Часть V тексты для чтения тексты для студентов экономических специальностей

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What Is Economics About?

Anyone beginning the study of a subject likes to have a concise description of its nature and content. Here is a modern definition of economics: Economics is a social science concerned chiefly with the way society employs its limited resources, which have alternative uses, to produce goods and services for present and future consumption. This definition needs some amplification.

1. Economics is a social science because it deals with the interactions of people (in particular, their interactions as they buy, sell, produce, and consume).

2. Resources are limited means that people taken together, people in any society want more goods and services than it is possible to produce. Human and material resources are scarce when compared with people’s wants – even in a relatively rich countries. Therefore it is important for any society to use resources effectively. Economics is concerned both with choices regarding the use of resources and with the forces that determine the choices.

3. Resources have alternative uses means that any resource that is being fully used for one purpose is not available to be used for another purpose. If a society decides, for example, to allocate more resources to the construction of highways, it will have fewer resources available for the construction of buildings. If it decides to allocate more resources to the production of military goods, it will have fewer resources available for the production of consumer goods.

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Factors of Production

Every economic system has various resources at its disposal to produce goods and services. These resources are of two broad types: material resources and human resources.

Material resources include such things as natural resources, raw materials, machinery and equipment, buildings, and transportation and communication facilities.

Human Resources consist of the productive physical and mental abilities of people. Economists divide property resources into two subcategories, “land” and “capital,” and human resources into two subcategories, “labor” and “entrepreneurship.” These four types of resources are known as the factors of production.

Land

The term land, in economics, means all nonhuman or “natural” resources, such as land itself, mineral deposits, timber, and water. Land thus consists of all the natural physical stuff on which any civilization must be built.

Capital

Capital is an economic resource that can be used to help produce consumer goods and services, such as food, cars, clothing, and health care.

Labor

To make land and capital productive requires labor, the efforts or activities of people hired to assist in the production of goods and services. In this sense, labor refers not to the workers themselves but to the service they provide by working.

In a broader sense, however, “labor” also means the services of everyone who works for a living. We often refer to the labor force of a nation – that is, all the people above a certain age who have jobs or are seeking jobs. The meaning of “labor force” and the notion of labor as a factor of production are different concepts in economics. The distinction between the two is generally clear from the context.

Entrepreneurship

For production of goods or services, the three factors described above must be organized and combined. This is where entrepreneurship (sometimes called “ownership”) enters the picture. Entrepreneurs recognize the opportunities to be gained from production. The entrepreneur assembles the factors of production, raises the necessary money, organizes the management, makes the basic business policy decisions, and reaps the gains of success or the losses of failure.

(From “Contemporary Microeconomics”by Milton Spencer)

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Goals of Economic System

Every society seeks to attain certain objectives. Four goals that are fundamental to all economic systems are efficiency, equity, stability, and growth. The meanings of these terms are worth examining because they are universal standards used for judging economic practices and policies.

Efficiency: Full Employment of Resources

Because every society possesses only limited amounts of the various factors of production, it is important to use them efficiently. What does this mean? In general, efficiency is the best use of available resources to attain a desired result.

Equity: Fairness or Economic Justice

Consideration of economic efficiency does not address the question of how a society’s goods are shared. This is a matter of income distribution. It concerns the division of a society’s output (that is, the income or value of what society earns from production) among its members. Because income distribution deals with the matter of who gets how much, it raises fundamental issues of equity, or justice. One of the major goals of our society is to achieve an equitable distribution of income. It is important to note that equitable means “fair” or “just,” not “equal.”

Stability: Steady Average Price Level

A third economic goal of every society is to achieve stability of prices. This does not mean that all prices should be stable. That would be impossible in a society in which people are free to make economic decisions. However, it means that the general or average level of prices should be reasonably stable. This goal is important because the costs to society of a sharply rising average price level – inflation – are serious and pervasive.

Growth: Rising Output per Person

A fourth economic goal of every society is economic growth. By this is meant an increase in the quantity of goods and services produced per person – in other words, a rising standard of living.

Striving for A Mix of Goals

The goals of efficiency, equity, stability, and growth seem reasonable enough. However, their realization may involve certain sacrifices.

(From “Contemporary Microeconomics”by Milton Spencer)

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Economic Measurements

Each society’s economic system reflects the country’s history, traditions, aspirations, and politics. What works for one culture might not work as well for another, and vice versa.

In measuring the success of different economic systems, the fairest approach would be to apply the standards that are valued by the people of that culture. Such goals as economic stability, job security, and equality of income and opportunity are given higher priority in some cultures than others.

One of the measures traditionally used for keeping economic score is gross national product (GNP) – the dollar value of all the final goods and services produced by an economy during a specified period (usually a year). GNP includes profits from foreign-owned businesses within a nation’s borders, and it includes receipts from overseas operations of U.S.-based companies.

The latest method used for tracking an economy is gross domestic product (GDP), which also measures the total output of goods and services. However, unlike GNP, the new GDP includes profits from foreign-owned businesses within a nation’s borders, and it excludes receipts from overseas operations of U.S.-based companies. When GNP (or GDP) is compared over a number of years, a pattern appears. A rise in GNP (or GDP) is a sign of economic growth, indicating that the country has achieved at least one goal – a higher level of production, which can be distributed to the people.

GNP and GDP are also used to compare two or more economies. These measures can be adjusted for inflation and currency rates, but these figures may be misleading because of different population sizes. So economists often calculate per capita figures – a nation’s total GNP (or GDP) divided by its population.

(From “Contemporary Microeconomics”by Milton Spencer)

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Scarcity: A Fact of Life

Every society faces a fundamental economic challenge. How can limited resources best be used to satisfy unlimited wants? This is the problem of scarcity.

For most people, scarcity is a fact of life. Most of the things they want and need are economic goods, in that they have a price. In this sense, they differ from free goods, for which the market price is zero. But even “free goods” may be scarce in some circumstances. Hawaiian sunshine and surf are free to residents of Hawaii, but not to tourists who must expend time, effort, and money to get there. The fish in a mountain lake may be free goods, but in a city they are economic goods. These considerations suggest an important law:

Law of Scarcity Economic resources are scarce. There are never enough at any given time to produce all the things that people want. Scarce resources can be increased, if at all, only through effort or sacrifice.

Scarcity of resources is what forces people in every economic activity to make choices. A decision to produce one thing frequently implies a decision to produce less of certain other things. All societies face the basic problem of deciding what they are willing to sacrifice to get the things they want. This is the central problem of economics.

Economics is fundamentally concerned with choices about the use of resources. Problems of choice arise when there are alternative ways of achieving a given objective. Economics develops criteria that define the conditions for making the best use of resources. These criteria can be used as guidelines for formulating and evaluating public policy.

(From “Contemporary Microeconomics”by Milton Spencer)

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Management of Economies

The word economy originally referred to household management. It comes from the Greek words oikos, meaning “household,” and nomos, meaning “rule” or “governance.” An important part of this definition is that an economy must be managed. For example, even in a household, people cannot keep buying new things if they do not have money coming in. The same is true of companies and societies.

People have to manage economies because the supply of resources is limited. The term resource applies to both natural resources (such as oil and wood) and artificial resources, which are created by people. If people allow a resource to be used up, there can be harmful effects on the economy and the society.

One important example of a limited resource is petroleum, or oil. Since the 1970s people have been increasingly aware that there is a limited supply of oil in the world. Oil is needed to power cars, heat homes, and run many different types of machines. As a result, the value of oil—its price—rises when its supply is not managed carefully. Managing the production and pricing of oil was vital to the economy of the entire world throughout much of the 20th century and remained so into the 21st. Many economists believe countries need to develop other energy sources because of the limited supply of oil.

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Types of Managed Economies

There are three main ways of managing economies. An economy may be planned, unplanned, or a combination of the two. These types of management have shaped governments and the lives of people in countless ways. Much of 20th-century history can be viewed as a competition between those who believed in planned and unplanned economies.

