Extended reading

UNIT 1

Task 1. Read the text “Frederick Taylor” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

4. Is Taylor generally recognised as “the father of scientific management”?

5. Did he have good life experience to see the greatest possibilities for improving the quality of management?

6. What made Taylor prosperous?

7. When was his well-known work published?

8. Why were most of congressmen unfriendly to Taylor’s ideas?

9. What are Taylor’s principles?

FREDERICK TAYLOR

(1856– 1912)

Frederick Winslow Taylor stopped going to college and started out as a trainee patternmaker and machinist in 1875, joined the Midvale Street Company in Philadelphia as a worker in 1878 and rose to the position of chief engineer after getting a degree in engineering through evening study. He invented high-speed steel-cutting tools and spent most of his life as a consulting engineer. Taylor is generally recognised as “the father of scientific management”. Perhaps no other person has had a greater impact on the early development of management. His knowledge and practice as a trainee, a common employee, a foreman, a master mechanic and then the chief engineer of a steel company gave Taylor more than enough opportunity to know personally the problems and attitudes of workers and to see the greatest possibilities for improving the quality of management.

Taylor’s patents for high-speed steel-cutting tools and other inventions, as well as his early engineering consulting work, made him so prosperous that he retired from working for payment in 1901, at the age of 45 and spent the remaining 14 years of his life as a not paid advisor and lecturer to advance his ideas on scientific management.

Taylor’s most important concern throughout most of his life was to enlarge efficiency in production, not only to minor costs and increased profits but also to make possible enlarged pay for workers through their higher productivity. He supposed that the use of scientific methods, rather than custom and rule of thumb, could yield productivity without the expenses of more human energy of effort.

His well-known work entitled “Principles of Scientific Management” was published in 1911. But one of the best expositions of his philosophy of management can be found in his testimony before a committee of the House of Representatives; he was forced to defend his ideas before a group of congressmen, most of whom were unfriendly because they thought, along with labour leaders, that Taylor’s ideas would lead to overworking and displacing workers.

Taylor’s principles are as following:

• Changing rules of thumb with science (organised knowledge).

• Attaining harmony in group activity, rather than disagreement.

• Achieving teamwork of human beings, rather than chaotic individualism.

• Working for highest output, rather than limited output.

• Developing all workers to the highest degree possible for their own and their company’s highest success.

Task 3. Read the text “Henry Fayol” and translate it.

Task 4. Find answers to the following questions in the text and write them down:

1. How is H. Fayol called?

2. When did his monograph appear?

3. Into what six groups are the activities of a business activity divided, according to H. Fayol?

4. Is the formulation of a theory of management essential for effective teaching of the subject?

5. What elements of management and its functions did H.Fayol consider? For what spheres are they relevant?

HENRY FAYOL

(1841– 1925)

The real father of modern management theory is the French manufacturer Henry Fayol. His monograph “Administration Indust­rielle et Generale” first appeared in 1916 in French and was reprinted several times. Fayol set up that activities of a business could be divided into six groups:

• Technical (production),

• Commercial ((buying, selling and exchanging),

• Financial (search for and optimum use of, capital),

• Security (protection of property and persons),

• Accounting (including statistics),

• Managerial (planning, organising, command, coordination, control).

Fayol considered the elements of management and its functions – planning, organising, commanding, coordinating and controlling – and examined them. In his works he pointed out that these principles were relevant not only to business but also to political, religious, philanthropic, military and other undertakings. Since all enterprises need managing, it follows that the formulation of a theory of management is essential for effective teaching of the subject.

Task 5. Read the text “Hugo Munsterberg” and translate it.

Task 6. Find answers to the following questions in the text and write them down:

1. Is Hugo Munsterberg “the father of industrial psychology”?

2. What scientific degree did Hugo Munsterberg receive?

3. What were the objectives of his research?

4. What was his approach aimed at?

5. What was he interested in?

HUGO MUNSTERBERG

(1863– 1916)

Hugo Munsterberg is “the father of industrial psychology“. He studied psychology and received his Ph.D. at the University of Leipzig in 1885. He also studied medicine and received the M.D. degree at the University of Heidelberg in 1887. At the age of 29, in 1892, Munsterberg was invited to Harvard by psychologist William James to take charge of the psychological laboratory and to act as professor of experimental psychology. In 1910, his interest turned to the use of psychology in industry. In his book entitled “Psychology and Industrial Efficiency”, published in 1912, Munsterberg clarified that his objectives were to discover:

• how to find people whose mental qualities best fit them for the work they are to do;

• under what psychological conditions the greatest and most satisfactory output can be obtained from the work of every person;

• how a business can influence workers in such a way as to obtain the best possible results from them.

He was interested in the reciprocity of interests between managers and workers. He stressed that his approach was even more strongly aimed at workers and that with the help of it he hoped to decrease their working time, increase their wages and raise their “level of life”.

