has decreased. Explain the trends for each of the following goods:
a) Spending as a percent of total consumption has decreased for good, clothing, household operation.
b) Spending as a percent of total consumption has increased for housing, medical care, transportation and travel.
2. Two hundred families live in the village of Middleville.
Every year, for as long as anyone can remember, there has
been one burglary. The average loss from the thefts has
been $5,000.
a) How could the people of Middleville insure themselves against the financial costs of a burglary?
b) Why is insurance often described as a «method of sharing risk»?
3. Most states require drivers to have liability insurance. Why?
You can choose whether you want collision insurance for a
car. Why would someone choose not to buy collision
insurance? Under what circumstances might you want to
buy collision insurance?
Lesson 5
LAUNCHING A BUSINESS
I. Read and memorize the following words, word-combinations and word-groups:
to start a business (syn. to launch a business) — розпочати справу (бізнес)
e.g. Those thinking of starting a business should keep informed about the kinds of opportunities that exist, the personal
qualities needed for success and the kinds of training available to prepare for the world of business.
to operate a business — керувати справою (бізнесом)
e.g. Many colleges now offer programs that teach students how to start and operate a business.
to face a problem — стикатися з проблемою
e.g. Small businesses face many problems.
to risk (syn. to run the risk) — ризикувати
e.g. Corporate leaders may risk their own jobs when they make major decisions that affect the future of corporation
negatively.
sole proprietorship — одноосібне володіння
e.g. A sole proprietorship is a business owned by one person
to pay taxes — сплачувати податки
e.g. Sole proprietors have minimal legal restrictions and do not have to pay the special taxes placed on corporations.
to assume the debts — брати на себе сплату боргів
e.g. If a business fails, the owner must personally assume the debts.
stockholder — акціонер, власник акцій
e.g. Ownership of a corporation is represented by shares of stock, and for that reason corporate owners are known as
stockholders.
partnership — товариство, компанія
e.g. A partnership is a business organization that is owned by two or more persons.
II. Give English equivalents of the following:
приймати рішення
товариство
стикатися з проблемою
нестача чогось
мати успіх
одноосібне володіння
сплачувати податки
керувати бізнесом
акціонер
брати на себе сплату боргів
досягти успіху
ризикувати
III. Fill in the blanks with appropriate words:
1. About 50 percent of entrepreneurs start their ... in industries in which they have some ....
2. People who come from families whose members were in business themselves are more likely to
start their own ....
3. In a large business the tasks of organizing and operating are done by many hired ... .
4. ... is a business owned by one person.
5. All debts and all problems associated with the business belong to the ....
6. ... is a business organization that is owned by two or more persons.
7. If the business were to fail, its ... would have the right to recover their money from any, or all, of the
partners. Ownership of a corporation is represented by shares of stock, and for that reason
corporate owners are known as ... .
8 IV. Read and translate the text:
experience creditors
stockholders
managers business
companies a sole
proprietorship a
partnership owner
There are numerous reasons that make people think about owning a business of their own. Personal independence,
unlimited profit potential, the opportunity to work at something that they really love and at hours they choose are some of
the reasons people have given for trying entrepreneurship. Many business leaders begin their careers as entrepreneurs
after four years of undergraduate college training and even additional graduate school training. Others become successful
entrepreneurs without special training.
Marty colleges now offer programs that teach students how to start and operate a business. Basic information is
combined with hands-on experienceond the advice of successful business consultants. These programs help potential
entrepreneurs decide whether their own ideas are good and how to follow through with them. With the high rate of
business failure, this approach can prevent personal financial losses.
A common way to learn about a business, and the opportunities for starting one similar to it, is to learn while working
for someone else. It provides a source of steady income to people while they are planning to start their own businesses.
About 50 percent of entrepreneurs start their businesses in industries in which they have some experience.
Evidence shows that people who come from families whose members were in business themselves are more likely to
start their own companies. Unfortunately, the record show that two out of three new businesses fail within their first four
years.
'Small businesses face many problems. Bad economic times affect small business more than they do big business. In
addition, small business profits tend to fall faster, and small businesses are more likely to fail.
What are the problems that face small business now? In January, 1985 the National Federation of Independent
Business reported that the four top problems facing small business at that time were taxes, slow sales, the high cost of
borrowing money and competition from other businesses.
In a large business the tasks of organizing and operating are done by many hired managers.
A corporation is one kind of business organization. Other kinds of business organizations are sole proprietorships and
partnerships. Sole proprietorships are the most numerous kind of business organization, but most are very small,. The
reason for their popularity is that they are the easiest and least costly to organize.
Sole proprietors own all the profits of their enterprises, and they are their «own bosses», free to make whatever
changes they please. They have minimal legal restrictions and do not have to pay the special taxes placed on corporations.
Sole proprietors also have opportunity to achieve success and recognition through their individual efforts.
There are also disadvantages. A very serious one is the unlimited liability that each proprietor faces. All debts and all
problems associated with the business belong to the owner. A second disadvantage of the sole proprietorship is that it has
limited capital.The money that a proprietor can raise is limited by the amount of his or her savings and ability to borrow.
Also, when the owner dies, the business dies. Other disadvantages may include lack of opportunities for employees,
limitations of size and lack of management resources.
A partnership is a business organization that is owned by two or more persons. Partnerships offer certain advantages
over sole proprietorships:
* Partners bring additional funds to a proprietorship.
* Partners can bring fresh ideas and talents to business organizations.
* Like the sole proprietorship, partnerships are relatively easy to form and are not subject to special taxation.
Partnerships have the following disadvantages:
* In many cases, each of the partners is subject to unlimited liability. Partners are individually responsible for all the
debts of the business. In other words, if the business were to fail, its creditors would have the right to recover their
money from any, or all, of the partners.
A corporation is a business organization created under a government charter. Ownership of a/corporation is
represented by shares of stock, and for that reason corporate owners are known as stockholders. One feature of the
corporation is that the courts treat it as a legal «person». It can, for example, sue or be sued and enter into contracts, and it
must pay taxes.
There are some other types of business organizations. They are: the corporation for small business, not-for-profit
corporation, government-owned corporations, cooperatives and franchises (pp.49—61).
V. Answer the following questions:
1. What makes people think about owning a business of their
own?
2. How do many business leaders begin their careers as
entrepreneurs?
3. What helps potential entrepreneurs to start and operate a business?
4. What problems do small businesses face?
5. Who does the tasks of organizing and operating in a large business?
6. What kinds of business organizations you know?
7. What are the advantages and disadvantages of sole proprietorship, partnership and corporation?
8. What other special types of business organizations do you know?
VI. Define the terms:
sole proprietorships
corporations
stockholders
taxes
partnerships
creditors
dividends
VII. Translate into English:
1. Підприємці — це люди, які мають власний бізнес і керують ним, сподіваючись одержати прибуток. 2. Тепер
багато вищих навчальних закладів пропонують програми, які вчать студентів, як розпочати бізнес і керувати ним. 3.
Близько 50 відсотків підприємців розпочали свою справу (бізнес) у тих галузях виробництва, в яких вони вже мали
певний досвід. 4. У великому бізнесі завдання, пов'язані з організацією та управлінням, виконуються багатьма
найманими менеджерами. 5. Великий і малий бізнес для досягнення своєї мети організовують свою роботу порізному. 6. Акціонерне товариство, одноосібне підприємство — це різні види бізнесових організацій. 7. Одноосібне
підприємство — це бізнес, яким керує одна особа.
VIII. Read and dramatize the following dialogue:
Nick: Hello, Peter. It's so nice to see you. How are you getting on?
Pete: Quite all right, thank you. And what about you? Haven't seen you for a long time. What have you been busy with?
N.: I've been pretty busy. In fact I want to talk to you about my business.
P.: Oh, I'll be glad to do something for you.
N.: I'm glad you are not in a hurry and we have time to talk today
P.: Sure.
N.; Well, Pete. I need some legal advice. John and I are thinking of incorporating. We are going to expand.
P.: Really? It sounds interesting. It means that your partnership has been doing very well.
N.: Oh, yes, we have a success. Now some businessmen are interested in investing with us.
P.: Let me get this straight. You want to issue and sell stock in exchange for investment capital, don't you?
N.: Exactly. By the way, does a corporation have limited liability?
P.: It does. Unlike the owners of sole proprietorships and partnerships who can be held personally liable for the debts of
their firms the most that corporate shareholders can lose (i.e. their liability) is limited to whatever they paid for their
shares of stock. Corporations are so important because of the advantages they offer over sole proprietorships and
partnerships.
N.: Tell me a litte about these advantages.
P.: Well. Stockholders can enter or leave a corporation at will simply by buying or selling shares of stock in that corporation.
When the corporate stockholders die, their shares of stock are passed on to their heirs. Meanwhile, the corporation is
free to conduct business as usual. In certain instances individuals can reduce their tax liability by incorporating.
N.; With all these advantages I wonder why there are so many more unincorporated business than incorporated ones?
P.: The answer has to do with the disadvantages of the corporation.
N.: Disadvantages? What can you tell me about them?
P.: It's difficult and expensive to organize a corporation. The process of obtaining a charter usually requires the services of
a lawyer. Most small firms prefer to avoid these by forming proprietorships and partnerships. Corporations are subject
to special taxes. The federal government, along with many state and local governments, taxes corporate income in
addition to the taxes paid by shareholders on their dividends.
N.: What does «dividends» mean?
P.: Dividends are the portion of a corporation's profit that are distributed to the stockholders.
N.: Thank you. What other things should I know?
P.: Well. Corporations whose stock shares are sold to the public give up their right to privacy. The law requires that
these large, open (or public) corporations disclose information about their finances and operations to anyone
interested in reading about them. The purpose of this legislation is to give people information that helps investors and
may also be of value to the competition. For that reason some corporations have chosen to remain closed (or private)
corporations rather than disclose information they would prefer to keep secret. Now you seem to know a lot about
business.
N. Not everything yet, and the subject becomes quite technical.
I'm glad to hear it. It's time to go now. See you later! Thank you very much for the information. Bye!
P.:
N.
IX. Make up your own dialogue using the following expressions:
to distribute profits and losses to
attract customers an ammount of
to make a right choice to
go into business to get
along with to be liable
money to run a risk
X. Inform the group about the future activites or states:
Model: I have the right to expect uniform product quality.
I shall have the right to expect uniform product
quality. 1. Many colleges offer programs that teach students how to start and operate a business. 2. I know a lot
about this business. 3. This program helps potential entrepreneurs decide whether their own ideas are good and how to
follow through with them. 4. About 50 percent of entrepreneurs start their own business in industries in which they have
some experience. 5. Evidence shows that people who come from families whose members were in business themselves
are more likely to start their companies. 6. Many business leaders begin their careers as entrepreneurs after four years of
undergraduate college training (and even additional graduate school training).
XI. Ask for confirmations of the truth of the following
statements:
Model: You will call on us tomorrow.
You will call on us tomorrow, won't you?
The manager will not answer my questions on
Saturday.
The manager won't answer my questions, will he?
1. A consumer will have the right to expect uniform product quality. 2. Voting won't take place at a corporation, annua
meeting. 3. Small businesses will face many problems.
4. Large and small businesses will organize in different ways to
meet their objectives. 5. Sole proprietors won't have to pay
the special taxes placed on corporations. 6. I shan't know a
lot about this business.
XII. Translate into English:
1. Батьки сподіваються, що він стане гарним підприємцем, матиме власний бізнес і керуватиме ним. 2. Вона вже
має чудовий досвід у цій галузі виробництва і, можливо, розпочне власну справу. 3. Як менеджер, він буде виконувати завдання, пов'язані з організацією та управлінням виробництвом. 4. Ми знаємо, що корпорація завжди матиме переваги над одноосібною власністю та партнерством.
5. Рада директорів обере президента та інших посадових
осіб для керівництва компанією.
XIII. Communicative situations:
1. Would you like to own your business? Why yes or why not?
If so, would you prefer to buy an existing business or start
from scratch? Explain.
a) What product or service would you provide?
b) What talents, interests, skills and abilities do you have, or likely will have, which would make you successful in this
business?
c) Where would you want to locate the business and for what reasons?
d) What type of business organization would you prefer? (sole proprietorship, partnership, corporation)? Explain your
choice.
2. Do you have the personal characteristics that might help
you become a successful entrepreneur? Read each question
on the Rating Scale. Place a check mark on the line above
at the point where you believe successful entrepreneurs
would rate themselves. Repeat the exercise for yourself by
placing an «X» closest to the answer that best describes
you. The check mark need not be placed directly over
one of the suggested answers if your rating lies somewhere
between two answers. Be honest with yourself.
Are you a self-starter?
a) I do things my own way. Nobody needs to tell me to get going.
b) If someone gets me started, I keep going all right.
c) Easy does it. I don't put myself out until I have to. How do you feel about other people?
a) I like people. I can get along with just about anybody.
b) I have enough friends and I don't need anybody else.
c) Most people bug me. Can you take responsibility?
a) I like to take charge and see things through.
b) I'll take over if I have to, but I'd rather let someone else be responsible.
c) There's always some eager beaver around waiting to show off. I say, let him.
How good an organizer are you?
a) I like to have a plan before I start. I'm usually the one who lines things up.
b) I do all right unless things get too complicated. Then I lose interest.
c) I just take things as they come.
How good a worker are you?
a) I can keep going as long as necessary. I don't mind working hard.
b) I'll work hard for a time, but when I've had enough, that's it.
c) I can't see that hard work gets you anywhere.
Can you make decisions?
a) I can make up my mind in a hurry if necessary, and my decision is usually O.K.
b) I can if I have plenty of time. If I have to make up my mind fast, I usually regret it.
c) I don't like to be the one decides things. I'd probably blow it.
Can you stick with it?
a) If I make up my mind to do something, I don't let anything stop me.
b) I usually finish what I start.
c) If a job doesn't go right, I turn off. Why beat my brains out?
Can you keep records?
a) Since they are needed I'll keep records even though I don't want to.
b) I can, but it's more important to get the work out than to shuffle numbers.