In a planned economy, a government decides which goods are to be created and sold. The rulers of that government set priorities for all producers of wealth, and laborers must follow those rules. China has a planned economy, and the Soviet Union had one when it was a nation.

In an unplanned economy, the government does not determine the goods that are to be created or how they will be sold. This does not mean, however, that the government is not involved in the economy. It may make laws to protect the safety of workers, to stop the sale of harmful products, or to limit the amount of pollution from a particular industry. However, the government overseeing an unplanned economy does not generally tell people what they should produce, buy, or sell. The United States is one country with an unplanned economy.

Unplanned economies may sound like they cannot be managed, but this is not so. They are managed, just not by governments. Control over the economy rests with the marketplace. This term refers to the entire arena of economic activity, where goods are created, bought, and sold. The United States and many other countries believe that the marketplace can regulate itself. This type of economy is called a free-market economy, or capitalism.

A combination of planned and unplanned economies can be found in places such as Japan. In these partially planned economies, governments encourage certain industries to create goods, and they assist certain industries with money acquired through taxes.

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Businesses – Organization and Size

Business decisions and policies influence the nature, structure, and goals of society. This makes the motives and actions of business firms the subject of ceaseless scrutiny and debate.

How are business firms organized? Why are some of them large and some small? Before we go on to answer these questions, a definition of a business firm will be helpful:

A firm is a business organization that brings together and coordinates the factors of production – capital, land, labor, and entrepreneurship for the purpose-supplying goods or services.

Business firms may be classified in various ways. One way is to group them according to their products. Firms that turn out similar or identical products are said to be in the same industry. Thus, General Motors and Ford Motor Company are in the automobile industry. But General Motors also produces trucks, buses, and diesel locomotives, among other things. Therefore, it would be correct to say that General Motors is also in the truck industry, the bus industry, and the diesel locomotive industry. Indeed, most large companies make more than one product.

Another method of classifying firms is by their legal form of organization. Three types of organizations are particularly common: the individual proprietorship, the partnership, and the corporation.

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Legal Forms of Business

The Proprietorship

The simplest, oldest, and most common form of business is the proprietorship. This is a firm in which the owner (proprietor) is solely responsible for the activities and liabilities of the business. But proprietorships have some disadvantages too. They tend to lack stability and permanence, it is difficult for them to raise funds for expansion, and their owners are personally liable for all debts of the business.

The Partnership

A partnership is simply a modified version of a proprietorship. That is, a partnership is an association of two or more people to carry on, as co-owners, a business for profit. A partnership has the same kinds of advantages and disadvantages as a proprietorship –but on a somewhat different scale. For example, partners can pool their funds to establish a business and they can combine their talents to manage it. However, they are jointly and personally liable for all debts of the business.

The Corporation

The third form of business organization, and the most important from an economic standpoint, is the corporation. Here is a definition that will be amplified in the following paragraphs:

A corporation is an association of stockholders (owners) created under law but regarded by the courts as an artificial person existing only in the contemplation of law. The chief economic characteristics of a corporation are

1) the limited liability of its stockholders;

2) stability and permanence;

3) the ability to accumulate large sums of capital through the sale of stocks and bonds.

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Corporation

The ownership of a corporation is divided into units represented by shares of stock. A stockholder who owns 100 shares of stock in a corporation has twice as much “ownership” as a stockholder with only 50 shares. Stockholders may participate in the profits of the corporation by receiving dividends in the form of a certain amount of money per share. If the corporation does not earn a profit, there may be no dividends.

One of the distinguishing features of a corporation is the limited liability of its stockholders. The owners of a proprietorship or partnership can be held personally liable for the debts of the business. However, stockholders in corporations cannot be held liable for any of the firm’s debts. For almost all practical purposes, the most that stockholders can lose if the business goes bankrupt is the money they paid for their stock.

The corporation has durability. Stockholders may come and go, but the corporation itself lives on. Indeed, some corporations in existence today were originally chartered hundreds of years ago.

Stockholders elect a board of directors, which is responsible for the management of the corporation. Each stockholder gets one vote for each share of stock owned. Some stockholders may thus elect themselves to the board if they own enough shares or if they can get the support of enough other stockholders. In large corporations, the board employs executives to manage the company and to report back to the board. In many corporations, one or more officers also serves as members of the board.

(From “Contemporary Microeconomics”by Milton Spencer)

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Advertising

Whenever people give information to the public about an event, a product, or a service, they are using advertising. A piece of advertising is called an advertisement, or ad.

The goal of most advertising is to make the public want to buy whatever is being advertised. People also use advertising to make the public form opinions about things. For example, an ad could try to make the public believe that a company treats its workers well. Another ad could try to make voters choose a certain candidate for president.

Ads appear almost everywhere. They are found in newspapers and magazines. They appear on television, radio, and the Internet. Ads are also posted as signs in all kinds of public places.

The Media and Advertising

When advertisers want many people to see or hear their ads, they pay the media to have the ads published or broadcast. Newspapers and magazines publish, or print, ads between their articles. Television and radio networks broadcast, or play, ads during their programs. (Television and radio ads are also called commercials.) Web sites, buses, movie theaters, and many other places also display ads in exchange for money.

Control of Advertising

Advertisers are regulated, or controlled, in several ways. Governments usually pass laws to make sure that ads are truthful and do not offend consumers. Also, the media usually set their own rules that advertisers must follow.

History of Advertising

Signs were the first form of advertising. Even thousands of years ago people created hand-lettered signs to advertise their goods and services. The invention of the printing press in the 1400s expanded this type of advertising. Merchants could print dozens of the same posters and fliers to advertise what they were selling. In the 1600s and 1700s newspapers appeared in Europe, the Americas, and Japan. Advertising then became even more widespread.

Today advertising is a huge part of business around the world. A major corporation may spend hundreds of millions of dollars a year just on advertising.

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Money

Whenever people pay for goods or services, they use some form of money. Money can be almost anything, as long as everyone agrees on its value. One of the earliest forms of money was metal, such as gold or silver. In North America, Native Americans used beads made of shell, called wampum, as a form of money.

How Money Works

Before people used money, they bartered, or traded things they had for the things they wanted. For example, a person may have traded five goats for one cow. Bartering was not always simple, though. Each person had to agree that the items being traded had an equal value. Also, each person had to have something that the other person wanted.

People invented money to avoid bartering. Someone with five goats could exchange them for a certain amount of money instead of a cow. The person could then exchange that money for grain, cloth, or other goods of the same value.

Today the metal coins and pieces of paper that people use for money have little real value. In other words, people do not use the paper for writing or the metal for making tools. The value of paper money and coins comes from an agreement between all people. They agree that they will accept certain forms of money in exchange for their goods and services. This agreement between people is the reason money works.

History of Money

People have used money for more than 4,000 years. In the 600s BC the kingdom of Lydia in what is now Turkey began to make coins. It was probably the first government to do so. These coins were a combination of silver and gold, called electrum. Many ancient peoples, including the Greeks and the Romans, also used coins.

The first types of paper money were used in China more than 1,000 years ago. Early paper money was simply a written promise to pay a certain amount of gold or silver money. The paper money was valuable because it could be traded for gold or silver. Later, governments began printing paper money. In the 1900s most governments made paper money valuable on its own. It no longer stood for gold or silver.

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Banks and Banking

A bank is a company that deals in money and other types of financial activities. Banks conduct many types of business, including helping people save money and giving out loans to individuals or businesses that need money for various purposes. In addition to cash, banks often deal in money equivalents such as stocks and bonds.

The most common activity of banks is the collection of money through various types of deposit accounts, such as checking accounts. Most people and companies pay their bills through checking accounts. A check is a written instruction from the depositor to the bank to pay the person or business named on the check using money from the depositor's account. That person or business can then deposit the check in another bank or cash it to receive the money it represents. Banks provide monthly statements to holders of checking accounts so they can keep records of their check transactions. Some banks require a fee for opening a checking account. Others charge fees if the account balance (the amount of money in the account) drops below a certain dollar amount.

Young people can open a savings account at a bank with the help of a parent or relative.

