Scarica RIASSUNTI INGLESE PERFEZIONAMENTO e più Sintesi del corso in PDF di Lingua Inglese solo su Docsity! 1. THE 3 SECTOR OF THE ECONOMY The first chapter is a general introduction about economy. We describe economy as consisting of three sectors: 1. primary sector: agriculture, extraction of raw materials; 2. secondary sector: manufacturing industry, in which raw materials are transformed in finished products; 3. tertiary sector: commercial services, distribution of goods, education, health care, tourism. The first passage consist in a reflection about the complex operations that make possible a simple action like preparing a cup of tea: it is necessary someone who grows the plants, someone that extracts the materials to make the cup, a power station that produces electricity, the mining coal that pump fuel to the generators, the cable to carry the current and tubes for the oil, etc. All these things are only an example of the complexity necessary to make any kind of thing, also the simplest things. The second passage speaks about the situation of the three sectors in the advanced industrialized countries. Only 2-3% of the population earns their living from agriculture. We can also observe the decline of the secondary sector. Galbraith thinks we don’t have to worry about unemployment and the loss of manufacturing industry in our countries, because they will be replaced by the tertiary sector. Education, entertainment, arts, services are activities as important as the production of goods. This progressive transformation is inevitable, and we can’t stop this change of patterns of human consumption. 2. MANAGEMENT Peter Drucker suggests that the work of a manager can be divided into five points: 1. SETTING OBJECTIVES: this involves developing strategies and tactics; 2. ORGANIZE: the manager must organize the work to achieve the objectives. He has to decide which is the best way to allocate the human, physical and capital resources available; 3. MOTIVATE AND COMMUNICATE: he must communicate the objectives and the way to achieve them, make people responsible of their position, improve their performance with social and monetary gratification; 4. MEASURE THE PERFORMANCE: managers have to supervise their subordinates, and try to improve their performance; 5. DEVELOP PEOPLE. The decision about objectives are not definitive: a good manager knows when it is better to change them. His prospective is the future: he must consider every time the possibility of innovation, without which any organization can only expect a limited life. A manager whose performance is unsatisfactory can be dismissed by the company’s board of directors. A manager must also have to manage business’ relations with customers, suppliers, distributors, investors and public authorities. Drucker thinks that management is not entirely scientific: it is a human skill. Some people are naturally good managers, someone else can become it, because there are management skills that can be learnt. It’s also true that some people will be unable to put management techniques into practice. Others have lots of technique, but few goods ideas. Outstanding managers are rather rare. The second passage is a critic about IBM’s working culture. The author thinks that this company gives too much attention to the managing problem and too less to the production aspects. IBM executives don’t design products and write software: they manage the design and writing of software. This means that the most IBM products are designed by the lowest level of people in the company and the majority of the top managers are not technical expertise of their products. That is why IBM products often aren’t very competitive. IBM has a great number of managers who check and verify each decision: the safety net is so big at IBM that is hard to make a bad decision, but is also harder to make any kind of decision at all! This is the company’s greatest problem and the source of its ultimate downfall. 3. COMPANY STRUCTURE Most of the organisations have a hierarchical or pyramidal structure. There is a clear line or chain of command running down the pyramid. All people know what decision they are able to make, who their superior is and their subordinates are. There are also position of parities: these are known as staff positions. Most of the companies are too complicated to be organized in a single hierarchy: in this case the structure is divided by functions. We have production, finance, marketing, sales, and every other kind of necessary department. Functional organization is efficient, but there are two standard criticisms: • People are more interested in the success of their department than in that of the company, so can grow battles between sections which have incompatible goals; • Separating functions is unlikely to encourage innovation. It is also possible to divide the organization into divisions: like General Motors did each division had its own production, sales departments, etc. which product a different category of car. systems; in Latin cultures of southern Europe and South America personal relations, intuition, emotions and sensitivity are of much greater importance. Some protestant cultures (like Canada, Usa, Britain, Netherlands, Germany and Scandinavia) are essentially individualist. In such cultures status has to be achieved: you don’t automatically respect people because they are older than you. In the USA a dynamic and aggressive manager can quickly rise in hierarchy. Latin and Asian cultures, on the contrary, give much more importance to the status, in fact rewards and promotion are given with age and experience. In northern cultures there is the principle of pay-for-performance. Asian managers object that pay-for-performance causes salesman to pressure customers, and this is bad for long term business relations and is ethically wrong. In Latin countries the American idea of “matrix management” doesn’t work very well: it conflicts with the principle of loyalty to all-important line superior. Trompenaars distinguishes between universalists and particularists: the former believe that rules are extremely important, the latter give precedence to personal relationship and friendship. According to Trompenaars’ data, there are many more particularists in Latin and Asian countries than in Australia, the Usa or North-west Europe. 