1232569082 Ingles Comercial Intermedio

IEFP - ISG

Ingls Comercial Intermdio Guia do Formando

Ficha Tcnica

Coleco MANUAIS PARA APOIO FORMAO EM CINCIAS EMPRESARIAIS

Ttulo Ingls Comercial Intermdio

Suporte Didctico Guia do Formando

Coordenao e Reviso Pedaggica IEFP Instituto do Emprego e Formao Profissional - Departamento de Formao Profissional

Coordenao e Reviso Tcnica ISG Instituto Superior de Gesto

Autor Anabela Horta/ISG

Capa IEFP

Maquetagem ISG

Montagem ISG

Impresso e Acabamento ISG

Propriedade Instituto do Emprego e Formao Profissional, Av. Jos Malhoa, 11 1099-018 Lisboa

Edio Portugal, Lisboa, Dezembro de 2004

Tiragem 1000 exemplares

Copyright, 2004 Todos os direitos reservados ao IEFP

Nenhuma parte deste ttulo pode ser reproduzido ou transmitido, por qualquer forma ou processo sem o conhecimento prvio, por escrito, do IEFP

TABLE OF CONTENTS IEFP

Table of Contents

I. A BUSINESS ORGANISATION......................................................................................1

1. Types Of Business Organisation.........................................................................................4

The Sole Proprietorship (USA) or a One-Man Business (UK):............................................4

Partnerships.......................................................................................................................4

Joint venture.......................................................................................................................5

Companies limited by shares..............................................................................................5

Corporations.......................................................................................................................5

Joint stock companies........................................................................................................6

Business alliances or mergers............................................................................................6

2. Distribution..........................................................................................................................7

The main distribution branches...........................................................................................7

The Distribution Chain........................................................................................................8

3. Intermediaries On A Business...........................................................................................10

Agents..............................................................................................................................10

Official organisations........................................................................................................12

4. Elements Of The Organisation..........................................................................................13

The corporate hierarchy....................................................................................................13

Managerial operations......................................................................................................14

5. A New Economic Deal......................................................................................................15

Contextual influences.......................................................................................................15

Pragmatic approach..........................................................................................................15

Exercises..........................................................................................................................16

Resolutions.......................................................................................................................16

IEFP TABLE OF CONTENTS

II. A BUSINESS TRANSACTION .....................................................................................19

1. Marketing..........................................................................................................................22

Elements of the marketing mix..........................................................................................22

2. Consumption.....................................................................................................................25

Variable consumption........................................................................................................25

Consumption versus GDP.................................................................................................25

Consumption changing habits...........................................................................................25

3. Selling...............................................................................................................................27

Commercial acts...............................................................................................................27

The contract of sale...........................................................................................................27

Weights.............................................................................................................................28

Price reductions................................................................................................................28

Exercises..........................................................................................................................29

Resolutions.......................................................................................................................29

III. FINANCIAL MATTERS ................................................................................................31

1. The Bank Sector...............................................................................................................34

Bank accounts..................................................................................................................34

Discount............................................................................................................................34

Credit................................................................................................................................35

Other services provided by banks.....................................................................................35

Credit cards......................................................................................................................36

2. The Finantial Market.........................................................................................................37

Commercial exchanges.....................................................................................................37

Stock exchanges...............................................................................................................38

Stockbrokers.....................................................................................................................39

Jobbers.............................................................................................................................39

The most influential Stock Exchanges...............................................................................39

TABLE OF CONTENTS IEFP

3. The Structure of a Business Organisation.........................................................................41

CEO..................................................................................................................................41

The Finance Department..................................................................................................41

The Statistics Department.................................................................................................42

The Sales Department......................................................................................................42

The Personnel Department...............................................................................................42

The Legal Department......................................................................................................42

The Production Department..............................................................................................43

The General Office...........................................................................................................43

Exercises..........................................................................................................................44

Resolutions.......................................................................................................................44

IV. INTERNATIONAL TRADE ............................................................................................45

1. How to Export and Import Goods and Services................................................................49

Target a marketing mix.....................................................................................................49

Distribution and supply chains..........................................................................................49

The role of the export manager.........................................................................................50

Export financing................................................................................................................50

2. International Transportation..............................................................................................52

Ocean transport (UK) or Maritime Transportation (US).....................................................52

Other forms of international transportation........................................................................52

Air cargo...........................................................................................................................53

3. The Role of the Insurance Activity....................................................................................54

The pooling of risks...........................................................................................................54

The contract......................................................................................................................54

Marine insurance..............................................................................................................54

Damage and Policies........................................................................................................55

IEFP TABLE OF CONTENTS

4. The Balance of Trade........................................................................................................56

Customs............................................................................................................................56

Duties...............................................................................................................................56

The General Agreement on Tariffs and Trade (GATT)......................................................57

Exercises..........................................................................................................................58

Resolutions.......................................................................................................................58

V. PAYMENTS ..................................................................................................................59

1. Balance of Payments........................................................................................................63

The current account..........................................................................................................63

The capital account...........................................................................................................63

2. Invisible Trade...................................................................................................................64

The importance of invisible trade.......................................................................................64

Technology trade..............................................................................................................64

3. Trade Barriers...................................................................................................................65

4. Foreign Investment...........................................................................................................66

Exercises..........................................................................................................................67

Resolutions.......................................................................................................................67

BIBLIOGRAPHY ................................................................................................................69

MARKETING TERMINOLOGY GLOSSARY .....................................................................71

EXPORT GLOSSARY .......................................................................................................73

ACCOUNTINGENGLISH II

I. A BUSINESS ORGANIZATION

I. A BUSINESS ORGANISATION IEFP

Accounting English II Guia do FormandoI

3

Objectives

Students will demonstrate knowledge of a wide range of business organisation vocabulary andproduce main structures of the language and concepts required to work in the accountig activity.

