7. Make up your own sentences using the words and word combinations given below.

To restate reserves, to scrap corporate structure, to underestimate, unification measures, to boost production, to bury the bad news, to deny the charge, to get smb’s reputation back, incremental acquisitions, to act as a deterrent, to overbook, to unbook.

8. Read the following text for additional information. How marketing adds utility to goods and services

All of marketing’s functions are performed to move goods from producers to consumers. The functions allow marketing to create utility. Utility refers to the value marketing adds to goods and services. There are five types of utility: 1. form, 2. time, 3. place, 4. possession, and 5. information.

Form utility refers to the changing of raw materials to a finished product.

Time utility helps consumers by making products available when the consumer wishes.

Place utility makes sure that goods and services are conveniently located to meet consumer needs.

Possession utility helps make the exchange of goods between buyers and sellers easy. Anything that helps complete the sale – delivery, installation, warranties, credit – is considered part of possession utility.

Information utility informs buyers that the product exists, how to use it, the price, and other information. Such information is provided through advertising, salespeople, and packaging.

In groups think of a product other than cereal that your friends want but cannot get near their house. Think of a product to fill that need, do a concept test, evaluate the total market, think of a brand name and a package, develop a promotional scheme, and think of how you would distribute it to students. Begin thinking about a marketing plan for the overall business plan so you can get funding for the project later. Compare your decisions and results with other groups.

9. Imagine you are the president of a small liberal arts college. Enrollment has declined dramatically. The college is in danger of closing. Show how you might revive the college by applying the marketing concept. How would you implement the three phases: (1) a consumer orientation; (2) the training of employees in all departments in customer service; (3) a profit orientation? Would you recommend a more societal orientation as well? How would you do it?

   ECONOMIC ISSUE: MANAGEMENT

FINANCIAL TIMES OCTOBER 29 2004

Managers break the last taboo

A culture of greater openness about who is earning what could enhance a company’s overall reputation. Rhymer Rigby explains

It is a staple of water-cooler conversation – bigger even than nocturnal dalliances at the Christmas party. She's just had her annual review - but is she getting more than me? And, if so, how much more? He was poached from a rival and the company must have paid him a hefty premium. He is more experienced than you, even though the boss rates you more highly. What do you think he earns: $5,000, $10,000 more?

The subject is, of course, what our colleagues earn. And few topics of conversation involve so much chatter based on so little knowledge. Of course, some people do talk openly about their salaries. In financial trading, for instance, if bonuses are handsome the boys like to brag – but are they talking themselves up or down? At fast food outlets, staff might discuss pay for precisely the opposite reasons. However, the vast majority of middle-class middle-earners would not dream of disclosing their salary to their colleagues. In a tiny minority of companies, though, they would have no choice.

Happy Computers, a London-based information technology training company, is one such business. “Everything here is open and available,” says Henry Stewart, chief executive. “Why should salaries be any different?”

Hiding pay levels, Mr Stewart explains, leads to a culture of disinformation in which people believe that the gaps between earnings are much greater than they actually are. Further, he says, openness means that managers have to be able to justify their decisions to everyone: “In that sense it's a very good discipline.”

Another company that operates a transparent system is Aspen, an actuarial insurance company. “We started up 16 years ago with five people and even though we now employ 50, we've maintained the system,” says John Hough, Aspen's managing director. Like Mr Stewart, he sees the discipline of justifying wage levels and transparency as a big plus and says the secrecy that an open salary structure eliminates means a more efficient business.

“It's quite an extraordinary thing to do,” says Charles Sutton, a director at Nicholson McBride, the London-based corporate psychologists, “especially when you consider that in some companies discussing salary levels is a sackable offence.” But, he adds, it does send out an undeniably powerful message: “If a business can be transparent about this, then one would assume that the other cultural characteristics are similarly transparent. If that's the case then it's a very good thing.”

In fact, it is remarkable how far such transparency can go. At Aspen, for instance, it is possible for any member of staff to look up not only Mr Hough's salary, but also his expenses – although he doubts that anyone actually bothers. Transparency, after all, does tend to build trust – or at least an assumption that there is nothing juicy enough to hide.

Like Mr Sutton, Chris Charman of remuneration consultants Towers Perrin is surprised and impressed by what these businesses are doing. “It's very bold and innovative and getting it to work could be very challenging,” he says, “but if you can do it, it's quite an achievement. I'd even go as far as saying that it's a bit Utopian.”

