10 Listen to Dialogue No 2 between two speakers and answer the questions below. Then listen again and check your answers.

1. Who are talking?

2. What are the main departments of TMN Ltd.?

3. How many divisions are there in the production depart­ment?

4. Who reports to the Financial Manager?

5. What are the functions of the purchasing department?

Unit 3. READING COMPREHENSION

Corporate combinations in the usa

The most common way of joining businesses is through mergers. A merger occurs when one company absorbs anoth­er. In a merger, the absorbed company is often forced to abandon its identity.

In the 1980s, the number of mergers increased dramati­cally. Between 1980 and 1985, more than 60 of the top 500 corporations in the United States merged with other compa­nies. Multibillion-dollar corporate mergers in the mid-1980s included Nestie's acquisition of Carnation, Capital Cities Communications' acquisition of the American Broadcasting Corporation (ABC), and General Motors' acquisition of Hughes Aircraft Company. In 1985 alone, more than 3.000 mergers and acquisitions occurred.

Three types of business mergers take place — horizontal combinations, vertical combinations, and conglomerate combinations.

Horizontal Combinations

A merger between two or more companies that produce the same good or service or dominate one phase of the production of a good is a horizontal combination. The Standard Oil Company provides a classic example of a horizontal combina­tion. In the 1870s, John D. Rockefeller and his associates formed the Standard Oil Company of Ohio.

Over the next 12 years, Rockefellers group purchased refineries throughout the United States. By 1882, Standard Oil controlled almost all of the country's oil industry. The Standard Oil Trust was formed in 1882 to unify the manage­ment of the various companies under Standard Oil's control. In the same year Standard Oil of New Jersey was chartered as one of the companies within the trust.

Vertical Combinations

A merger between two or more companies that are involved in different phases of the production of the same good or service is a vertical combination. The founding in the United States Steel Corporation in 1901 combined companies involved in different phases of the production and distribu­tion of steel. The combined companies owned ore deposits, iron mines, coal mines, shipping companies, railroads, and steel mills. United States Steel's founder, J.Pierpont Morgan, built the world's first billion-dollar corporation through the merging of these varied companies.

Conglomerate Combinations

A merger between two or more companies producing or marketing different products is a conglomerate combination. While horizontal and vertical combinations have been com­mon since the mid-1800s, conglomerate combinations did not become common until the 1960s and 1970s.

The classic example of a conglomerate is the International Telephone and Telegraph Corporation (ITT). Until the 1950s ITT manufactured only telecommunications equipment. During the 1960s and 1970s, however, ITT acquired hun­dreds of subsidiaries - acquired companies that have not been forced to abandon their corporate identities.

Today ITT owns companies in more than 80 countries and is involved in such varied enterprises as in production of frozen foods and plumbing supplies and in operation of com­puter services, consumer finance companies and hotels.

Trends in Corporate Combinations

The trend toward conglomerate combinations began in the 1960s and carried into the 1970s. Conglomerate mergers helped to build corporate empires for ITT, Gulf & Western, and many other major producers. During the 1980s, however, a trend toward vertical and horizontal combinations redevel­oped. Companies in the 1980s tended to merge with other com­panies that produced the same or related goods or services.

Advantages of combinations.

One of the major business advantages of corporate mergers is efficiency. By centraliz­ing decision making within an industry, corporate combina-Jions, especially horizontal and vertical combinations, can increase efficiency. Costs also can be cut by eliminating unnecessary or overlapping jobs and departments.

A second business advantage of mergers is that buying an existing business is often far less expensive than building new plants, hiring new employees, or acquiring additional capital in order to expand. In most mergers, the acquiring corporation obtains additional capital resources and experi­enced management and employees.

A third business advantage of mergers is that the increased size of merged corporations often makes it possible to borrow more capital. This additional capital can be used for such improvements as enlarging the sales force or moderniz­ing production facilities. In general, larger corporations also are able to compete more effectively in the marketplace.

Disadvantages of combinations.

Corporate combinations may result in disadvantages for the merged corporation stockholders and consumers. Corporate mergers sometimes have negative consequences for the merged corporations, both from the standpoint of corporate performance and from the standpoint of worker satisfaction.

In some instances, especially in conglomerates, the man­agers of merged corporations may not have the necessary skills to supervise the production of newly acquired goods . and services. Lack of supervisory skills can result in decreased efficiency and profits.

Mergers also may result in added unemployment because of changes in business operations. Employees may be reshuf­fled and some people may be laid off. The employees who stay on the job sometimes suffer from low morale due to altered job descriptions or other negative changes that occur in the workplace. While mergers usually are beneficial for stock­holders in the acquired company, almost half of all major mergers in the United States result in a decrease in the value of the purchasing corporation's stock. For consumers, one of the major disadvantages of corporate mergers is that they often lead to decreased competition in the marketplace. This lack of competition may result in higher prices for con­sumers. It also may limit the choices available to consumers by reducing the number of competing goods and services.