Topics

1. Types Of Business Organisation

2. Distribution

3. Intermediaries On A Business

4. Elements Of The Organisation

5. A New Economic Deal

Exercises

Resolutions

IEFP I. A BUSINESS ORGANISATION

Guia do Formando Accounting English II4I

1. TYPES OF BUSINESS ORGANISATION

There are different types of business organisation that we shall consider in this chapter:

The sole proprietorship (USA) or a one-man business (UK)

Partnerships

Joint ventures

Companies limited by shares (UK)

Corporations (USA)

Joint-stock company

Business alliances or mergers

For each of them we shall study its main characteristics.

The Sole Proprietorship (USA) or a One-Man Business (UK):

This type of business organisation is owned by a single person, also known as a sole trader.

This person receives all the profits, but is also the unique bearer of all the losses. He or she hasunlimited liability for debts.

Partnerships

It is an association of persons whose common objective is to run a business together in order toachieve certain goals or profits. In the United Kingdom the upper limit of partners is 20, whereas inAmerican law there is no upper limit, but this type of organisation is subject to state laws regulations.However, many American states have adopted the Uniform Partnership Act of 1914, which relies onthe British Partnership Act of 1890.

There are trading partnerships: they sell and buy goods.

The non-trading partnerships concern professional associations, like those of lawyers, doctors,accountants, etc.

General partnership

Each member of a partnership is considered as a general partner, who contributes in a specific way,which may be a financial contribution, or even in the form of a property, skills, or any other agreed



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way. Any member has the right to participate in the management process of the partnership and canlegally obligate the other partners.

The articles of partnership must accurately stipulate the share of profits and losses that each partneris entitled to. In general, this sharing takes into consideration the proportional involvement of thepartner within the business organisation: percentage of invested capital, of property and the degreeof expertise or skills, work, etc which benefits the organisation.

The liability of general partners may be unlimited and joint, which permits a creditor to sue all thepartners. If the liability is joint and several, then the creditor may choose whom he is going to sue.In such a case it may be one, some or all the partners at the same time.

There are also silent partners. These have no direct involvement nor can they interfere within themanagement process of the organisation, contrarily to the active partners.

Limited partnership

This concerns a general partner who is associated with another person with limited liability, or evenwith more than one partner but who have limited liability.

Whenever there is a limited partner in an organisation, this person has no direct involvement in themanagement of the organisation, but is entitled to have access to the books of accountancy.

This type of organisation is not very popular as it reduces the amount of capital that is invested andat the same time it increases the legal responsibility of the general partner.

Joint venture

This is a temporary partnership that binds two or more persons or organisations, also known as jointadventure. Their common purpose focuses the undertaking of specific business transactions for theirjoint account.

Companies limited by shares

This is a British type of organisation that stresses the fact that all its members are considered asshareholders and all enjoy a proportional limited liability to their financial involvement within thebusiness organisation.

They are subject to the European Union laws, but each company has to submit their articles ofassociation to the British Registrar of Companies, mentioning their internal regulations.

Corporations

Their stockholders have a limited liability according to the amount of capital that they have investedwithin the corporation.



They have a centralised management.

Open corporations can offer their stocks to the public, but have to publish their balance sheets.

Close corporations are generally owned by a person, a family, a company or even a foundation.They do not need to publish their annual report nor their balance sheets.

Stock corporations are bound by the articles of incorporation.

The corporate structure relies on a Board of Directors, then immediately below them there is theManaging Director or Chief Executive Officer (CEO), there may be one or more Vice-Presidents, theSecretary- Treasurer, and all the department directors or managers.

In the USA a public company must comply with Security and Exchange Commission (SEC)requirements, which imply the compulsory registration of its securities, and the filing of annualreports.

Joint stock companies

There is a distinction between the British and American terminology as regards stocks and shares.

In the UK shares are sold and quoted individually and once they are fully paid, the company mayconvert them into stock. Stock has a nominal value and can be bought and sold in any chosenamount, exactly like debenture stock or loan stock.

In the USA stock implies the capital stock of a stock corporation, whereas shares are considered asownership securities that give the holder the status of a co-owner who is entitled to a share in theprofit and in case of a company dissolution he has a claim to the residual assets or assets that havebeen left after all debts have been paid for.

A shareholder receives a dividend of the annual net profit that is distributed at the end of the year.

Business alliances or mergers

In times of crisis business organisations tend to merge or create alliances with other companies.However there are a few different kinds of possible alliances.

In the case of multinational, there is a parent company and at least 20 subsidiaries or affiliatesthat are controlled by the parent company. In this case subsidiaries may be fully or partly-owned bythe parent company, which has a majority interest. Nevertheless, a subsidiary keeps its name andlegal entity, whereas the branch does not retain its legal entity.

A holding company is created whenever there is a company that wishes to hold all or the majorityof the capital of other companies.

A complete merger erases the legal identity of the different companies that have signed the mergingagreement, and the shares of the company or companies that have been absorbed pass on to theabsorbing company or else a completely new company is created and it is thus called aconsolidation.



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2. DISTRIBUTION

Distribution is included in the main trading activities linking production and consumption.

Indeed, once the goods have been produced they must be conveyed to the consumer, or customer.This can only be performed through a distribution chain that may rely on a network of middlemen,such as agents, travelling salesmen, representatives, forwarding agents, brokers, etc

The main distribution branches

Home Trade (domestic trade)

It covers a national area and includes:

- Wholesale trade: goods are bought and sold in bulk or large quantities.