There is certainly an engaging whiff of idealism about a company that lays so many of its cards on the table. Salary transparency means that a lot of ugly little secrets – such as any sexism in pay structure –would be laid bare. And when this happens, management has to do something about it. For example, says Mr Stewart, no one could accuse Happy Computers of pay discrimination against women “because most of our best-paid staff are women... It's there for anyone to see.”

So, why isn't everyone opening up their payrolls? For one thing, it is notable that both Happy Computers and Aspen have practised transparency from the outset. In most companies – where pay structures have evolved over the years and been subject to all sorts of pressures, such as the need to recruit outside talent at a premium – it would be very difficult subsequently to impose an utterly fair and equable pay structure.

“A lot of organisations shy away from this,” says Mr Charman, “because they have been dealt a legacy hand.” In this case, he adds, probably the only solution would be to raise everyone’s pay to the highest common denominator.

Both Aspen and Happy Computers are based in a single location and are relatively small, with about 50 employees. Imagine, by contrast, the difficulties involved in imposing payroll perestroika on a company with tens of thousands of workers in dozens of countries. Transparency could make it difficult to explain to an employee in India, say, why he was earning one-eighth the salary of his UK counterpart.

Moreover, although staff reaction in both businesses is generally positive, Mr Hough says it puts a lot of pressure on some employees. “It makes your pay review a very public indicator of how you’ve performed over the last year. It can be quite brutal if you're not doing very well.” And, for management, the downside of the “discipline” of rigorous and totally defensible pay reviews is that all that justification can make them time-consuming and long-winded.

For some businesses the disadvantages can accumulate. CMG, an IT services business, operated pay transparency until it merged with Logica (which did not) to form LogicaCMG. After the merger the new group dropped the policy. “It would have caused unnecessary complications,” explains a spokesman, “as one of the two businesses had never operated it. And it was difficult to see what commercial purpose implementing it [for those who had never had it] would serve.”

The return to secrecy was not complete, however. Every consultant in the group has a billing client rate (BCR), which is well known and regularly used when assembling project teams. “If you were really that interested you could take someone's BCR and work back to get an idea of their basic salary,” says the spokesman.

Public bodies, too, are more likely to operate with open pay systems. Until recently, for instance, the UK senior civil service (SCS) had nine pay grades and, says a Cabinet Office official, “if you knew someone's grade, you didn't know exactly what their pay was, but you had a good idea.”

All this changed in 2001 when, to move into line with the private sector, the SCS adopted three (sometimes four) bands. Pay can still be guessed at, but as the grades overlap and the first senior salary grade stretches from £53,451-£74,289 ($97,000-$135,000), scope remains for water-cooler speculation. And, although jobs are graded by band, the breadth, the official adds, “allows for a sizeable performance-related element to pay.”

Although some companies have dropped their transparency policies many believe it remains a tantalising possibility for business. Given time, it could be implemented more widely. “You could start by capping the salaries of highly paid employees who weren't performing,” says Mr Charman, “but you’d have to make sure the business case was there for it.’

David Ellis, a partner at BDO's employment solutions group, takes a similar line. “The challenge is ensuring that the upside – like getting rid of sniping and speculation – outweighs the negatives. Although it’s very rare at the moment, it could work tremendously well if you got it right.” Even so, expect change to be gradual. He adds: “Being honest about what you earn is the last great business taboo.”

THE PROS AND CONS OF PUTTING YOUR CARDS ON THE TABLE

BENEFITS

• Transparent salary systems put a stop to the petty sniping, bickering and misinformation that surrounds how much people are paid. And when it is there for all to see, say advocates, people tend to lose interest.

• The directors of a publicly quoted company have to declare their earnings - so why should everyone else not do so?

• Managers are forced to think very carefully about pay reviews -and it takes away the scope for reward based on individual prejudices.

• Directors of open salary companies are less likely to face allegations of pay discrimination based on sex, race and so on.

RISKS

• Anyone who has performed poorly over the year runs the risk of being humiliated in front of their colleagues after their annual review.

• Those at the bottom of the ladder may find themselves feeling inadequate compared with their higher flying co-workers.

• When managers have to justify pay awards publicly, pay reviews can be very time-consuming.

• Companies with employees operating in many geographical areas may find it difficult to justify differentials based on standards of living.

• Transparent pay structures make it difficult to attract talent from outside by paying a premium: if managers do it, they may be forced to raise other employees' salaries. In a merger or acquisition, retaining an open salary structure could raise costs significantly.

• Managers wishing to impose transparency on an existing salary structure are likely to find themselves paying up to the highest common denominator rather than down to a mean.