I would rather hire someone to keep records for me
Lesson б
FINANCING A BUSINESS
I. Read and memorize the following words, word-combinations and word-groups:
internal funds — внутрішні борги
external funds — зовнішні борги
e.g. Since the funds come from within the firm they are described as internal funds. The rest must come from outside,
or external funds.
to meet one's expenses — покривати чиїсь витрати
e.g. As a firm sells its products or services, it receives money which it uses to meet its expenses.
depreciation — знецінення, зниження цін
to wear out — зношуватися, спрацьовуватися
e.g. Depreciation represents the cost of replacing assets that wear out.
to cover the cost of smth. — покрити вартість чого-небудь
e.g. Businesses use internal funds to cover the cost of depreciation.
short-term loans — короткострокова позика
e.g. Short-term loans are used to finance the everyday costs of doing business.
long-term loans — довгострокова позика
e.g. Long-term loans mature (come due) in more than a year.
the principal — запозичена сума
e.g. Creditors expect to receive interest and the return of the principal at the end of a specific period of time.
common stock — спільні акції
preferred stock — привілейовані акції
e.g. All corporations issue common stock; some, however, also issue preferred stock.
to have voting rights — мати право голосу
e.g. Preferred stockholders do not have voting rights.
security exchange — фондова біржа
e.g. Security exchange is a market where brokers meet to buy and sell stocks and bonds for their customers.
default — невиплата, невиконання договору
e.g. There is some risk of default on the bonds of even the strongest corporations.
1 WHAT IS BUSINESS?
In 1989 Drucker1 talked about sharp transformations or divides that signal fundamental changes in the basic
structure of society. The same theme was developed by Piore and Sabel in their book, The Second Industrial
Divide.2 The authors trace the development of those processes and key transformations in business that have
had profound effects on society. They begin their discussions with the creation of guilds, go on to describe the
industrial revolution, and end with a delineation of business activity during the first half of the twentieth
century. These authors pay homage to The Wealth of Nations by Adam Smith as they develop the various
transformations that have led to the postmodern industrial era.
It would be easy, and almost obligatory, to proceed down the same path as these authors have described
and provide a similar review of business history. However, instead of serving the same wine in a new bottle,
we will introduce new, exciting, dominant themes that are occurring in the rapidly changing business world of
today. Our goal in this chapter is to briefly set a context for the remainder of the book and to draw attention to
the challenges that face managers as they prepare to enter a new century.
These dominant themes are related, and they lay a foundation for understanding what is going on in
today's business environment. By delineating these themes, we show that "business as usual" is a bankrupt
concept. A number of fundamental changes are occurring that impact business and the larger society of which
it is a part. These changes are reflected in the following themes. One theme
is the new competition, in which a new business paradigm affects the very soul of the business enterprise. The
second theme is based on a shift to a knowledge-based society and the rise of the intelligent enterprise.3 The
third and final theme refers to the rise of cooperation among firms that now compete as constellations of
companies. These ecosystems4 of firms are as strong as their weakest partner. They vie for resources and
customers against other competing constellations of firms. These ecosystems redefine how managers should
think about competition and competitive forces. We believe that these themes set the tone for many of the
issues raised in this book. And, more important, these themes reflect basic changes in how business will be
discussed and transacted into the next century.
THE NEW COMPETITION
At the core of the new competition5 is the belief that continuous improvement will be driven by the
entrepreneurial firm. Based on the Schumpeterian notion of creative destruction, these firms offer a new
approach to business production and processes. Benetton, for example, is a collection of collaboratively linked
smaller firms that manufacture, design, and market a line of stylish clothing based on a model first developed
centuries ago by Italian lace producers. Benetton, the name most people recognize, is mainly a marketing and
distribution company that relies on its alliances and cooperative relationships to design and manufacture under
its label. There are many other examples of networks of companies that form virtual corporations with the sole
intention of challenging the dominant paradigm by which business conducts itself. During the 1980s and 1990s
a number of industries have converged and been redefined. Recognizable names like Nike, FedEx, Nucor,
Calyx & Corolla, and Dell have emerged as change agents in their respective industries.
The new competition is based on four dimensions and is driven by a proactive approach to strategy
whereby the competitive landscape is not taken as a given, but rather is subject to reinterpretation. Managers
strive to invent the world in which they choose to compete, often by changing the rules of the game. These
four dimensions are: (1) the firm, (2) the production chain, (3) the sector, and (4) the government.
The Firm
The firm is here defined as an entrepreneurial company, which is in contrast to the firm as portrayed by
Chandler and others6 who view the firm as a bureau cratic hierarchy. Here, the firm strives to maintain
continuous improvements in support of its strategic goals. Innovation comes as a result of marginal gains in
production, processes, and organization. Innovation is seen as part of the learning process, which lies at the
core of the firm's values and culture. While a centralized research and development facility can engage in seachange levels of innovation, the entrepreneurial firm survives by its ability to induce workers at all levels to
participate in small, incremental attempts at continuous improvement. There is no question that inventions
derived from work at Bell Labs have changed the course of history. Yet AT&T's bureaucratic structure has
strained the firm's ability to sustain a competitive edge in a number of markets. To be sure, MCI's competitive
spirit and entrepreneurial culture has caused senior management at AT&T many a sleepless night! Is MCI's
friends and family™ campaign on par with the invention of the transistor? Certainly not—but MCI's relentless
attempts to create innovative marketing programs has caused AT&T to lose important and costly market share
in the residential long-distance market.
The Production Chain
The notion of the production chain is similar to the value chain concept in which each discrete phase of valueadding activity is traced from the acquisition of raw material to its sale and after-sale service. The traditional
model presumes that these activities are all performed internally in the firm. Under the new competition, it is
quite likely that firms will partner to perform value-adding activities and that through cooperation one firm can
better leverage the unique skills and competencies of another firm.
In an attempt to be more price competitive, IBM has shifted some PC manufacturing responsibility
downstream to its distributors. Inacom Corp., an IBM distributor, customizes the IBM PC, reduces IBM's
costs, and maintains the corporate relationship. While still not as efficient as Dell, IBM has used this new value
chain to market 60% of its commercial PC line. Inacom uses Skyway, a Union Pacific subsidiary, to handle its
logistics as it attempts to reduce its inventory levels through more information-intensive exchanges with its
outsourced logistics provider. Suddenly, we have a production chain that relies on the shared mutual goals of
interdependent firms that establish a set of shared working norms. This new configuration can easily be
contrasted to the vertically integrated IBM of the "big iron" days. To be sure, terms like outsourcing and value
chain analysis have entered the lexicon of today's managers in a way unimagined five or ten years ago.
The Sector
The previous discussion suggests the existence of a network of firms that transcend the single firm. Now the
interfirm cooperative relationships become the appropriate level of analysis. Alliances and partnerships
become key success factors in a large number of industries. The business sector becomes the focal point of
discussion, and interfirm relationships driven by cooperative interests become the meaningful competitive
metric. A more traditional model might view such cooperative actions as cartel-like behavior. Such an
interpretation would suggest that cooperation is anticompetitive and serves to stifle innovation. Under the new
competition, the opposite is true, because these new organizational linkages often give rise to heightened
competition and are the result of new and innovative thinking. Milliken, for example, sits at the hub of a
number of interfirm networks whose immediate goal is to improve the inventory levels of the apparel industry
through economic order levels and other types of just-in-time systems. This cooperation from the mill to the
fabricator, retailer, and consumer removes unnecessary costs from the entire channel of distribution.
The Government
At a deeper level, the Milliken example represents a change in government policy regarding the interpretation
of antitrust behavior. By focusing on a different level of analysis, concern now shifts to international trade: At
stake is the survival of the U.S. textile industry as it attempts to compete against lower-cost Asian imports.
Similar stories can be told about the horizontal alliances among global airlines, ocean shipping, and the various
research consortia that exist in the semiconductor, specialized metals, and multimedia industries. In short,
when the new competition is taken to a global context, firms do not have the luxury of a go-it-alone strategy
and are likely to be severely disadvantaged if they try to do so. As we'll discuss elsewhere in the book, capital
and knowledge know no company or national boundaries. Access to national resources is not sufficient to
ensure success. The only sustainable means of production is knowledge! The rise of the Internet, for instance,
has made information widely available in real time. Drucker7 suggests that the function of the business
enterprise is to make knowledge productive.
THE INTELLIGENT ENTERPRISE
The notion of the intelligent enterprise has a profound impact on the definition of business. Our goal is not to
argue that the U.S. economy has shifted away from its manufacturing base and become a service economy.
Rather, our intent is to
show how a number of Quinn's points serve to reshape managers' thinking. Many of the points raised here are
consistent with the new competition.
Basic Restructuring of the Economy
Basic power relationships have shifted away from those who produce to those who control information.
Whether we examine Toys 'Я' Us, Wal-Mart, or Boeing, it is clear that all are driven by a need to compete
through reduced cycle time. For retailers, the issue is how to reduce inventory levels so they can be responsive
to changing customer tastes. To be sure, Wal-Mart tracks consumer taste along with its distribution costs with
equal concern. For Boeing, the question is how to develop, FAA-certify, and sell a new generation of aircraft
in the fastest possible manner without sacrificing quality and safety. For all three companies, sharing
information with their partners contributes to competitive success. These linking technologies permit real-time
information access and sharing that have restructured the economy. It is important to recognize that the 777
went from concept to production without the different stages of development and prototypes witnessed with
the production of the 757 or the 767. Again, the airframe industry is being redefined as Boeing's constellation
of firms compete against AirBus and its consortium of Pan-European aerospace companies.
Different Organizational Strategies
The notion that organization follows strategy must be complemented by the second adage that structure
follows technology. Organizations have become flatter as a result of technology, and the concept of mass
production as the only way to achieve low costs has become passe. In later chapters we espouse the merits of
mass customization. To be sure, this new paradigm has changed the face of business forever! Again, these
different structures and strategies are knowledge-based and depend on information exchanges both among
function units within the firm and among different organizations. In short, command-and-control
administrative systems are not effective with these new organizational forms. In addition, the strategies that
emerge allow innovative relationships with customers and competitors. These new strategies are driven, in
part, by the role of middle managers, as we discuss in Chapter 14, "Leading from the Middle."
Management Challenges
More and more, the distinction between manufacturing and service is fading as the two become more
intertwined. The issue becomes one of understanding the full value chain, recognizing unique competencies,
and identifying the skills
essential for competitive advantage. In many instances, core competencies center on an ability to use and
manipulate knowledge. In addition, it is possible that this knowledge is not resident in the firm and must be
leveraged from its partners. In the health care arena, for example, a number of key business strategies are
involved in accessing information about patients for the purpose of improving total disease management. It
was not long ago that drug companies fought for market share by drug category. Now the rules have changed,
information is key, and the total cost of managing a disease is of paramount concern. A primary challenge
becomes knowing what investments need to be made in infrastructure and people to accomplish your goals. As
stated earlier, both capital and information know no boundaries—if not managed wisely, these factors of
production are fungible and move across both firm and national boundaries. A key goal for todays senior
executives is to enable managers to encourage and develop their knowledge workers. Related to these
managerial challenges are regulatory concerns affecting the nature and scope of competition, the protection of
intellectual property, and global trade policies.
UNDERSTANDING BUSINESS ECOSYSTEMS
Moore8 uses the biological metaphor of looking at business relationships as an ecosystem to examine a new
paradigm for understanding competition and the effects of competitive forces. Rather than focus on downsizing
and cost reduction as the default response to a hostile business environment, managers should attempt to create
market opportunities. These opportunities often come through innovation and a new way of viewing the
marketplace—seeing the market from the perspective of those who can change the competitive terrain. Often,
change comes by working more closely with customers and suppliers to jointly create the future. Even the term
industry might be obsolete in that it presumes an easily delineated business area in which a fixed set of firms
compete. You need only look to the convergence of voice, data, and video technologies to appreciate the
difficulty in defining the scope of competition in this burgeoning industry. Partners compete with partners in
one part of the market and cooperate in other parts; ventures are started and disbanded at a moment's notice;
the technology changes daily. There is an element of complexity reflected here that is unparalleled in recent
business history. Survival is based on an ability to transform and adapt to new business conditions—similar to
evolution in the biological arena.
The business ecosystem evolves from conversations with suppliers and customers and is not limited to more
traditional analyses that compare competitors head-to-head regarding their skills and competencies. The
objective here is to cast a wide intellectual net and see where it is possible to change the rules of engagement
and to develop a sustainable value proposition at the same time.
IMPLICATIONS
As we reach the end of the century, it is clear that the criteria that defined business in the early part of the
century are less relevant. We have in the present generation of managers witnessed changes in how firms are
managed and how they are defined. Terms like economic value added (EVA), brand equity, and the lifetime
value of a customer have changed the metric by which firms are evaluated. Exhibit 1.1 compares the market
value of both Bethlehem Steel and Nucor. You can infer from this exhibit that Wall Street's perception of the
value inherent in integrated steel mills has decreased over time. In the early part of this century, vertical
integration was a sign of market strength and dominance. Chrysler has, in effect, become an assembler and
marketer of automobiles, while of the Big Three, GM is still the most vertically integrated. Chrysler, on a
percentage basis, has in recent years shown higher profit levels than GM.
Not long ago, banks looked to their number of branches as an indication of market share. Now the battle
cry is "banking anywhere, anytime, any way." Docutel, Intuit, Mondex, CyberCash, and a host of other firms
have changed the face of retail banking forever. Using PC banking and the Internet, these burgeoning
nonfmancial institutions have challenged the likes of Citibank and NationsBank for a share of the purse. Our
point is that old rules no longer apply.
EXHIBIT 1.1 Comparison of Bethlehem Steel and Nucor.
Source: Reprinted with permission of Harvard Business School Press. From CDI Value Growth Database, cited in Slywotzky, Value
Migration (Boston: HBS Press, 1996), p. 9. Copyright © 1996 by the President and Fellows of Harvard College; all rights reserved.
The manager of the twenty-first century must be prepared to challenge the status quo.
