Company structure
Most organizations have a hierarchical or pyramidal structure, with one person or a group of people at the top, and an increasing number of people below them at each successive level. There is a clear line or chain of command running down the pyramid. All the people in the organization know what decisions they are able to make, who their superior (or boss) is (to whom they report), and who their immediate subordinates are (to whom they can give instructions).
Some people in an organization have colleagues who help them: for example, there might be an Assistant to the Marketing Manager. This is known as a staff position: its holder has no line authority, and is not integrated into the chain of command, unlike, for example, the Assistant Marketing Manager, who is number two in the marketing department.
Yet the activities of most companies are too complicated to be organized in a single hierarchy. Shortly before the first world war, the French industrialist Henry Fayol organized his coal-mining business according to the functions that it had to carry out. He is generally credited with inventing functional organization. Today, most large manufacturing organizations have a functional structure, including (among others) production, finance, marketing, sales, and personnel or human resources departments. This means, for example, that the production and marketing departments cannot take financial decisions without consulting the finance department.
Functional organization is efficient, but there are two standard criticisms. Firstly, people are usually more concerned with the success of their department than that of the company, so there are permanent battles between, for example, finance and marketing, or marketing and production, which have incompatible goals. Secondly, separating functions is unlikely to encourage innovation.
Yet for a large organization manufacturing a range of products, having a single production department is generally inefficient. Consequently, most large companies are decentralized, following the model of Alfred Sloan, who divided General Motors into separate operating divisions in 1920. Each division had its own engineering, production and sales departments, made a different category of car (but with some overlap, to encourage internal competition), and was expected to make a profit.
Businesses that cannot be divided into autonomous divisions with their own markets can simulate decentralization, setting up divisions that deal with each other using internally determined transfer prices. Many banks, for example, have established commercial, corporate, private banking, international and investment divisions.
An inherent problem of hierarchies is that people at lower levels are unable to make important decisions, but have to pass on responsibility to their boss. One solution to this is matrix management, in which people report to more than one superior. For example, a product manager with an idea might be able to deal directly with managers responsible for a certain market segment and for a geographical region, as well as the managers responsible for the traditional functions of finance, sales and production. This is one way of keeping authority at lower levels, but it is not necessarily a very efficient one. Thomas Peters and Robert Waterman, in their well-known book In Search of Excellence, insist on the necessity of pushing authority and autonomy down the line, but they argue that one element - probably the product - must have priority; four-dimensional matrices are far too complex.
A further possibility is to have wholly autonomous, temporary groups or teams that are responsible for an entire project, and are split up as soon as it is successfully completed. Teams are often not very good for decision-making, and they run the risk of relational problems, unless they are small and have a lot of self-discipline. In fact they still require a definite leader, on whom their success probably depends.
Assignment 4. Which of the following three paragraphs most accurately summarizes the text, and why?
First summary:
Although most organizations are hierarchical, with a number of levels, and a line of command running from the top to the bottom, hierarchies should be avoided because they make decision-making slow and difficult. A solution to this problem is matrix management, which allows people from the traditional functional departments of production, finance, marketing, sales, etc. to work together in teams. Another solution is decentralization: the separation of the organization into competing autonomous divisions.
Second summary:
Most business organizations have a hierarchy consisting of several levels and a clear line of command. There may also be staff positions that are not integrated into the hierarchy. The organization might also be divided into functional departments, such as production, finance, marketing, sales and personnel. Larger organizations are often further divided into autonomous divisions, each with its own functional sections. More recent organizational systems include matrix management and teams, both of which combine people from different functions and keep decision-making at lower levels.
Third summary:
Most businesses are organized as hierarchies, with a clear chain of command: a boss who has subordinates, who in turn have their own subordinates, and so on. The hierarchy might be internally divided into functional departments. A company offering a large number of products or services might also be subdivided into autonomous divisions. Communication among divisions can be improved by the introduction of matrix management or teams.
Assignment 5. The text mentions the often incompatible goals of the finance, marketing and production (or operations) departments. Classify the following strategies according to which departments would probably favour them.
a factory working at full capacity
a large advertising budget
a large sales force earning high commission
a standard product without optional features
a strong cash balance
a strong market share for new products
generous credit facilities for customers
high profit margins
large inventories to make sure that products are available
low research and development spending
machines that give the possibility of making various different products
self-financing (using retained earnings rather than borrowing)
Assignment 6. Match up the definitions with the terms in the previous assignment:
an amount of goods stored ready for sale
collective term for a company’s salespersons
producing as many goods as possible, or doing as much work as possible
profits generated by a company that are not distributed to shareholders as dividends but are either reinvested in the business or kept as a reserve for specific objectives (such as to pay off a debt or purchase a capital asset)
the money a company is willing to set aside to accomplish its marketing objectives
A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings.