6. RECRUITMENT This unit speaks about recruitment. A person who is looking for a job reads job description advertised in newspaper and employment agencies. To reply to an advertisement is to apply for a job. In this way you are an applicant or candidate. You must write an application form, a curriculum vitae or a résumé and a covering letter. You have also to give references. If you are selected, you have to attend an interview. When a person resigns, the company tries tounderstand why this person decided to resign meanwhile it establishes if there is an internal candidate who could be promoted. If there isn’t, it’s necessary to hire a job agency or advertise the vacancy. When applications, CV and covering letters are received, employers make a preliminary selection (a short list), and invite the short-listed candidates for an interview. Now it’s possible to make a final selection to choose the right candidate. After this, the company has to write to all the other candidates to inform them, that they have been unsuccessful. 7. LABOUR RELATIONS Workers are often organized in labour/trade unions, which attempt to ensure fair wages, reasonable working hours and safe working conditions for their members. In Britain they are organized according to trade or skill, instead in some countries, like Italy or France, unions are largely political: workers in different industries join unions with a particular political position. This could be a problem, because in this way trade unions pursue political goals and don’t care the real workers’ interests. Laissez faire and theory of free market oppose unions and pursue deregulation, because they think that in this way the market could be more elastic and efficient. However, unions are important not only for workers, but also for government and industrials: they cannot negotiate with each single employee, but they need a representative to negotiate with. Often workers are worried about weakness of unions, and believe that unions are incapable to care their interest, and choose not to join them. + Reading (v. libro). 8. PRODUCTION In Just In Time production (also called lean production, stockless production, continuous flow production), nothing is bought or produced if it is not necessary. Something is done only if it is needed. Each section of the production process makes the necessary quantity of the necessary units at the necessary time. This system is credited to Taiichi Ohno, who was Toyota’s vice-president. JIT is contrary to European and American logic of encouraging greater productivity and creating an extra inventory in case of future problems. JIT minimizes the costs of holding inventories and ensures that there is no waste from overproduction. This way of production is possible only if there is flexibility and multi-skilled employees. This is possible in Japan, where large manufacturing companies have long practised outsourcing and use extensive networks of small subcontractors. Small suppliers attempt to situate their facilities close to the location of the larger company with which they work. 9. PRODUCTS Marketing theorists use the word product to refer to anything capable of satisfying a need or want. Some manufacturers use their name (the family name) for all their products (i.e. Philips, Colgate, Yamaha). Other market various products uses individual brand names, for example Philip Morris, Procter and Gamble, Unilever and so on. Companies whose objectives include high market share and market growth generally have long product line; companies whose objective is high profitability have a short product line, including only profitable items. Some product lines have a tendency to last in time, so companies introduce variations on existing items to make them young. This operation is the result of line-stretching or line-filling. Line-stretching means moving product line up-market or down-market, making items of higher or lower quality. This can be carried out to reach new customers or to give an image of higher quality. Line-filling means adding further items in a part of product range which is already covered, in order to compete in competitors’ niches. Personal selling is the most expensive promotional tools. It is a medium of information between company and customers: company sells products and services, and assists customers in case of possible technical problems and takes down advices. + Reading (v. libro). 