The role of business has changed dramatically, and the transformations that point to fundamental changes
in the basic structure of society alluded to at the beginning of this chapter are likely to occur more frequently.
Andy Grove,9 CEO of Intel, confirms this view and speaks of inflection points that cut to the heart of the
business, threatening its existence. Inflection points reflect those moments that changes in the nature of
competition, technology, or the marketplace present profound opportunities/threats for a firm's future survival.
The role of senior management will be to set the vision that ultimately transforms the business. However, it is
often the middle manager who will need to anticipate this change, who appreciates its potential impact, and
who is charged with implementing a response to this change. Success often hinges on execution—achievement
of goals is truly in the details! The chapters that follow move with facility between questions of strategy and
problems of implementation. All the chapters combine to prepare you for the challenges that face managers in
the twenty-first century. Our journey takes a number of turns and twists. Some chapters focus on the traditional
functional business disciplines such as marketing and operations. Others address the details of accounting,
quantitative analysis, and net present value. Still other chapters soar into the stratosphere of the corporate
environment by dealing with the business policy level as we address issues germane to strategy and the
management of alliances. These issues stand side by side with a discussion of the effects of empowerment, the
stresses associated with the changing social contract, the need to incorporate business ethics as an essential part
of management's thinking, and the challenges inherent in leading from the middle.
FOR FURTHER READING
Michael Best, The New Competition (Cambridge, MA: Harvard University Press, 1990).
Francis Gouillart and James Kelly, Transforming the Organization (New York: McGraw-Hill, 1995).
James Moore, The Death of Competition (New York: Harper Business, 1996).
James Brian Quinn, The Intelligent Enterprise (New York: The Free Press, 1992).
Michael Yoshino and U.S. Rangan, Strategic Alliances (Cambridge, MA: Harvard Business School Press, 1995).
CHAPTER 5
ENTREPRENEURSHIP
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1
Explain what entrepreneurs do and describe how the environment supports their activities.
2
Describe the personal characteristics that contribute to entrepreneurs' success.
3
Describe the planning requirements associated with becoming a successful entrepreneur.
4
Recognize intrapreneurs and the organizational characteristics that encourage
intrapreneurship.
OUTLINE
1
Explain what entrepreneurs do and describe how the environment supports their activities.
I.
Development of Entrepreneurial Activity
1. Entrepreneur—is the label usually given to someone who creates new business
activity in the economy.
a. In the broadest sense, then, entrepreneurs manage resources in order to create
something new—a new product or service, or even a new market.
b. People often think that entrepreneurs succeed primarily because they invent
new products or services, but that isn't the case. Most successful
entrepreneurs begin by offering higher quality product or service.
2. Incubator Organization—is a term used for organizations that support
entrepreneurs.
a. These organizations rent space to new businesses. They also offer administrative
services and provide management advice.
3. Small-Business Owner—is anyone who owns a major equity stake in a
company with fewer than 500 employees.
a. The Small Business Administration (SBA) is the agency of the federal government
responsible for supporting the development of small-business
activity, and it offers many useful resources to help people establish and
effectively manage such businesses.
b. In 2000, there were 24 million small businesses in the US, representing 40 percent
of US companies and creating three-fourths of all new jobs.
с Many entrepreneurs are small-business owners for a while, but not all smallbusiness owners become entrepreneurs.
4. Family Business—the term used to describe a business owned and managed mostly by
people who are related by blood and/or marriage. Often are passed down one
generation to another.
2
Describe the personal characteristics that contribute to entrepreneurs' success.
II.
Characteristics of Entrepreneurs
1. Key Personal Attributes ~ Even with the best business conditions, not everyone
becomes an entrepreneur nor do all entrepreneurs become successful. The personal
attributes most entrepreneurs exhibit include:
a. Need for Achievement—a person's desire for excellence or to succeed in
competitive situations.
1. High achievers take responsibility for attaining their goals, set moderately
difficult goals, and want immediate feedback on how well they have
performed.
2. David McClellan and others have conducted extensive research into the
human needs for power, affiliation, and achievement. Their findings
indicate that perhaps only 5 percent of the U.S. population is
characterized by a predominant need to achieve.
3. Entrepreneurs learn to set challenging but achievable goals for themselves
and for their business and, when they achieve them, to set new goals.
b. Desire for Independence—entrepreneurs often seek independence from
others.
1. Entrepreneurs aren't motivated to perform well in large, bureaucratic
organizations.
2. They have internal drive, are confident of their own abilities, and possess
a great deal of self-respect.
с Self-Confidence—because of the risks
involved
in
running
an
entrepreneurial organization, having an " upbeat" attitude is essential.
1. Most people want an optimistic and enthusiastic leader—someone they can look
up to.
d. Self-Sacrifice—entrepreneurs recognize that nothing worth having is free.
1. Success has a high price and they are willing to pay it.
e. Entrepreneurs: Made, Not Born - Although different from most people,
entrepreneurs probably weren't born that way. Instead, they developed personal
attributes over the years, but they acquire many of their key attributes early in life.
1. Corridor Principle—using one's business as a springboard to start or acquire
other ventures and then repeating the process.
2. Serial Entrepreneur—are those individuals who are hooked on the corridor
principle of continuously opening new businesses.
2. Technical Proficiency—entrepreneurs often demonstrate strong technical skills,
typically bringing some related experience to their business ventures.
3. Managerial Competencies—to succeed entrepreneurs need to develop and draw upon
the following competencies.
a. Strategic Action Competency—a study of 906 CEOs who were winners of
awards in the Ernst & Young LLP Entrepreneur of the Year Program
identified the following strategic practices:
1. Delivering products and services that were perceived as being of the highest
quality to expanding market segments;
2. Cultivating pace-setting new products and services that are first to market;
3. Delivering products and services that demand average or higher pricing;
4. Using new products and services to expand revenue by about 20 percent
annually;
5. Generating new customers that expand revenue by about 30 percent annually;
6. Focusing marketing expenditures on a high-quality sales force that can rapidly
expand the company's geographic presence;
7. Maintaining financial control of the firm; and
8. Linking the entrepreneur's long-term objectives to a defined exit strategy.
b. Planning and Administration Competency—though plans may have to
change, planning is important for entrepreneurial companies, and nearly 80
percent of successful entrepreneurs put their plans in writing.
1. The planning horizon is relatively short, often less than 3 years.
2. Written monthly plans (12-24 months) are common and as the time frame
grows longer the plans tend to become more general.
3. In the start-up phase, when funds are scarce and the company has no track
record, attracting top-notch employees is difficult.
с Teamwork Competency—successful entrepreneurs are self-starters who usually
support subordinates and their programs.
1. The majority of successful companies (of the study previously described) had a
particularly effective top management team.
d. Communication Competency—being able to communicate effectively is essential to gaining
the cooperation and support needed to turn a vision into reality.
1. Much of communication that occurs in larger companies takes the form of speeches,
written reports, formal proposals, and scheduled reviews. In small companies, most
communication is direct and less formal.
Describe the planning issues associated with becoming a successful entrepreneur. Planning and
Entrepreneurship
1. Business Plan—is a step-by-step
owner expects to turn ideas into reality.
outline
of
how
a. A business plan also provides prospective
the new business or expanding business.
b. Entrepreneurs should
business plans.
address
the
an
entrepreneur
investors
following
types
with
of
or
business
information
questions
about
in
their
1. What are my motivations for owning a business?
2. Should I start or buy a business?
3. What and where is the market for my product or service?
4. How much will it cost to own the business, and where will I get the money?
5. Should my company be a domestic or global company?
6. How will growth be managed?
2. Understanding
reasons.
Your
Motivations—people
become
business
owners
for
various
a. Reasons for owning a business include: making a hobby or craft pay off,
entering family-owned businesses; or for its profit potential.
b. Lifestyle
Venture—is
designed
independence, autonomy, and control.
to
meet
the
founder's
desire
for
3. Deciding Whether to Start or Buy a Business—in deciding whether to start a
business,
the
prospective
entrepreneur
should
weigh
the
advantages
and
disadvantages of each strategy.
a. Is there a way that I can begin the enterprise in stages or with a limited
investment?
b. Can I run the company at first as a home-based business?
с Can I continue working for someone else and put in time on my own business after hours?
d. To what extent can I draw on relatives to help me?
4. Franchise—a business operated by someone
franchiser grants the right to market a good or service.
(the
franchisee)
to
whom
a
a. The franchisee pays a franchise fee and a percentage of the sales.
b. The franchisee often receives financial help, training, guaranteed supplies, a
protected market, and technical assistance in site selection, accounting, and
operations management.
с A franchise agreement means the franchisee obtains a brand name that enjoys
recognition among potential customers.
d. Franchisees must conform to standards set by the franchisor, and sometimes
they must buy the franchisor's goods and service.
e. Buying a nonfranchise existing firm is complex and may involve more risk.
f. The prospective buyer should specify, in the purchase agreement, restrictions
limiting the previous owner's ability or right to compete with the new
owners.
5. Assessing the Market—should be researched and forecasting techniques should
be used.
a. Help in targeting and analyzing markets is available to the prospective entrepreneur
from numerous sources.
1. The federal government compiles an enormous amount of data on products,
industries, consumers, and other market-related categories.
6. Finding Funds—the new-venture plan should identify anticipated costs of
opening the business (e.g., deposits, fixtures, and incorporation fees).
a. The business plan should also project, month by month, the expenses that
reasonably can be expected for the first 1 to 3 years.
b. The entrepreneur must plan for obtaining funds to handle expenses, such as
those associated with the start-up phase, that revenues can't initially cover.
с Common sources of funds include the entrepreneur and other members of the
venture team, family and friends, financial institutions such as banks and venture
capital firms, and angels.
d. Venture capitalists - are like bankers. They are organized as formal
businesses, but because they aren't subject to the same state and federal
regulations as banks, they can take greater risks in making investments.
e. Angel—a private individual who invests directly in firms and receives an
equity stake in return.
7. Going Global—most new ventures begin with a domestic focus, but increasingly
entrepreneurs find their firm turning into global enterprises.
a. Specific considerations for whether to found a domestic or global start-up include
the following.
1. Are the best human resources dispersed among various countries?
2. Would foreign financing be easier or more suitable?
3. Do target customers require a venture to be international?
4. Will worldwide communication lead to quick responses from competitors
in other countries?
5. Will worldwide sales be required to support the venture?
6. Will domestic inertia be crippling if internationalization is postponed?
8. Managing a Family Start-up—family-owned businesses are an integral part of the
U.S. economy.
a. For a family business to succeed, a family should take the following steps:
1. Decide who is responsible for what;
2. Draw up a legal agreement on disposing of the business;
3. Agree on how to make a decision about whether and when to sell the
business;
4. Decide whether the business will employ other family members and, if
so, what hiring criteria will be used;
5. Settle fights as they develop; and
6. Establish a board of advisors.
b. Survival issues may arise only once in the lifetime of the owners and the
enterprise, but the way they are resolved may determine whether the firm will
continue to exist.
1. Survival issues include: ensuring equitable estate treatment, preparing for
ownership transfer, minimizing estate taxes, ensuring the financial security of
the senior generation, and selecting and developing a successor.
с Operational issues arise almost daily. Left unattended, they may become survival
issues.
1. Anyone employed in a family firm is affected by how the family gets along.
Their relationships and interactions influence the company's competitive
position and survival prospects, career advancement opportunities, employee
motivation and morale, and employee quality of life at work as well as at
home.
4
Recognize intrapreneurs and the organizational characteristics that encourage
intrapreneurship.
IV.
Entrepreneurship in Large Organizations
1. Intrapreneur—someone in an existing organization who turns ideas into
profitable realities.
a. Many large organizations now recognize that entrepreneurial behavior can produce
growth and profits.
2. Fostering Intrapreneurship—top management can foster an intrapreneurial
culture by eliminating obstacles and providing incentives for intrapreneurship.
a. Organizations that redirect themselves through innovation have the following
characteristics:
1. Commitment from senior management;
2. Flexible organization design;
3. Autonomy of the venture team;
4. Competent and talented people who exhibit entrepreneurial behaviors and
attitudes;
5. Incentives and rewards for risk taking; and
6. An appropriately designed control system.
b. Skunkworks -islands of intrapreneurial activity, where formal rules and
procedures are ignored in favor of experimentation and innovation.
MATCHING
Directions: Select the term that best identifies the statement listed below. Place the letter of the
correct term in the space provided.
A. Family Business
B. Lifestyle Venture
С Business Plan
D. Intrapreneur
E. Franchise
F.
G.
H.
I.
J.
Corridor Principle
Small-Business Owner
Skunkworks
Angel
Entrepreneur
1.
A step-by-step outline of how an entrepreneur or the owner of an enterprise expects to
turn ideas into reality.
2.
Someone who creates a new business activity in the economy.
3.
A business owned and managed mostly by people who are related by blood or marriage.
4.
Using one business to start or acquire others and then repeating the process.
5.
Often a small company designed to meet the founder's desire for independence,
autonomy, and control.
6.
Someone who owns a majority equity stake in a company with fewer than 500
employees.
7.
A business run by an individual to whom a franchisor grants the right to market a certain
good or service.
8.
Islands of intrapreneurial activity within an organization.
9.
Someone in an existing organization who turns new ideas into profitable realities.
10.
An individual who invests directly in firms, receiving an equity stake, and often acts as
a business adviser to the founder.
TRUE OR FALSE
Directions: Write True or False in the space provided.
1
__
1.
Most entrepreneurs succeed because they invent new products or services.
__
2.
Rates of entrepreneurship are relatively consistent with the US having consistent
levels of entrepreneurs since World War II.
__
3.
Rapid technological change tends to stimulate entrepreneurship.
__
4.
An incubator tenant can be fully operational the day after moving into the rental
space.
__
5.
Small business owners refers to anyone who employs fewer than 100 employees.
__
6.
All small-business owners are entrepreneurs.
__
7.
One benefit of small-business ownership is the ability of owners to see how their
performance affects the company's profitability.
__
8.
Family businesses may be either small or large.
9.
Self-sacrifice enables entrepreneurs to be optimistic in representing their firm to
2
__
employees and customers alike.