Another type of bank account is a savings account. Savings accounts allow their owners to store money in the bank and earn a small amount of interest. Interest is a percentage of money that the bank pays an account holder for keeping money in the bank. The interest rate, or the percentage amount, changes based on the type of savings account or on the state of the country's economy. The owner of a savings account can withdraw, or take out, money from the account as needed.

Some types of bank accounts combine the features of checking and savings. Certain checking accounts earn interest, for example. However, the account holder often must keep a higher minimum balance in the account.

Another type of bank account is a certificate of deposit, or CD. These certificates generally earn more interest than savings accounts. In exchange, however, they require the account owner to keep the savings in the bank for a set period of time, such as 90 days, a year, or even five years. Withdrawing money earlier than the set end date can result in penalties such as fees.

 

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Lending and Other Services

Another common activity of banks is lending, or loaning money. People borrow money from banks (and other lending institutions) for such things as a new house, a new car, college tuition, or starting a business. Businesses borrow money to expand or to buy new equipment. People and businesses repay the loans in installments, or amounts due at regular periods of time, such as once a month. Each installment includes two parts: a portion of the loan itself, called the principal, and an amount of interest paid to the bank as a profit.

Modern banks handle a number of other types of financial transactions besides checking, savings, and lending. In the 1970s and 1980s laws were changed in the United States that allowed other types of companies, such as insurance companies, the ability to provide banking services. As a result, many banks added new services in order to compete. Some of these “full-service banks” now sell insurance, provide help with taxes, and handle investments in stocks and bonds in addition to handling loans and deposit accounts.

How Banks Handle Money

Even though people keep their money in banks, all the money does not remain in the bank as cash. Banks keep only a portion of the money deposited as cash. They use the rest to lend money to other people and to make their own investments. They keep all the information on deposits, loans, and other transactions in a record called a ledger. In a modern bank, much of these ledger transactions are managed by computers.

Banks exchange money through a type of organization called a clearinghouse. Banks send messengers to the clearinghouse to deliver checks from other banks and to pick up their own checks. In the United States, twelve banks in a national system called the Federal Reserve act as a type of clearinghouse for other banks. There are also automated clearinghouses that allow banks to exchange money electronically.

 

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Regulation of Banks

Banking is a very complex business, and the exchange of money from one bank to another leaves much room for criminal activity. For this reason governments often regulate, or oversee, banks to make sure that they are following the law. In the United States the Federal Reserve System sets various policies for banks. Another regulator, the Comptroller of the Currency, acts as the chief bank examiner for all banks. The Comptroller of the Currency and the Federal Reserve must approve the expansion of banks into multiple offices (called branches) and the combining of banks (called mergers). The Federal Deposit Insurance Corporation (FDIC) was created during the 1930s to protect people's deposits when banks close down. The FDIC insures all deposits up to 100,000 dollars.

Types of Banks

The banks described so far are called commercial banks because they work with people to manage day-to-day commerce. There are other types of banks that operate in similar ways as commercial banks. Investment banks sell only stocks and bonds. Savings banks operate like commercial banks, but the people who deposit money in the bank actually own the bank and share in any profits. Central banks, such as the Bank of England or the U.S. Federal Reserve, set monetary policies for their entire countries. There are also banks that specialize in international development, or lending money to underdeveloped nations to build roads, dams, and other projects.

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History of Banking

Banking has been practiced for at least 4,000 years, mostly by individuals, families, and countries. Clay tablets from around 2,000 BC show that the ancient Babylonians deposited their wealth in banks, paid service charges, and borrowed money.

The rise of empires and commerce sped the development of banking. In ancient Rome an entire street, the Street of Janus, was set aside for exchanging foreign currencies, obtaining loans, and other bank activities. In the Middle Ages many bank activities were stopped because the Roman Catholic church had laws against the practice of lending money, known as usury. By the time of the Renaissance international trade had revived, leading to a growing need to exchange money.

In the late 16th century two cities in Italy, Florence and Venice, became great banking centers. As other centers of trade arose throughout Europe, banking systems needed to be set up. The Bank of Amsterdam opened in 1609, and in 1656 a public bank opened in Sweden that issued the first bank bills, which replaced the use of copper coins.

In England goldsmiths served as bankers until the Bank of England was founded in 1694. They stored money and other valuables for customers, and they exchanged foreign currency. These goldsmiths saw that deposits and withdrawals usually balanced each other out because customers withdrew only the money they needed from day to day. The goldsmiths realized that they could lend the remaining money at interest without harming their customers' savings. These practices led to the modern form of banking: taking deposits, loaning money, and keeping money in reserve.

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Banking in the United States

The first banks in the United States were the Bank of North America in 1782 and the Banks of Massachusetts and Bank of New York in 1784. In 1791 Congress gave a charter to the first Bank of the United States, founded by Alexander Hamilton, the first secretary of the treasury. Other banks in the nation opposed the Bank of the United States, and Congress refused to renew its charter in 1811. A second Bank of the United States was chartered in 1816. In 1832, however, President Andrew Jackson vetoed the bill to renew its charter because he did not believe the bank should be a monopoly, or a company without competitors. The bank was completely dissolved during a financial crisis in 1837.

In 1863 the National Bank Act allowed banks to organize under national charters and to issue bank notes. The main purpose was to secure credit for the government during the American Civil War. One year later the government established the Department of the Treasury, which started the office of the Comptroller of the Currency. The comptroller oversaw state banks.

Many changes in the banking system arose from financial crises. In 1933 thousands of banks failed in the midst of the Great Depression, a financial crisis that led to mass unemployment and many business closings. Congress wrote laws to protect the money that people deposited in banks. One of those laws established the FDIC.

After World War II U.S. banks were the largest and most powerful in the world for several decades. By 1990, however, the growth of other economies had led to the rise of powerful banks in other countries. Most of the world's largest banks by that time were in Japan and Europe.

 A number of innovations in banking arose in the United States in the second half of the 20th century. In the 1960s many banks installed drive-up windows for customers who did not want to stand in line. Banks also began to issue credit cards, which allowed customers to buy goods on credit from retailers. These cards were nationally recognized by the 1970s. In that decade banks began allowing customers to manage deposits and withdrawals through automated teller machines, or ATMs. The rise of personal computers in the 1980s and 1990s led to computerized banking, which allowed customers to pay bills, transfer funds between accounts, and perform other activities over the Internet using their computers.

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The Internet

The Internet is a network, or system, that connects millions of computers worldwide. It was one of the greatest inventions of the 1900s. Today the Internet helps many people communicate, work, learn, and have fun.

In the 1960s the U.S. government, businesses, and colleges worked together to make a system that would let computers across the United States share information. They created an early form of the Internet called ARPANET in 1969. In 1971 electronic mail, or e-mail, was invented as a way to send a message from one computer to another.

By the mid-1970s many groups of computers were connected in networks. Machines called routers were invented to connect the networks. This is how the original ARPANET eventually grew into the Internet.

In 1989 hypertext was invented. Hypertext is a link between different parts of an electronic document or between different documents. Hypertext became the basis of the World Wide Web, or “the Web,” which was created in the early 1990s.

Information on the Web is arranged in sites or pages. People view Web sites using computer programs called Internet browsers. People create Web sites using a code called hypertext markup language, or HTML. Browsers read HTML and allow people to view Web sites on the computer. Each Web site has its own Internet address, called a uniform resource locator, or URL.

Since its beginnings, the Internet has changed to keep up with the demands of its users. Advances in technology make using the Internet quicker and easier. And as more and more people use the Internet, the quantity of information grows.

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History of Computers

The dream of computing is almost as old as the idea of numbers. The first device for doing arithmetic, the abacus, was invented thousands of years ago. The Italian genius Leonardo da Vinci designed a mechanical calculator in about 1500 but, like so many of his inventions, the tools did not yet exist to build it. The credit for actually building the first calculator goes to the German astronomer Wilhelm Schickard, for his Calculating Clock in 1623. The first calculator to be produced in quantity was the Pascaline, designed and built by the French mathematician Blaise Pascal in 1642.