13.ACCOUNTING AND FINANCIAL STATEMENTS In accounting, it is always assumed that a business is a “going concern”: value are recorded as if it continued indefinitely into the future. This means that the current market value of fixed asset is irrelevant, as it is not for sale. Consequently the most common accounting system is historical cost accounting, which records assets as their original purchase price, minus accumulated depreciation charges. Laws specify that companies have to draw up three financial statements in their annual report. In accordance with the principle of double-entry bookkeeping all transactions are entered as a credit in one account and as a debit in another one. The “profit and loss account” (GB) / “income statement” (US) shows revenue and expenditure. If the first figure is higher than the second, there will be a profit: part of profit goes to government in taxation, part is usually distributed to shareholders as dividend and part is retained by company. The “balance sheet” shows the company’s financial situation on a particular date; it lists company’s assets, its liabilities and shareholders fund. The third financial statement has various names: source and application of funds statement (GB), statement of changes in financial position (US), etc. This shows the flow of cash in and out between balance sheet dates. It’s also an explicative description of the first two statements. 14. BANKING Commercial banks or Retail banks: are businesses that trade money. They receive and hold deposits, pay money according to customers’ instructions, lend money, offer investment advice, and so on. They make a profit from the difference between the interest rate they pay to depositors and those they charge to borrowers. Merchant banks (GB) / Investment banks (US): raise funds for industry on various financial markets, issue and underwrite securities. They also offer portfolio management services. [Investments banks (US) are similar but they can only offer advisory services and cannot offer loans themselves.] Universal banks: are conglomerates combining the services previously offered by banks, stockbrokers and insurance companies. They are a consequence of American and British deregulation: in some European company there have always been universal banks combining these services. A country’s minimum interest rate is usually fixed by the central bank. This is a discount rate at which the central bank makes loans to commercial banks. A Eurocurrency is any currency held outside its country of origin: the first significant Eurocurrency market was for US dollars in Europe, but the name is now used for foreign currencies held anywhere in the world. A central bank can determinate the minimum lending rate for its national currency, but it has not control over foreign currencies. 15. STOCKS AND SHARES Individuals and group of people doing business as a partnership have unlimited liability debts unless they do business forming limited companies. If you form a limited company and it goes bankrupt its assets are liquidated (sold) to pay debts; if the assets don’t cover the liabilities or the debts, they remain unpaid. The creditors simply don’t get all their money back. A limited company is a legal entity separated from its owners. Most companies begin as private limited companies: their owners have to put capital themselves. The founders have to write: • The Memorandum of Association (GB) or a Certificate of Incorporation (US), which states the company’s name and its purpose; • The Article of Association (GB) or Bylaws (US) which sets out the duties of directors and the rights of shareholders. A successful company can apply to a stock exchange to become a public limited company (GB) or listed company (US). The act of issuing shares (GB) / stocks (US) for the first time is known as floating a company or making a flotation. Companies wishing to raise money for expansion can sometimes issue new shares (right issue); if a company capitalize part of their profit by issuing new shares to shareholders instead of paying dividends, we’ll speak of bonus issue. If I buy shares I’ll become part of the ownership of the company, and I’ll receive a proportion of distributed profits in the form of a dividend. Nominal value is the quote of company that a single share represents: its market price is its value on the market in a particular moment, and reflects how well or badly the company is doing. 16. BONDS Companies finance most of their activities with their profits; if they need more money the can issue share or bonds or borrow from banks. Issuing bonds is cheaper than borrow money from banks: market may lend money at a lower interest rate. Private rating companies like Moody’s and Standard & Poors classify bond-issuing companies by investment-grade, according to their financial situation: the higher the rating, the lower the interest rate at which a company can borrow. (AAA is the best financial situation; C the worst nearly bankrupt). Most bonds can be traded on the secondary bond market until they mature. The advantage of debt financing over equity financing is that bond interest is tax deductible. A company deducts its interests payments from its profits before paying tax, whereas dividends are paid out of already taxed profits. Increasing debt increases financial risk: when the debt is matured, company is obliged to pay it, whereas it’s not obliged to pay dividends. Governments don’t have the option of issuing equities, consequently they can only issue bonds. Long-term government bonds are known as gilt-edged securities, or gilt (GB) / Treasury Bonds (US). Central banks regulate the money supply with open- market-operation: buying stocks they increase money supply (because they pay with newly created money which is put into circulation), selling them decrease it (because they withdraw cash from circulation). + Reading (v. libro). Leverage buyout à takeover using borrowed money. There are some reason that make us think that a takeover might have some disadvantages. Collections of unrelated business combined into a single corporate structure become only conglomerated of too many companies and not a synergy. The individual companies might be more efficent if liberated from central management. Often takeovers are only financial operations: raiders buy companies with successful subsidiaries that could be sold to repay the principal, or companies with huge cash reserves. Raiders argue that the permanent threat of takeovers is a challenge to company managers to do their jobs better: fat or lazy companies are taken over by raiders who use assets more efficently, cutting costs and increasing shares’ value. 