__
10.
The need to achieve is consistently strong in successful entrepreneurs.
__
11.
Entrepreneurs use the strategic action competency in their daily actions.
__
12.
Individuals are born with the key attributes to be successful entrepreneurs, such as
willingness to take risks and need for high achievement..
__
13.
The teamwork competency is seldom used by entrepreneurs because they do
nearly all the work themselves.
__
14.
Ralph Douglas is an interior decorator who has two young sons. He operates his
business from home to maintain an active role as a father. This is an example of a lifestyle venture.
__
15.
Once a franchise has been purchased the business owner has total discretion on
how to run the enterprise.
__
16.
Venture capitalists do not invest money in new entrepreneurial firms due to the
high failure rate and extreme risk.
__
17.
An angel is a private individual who invests directly in firms and receives an
equity stake in return.
18.
An entrepreneur is someone in an organization who turns ideas into profitable realities.
19.
Most corporations today try to eliminate employees who exhibit entrepreneurial
characteristics because entrepreneurs tend to be too independent.
20.
Islands of intrapreneurial activity have been called skunkworks.
3
4
MULTIPLE CHOICE
Directions: Select the best answer in the space provided.
1
is the label usually given to someone who creates new business activity
in the economy
a. Developer
b. Intrapreneur
с Entrepreneur
d. Industrialist
are often located in recycled buildings and serve businesses by providing
administrative services and management advice.
a. Incubator organizations
b. Start-up organizations
с New business consultants
d. Small Business Administration offices
Second-Chance Body Armor manufactures bullet-proof vests and other body
armor used by police officers and the military. It was established in 1973 and still
only employs 70 people. This is a(n) _______ .
a. incubator organization
b. small business
с corporation
d. nonprofit organization
2
Which of the following is not a key personal attribute of entrepreneurs?
a. desire for dependence
b. high need for achievement
с self-confidence
d. a and с
5.
Using one business to start or acquire others and then repeating the process is
termed the _______ principle.
a. repetition
b. corridor
с skunkworks d. incubator
6.
Entrepreneurs who deliver products and services that were perceived as the
highest quality to expand market segments and cultivate pace-setting new products
and services that are first to market are implementing the ________ competency.
a. self-management
b. strategic action
с planning and administration d. teamwork
7.
Which of the following is not a managerial competency associated with successful
entrepreneurs?
a. teamwork competency
b. strategic
action
competency
с communication
competency
d. innovation competency
8.
Entrepreneurs must answer which of the following
plans?
a. Should I start or buy a business?
b. What and where is the market for my product or service?
с How will growth be managed?
d. All of the above.
9.
Independence, autonomy, and control are the overriding goals of ____________
ventures.
a. life-style
b. smaller, profitable
c. high-growth
d. bureaucratic
10.
questions
in
their
business
A middle ground between starting a business and buying an existing business is to
run a _______ .
a.
b.
с
d.
11.
partnership
franchise
conglomerate
pyramid organization
Which of the following statements regarding franchisees is true?
a. The franchisee pays a franchise fee and a percentage of the sales.
b. The franchisee often receives financial help, training, guaranteed supplies, and
technical assistance.
с The franchisee must conform to standards set by the franchiser. d. All of the
above.
12.
13.
All of the statements below about business plans are true, except:
a. It should include a month-by-month projection of the cost of goods or services
sold.
b. A business plan should identify the target market.
с The best business plans are long.
d. It provides personal data sheets on the owners or local entrepreneurs.
A(n)
is a private individual who invests directly in a firm and receives an
equity stake in return.
a. venture capitalist
b. angel
с philanthropist
d. financial intrapreneur
14.
A(n) is like a banker in that they are a formal business, but are freer to take
greater risks in making investments.
a. financial intrapreneur
b. venture capitalist
с angel
d. philanthropist
15.
_______ issues in family businesses include preparing for ownership transfer and
selecting and developing a successor.
a. Estate
b. Operational
c. Survival
d. Future
4
16. A(n)
profitable realities.
a. entrepreneur
b. intrapreneur
с manager
d. extrapreneur
17.
describes someone in an organization who turns ideas into
The introduction of the IBM personal computer is an example of
a. employee autonomy
b. intrapreneurship
с entrepreneurship
d. matrix collaboration
18. Organizations that redirect themselves through innovation have all of the following
characteristics except:
a.
flexible organization design.
b.
autonomy of the venture team.
с
bureaucratic controls.
d.
incentives and rewards for risk taking.
19.
__
__________ are islands of intrapreneurial activity within an organization.
a. Skunkworks
b. Corridors
с Incubators
d. Turnkeys
20.
Which of the following statements is true regarding skunkworks?
a. The subculture within skunkworks is similar to those in many incubator
organizations.
b. Formal rules and procedures are ignored in favor of experimentation and
innovation.
с Typing performance to rewards can keep the skunkworks team focused on its
goals. d. All of
the above.
ESSAY QUESTIONS
1
1.
Define entrepreneur. Who becomes an entrepreneur?
2
2.
What are the key personal attributes of entrepreneurs?
3
3.
Identify and discuss the steps a family business should take to increase its potential for
success.
4
4. Define and discuss the characteristics of intrapreneurs.
CHAPTER 5
ENTREPRENEURSHI
P
MATCHING SOLUTIONS
1
.2.
3.
4.
5.
6
7.
8.
.
9.
0.
С
J
A
F
В
G
E
H
D
I
- Business Plan
- Entrepreneur
- Family Business
- Corridor Principle
- Life-style Venture
- Small Business Owner
- Franchise
- Skunkworks
- Intrapreneur
- Angel
TRUE/FALSE SOLUTIONS
Question
Answer
Page
1.
False
135
2.
False
135
Explanation
Most successful entrepreneurs begin by offering a
higher quality product or service, rather than by
introducing something completely new.
Rates of entrepreneurship ebb and flow with
environmental conditions in the U.S.
3.
True
4.
True
5.
False
136
A small-business owner is anyone who owns a major
stake in a company with fewer than 500 employees.
6.
False
136
Many entrepreneurs are small business owners for
awhile, but not all small-business owners become
entrepreneurs. That is, not all small-business owners
introduce new business activity.
7.
True
8.
True
9.
False
139
Self-confidence - enables a person to be optimistic in
representing the firm to employees and customers
alike.
Self-sacrifice - recognizing the nothing comes for
free, these individuals make many sacrifices for their
enterprise.
10
True
11
True
12
False
139
Entrepreneurs are made, not born. Although they
develop personal attributes over many years,
entrepreneurs develop many of their key attributes
early in life, with the family environment playing an
important role.
13
False
142
Successful entrepreneurs are extremely hard working
and task oriented, but they aren't lone wolves—one
person can do only so much alone. Many day-today problems that entrepreneurs encounter require
the application of teamwork competency for effective
resolution—both by top management and by lower
levels of management.
14
True
15
False
147
A franchise is a business operated by someone (the
franchisee) to whom a franchiser grants the right to market
a good or service. Whoever enters a franchise agreement
obtains a brand name that enjoys recognition among
potential customers. However, franchisees are their own
bosses only to a degree. They usually must conform to
standards set by the franchiser, and sometimes they must
buy the franchiser's goods and services.
16
False
148-149
Common sources of funds for entrepreneurs include: other
members of the venture team, family and friends, financial
institutions such as banks and venture capital firms, and angels.
According to a survey by Price Waterhouse, venture capitalists
invested $9.5 billion in some 2,000 companies in 1996, or more
than 25 percent over the preceding year.
17
True
18
False
19
False
20
True
153
153-154
Intrapreneur—is someone in an organization who turns ideas into
profitable realities.
CEOs of large corporations recognize that entrepreneurial
behavior within their companies can produce growth and profits.
In fact, such behavior may be necessary for long-term survival.
MULTIPLE CHOICE SOLUTIONS
Question
Ansver
Page
с
1
134
136
Explanation
Entrepreneur is the label usually given to someone who
creates new business activity in the economy. During the
past 10 years, entrepreneurs have created several million
new businesses throughout the world.
2
a
The term incubator organization applies to organizations that
support entrepreneurs. They rent space to new businesses or
to people wanting to start businesses. They often are located
in recycled buildings, such as warehouses or schools. In
addition to making space available, they serve fledgling
businesses by offering administration services and providing
management advice.
3
b
136
The U.S. government defines a small business as a company
employing fewer than 500 people.
4
a
138-139
The key personal attributes of entrepreneurs include: need for
achievement, desire for independence, self-confidence,
technical proficiency, and self-sacrificing.
5
b
139-140
The corridor principle means using one business to start or
acquire others and then repeating the process.
6
b
141
A study of 906 CEOs who were winners of awards in the
Ernst & Young LLP Entrepreneur of the Year program
revealed several leading strategic practices they had used to
sustain rapid growth for their companies. The most common
strategic practices were: delivering products and services
that were perceived as highest quality to expanding market
segments; cultivating pace-setting new products and services
that are first to market; delivering products and services that
demand average or higher pricing; and others listed in the
textbook.
7
8
d
d
The six managerial competencies are: strategic action
competency, planning and administration competency,
teamwork competency, communication competency, selfmanagement
competency,
and
global
awareness
competency.
141-143
145
A business plan is a step-by-step outline of how an
entrepreneur or business owner expects to turn ideas into
reality. Entrepreneurs must answer the following types of
questions in their business plans: What are my motivations
for owning a business? Should I start or buy a business?
What and where is the market for my product or service?
How much will it cost to own the business, and where will I
get the money? Should my company be a domestic or
global company? How will growth be managed? What is
involved in running a successful family business?
9
a
10
A lifestyle venture is designed to meet the founder's desire
for independence, autonomy, and control. Such ventures
often remain small and may even be limited to a sole
proprietor.
146
b
147
All of the statements are true. Whoever enters a franchise
agreement obtains a brand name that enjoys recognition
among potential customers. However, franchisees are their
own bosses only to a degree. They can't run their businesses
exactly as they please. They usually have to conform to
standards set by the franchiser, and sometimes they must
buy the franchiser's goods and services.
с
148
John Doerr, one of the most successful venture capitalists
of all time, says that the best business plans are short.
b
149
An angel is a private individual who invests directly in a firm
and receives an equity stake in return. Often such a person
acts as a business adviser to the founder.
11
d
12
13
14
b
15
c
16
148 -149
151
b
17
A franchise is operated by someone (the franchisee) to
whom a franchiser grants the right to market a good or
service. It is a middle ground between starting a business
and buying an existing business.
147
b
153
153
Venture capitalists are like bankers. They are organized as
formal businesses, but because they aren't subject to the
same state and federal regulations as banks, they can take
greater risks in making investments.
Survival issues for family businesses include: ensuring
equitable estate treatment, preparing for ownership transfer,
minimizing estate taxes, ensuring the financial security of the
senior generation, and selecting and developing a successor.
Operational issues arise almost daily. Left unattended, they
may become survival issues.
Gifford Penchot III coined the term intrapreneur to describe
someone in an organization who turns ideas into profitable
realities.
Jacques Robinson and Howard R. Stevenson, Jr., who also
teamed up to rejuvenate General Electric's video products
division, are intrapreneurs. The introduction of the IBM
personal computer represents another intrapreneurial activity.
18
с
154
Organizations that redirect themselves through innovation have
the following characteristics: commitment from senior
management, flexible organization design, autonomy of the
venture team, competent and talented people who exhibit
entrepreneurial behaviors and attitudes, incentives and rewards
for risk taking, and an appropriately designed control system.
Nothing is more stifling to an intrapreneurial activity than
bureaucratic controls.
19
a
154
Skunkworks are islands of intrapreneurial activity, which often
violate formal review and reporting policies. Top management
must create subcultures wherein these violations are tolerated, if
not rewarded.
20
d
154
All of the statements are true. However, a large organization isn't
likely to support a particular skunkworks operation forever.
ESSAY SOLUTIONS
[Pages 134-135]
1. Entrepreneur is the label usually given to someone who creates new business activity in
the economy. During the past 10 years, entrepreneurs have created several million new
businesses throughout the world. According to a 1997 Inc. magazine article, most of the
CEOs are between the ages of 30 and 50. Only 3 percent are younger than 30. These
highly successful entrepreneurs are well educated, with 80 percent having a college
degree and one-third having some type of graduate degree. On average they say they
sleep 6 hours per night and take 2 weeks vacation per year. Finally, although most Inc.
500 entrepreneurs were men, 10 percent were women.
[Pages 138-140]
2. The many studies of entrepreneurs that have been conducted over the years indicate that
those who succeed have several characteristics in common.
a.
Need for Achievement. This is a person's desire either for excellence or to succeed
in competitive situations. High achievers take responsibility for attaining their
goals, set moderately difficult goals, and want immediate feedback on how well
they have performed. This need is consistently strong in successful entrepreneurs.
Entrepreneurs strive to achieve goals and measure success in terms of what those
efforts have accomplished. They learn to set challenging but achievable goals for
themselves and for their businesses and, when they achieve them, to set new goals.
b.
Desire for Independence. Entrepreneurs often seek independence from others. As a
result, they generally aren't motivated to perform well in large, bureaucratic
organizations. They have internal drive, are confident of their own abilities, and
possess a great deal of self-respect.
с
Self-Confidence. A successful track record of accomplishment does much to
improve an entrepreneur's self-confidence and self-esteem. It enables the person to be
optimistic in representing the firm to employees and customers alike.
d.
Self-Sacrificing. Successful entrepreneurs must be self-sacrificing. They recognize
that nothing worth having is free.
e.
Technical Proficiency. Entrepreneurs often demonstrate strong technical skills,
typically bringing some related experience to their ventures.
[Pages 150-152]
3. Family-owned businesses are an integral part of the U.S. economy, responsible for nearly
half of the nation's gross domestic product (GDP). To increase their probability of
success a family should take the following steps:
a.
Decide who is responsible for what. Jobs in companies just starting up should not
be too narrowly defined. Families should recognize each other's areas of expertise
to determine who is best able to make each decision.
b.