- Retail trade: goods are sold in smaller quantities to the final costumer.

Foreign Trade (overseas trade)

It covers all the imports and exports of a business organisation or even a region.

At the national level, the relation between imports and exports makes up the balance of trade.

Services give a back up support to international transactions. They are then considered asinvisibles. The balance of invisibles and the balance of trade make up the balance of payments.

They include:

Transport by road, sea, air or railway.

Insurance of goods is compulsory and must cover their value in case of loss, accident or anyother damage stipulated in the contract.

Banking services are charged by banks, but enable the safe transaction of capitals,payments, investments, discounts, and also the granting of credits, documents such asletters of credit (L/C).

Marketing services, such as market research, advertising, promotional campaigns.



The Distribution Chain

This refers to the various factors involved in a business transaction, as it has to deal with the supplychain of raw materials, equipment, and thus production of goods, then wholesale and retail tradenetworks to finally reach the final customer.

Production of goods

It relies on supply chains of raw materials and equipment. Its basic purpose is to transform rawmaterials into saleable manufactured goods or agricultural produce. In order to achieve this aim, theproducer adopts a wide range of processing methods, such as standardized production, or mass-production. Through this process, productivity levels are higher and prices lower and morecompetitive even though quality standards are not always top-notch.

Wholesale

It stands as an intermediary between the producer and the retailer.

Goods are bought in bulk and must be stored in warehouses before being distributed to a retail tradenetwork.

The wholesaler charges warehousing expenses or sells the goods at above cost price that mayinclude transport as well. He has a profit margin.

In the USA and in Europe intermediaries tend to be eradicated so as to increase the producersprofit margin, trade volume and turnover. Thus, there was the need to create factory outlet storesthat sell directly to the final consumers. This process reduces the products final cost and raises theglobal levels of competitiveness of a business organisation.

The Retailer

He is the final trader and deals directly with the customer. He sells goods at above cost price andthus has also a profit margin. The wholesalers representatives visit the retailer regularly to write uporders, present new products, receive complaints. They supply the retailer with whatever product thelatter needs.

Retail Outlets

There are several kinds of retail outlets:

Chain stores: they sell a specific category of products. For example, Boots sellspharmaceutical products; W.H. Smith sells stationery and books. They offer deliveryservices in some cases.



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Department stores: they sell a wide range of consumer goods that may go from furniture,clothes, perfumes and high-fidelity items. They sell well-known brands and advertised products.They may also have their own catalogues of products, ensure delivery and an after-salesservice. Credit may be granted. They also accept and exchange returned articles. They organizepromotional events and periods of sales.

Shopping centres: They first appeared in the USA and then in France and the UK. Theyregroup stores from all trades but also provide support facilities to the consumers that may gofrom day-nurseries, parking lots, restaurants, bars, banks, beauty parlours, swimming-pools,dentists, cinemas, etc

Franchise businesses: These are businesses that are allowed through a contract signed by afranchiser, which is a large firm or a well-known brand, and a franchisee to use their name, selltheir products in return of a royalty of an agreed percentage on their turnover.

Mail order businesses: This process has completely eradicated intermediaries and points ofsale. However, an efficient distribution chain is unavoidable, as the business organisation sellsits items through the support of an illustrated catalogue, with accurate descriptions for each item,which has to be distributed in super or hypermarkets, or even sent by mail. Orders are placed byphone, mail or by email. The customer pays cash on delivery (COD). Articles may be returned orexchanged if they do not correspond to the ordered items as described in the catalogue.

This shopping process is convenient for people who live far away from shopping centres, frombig cities, or customers who have no time or possibility to go shopping.

Traditional Shops: They offer a more individualised service to the customer. Their prices aresomewhat reasonable, though they suffer from the competitive prices that super markets canafford displaying. They only have an occasional home-delivery service. They may also haveclearance sales.

Self-service stores: Their main advantage is that they benefit from reduced overheads, as theyjust need to employ cashiers and to have a good surveillance system. Customers pick up a cartor basket at the entrance, then they make their way round the store. Prices must be wellindicated on each item.

This process applies to small stores as to hypermarkets as well.



3. INTERMEDIARIES ON A BUSINESS

Intermediaries link sellers and buyers thanks to their connections and perfect knowledge of themarket and its demands.

However, competitiveness is so harsh that more often than not the general tendency is to reduce thecost of the goods to the maximum, thus reducing the number of intermediaries as well.

There are several types of middlemen: agents, brokers, traders.

Agents

Commission agents

These intermediaries are in charge of carrying out successfully any commercial transaction. In orderto achieve such an aim they have several means at their disposal. They may buy specific goods fora client and resell them to another who needs them. The latter is known as the principal and paysthe agent a commission on the percentage of the sales amount. Meanwhile, the agent may definehis or her own profit margin when reselling the goods, as most often buyer and seller never meetone another. The agent may also work for both buyer and seller and is then entitled to a commissionfrom both.

Commercial agents

They may work on an exclusivity basis or work for several business organisations at the same time.In any case, they represent a specific firm in a specific deal, so they may show their clientscatalogues, leaflets, brochures, samples, price-lists and even offer them some gifts on behalf of thefirm they represent at that precise moment. They take part in the promotion process of products, oreven brands.

They convey valuable information as to the fashion or market trends, and as to where the possiblesources of products may be found at a competitive price.

Shipping and forwarding agents

They are in charge of the safe and efficient shipping and loading of goods either nationally orinternationally.