A type of loan made in a business or corporate finance context.
The percentage of an industry or market's total sales that is earned by a particular company over a specified time period.
The ideal amount of cash that a company wishes to hold in reserve at any given point in time.
Part 2
Describing company structure
Assignment 1. This is an example of part of a company organization chart:
The most common verbs for describing structure are:
consists of is composed of
contains
is made up of
includes
is divided into
e.g. The company consists of five main departments.
The marketing department is made up of three units.
The sales department is divided into two sections.
Other verbs frequently used to describe company organization include:
to be in charge of
to support or to be supported by
to be accountable to
to be responsible for
to assist or to be assisted by
e.g. The marketing department is in charge of the sales force.
The marketing department is responsible for advertising, sales promotions and market research.
The five department heads are accountable to the Managing Director.
Assignment 2. Now write a description of either the organization chart above, or a company you know, in about 100-150 words.
Part 3
Competition and communication
Assignment 1. Jared Diamond is the author of Guns, Germs, and Steel: A Short History of Everybody for the Last 13,000 Years, in which he investigates why human history evolved differently on different continents. Here is a short extract from a talk by Professor Diamond called 'How to get rich', in which, drawing on the history of human societies, he makes a suggestion concerning the best way to organize a business.
Jared Diamond
I've received a lot of correspondence from economists and business people, who pointed out to me possible parallels between the histories of entire human societies and histories of smaller groups. This correspondence from economists and business people has to do with the following big question: what is the best way to organize human groups and human organizations and businesses so as to maximize productivity, creativity, innovation, and wealth? Should your collection of people be organized into a single group, or broken off into a number of groups, or broken off into a lot of groups? Should you maintain open communication between your groups, or erect walls between them, with groups working more secretly?
How can you account for the fact that Microsoft has been so successful recently, and that IBM, which was formerly successful, fell behind but then drastically changed its organization over the last four years and improved its success? How can we explain the different successes of what we
call different industrial belts? When I was a boy growing up in Boston, Route 128, the industrial belt around Boston, led the industrial world in scientific creativity and imagination. But Route 128 has fallen behind, and now Silicon Valley is the centre of innovation. And the relations of businesses to each other in Silicon Valley and Route 128 are very different, possibly resulting in those different outcomes.
I've spent a lot of time talking with people from Silicon Valley and some from Route 128, and they tell me that the corporate ethos in these two industrial belts is quite different. Silicon Valley consists of lots of companies that are fiercely competitive with each other, but nevertheless there's a lot of collaboration, and despite the competition there is a free flow of ideas and a free flow of people and a free flow of information between these companies that compete with each other. In contrast, I'm told that the businesses of Route 128 are much more secretive, and insulated from each other.
Or again, what about the contrast between Microsoft and IBM? Microsoft has lots of units, with free communication between units, and each of those units may have five to ten people working in them, but the units are not micro-managed, they are allowed a great deal of freedom in pursuing their own ideas. That unusual organization at Microsoft, broken up into a lot of semi-independent units competing within the same company, contrasts with the organization at IBM, which until four years ago had much more insulated groups. A month ago, I met someone who is on the board of directors of IBM, and that person told me, what you say about IBM was quite true until four years ago: IBM did have this secretive organization which resulted in IBM's loss of competitive ability, but then IBM acquired a new CEO who changed things drastically, and IBM now has a more Microsoft-like organization, and you can see it, I'm told, in the improvement in IBM's innovativeness.
So what this suggests is that we can extract from human history a couple of principles. First, the principle that really isolated groups are at a disadvantage, because most groups get most of their ideas and innovations from the outside. Second, I also derive the principle of intermediate fragmentation: you don't want excessive unity and you don't want excessive fragmentation; instead, you want your human society or business to be broken up into a number of groups which compete with each other but which also maintain relatively free communication with each other. And those I see as the overall principles of how to organize a business and get rich.
Assignment 2. Answer the questions:
Which of these do the part-sentences 1-8 refer to?