UNIT 2

Task 1. Read the text “McDonald’s Corporation” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

1. Who was responsible for making McDonald’s what it became by the 1980s?

2. What was Ray Kroc impressed by at the small restaurant?

3. What concept has McDonald’s developed?

4. Did the original McDonald’s units have inside seating?

5. When was the first restaurant with drive-thru window built?

6. What innovations did McDonald’s pioneer?

7. What challenge was McDonald’s faced with?

8. What do McDonald’s plans for future include?

Task 3. Using your own experience and facts from the text point out pros and cons of McDonald’s activity.

Task 4. Prove that McDonald’s Corporation participates in public events. Confirm your answers using the sentences from the text.

Task 5. Compose a summary of the text in 80 words.

MCDONALD’S CORPORATION

Ray Kroc, more than any other person, was responsible for making McDonald’s what it became by the 1980s. In 1954 52-year-old Ray Kroc’s attention was focused on a particularly successful restaurant in San Bernardino, California. He was very impressed with a number of factors he saw at that small restaurant. They included the quality of food, fast service, cleanliness and inexpensive prices. Kroc approached the owners, Richard and Maurice McDonald, with a proposal to sell franchises for their fast-food restaurant concept.

McDonald’s new chief executive, Kroc took note of several significant demographic trends. The American middle-class popula­tion was relocating to the suburbs in a massive migration. Kroc believed these factors pointed to the need for a chain of restaurants that could provide uniform quality, cleanliness and quick service. McDonald has developed the concept of QSC – quality, service and cleanliness. Quality meant fresh, good-tasting meals using quality ingredients and served hot. Service meant fast, friendly service by trained McDonald’s personnel. Cleanliness meant that the store’s interior and exterior were free from dirt and trash.

At the end of 1984, McDonald’s had 8,304 fast-food restaurants: 6,598 of them in the USA and 1,706 in other countries. The original McDonald’s units did not have inside seating. The first restaurant with inside seating was opened in 1966. The first restaurant with drive-thru window was built in 1975. By the mid 1980s, drive-thru window orders accounted from 10 to 45 percent of the sales for the usual McDonald’s restaurant.

McDonald’s prices were extremely competitive and value oriented. Its various hamburgers were priced equal to or cheaper than most of its food competitors.

McDonald’s advertisements relied upon a variety of media. McDonald’s began some network television advertising in 1967. McDonald’s was the official fast-food restaurant sponsor of the 1984 Olympic Games.

Until 1984, the focus of McDonald’s marketing efforts had been to target the baby boom market. In the late 1980s and early 1990s that market segment was expected to minimise. A challenge, which McDonald’s faced, was how to adapt to a new generation of older, more health-conscious consumers. In view of healthy food trend, fast-food chains were experiencing stabilising customer counts and slackening income growth.

The company undertook extensive testing of chicken and other types of sandwiches and salads. This helped to screen out new products that had limited chances for success. New introductions often led to innovation in the production equipment used by McDonald’s. McDonald’s had pioneered a number of innovations:

• a clam shell grill that cooked patties simultaneously on both sides;

• wireless communication headsets used by customers as they came through the drive thru;

• energy management systems to reduce air-conditioning and related electrical costs by optimising running times of compressors in response to outside temperatures;

• lighting control panels to automatically regulate the operation of all exterior lighting and signs;

• laser disc point-of-purchase displays;

• a Ronald Room for young customers where Ronald McDonald wall decorations lit up, then moved, played music and even spoke to children.

McDonald’s had consistently followed a policy of promotion from within. Training for all new employees was done on the job. A new crewmember was trained for at least ten hours before serving his first customer. In addition, new crewmembers read training manuals that provided them with further job know-how.

McDonald’s plans for future include adding new restaurants all over the world, maximising sales, emphasising international expan­sion and profitability.

UNIT 3

Task 1. Read the text “Latin America’s Economies: Here We Go Again!” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

1. What happened after the collapse in Argentina in 2001?

2. Did the financial markets in Latin America’s biggest economy come close to panic in 2002? Why?

3. What are the similarities and differences between Brazil and Argentina?

4. May the rich countries and the IMF decide whether to swallow their doubts and organise large-scale financial support?

5. What two things would help to stabilise the situation?

Task 3. Compose a summary of the text in 80 words.

LATIN AMERICA’S ECONOMIES: HERE WE GO AGAIN!

In international finance it never rains, it pours. Rich-country currencies and stock markets are in the mess – not much helped by the latest revelations at American malpractice. Fears emerge together with emerging markets. This time the attention is focused on Latin America.

After the collapse in Argentina in 2001, the rest of the region and emerging markets seemed to get off slightly. Worries about financial contagion of the kind that spread disaster during the East Asian crisis of 1997-1998 eased. Argentina was allowed to sort out its own problems without the assistance it might once have expected. Nevertheless, Argentina’s plight had gone from bad to unbearable – and contagion was back. The strain was being clearly felt in Brazil. In 2002 financial markets in Latin America’s biggest economy came close to panic. The stock market tumbled; risk spread on the country’s debts; rumours abounded of a gathering flight from the currency. Brazil couldn’t go the way of Argentina.