Draw up a legal agreement specifying how to dispose of or reallocate, the equity.
Investors and other outsiders have an interest in family member accord on how to
handle management transitions in the business when the current head of the
business steps down or dies.
с Agree on whether and when to sell the business. It is much easier to decide this in
advance, before the issue becomes a reality, due to retirement or changing desires
by family members.
d.
Decide whether the business will employ other family members and, if so, what hiring
criteria will be used. It may be difficult to hire every family member and extended
family member. Without specific criteria for hiring determined in advance, a family
member who is not hired may have negative feelings and ill-will toward the business.
e.
Settle fights as they develop. If a co-worker/family member does something on the
job that makes another angry, correcting the problem requires that it be brought into
the open.
f.
Establish a board of advisers. Sometimes outsiders are needed to mediate a conflict
or at least to provide a fresh perspective.
[Pages 153]
4. An intrapreneur is someone in an organization who turns ideas into profitable realities. An
individual must possess certain attributes to be a successful intrapreneur within an
organization. These attributes include:
a.
Dream. The person who is going to establish a new intrapreneurial venture must
have a dream. To establish the new venture, the individual will have to sell that
dream to others.
b.
Ability to Build a Team. By challenging the beliefs and assumptions of the
organization, the intrapreneur has an opportunity to create something new. This
person must encourage teamwork and must be a diplomat, skilled in crossing
departmental lines, structures, and reporting systems.
PART / THE LEGAL
FORMS OF BUSINESS
In the private sector a firm can trade as a sole proprietor, partnership, private company, public
company or cooperative society.
The sole proprietor is the oldest form of business organisation. Even today, from the point of view of
numbers, small firms predominate, but in their total productive capacity they are far less important than
companies. Such one-person firms can range from the window-cleaner working on his own account to
the fanner, shopkeeper and builder who employ other workers and may even own separate units.
Nevertheless these businesses all share the characteristic of being owned and controlled by a single
person. This person decides the policy of the firm, and alone takes the profits or bears losses. This
makes for energy, efficiency and careful attention to detail.
However, the sole proprietor suffers from four main disadvantages. First, such firm can only develop
slowly, because sources of capital are limited. The success of the venture, especially in its early stages,
depends mainly on the person in charge.
Second, in the event of failure, not only the assets of the business, but also the private assets and
property of the proprietor can be claimed by creditors. In short, there is no limited liability.
Third, where profits are high, income tax paid on annual profits may be larger than a company's
corporation tax.
Fourth, there is lack of continuity; on the retirement or death of the owner, a one-man firm may cease
to function.
Because of these disadvantages, sole proprietors are mainly confined to businesses which are just
setting up and also to certain industries, such as agriculture and retailing, where requirements of management make the small technical unit desirable.
The partnership
More capital is available when persons join together in a 'partnership', though normally not more than
twenty may do so. Each partner provides a part of the capital and shares the profits on an agreed basis.
Yet the amount of capital which can be raised in this way is still inadequate for large-scale business.
Thus partnerships remain relatively small, predominating in retailing, insurance broking and underwriting,
and among professional people (doctors, consulting engineers and lawyers), where the capital provided is
not so much in the form of money as in experience and skill, each partner probably specialising in a
particular branch.
Nor is the partnership without its snags. The risk inherent is unlimited liability is increased because
all partners are liable for the firm's debts, irrespective of the amount of capital which each has invested.
Second, since any action taken by one partner is legally binding for the others, not only must each
partner have complete confidence in his fellows, but also the risk inherent in unlimited liability increases
with the number of partners. Finally, at any time one partner may give notice to end the partnership, and it
is automatically dissolved upon the death or bankruptcy of a partner. To preserve the business, surviving
partners may be put to great expense and trouble in buying the partner's share or finding a purchaser
acceptable to everyone.
власність
1) відповідальність; 2) зобов 'язання
обмежена
/необмежена
limited / unlimited liability
відповідальність
to be liable for the
firm's нести відповідальність за борги
фірми
debts
річний прибуток
annualprofit
податок
tax
податок на прибуток корпорації
corporation tax
подохідний податок
income tax
заощадження
savings
брати гроші у борг
to borrow money
акції
shares
роздрібна торгівля
retailing
залучувати капітал
to raise capital
страхове брокерство; залучувати
insurance broking
капітал
андеррайтинг
underwriting
бути обов 'язковим до виконання
to be legally binding
витрати
expenses
розпускати партнерство
to dissolve partnership
property
liability
sole proprietor
приватний підприємець
partnership
партнерство
private company
public company
акціонерна компанія закритого типу
акціонерна компанія откритого типу
productive capacity
profit
to take profit
to plough back profit
income
account
to work on one's own account
losses
to bear losses
assets
виробничі потужності
прибуток
отримувати прибуток
реінвестувати прибуток
дохід
рахунок
працювати за власний рахунок
збитки
нести збитки
активи
І. Match the words from the text with their corresponding definitions on the right (a-l):
1) sole proprietor a) the property of a person, company, esp. that has value and that may be sold to
pay a debt
2)private company b)someone who owns and runs a business on his or her own rather than with
another partner c)the process of accepting risks in insurance
3) profit
c) the process of accepting risks in insurance
4)assets
d) a company whose shares are freely sold and traded
5)corporation tax e) money that you gain from selling something or doing business after taking
away costs
6) income
f) a tax on the profits of incorporated bodies. The tax is based on the profits of an
accounting period
7)account
g) a tax on income. Sole proprietors
and part nerships are subject to this tax.
8)partnership
h) a company whose shares are not openly traded and can only pass to another person
with agreement of other shareholders
9) public company i) any document or device whereby a record is kept of flows of value.
10) venture
j) a new business activity or project that involves risk.
11) income tax
k) money that you earn from your job or receive from investments
12) underwriting
l) the relationship which exists between two or more persons carrying on a business in
common with a view to profit.
II. Complete the following sentences:
In the private sector one can find different forms of business
The examples of one-person firms are ...
The owner of the sole proprietorship decides ...
The sole proprietor has the following snags ...
5 6 One-man firms develop slowly because
tires If the person in charge of the sole proprietorship dies or re7 8
9
If one-person firm goes bankrupt...
Sole proprietors can be found in such industries as ....
When persons join together in a ' partnership' ...
The amount of money provided by each partner is inadequate for...
In partnership the risk of unlimited liability increases because ...
At any time one partner ....
The partnership is automatically dissolved upon ...
III. Match the words on the left with their synonyms on the right.
to stop
disadvantage
to reinvest
to demand
earnings
shares
to cease
to dissolve
bankruptcy
to be liable for
purchaser
binding
to restrict
failure
snag
to wind up
to claim
stocks
to confine
to plough back
income
to be responsible for
buyer
mandatory
IV. Supply the correct word from the box for each space in the sentences given below:
Capacity; to plough back; to be liable for; to provide; creditors; losses; to be inherent; to claim; binding;
profit; to employ; income; to own; assets; retailing;
1. They will have to produce and sell more than 300 000 cars a year to make a
2. He_____ people he likes personally.
3. This document shows what the business ______ and what it owes
to its creditors or its owners.
4. Our production _____ has gone up again with throughput of 800
tabloid pages per week
5. These accounts should information us with all the necessary we
need.
6. They _____ profit to buy new equipment
7. Old people are entitled to_____ a special heating allowance from
the government.
8. He declared, he wasn't ______ his wife's debts.
9. The company has a tremendous — 50 hectars of real estate.
10. I'm afraid the problems you mention are _______ in the system.
11. The company said its largest had gone bankrupt.
12. The contract is _____ on everyone who signed it.
13. His experience in includes managing a number of shopping centers in India.
14. The family pays more than 70% of its _______for rent.
15. Last year British banks were hit by heavy _______ on bad debts.
on the model.
V. Make up sentences of your own with the words and expressions given below. Summarize the answers:
private sector
sole proprietor
partnership
productive capacity
to work on one's
account
to bear losses
to incur costs
to take the profits
to borrow money
income
profit (annual profit)
owner's savings
to plough back profits
assets of the business
lack of continuity
to cease
to raise the capital
to preserve business
retailing
insurance broking
underwriting
surveyor
unlimited liability
to enjoy limited liability
to be legally binding
to dissolve partnership
to be liable for the
firm's debts
VI. Make up questions to which the following statements will be the answers:
Q ...................................
A. A firm will produce those goods which enable it to make the greatest return on capital. In practice it
means that it has to choose a line of production within the limited range of it specialist
knowledge
Q ...................................
A. When deciding what to produce, the owners of the firm have to
consider the current prices of the similar products manufactured
by competitors.
Q ...................................
A. The firm would also have to estimate its own costs for producing similar goods, the number it could
expect to sell at this price and its likely profits. Thus it can calculate the return on capital
employed.
Q....................................
A. If the proposed market is new or different from existing products
the firm must fall back on some form of market research.
Q ...................................
A. First of all it examines the broad determinants of the potential demand by using published materials
and government statistics. More specialist facts could be obtained from relevant periodicals and trade
journals.
Q.............................. :....
A. It also covers many aspects of market behaviour, particularly consumer reaction to the product —
especially with regard to its quality, packing, delivery dates and after-sales services.
VII. Answer the questions. Begin your answers with:
Well, let me see ... I am not really sure ... As far as I can remember ...
I remember quite clearly that ... I am not sure I can remember all the details but ... Well, I'd just like
to say that ... My attitude from the beginning was ... I would like to say that ... I think/believe that...
1. In what fields of business do one-person firms dominate?
2. What are the characteristic features of the sole proprietor?
3. What dilemma faces small-sized firms as they continue to grow?
4. Describe the disadvantages of the sole proprietorship.
5. How many persons can join together in a 'partnership'?
6. Is the amount of capital, raised by the partnership, adequate for large-scale business?
7. What spheres do partnerships dominate in?
8. What do you understand by insurance underwriting?
9. What are surveyors responsible for?
10. What type of contributions do partners usually make?
11. What are the disadvantages of the partnership?
Yes, I am in total agreement with
you ...
You are absolutely right. I think ...
I agree with you up to a point, but
I don't forget...
That's right. In fact...
I'm sorry I have to disagree ...
That's out of the question, I
am afraid ...
1. Sole proprietorship is the most important form of business in the
private sector.
2. The attraction for the sole proprietor is that he has maximum
control over the business, making decisions without reference to
others.
3. The main disadvantage of the sole proprietor is limited liability.
4. The development of the sole proprietorship may be slow because of high taxes.
5. Sole proprietors predominate in such industries as agriculture and retailing.
6. In partnership profits and losses are shared on the agreed basis.
7. Surveyors are the employees of the bank.
8. In partnership the risk of unlimited liability increases because the amount of capital increases
as well.
9. If one partner dies or goes bankrupt the partnership is automatically dissolved.
10. To preserve the business, the surviving partners may be put to great expense.
DC. Translate into English:
1. Суть одноосібного господарства полягає в тому, що все майно фірми належить одному
власникові. Він самостійно одержує прибуток та несе збитки.
2. Перевагами одноосібного господарства є незначні витрати на організацію виробництва.
3. Недоліком одноосібного власника є те, що він має необмежену відповідальність.
4. Необмежена (повна) відповідальність означає, що у разі банкрутства одноосібний власник
може втратити не тільки активи фірми, а й власне майно, яке піде на сплату боргів кредиторам.
5. Одноосібний власник має труднощі з залученням капіталу. Власного капіталу здебільшого не
вистачає для розвитку своєї справи.
6. Недоліком одноосібного господарства є той факт, що у разі банкрутства або смерті
одноосібного власника діяльність такої організаційної форми припиняється.
7. Партнерство — це форма організації підприємства, за якої дві або більше осіб об'єднують
свої капітали та спільно управляють бізнесом.
8. Часто партнери інвестують не тільки гроші, а також знання та навички.
9. Позитивною стороною партнерства є більша можливість розширення бізнесу (внаслідок
об'єднання капіталів).
10. Необмежена відповідальність партнерства може загрожувати всім партнерам так само, як і
одноосібному власнику. Крах одного з партнерів може спричинити банкрутство товариства в
цілому.
11. В разі виходу одного з партнерів з товариства інші учасники зобов'язані викупити його
частку.
12. Несумісність інтересів партнерів може провокувати малоефективну діяльність
підприємства.
13. Партнерства найбільш поширені у сфері дрібного бізнесу при наданні послуг, зокрема у
медицині та юриспруденції.
X Act as an interpreter:
Dialogue A
А.: Я знаю, що після закінчення університету Ви плануєте розпочати свою особисту справу. Ви не
будете залежати від когось іншого, Ви самі будете приймати рішення та отримувати
прибутки. Ви вже вирішили, чим зайнятися?
В.: Of course I have. Picture a small-scale production of toys, mainly hand-made and using the
minimum amount of equipment, perhaps manufactured in a simple workshop. The toys would
probably only be sold locally through market stalls or small shops. There would be little or no
advertising and other selling and distribution expenses would be slight.
А.: Я бачу, що Ви вже обдумали це питання. Якщо іграшки будуть чудовими, а Ваш бізнес
прибутковим, Вам, мабуть, знадобляться додаткові джерела фінансування?
В.: You are absolutely right. If my toys are particularly good and there is high demand for them I will
need extra finance to buy additional stocks of raw materials and components or additional labour
to help with finishing and packaging. May be I will need additional capital to buy extra
equipment or extend the
workshop.
А.: Ви маєте на увазі банківські кредити? Адже одноосібні власники можуть розраховувати тільки
на короткострокові позики. Більш того, ціна надання позики досить висока.
В.: І fully agree with you. In addition to the problem of finding extra finance I can foresee other
difficulties such as, for example, the need to provide for additional managerial skills to cope with
the increased workloads as the business expands.
А.: Я повністю згоден з Вами. Відсутність спеціалізованого менеджменту, ясна річ, негативно
позначиться на ефективності управлінської діяльності.
В.: One way of solving these problems is to form a partnership. In these case a common arrangement
would be for the partner or partners to contribute money and managerial skills to the business,
drawing a salary and participating in the profits according to their share of the capital. I can
recommend a very reliable person.
