- •I. The scope of economic problems
- •Opportunity Cost
- •The scope of economics and the role of the economist
- •Try to reconstruct the text using key words and word combinations listed above.
- •Answer the following questions to the text.
- •3. Define whether the statement is true or false.
- •Choose the best alternative to complete the sentence.
- •Match the words from a and b to make a combination.
- •Find synonyms and antonyms (if any) to the words given.
- •II. Production
- •Division of labour
- •Try to reconstruct the text using the key words and word combinations listed above.
- •Answer the following questions to the text.
- •Classification of trades
- •Products
- •Consumer products
- •Producer products
- •Products and technology
- •Product life cycle
- •Introductory stage
- •Product quality
- •Try to reconstruct the text using key words and word combinations listed above.
- •Answer the following questions to the text.
- •Economies of scale
- •Productivity
- •Types of production
- •Push and pull production
- •Continuous and batch production
- •Large scale production
- •Try to reconstruct the text using key words and word combinations listed above.
- •Answer the following questions to the text.
- •Define whether the statement is true or false.
- •Choose the best alternative to complete the sentence.
- •Match the words with their definitions.
- •Find synonyms and antonyms (if any) to the words given.
- •III. Business organisation
- •Sole trader
- •Partnership
- •Joint stock company
- •Business combinations
- •Integration
- •Capital Structure
- •Try to reconstruct the text using key words and word combinations listed above.
- •Answer the following questions to the text.
- •Define whether the statement is true or false.
- •Choose the best alternative to complete the sentence.
- •Match the words with their definitions.
- •Find synonyms and antonyms (if any) to the words given.
- •IV. Economic systems
- •Free enterprise
- •Planned economy
- •Mixed economy
- •Recent State Enterprise in Europe
- •Try to reconstruct the text using key words and word combinations listed above.
- •Answer the following questions to the text.
- •3. Define whether the statement is true or false.
- •4. Choose the best alternative to complete the sentence.
- •Classify the tasks you consider to be governmental responsibilities in the order of importance.
- •Match the words from a and b to make a combination.
- •7. Find synonyms and antonyms (if any) to the words given.
- •V. Government in a market economy Supplemental reading
- •Income and Social Welfare
- •References
Business combinations
Holding Company
There are certain kinds of companies whose sole objective has been to buy and hold the stock of other corporations. In this way they hope to own enough shares of stock to control the operations of these businesses. Firms that control others in this way are called holding companies. Perhaps the best-known holding company is the American Telephone and Telegraph Corporation (AT&T). This giant firm holds controlling shares in the telephone companies servicing most of the United States. It also controls a number of other kinds of corporations.
Merger
A merger takes place when two or more firms are brought together into one. Once merged, the companies may keep their old names, take on the name of just one of the firms, or acquire an entirely new name.
Conglomerate
The conglomerate is a combination of companies in unrelated fields. For example, the International Telephone and Telegraph Corporation (ITT), which was originally concerned with telephone communications and the manufacture of telephone equipment, has become a conglomerate. ITT now owns Sheraton Hotels, a company that operates hotels and motor inns; Continental Baking, a baker and a vending machine distributor; and other companies in such areas as manufacturing, mutual funds, and insurance.
Integration
Integration takes place when two or more firms combine together to form a larger unit.
Firms doing the same kind of work which combine are said to form a horizontal integration e.g. five radio shops. Firms operating at different stages of production e.g. a supplier of leather, a shoe manufacturer and a shoe shop, are said to form a vertical integration if they combine. Occasionally an organization integrates both horizontally and vertically. Lateral integration is sometimes identified separately as forms in related but not competitive fields e.g. Schweppes and Cadbury.
Horizontal combinations have two major advantages. For one, they reduce competition. After all, every time the parent acquires another firm, it eliminates a competitor. A second advantage of the horizontal combination is that it reduces the cost of doing business. Take advertising, for example. In their effort to compete with one another two paint stores in the same town might take two separate ads in the local paper. But suppose one store bought out the other. Now it would no longer be necessary to take out two ads - just one would do. In other words, in combining, the two stores advertising expenses were out in half. The same would be true of similar expenses. For example, the stores might be able to get by with one bookkeeper rather than two. Perhaps there could be a saving by sharing salesmen. Furthermore, since they would now be buying large quantities of paint, the paint companies might give them a discount on the price.
The vertical combination. The United States Steel Company is in the business of selling steel. U.S. Steel also owns iron mines, shipping companies, coal mines, and steel mills. It is easy to see why a company selling steel would want to own steel mills, because that is where steel is made. But why own an iron mine or a coal mine? Why shipping companies? It all has to do with the way steel is made. The basic ingredients are iron ore and coal. Shipping is needed to bring these ingredients together to the mill. What U.S. Steel has done has been to combine some companies that take part in the stages of the manufacture of steel. By doing this, the company hopes to lower its costs. Such a combination of two or more companies doing business in the various stages of the manufacture of a particular product is called a vertical combination.
The circular combination. General Foods is a combination of companies producing breakfast cereals, flour, baking powder, canned fruits and vegetables, and household cleaning supplies, as well as a number of other products. What does a breakfast cereal company have in common with companies producing baking supplies, canned goods, and cleaning supplies? The answer is that these products are all sold in the same kind of store: a grocery store or supermarket. This means that General Foods need have only one salesman, one delivery man, and one truck to sell and deliver all these different items because they are all sold to the same customer. This combination of two or more firms in businesses that do not compete with each other but whose goods are sold in the same place, is called a circular combination.