They stand between their clients and the transport companies. They take the necessary steps so asto duly fill in all the shipping documents, such as the bill of lading, consular invoices in some cases,insurance policy. They may check if the goods are loaded and handled with care, if their packing isnot defective in order to avoid complaints from both sides.



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In exports, they are considered as indispensable since they accomplish all the dull formalities thatare required by the customs authorities.

Clearing agents

They are in charge of the clearing formalities of the goods through the customs once they reach theport of discharge. They deal with imports.

Sole agents

They may represent a business organisation within a specific area, region, country or economicbloc.

They create links between producers and retailers through a distribution network. They may also bethe first step towards the creation of a branch or a subsidiary as they are well aware of the degree ofsuccess of the products they represent and the possible market share for their brand.

They are most of the time entitled to exclusive representation rights for a firm or brand within adefinite area.

Traders

They usually represent several firms, from which they receive a commission on the amount of salesand work from their own office. They are also registered at the Trade Register.

Travellers

They usually represent a firm on an exclusive basis throughout a definite area.

They call on retailers in order to show them their firms products and take orders. They are paid acommission on the amount of sales. Some may also earn a salary and get a lower percentagecommission.

All their travelling expenses are paid for by the company they represent.

Brokers

They are in charge of the direct connection between buyer and seller. Thus, he deals with both.Once the goods have been sold, the broker sends a bought note to the buyer and a sold note to theseller. Both these documents include the kind of goods, their price, sales, delivery, and paymentterms.

He receives a brokerage fee, which is a commission on the percentage of the sales.



There are different types of brokers dealing with a specific branch of commerce. Indeed,stockbrokers deal with the buying and selling of stock, securities, company shares; shipbrokers dealwith sea freight; insurance brokers are in charge of insurance policy contracts

Auctioneers

They are in charge of selling objects at a private or public auction sale. They play an important partin obtaining the highest price possible for the exhibited goods, which are auctioned off to the finalbidder. That is, the client who bids the highest price.

Official organisations

The Board of Trade

It exists in every country. Its specific part relies on the governmental support to internationaltransactions and sometimes also the promotion of national products or brands.

It conveys information through official publications, such as specific magazines, economic reports,statistics, foreign market trends.

The Chamber of Commerce

It is a local or national association of businessmen and businesswomen whose aim lies on thepromotion of local products and the economic development of the area they represent. They alsofinancially support educational institutions in order to provide the necessary educational means to aspecific area in a specific technical sphere.



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4. ELEMENTS OF THE ORGANISATION

Within a business organisation there are three important intervening factors: customers, employeesand shareholders. These elements aim at a common goal: the successful performance of theorganisation, which brings benefits and thus satisfaction to them all. Nevertheless, this can only beachieved if a manager, who in turn executes the guiding strategic lines adopted by the Board ofDirectors, efficiently leads each intervening factor.

The corporate hierarchy

PRESIDENT

THE BOARD OF DIRECTORS

THE MANAGING DIRECTORor

THE CHIEF EXECUTIVE OFFICER

SENIOR MANAGERS

Finance Marketing Production HumanResources

(HR)

InformationTechnology

(IT)

Research andDevelopment

(R & D)

PublicRelations

(PR)

MIDDLE MANAGERS And JUNIOR MANAGERS

. Accounting

. Stock

. Investments

. Credits

. Assets

. Purchases

. Market research

. Product development

. Product design

. Customerrelationships

. Publicity

. Press Releases

. Sales

EngineeringProduction planningProduction controlQuality controlSuppliersWork simplification

Job designRecruitingTrainingAppraisalLegal affairsQuality ofWorking Life

(MIS) ManagementInformationSystem :gathers, integrates,analyses, conveysany relevantinformation to themanaging process.

Assistants; secretaries; supervisors; foremen; skilled workers; trainees



Managerial operations

There are several management levels:

Top management:

At the top of a corporation, there is a President or Chairman who presides over the Board ofDirectors.

All its members make global and strategic decisions as to define the business organisation policy.

The Managing Director or CEO (Chief Executive Officer) reports to the members of the Board inorder to inform them of the results of their decisions. He may advise them in some issues as he hasa more direct approach of the business organisation.

They require leadership skills, as they must enforce all the general strategies adopted by the Board.

They draw a global planning of the business organisation activities and organise theirimplementation.

Senior management:

Senior managers are responsible for a whole department within the business organisation.

They depend on the managing director and they implement all the management strategies that havebeen decided by the Board of Directors.

Their leadership skills have to be directed to the staff members who work in their department.

They must be able to control any managerial task performed by the middle managers. They havedecisional power in any issue related to their department.

Middle and Junior management:

They plan, organise and control their teamwork.

They coordinate all the individual efforts within their department in order to achieve efficiency andgood results. They consider themselves as team leaders since they work directly with assistants,secretaries, supervisors, foremen, skilled workers, and trainees. Thus, they require human skills thatensure security, trust and motivation. They must be pragmatic and find practical solutions towhatever problem that may occur.

They must inspire confidence and let their subordinates express themselves freely in order to beaware of any occurrence in their department.



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5. A NEW ECONOMIC DEAL

According to Mr. Konosuke Matsushita, founder of Panasonic, Technics, National, and Quasar, anenterprise does not only provide products or services, its basic aim is to make people as well.

Even though Mr. Konosuke Matsushitas perspective must be set in an historical context, we have toacknowledge that without people organisations could not exist. Hence, the human resources of anenterprise are a fundamental intervening factor in its productivity, profits and image. But would theyexist without consumers, you and me? Doubtfully so. We are equally determining in the relationbetween our demands and what the business organisations offer us or propose us or even how theymould our standard of living, and how consumers mould their growth and existence.