First Computer

The invention that turned these calculators into computers came from an idea borrowed from the Jacquard loom. This device used special “cards” that enabled the weaving to be made automatic. In the 1830s the British inventor Charles Babbage adapted this idea to design an automatic computation machine he called the Analytical Engine. The machine was designed to have input devices, a store (memory), a mill (computing unit), a control unit, and output devices—the essential components of every computer today. Babbage ran into trouble completing his Analytical Engine because tools were still not good enough to build all of the small mechanical gears and switches that he needed. Nevertheless, his device is considered to be the first true computer.

Among those who were fascinated with Babbage's invention was a young woman named Augusta Ada King, the countess of Lovelace. She was the daughter of the famous English poet Lord Byron. Lady Lovelace learned enough about the Analytical Engine's workings and how to control it to write about it so that others could also understand what it could do. She is often credited as the first computer programmer.

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Marketing

The average consumer would probably define marketing as a combination of advertising and selling. It actually includes a good deal more. Modern marketing is most simply defined as directing the flow of goods from producers to customers. It encompasses, however, a broad range of activities including product planning, new-product development, organizing the channels by which the product reaches the customer, the actual distribution of products, wholesaling, price setting, advertising and promotion, public relations, product warranties, retailing, financing, and more.

There was a time, not many decades ago, when marketing was an incidental concern for businesses. The main emphasis was on production. Goods were produced and made available for customers to buy, with a minimum concern for what customers might want. What was on the market at any one time was determined by production managers.

Most businesses now are dominated by an orientation toward marketing, not toward production. This means that firms begin by anticipating what consumers want. They then plan their products accordingly. What is produced is guided by marketing decisions, and marketing managers have more to say about company decisions than production managers. It is estimated that at least half of the cost a consumer pays for a product is accounted for by marketing expenditures.

 

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Markets, Products, and Customers

In the simplest terms, a market is the place where seller meets buyer to exchange products for money. (“Products” include services as well as goods.) Traditional markets still function in many parts of the world. Even in the United States, during summer months, there are farmers' markets where direct selling and buying take place between producers and consumers. Most service industries still operate at this market level.

Manufacturing industries and most agricultural enterprises are more remote from the consumer. Their products pass through several hands—truckers, warehouse workers, wholesalers, and retailers—before reaching the final consumer.

Products, or commodities, are usually divided into two types: consumer and industrial. (Manufacturers are consumers as well as makers of products.) Consumer goods are those that are sold to final users, the customers. These goods include food, clothing, automobiles, television sets, appliances, and all those things people go to stores to purchase.

Industrial goods are those that are sold to companies or other businesses for use in manufacturing or other purposes. Automobile makers buy many of the parts used to assemble cars. A tire manufacturer buys rubber, synthetic or otherwise, with which to make tires. Eventually these materials will end up in the hands of final users—the owners of the cars. The nature of industrial goods depends on the nature of the goods to be made for final users. The price of industrial goods and raw materials will influence the price of final goods, those that the consumer buys.

Agricultural and manufacturing enterprises are also final customers of some goods. Farmers buy seed, fertilizer, machinery, pesticides, animal feed, and other goods. Factories need machinery, fire protection, meal services, computers, paper and other office supplies, heating and air conditioning, janitorial services, and other goods to keep operating. Service industries also are final customers for many goods. Doctors and dentists need offices, medicines, and equipment. Insurance companies need desks and chairs, adding machines, and computers.

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Marketing Research

Marshall Field's, a department store in Chicago, has long used the motto: “Give the lady what she wants.” Finding out what the customer wants is one of the problems marketing research tries to solve. Marketing research has been defined as trying to analyze marketing problems scientifically. It studies people as buyers and sellers, examining their habits, attitudes, preferences, dislikes, and purchasing power. It often studies specific segments of a population, such as teenagers, high-income groups, or senior citizens. Marketing research also investigates distribution systems, pricing, promotion, product design, packaging, brand names, and almost every aspect of the seller-buyer relationship.

Marketing research is divided into a number of subareas. Advertising research attempts to find out the effectiveness of advertising. It also seeks to learn the best media for advertising specific products: television, newspapers, radio, magazines, billboards, and others. Market analysis tries to identify and measure markets for specific products and to estimate sales potential. Markets may be differentiated by population groups or by geography. Some types of clothing are more likely to sell in Florida and California than in the northern Midwest. Some cosmetics will appeal more to black customers than to white customers. Performance analysis helps a company learn how well it is meeting its goals of sales and profits. Product research covers the whole area of new-product development. Marketing research is an expensive undertaking, and its costs are built into the prices of products.

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Product Development

Akio Morita, the chairman of Sony Corporation in Japan, wanted a radio he could carry with him and listen to wherever he went. From that small desire was born the Sony Walkman, a radio small enough to be worn on a belt or carried in a pocket. With a headset smaller than earmuffs, the Walkman can be worn and listened to anywhere.

Not all product development is so easy. Most of today's products (including many of the basic necessities of food, clothing, and shelter) are the result of creative research and thinking by staffs of people. A new product is one that is new for the company that makes it. A hamburger is not new, but when McDonald's introduced the Big Mac, it was a new product for that company.

Decisions to make a new product may be the result of technology and scientific discovery. The discovery can be accidental or sought for. The original punch-card data-processing machine was devised for use by the Bureau of the Census. Penicillin, by contrast, was an accidental discovery and is now one of the most useful antibiotics. Products today are often the result of extensive marketing research to learn what consumers and retailers want. Ideas for products may come from consumers, salespeople, engineers, competitors, trade associations, advertising agencies, or any number of other sources.

Once a product has been approved, it must be designed, made, tested, revised, and retested. It may be subject to test marketing (sold or given away in a few places) before being put on the market generally. This whole process may take several years.

Package design and brand-name selection are two major aspects of product planning. Packaging not only contains and protects a product, but also provides a form of advertising intended to appeal to consumers by its appearance or convenience. Carbonated beverages could be sold in colorless glass jugs, but they are far more appealing and convenient in colorful six-packs of aluminum cans. Packaging also can add significantly to the cost of a product.

The packaging of many products is regulated by governments. In the United States, the federal government requires certain information to be placed on cartons, boxes, and other packaging for products used by consumers. Nutrition information, for instance, is required on most packaged foods. Most packaging today carries a universal product code stamped on it. The code can be read by electronic scanners to speed up the buying process and to automate inventory control.

Text 27

Personnel Management

The most valuable asset of any business is its people. Land, buildings, goods, and equipment may dominate a balance sheet, but they do not make a business successful: people do. The best businesses are the ones that have the best people – capable, creative, energetic people. To attract them requires both ingenuity and initiative on the part of employer. But the payoff in productivity is worth it. Staffing your business with the best people should be one of the highest priorities.

Staffing, leading and controlling are important functions of management. The main aim of staffing is to fill and keep filled the positions in the organization structure with competent people. It also involves selecting, hiring, promoting, planning the career, compensating and training.

Many firms have a personnel department with personnel manager directly responsible for coordinating activities of the employees. Yet, whether or not there is a personnel department, all managers are responsible for managing human resources.

Text 28

The International Manager

In recent years, many companies have expanded globally. They have done this through mergers, joint ventures and co-operation with foreign companies. Because of this globalization trend, many more employees are working abroad in managerial positions or as part of a multicultural team.

Although it is common nowadays for staff to work abroad to gain experience, many people have difficulty adapting to the new culture. The failure rate in US multinationals is estimated to be as high as 30% and it costs US business $3billion a year.

Two topical failures have been described in the journal “Management Today”. The first example concerns a German manager with IBM who took up the position as a product manager in England. He found that at most lunchtimes and especially on Fridays, many members of the staff went to the pub. “I stopped that right away”, he says. “Now they are not allowed off the premises. It did not make me very popular at the time but it is not good for efficiency. There is no way do that in Germany. No way.”