20. EFFICIENCY AND EMPLOYMENT There was a rapid, irreversible transformation of the supposed world of stable, long- tenured employment that dominated the industrialized economies for the three decades after the second world war. A research paper from the International Labour Organization (ILO) shows that the average length of job tenure hardly changed during 1990s. The investigation of job tenure does not reveal any universal trend towards increased labour market instability among the major industrialized countries. There is no systematic change in the duration of jobs over time. Research shows that flows both in and out of employment tend to be counter-cyclical, so average job tenure is declining in upswings and is increasing in downturns. The decline in job tenure observed in recent years may mainly reflect the economic recovery that has taken place in some countries, rather than a structural shift towards increased job instability. Shorter job tenures can be found among university graduates, while those with the longest time in a job have a medium level of educational qualifications. Downsizing tends to hit junior workers most, not the ageing core. The report found that job retention rates stayed remarkably stable during 1980s. But the figures mask a tendency for younger and older workers to have lower retention rates compared with those of prime age. Besides the report tries to find out why so many people believe they are living through a period of exceptional job instability. Between 1985 and 1998 there was a net increase of temporary work, but temporary work contracts are not necessarily a sign of instability. What explains the view that we think we are living in an uncertain world of work? It may be that an involuntary loss of work now covers the articulate, skilled white- collar elites – not just blue-collar workers – and they make a bigger fuss about being made redundant. 21. BUSINESS ETHICS In the 1920s, many large American corporations began to establish pension funds, employee stock ownership, life insurance schemes, unemployment compensation funds and high wages. They built houses, churches, schools and libraries, provided medical and legal services and gave money to charity. Now this behaviour would be incredible. Neil Mitchell argues that this “welfare capitalism” was a way of creating favourable public opinion. Instead “Rational capitalism”, starting with Henry Ford, realized that a better paid work force would be more loyal and would be able to buy more goods and services, and that better educated workers would be more efficient one. Pure free market theorists disapprove this behaviour; they think that it’s not a good way to maximize profits. Milton Friedman says that “a corporate executive is an employee of the owners of the business” and its responsibility is “to make as much money as possible”. He also thinks that the executive shouldn’t make expenditures on social welfare beyond the amount that is required by law. To do so is to be guilty of spending the stockholders’ money. On the contrary, J.K. Galbraith says that business managers have the responsibility to all groups of people with an interest in the firm. This will include suppliers, customers, employees and the local community, as well as stockholders. For example, a firm ought not to pollute the area around its factories. Proponents of “stakeholder approach” suggest that suppliers, customers, employees and members of the local community should be strongly represented on a company’s board of directors. 22. THE ROLE OF GOVERNMENT Some people argue that governments have too much power, someone else that too much regulation is bad for business. There are some things that market system doesn’t do well: in the good society these are state’s responsibility. Health care, low-costing houses, policies, libraries and the arts must be a public responsibility. Often a person who attacks the services of the state is one who can afford to provide similar services for himself. There are also some activities that are beyond the time horizons of the market system: it invests for relatively short-run return. These activities are science, medical research, transports, research & development in general, and depend heavily by public investment. An other important sector of public responsibility is the environment: a good society protect and improves life. Milton and Rose Friedman think that the limitations imposed on economic freedom are a limitation for the economic progress and human freedom: an essential part of economic freedom is the freedom to chose how to use our income. We aren’t free to offer service as a lawyer, a physician, a doctor, etc. without getting first a permit or licence from a government official, we cannot buy a car without seat belts. They think that freedom cannot be absolute, because we live in an interdependent society: some restriction on our freedom are necessary. However, we have already done too much in this sense: the urgent need today is to eliminate restrictions, not add to them. + Reading (v. libro). 