entitled to apply both the statutory and chartered depreciation rates; it is not subject to price and distribution restrictions for its produce. An enterprise with participation of foreign capital can be dissolved by only judgment. The law guarantees the right to transfer foreign currency income derived from the enterprise with foreign capital to any foreign investor. The law also guarantees against forced extraction of investments and illegal intervention of state bodies in the activities of enterprises with participation of foreign capital. A major guarantee of stability of business activity for enterprises with participation of foreign capital in the Republic of Belarus is Article 34 in the Law on Foreign Investments on the Territory of Belarus which imposes a moratorium on application of legal rules which might impair the position of and business conditions for foreign investors and enterprises with participation of foreign capital. Should an act of the like effect has been adopted, the rules applied to an enterprise with participation of foreign capital would be very much like those in effect at its registration for five years since the registration date.

Any goods imported to the customs territory of the Republic of Belarus as a contribution of a foreign partner into the chartered capital of an enterprise with participation of foreign capital, shall be exempt from customs duty and value-added tax, provided they belong to fixed production assets, are non-excisable, and imported within the period established by the constituent documents for formation of the chartered capital of the enterprise with participation of foreign capital. The minimum contribution of each foreign investor in the chartered capital shall be no less than 20,000 USD. The chartered capital of enterprise to be established may consist of both monetary and non-monetary contributions. According to the law at least 50% of the declared chartered capital of any enterprise with participation of foreign capital shall be contributed before expiration of the one-year period and 100% before expiration of the two-year period since its registration. The law provides that the time of forming the chartered capital can only be changed by consent of the Council of Ministers.

VI. Speaking

A. Giving your opinion

C. Role play

A round table discussion.

How optimistic are you about the future of business in Belarus? Discuss the problem with regard to the following: Employment and labour market; Inflation; Market regulation; Wages; Electronic and computer industry; Forestry and agriculture; Tourism.

VI. Writing

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

Verb Adjective Noun
acquire    
    bid
litigation    
    merger
write off    
  purchasable  
    buyout
recombine    
  extensive  
  relative  

*Remember: Do not confusehinder andprevent.Hinder means to make the progress or development of something slow down or stop.Prevent means to make it impossible for someone to do something.

C. Word Groups

D. Word Fields

1. Which of phrases below are associated with the following: 1) a hostile acquisition? 2) a friendly acquisition?

Harmful effect on the economy, the takeover is perceived as beneficial, new management may not understand the technology, fears among employees about job security, the acquired company gets free access to new technologies, consolidation often results in layoffs, breaking into new markets using the brand of the acquired company.

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

Demergers

Demergers are situations in which divisions or subsidiaries of parent companies are split off into their own independent corporations. The process for a demerger can vary slightly, depending on the reasons behind the implementation of the split. Generally, the parent company maintains some degree of financial interest in the newly formed corporation, although that interest may not be enough to maintain control of the functionality of the new corporate entity.

A demerger can be seen as the opposite of a merger. With a merger, the object is to take two separate business entities and combine them to form a new corporation that is able to accomplish more than the two former entities could ever accomplish on their own. The demerger still has the same ultimate goal. However, the thought is that by splitting off a portion of the existing company into a new and separate corporate entity, the chances for success and profitability are greater than if the company remained one unit.

There are many reasons why a company may undergo a demerger process. In some cases, the action may be necessary in order to comply with laws and regulations in place in a location where the company wishes to establish a presence. At other times, a division may have reached a point where it would become more profitable if it were to become an entity that is separate from the parent. The demerger may come about because the parent is changing direction and the division may be spun off as a way to continue meeting the needs of current clients while allowing the parent to focus on new markets. In all cases, the general idea behind the demerger is that the action will prove to be profitable for all parties concerned.

VI. Speaking

A. Discussion

B. Giving your opinion

C. Case Study

1. Study the case.

In October 2009 Mr. B, a famous actor, started a litigation in the court against his business partner, a well-known businessman Mr M, who, in his turn, did the same against Mr B. They could not agree upon the right to own the “South Pole” trade centre in Moscow. It had been built and then successfully used for 2 years by the both partners. Mr B owned 1/3 of the shares. Every party seemed to be satisfied, as the centre provided a good profit. Then they … (1) and as a result quarreled. The actor insists that he has always been running an honest business, while his partner once used to be involved in a strange bankruptcy of an alcohol producing plant. (2) As a result the partners decided to drift apart. There were a few ways out: either one of the partners could buy the other's shares out, or they could demerge, or the whole business could be bought by the third party. As a result the centre was sold at a price from 40 to 80 million dollar. (3) (After «Комсомольская правда, March, 2010).