A Route 128 (the industrial belt around Boston, Massachusetts)
B Silicon Valley (the high-tech companies in the area between San Francisco and
San Jose, California)
C IBM
D Microsoft
has lots of companies that are secretive, and don't communicate or collaborate with each other
has lots of companies that compete with each other but communicate ideas and information
has always had lots of semi-independent units competing within the same company, while communicating with each other
is organized in an unusual but very effective way
is currently the centre of innovation
used to have insulated groups that did not communicate with each other
used to lead the industrial world in scientific creativity and imagination
was very successful, then less successful, and is now innovative again because it changed the way it was organized
Assignment 3. Match up the words on the left with the definitions on the right:
industrial belt A a company's ways of working and thinking
wealth B alone, placed in a position away from others
productivity C an area with lots of industrial companies, around the edge of a city
corporate ethos D breaking something up into pieces
collaboration E the amount of output produced (in a certain period, using a certain number of inputs)
insulated or isolated F the products of economic activity
fragmentation G working together and sharing ideas
Assignment 4. Working in pairs, rearrange the following part-sentences to make up a short paragraph summarizing Diamond's ideas about the best form of business organization.
a and regularly engage staff who have worked for your competitors,
b are at a disadvantage,
c because most groups of people get
d but also communicate with each other quite freely,
e creativity, innovation, and wealth,
f into a number of groups which compete
g Isolated companies or groups
h most of their ideas and innovations from the outside,
i So in order to maximize productivity,
j You should also exchange ideas and information with other companies,
k you should break up your business
Part 4
Big and small companies
Assignment 1. Do you, or would you, prefer to work for a big or a small company or organization? Why? What are the advantages of each?
Read the following statements, and decide whether they are about the advantages of working in a big or small company.
If you have problems with your colleagues you can always change departments.
The atmosphere is friendlier and you know everyone.
You are often responsible for a variety of different tasks.
You can actually see the result of your contribution to the company.
You can be proud of working for a company with a national or international reputation.
You can become more specialized in your work.
You can deal with problems face-to-face.
You have a better possibility of realizing your potential.
You have more independence, and you don't always have to wait for permission from a superior.
You may be able to go and work in a foreign subsidiary.
You often get greater freedom, flexibility and openness to change.
You'll probably get a slightly higher salary.
You're unlikely to be fired in a sudden reorganization or downsizing.
Your company will be in a better position in an economic downturn or recession.
Assignment 2. Study the Active vocabulary and give the Ukrainian equivalents of the words and word combinations:
1.to be responsible to
2. to report to
3.functional structure
4. line structure
5. matrix structure
6 staff position
7. at each successive level
8. immediate subordinates
9. Assistant to the Marketing Manager
10. Assistant Marketing Manager
11. to be credited with
12. personnel (human resources) department
13. permanent battles
14. incompatible goals
15. to separate functions
16. engineering department
17. overlap
18. determined transfer prices
19. to simulate decentralization
20. to keep authority at lower levels
21. relational problems
Unit 5 Company Law
Types of Business
Assignment 1. Complete the text using the words in the box:
bankruptcy |
financial |
creditors |
issue |
liability |
corporations |
partnership |
registered |
shares |
sole trader |
losses |
premises |
capital |
prospectus |
files |
Types of Business
The simplest form of business is the individual proprietorship or (1)…..: for example, a shop (US = store) or a taxi owned by a single person. If several individuals wish to go into business together they can form a (2) …….; partners generally contribute equal capital, have equal authority in management, and share profits or (3) ……. . In many countries, lawyers, doctors and accountants are not allowed to form companies, but only partnerships with unlimited (4) ……. for debts - which should make them act responsibly.
But a partnership is not a legal entity separate from its owners; like sole traders, partners have unlimited liability: in the case of (5) ……., a partner with a personal fortune can lose it all. Consequently, the majority of businesses are limited companies (US = (6), in which investors are only liable for the amount of capital they have invested. If a limited company goes bankrupt, its assets are sold (liquidated) to pay the debts; if the assets do not cover the debts, they remain unpaid (i.e. (7) …..do not get their money back.)
In Britain, most smaller enterprises are private limited companies which cannot offer (8) …… to the public; their owners can only raise capital from friends or from banks and other venture capital institutions. A successful, growing British business can apply to the Stock Exchange to become a public limited company; if accepted, it can publish a (9) ……. and offer its shares for sale on the open stock market. In America, there is no legal distinction between private and public limited corporations, but the equivalent of a public limited company is one (10) …… by the Securities and Exchange Commission.
FOUNDING A COMPANY
Founders of companies have to write a Memorandum of Association (in the US, a Certificate of Incorporation), which states the company's name, purpose, registered office or premises and authorized share (11) ….. .
(12) (always with an 's' at the end) — is the technical term for the place in which a company does its business: an office, a shop, a workshop, a factory, a warehouse, etc. Authorised share capital means the maximum amount of a particular type of share the company can (13) ……. .