Contextual influences

An enterprise can never be set apart from economical, political, social and cultural forces and trendsthat surround it. Indeed, as society evolves so does a business organisation, as it has to adopt andadapt instantaneously to its environmental context.

The characteristics that have marked the 19th and 20th centuries cannot be same as those that areemerging in the 21st century.

Indeed, from a pyramidal hierarchical organisation we are entering a web-like kind of organisation,imposed upon us all by an increasingly tentacular globalisation. Companies were ruled by their ownobjectives, whereas now we can notice that they are driven by outwardly forces, leading them tocreate bounds and interdependencies, to merge in order to cope with the exhilarating rhythm ofchange. Before, stability was the root upon which companies stood. Now they can only expect tothrive if they navigate on virtual waters and integrate revolutionary options into their customisation.They have to think global and act local, thus glocalisation is the wave any business organisationhas to surf today.

Pragmatic approach

These changes reduced the size of business organisations, often through drastic measures such asdownsizing. The hierarchical structure has swung from a vertical line to an intricate network web ofhighly specialised professionals. They will regard one another as peers and partners instead ofsuperior versus subordinate. Information Technology widened our apprehension scope renderinginformation and knowledge valuable economic elements which tend to supersede materiallymanufactured fixed assets. As a fact, Silicon Valley regroups the highest market capitalization. Asan example of that emphasis, Microsoft Corporation with just 31,000 employees holds a $600 billionshare of the whole, whereas McDonalds with over than 300,000 employees has a marketcapitalization of $60 billion.

This New Economy is leading us towards a new economic deal blossoming new values in everysphere.



Exercises

1. Mention three types of business organisations and give the main characteristics of each.

2. In a written essay, associate these types of business organisations to firms that are wellknown and check whether all the characteristics apply to them.

3. Discuss on the importance of distribution networks.

4. Explain the advantages of buying in bulk.

5. What are the characteristics of factories outlet stores?

6. What differs between a chain store and a department store?

7. Discuss on the pros and cons of the various forms of distribution.

8. Write an essay on the pros and cons of having intermediaries in the trading process.Exemplify.

9. Choose a famous CEO and write his biography. Then, in a more critical approach describehis main characteristics and try to discover and analyse the roots of his success.

10. Present your CEOs portrait orally to the rest of the class in no more than 10 minutes.

11. Comment on Mr Matsushitas quotation: An enterprise is the people.

12. Research on the main differences between the 20th centurys business organisationscharacteristics and those of the 21st business organisations.

Resolutions

1. There are seven types of business organisations. Here are three examples their and maincharacteristics:

The Sole Proprietorship (USA) or a One-Man Business (UK):This type of business organisation is owned by a single person, also known as a soletrader. This person receives all the profits, but is also the unique bearer of all the losses. Heor she has unlimited liability for debts.

Limited partnershipIt is a type of partnership, i.e., an association of persons whose common objective is to run abusiness together in order to achieve certain goals or profits. This type of partnershipconcerns a general partner who is associated with another person with limited liability, oreven with more than one partner but who have limited liability.Whenever there is a limited partner in an organisation, this person has no direct involvementin the management of the organisation, but is entitled to have access to the books ofaccountancy.



17

This type of organisation is not very popular as it reduces the amount of capital that isinvested and at the same time it increases the legal responsibility of the general partner.

Joint ventureThis is a temporary partnership that binds two or more persons or organisations, also knownas joint adventure. Their common purpose focuses the undertaking of specific businesstransactions for their joint account.

2.

3. Distribution networks allow goods and services to reach cosummers, through distribution chainsof several diferent types, accordingly with the trade activity in each particular case.

Thus, a retailer is the final trader in almost all of these chain networks and deals directly with thecustomer. He sells goods at above cost price to the customer, and thus has also a profit margin.In most of the products actually sold in the market, the customer can never have access to themwithout a retailer shop.

The retailer has the wholesaler to be his intermediary to the producer of goods and services heprovides to the consumers. Goods are bought in bulk and stored in warehouses before beingdistributed to retail trade network.The wholesaler charges warehousing expenses or sells thegoods at above cost price that may include transport as well. He has a profit margin. He is themain link to the producer.

In fact, without the two later intervenients in the supply chain the producer could never have hismerchandise to be sold into the greater market. However, he sometimes has his own chainstores to reduce final costs and improve competitiveness of his organization. This is the mostrecent trend in the USA and Europe, where factory outlet stores, franchise businesses and mailorder businesses are substituting traditional distribution chains.

4. Buying in bulk gives the buyer the opportunity to negotiate prices for a larger quantity ofproducts. It permits also a better distribution of the fixed costs suported by the wholesaler, suchas warehousing, trasportation, insurance and others, contributing thus to a higher profit margin.

5. Factories outlet stores eradicates the intermediary in order to increase the producers profitmargin, trade volume and turnover. Through them the producer sell directly to the finalconsumer, reducing the products final cost and raising the global level of competiteveness of abusiness organisation.

6. A chain store is a retail outlet that sell a specific category of products and a department store is aretail outlet that sell a wide range of consumer goods.

7. There are several forms of distribution. The advantages of most of them are linked with thesatisfaction they provide to customers located far from the production units. They conveyeffectively goods to the final market in exchange of a fee that constitutes their profit, their reasonto be in the business. They also allow customers to compare the prices and the quality ofdifferent products within the same range of utility. The wholesaler has the advantage ofconveying large quantity of merchandise to various retailers, thus reducing their costs. Theretailer on other hand, is close to the consumer, permiting a rapid and confortable satisfaction oftheir needs.