The second example is about an American manager who came to France on management assignment. He was unable to win the trust of his staff although he tried all kinds of ways to do so. He set clear goals, worked longer hours than everybody, participated in all the projects, visited people’s offices and even took employees out to lunch one by one. But nothing seemed to work. This was because the staff believed strongly that the management was trying to exploit them.

The German manager’ mistake was that he hadn’t foreseen the cultural differences. IBM had a firm rule about drinking during working hours. It was not allowed. He didn’t understand that staff in other countries might be more flexible in applying the rule.

The American manager used the ways he was familiar with to gain the staff’s trust. To them, he seemed more interested in getting the job done than in developing personal relationships. By walking around and visiting everyone in their offices, perhaps he gave the impression that he was “checking up” on staff. His managerial approach strengthened their feeling of exploitation.

When managers work in foreign countries, they may find it difficult to understand the behavior of their employees. Moreover, they may find that the techniques which worked at home are not effective in their new workplace.

Text 29

Some Notes on Negotiating

Negotiations may become emotional. You may find your Russian negotiator banging his or her fist on the table or leaving the room. Accept such tactics with patience and calmness. They are designed to make it difficult for you to concentrate.

Russian negotiating teams are often made up of experienced managers whose style can be like a game of chess, with moves planned in advanced. Wanting to make compromises may be seen as a sign of weakness.

Distinguish between your behavior inside and outside the negotiations. Impatience, toughness and emotion during the negotiations should be met with calmness, patience and consistency. Outside the negotiating process you can show affection, and personal sympathy.

As well as being formal, negotiations are direct. German managers speak their mind. They place great weight on the clarity of the subject matter and get to the point quickly.

Excessive enthusiasm or compliments are rare in German business. You should give a thorough and detailed presentation, with an emphasis on objective information, such as your company’s history, rather than on clever visuals or marketing tricks. Prepare thoroughly before the negotiation and be sure to make your position clear during the opening stage of the talks, as well as during their exploratory phases. Avoid interrupting, unless you have an urgent question about the presentation.

Communicating is a natural talent of Americans. When negotiating partners meet, the emphasis is on small talks and smiling. There is liberal use of a sense of humor that is more direct than it is in the UK. Informality is a rule. Business partners do not use their academic titles on their business cards. Sandwiches and drinks in plastic or boxes are served during conferences.

This pleasant attitude continues in the negotiation itself. US negotiators usually attach little importance to status, title, formalities and protocol. They communicate in informal and direct manner on a first- name basis. Their manner is relaxed and casual.

The attitude “time is money” has more influence on business communication in the US than it does anywhere else. Developing a personal relationship with the business partner is not as important as getting results.

At the start of the negotiations you might want to decide whether you need interpreters. You should have documentation available in Spanish. Business cards should carry details in Spanish and English.

During the negotiations your counterparts may interrupt each other, or even you. It is quite common in Spain for this to happen in the middle of the sentence. For several people to talk at the same time is accepted in Latin cultures, but is considered rather unusual in Northern Europe.

The discussion is likely to be lively. In negotiations, Spanish business people rely on quick thinking and spontaneous ideas rather than careful preparation. It may appear that everybody is trying to put his or her point across at once. That can make negotiations in Spain intense and lengthy, but also enjoyably creative.

Text 30

The Heart of Business

It’s been said that nothing happens in business until somebody sells something. The significance of this is that for a business to be successful, it has to get its products or services into the hands of its customers. A business can have the best products or the finest services, but unless they find their way to customers in sufficient quantities, the business won’t have a chance of succeeding.

That’s why the process of getting your product or service to the ultimate consumer plays such a crucial role in your marketing mix. Sales and distribution is the “place” in the four Ps mentioned, it’s where customer buys the product or service, and includes all the steps involved in getting the product from where it originates to where it finally becomes available for purchase by the customer.

Text 31

Personal Selling

Every business owner is a salesperson whether they realize it or not. In order to create a successful business, it’s necessary for a business owner to know how to sell – not only their product or service, but themselves and their business as well. You may have to sell your business idea to a banker to get a loan, or to a prospective employee.

Though few would deny the importance of sales ability to business success, many small business owners find personal selling either distasteful or downright frightening. It doesn’t have to be either if you understand the important role that sales plays in any business, and learn the selling skills necessary to be a good salesperson.

Just remember this: to be a successful business owner you’re going to be a salesperson whether you want to be or not. What you have to decide is whether you’re going to be a good salesperson or a mediocre one.

Text 32

The Sales Process

Regardless of your type of business, it is important for you and any sales employees you hire to understand the selling process. This process consists of a series of steps, each one of which is the foundation for the following step. When each is done correctly and in the proper order, the result-is another sale for your business. The following overview will introduce you to the basic selling process, which you can adapt for your business:

Preparation. Make sure you have as com­plete a knowledge of your product or service as possible. Think of yourself as a problem solver or consultant to your customers, and prepare to be an expert for them. At the minimum you should be aware of all the features, benefits, and prices of your product or service. No less important is to have the most thorough knowledge of your customers you can. It’s also necessary to know ahead of time what your company sales policies and procedures are, and how to correctly fill out order forms or use the cash register. Every one of your employees should also be familiar with, and comfortable about, these mechanics too.

Text 33

Every Business Needs Money

Every business needs money to get started. And just about every business needs money at some point to finance growth or get through a difficult period. Additional capital may also be needed to cope with seasonal peaks or to purchase new facilities and equipment.

Many businesses have failed because the owners didn’t know how to predict their cash needs, didn’t know what sources of funds were available, and didn’t know the most effective ways for obtaining funding. Often these failures were attributed to insufficient financing.

But lack of money isn’t really what makes most businesses fail. Pouring more and more money into an ill-advised venture, or one run by an owner lacking good management skills, won’t make it successful. Money isn’t a substitute for a sound business idea, a well-prepared business plan, and careful execution of that plan.

Smart business owners acquire a basic understanding of financial matters and financial planning in order to avoid becoming victims of financial disaster. Some of the financial pitfalls inexperienced business owners fall into when raising money are not requesting enough financing, asking for too much, not matching the incoming funds with actual business needs, and not considering the real cost of money.

Text 34

Determining Your Financial Needs

Before raising any money for your business, carefully review your financial needs. The first thing to determine is exactly what you want the money for: start-up costs, increased working capital to meet expenses due to expansion, or equipment purchases, for instance. Be clear about what the money is intended for and how it will help make your business successful.

Once you know how you’re going to use the money, you’ll know how much money you’re going to need. Then determine how you’ll pay it bark. And finally, ask yourself if you can afford the cost of the money, whether that cost is in the form of interest on a loan or having to give up a share of the ownership in the business.

The best time to ask these questions is before you actually have financial problems. This is one of the main reasons for preparing the “Cash Forecast” Any projected cash deficits (negative cash flow) could be a warning that financing is needed. Not all projected deficits require additional funding because you may be able to find ways to reduce expenses or convince suppliers to extend credit terms to prevent projected deficits from occurring.

Though cash flow projections are helpful, they’re not the only way a business plan can help you raise money. In fact, your business plan is your primary tool for raising capital. Investors and lenders both want to see in writing what they’re being asked to put up money for and how they’ll be repaid. Trying to get loans or investments without a business plan is almost certainly a waste of time.

Text 35

Look Before You Leap Into That New Business

Many failed businesses should never have been started in the first place, as their owners would have discovered with a little preliminary investigation. That’s why market research is necessary even before a business opens its doors. Answering a few questions before launching a new business can save time, trouble, and money later.

Before starting a business, you should perform an informal feasibility study. If this study indicates saved your time and money for a more promising enterprise. But if this study shows your business idea has good potential, you’ll have the satisfaction and increased confidence from knowing you have a sound business idea. You’ll also have gained an increased understanding of the business.

While the terms “market research” and “feasibil­ity study” may sound complicated and technical, they merely involve getting the answers to a few simple questions, and then thinking about how the answers apply to your venture. When considering any new venture, use the checklists in the Business Assessment section to determine whether that particular business is right for you, and whether the business idea has any serious flaws. Once you’ve done this, you’re ready to conduct some market research.