With luck and resolve it need not happen. The similarities between these two countries are only skin-deep. Argentina’s debt was mostly external; Brazil’s is mostly domestic. Argentina had tied itself to a fixed exchange-rate system; Brazil has a floating currency to act as a shock absorber.

Argentina’s economy is small and dependent on trade in just a few goods, Brazil’s is big and diversified.

The trouble is, markets have a habit of getting their way even when they are wrong. Predictions of financial collapse are notoriously self-fulfilling. And the medium-term sustainability of Brazil’s do­mestic debt is genuinely in doubt.

Therefore, the rich countries and the IMF (International Monetary Fund) may decide whether to swallow their doubts and organise large-scale financial support. In the meantime, two things would help to stabilise the situation. First, all of Brazil’s presidential candidates should make it clear that they are preparing to deal with the domestic-debt problem and support current moves to make the country’s central bank independent. Second, rich-country leaders should either say helpful things or keep quiet.

UNIT 4

Task 1. Read the text “What the Pros Are Buying Now” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

1. What question do the individual investors face? Why?

2. What is the goal of George Mairs?

3. Joel Dobberpuhl’s recent buys include Jonson & Jonson, Noble Drilling and NVR, a Mid-Atlantic region homebuilder, don’t they?

4. What do you know about Richard Nash? What is he famous for in management?

5. What is the difference between cyclical companies and hospitals?

6. Are the tobacco shares still cheap?

Task 3. Find the names of people mentioned in the text. Using your knowledge of management and facts from the text characterise their job duties.

WHAT THE PROS ARE BUYING NOW

Investors Turn to Defense Stocks, Hospitals and Cyclicals; Should You Follow Suit?

In recent days, market professionals have stormed back into the market, snapping up individual stocks at prices that would have been unthinkable a few months ago. That poses an important question for individual investors: Should you be buying what the pros are buying?

Stock picking was long derided during the 1990s as index funds piled up double-digit gains. But with the market’s declines of the past two years, the pros are once again shopping with the list of very specific targets.

George Mairs, portfolio manager for Mairs and Power Growth fund, one of the top-performing mutual funds during the past 20 years, recently bought shares of both Merck and General Electric, blue-chips that he had long been waiting to get at favorable prices. His goal: “Very solid companies with good balance sheets, a continuous record of good management and earnings performance better than the overall market.” Mr. Mairs’s purchases included Supervalu, a food wholesaler and retailer and Donaldson, a maker of filtration systems.

Joel Dobberpuhl, manager of the Aim Worldwide Spectrum Fund, had been investing most of his fund’s cash overseas. Now, he’s refocusing his efforts on the U.S. “Pros are picking their spots,” he says, and adding to holdings them already comfortable in case where prices have dropped. His recent buys include Jonson & Jonson, Noble Drilling and NVR, a Mid-Atlantic region homebuilder.

Other institutional investors have been directing funds into a variety of cyclical stocks, defence companies and hospitals, providing a road map for individual investors looking to return to the market.

Is it too late to buy the stocks the pros have been grabbing? In some cases, prices have already moved up substantially from last week’s low. Last Tuesday, the Dow Jones Industrial Average hit its lowest level since October 1998. It has since rebounded about 13 per cent, closing yesterday down 31.85 at 8680.

Still, some stocks remain attractively priced. While index funds should remain an important part of most investors’ portfolios, there are a few basic stock-picking principles that individuals can follow: Get to know a company and wait until you feel it’s reasonably priced. Since the market is likely to remain volatile, investors considering the sectors below should have at least a two-year investment horizon.

CYCLICALS: Richard Nash, chief investment strategist for Victory Capital Management, a unit of KeyCorp, sees a variety of cyclical benefiting as economic growth picks up. His picks include industrial manufactures such as Ingersoll-Rand and Eaton. Another company likely to benefit from a pick-up in orders is International Paper.

Other investment pros are also betting on transportation companies, tool-markets and industrial manufacturers that should see business grow as manufacturers restock their inventories and boost capital spending. “This is a different recovery than we’ve seen in the past,” says Jeffrey Kleintop, chief investment strategist for PNC Financial Services Group.

Among the companies likely to benefit from stronger economy growth are United Parcel Service, the world’s largest package carrier and Illinois Tool Works, a maker of engineered component and industrial systems, Mr. Kleintop says.

HOSPITALS: Unlike cyclical companies, hospitals should do relatively well even if the economy suffers. That’s because as Baby Boomers get older, more of them will be visiting hospitals for hip replacements, CAT scans and other medical procedures. At the same time, medical procedures are getting more complicated – and more costly. “The demographics are very positive on a long-term basis,” says Edward Yardeni, chief investment strategist for Prudential Securities.