Dialogue В
A.: Any business whether it is sole proprietorship or partnership is always open to numerous risks: of
increased unlimited liability, loss of profit, failure to meet customers demand, to say nothing of fire,
accidents, burglary, storm damage, etc. What can a businessman do about them?
В.: Найбільш легким варіантом відповіді може бути той, що підприємець повинен шукати справу без
ризику, вести бізнес із заздалегідь визначеним результатом. За такого підходу взагалі дуже важко
розпочати власну справу. Тому правильною відповіддю може бути тільки та, що підприємець
повинен не уникати ризику, а передбачати його, намагаючись уникнути.
A.: There are different types of risks. Some risks, such as fire or burglary are calculable. A
mathematician can work out, for instance, the chances of a building's catching fire during the year.
While he cannot say which building will be destroyed, he knows that on average, say, one out of
every 10,000 will be. Such risks, therefore, can be insured against.
В.: Я з Вами повністю згоден. Але існують ризики, які не можна передбачити. Ніхто, наприклад, не
зможе сказати заздалегідь, скільки іграшок куплять споживачі протягом року. Вам здається, що
все було розраховано добре: чудовий дизайн, помірні ціни, цікава реклама. Але існує ризик, що в
той самий час конкуренти вийдуть на ринок з кращою пропозицією.
А.: І take your point. Such risks cannot be insured against. They must be accepted by those people
whose money is tied up in producing goods for uncertain demand. These uninsurable risks are
inherent in a dynamic economy. Modern methods of production take time. When an entrepreneur
engages resources, therefore, it is the act of faith — faith in his estimate of the demand for the
product. But demand can never be completely certain. People have freedom of choice and their
taste can change. Techniques do not stand still; new methods discovered by a rival may mean that,
by the time a firm's product comes on the market, it is unsold by a cheaper or better substitute.
В.: Так, це абсолютно вірно. Підприємницька діяльність пов'язана з ризиком. Можливі втрати в
підприємницької діяльності необхідно враховувати перед тим, як розпочинати нову справу.
Найважливішими антиризиковими заходами є: страхування ризику, вивчення ринку, вивчення
конкурентів, вивчення клієнтів, удосконалення цінової політики тощо.
А.: Успіх у підприємництві базується на здатності підприємця приймати правильні рішення.
Підприємець є визначальною особистістю у підприємництві, ключовою (центральною)
фігурою у ринковій економіці. Будь-який підприємець працює як ділова людина, але не будьяку ділову людину можна назвати підприємцем. Хто ж такий підприємець? Чим він
відрізняється від інших суб'єктів господарської діяльності?
В.: Підприємцем прийнято вважати ділову людину, котра вигадує щось нове або поліпшує щось
вже існуюче і реалізує це у практичній діяльності. Зміст самостійного прийняття
інноваційного рішення підприємцем зводиться до організації виробництва і постачання на
ринок товарів та послуг з певним зиском для себе. Таким чином, підприємець — це людина,
яка здійснює самостійну, систематичну, ініціативну, ризикову діяльність, спрямовану на
виробництво товарів та надання послуг з метою одержання прибутку і передбачає здійснення
нововведень. Отже, підприємець — це суб'єкт, що поєднує у собі комерційні, організаторські
та новаторські здібності для пошуку і розвитку нових видів виробництва, нових благ та їх
нових якостей, нових сфер застосування капіталу.
А.: Які вимоги до особистості підприємця висуває підприємницька діяльність?
В.: Характер підприємницької діяльності висуває певні вимоги до особистості підприємця.
Підприємець повинен мати не лише бажання або нахил до підприємництва, а й певні ділові
якості й риси характеру. За даними п'ятирічного проекту виявлення «моделі підприємця»,
організованого американською фірмою «Мак-Бер енд Компані», виділено 21 найважливішу
рису «оптимального типу підприємця. Найбільш важливі серед них:
— організаційно-господарське новаторство;
— готовність та здатність до ризику;
— пошук нових можливостей та ініціативність;
— орієнтація на ефективність та якість продукції і обслуго вуання;
— майнова відповідальність та цілеспрямованість;
— висока інформованість та постійне спостереження;
— здатність до «жертв» в інтересах справи;
— чіткість, планомірність у роботі;
— здатність переконувати людей;
— комунікабельність;
— чесність, надійність тощо.
Отже, деякі найважливіші характерні риси підприємця є результатом навчання та досвіду, а
інші — продуктом розвитку природних даних людини. Тому підприємцем має бути людина не
лише з яскраво вираженими рисами лідера, зі здатністю впливати на інших людей, а й
професійно підготовлена.
Complete the open dialogue:
A.: I need some information about types of economic systems, I have to write a course-paper.
В.: I can help you. You see last month I studied this topic at the
University ............. is an accepted way of organizing production,
using productive resources and governing business transactions in a society. There are four basic types
of economic systems.
A.: Well, actually, I know that they are .............
В.: You are right. In a ............ economy the government makes all
decisions about ..............In ........... economy the government
plays no role in allocating .............. In a ............. economy both
the ........... and the private sector (businesses and consumers)
play important roles in answering the .............. questions for
society as a whole.
A.: But what about a traditional ........... ?
В.: It is usually found in .............. Such systems may characterize
............. Until fairly recent times the most common way of
solving economic problems was that of .............
XI. Compose your own dialogues.
XII. Read the following text and give a short summary of it:
Early economists considered that only work in the extractive industries (agriculture, mining and
fishing) was productive. In his Wealth of Nations in 1776 Adam Smith added manufacturing, but he was
specific in excluding workers who merely rendered services.
This was illogical. People work, and production takes place, in order to satisfy wants. Consequently
people who render services must be regarded as being productive. The soldier, actor and footballer are all
satisfying wants. Similarly, in a factory, the clerk who calculates the wages is just as productive as the
man who makes the nuts and bolts. All are helping to produce the final product, a goods satisfying wants.
Wants can take different forms. Most people like a newspaper to read at the breakfast-table; thus the
boy who takes it from the shop to the customer's letterbox is productive. Most people, too, prefer to buy
their potatoes weekly; thus the fanner or merchant who stores them through the winter is satisfying the
wants of consumers, and is similarly productive. Utility is created by changing not only the form of our
scarce resources, but also their place and time.
For certain purposes it may still be useful to classify industries broadly. Primary industries cover the
first steps in the productive process — agriculture, fishing, mining and oil-prospecting. Secondary
industries use the raw materials of the extractive industries to manufacture their own products — flour,
clothing, tinned salmon, steel girders, petrol and so on. Tertiary industries are concerned with the
provision of services — transport, communications, distribution, commerce, government, and
professional and other services.
PARTII THE JOINT-STOCK COMPANY
The joint-stock company dates from Tudor times, when England's foreign trade began to expand.
Instead of a trading ship's being owned by one person, it was financed by a number of people who bought
«shares» in a company formed for the purpose. However, since they enjoyed no limited liability, people
were reluctant to join such companies: by purchasing only one share a person risked not only the money
he had invested, but all his private assets, should the company be forced into liquidation. This made it
impossible to adopt the technique of spreading risks by investing in a number of companies.
The industrial revolution, with the introduction of machines and factory organisation made it essential
that more capital should be available to industry. So, in order to induce small savers to invest, parliament
granted limited liability in 1855.
Today the joint-stock company is the most important form of business organ isation. The
advantages it enjoys over the partnership are limited liability, continuity, the availability of capital
(since investors can spread their risks and sell their shares easily) and, should the need arise, ease of
expansion. Indeed, some kinds of businesses, e.g. aircraft production, could not be operated on a small
scale. Here firms have to start as joint-stock companies, being either sponsored by important interests
or developed as subsidiaries of existing large firms.
Against these advantages, however, the small joint-stock company in particular has to consider certain
snags. Additional cost is incurred in submitting audited annual accounts to the Registrar of Companies.
Furthermore, any assets of the company which have been built up over the years will increase the value
of the original shares (usually owned by a family), so that when the time comes to wind up the company,
e.g. because of retirement, this increase may be subject to capital gains tax. Finally, if the company is
expanded by the issue of more shares, the original owners may lose control or even be subject to a
takeover bid.
Joint-stock companies are of two main kinds, private and public.
The private company
A private company is simply a company that is not a public company. While con-ferring the advantage
of limited liability, it allows a business to be privately owned and managed. The formalities involved in its
formation are few, but the Companies Act 1948 imposes conditions restricting its size and the sale of
shares to the public.
Thus the private company is particularly suitable for either a medium-sized commercial or industrial
organisation not requiring finance from the public, or for a speculative venture where a small group of
people wish to try out an idea and are prepared to back it financially to a definite limit before floating a
public company. While private companies are far more numerous than public companies, their average
capital is much smaller.
The public company
To obtain a large amount of capital it is necessary to form a public company. This must have at least
two shareholders, a minimum authorised capital of £50,000 and carry the designation 'public limited
company' — abbreviated to PLC — after its name. But it is the second step which is really important —
getting shares quoted on the stock exchange. This involves an exhaustive examination and full advertisement of the company affairs. Sufficient shares have to be available to outsiders to make dealing
and the price.
a company whose capital is subscribed by
Joint-stock
applicants for shares;
company
a company that is at least half-owned by
subsidiary
another company;
to ask or agree to buy shares in a company
to subscribe
that has offered shares to investors;
the amount of money that you have to pay in
cost
order to buy, do or produce something;
the complete set of records showing money
accounts
coming into and going out of a business its
profits and its financial situation;
audited accounts accounts that have been checked and approved
by auditors ( outside specialist that checks that
organization's accounts are true and honest.
capital gains tax a tax that is imposed on money received from
selling an asset such as property;
takeover takeover the act of getting control of a company by
buying over 50% of its shares;
attempt to get control of a company by
bid to speculate an
buying 50% of its shares;
to buy goods, shares, property in the hope that
their value will increase so that you can sell
them at a higher price and make a profit;
speculative
bought or sold in the hope of making a profit;
to float
to sell new shares, bonds etc on a financial
market;
to float a company on to sell the shares of the company on a
the stock market
stockmarket for the first time;
authorised capital
the largest amount of capital that is allowed to
have in the form of shares;
shareholder
shareholder
someone who owns shares in a company;
S sock exchange a market where company shares are traded;
II. Read the text given below and find the equivalents of the Ukrainian words and expressions in
the box:
Кооперативні товариства; жертвувати гроші; нагромаджувати початковий капітал; орендувати
магазин; запаси борошна; розподіляти прибутки; придбання; оборот; роздрібні товариства;
оптова торгівля; право голосу ;погашати готівкою; конкурувати; споживачі; виробники; житловобудівельне товариство;
Co-operative societies
Although there were many co-operative societies in operation before the Rochdale Pioneers of 1844, it was
these twenty-eight workers who started the modern co-operative movement. By subscribing a few pence per
week they accumulated an initial capital of £28, with which they rented a store and started trading with small
stocks of flour, oatmeal, sugar, butter and candles. Profits were distributed to members in proportion to their
purchases. In 1991 there were 65 retail cooperative societies in the UK, with an aggregate membership of over
8 million. Turnover was £7.3 bn, making these societies Britain's biggest retailer. In addition, these retail
societies largely provide the capital and control the operations of the Co-operative Wholesale Society.
The minimum shareholding in a retail co-operative society is usually £1. Only if a full share is held does a
member enjoy voting rights, but each member has only one vote irrespective of the number of shares held.
Some societies distribute profits as a dividend in proportion to the value of the member's purchases over the
period as recorded at check-out through a numbered plastic card. Others use 'The National Dividend Stamp
scheme run by the Co-operative Wholesale Society. Stamps are given to customers in proportion to their
purchasers, and a book of stamps can be redeemed for cash, goods or a deposit in a share account. Both systems
have allowed co-operative shops to compete with supermarkets.
Co-operative societies described above are organised directly by consumers and are therefore called
consumer co-operative societies. Producers have also formed producer co-operative societies e.g. the Meriden
motorcycle workers co-operative, which was established with government aid when its firm was threatened
with closure. A highly successful retail co-operative is the John Lewis Partnership; and building societies can
be regarded as co-operative ventures.
These co-operatives are chiefly important in agriculture, particularly where production is carried on by
small farmers, as in Denmark, New Zealand and Spain. Their main function is to market their produce and to
purchase inputs. They are likely to become more important in the UK as the government winds up the Marketing Boards.
///. Match the words on the left with their definitions on the right. Memorize the definitions. Use the
words in the sentences or situations of your own.
1) operative society
a) To exchange shares, bonds, stamps for cash
2) turnover
b) a type of stamp given by a shop to a customer each time the customer spends
certain amount of money, for sticking in a book and which later can be
exchanged for goods or money
3) building society
c) the right of someone who has shares in a company to attend and vote at the
company's general meeting
4)retail (consum
d) to sell something or make it available for sale, especially in a particular way
ers ') cooperative
5) to redeem
e) a cooperative that buys goods from a wholesale cooperative and sells them in
a shop. Any profit made that it makes is divided between the members.
6)
trading stamp
f) an organization providing financial services to customers, especially lending
money in the form of mortgages to buy a house or flat and paying interest to
savers
7) to accumulate
g) the amount of the business done in a particular period of time.
8) voting right
h) a cooperative owned by a number of consumer cooperatives that buys or
produces large quantities of goods and supplies them to its members and to other
cooperatives.
9) wholesale cooperative i) an organization run by a group of people whose aim is to give benefits to its
members rather than to make a profit.
10) Market
11) Shareholding
j) A quantity of shares in a company held by a particular person
k) To get, to earn or obtain something gradually over a period of time
IV. Complete the sentences by filling in the following table. Connect the figures (1-8) with the letters (a-h)
1) Limited liability means ...
a) Shares are bought and sold freely, for example, on the stock exchange.
2) If a corporation
b) that the owners are responsible for their company's debts up to a certain amount
if it goes out of business and do not sell their personal assets to repay their debts.
3) In a public limited company ...
4) In a private limited company ...
you can not sue the shareholders, you will sue the company.