Text 36

The Role of Market Research

Launching a new business, introducing a product or service, and buying advertising are all so expensive that misjudgments can mean disaster for a small business. Market research can avoid costly errors by telling you what people want to buy and how they want it presented to them.

Regardless of how great you think your product is, if s virtually impossible to sell any product or service that people don’t want. On the other hand, it’s very easy to sell people what they do want. That’s the whole point of market research — to find out what people want so you can provide it for them. To be successful, a business has to know its market – who its customers and potential custom­ers are and how they perceive its products and services.

Market research is the way to obtain, analyze, and interpret the information necessary for making marketing decisions. It provides the timely information you need to:

• reduce your risks

• identify and profit from new opportunities

• improve existing products

• plan and refine advertising campaigns

• spot problems and potential problems

• evaluate alternative distribution channels

Fortunately market research doesn’t have to be expensive. Although large corporations often spend millions of dollars for market research, a small business owner can accomplish much for very little money. Initially you need to determine such things as whether there is a market for your product or service, how that market can be.

Text 37

The Development of Accounting Thought

Accounting has a long history. Some scholars claim that writing arose in order to record accounting information. Account records date back to the ancient civilizations of China, Babylonia, Greece, and Egypt. The rulers of these civilizations used accounting to keep track of the cost of labour and materials used in building structures like the great pyramids.

Accounting developed further as a result of the information needs of merchants in the city-states of Italy during the 1400s. In that commercial climate the monk Luca Pacioli, a mathematician and friend of Leonardo da Vinci, published the first known description of double-entry bookkeeping in l494.

The pace of accounting development increased during the Industrial Revolution as the economies of developed countries began to mass-produce goods. Until that time, merchandise had been priced based on managers hunches about cost, but increased competition required merchants to adopt more sophisticated accounting systems.

In the nineteenth century, the growth of corporations, especially those in the railroad and steel industries, spurred the development of accounting. Corporation owners – the stockholders – were no longer necessarily the managers of their business. Managers had to create accounting systems to report to the owners how well their businesses were doing.

The role of government has led to still more accounting developments. When the federal government started the income tax, accounting supplied the concept of “income”. Also, government at all levels has assumed expanded roles in health, education, labour, and economic planning. To ensure that the information that it uses to make decisions is reliable, the government has required strict accountability in the business community.

Text 38

Managing the Future

What does it mean “managing the future”? It means paying attention to the past, to the present, and to past and current patterns of change in the world around you. In managing the future, understanding and initiating action are top priorities Constant innovation and improvement are valuable action steps. Relying solely on the past is neither possible nor good business. Using a past orientation results in missing opportunities and not keeping up with changes in today’s emphasis on the customer. The past-oriented manager wants to attract and retain customers, but focuses on other parts of the business: the accounting system, tax laws, the source and flow of available raw materials.

One future-oriented company that respects and has learned from the past and appreciates its founder is McDonald’s. This fast food firm knows that the past can’t be repeated. This firm is in constant search of innovations to remain competitive to build on its past reputation, and to improve its position in holding off more and more competitors. McDonald’s innovations include the Big Mac, the Egg McMuffin, etc.

McDonald’s keeps innovating and improving and learns from the past because it can’t afford to be lazy and nonresponsive. The competition is too fierce and opportunistic. The firm responds to its changing external and internal environment with new products, environmentally friendly waste products, improved service and better ways of doing business.

Whether McDonalds Corporation founder Ray Kroc ever studied or considered the historical roots of management isn’t known. However by reviewing Kroc’s style and strategies we get the impression that, he used the past as a way of learning how to manage his and McDonald’s future.

Kroc was an innovator who favoured taking action to stay ahead of the competition. The firm’s history clearly shows that his insistence on quality has become a part of McDonald’s internal cultural fabric.

Text 39

World Domination

If the British over, the centuries spread English across the world by colonization, America has spread it even more effectively and quickly by different means. Who in the world has not heard Of Coca Cola, McDonald’s, IBM, General Motors, Microsoft and Boeing? It is clear that American industries have made their own forms of conquest. The slate of the American dollar influences all the money markets of the world. United States foreign policy affects many other countries, both, near and far.

Along with all this economic and political power, there is also unequalled power in all the fields of communication, information and entertainment. No other country has played a greater part in the development of the computer. America leads the world in the design and manufacture of hardware and in the development and production of software. UNESCO figures show that 94 per cent of Internet communications are in English.

Early in the twentieth, century, America established itself as the world leader in the new medium of the cinema. In 1906, the first full-length movie was made there and in the following year film-making began in the Hollywood area of Los Angeles. In many countries of the world today, most people’s familiarity with English comes from films, TV and other types of American entertainment.

Text 40

Euro

On 1 January 1999, eleven European Union Countries adopted the new euro currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Four European Union Countries did not adopt the euro: Britain, Denmark, Greece, and Sweden. The official abbreviation for the euro is EUR (capital E, capital U and capital R).

Notes

There are 7 euro notes in the following denominations: 500 euros, 200 euros, 100 euros, 50 euros, 20 euros, 10 euros, 5 euros

Coins

There are 8 euro coins in the following denominations: 2 eu­ros, 1 euro, 50 cents, 20 cents, 10 cents, 5 cents, 2 cents, I cent. Bank notes and coins for the euro will not be used until 2002. Until that time, the 11 euro countries will continue to use their existing bank notes and coins.

Symbol

The symbol for the euro is like a round E with two horizontal parallel lines. The inspiration for this symbol was the Greek letter epsilon (a reference to Greece as the foundation of European civilization). The parallel lines are intended to represent the euro’s stability.

Text 41

THE SMALL SHOP

Small shops generally deal in a certain kind of goods and may be called specialized shops. Thus, you go to the fishmonger’s for fish and if you run out of bread, you go to the baker’s. However, more often small shops trade in a variety of foodstuffs, such as flour, butter, eggs, sugar, tinned and frozen foods. The householder can use the small shop when he or she runs short of small items of grocery, etc.

There are many tens of thousands of small Shops in Great Britain and many people have a small shop within walking distance of their home. This makes them very convenient to the shopper. However, the number of small shops in Great Britain has declined in the last twenty years.

The small shop will often be open early in the morning and late at night. The shopkeeper will also allow some of the best customers to buy on credit and pay their bill at the end of the week. Special likes and dislikes of the customers are catered for by the small shop and they will often carry a wide variety of stock to cover individual needs of many customers. The shopkeeper will spend a lot of time and trouble to make sure that regular customers get exactly what they want.

The personal service offered by the small shop is its greatest advantage. However, as the small shop gives good personal service, customers may have to wait whilst the shopkeeper is serving an earlier customer, and this can sometimes be a disadvantage.

Because the small shopkeeper buys his goods in small quantities, he does not have the price advantages offered by bulk purchase. The small shopkeeper may buy, say, 10 or 20 tins of food and has to pay a much higher price per tin to the wholesaler than the owner of a larger shop, who would buy the tins of food by the hundred or even by the thousand. For a big order like this the price per tin would, of course, be much less. The supermarket can therefore offer its goods at a much lower price than the small shop because it buys in bulk.

Because the small shop is small, it cannot carry a large stock and it may be difficult to see the stock because of poor display.

Text 42

10 Ways Outsourcing Can Help Grow Your Business

Outsourcing is when you hire outside professionals or services to take on part of your business workload. You may want to outsource part of your work because you don’t have the room, you need an expert, you have periodic busy periods, or you need more production to get orders out on time, etc. The following are ten ways outsourcing can save your business time and money.

1. You won’t have to take the time to train employees. This will allow you to spend more time working on your marketing and advertising campaign.

2. You won’t have to do time consuming tasks like adding on new equipment or learning new software to complete certain tasks. This will allow you to spend more time testing your advertisements.

3. You won’t have to interview employee candidates. This will allow you to spend more time improving your customer service, in return you will get more repeat purchases.

4. You won’t have to fill out all the employee paper work like tax forms, scheduling, retirement plans, etc. This will allow you to spend more time developing new products.