Hospitals have been one of the few sectors to deliver positive stock returns this year. But the good days aren’t over, says Elizabeth Bramwell, president of Bramwell Capital Management in New York. Her top picks include Tenet Healthcare, Hospital Corp. of America and Triad Hospitals. “This is a group for the next 12 months,” she says. She expects earnings for hospital companies to rise 15% to 20% over the next year and stock prices for the top companies to increase at least that much.

DEFENSE: Continued concerns about national defence and homeland security should provide a continuing boost to companies that produce missiles and other products used in national defence. “Defense spending is still rising,” says Salomon Smith Barney strategist Tobias Levkovich.

Among the defence stocks that should fare well, says Mr. Levkovich, are Lockheed Martin, the nation’s biggest military contractor and L-3 Communications Holdings, a defence-electronics maker. Mr. Kleintop of PNC likes defence contractor Raytheon.

TOBACCO: Tobacco shares have risen in recent days, but they are still “really cheap,” says David Dreman, chairman of Dreman Value Management. Among his favourites are UST, a maker of snuff and chewing tobacco whose shares fell sharply after a federal judge denied its appeal of an antitrust case that involved a $1.05 billion award. “Here’s a company that’s very strong,” says Mr. Dreman, who says UST has the cash needed to pay the award.

Tobacco stocks also pay hefty dividends, with some yielding more than 6%. Ben Fischer, managing director of NFJ Investment Group in Dallas, likes R.J. Reynolds because of its high dividend yield.

Many stocks, however, aren’t the bargains they were just a few days ago. Ed Walczak, manager of Vontobel U.S. Value Fund, boosted his holdings of insurer American International Group. The stock is still well below its target price, but it was a better buy a week ago. With its recent rebound “there’s simply less margin for safety,” Mr. Walczak says.

Task 4. Read the text “Working Capital Problems in a Small Business” and translate it.

Task 5. Find answers to the following questions in the text and write them down:

1. What financing problems do seasonal small businesses have?

2. Is seasonality a problem that is exclusive to small business?

3. The smaller business firms are likely to be more dependent on suppliers and commercial banks, are not they?

4. What is the answer to seasonal working capital problems?

5. Does the answer to all these financing problems lie just in planning?

Task 6. Reduce the text saving the main ideas.

WORKING CAPITAL PROBLEMS IN A SMALL BUSINESS

Many small businesses that are seasonal in nature have difficult financing problems. This is particularly true of retail nursery (plants) stores, greeting card shops, boating stores and so on. The problem is that each of these businesses has year-round fixed commitments, but the business is seasonal. For example, Calloway’s Nursery, located in the Dallas – Ft. Worth Metroplex does approximately half of its business in the April to June quarter, yet it must make lease payments for its 16 retail outlets every month of the year. The problem is compounded by the fact that during seasonal peaks it must compete with large national retail chains such as Kmart and Home Depot who can easily convert space allocated to nursery products to other purposes when winter comes. While Calloway’s Nursery can sell garden-related arts and crafts in its off-season, the potential volume is small compared to the boom periods of April, May and June.

Seasonality is not a problem that is exclusive to small businesses. However, its effects can be greater because of the difficulty that small businesses have in attracting large pools of permanent funds through the use of equity capital. The smaller business firm is likely to be more dependent on suppliers, commercial banks and others to provide financial needs. Suppliers are likely to provide necessary funds during seasonal peaks, but are not a good source of financing during the off-seasons. Banks may provide a line of credit (a commitment to provide funds) for the off-season, but it can sometimes be difficult for the small firm to acquire bank financing. This has become particularly true with the consolidation of the banking industry through mergers. Twenty years ago, the small business person was usually on a first-name, golf-playing basis with the local banker who knew every aspect of his or her business. Now a loan request may have to go to North Carolina, Ohio, California, New York or elsewhere, for final approval.

The obvious answer to seasonal working capital problems is sufficient financial planning to insure that profits produced during the peak season are available to cover losses during the off-season. Calloway’s Nursery and many other small firms literally predict at the beginning of their fiscal period the moment of cash flow for every week of the year. This includes the expansion and reduction of the workforce during peak and slow periods and the daily tracking of inventory. However, even such foresight cannot fully prepare a firm for an unexpected freeze, a flood, the entrance of a new competitor into the marketplace, a zoning change that redirects traffic in the wrong direction and so on.

Thus, the answer lies not just in planning, but in flexible planning. If sales are down by 10 per cent, then a similar reduction in employees, salaries, fringe benefits, inventory and in other areas must take place. Plans for expansion must be changed into plans for contraction.

Task 7. Read the text “Why Japanese Firms Tend to Be So Competitive” and translate it.