The disadvantages are mostly regarded to the higher costs this intermediaires put into the finalproducts and over the production costs, as they may include warehousing, transportation,insurance and other poss-production costs into the final price.

8.

9. ..

10. ..

11. ..

12.

ACCOUTINGENGLISH II

II. A BUSINESS TRANSACTION

II. A BUSINESS TRANSACTION IEFP

Accounting English II Guia do Formando 21II

Objectives

At the end of this chapter students must demonstrate an ability to use appropriate managementlexis, marketing vocabulary and communicative strategies.

Topics

1. Marketing

2. Consumption

3. Selling

Exercises

Resolutions

IEFP II. A BUSINESS TRANSACTION

Guia do Formando Accounting English II22II

1. MARKETING

Changes may occur at any level in the business world, but what may stand as perennial goals arethe selling and buying of goods on the market in parallel to the profit-driven targets of the businessorganisations.

In order to sell goods successfully, a thorough knowledge of the market trends is required. This canonly be achieved through a marketing mix.

Elements of the marketing mix

Market Research

It primarily involves three main steps:

collecting information through surveys for example.

analysing the information that has been collected so as to spot the number of potentialconsumers for a product. What can be main the successful lines of the product?

drawing the necessary conclusions from the results so as to evaluate the profitability of theproduct.

Market research results are then forwarded to three main departments:

Product research that will be focused on consumers wishes.

Consumer research that will pry into consumers tastes and habits.

Motivational research that will psychoanalyse consumers buying motives.

These methods may rely on the hierarchy of needs theory drawn by Abraham Maslow. Indeed,Maslow observed five categories of needs having a pyramidal ascending importance. Each levelrequires being satisfied in order to proceed and pass on to the upper level of needs. The two basicneeds are biological, the others are social and self-actualisation needs.



Self- Actualisation

_______Esteem______

Affiliation or__________ Acceptance___________

Security or__________________Safety__________________

____________________Physiological___________________

Maslows Hierarchy of Needs

As marketing focuses on consumers satisfaction, Maslows approach helps distinguish betweenessential and superfluous products that would require motivational research from depthmerchandisers in order to find means to influence consumption.

Advertising

It is another part of the marketing mix. It tackles several aspects such as a product concept, nameand design. It may also define a price according to the consumer target it is directed to.

The distribution process is part of its concern as well. Indeed, the selection of the retailers must fitthe type of product entering the market.

Equally important is the way the product is exhibited, displayed, promoted and how the informationabout the product can reach the consumers and incite them to try and adopt the product.

Advertising consists of an increasingly profitable business. Advertising agencies strive for innovativeand creative ways of conveying information about brands (corporate or company advertising),products, general information, and even ideologies.

Globalisation brought another dimension to advertising as its current trend moves towardsinternational, multinational or global advertising campaigns. Advertising agencies are buying up localor national agencies all over the world so as to create a global network that can intervene in aworldwide scale simultaneously. Moreover, competitiveness has become so fierce that agenciestend to stretch their investment and increase profits by making one single global advertisingcampaign.

Market segmentation

Mass-consumption is fading away. Consumers tend to react to originality, innovation, in fact toanything that outstands them from the rest. Thus, market trends need to be accurately segmented inorder to satisfy todays consumers lifestyle and values.



Product-pricing

This is a fundamental element of the selling process as on it lays all the potentiality derived from thecompetitive advantage.

There are several steps involved.

a) Before a product is conceived, a market research must be undertaken in order to detect orprobe the needs, desires or even unconscious whims that customers may express.

b) Then, an analysis of the results obtained in the market research will outstand a customersprofile and thus a possible product profile.

c) In its turn, the results of the analysis will help a designer in his creative approach of apotentially successful product. He or she will determine the functionality, shape, colours, andthe materials of the product.

d) With the designers project, an engineer will have to ponder on the most adequate productionprocess in order to efficiently manufacture the product. Such factors as the maximization ofraw materials and time, will have to co-exist with other concerns dealing with quality and thecompliance with safety rules, but also with the least possible rate of losses throughout theproduction process.

e) Once it is produced, a distributor chain will convey the product directly to the retailer or storeit in a warehouse, in order to sell it to wholesalers and then retailers.

f) The retailer will put into practice elementary marketing strategies to sell it as fast as possibleand in the best financial conditions as competitiveness imposes him to.

g) This product is sold to the final consumer at a final price that has included in its progressiveevaluation all the costs and mark ups of the different intervening elements, such asmarketing, production, distribution, and commercialisation.

Thus, we can say that: COSTS + Mark up (profit margin) = PRICE

This formula is applied whenever there is a commercial transaction.

Price is an unavoidable reality but quite intricate to track, as there are too many steps to take intoaccount and too many subjective approaches involved in determining the right profit margin.

Nevertheless, a product and its price tag must correspond to the final consumers expectations aswell as the notion of the best correspondence between quality and price.

Other factors are determining in the product-pricing process. Indeed, the fame or popularity of abrand, the place where the product is commercialised, the standard of living of the country where itis sold, economic or political conjunctures, tax or protectionist policies, may alter the final price fromone commercial spot to another.



2. CONSUMPTION

Consumerism is the unique target of most business organisations. As a fact, the endless play,staging an ever-increasing offer of goods and services opposed to a variable demand for goods, isstill highly popular.

