1. Answer the following questions. Read the text and check your answers.

1. What challenges is air cargo industry facing now?

2. What were the reasons for 2009 recession?

3. What do you think were the impacts of the economic crisis in 2009?

Air Cargo 2009⁶⁵

The air cargo industry now faces an unprecedented fall in demand and revenues. Forecasts made in December predicting a 5% fail in volumes and 9% revenue decline during 2009 now look highly optimistic given January FTK levels of minus 23.2%. Economic forecasts are now predicting the deepest recession since the 1930s. Capacity is being cut and fuel prices have fallen but efforts to shrink the industry's cost base are struggling to keep pace with the contraction in revenues. Recovery is not yet in sight.

With bank losses estimated at US$3.6 trn the new US bailout of US$2 trn has yet to start bank credit flowing again. Moreover, the 5% of GDP US fiscal stimulus is only half the size required to offset the fall in private spend­ing. Deep recession is forecast in the major economies. World GDP is expected to fall -1.9% in 2009.

Air freight volumes collapsed at the end of last year to a level in January just three-quarters of their size a year ago. Weakness is widespread, even across emerging markets. The key ques­tion for the outlook is the extent to which this is cyclical or a structural change, due to what some are calling 'de-globalisation'.

An astonishing 20% rise in inventory overhang led to output and air freight being slashed, as shown in the semi-conductor industry. Forward-looking indicators suggest may have reached bottom but recovery from that weak level requires elimination of the inventory overhang, which will take time.

Cargo yields fell sharply during the fourth quarter of last year to a level 7% below a year earlier. Coupled with the slump in volumes this means a very significant fall in revenues. December forecasts for a 9% fall in 2009 cargo revenues now look optimistic.

Costs are now starting to fall significantly but unevenly across the industry. Dollar appreciation and some hedging contracts are limiting the large fall in fuel costs. Aircraft and labour costs are falling but infrastructure providers are, counter-cyclically, raising their charges.

Airlines are cutting freight capacity in all regions, with the exception of the Middle East. However, demand is collapsing faster than airlines can shrink and so load factors have taken a big hit. The collapse of bulk commod­ity shipping seems to have reached a floor, but no recovery is in sight as yet. Containerised shipping rates are now down 24% on the year, significantly more than air freight rates. Contai­nerised volumes are also falling, but not as fast as air freight.

Cargo profitability, at least in the U.S., held up surprisingly well during 2008 but with revenues collapsing the outlook is very poor. Heads of cargo expect sub­stantial falls ahead for both freight tones and yields.

As further evidence of the unprecedented impact of the economic crisis, the latest traffic report from ACI EUROPE – the voice of Europe's airports, reveals a decrease of-13.6% in the overall passenger traffic at European airports in February 2009 compared with February 2008.

The overall freight traffic among European airports recorded 23.5% less in February 2009 when compared with the February 2008: The overall figure for movements at European air­ports decreased by 13.2% in February 2009 when compared with February 2008.

Rare examples of airports that continue to see passenger traffic growth, despite the current down­turn, when comparing February 2009 with February 2008, include: airports welcoming between 5 and 10 m passengers - Berlin SXF (+4.0%), Toulouse (+1.2%) and Milan/Orio al Serio (+1.0%); airports welcoming less than 5 m passen­gers per year - Ohrid (+12.5%), Brindisi (+10.3%), Liege (+7.9%) and Riga (+1.2%).

b. Translate the terms.

revenue	freight
to forecast	capacity
capacity	volume
inventory	output
industry	shipping

c. Match synonyms.

forecast	cargo
revenue	profit
slump	gain
commodities	predict
recovery	downturn
yield	collapse
crisis	rehab
freight	goods

d. Match terms to make word combinations consulting the text.

to shrink	commodity
private	freight
bulk	costs
freight	costs
emerging	market
to raise	ton
air	charges
labour	spending

e. Explain the following concepts in English: recession, GDP, fiscal stimulus, revenue, costs, hedging.

f. Fill in the table with correct word forms:

Verb	Noun	Adjective
to predict
	Economics
		cyclical
to eliminate
	capacity

g. Fill in the gaps with prepositions consulting the text and make your own sentences with the phrases.