The change in status from private to involves greater disclosure of information about the company's
activities, as well as scrutiny and comment in the financial press.
public company...
all shareholders must agree before any shares can be bought or sold
In Tudor times people ...
The expansion of the company by the
to attract small investors' savings.
issue of more shares ...
In 1855 British Parliament granted
were reluctant to buy «shares» because they risked not only the
limited liability
money they had invested but all private assets.
h) may give rise to the situation when the original owners lose control
of their business.
V. Make up questions to which the following statements will be the answers:
Q .......................................
A. Public company is a fairly complex organization, possibly with separate divisions or subsidiary companies,
some of which may be established overseas for selling and manufacturing.
A. The ownership is likely to be scattered among a large number of shareholders. In some large corporations
shareholders are actually more numerous than the employees.
Q ........................................
A. Although the original founders of the company may still be important, they will no longer dominate the
business. Control of the company will be entrusted to a number of career director/managers, who will
probably be specialists in various aspects of the company's operations such as finance and marketing.
They will not necessarily have shares in the company. Thus the owners of the firm — the hundreds or
thousands of shareholders - are no longer the managers.
Q. A.
Ordinary shareholders are entitled to elect directors answerable to them to run the company on their
behalf. These directors may be removed from office if the shareholders have reasonable grounds for
believing that the conduct of company affairs has been negligent.
Q .......................................
A. Shareholders have no career in the business and do not see it as a way of life. They are only interested in the
dividends on their shares, in other words, they are interested in maximizing the profit of the company.
Q .......................................
A. At the Annual General Meeting (AGM) shareholders can, in theory, question their directors, express their
views and give effect to the latter by vote. However, in practice the AGM is not a particularly effective
instrument for shareholder control. Shareholders may have insufficient information to ask challenging
questions. Because voting power is likely to be dispersed among a large number of shareholders, it will be
difficult to get a consensus in order to express a majority vote of 'no confidence' or remove directors from
office.
Q .......................................
A. Some observers take the view that in many large companies the Board of Directors, once elected, tends to be
self-perpetuating, unless the company runs into serious difficulties.
Q .......................................
A. Any company will prosper if interests of shareholders and managers coincide.
VI. Agree or disagree with the statements. Give your reason. The following phrases may be helpful:
I entirely agree ...
I couldn't agree more with the
To some extent I agree, but the
idea ...
fact is ...
Another point is ...
I'm a bit doubtful about...
What is more ...
Let's discuss it in more detail...
Well, I'm not sure I entirely
agree ...
I'm sorry, I have to disagree ...
That's not right I'm afraid ...
I'm sorry, I can't give you the
exact answer ...
England's foreign trade originated in Tudor times.
Today the joint-stock company is the most important form of business organization.
If joint-stock company is expanded, the original owners may be subject to a takeover bid.
Public companies are far more numerous than private companies.
Getting shares quoted on the Stock Exchange involves thorough examination and full advertisement of
the company's affairs.
Cooperative societies are chiefly important in manufacturing industries and agriculture.
Cooperatives are organizations owned by its members.
Building societies are examples of'cooperative ventures'.
VII. Answer the questions. Begin your answers with:
The obvious answer is ... I think it will help if I give you some background information on the
matter ... The point is that ... Well, let me see ... I'm glad you asked me that... As far as I can
remember ... Oh, let me think for a moment... I an afraid there's no easy answer to that ...I think I
ought to say right from the start that... 1 believe you know that...
When did joint-stock companies begin their activity?
1. Why were people reluctant to become members of the first joint stock companies?
2. What did the British Parliament do to induce small savers to invest into growing industries?
State the advantages of the joint-stock company.
Give the disadvantages of the joint-stock company.
What kind of businesses is it suitable for?
3. What requirements should shareholders meet to form a public company?
What is an authorised capital?
4. Explain the expression « to get shares quoted on the Stock Exchange».
How many workers started the modern co-operative movement?
How much money did they originally subscribe?
What was the essence of the first co-operative society?
How many people were there in the co-operative societies in 1991?
What is a voting right?
What system allowed co-operative shops to compete with the supermarkets?
VIII. Translate into English:
Корпорація (акціонерне товариство) є зараз домінуючою формою підприємницької діяльності. її
власниками вважаються акціонери, що мають обмежену відповідальність. Весь прибуток корпорації належить її акціонерам. Функції власності та контролю поділені між акціонерами
(власниками акцій) і менеджерами.
Переваги корпорації (акціонерного товариства) є достатньо відомими.
По-перше, корпорація є найефективнішою формою організації підприємницької діяльності з
огляду на реальну можливість залучення необхідних інвестицій. Саме через ринок цінних паперів
(фондову біржу) вона може об'єднувати різні за розмірами капітали для фінансування сучасних
напрямів науково-технічного й організаційного прогресу, нарощування виробничого потенціалу.
По-друге, потужній корпорації значно простіше постійно збільшувати обсяги виробництва або
послуг. Це дає добру можливість отримувати прибуток, що постійно зростає.
По-третє, кожний акціонер як співвласник корпорації несе лише обмежену відповідальність
(за банкрутства фірми він втрачає тільки вартість своїх акцій). Важливо й те, що окрема особа
може зменшити свій власний фінансовий ризик, якщо купуватиме акції кількох корпорацій.
Кредитори можуть пред'явити претензії лише корпорації як юридичній особі, а не окремим акціонерам як фізичним особам.
По-четверте, корпорація — це організаційно-правове утворення, яке може функціонувати
дуже тривалий період (постійно), що створює необмежені можливості для перспективного
розвитку.
IX. Render into English:
Корпоративна форма організації бізнесу має недоліки.
1. Мають місце певні розбіжності між функціями власності й контролю, що негативно впливає
на необхідну гнучкість оперативного управління корпорацією. Розподіл функцій власності та
контролю може призвести до виникнення соціальних суперечностей (конфліктів) між
менеджерами і акціонерами корпорацій
Корпорація сплачує більші податки в розрахунку на одиницю отримуваного прибутку, ніж інші
організаційні форми бізнесу. Адже оподаткуванню підлягає спочатку отриманий корпорацією
прибуток, а потім —дивіденди акціонерів, тобто фактично є проблема подвійного оподаткування.
3. У корпоративній формі бізнесу існують потенційні можливості для зловживань посадових
осіб.
X. Read and retell the following text:
The objectives of the firm.
In a market economy a firm has to cover its costs if it is to stay in business. Thus regard must be paid
to 'profitability'.
But in practice are firms always single-minded in seeking to maximise money profits? The answer is
no; there is a range of possible objectives.
Personal motives may be important, especially where the manager is also the owner of the firm. Thus
emphasis may be placed on good labour relations, the welfare of the workers, the desire for power, political influence, public esteem or simply 'a quiet life'. To cover such objectives profit would have to be
interpreted in a wider sense than 'money profit'.
With major companies there is in practice a gap between the ownership and administration. The
business is run by professional managers, and is too complex for shareholders to be able to exert
effective control. This applies even to the institutional shareholders, who avoid being directly involved
in the running of the business. Thus the motives of the full-time executive managers tend to override
the shareholders' desire for maximum return on capital invested. Managers may be anxious for the
security of their own jobs and, instead of taking the calculated risks necessary to earn maximum
profits, may tend to play for safety. More likely, they will be motivated by personal desires for status.
Provided they achieve a level of profit which keeps shareholders content, their positions and salaries
can be enhanced by expanding the firm to where it maximises sales rather than profits. Alternatively,
the rate of growth may be maximised.
Even when there is an emphasis on money profit, a firm may stress its long-term position rather than
immediate maximum profit. Security of future profits may be the dominating motive for mergers and takeovers as an alternative to developing new products and techniques. Moreover, where there is an element
of monopoly, a firm can follow its own pricing policy rather than have it determined by competitive
market conditions . In such circumstances it may not adjust prices to short-term changes in demand and
supply conditions. For one thing, there are the administrative costs of printing and distributing new
price lists. For another, frequent changes in price tend to offend retailers and customers.
Again, a firm enjoying a degree of monopoly has always to assess what effect the pursuit of maximum
profit may have on its overall position in the long term. Will a high price attract new entrants or encourage the development of a rival product? Will it lead to adverse publicity and eventually to
government intervention by a reference to the Office of Fair Trading?
Finally, a firm has often to modify its objectives in deference to government policy. Thus it may be
expected to follow government guidelines regarding wage increases, to have regard to the environment
in the disposal of its waste products and even to retain surplus workers for a time rather than add to an
already high level of unemployment.
Yet, while we must take account of these other objectives, our analysis cannot proceed far if any are
seen as the main motive force of the firm. In any case they merely supplement the profit objective, for
profits have to be made if the firm is to survive. Thus it is useful to start with the broad assumption that
firms seek to maximise profits. We can then establish principles concerning how resources should be
combined and what output should be produced.
(c) The decisions of the firm
To achieve its objective of maximising profit, a firm has to assess the demand of potential customers
for its product and produce that output which secures the greatest difference between total revenue and
total cost. Moreover, the cost of producing this given output must be the lowest possible.
This means that the firm has to answer the following questions:
This means that the firm has to answer the following questions:
1. What goods will it produce?
2. What shall be its legal form?
3. How shall it raise the necessary capital?
4. What techniques shall be adopted, and what shall be the scale of operations?
5. Where shall production be located?
6. How shall goods be distributed to the consumer?
7. How shall resources be combined ?
8. What shall be the size of output?
9. How shall it deal with its employees?
XI. Case-Study:
EAST MEETS WEST: BUSINESS JOINT VENTURES
One of the shining examples of an East-West joint venture was the case of Combustion Engineering
and the Soviet Union. A firm from the Western world working with a Soviet partner was still big news.
This example was used to show how two different approaches to business could be integrated and
blended. But this highly publicized joint venture was starting to unravel.
The internal bickering between the partners centered on payment of money (hard currency) for
services rendered, as well as on different management practices and manufacturing procedures. The
partners was bickering, complaining about each other, and accusing each other of possessing poor
business sense.
About 1,790 joint ventures were registered in the Soviet Union. At that time only about 445 actually
started operations. About 100 of the joint ventures were losing money. The reasons for the difficulties
with Western-Eastern European business deals could fill a book. However, some clues suggest that
business and the way it was conducted in New York or Tokyo are different from the way business is
transacted in Warsaw and Moscow. Western and Eastern economic systems differed for decades. Under
the Soviet system, the customer was expected to be grateful for whatever he or she got. Take it and don't
complain. In the United States, this philosophy would get a business owner a severe case of «lost
customers» and no «customer loyalty.»
Customers under a mixed American-type economic system are kings and queens. The autocratic style
of doing business will just not work in the West. Americans have numerous choices from which to select
the company with whom they will do business or from whom they will purchase products or services.
Improvement or education of Soviet managers in dealing with customers was what Combustion
Engineering should have accomplished. Even though the Soviet Union was slowly changing the way it
conduced business, this was a difficult task.
If the Soviets were going to attract more joint venture partners, they would need to change their
management philosophy and their way of treating customers. They would need to place new emphasis
on profit. Some Soviets claimed that Americans were too impatient,
wanting to earn a profit within five years. They estimated that some of the joint ventures would not earn a
profit for 10 to 15 years.
Operating a joint venture like a business requires understanding the foundations of business. The
Soviets and other Eastern Europeans were learning that conducting business was challenging, and many
planed to be successful in the near future. A Western joint venture partner could help in the learning
process.
Questions for Discussion
1. Why would a joint venture partner from a planned economy have difficulty understanding that the
consumer is king or queen?
2. Could a small business owner tolerate a business deal (joint venture) that had little probability of
being profitable within the first 10 years?
3. Why few Americans were willing to enter into joint ventures with Soviet partners in mid-1991?
Pres ent perfect (1)
A Form
The present perfect tense is formed by using the present tense of the
auxiliary have and the past participle:
I/you/we/they have taken/have not (haven't) taken.
He/she/it has taken/has not (hasn't) taken.
Have I/you/we/they taken? (Yes, I/you/we/they have./No, I/you/we/they
haven't.)
Has he/she/it taken? (Yes, he/she/it has./No, he/she/it hasn't.)
(The past participles of regular verbs end in -d or -ed, and have the same form as
the past tense. For a list of irregular verbs, see Appendix 2, page 188.)
В Present result of the past
We use the present perfect to talk about a present situation which is a result
of something that happened at an unspecified time in the past. Therefore we do not
use specific time expressions such as yesterday, last week, etc.:
I have given your report to the MD. (I gave him
your report and he has it now.) I have sent them
the samples they wanted. (I sent them. They are
in the post now.)
С Specific and non-specific
time
If we need to mention the specific time when something happened, we use
the simple past, not the present perfect:
WRONG: I
RIGHT: I
have spoken to her yesterday.
spoke to her yesterday.
Similarly, with expressions such as on Monday, in 1987, at 3.30, etc. (see Unit
4), or with questions beginning When ...? and How long ago ...?, we
use the simple past and not the present perfect.
D Just
The present perfect is often used with the word just to talk about actions
that have taken place very recently. The exact time is not mentioned:
I'm sorry, Mrs Smith is not here. She has just left.
E Been and gone
Notice the difference between has been and has gone:
I'm afraid Mr Smith is not here at the moment. He has gone to a meeting in
London.
(He is still at the meeting.)
Amanda has been to the travel agent. She has your tickets for Hong Kong.
(She went to the travel agent and has returned.)
22
Practice
Exercise 1
Form
Complete the following sentences by putting the irregular verbs into the present
perfect.
1
I'm going to send them a reminder. They haven't paid (not pay) us for their last
order.
2 Their shares ________ (fall) by over 23% and now look like a good buy.
3 _______ (you/write) to them about that shipment, or do you want me
to phone them?
4 We _______ (spend) a lot on modernizing the factory, and it is now very
well equipped.
5 Unemployment is very high here because a lot of factories ___________
(shut) down.
6 The lawyers _______ (draw) up the contracts, so we are now ready to go
ahead with the deal.
7 I _______ (not speak) to the MD about your proposal, but I will soon.
8 ______ (you/find) a suitable replacement for Mr Chambers, or is the
post still vacant?