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

Verb Adjective Noun
    corporation
    share
register    
respond    
  executive  
  own  
trade    
  liable  
associate    
limit    
    termination

C. Word Groups

D. Word Fields

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

One Person Company

Private companies represent a different set of relationships in terms of ownership, risk and reward as compared to public companies. Since private companies, do not access capital markets, they require less rigorousprotection for their shareholders. The existing law provides for certain relaxations to private companies on account of their nature. In particular, the law should enable a private company to take any decision it is otherwise empowered to take, without observing the formalities of the Act if the members of the company unanimously agree. A simplified circular resolution procedure should also be considered where unanimity is not possible. Since disputes may also arise amongst the members of such companies, the costs of which may ruin the company, the regime for private companies should contain simplified dispute resolution procedures.

With increasing use of information technology and computers, emergence of the service sector, it is time that the entrepreneurial capabilities of the people are given an outlet for participation in economic activity. Such economic activity may take place through the creation of an economic person in the form of a company. Yet it would not be reasonable to expect that every entrepreneur who is capable of developing his ideas and participating in the market place should do it through an association of persons. We feel that it is possible for individuals to operate in the economic domain and contribute effectively. To facilitate this, the Committee recommends that the law should recognize the formation of a single person economic entity in the form of ‘One Person Company’. Such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters. 6.1 The concept of ‘One Person Company’ may be introduced in the Act with following characteristics :- a) OPC may be registered as a private Company with one member and may also have at least one director; b) Adequate safeguards in case of death/disability of the sole person should be provided through appointment of another individual as Nominee Director. On the demise of the original director, the nominee director will manage the affairs of the company till the date of transmission of shares to legal heirsof the demised member. c) Letters ‘OPC’ to be suffixed with the name of One Person Companies to distinguish it from other companies.

VI. Speaking

A. Giving your opinion

1. Explain how you understand the words ofJohn D. Rockefeller, an American business leader.

‘A friendship founded on business is a good deal better than a business founded on friendship’.

Work in groups.

Compare economic advantages and disadvantages of sole proprietorship, partnership and corporation, franchising.

Work with a partner.

Ask and answer questions about ◊‘Medovik’◊-What are ‘Medovik’s business activities? What type of company is it? Where is its head office situated? What is the number of its employees? What are its current projects? What are its future trends?

Principal business activities Form of business Head office Number of employees Current projects Future trends
Confectionery production: chocolates, candy bars, chewy candies, jelly shapes. corporation Grodno Belarus 200 p. Exploring some business opportunities in the regions, developing a new chain of stores. Building up oversea premises.

B. Role play

VII. Writing

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

verb noun adjective
audit    
  profit  
report    
    summarized
  charge  
  statement  
lose    
  depreciation  
    variable
  liable  

C. Word Groups

D. Word Fields

Which of the words and phrases below are associated with the following: 1) capital and reserves? 2) liabilities of the company?

Share capital, dividends, premises, running costs; cash, loans, credits, overhead charges, land and building, plant and equipment, fixed costs, revenue, loans, income, credits, plant and equipment, issued share capital, current assets, taxes, expenses, variable costs, invariable costs.

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

Business Failure

Businesses may have a very high failure rate. The reverse side of the coin is that almost a half of them survive and go on to prosper. Key reasons for a business failure may include:

Poor marketing: Successful modern businesses are ones that understand and meet the requirements of their customers. Detailed market planning and market research is therefore an essential for new businesses, to find out details such as the potential size of the market, the extent of competition, as well as consumer preferences and tastes.

Cash flow problems:Many businesses struggle through poor cash flow management. It is all very well having a good idea and a good product but it is also necessary to be able to meet short term outflows. Many businesses try to grow too quickly, and end up borrowing too much money externally, resulting in crippling interest repayment charges.

Poor business planning:Business planning should cover aspects such as marketing, finance, sales and promotional plans, as well as detailed breakdowns of costing and profit predictions. It is often said that 'failing to plan, is planning to fail'.

Lack of finance:Insufficient finance often means that businesses are unable to take opportunities that are available to them, or have to compromise - going for high cost solutions to problems, rather than lower cost ones that would yield greater competitive advantage.

Failure to embrace new technologies and new developments: In a fast changing world leading businesses are ones that make best use of advanced modern technologies in an appropriate way. Firms that operate with outdated technologies and methods frequently find themselves at a cost disadvantage over more dynamic rivals.

Poor choice of location: Location is a very important business decision. A good location is one that appeals to large numbers of customers, while at the same time minimizing costs. For example in retailing it is often a mistake to choose a low cost location that is not visible to customers. However, conversely there are considerable cost advantages to out-of-town retailers that customers are prepared to travel to visit.