5. You won’t have to buy extra office or work space to complete certain tasks. You can use all the money you save on other business expenses.

6. You won’t have spend money on employee costs like taxes, medical, vacation time, holidays, workers comp., unemployment costs, etc. (These may vary depending on which country you do business in.)

7. You can speed up you order and delivery system with the extra help. Your customers will appreciate the fast service and you’ll have a higher chance that they will buy from you again.

8. You could expand your market share by becoming a middleman and offering your subcontractors products or services. This will increase your business profits and give you multiple income streams.

9. You can take on extra or large orders your business couldn’t handle before. This will expand your market share and you could also offer to take the work your competition can’t handle.

10. You could get end up receiving orders from your subcontractors. Your subcontractors may also tell other people about your business.

Text 43

“Online Credit Card Usage” – Convenience at its Best

Commerce and technology, combined as a one package – this is what online credit cards are. With the advent of internet, the knowledge and communication barriers were broken. Also, with internet, came the concept of e-shops or virtual shops that existed only on the internet. You could shop at these shops by making use of their online credit card payment-acceptance ability. Once the online credit card payments were verified and approved, the goods got delivered to your door. This is what we call convenience at its best.

With more and more e-shops getting setup everyday, online credit card usage is becoming even more popular. The possibility of receiving online credit card payments has given a totally new dimension to shopping. Now, you can not only shop from the comfort of your home, you can even get discounts on these products. This is really amazing. No need to bother about the weather, no need to worry about the traffic jams or any other thing. Just go to an e-shop, select a product, make use of their online credit card payment-acceptance facility to make the payment and be ready to receive the goods at your doorstep. With online credit card processing facility, starting a business (an online business) has become just unbelievably easy.

However, there is nothing without pitfalls. One of the pitfalls of online credit card usage is the possibility of online credit card fraud. This online credit card fraud can happen in two ways. The first one is related to the company, on whose website you made online credit card payment for purchase of goods; this company itself could be fraudulent i.e. it could take the online credit card payment from you but not deliver the goods to you. Moreover, they could use the details of your credit card (received through the filling up of online credit card payment form by you) for fraudulent purposes. The second type of fraud is committed by fraudsters who use various softwares/devices to capture the details of online credit card payments (as you enter them on the online credit card payment form of a website). These softwares are popularly known as spyware and these fraudsters as online spies. The spyware works by capturing keystrokes or taking screenshots of whatever you do on your computer and then passes it on to the spy. However, there are anti-spyware softwares available which can be used to counter such spyware.

So, the advent of online credit card usage facility is a boon to us. However, you must exercise caution when making online credit card payments e.g. don’t access your bank accounts or make online credit card payments from internet cafes (unless you are absolutely sure about the credentials of the internet café).

TEXTS ABOUT DIFFERENT COMPANIES

Text 1

McDonald’s

Dick and Mac McDonald opened the first McDonald’s in 1948, in San Bernardino, California. In 1954, Ray Kroc also joined them in their business. By 1959, McDonald’s had sold its 100 millionth hamburger, and had opened its 100^th store. At that time, McDonald’s was going at full speed, and Kroc bought out the McDonald brothers. McDonald’s began advertising on TV, and in the 1960s added new menu entrees having expanded to other countries.The rate that McDonald’s was adding restaurants also was increasing steadily. The restaurants opened by the hundreds each year, and the whole world was able to eat at one. Also, in 1996 McDonald’s opened restaurants in India, and added about 80 in Italy.

Text 2

IBM

The International Business Machines Corporation (IBM) is the leading American computer manufacturer, with a major share of the market both in the United States and abroad.

The company assumed its present name in 1924 under the leadership of Thomas Watson, a man of considerable marketing skill who became general manager in 1914 and had gained complete control of the firm by 1924. Watson built the then unsound company into the leading American manufacturer of punch-card tabulating systems used by governments and private businesses. He also developed a highly disciplined and competitive sales force that adapted the company’s custom-built tabulating systems to the needs of particular customers.

In 1933 IBM purchased Electromatic Typewriters, Inc., and thereby entered the field of electric typewriters, in which it eventually became an industry leader. During World War II, IBM helped to construct several high-speed electromechanical calculators that were the ancestors of electronic computers. But the firm refrained from producing these electronic data-processing systems until Watson’s son, Thomas Watson, Jr, became president of the company in 1952 and sponsored an all-out push into that field. Having entered the computer field, IBM’s size allowed it to invest heavily in development. This investment capability, added to its dominance in office-calculating machines, its marketing expertise, and its commitment to repair and service its own equipment, allowed IBM to quickly assume the predominant position in the American computer market. By the 1960s it was producing 70 percent of the world’s computers and 80 percent of those used in the United States. IBM’s specialty was mainframe computers – i.e., expensive medium- to large-scale computers that could process numerical data at great speeds.

The company did not enter the growing market for personal computers until 1981, when it introduced the IBM Personal Computer. This product achieved a major share of the market, but IBM was nevertheless unable to exercise its accustomed dominance as a maker of personal computers. IBM’s enormous Size hindered it from responding rapidly to the accelerating rates of technological change, and by the 1990s the company had downsized considerably.

IBM’s products include virtually every type of equipment needed for information processing, storage, and retrieval. In addition to being the world’s largest manufacturer of computers, the company produces electric typewriters, electronic cash registers, and other business machines.

Text 3

Microsoft

Microsoft is the largest software company in the computer world, and its operating systems are on almost all computers. Its release of Windows 95 and the Microsoft Office 95 has increased the size of already giant company. It has been so successful because of the low priced and easy to use software it creates. From six year olds to presidents of large corporations use their products.

William Gates, a 19-year old dropout from Harvard, founded Microsoft with his friend Paul Allen. The two rewrote BASIC, the language that let people create programs for their PC. Then, IBM chose them to write an operating system for the new IBM-PCs. Gates and Allen paid $50,000 to Tim Paterson for his QDOS, and renamed it to MS-DOS. The operating system was extremely successful, and soon all other PC manu­facturers wanted to be compatible with IBM. This gave Microso­ft the chance to make huge profits, and they had done.

Their next big success was Windows, which was a graphical operating system that became popular because it was extremely easy to use. Then, in 1993, they released Windows NT, which made networking extremely easy. By this time, Bill Gates had monopolized the operating system market and had become a billionaire.

Text 4

The Wrigley Company

William Wrigley went to work as a travelling soap salesman for his father’s company at the age of 13. In 1891 he went to Chicago as a soap distributor and there started offering baking powder as a premium with each box of soap. In 1892 he began selling baking powder as a sideline, offering chewing gum as premium. The chewing gum proved to be more popular than the baking powder, so he dropped both soap and baking powder sold only chewing gum. He also gave dealers premiums, such as clocks, coffee grinders, or fishing tackle, which varied with the size of the order.

Wrigley relied on advertising to increase sales of Wrigley’s Spearmint chewing gum, which he introduced in 1893. By 1908, sales of Wrigley’s Spearmint were more than $1,000,000 a year. In 1911 he established the Wm. Wrigley Jr. Company. His company became one of the biggest advertisers in the United States. By 1925, when Wrigley turned the company presidency over to his son, Philip and became chairman of the board, the Wrigley company had had factories in the United States, Canada, and Australia. Wrigley’s Chicago headquarters, the Wrigley Building, became a noted architectural landmark of that city.

Text 5

Nike

Owing about 37% of the US athletic market, Nike is in fairly good shape. Its popularity is due largely to the use of Nike shoes by famous athletes such as Michael Jordan. Its largest com­petitor is Reebok, which owns 20% of the market. Nike not only produces shoes, but athletic apparel and accessories also are produced by the company. Since almost all the famous athletes use their products, Nike does not have a hard time selling its products, although now they are looking for a way to expand.