Task 8. Find answers to the following questions in the text and write them down:

1. What do firms such as Hitachi, Honda, Mitsubishi and Sony have in common except that they all are Japanese companies?

2. What are Japanese companies known for?

3. Do Japanese companies have a high fixed cost commitment?

4. Are the credits much more available in Japan than in the USA? Why?

5. What makes Japanese firms act very competitively?

6. What is a general rule of business?

WHY JAPANESE FIRMS TEND TO BE SO COMPETITIVE

What do firms such as Fijitsu, Hitachi, Honda, Mitsubishi and Sony have in common? Not only are they all Japanese companies, but they are highly leveraged, both from operational and financing perspectives.

Japanese companies are world leaders in bringing high technology into their firms to replace slower, more expensive, labour. They are known for automated factories, laser technology, memory chips, digital processing and other scientific endeavours. Furthermore, the country has government groups such as the Ministry of International Trade and Industry (MIYI) and the Science and Technology Agency encouraging further investment and growth of government grants and shared research.

To enjoy the benefits of this technology, Japanese firms have a high fixed cost commitment. Obviously high initial cost technology cannot easily be “laid off” if business slows down. Even the labour necessary to design and operate the technology has something of a fixed cost element associated with it. Unlike in the United States, workers are not normally laid off and many people in Japan consider their jobs to represent a lifetime commitment from their employers.

Not only does the Japanese economy have high operating leverage as described above, but Japanese companies also have high financial leverage. The typical Japanese company has a debt-to-equity ratio two to three times higher than its counterparts in the United States. The reason is that credits tend to be much more available in Japan because of the relationship between an industrial firm and its bank. They both may be part of the same cartel or trading company with interlocking directors (directors that serve on both boards). Under such an arrangement, a bank tends to make a larger loan commitment to an industrial firm and there’s a shared humiliation if the credit arrangement goes badly. Contrast this to the United States, where a lending institution such as Citicorp or Bank of America has extensive provisions and covenants in its loan agreements and is prepared to move in immediately at the first sign of a borrower’s weakness. None of these comments imply that Japanese firms never default on their loans. There were, in fact, a number of bad loans sitting on the books of Japanese banks in the mid-1990s.

The key point is that Japanese firms have high operating leverage as well as high financial leverage and that makes them act very competitively. If a firm has a combined leverage of 6 to 8 times, as many Japanese companies do, the loss of unit sales can be disastrous. Leverage not only magnifies returns as volume increases, but magnifies losses as volume decreases. As an example, a Japanese firm that is in danger of losing an order to a U.S. firm for computer chips is likely to drastically cut prices or take whatever action is necessary to maintain its sales volume. A general rule of business is that firms that are exposed to high leverage are likely to act aggressively to cover their large fixed costs and this rule certainly applies to leading Japanese firms. This, of course, may well be a virtue because it ensures that a firm will remain market oriented and progressive.

UNIT 5

Task 1. Read the text “History of Insurance” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

• What did Chinese merchants do to limit the risk of losing their goods?

• What was recorded in the famous Code of Hammurabi?

• What did the concept of ‘general average’ imply?

• What did Greeks and Romans introduce?

• Why was there demand for marine insurance in London?

• What was Lloyd’s coffee house famous for?

• When and where was insurance as we know it today introduced?

• What was Franklin’s contribution to the history of insurance?

HISTORY OF INSURANCE

Early methods of transferring and distributing risk were practiced by Chinese and Babylonian traders as long as the 3^rd and 2^nd millennium BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1759 BC and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender additional sum in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen.

A thousand years later, the inhabitants of Rhodes invented the concept of the ‘general average’. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organised guild called ‘benevolent societies’ which acted to care for the families and funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17^th century, “friendly societies” existed in England, in which people donated amounts of money to a general sum that could be used in case of emergency.

Separate insurance contracts (i.e. insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14^th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles first proved to be useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe and specialised varieties developed.

Toward the end of the 17^th century, the growing importance of London as a centre for trade led to rising demand for marine insurance. In the late 1680s, Mr. Edward Lloyd opened a coffee house which became a popular haunt of ship owners, merchants and ships’ captains and thereby a reliable source of latest shipping news. It became a meeting place for parties wishing to insure cargoes and ships and those willing to underwrite such ventures. Today Lloyd’s of London remains the leading market for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster Nicholas Barbon opened an office to insure buildings. In 1680 he established England’s first fire insurance company, “the Fire Office”, to insure brick and frame homes.

The first insurance company in the United States provided fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732.

Benjamin Franklin helped to popularise and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin’s company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazard, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses.

Task 3. Read the text “High Stake Espionage in International travel” and translate it.

Task 4. Find answers to the following questions in the text and write them down:

1. Where do the majority of cases of stealing information appear?

2. Why does this happen according to security experts?

3. What are the former personnel of secret police busy with now?

4. What are the main ways of stealing information?

5. What are the consequences of information thefts?

6. What are the main pieces of advice for avoiding theft?

Task 5. Compose a summary of the text in 80 words.