Poor management: Weak and inexperienced management is one of the major causes of business failure. Managers have to work extremely hard, and to understand their customers needs, and the business that they are in if they are to be successful.

Poor human resource relations: Are often a cause of failure. Successful businesses motivate their employees to work hard to help the business to succeed.

Lack of clear objectives: Successful organizations have clearly focused and communicated objectives that enable everyone in the organization to pull in the same direction.

VI. Speaking

A. Giving your opinion

B. Discussion

C. Role play

The situation

The company has had a difficult year. Find the evidence for these facts:

e.g. Fact- Competition was very tough.

Evidence- Turnover has fallen.

The company has borrowed money to buy new equipment.

Their customers have been demanding that they keep lager stocks.

The customers have also been demanding longer credit periods.

Their suppliers have been insisting on shorter credit periods.

The roles:

The owners of the company; The auditors; The suppliers; The customers.

VII. Writing

Unit 18 TEAM BUILDING

I. Anticipating the Issue

II. Background Reading

Team Building

1. Team development

Team building potentially includes a very wide variety of methodologies, techniques, theories and tools, values and philosophy. At the foundation of good team building is compassion and humanity - genuine care for others. This is what sustains and fuels people in organizations.

The aim of team building is to achieve improvement in the way your staff view and do their work, to inspire them to action so that your organization runs more smoothly and your staff interactions (say department to department, or hierarchically) improve.

2. Before an effective team can be developed, the organizational environment itself must foster teamwork. Accordingly an effective organization must meet certain requirements: 1) Share a certain vision or sense of purpose that all its employees can articulate. 2) Develop a structure appropriate for the organizational environment (e.g., a structure that works for a bank may not work for a fire department). 3) Strike a balance between reason and intuition so that its employees are neither too oriented towards nor too disregarding of “hard” facts. A leader should examine all pros and cons in such plights, alignemployees so that everyone is going in the same direction, improve the way team members interact, thus improving their ability to solve problems. Better problem–solving means better efficiency in general. Increased efficiency tends to boost or increase morale and productivity. It also helps to decrease stress, turnover and operating costs and bolster your organization’s public image. There are four key variables in the team development process. They are:

· Goals - individuals must understand and accept goals.

· Roles - team members must know what others want and expect from them.

· Procedures - All members must know how to get work done together e.g. making decisions, solving problems, managing time, communicating, resolving problems).

· Relationship - People who like and or respect one another usually work more effectively.

Ambiguity in these variables produces stress andhampers performance. To make the team development process more effective, team building exercises and activities can be used. They are designed to be stimulating, informative and challenging.

3. Workshops

Workshops are an extremely flexible and effective method for training, learning, development, change management, team building and problem solving. Workshops are effective in managing change and achieving improvement, and particularly the creation of initiatives, plans, process and actions to achieve particular business and organizational aims. They are also effective for breaking down barriers, improving communications inside and outside departments, and integrating staff after acquisition or merger. Besides, workshops are particularly effective for (CRM) customer relationship management development.

4. Team building games

Team building games, exercises and activities help build teams, develop employee motivation, improve communications and are a sort of fun. Quizzes also warm up meetings and improve training, and liven up conferences.

5. Role Playing

During the preparation stage for the team building workshop, relevant special interest groups or (SIGs) are identified. The key during role playing, is role reversal, for instance rank and file employees role play senior management, then explain the art of give - and - take in handling the situation. Output from the team building process, such as problems, challenges, opportunities, weaknesses etc. are evaluated by SIGs.

6. Buzz sessions

Buzz sessions can be inter-spaced through out the team building process to stimulate thought, discussion and add interest. These short sessions entail a guest-speaker delivering a short presentation on a relevant subject. Such speakers can be experts in their field; they can be internal employees or external guests from suppliers or customers.

7. Site visits

Site visits can be arranged and conducted prior to the workshop, during the workshop or post the workshop. They are used to develop organizational awareness to compare how the organization perceives itself internally and how it is perceived externally by suppliers and customers. Site visits also develop better working relationships and improved problem solving capability.

8. Risks and dangers of corporate events and social responsibility

Corporate events in terms of effects on employees' families and people's broader life needs should be carefully considered in team building process. Nowadays organizations have a deep and wide responsibility, which is progressively reflected in law. Alcohol and discrimination where wining and dining is concerned are big issues in modern organizations. Encouraging healthy work and home life balance tends to make organizations run smoother and less problematically, notably in areas of grievanceand counseling, stress and conflict, disputes and litigation, recruitment and staff retention, succession planning, company reputation and image.