23.CENTRAL BANKING, MONEY AND TAXATION The primary function of taxation is to finance government expenditure, but taxes can also have other purpose. Government can dissuade people from smoking, drinking and so on elevating taxation on these, or can encourage capital investment by the deduction of more of the cost of investments from company’s profits. Income taxes are often “progressive”, and are one of the ways in which governments can redistribute wealth; most sales taxes are “regressive”, because poorer people need to spend a larger proportion of their income on consumption than the rich. The higher the tax rates, the more people are tempted to cheat, and this is the black or underground economy. In Italy lots of people have undeclared jobs, on which no one pays any tax or national insurance. 26. KEYNESIANISM AND MONETARISM Keynesianism: The great depression of the 1930s demonstrated that the market system doesn’t automatically lead to full employment. In “The General Theory” John Maynard Keynes argued that market forces could produce an equilibrium of unemployment of indefinite duration. For example, if people are worried about their future probably they save more money and consume less, and in these conditions producers will not be interested in making new investments; so people’s savings will remain unused and the economy will settle into a new equilibrium at a lower level of activity. Classical economists suggest that in the long run the excess saving would cause a decreasing of interest rates, so investments increase again. Keynes didn’t rely in automatic market mechanism, and argued that “in the long run, we are all dead”. He recommended governmental intervention in the economy, to counter the business cycle. During an inflationary boom governments could decrease their spending or increase taxation: during a recession they could increase their spending, reduce taxation or increase money supply reducing interest rate to stimulate investments. Monetarism (1950-1960): Milton Friedman argued that Keynesian fiscal policy had negative long-run effects. Monetarists insisted that money is neutral, meaning that in the long run, changes in the money supply will only change the price level and have no effect on output or employment. Governments had only to ensure a constant and non-inflationary growth in the money supply. Monetarists thought that recession are not caused by long-run market failures but by short-run errors by firms and workers, who don’t reduce their prices and wages quickly enough when the demand falls. More over government policies are not quickly enough, and anti-cyclic measures are pro-cyclic, because those take effect when economy is already recovering and make a new swing in the business cycle even greater. Neo-Keynesianism: Classical and neo-classical economic theories assumed that prices and wages are flexible: in this way they can eliminate excess supply or demand. Neo-Keynesians argued that wages are inflexible or “sticky” because of labour union contracts, government regulation and so on. There are also costs (“menu costs”) to change prices too frequently. Individuals and firms are unable to find the right prices that would bring the economy at the point of full employment: economies can get locked into disequilibrium for long periods. 27. INTERNATIONAL TRADE Nations may have an absolute or comparative advantage in producing goods or services because of factors of production, climate, division of labour, and so on. Economists believe in the comparative cost principle, which proposes that all nations will raise their living standard if they specialize in the production in which they have the highest relative productivity. Often governments impose tariffs and quotas in order to: • (To) protect what they see as strategic industries; • (To) make imports more expensive than home-produced substitutes to reduce a balance payments deficit; • (To) have a protection against dumping (the selling of goods abroad at below cost price in order to destroy competitors); • (To) protect “home infant industries” until they are large enough to compete internationally. There are also different barriers, like safety norms and the deliberate creation of custom difficulties and delays. The General Agreement on Tariffs and Trade (GATT) is an international organization which has the objective of encouraging international trade: the most important clause of the GATT agreement specifies that countries ought not to have favoured trading partners. Third World governments are aware of the export success of the “East Asian Tigers” economies (Hong Kong, Singapore, South Korea and Taiwan), and are afraid of being excluded from the world trading system, by the development of trading blocks such as the European Union and NAFTA (North American Free Trading Agreement). So they tended to liberalize their economies, lowering trade barriers and opening up to international trade. THE BANANA WARS The progressive reduction of tariff barriers has caused World Trade to increase by several hundred per cent since 1945 and that created work and prosperity. For many years, the banana industry had a special status. The European Union allowed British and French colonies in Africa and the Caribbean to export to Europe as many bananas as they wished, at slightly above world price. Banana production costs are higher in the Caribbean than on American-owned plantations in Latin America, because the difficult terrain and the climate. In 1999 Chiquita Brands made a donation to Democratic Party, so the US government put a 100% import tariff on various European goods. Population of Caribbean and Dominica depends strongly from banana, without this kind of trade the economy would collapse.