HIGH STAKE ESPIONAGE IN INTERNATIONAL TRAVEL

The world of international business travel could provide the plot for the next James Bond movie. Top U.S. executives are realising that business espionage in the real world is not unlike that in the movies. Travelling executives tell tales of spies, ransacked rooms, stolen information and surveillance cameras. Reports to the American Society for Industrial security of lost information have more than tripled in the past two years. The majority of the thefts appear abroad, with the top U.S. executives as the target. According to security experts, these western executives are naïve and unaware of the ruthless nature of some of their foreign competitors. It seems that too many U.S. executives expect everyone to “play by their rules”, while their counterparts will use every opportunity to gain an advantage.

Although corporate theft has been a reality in the business world for some time, it has increased dramatically in recent years. This has been due in part to the ease industrial spies have today in extracting the desired information from the competition. Former personnel from intelligence networks and secret police agencies have found new employment helping local industries steal information. The traditional phone tap is the cliché of surveillance devices, but the fax tap is becoming the more prevalent cause of information leaks in foreign countries. Many executives who have incoming faxes in their hotels never receive them. For example, Moscow’s Metropol Hotel is fully staffed with former FBI and KGB informants who instead of discovering national secrets now intercept faxes and other forms of communication to find corporate secrets. Additionally, it is not difficult to impersonate an executive and pick up his or her fax.

The advancement of technology, with its gadgets such as penlight cameras and miniature listening devices, has made it easier and safer for spies to steal information. The risk involved with these high-tech devices is much lower because spies can only be caught if they are in the act of bugging or photographing the executives’ rooms, computers or conversations. The second reason for the increase of theft is simply that more executives travel around the world, bringing their corporate secrets along in their laptop computers. Some security specialists estimate that foreign companies will pay up to $ 10,000 for the laptop of a Fortune 500 executive.

In the past few years many companies have become victims of this type of espionage – deals have been lost, companies have been underbid and secret details of new prototypes have mysteriously been leaked to competitors. For example, The Wall Street Journal reported that a U.S. paper-product executive was having dinner in Sweden with a business acquaintance when a spy broke into his hotel room and copied all the data from his laptop, including pricing information. A few weeks later the firm was underbid by a competing company who knew of its pricing information and strategy on an important contract.

It is important to realise that the theft of corporate information affects every operation from closing a multi-million dollar deal to the extra time spent backing up personnel files. Businesses are becoming more oriented toward technology and globalisation, and this combi­nation has increased competition and travel. This causes sensitive information to go out of corporate headquarters and into the possible grasp of industrial spies. Many companies have started a proactive approach to prevent the theft of company secrets. Seminars given by security experts inform executives of precautions they can implement to deter theft. Such tips include never taking a room on the first floor of a hotel and always discussing important matters in private locations. Laptops should have privacy screens and executives should never allow their laptops out of sight while travelling.

Unfortunately, the situation looks as though it will only increase in severity in the future, and corporations need to decide how this will affect their own specific industries and take preventive measures to combat this growing trend.

Task 6. Read the text “Asset Valuation in a Changing Society” and translate it.

Task 7. Find answers to the following questions in the text and write them down:

1. What do bankers demand from anyone who wants to get a loan?

2. What does the term ‘intangible asset’ mean?

3. What did Margaret Blair’s study show?

4. How is the value of a company determined on the market?

5. What can be a solution in dealing with intangible assets?

Task 8. Make up a plan of the text.

ASSET VALUATION IN A CHANGING SOCIETY

The United States is becoming more of a service-driven, techno­logy-oriented society. In such an environment, it’s not so much bricks and mortar that represent value as it is ideas, theories and other intangibles.

But just try to go to your banker with a great idea and ask for a loan. Perhaps you have an innovative idea for making a microchip or a new scientific method for processing food. On a less technical basis, it may simply be a better way to service customer needs. The banker’s response is likely to be, “Where’s the collateral?” Bankers want to see tangible assets that they can repossess and sell if necessary.

Brand names, reputation and intellectual capability are other forms of intangible assets that are taking on increasing importance in our service-oriented economy. Although they are not recognised as assets on the financial statements of a firm, they can have tremendous value in the marketplace. For example, in 1995 shares of Coca-Cola and Microsoft both sold in the stock market for over ten times the physical value of their companies’ assets as listed on their balance sheets.

A study by Margaret Blair, a Brookings Institute economist, found that tangible assets (those that are generally recognised on financial statements) represented 62 percent of manufacturing and mining companies’ total market value in 1982. A decade later, the value was down to 32 percent. The difference between 32 percent and the full market value of 100 percent is made up by intangible assets.

Intangible values take on even greater importance where professionals services are provided. For example, a 150-person law firm may have a book value that represents little more than desks, chairs, telephones, file cabinets and computers. Yet, the firm may have an international reputation for advising clients on mergers, for possessing patents, for structuring highly sophisticated real estate deals or have other capabilities. The true value of the firm, including its reputation and intellectual capital, may run into the millions, yet its value on its financial statements may be minimal.