Nike was started in 1958 by Phil Knight, a track runner. His idea was to create a good American running shoe. The running shoe was designed by him and his coach, and a shoe manufacture created it. Then the company was called Blue Ribbon Sports. Knight substituted the name to Nike after the Greek goddess of victory, and a logo was added. Running was increasingly popular and runners who were persuaded by Knight’s advertising, bought the shoes. In 1972, four of the top seven Olympic marathon runners were wearing Nike shoes. After the next design of the waffle running shoe, Nike increased profits considerably. After running became less popular, Nike changed its products in accordance with the West desire for fitness. But when basketball shoes were created, they began to profit enormously. As Michael Jordan was used to advertise, Nike quickly made it to the top with their Air Jordan.

Text 6

Sony Corporation

The company was established in 1946 as Tokyo Telecommunications Engineering Corporation and changed its name to Sony Corporation in 1958. In 1960 it established the Sony Corporation of America in New York City and Sony S.A. in Switzerland. In 1961 Sony became the first Japan-based company to offer its shares on the United States stock market.

In the late1970s Sony introduced the Walkman, a portable headset stereo system, and later the Watchman, a television small enough to be worn as a wristwatch. Sony’s Betamax was the first home videotape recorder on the market, but the system but the system eventually was replaced by the VHS videotape format; the VHS format became the industry videotape standard. Sony’s Betacam system is now the Standard in commercial broadcasting equipment, however.

Nowadays, after the acquisition of CBS Records and Columbia Pictures Entertainment Sony has become a major force in the recording motion picture and television production industries as well as the leading producer of computer games with advanced three-dimension graphics.

For the last several years Sony actively has been encouraging innovation by its employees. The company holds an annual contest in which engineers show off their prototypes; bonuses are awarded to those whose prototypes are selected for eventual manufacture and to marketing.

Text 7

The Fiat Group

The Fiat Group is one of the world’s largest industrial companies operating in 60 countries with 220 production plants 224.000 employees.

Today, Fiat is a multi-business with an automotive core, aiming to increase its operations worldwide and to grow in the service areas related to its business.

In order to meet this challenge, the Fiat Group is actively recruiting young engineering graduates (24—28 years of age) to become the company’s future management as it pursues its global growth.

Candidates should possess the following:

• Recognized university degree

European Union member state nationality

• Fluency in English and at least one other language

• Interest in automotive industries

• An international outlook and mobility

In return, successful candidates will receive:

• Engagement by the Fiat Group, London

• Introductive training program in Turin, Italy

• Work experience in different countries in the engineering manufacturing and commercial operations of Fiat Group’s main automotive divisions

• Competitive salary and career development

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Volkswagen

Volkswagen AG is the major German automobile manufacturer, founded by the German government in 1937 to mass produce a low-priced “people’s car.” Its headquarters are in Wolfsburg.

The company was originally operated by the German Labour Front, a Nazi organization; and Ferdinand Porsche was brought in to design the car. Production was interrupted by World War II, and by the end of the war both the Volkswagen factory and the city of Wolfsburg were in ruins. Allied attempts to revive the West German auto industry after the war centered on the Vo1kswagen, and in little more than a decade the company was producing half of West Germany’s motor vehicles.

Exports to most parts of the world were strong, but because of the car’s small size, unusual rounded appearance, and historical connections with Nazi Germany, sales in the United States were originally slow. This changed in 1959, when an American advertising agency, Doyle Dane Bernbach, began a landmark advertising campaign, dubbing the car the Beetle because of shape and pointing to its size as an advantage to the consumer. This campaign was very successful, and for some years following, the Beetle was the leading automobile import sold in the United States.

The Volkswagen hardly changed from its original design, however, and by 1974, with increasing competition from other compact foreign cars, Volkswagen came near bankruptcy. This spurred the company to develop newer, sportier car models, among them the Rabbit and its successor, the Golf.

Although the company had been founded by the German government, in 1960 the state essentially denationalized it by selling 60 percent of its stock to the public. Volkswagen acquired the Audi auto company in 1965. Volkswagen and its affiliates operate plants throughout most of the world. In addition to cars, the company produces vans and minibuses, automotive parts, and industrial engines. It owns several other auto companies, including Audi in Germany and SEAT (Sociedad Espanola de Automoviles de Turismo) in Spain, and it also makes and markets cars with Fiat of Italy and Skoda of the Czech Republic.

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Nestle Expands Globally

The Switzerland-based Nestle Corporation, once a Swiss chocolate maker, now is the world’s biggest food company and the largest producer of coffee, powdered milk, and frozen dinners. The company also became number 1 in candy after passing Mars. And with the purchase of Perrier for $ 2.7 billion, Nestle became the world’s largest producer of mineral water with a 20 per cent share of the world market. Nestle achieved its success through intensive global expansion. Nestle does only 2 per cent of its business in Switzerland: the remaining 98 per cent is in other countries.

One of the first multinational corporation, Nestle now has production facilities in more than 60 countries. Its products can be found almost everywhere around the globe. In Europe, where Nestle’s success is greatest, sales of instant coffee, mineral water, yogurt, frozen foods, cold cuts, candy, and cereal bars total roughly $ 10.2 billion.

One secret to Nestle’s success is that many of its products – especially instant coffee, chocolates, and frozen foods – appeal to consumers all over the world. For example, coffee is closing in on tea as the favourite drink, in Japan. Frozen dinners, long a hit in the United States, are catching on in Europe. And of course chocolate tastes the same in any language. Although these products have to be adapted slightly to local tastes, they generally can be sold worldwide. Because of high research and development costs as well as high costs of marketing, Nestle benefits greatly by offering products with global appeal. After making large investments in its products, the company has been to move brands from one country to another with relative ease. ;

Now Nestle is looking to what Maucher thinks is the market of the future, the Third World. Currently, 20 per cent of the world’s population consumes 80 per cent of Nestle’s products. They would be satisfied if the company’s products were seen in more parts of the world. The company also will look to what Maucher considers the food of the future-pasta. As he puts it, “We can’t feed the world on beefsteak. So noodles will conquer the world”.

Most industry experts agree that Nestle is in the best position of any food company to expand internationally. Most of its competitors, which have been concentrating on their domestic markets, would be happy if they were involved in the profitable international trade.

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1. Established in 1908, General Motors Corp. became the nation’s leading car maker by the early 1930s, winning the competition with Ford Motor Co. By that time, the plant has acquired its best known brands, such Cadillac and Chevrolet. The Buick line was the part of the company from its foundation. Over the decades, the Detroit-located company has enlarged a long list of technological innovation, including the V-8 engine, which was put into production in 1914, and the automatic transmission in 1948. But management mistakes and growing competition in the 1970s and 1980s caused financial crisis in the company. It led to a serious reorganization that returned GM to financial health by the end of 1995.

2. Standard Oil Co. Since 1899 New Jersey Standard Oil Co. was an umbrella for John Rockefeller’s numerous oil operations. The federal government closed the umbrella in 1911, breaking Standard Oil into 33 different companies. The one that kept the name Standard Oil of New Jersey was renamed in Exxon Corp. in 1972. Today Exxon is the nation’s biggest oil company, and also has interest in refining and marketing chemicals, in coal, mineral and power-generating business. The company is located in Irving, Texas.

3. Coca-Cola Co. Atlanta pharmacist John Pemberton brewed Coca-Cola in 1886, advertising it as a tonic for lots of illnesses. In 1891, pharmacist Asa Candler bought the company for $2,000and promoted the beverage as a soft drink. Coke’s huge business was launched in 1894 when it started selling the beverage in bottles. In 1919 the company was bought by Atlanta banker Ernest Woodruff for $25 million. His son, Robert W. Woodruff, was soon appointed president, beginning more than six decades of successful leadership that build the company into a market giant.

4. International Business Machine Corp (IBM). Big blue was incorporated in 1911 under the rather inelegant name Computer-Tabulating-Recording Co. It produces scales, adding machines and other business equipment. CTR became IBM in 1924. In the 1950s, IBM made an entry into electronic computers. It dominated that market till the early 1980s when its position was challenged by the rise of personal computers. Since then, under new management, IBM has laid off tens of thousands of workers, refocused its products and returned to profitability, though it hasn’t returned its former dominance.