1. to struggle to keep pace __ the revenues

2. recovery __ the weak level

3. coupled __ the slum in volumes

4. a forecast __ a fall

5. Feb 08 compared __ Feb 09.

h. Draw a diagram(s) to illustrate the text.

Case study

Read the case and discuss the following questions in groups.

1. Do you think Google’s decision-making culture will help or hurt Google in the long run?

2. What are the factors responsible for the specific culture that exists in Google?

3. What type of decision-making approach has Google taken? Do you think this will remain the same over time? Why or why not?

4. Do you see any challenges Google may face in the future because of its emphasis on risk taking?

Decision-Making Culture: The Case of Google⁶⁶

Google is one of the best-known and most admired companies around the world, so much so that “googling” is the term many use to refer to searching information on the Web. Google grew from 10 employees working in a garage in Palo Alto to 10,000 employees operating around the world by 2009. What is the formula behind this success?

Google strives to operate based on solid principles that may be traced back to its founders. In a world crowded with search engines, they were probably the first company that put users first. Their mission statement summarizes their commitment to end-user needs: “To organize the world’s information and to make it universally accessible and useful.” While other companies were focused on marketing their sites and increasing advertising revenues, Google stripped the search page of all distractions and presented users with a blank page consisting only of a company logo and a search box. Google resisted pop-up advertising, because the company felt that it was annoying to end-users. They insisted that all their advertisements would be clearly marked as “sponsored links.” This emphasis on improving user experience and always putting it before making more money in the short term seems to have been critical to their success.

Keeping their employees happy is also a value they take to heart. Google created a unique work environment that attracts, motivates, and retains the best players in the field. Employees are treated to free gourmet food options including sushi bars and espresso stations. They have access to gyms, shower facilities, video games, on-site child care, and doctors. Google provides 4 months of paternal leave with 75% of full pay and offers $500 for take-out meals for families with a newborn. These perks create a place where employees feel that they are treated well and their needs are taken care of.

In addition, Google encourages employee risk taking and innovation. How is this done? Google encourages employees to act fast and accepts the cost of resulting mistakes as a natural consequence of working on the cutting edge. This may explain why the company is performing much ahead of competitors such as Microsoft and Yahoo! One of the current challenges for Google is to expand to new fields outside of their Web search engine business. To promote new ideas, Google encourages all engineers to spend 20% of their time working on their own ideas.

Google’s culture is reflected in their decision making as well. Decisions at Google are made in teams. This is not a company where decisions are made by the senior person in charge and then implemented top down. It is common for several small teams to attack each problem and for employees to try to influence each other using rational persuasion and data. To facilitate teamwork, employees work in open office environments where private offices are assigned only to a select few.

Will this culture survive in the long run? It may be too early to tell, given that the company was only founded in 1998. Larry Page, one of the founders, is quoted as saying, “We have a mantra: don’t be evil, which is to do the best things we know how for our users, for our customers, for everyone. So I think if we were known for that, it would be a wonderful thing.”

Translation

Translate the sentences focusing on the underlined terms.

Stock

1. As a rule the decoupling point coincides with an important stock point, from the point of view of control a main stock point, from where the customer has to be supplied.

2. Decoupling stock is the stock which serves to make two successive pro­cesses in the goods flow independent of each other to the desired extent. This includes: anticipation stock, capacity loading stock, cyclical stock, seasonal stock, lot-size stock, safety stock (buffer stock) and working stock.

3. Pipeline in general is the path between the various stock sites or physical processes and measuring points on the logistics goods movement.

4. Production batch stock arises out of the fact that a product is made in batches.

5. Supply planning is the delivery on the basis of the sales, stocks, stock standards, stock locations and lead times of the customers.

Purchase

1. Purchase is preparation and conclusion of a contract for the offtake of goods by a customer of an external supplier, either immediately or at a later date, for a particular price.