Of course, accountants are hesitant to recognise intangible value on the balance sheet because there generally is no objective method for assessing this type of value. One exception is a merger or acquisition when the purchase price paid is well above the book value of the acquired company, and goodwill (an intangible asset) is created. Nevertheless, accountants are like bankers; they want to see an actual asset to establish value. One can empathise with an accountant who has an entrepreneur for a client who wants to list a great idea as a million dollar asset to go along with $1,000 in cash and show a net worth of $1,000,000.

In dealing with intangible assets, perhaps the best solution lies with a strong recognition of the value of ideas and reputation in a technically oriented, service-based society that stops short of actually placing that value on a firm’s audited financial statements. The value may well be added as a separate factor by the financial analyst in determining total worth.

UNIT 6

Task 1. Read the text “Public Relations” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

1. What is PR?

2. What is the role of advertising as a part of PR?

3. What are two other approaches to conducting PR?

4. What does direct contact with public include?

5. What is the essence of publicity and what are its advantages?

6. What are publicity’s limitations?

7. What are the types of publicity materials and the demands to them to be used by media?

8. What are the types of relations with media?

9. Should PR managers respond to the materials about their organisations that are broadcast or published in media?

Task 3. Make up a list of the types of public relations mentioned in the text and try to think about:

1. What is PR used for?

2. Who is the target market for PR?

3. What is the most efficient type of PR?

Task 4. Compose a summary of the text in 80 words.

PUBLIC RELATIONS

Public relations (PR) is usually referred to as communication designed to correct wrong impressions, maintain the goodwill of the orga­nisation’s publicity and explain the organisation’s goals and purpo­ses. Advertising is considered to be one of the essential parts of PR. Ads are constantly aimed at creating or enhancing a positive image of the orga­nisation. Therefore, we should concentrate our attention upon two other approaches to conducting public relations: direct contact and publicity.

Direct contact with public includes letters, visits by public relations personnel, plant tours and company-sponsored events. Employers who recruit on college campuses may write personal letters to professors explaining their management philosophy and required qualifications for the student interviewees. Plant tours are scheduled by enterprises producing beverages, for example. Visits by PR personnel comprise speakers at civil and service club meetings focused on explaining their firms’ goals and objectives that might be of interest to the local community. Company– sponsored events represent craft fairs, youth athletic programs, running races etc. Hospitals often sponsor blood pressure screening clinics as part of their PR effort. This type of direct contact PR helps in generating publicity for hospitals.

Publicity is news presented in mass media about an organi­sation – its products, policies, personnel or actions – at no charge to the organisation for media time and space. However, the marketer should be ready to bear the costs of preparing news releases and inducing media editors to print or broadcast them.

Publicity offers several advantages as a promotional tool. First of all, it may appeal to those people who do not pay much attention to advertising, sales promotions and sales-people. Secondly, it has greater credibility than advertising. Thirdly, it is relatively inexpensive.

Nevertheless, marketers have to recognise publicity’s limita­tions. Marketers cannot totally control the actions by editors dealing with publicity materials that marketers prepare. Media people disre­gard materials they do not consider to be newsworthy – subject matter must be interesting, ultimate and accurate to be taken into account.

Marketers try to influence the media by providing publicity materials to submit, however media personnel reject a considerable amount of the information. Sometimes the materials are disregarded because they are poorly prepared. Great care is needed while preparing publicity materials to help to ensure that they will be used by the media.

A news release contains information that organisation wants disseminated, along with the name, address and phone number of the person whom media personnel should contact for further information. Feature articles are longer (more than one printed page) and are prepared for specific publications. Media representatives are invited to press conferences to listen about a major event a marketer hopes to be newsworthy and to receive written materials concerning the event. Letters to the editor are sent to newspapers and magazines in response to articles that appeared in those media. Radio and TV stations are provided with tapes and films for broadcasting.

UNIT 7

Task 1. Read the text “Jamie Bonini at Chrysler” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

1. What did The Wall Street journal write about Jamie Bonini and management at Chrysler?

2. What is Chrysler teaching its foremen?

3. What were the challenges for J. Bonini when he was appointed to Windsor plant of Chrysler?

4. How did J. Bonin feel when he came to work to Windsor plant? Did he give up?

5. Why did J. Bonin leave his position at the Windsor plant?

Task 3. Identify the main points of the text.

Task 4. Compose a summary of the text in 80 words.

JAMIE BONINI AT CHRYSLER

An engineer by training, Bonini was named plant manager of Chrysler’s big –van plant in Windsor. He was 33 years old. Within a year, The Wall Street Journal hailed him as the new breed of managers who are reshaping the US auto industry’s manufacturing plants. The article also suggested he would be equally successful in other industries.

