Market structure

Technology

The use of science to create new products or more efficient ways to produce products is called technology. Technology makes the other factors of production — natural, human, and capital resources — more productive. Technological advances in the computer industry, for example, have increased efficiency in the workplace.

Entrepreneurship

The risk-taking and organizational abilities involved in starting a new business or introducing a new product to consumers are called entrepreneurship. The goal of entrepreneurship is to create a new mix of the other factors of production and thereby create something of value. The entrepreneur is a person who attempts to start a new business or introduce a new product.

capital goods - основные средства, средства производства

capital resources - капитал компании, собственные фонды

consumer n - потребитель

consumer goods - потребительские товары, товары народного потребления

economics n - экономика, народное хозяйство

entrepreneur n - предприниматель

entrepreneurship n - предпринимательство

factor of production - движущая сила производства

fee n - вознаграждение, гонорар, for a fee - за плату

goods n - товар, товары

human resources - кадры, персонал, людские резервы

natural resources - природные богатства

need n - первостепенная необходимость, жизненная потребность

producer n – производитель

product n – продукт, продукция

production n – производство

purchase n - покупка, закупка, v – покупать, закупать

resource n – ресурсы, возможности

satisfy v - удовлетворять (кого-л.; чьи-л. требования, запросы)

scarcity n – нехватка, дефицит

service n – оказание услуг, обслуживание

survival n – выживание

technological advances – технический  прогресс

technology n – техника, технические и прикладные науки

want n – необходимость, потребность, нужда

 

TYPES OF BUSINESSES

 

Objectives of Business Organizations

Business organizations are established to meet wants in society. Private businesses are formed mainly to provide for material wants (i.e. goods and services) and commercial wants (i.e. banking, insurance) in society. Government Organizations, on the other hand, tend to satisfy society's desire for defence, law and order, education and social welfare.

Organizations are thus established to meet wants in society. In meeting these, organizations will set very definite and clear aims, e.g. a manufacturing firm will want to stay in business and make a profit. The aims of an organization are normally decided by the board of directors, or in the case of public organizations by government ministers.

The most common forms of private business organizations are sole proprietorships, partnerships and corporations.

Sole Proprietorships

A business owned and controlled by one person is a sole proprietorship. Sole proprietorships are the oldest, simplest, and most common of all types of businesses.

Because the financial resources available to one person often are limited, sole proprietorships tend to be enterprises that require small amounts of capital to start and operate. Many doctors, dentists, lawyers, bakers, and beauticians organize as sole proprietors to provide professional services. Other services offered by sole proprietors include plumbing, carpentry, dry cleaning and lawn care. Many construction companies, small grocery stores, florists, other small retail stores, farms, real estate firms and insurance firms are also organized as sole proprietorships.

Partnerships

A partnership is a business that is owned and controlled by two or more people. As in the case of sole proprietorships, partnerships are concentrated in businesses that require relatively small amounts of money to start and operate. Small retail stores, farms and construction companies are often organized as partnerships. People in service occupations, such as doctors, lawyers, accountants, and photographers, also form partnerships. Many of these partnerships may have started as sole proprietorships. A partnership begins when two or more people agree to operate a business together. Partnership can be general or limited. In order to avoid later conflicts, the partners usually formulate a written agreement called a partnership contract. A partnership contract outlines the distribution of profits and losses. It details the specific responsibilities of each partner and includes provision for adding or dropping partners and dissolving the partnership.

Corporations

A corporation is a business organization that is treated by law as if it were an individual person. A corporation can do everything that a sole proprietorship or a partnership can do. It can, for example, buy property and resources, hire workers, make contracts, pay taxes, sue others and be sued and produce and sell products. A corporation, however, is owned by stockholders. Stockholders are individuals who invest in a corporation by buying shares of stock. Stocks are the certificates of ownership in the corporation. Stockholders invest in a corporation in order to make a profit.

Types of Corporations. A corporation may be either publicly owned or closed. A publicly owned corporation allows its shares to be purchased by anyone who chooses to invest in the business. Most corporations today are publicly owned. A closed corporation is owned by a limited number of shareholders. People outside of this limited group may not buy shares in the corporation.

Aims of Private Organizations

Profitability is the main aim of private organizations but it is important to realise that a business will have other aims. These include:

1. Survival: most of the time firms will not be worried about this. However, particularly in times of economic difficulty - such as recession - surviving will become an important short-term aim of the firm. In order to survive, the firm may have to make workers redundant and close some of its factories.

2. Growth: not all firms want to grow continually but growth is closely associated with survival. Very often, particularly for firms in highly competitive situations, e.g. computing and electronics, growth and development are the only way to ensure survival. Furthermore, shareholders and employees may benefit from the growth of the company.

3. Image: how the public at large views a company can be particularly important, and to this end a number of companies have public relations departments that have specific responsibility to improve the image of the company. A tarnished image can very often lose the company business

aim n - намерение, цель; to set an aim – ставить цель

business organization - коммерческая организация

commercial wants - коммерческие потребности

competitive adj – конкурентоспособный

corporation n - акционерное общество; корпорация

distribution n - распределение

establish v - основывать, учреждать

general partnership - компания/товарищество с неограниченной ответственностью

government organization - правительственная организация

growth n - рост, развитие

invest v – инвестировать, вкладывать деньги, капитал

limited partnership - компания/товарищество с ограниченной ответственностью

make a profit - получать прибыль

material wants - материальные потребности

meet wants - удовлетворять потребности

partnership contract = partnership agreement - договор/соглашение о сотрудничестве

partnership n – товарищество, партнерство

private business – частное предприятие

private organization – частная организация

profitability n - рентабельность, прибыльность, доходность

provision of a contract - условие договора

public at large - широкий круг людей

public organization - общественная  организация

shareholder n - акционер

shares n pl - акции

social welfare - социальное обеспечение

sole proprietorship - единоличное владение

stock n - акционерный капитал; основной капитал; фонды

stockholder n - акционер, владелец государственных ценных бумаг; пайщик

stocks n pl – государственные ценные бумаги

sue v – подавать в суд, возбуждать иск, предъявлять иск

survival n – выживание (на рынке)

to this end – с этой целью

 