Variable consumption

An array of external factors to the consumers demands affect his or her buying habits and rates.Indeed, we have recently noticed how influential September 11th dramatic events have been on theeconomy and more particularly on consumer spending. Consumers income, employmentopportunities, unemployment crisis, interest rates, inflation, terms of credit, exchange rates,economic or even political crises, are some of the external factors that may interfere with theconsumers demand rates.

In times of crisis or instability, consumers focus their spending needs upon non-durable goods, suchas food and clothes that are considered as primary needs. These expenses must be added to thefixed services like rent, mortgages, utilities, educational expenses, health care, which constituteabout half of a household spending rate.

Durable goods, such as a house, car, household appliances and furniture are considered as seconddegree priorities and await better financial or economic conditions for consumers to willingly investupon them or at least consider purchasing them.

Consumption versus GDP

Economic analysis and statistics have demonstrated that there is a proportional growth betweenconsumer spending rates and GDP. Income raises generally lead to a higher consumption rate.Nonetheless, we must take into consideration that consumers do not spend all their earnings; theyalso save a share of their income. During economic crises, consumers tend to save a greater shareof their income and also they prefer not to buy too many superfluous items, as they fear instability.

Consumption changing habits

Consumers have at their disposal a wide range of products. According to branding expert JackTrout, there are now around 40,000 distinct items in an average American supermarket. From allthese, the average household members only need 150 in order to satisfy their every day needs.

The ways that corporations are adopting to canvass new consumption trends are limitless,nevertheless, here are some examples:



Coca Cola CEO, Douglas N. Daft, attempted to decentralize Cokes corporate structure and toempower local managers all around the world, to develop new products through the creation ofinnovation centers. These centers are staffed by teams of scientists and marketing directors.They aim at adapting the corporations products to the local markets peculiarities. Theirexperiences have resulted into a wider range of flavours. For example, in Turkey you can have apear-flavoured drink, in Germany Fanta has a berry-flavoured characteristic, and in Belgium andthe Netherlands you can have an Aquarius, which is a sports drink. One of Coca Colamarketing directors once said, Our big successes have come from markets where we read theconsumer psyche every day and adjust the marketing model every day.

Another example can be the American company Kraft Foods Inc. Indeed, its Vice-PresidentBridgette P. Heller, had her coffee business marketing team sent to Spanish and Asianneighbourhoods in order to feel on the spot what these costumers really needed or looked for.

Other companies rely on online canvassed and collected information. This also enablesmarketing directors to have their teams interact directly with the customers or the retailers. Thus,they can obtain real-time information and hasten their products development, testing processesand launching products in chosen markets. This relies on a new marketing approach, a one-to-one marketing strategy that focuses customer share, instead of the old marketing goal: marketshare. Indeed, customer share enhances direct understanding of the individual consumer,thanks to the use of web sites, chat lines, email correspondence, electronic exchanges ofopinions.

The family run E&J Gallo Winery applied this canvassing strategy. As a fact, the company has itsemail address printed on every bottle, thus enabling any one who wishes to test, evaluate andtransmit his or her opinion directly to the firm, so as to refine the final product according to thecustomers demands. The result is a metamorphosis from a cheap ordinary wine to an affordablegood wine.

We are living in a fast-moving society, where products need to get to market quickly, if possibleglobally as well, otherwise their innovative characteristics will rapidly be overtaken by shrewder andmore incisive competitors.

Young customers are not too loyal to brands but they stand at the heart of marketing directorsproduct research and development, as the latter are perfectly aware that teenagers represent thehighest rate of consumer share, along with the women. Todays youngsters will be tomorrows adultsand no marketing expert wants to hurt either of them, on the contrary they strive to cherish them andsatisfy their consumption whims.



3. SELLING

The most common of all commercial acts is the act of sale, as all the economic activity aimsessentially at selling with a profitable margin. Conflicts may arise between buyer and seller and thecase must be presented to Trade Courts.

Commercial acts

A commercial act implies buying with the intention of reselling at a profit, contrarily to a civil actwhich only concerns purchasing for personal use.

There are many commercial acts:

Transforming raw materials, or half-finished products into finished goods.

All the operations undertaken by middlemen.

Transportation subject to payment.

Any service that is provided.

The contract of sale

It is a contract in which the seller transfers the right of property onto the buyer for an agreed price.

Nowadays, a contract of sale is always a written document concerning existing goods or goods yetto be made. The terms of delivery must be accurately indicated, as well as the place of delivery.

When an order is placed the seller may require a partial payment or a down payment. If the clientdecides, later on, not to buy the goods anymore, the down payment cannot be refunded, whereas ifthe seller cannot honour the contract, the down payment must be returned to the buyer.

Goods may be sold:

By sample: it is a small portion of the merchandise enabling the buyer to check its quality,shape, colour, size, resistance, or taste. Purchased goods must be up to sample otherwisethe buyer may reject them and claim for a reduction or even a compensation.

By type or standard type: any kind of farm or agricultural produce must be in conformity with aspecific type, otherwise the buyer may claim for the price to be adjusted accordingly.

On inspection: the goods are exhibited in a showroom or at a fair.

On approval: or on appro: If the buyer is not satisfied with the delivered goods then the goodsmay be returned to the seller.



By description: Catalogues, leaflets, brochures, and 3D computerised presentations may conveythe necessary information to the buyer. In such a case, order forms are enclosed, or attached if itis an electronic order, so as to enable the buyer to place an order rapidly.

In mail order business, cash on delivery (COD) is generally required.

Cash sales: delivery and payment are immediate or in a short delay. It is then called promptcash.

Credit sales: delivery is immediate but payment is settled at a later date or according to aninstalment plan, or deferred payments. The buyer is owner of the goods as soon as the firstpayment is made.