At the same time, Forbes selected Chrysler as its Company of the Year. They selected Chrysler based on its results, its ways of operating, and its superb management, mentioning “We think Chrysler has superior management – not just at the very top but deep down an organisation.”

Chrysler, like many other American companies, is teaching its foremen new ways of managing: giving more power to workers, rather than exercising top-down, management-by-intimidation. Previously, at some of Chrysler’s manufacturing plants, managers were described as acting like drill sergeants, quality problems were abundant, and the people were demoralised. Dennis Pawley, who is in charge of Chrysler manufacturing worldwide, decided to change this dramati­cally and among other things appointed the young and inexperienced Bonini to the Windsor job.

The plant was the least automated in the industry, with hundreds of manual jobs. Sales were stagnant and the plant was scheduled to launch a new van. Adding to the challenges was the resentment of other managers who were passed over for the promotion and the scepticism of many who thought Bonini was not up to the job. Looking back, he said, “I was scared. There were moments when I thought, “I’m in over my head”.

But he went to work, and within a year, productivity, sales and morale were all up. You can learn elsewhere how he did it. But what would you do if you were in his shoes?

After his success at the Windsor plant, Bonini was offered a position in Latin America, to run an engine plant that Chrysler is building with BMW in Germany. He was torn; he wanted to stay at Windsor to see the new van launched, and people were upset that he was leaving them. But he felt he couldn’t turn down the offer. He took the job and he may now have the impact on car building in other parts of the world.

UNIT 8

Task 1. Read the text “AgriComp” and translate it.

Task 2. Find answers to the following questions in the text and write them down:

1. What did AgriComp sell?

2. Where was the equipment assembled?

3. What duties did the local dealers have?

4. When were the claims denied and why?

Task 3. Compose a summary of the text in 80 words.

AGRICOMP

“How do I make sense of all this?” asked Jody, as he prepared to write his report to the dealer relations committee. He stared at the 292 responses to a survey of AgriComp’s dealers as he began to ponder the problem. The question was whether to recommend a change to AgriComp’s current procedures for setting warranty claim disputes with its dealers.

AgriComp sold computer systems to farmers, who used the systems for such purposes as crop rotation planning and spreadsheet analysis for financial planning. Many also used the systems to provide remote access to agriculture-oriented databases, market news and even weather information. The equipment was assembled at company headquarters at Minnesota. The software was provided by subcont­ractors but it was distributed under AgriComp’s name. Both hardware and software were sold through some 350 affiliated dealers nationwide, 292 of whom had responded to Jody’s survey. It was relations with these dealers that concerned him.

The local dealers handled warranty service for AgriComp products. When hardware or software problems occurred, they arranged for appropriate repairs to be made and submitted vouchers to AgriComp headquarters in Minnesota. The headquarters staff reviewed the vouchers and issued reimbursement checks to the dealer. Occasionally claims were denied when the staff found that the particular repair was not covered by the company’s warranty or the warranty had expired. In such cases, the dealer was more or less stuck for the cost of the repairs, and this had caused occasional hard feelings.

The company had an internal appeals process for dealers to follow to protest such denials but, at the last dealer’s meeting, Jody heard a lot of grumbling about that process. More than one dealer suggested that it was useless, as appeals were always denied. For the dealers, the costs of repairs might correspond to the profits on many systems, so their concern was understandable.

Jody knew that clearer warranty instructions would help. Sometimes the dealers couldn’t understand exactly what was or wasn’t covered by warranty. In that kind of case they often arranged for the repairs (to keep the customer happy) and took their chances on reimbursement. New documentation currently being developed would probably help with that part of the problem.

In a corridor conversation at the dealers’ meeting, one dealer suggested that perhaps in cases of dispute, an important mediator, external to the company, might be called in to settle a matter. In the annual survey of dealers Jody included a question about that proposal. As a part of one-page survey, dealers were asked to respond to the statement, “The warranty appeals process should be replaced by a process using impartial mediators,” on a scale of 1 to 5, where 1 indicated “Strongly agree,” 3 indicated “Neither mediators nor disagree,” and 5 indicated “Strongly disagree.” Each dealer was also asked to give the number of times in the last three years in which he or she used the warranty appeals process. Answers to this question were 0, 1, 2 and ”3 or more.”

Jody was willing to consider changing the warranty appeals process along the lines suggested, if it was important to the dealers. It would cost the company some money, both for the external mediator and for increased costs from appeals the company lost, but keeping the dealer happy was obviously important.

Task 4. Read the text “Inquiring Minds Want to Know – Now!” and translate it.

Task 5. Find answers to the following questions in the text and write them down:

1. What are the publication reader service cards used for?

2. How did Penton start its research?

3. What are the main ways of contacting advertiser?

1. What are the reasons of the need for fast response and the need for information on product availability and delivery?

Task 6. Compose a summary of the text in 80 words.