Founders also write Articles of Association (US = Bylaws), which set out the rights and duties of directors and different classes of shareholders. Companies' memoranda and articles of association, and annual (14) ….. statements are sent to the registrar of companies, where they may be inspected by the public. (A company that (15) ….. its financial statements late is almost certainly in trouble.) In Britain, founders can buy a ready-made "off-the-shelf company from an agent, that is, a company formed and held specifically for later resale; the buyer then changes the name, memorandum, and so on.
Assignment 2. Answer the questions:
1. What is the simplest form of business?
2. What rights and duties do partners in a partnership usually have?
3. What risks can partners in a partnership run in the case of bankruptcy?
4. What happens if a limited company goes bankrupt?
5. Where do private limited companies raise their capital from?
6. How can a successful, growing British business become a public limited company?
7. Is there any legal distinction between private and public limited corporations in America?
8. What do founders of companies have to write?
9. What service is provided in Great Britain for those who want to found a company?
Assignment 3. Match the following terms to the definitions given below:
partnership, unlimited liability, proprietorship (sole trader), limited company
an unincorporated business with one owner who pays personal income tax on profits from the business.
A type of unincorporated business organization in which multiple individuals, called general partners, manage the business and are equally liable for its debts.
The responsibility of one or more owners of a business for the total amount of debt and other liabilities that the business accrues, regardless of how much the owner(s) have personally invested.
a type of business ownership combining several features of corporation and partnership structures.
Now read the texts and check whether you have chosen the right answer. Make a list of advantages and disadvantages of these types of business:
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. This means that the owner has no less liability than if they were acting as an individual instead of as a business. A sole proprietor may use a trade name or business name other than his or her legal name. The benefit of the sole proprietorship is the tax advantage. The disadvantage of a sole proprietorship is obtaining capital funding, specifically through established channels, such as equity (selling shares) and obtaining bank loans or lines of credit. As a business grows it often transitions to a limited liability company (LLC) or corporation.
A partnership is a type of unincorporated business organization in which multiple individuals, called general partners, manage the business and are equally liable for its debts; other individuals called limited partners may invest but not be directly involved in management and are liable only to the extent of their investments. Unlike a Limited Liability Company or a corporation, in a partnership each partner shares equal responsibility for the company's profits and losses, and its debts and liabilities. The partnership itself does not pay income taxes, but each partner has to report their share of business profits or losses on their individual tax return. Estimated tax payments are also necessary for each of the partners for the year in progress.
An unlimited liability is a type of business where owners share joint responsibility for the entire amount of debt and other liabilities amassed by the business. Unlimited liability exists regardless of the amount of investment each owner has personally made. If the business is unable to meet any financial obligations or settle any outstanding liabilities, the owner's personal assets can be seized to satisfy the debts. This is in contrast to a limited liability structure where owners' losses cannot exceed the total amount invested in the business. Unlimited liability is found in general partnerships and sole proprietorships.
A Limited Liability Company (LLC) is a popular business structure because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation. Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner. A few types of businesses generally cannot be LLCs, such as banks and insurance companies.
Assignment 4. Translate the following words and use them in the sentences of your own.
Equity business, entity, tax payments, tax return, income taxes, amass
Assignment 5. Study the Active vocabulary and give the Ukrainian equivalents of the words and word combinations:
individual proprietorship (sole trader)
to go into business
partnership
to share profits and losses
partnership with unlimited liability
limited company (corporation)
legal entity
personal fortune
to be liable for smth
assets
to cover the debts
private limited company
public limited company
shares
to raise capital from smb
venture capital institution
the Stock Exchange
prospectus
Securities and Exchange Commission
Memorandum of Association (Certificate of Incorporation)
authorized share capital
premises
to issue shares
Articles of Association (Bylaws)
to file financial statements
ready-made “off-the-shelf” company
shareholders
bankruptcy
legal distinction
Assignment 6. Translate the sentences:
1. Компанія має подавати щорічні фінансові звіти до регістру компаній, щоб у неї не виникло ніяких проблем.
2. Якщо компанія збанкрутіла, її активи продаються, щоб погасити борги.
3. Кожне підприємство має назву, ціль, офіс або приміщення та дозволений для випуску капітал.
4. В підприємстві з обмеженою відповідальністю, підприємець відповідає тільки за ту частину капіталу, яку він інвестував.
5.Нацбанк України має негайно погасити свої борги перед великими приватними компаніями.
6. Наразі фондова біржа Великобританії є ареною протистояння найрозвинутіших ТНК світу.
7. Колегія юристів стверджує, що між цими договорами немає вагомої юридичної відмінності.