9 Anne ________ (just/get) back from lunch. Why don't you call her now?
10 Peter, _______ (you/meet) David Long? He's our new Finance Director.
Exercise 2
Present result of the past
Match each sentence in column A with the two sentences in column В that give
more information about: (i) the action in the past, and (ii) the result in the present.
В
/ have missed my flight to Rome.
A
В
We moved offices two months ago.
We bought some new machinery.
I have lost that file on Inchcape.
С It dropped in value yesterday.
D The factory is now very efficient.
We have relocated to Corby.
E
F
The dollar has fallen sharply.
G I arrived at the airport late.
H The economy slowed down last year.
We have automated our production lines.
I
J
I don't know where it is.
/ am waiting for another plane.
The recession has been very severe.
К
L
We have a new address.
I put it somewhere.
It is trading at $1.90 to the pound.
A lot of firms are in trouble.
23
Practice
Exercise 3 Specific
and nonspecific
time
Read the following newspaper extracts and say when these actions took place. If
you do not have the information, write don't know.
The
seemingly
unstoppable
success story of J Sainsbury,
Britain's biggest supermarket
group, (3) came to an abrupt halt
yesterday when they (4) warned
that profits in the current year
would be substantially lower than
market expectations. The news
(5) hit Sainsbury's shares, which
(6) plummeted from 48lp to
393p.
China (1) has extended its freeze on
new capital spending projects until the
end of this year as part of an effort to
combat inflation. The State Council,
China’s cabinet, (2) announced at the
weekend that ‘no new fixed-asset
investment projects’ would be
approved.
1.
2.
3.
4.
5.
has extended
announced
came
warned
hit
don’t know
at the weekend
____________
____________
____________
Two years ago it (7) seemed as
though Mr Trump might no
longer have his desk, his
office, his tower, or any of the
rest of the property and casino
empire he (8) built up during
the 1980s. And yet, he (9) has
survived. Helped by the
cashflows from his casinos, he
(10) has paid off a large part
of his debt.
6. plummeted ___________
7. seemed
___________
8. built
___________
9. has survived __________
10. has paid off __________
Complete the sentences with one of the verbs in the box, using just and the
present perfect.
Exercise 4 Just
announce
1
2
3
4
5
6
7
Exercise 5
Been and gone
arrive
buy
give
leave
read
speak
I'm afraid Mr Jamieson isn't here. He has just left.
A: There's an article in the paper about BMW. B:
Yes, I know. I ___________ it.
He's feeling very pleased. They ________ him a pay rise.
I ________a new car. Would you like to come and have a look at it?
A parcel for you ________ in reception. Shall I send it up to you?
I ________to the MD about your proposals, and he wants to discuss
them with you.
. that it is going to close the Glasgow factory next
The company ____
month.
Fill in the blanks with have/has been or have/has gone.
1. I'm afraid Mr Davis has gone to Bali and won't be back for two weeks.
2. Ask Amanda where to stay in New York. She _______ there a few times.
3. I_____ to the printers to collect the brochures. They're in my car.
4. Mr Lund __ to Oslo. I can give you the phone number of his hotel
if you like.
5. I don't know where their new offices are. I _____ not ______ there.
Production
Task 1
Task 2
Task 3
Complete these sentences. Use a verb in the present perfect to explain why
the present situation has occurred.
1
Our sales are improving because ...
we have introduced some new product lines.
2
Our agent wants the brochures delivered urgently because ...
3
Maria is off work for three months because ...
4
It is now much easier for us to export because ...
5
At the moment the government is very unpopular because ...
6
This year's coffee crop in Colombia will be very small because ...
7
I think it would be a good time to buy shares now because ...
Write short paragraphs about the changes that have taken place.
1
The new supermarket is attracting a lot of new customers.
The new managers have refurbished the building completely and they have put
in a new delicatessen section. They have improved their range of fresh foods
and have added a cafeteria.
2
The office isn't the same as it was when you were here.
3
The company is now in a much better financial position.
Complete or continue these sentences using just and the present perfect.
1
2
3
4
5
6
7
I have just seen Jane. She wants to have a word with you.
He probably won't come in to work today because __________________
Yes, the report is ready. __________________ .
Boeing's financial future now looks very secure. ____________________
Why don't we have lunch in that new restaurant that _________________
I think she must be out. ___________________ .
No, I won't have a coffee, thank you. ____________________ .
Present perfect (2): ever, never, already, yet
A Ever and never +
present perfect or simple
past
The present perfect is often used with the words ever and never to talk about
general life experience:
Have you ever worked abroad? (i.e., In all your life up to now?) / have
never been to America (i.e., Not in all my life up to now.)
The present perfect with ever is often followed by the simple past. We use the
simple past to give more information about a completed action, when referring
to a specific time or context:
Have you ever been to Hong Kong?
Yes, I have. I worked there when I was with Coopers and Lyhrand.
В Already and yet
The present perfect is often used with already and yet:
They are getting on well with the new building. They have already modernized the
warehouse, but they haven't decorated the reception area yet.
Already is used in positive sentences. It often indicates that something has taken
place slightly earlier than expected. Notice its position in the sentence:
She has already shown me the figures. (NOT: She has shown already...)
Yet is used in questions and negatives. It shows that we expect an action will take
place if it has not happened up to now. Notice the position of yet, and not yet:
Have you talked to Peter yet? (NOT: Have you talked yet to Peter?) I
have not talked to him yet. (NOT: / have not talked yet to him.)
С Finished and unfinished
periods of time
The present perfect is often used with prepositions or prepositional phrases
indicating periods of time that have not finished yet. Common examples are:
today, this morning, this month, this year, so far, to date, over the last few
weeks, up to now, etc.:
This month we have received a lot of complaints about late deliveries. (The
month has not finished, and there may be more complaints.)
If we are speaking after one of these time periods, we use the simple past because
we are referring to a period of time that has finished. Compare:
Have you seen John this morning?
(It is now 11.15 in the morning; the morning has not finished.)
Did you see John this morning?
(It is now 2.30 in the afternoon; the morning has finished.)
Practice
Exercise 1
Make up typical interview questions and answers, using the prompts.
Ever, never +
1
present perfect
work for yourself
A. Havevou ever worked for yourself?
B: Yes, I have, or No, I have never worked for myself. ?
2. work for a multinational company
A.: ________________________________________
B.: ________________________________________
3. have experience of managing people
A.: ________________________________________
B.: ________________________________________
4. hold a position of responsibility
A.: ________________________________________
B.: ________________________________________
5. study economics or accountancy
A.: ________________________________________
B.: ________________________________________
6. give a presentation in English
A.: ________________________________________
B.: ________________________________________
Exercise 2
Ever + present perfect or
simple past
Read the following dialogues. Put the verbs into the present perfect or the
simple past.
1
A:
B:
A:
B:
2
A: ________________ (you/ever/be) on a skiing holiday?
B: Yes, I have. We ________ (have) a family holiday in the
Alps last year.
A: Which resort _________________ (you/go) to?
B: We ________ (stay) in Wengen.
3
A:
B:
A:
B:
A:
B:
4
Have you ever been (you/ever/be) to South Africa?
Yes, I have. I went (go) there last year.
How long did you stay (you/stay)?
I was (be) only there for a couple of days for a meeting.
__ ______________ (you/ever/be) to one of Karl Mason's seminars?
Yes, I have. I ________ (go) to one a couple of months ago.
What ________________ (it/be) like.
I ________ (think) it ________ (be) very interesting.
______________ (you/ever/hear) of a place called Hindhead?
Yes, it's in Surrey. I ________ (do) a training course there when I
______ (be) with the bank.
A: Which bank _______________ (you/work) for?
B: Lloyds, but I_______________ (not/stay) with them very long.
Practice
Exercise 3
Already and yet
Exercise 4
Unfinished periods of time
Complete the dialogue by putting the verbs into the present perfect.
A: Good afternoon, Mr Jackson here. How you are getting on with the car I
brought in this morning?(l) Have you finished it yet (you/finish it/yet)?
B: Nearly. We (2) ________ (already/do) most of the work on it. We
(3)
(4)
(not/find any major problems/yet), but we
(already/fix) the things you mentioned.
A (5) __________ (you/check) the headlights? I think they need adjusting.
: Yes, we (6) __________ (already/fix) them. The only other thing is that you
B: need two new tyres, but I(7) _________ (not/order them/yet), because
they're £50 each.
A: That's fine, go ahead with that. Do you know what the bill will be?
B: No, I(8) ________ (not/work it out/yet), but it'll be about £180. Are you
coming to get the car now?
A: No, I(9) _________ (not/finish work/yet). I'll be there in about an hour.
Read this passage about the performance of the computer manufacturer,
Compaq. Fill in the blanks with the verbs in the box, using the present
perfect.
be
go
grow
have
manage
already/reach
open
This (1) has been an excellent year so far, and we (2) ___________ most of our
sales targets. Worldwide unit shipments (3) __________ up to 2.5m over the last
eight months, and every region (4) __________ to set new records. In North
America, we (5) ________ sales of $3.1 billion, and sales in Europe and the
Pacific Rim (6) ________ by 38% and 94%. Our
are going well. We open international expansion plans
five more next year. (7)
a new office in Beijing and are planning to
Exercise 5
Finished and unfinished
periods of time
Match each of the sentences from column A with a suitable context from
column B.
В
1
2
3
4
5
6
7
8
/ hope you enjoyed the launch party.
I hope you have enjoyed the launch party.
Has the post come this morning?
Did the post come this morning?
Has Max rung this week?
Did Max ring this week?
Has Mary finished that report?
Did Mary finish that report?
A
В
С
D
E
F
G
H
Mary has gone home. It is 5.15.
The launch party is about to finish.
Max rings on Monday or Tuesday. It's Thursday.
Mary is still at the office. It is 2.30.
It is 10.00 in the morning.
Max rings on Monday or Tuesday. It's Tuesday.
It is 3.00 in the afternoon.
The launch party was last week.
Production
Task 1
Task 2
Complete these sentences using never and the present perfect.
1
I'm feeling rather nervous.
I have never given a presentation to so many people.
2
I don't like taking unnecessary risks with money, so
3
______________________________________________
but I would like to go there for a holiday.
4
What are Nigel Seymour's books on management like?
5
I can definitely recommend Hewlett Packard printers. I've had one for years,
and _________________________________________________________
6
Their record of industrial relations is excellent.
Write short paragraphs saying what you have already done and what you
haven't done yet.
1
The new model is almost ready for production. We have done a lot of research
and we have finalized the design. We have solved the problems we had with the
prototype and we have already set up a production unit in Cambridge. We
haven't decided who will lead the project yet, but we are interviewing three
possible candidates.
2
I am nearly ready to start my own business.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Task 3
Complete the sentences, using the present perfect to make it clear that the
periods of time have not finished yet.
1
2
I must get a new alarm clock. I have been late three times this week.
GM's new saloon car has been a great success. To date,
3
British Coal is cutting its workforce dramatically. So far this year
4
I think they must have put the wrong phone number on the
advertisement because up to now we _____________________
7
Present perfect (3): for and since
A Stative verbs + for and
since
The present perfect simple is often used with for and since and stative verbs to
talk about things that began in the past and have continued up to now:
I have known about the takeover bid for several weeks. (And I know now.) She
has owned shares in ICI since she started work there. (She owns them now.)
В For or since?
We use for to talk about the duration of periods of time and since to talk about
when a period started. Look at the time line and the examples:
for
ten minutes/five days/three months/two years/a long time/ages/etc. since
10.15/Monday/the 18th/last week/June/1989/I left school/etc.
/ have been with this company for six years.
I have been in computing since the beginning of 1989.
С How long ...?,
for and since
To ask questions about periods of time, we can use How long...? + the present
perfect:
How long have you been in England? I have been here since August/for six
months.
COMMON MISTAKES: We do not use the present simple tense with for and
since to talk about something that began in the past and has gone on up to
the present:
WRONG: I am here since December.
RIGHT: I have been here since December.
D Negatives
We can use the present perfect negative to talk about the amount of time that
has passed between now and the last time something happened:
We haven't had any large orders from them for several months.
I'm not sure if his trip is going well. I haven't heard from him since Monday.
E Completed actions over a
period of time
If we talk about a completed action, (particularly if we give details about how
much, how many, etc.), we can use the present perfect and since (but not for). We
can also use other phrases of duration such as to date, recently, over the past
five years, etc. The action itself is finished, but the period of time extends up to
the present: We have opened six new branches since July. (From July until
now.)
Practice
Exercise 1
For and since with stative
verbs
Some of the following sentences are right and some are wrong. Put a tick \\/\ next
to the ones that are right, and correct the ones that are wrong.
1
I am here since last week.
2
He has had a company car for two years.
3
I know Mr Smith since we did an MBA together.
4
How long are you with ICI?
5
We have had an office in Japan for several years.
6
She has an account with FN Bank since 1980.
7
CPT is in financial difficulties for several months.
8
How long has the office been vacant?
Exercise 2
For or since?
Fill in the blanks with for or since.
Exercise 3
How long...?, for and since
Make questions and answers, using the prompts.
I have been
1 They have operated as joint directors since the company started.
2 Orders have increased _____ the advertising campaign in June.
Our sales executives have used the same hotel __________ over 20 years.
Sorry, Mr Smith is not available. He has been in a meeting ___________ 8.30.
_______ I joined the company, I have been to over twenty countries.
Car sales have gone up by 10% ________ the tax cuts in December.
Portugal has been a member of the European Union ___________ 1986.
It isn't a new Mercedes. He has had it _________ years.
1
How long/you/be/in charge of the Finance Department?
A How long have you been in charge of the Finance Department? В
(I/six months) I have been in charge of it for six months.
2
How long/you/have a phone line for investors?
A ______________________________________________________
В (We/three months) _____________________________________
How long/the property/be on the market?
A __________________________________ __________________
В (It/six months).
How long/you/have an office in Spain?
A _______________________________ _____________________
В (We/1992).
How long/Jason/be in the States?
A __________________________ _________________________
В (He/the 18th)