ECONOMIC INTERDEPENDENCE AND INTERNATIONAL TRADE

 

International trade is the voluntary exchange of goods and services between people in different nations. For thousands of years people have benefited from international trade, which provides them with products not available in their homeland. By the mid-1980s international trade amounted to about $2 trillion annually.

At the basis of international trade are the concepts of specialization and economic interdependence. When individuals or businesses produce a single or very narrow range of products, it is called specialization. Many individuals and businesses specialize because by concentrating their efforts on the production of a narrow range of products they are able to increase productivity.

Specialization, however, leads to a decrease in self-sufficiency. If individuals and businesses concentrate on the production of specific goods and services, they must rely on other people to furnish the remaining products that are needed to satisfy their wants and needs. Economists call such dependence economic interdependence.

The same process of specialization and economic interdependence takes place on a national level in international trade. As people in various nations specialize to use their resources better, the nations become less self-sufficient. The political and business leaders of these nations turn to international trade to fulfill some of their wants and needs.

Absolute and comparative advantage. The world's resources are unevenly distributed. Each nation has a different quantity and quality of natural, human and capital resources. The unequal distribution of resources affects what and how much goods and services a nation can produce.

Two concepts help people to decide which goods and services to produce for export. The two concepts are: absolute advantage and comparative advantage.

Absolute Advantage

The distribution of resources often gives a nation an absolute advantage in the production of a particular product. Absolute advantage means that using the same resources one nation can produce a product at a lower cost than a second nation.

Brazil, for example, enjoys an absolute advantage over the United States in coffee production. Brazil's resources — especially its land, climate and inexpensive labor force — enable it to produce large quantities of coffee at a relatively low price compared to the costs for coffee production in the United States. Thus, it is to Brazil's advantage to export coffee to the United States.

The United States, on the other hand, enjoys an absolute advantage over Brazil in many other areas, particularly in the production of manufactured goods. The United States has well-tapped natural resources, a highly skilled labor force and well-developed means of production for consumer and capital goods. Thus, it is to the advantage of the United States to export manufactured goods to Brazil.

Comparative Advantage

Although nations have an absolute advantage in the production of numerous goods and services, they generally specialize in the production of those items in which they have a comparative advantage. A comparative advantage is the advantage that arises from being able to produce a product at a lower opportunity cost relative to other products.

A nation determines its areas of comparative advantage by calculating the economic benefits received from producing various goods and services. The nation then chooses to specialize in the production of those goods and services that provide the greatest economic benefits. In other words, the nation specializes in those products that can be produced at the least expense relative to the other products that the nation might produce.

Difference Between Absolute Advantage and Comparative Advantage

A nation's absolute advantage is measured in relation to other nations. A nation has an absolute advantage in the production of a product any time it can produce that product at a lower cost than can other nation. A nation's comparative advantage is measured in relation to all of the goods and services the nation produces. A nation has a comparative advantage in those products that have the lowest opportunity costs.

By specializing in the production of the product it can produce most efficiently, each nation is able to make the best use of its available resources. International trade then allows each nation to enjoy the most products at the lowest opportunity costs.

 

absolute advantage - абсолютное преимущество

calculate the economic benefits - подсчитывать экономическую выгоду

comparative advantage - сравнительное  преимущество

cost n - стоимость

decrease in self-sufficiency - уменьшение  экономической самостоятельности

economic interdependence - экономическая взаимозависимость

international trade - международная  торговля

manufactured goods - промышленные  товары

narrow range of products - ограниченный  ассортимент продукции

productivity n - производительность

specialization n - специализация

unequal distribution of resources - неравномерное  распределение ресурсов

voluntary exchange of goods - добровольный  обмен товарами

well-developed means of production for goods - хорошо  развитая база средств производства  товаров

well-tapped natural resources - хорошо разработанные природные ресурсы

 

CORPORATE COMBINATIONS IN THE USA

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

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

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

Horizontal Combinations

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

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

Vertical Combinations

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

 

Conglomerate Combinations

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

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

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

Trends in Corporate Combinations

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

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

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

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

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

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

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

 

Words and Expressions

abandon v - покидать, отказываться, прекращать

absorb v - поглощать, всасывать

acquisition n - приобретение, поступление

charter v - давать привилегию

coal mine - угольная шахта

conglomerate combination - конгломератное объединение

corporate merger — корпорационное слияние

corporate performance - совместное функционирование

corporation n - корпорация, объединение, акционерное общество

efficiency n - продуктивность, производительность

horizontal combination - горизонтальное объединение

identity n - индивидуальность; своеобразие; особенность

iron mine - шахта по добыче железной руды

lay off v – увольнять

merger n - слияние, объединение

ore deposit - залежи руды

production of frozen foods - производство полуфабрикатов

refinery n — нефтеочистительный завод

related goods - взаимосвязанные товары

reshuffle v - перегруппировывать, менять местами

sales force - продавцы, торговые агенты