Today's well-led and ethically-managed corporations understand that divisive treatment of employees' partners and families undermines loyalty and motivation of employees. Modern ethical socially responsible organizations strive for the moral code of the team and do their best to minimize negative effects of corporate events.

B. Word Families

Complete the chart.

verb noun adjective
align    
boost    
  compassion  
  grievance  
  litigation  
    morale
disregard    
vary    
  dispute  
    divisive
    ambiguous

C. Word Groups

D. Word Fields

1. Which of the words and phrases below are associated with the following: 1) team development process? 2) risks and dangers of corporate events?

To sustain and fuel the staff; to inspire the staff; to foster the team; organizational environment; turnover and operating costs; buzz sessions; to disregard facts; to align employees; to hamper performance; to develop organizational awareness; to break down barriers; social responsibility; strive for the moral code of the team; to undermine/foster employee’s loyalty and motivation; to encourage healthy work and life balance; weaknesses; employees' families; life needs; employer's duty of care; law; areas of grievance and counseling; divisive treatment; disputes and litigation.

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

VI. Speaking

A. Giving your opinion

Comment on the saying.

Coming together is a beginning. Keeping together is progress. Working together is success. ( Henry Ford, an American industrialist, 1863-1947)

B. Discussion

C. Role play

Situation №1

A sales rep went on a three-day business trip: He/She: stayed in a 5-star hotel; phoned home from their room; ordered breakfast in their room; drank most of the mini-bar; had clothes dry-cleaned by the hotel. After the trip, the Finance director thinks the rep’s expenses are excessive and refuses to pay them. The sales rep defends their actions.

The roles: the Finance director, the sales representative.

Situation№2

A team of multinational staff is managing a number of resort centres in Minsk, Belarus. The managing director is rather young and he is keen on providing team building games, buzz sessions with external experts to improve employee motivation and communication. In spite of this fact one employee is unhappy and uncooperative. He refuses to participate in some of the team’s activities.

The roles:the team leader, the unhappy employee.

Task for the team leader:

find out about the problem; offer some solutions so that the employee performs better as a member of your team.

Task for the unhappy employee:

feels he/she is working harder than other members of the team; is always the last to leave work; his/her hard work is not recognized or appreciated; is married and misses his/her family.

VII. Writing

Write an essay on the following topic. "None of us is as smart as all of us”

I. Anticipating the Issue

II. Background Reading

Risk and Crisis Management

1. Corporations are operating in a turbulent world where businesses are seeking growth through globalisation, outsourcing, consolidation, just-in-time delivery and cross-border supply, thus increasing their exposure to risk. Add regulatory, legal and labour considerations, and you begin to understand the complex nature of business risk in the 21st century.

2. All business is built on risk. By putting money into a new venture, investors are taking serious financial risks. Some businesses fail and this can happen increasingly quickly after they are founded.

3. The majority of all loss can be prevented or minimized and this should be the first part of any disaster recovery plan. Prevention is better than cure and there is a lot companies can do to stop such events from becoming a disaster in the first place. However, all risks can never be fully avoided or mitigated simply because of financial and practical limitations. Therefore all organizations have to accept some level of residual risks.

4. Research shows that more than one-third of the world’s leading companies are not sufficiently prepared to protect their main revenue sources and have room for improvement. To best protect cashflow, competitive position and profit, companies need to assess the potential hazards that can impact top revenue sources and make sure there is business continuity planning. The most successful, least crisis-prone businesses will be those whose boards have shown firm resolve and taken decisive actions. Effective, integrated strategies for dealing with tomorrow’s risks require a change in culture at board level now.

5. A new research found that half of European companies did not know how to manage the most significant risks to their businesses. Most of senior executives admitted that they did not have procedures in place to manage properly operational and strategic risks, which were responsible for most company failures in the 21st century. The three most significant risks, and those that businesses felt least able to manage, were: (a) increased competition, (b) adverse changes in customer demand, (c) reduced productivity because of staff absenteeism and turnover.

6. Management processes could easily help companies identify and address these risks. Instead, too many companies take a low-level approach to risk management preferring to focus on easy-to-solve risks, such as asset protection and health and safety.

7. Risk is dynamic, it changes with the environment. Unless businesses accept this and review risk regularly, they could eventually find themselves in a state of crisis, struggling to survive rather than focused on growth. Business leaders have an obligation to their employees, shareholders and other stakeholders to properly protect themselves against risk. Businesses that do attempt to manage these risks will boost their bottom lines. Risk management is a practice of systematically selecting cost effective approaches for minimising the effect of threat realization to the organization. The strategies of effective risk management include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.

8. A crisis is a major, unpredictable event t

Наши рекомендации