2. Purchase is obtained by a customer from external suppliers in a particular period expressed in quantitative or financial terms.

3. Acquisition price is the costs arising from obtaining ownership of an asset that comprises the purchase price and additional costs incurred to complete the transfer of ownership.

4. Buying capacity is an arrangement whereby a purchaser commits a specific amount of a supplier's resources for a period of time for the manufacture of goods required by the purchaser.

5. Dedicated purchase order is a purchase order to serve a specific requirement, e.g. a production batch or a service order or an incidental requirement.

Writing

1. Write an email. You have learned that your client is planning to replenish stocks of white wines in the near future. Offer your white wines, describe their quality, explain contract terms, delivery terms, discounts, suggest nearest shipping dates and attach a price list. Write at least 100 words.

2. Write about the following topic: Forecasts are now predicting the deepest crisis in services management since the 1930s. Do you agree or disagree? Why? Give reasons for your opinion and include any relevant examples. Write at least 250 words.

Culture

Read the text and discuss the following questions:

1. What facts in the text may be most important for foreign business partners?

2. What other information of Russian business and social culture is essential to an international company’s success and why?

3. Compare the national specificity of Russian business ethics in the past and nowadays. What are the reasons of major changes?

Challenges of Doing Business in Russia⁶⁷

A huge country richly endowed with natural resources, Russia continues to develop both politically and economically. Russia’s cultural identity has been influenced by a mixture of ethnicities and a diverse history. While there are some clear benefits to doing business in Russia, an understanding of Russian business and social culture is essential to an international company’s success.

Punctuality – Russia is a polychronic culture, in other words, people tend to be flexible in the organization of their priorities and attitudes towards punctuality are relaxed. Polychronic cultures also often feel it is more efficient to do several things at once; therefore, meetings may not follow a linear agenda and may be interrupted by phone calls or people coming in. As a foreigner, you are expected to be on time to all business appointments, however social events are more relaxed and being up to 30 minutes late is acceptable. Patience is highly valued in the Russian society, try not to be mad when a colleague arrives late and do not expect an apology, they may simply be testing your patience.

Collectivism – Historically a country rooted in agricultural communes, Russia has maintained a collectivist spirit that pervades many sectors of society. The Russian affinity for the group can be seen in everyday life, for example, Russians will often choose to join strangers in a restaurant, recreation is commonly arranged in groups and advice can sometimes be given to you by a complete stranger. This sense of co-operation and togetherness must be considered when doing business in Russia, especially when communicating. For example, it is important to remember to address the group rather than the individual.

Hierarchy – Hierarchy is an important aspect of Russian business culture with status being linked to age and position. It is important to be aware of the fact that usually meetings are held with people of equal status. Decision-making is commonly done by the most senior employees in the company. Showing respect for seniority is essential for maintaining strong business relationships when doing business in Russia.

Personal relationships – Relationships start out quite formal within Russia but maintaining trust and a good working relationship from the beginning is invaluable for future business. When meeting someone for the first time, it is wise to address them by their patronymic name. This name is based on the name of the person’s father with the suffix “ovich” (son of) for men and either “ovna” or “evna” (daughter of) for women. The Russian language also has two forms of the word “you” distinguishing between the formal “vy” used to denote respect and the more casual “ty” used between friends.

Communication style – Russians tend to have a high context communication style. A high context preference translates to placing emphasis on relationships, emotions and body language and expecting the listener to read between the lines. Differing communication styles can often pose one of the most significant challenges for businesses working cross-culturally. When doing business in Russia remember that Russians are patient and will expect the same patience from you.

Negotiating – In negotiating, Russians often take their time and will not rush to make a decision. Russians tend to avoid compromise, which they see as a weakness and expect to either win or lose a negotiation. Therefore, expect negotiations to be tough and occasionally theatrical. Do not be surprised if you witness the occasional loss of temper, people leaving the room and threats to call off the deal, this is all part of the process of driving a hard bargain.