8. Партнери вклали однакові обсяги капіталу, тому претендують на однаковий прибуток.
9. Ніхто крім вас не оплатить борги у разі банкрутства фірми.
10. Останнім часом «компанії під ключ» стали хорошим варіантом для початку свого бізнесу.
11. Відкрита фондова біржа дозволяє її учасникам мати доступ до інформації про усі акції, що є в продажі.
Mixed Bag
Translate the sentences:
Обробна промисловість – дуже важлива складова економіки Китаю, обсяги виготовленої продукції зростають з кожним роком.
Швидкий розвиток та зростання агрохолдингів в Україні означає, що все більше людей заробляють на життя в агропромисловому комплексі.
Якщо ви збираєтесь відкрити інтернет магазин, вам потрібно забезпечити стабільні поставки товарів.
Зростання кількості безробітних в країні свідчить про проблеми з економікою.
Важка промисловість є основою української економіки, закладена ще в радянські часи.
На складі зберігалася величезна кількість різноманітних товарів, призначених для продажу в супермаркеті.
Вибух на Чорнобильскій електростанції став величезною трагедією для українського народу, залишивши по собі жахливі наслідки.
Розробка нових технологій потребує колосальних зусиль та фінансування.
В час пік в метро жахлива штовханина, адже всі люди поспішають на роботу.
Рада директорів назначає та слідкує за роботою топ менеджерів, від дій яких залежить майбутнє компанії.
Однією з основних задач будь-якого менеджера є правильне встановлення цілей компанії, тобто напряму, в якому вона буде рухатися.
Він займає високу посаду у компанії і тому у нього велика кількість підлеглих. Він несе відповідальність за якість їхньої роботи.
За блискуче виконану роботу, що призвела до збільшення продаж, його було підвищено до начальника відділу.
Рівень цін на акції цієї компанії неухильно спадатиме, що спричинено невдалими діями топ менеджера.
Ринок послуг змінюється в залежності від зростаючих потреб людства.
Чим складніший продукт, тим вищі затрати на робочу силу для його виготовлення.
Нажаль, сьогодні в Україні виготовляються тільки низькотехнологічні продукти.
Я дуже сумніваюся що ця компанія вибереться з фінансових труднощів. Ситуація вже давно вийшла з-під контролю.
Безперечно, він добився успіху в житті. Його підприємство процвітає, в нього чудова сім’я та надійні друзі.
Якщо ви не сплатите борги до кінця місяця, все ваше майно буде конфісковано та продано на аукціоні.
Товариства з обмеженою відповідальністю – найбільш розповсюджена форма юридичної реєстрації підприємства.
Через невдало обрану стратегію продажу товарів компанія ледь не збанкрутіла.
До активів компанії належать багато патентів, інноваційних розробок та високотехнологічне обладнання.
Щоденне управління великим магазином – справа нелегка, і вона під силу тільки деяким людям.
Якщо до робітників не ставитимуться з повагою, вони не будуть достатньо змотивовані робити свою роботу добре.
Майк – мій безпосередній керівник. Зважаючи на нещодавні події, можна зробити висновок що він талановитий менеджер.
Товар, який ми виготовляємо – лідер на ринку, він випереджує конкурентів по всім показникам.
Щорічна фінансова звітність, згідно з діючим законодавством, є обов’язковою для всіх підприємств.
Сьогодні ми можемо прочитати у газетах або ж побачити по телевізору, що найбільша соціальна мережа «The Facebook» переживає неминучий спад вартості своїх акцій.
Дев’ятнадцяте століття добре відоме своїм проривом в області науки та техніки; багато нових виробів було винайдено для служіння людству.
Вихід нового сенсорного телефона під назвою IPhone у 2007 році приніс компанії Apple рекордний прибуток на ринку IT технологій.
Для того, щоб бути конкурентоспроможним на ринку робочої сили кожен студент, котрий щойно закінчив університет має бути наполегливим, готовим працювати по 24 години на добу та бути високо кваліфікованим.
На сьогоднішній день корпорація Microsoft є лідером у написанні програмного забезпечення.
У кожній компанії мають бути стажери, яких потрібно тренувати як наступне покоління робітників, які б підтримували засади та принципи компанії.
Мережа захисту – це спеціальна схема, котра виключає можливість здійснення помилок на будь-якому рівні управління.
Природжені менеджери мають вирізнятися від звичайного робітника деякими професіональними рисами, такими як схильність до «відповідальних» інновацій та можливістю прогнозувати ризики.
Боксит – це алюмінієва руда, яка на сьогодні вважається основним джерелом алюмінію.