Hire-purchase sale: the buyer pays a kind of a rental fee (it is the hire system), which isdeducted from the total price. The buyer is only considered the legal owner at the moment of thelast payment.

Forward sales: delivery and payment are deferred.

Weights

There are several weights to take into consideration:

Net weight: weight of the goods before being packed.

Tare: weight of the package.

Gross weight: total weight of package and goods.

Price reductions

In some circumstances a reduction may be granted to the buyer.

A discount: if the buyer pays before the end of normal time allowed for payment due.

A price reduction: it can be granted if the buyer complained about a slight flaw in the quality ofthe merchandise or if it is not up to sample. It may also be granted for purchases in bulk.

A rebate: it is a discount on regular orders, or large orders. It is calculated on the sum total of thepurchases.



Exercises

1. Write a definition of marketing. Then illustrate your approach of marketing with examples andpresent your work orally to the class.

2. How are prices fixed?

3. Write an essay on the pros and cons of consumerism. Rely your commentary on preciseeconomic, political, social and cultural examples.

4. What are the intervenient factors of a commercial act?

Resolutions

1. The activity involved in transfering goods from producer to consumer requires that theproducer, the retailer and also the wholesaler, each in his own business, keep abreast ofchanges in their market and understand how these will impact in their customers. Marketingis thus the combination of product offerings used to reach a target market for theorganisation.The targeting mix comprises the Product (what the actual offering comprises),Price (the value exchanged for that offering), Promotion (the means of communicating thatoffering to the target audience) and distribution (also known as Place, the means of havingthe product offering available to the target audience. The marketing mix is also known as thefour Ps.

2. Prices are fixed including in its progressive evaluation all the costs and mark ups of thedifferent intervening elements, such as marketing, production, distribution, andcommercialisation.Thus, we can say that: COSTS + Mark up (profit margin) = PRICE

3.

4. The intervenient factors of a commercial act are the transforming of raw materials, or half-finished products into finished goods; the operations undertaken by middlemen in the buyingwith the intention of reselling at a profit (contrarily to a civil act which only concernspurchasing for personal use), the transportation subject to payment and any other servicethat is provided with the objective to sell with a profitable margin.


III. FINANCIAL MATTERS

III. FINANCIAL MATTERS IEFP

Accounting English II Guia do FormandoIII

33

Objectives

This chapter provides an overview of the banking system, which should be able to give students theability to understand better the business environment.

Topics

1. The Bank Sector

2. The Finantial Market

3. The Structure of a Business Organisation

Exercises

Resolutions

IEFP III. FINANCIAL MATTERS

Guia do Formando Accounting English II34III

1. THE BANK SECTOR

Banks are essential business organisations that offer financial support to their clients that may beindividuals or business organisations. Their services include the safekeeping of their clients money,the granting of credits, investments, the transfer of funds, the exchange of money, the financialsupport in business transactions, the issuing of money and cheques and many others.

Bank accounts

Deposit accounts

In these accounts the clients deposit their money, after filling a deposit slip and receive a small rateof interest.

The deposited amount is credited to the account and that sum is registered in the clients passbookconfirming the new balance, which is a convenient reminder offered by most American banks.

As to the withdrawal of important sums of money, banks require being notified a given length of timebeforehand, since they can use their clients money to invest or to lend to other clients at interest.Banks are not supposed to have all the money that is deposited in their safes at the disposal of alltheir clients.

Current accounts

In these accounts, clients deposit cash, cheques or bills of exchange. They can withdraw any sumthey wish by cheque, or even order transfers. Due to this, interest is not generally granted for theseaccounts.

A fee is charged for the issuing of cheques. And the client is given a chequebook, which maysometimes have cheques stubs.

According to the average credit balance, banks may allow an overdraft. Then, the account is in thered. In such a case, the borrower is charged interest by the bank for the amount of money that wasoverdrawn and for the amount of time the clients account remained in the red.

Discount

In order to cash a negotiable instrument before the date of maturity, a tradesperson can deposit it into his or her bank. Nevertheless, the bank enters it on the credit part of the tradespersons account,subtracts a percentage of interest that is known as a discount, which is in fact the bankscommission for advancing the money before the due date.



35

In its own turn, the bank presents the negotiable instrument to the national bank, which will chargean interest as well.

Discounts are an accurate indicator of the money supply. State banks can raise or lower the rate ofdiscount and thus, control inflation.

Credit

Any credit operation incurs a charge of interest. Moreover, when granting credit in form of loans, abank always requires guarantees, so as to secure its investment.

Unsecured loans allow the client to have his or her current account debited up to a certain limit.

Ordinary personal loans enable the client to dispose of an agreed amount of money for a definitetime.

Secured loans are guaranteed by collateral and consist of securities, goods, or real estate, on whichis granted a mortgage loan.

Another form of credit is the credit account, which enables the client to pay interest only on the sumthat he or she borrows and for the specific period of time he or she needs it.

Documentary credit is used in international trade. A bank lends money to an importer in exchangefor the shipping documents.

Other services provided by banks

Travellers cheques

They look like bank-notes with a fixed nominal value and can be bought at the bank. They are saferthan bank-notes as they can only be acknowledged when they are countersigned by the buyer.Indeed, they must bear the buyers name, and identification numbers.

They are exchanged for cash and in case of loss or theft the buyer can be refunded if he or she hasa receipt.

Letter of credit

A bank issues a letter of credit to a correspondent bank in another country. This order authorizespayment to the bearer up to the amount stipulated on it.

Exporters prefer letters of credit to any other form of payment, as they are a solid, and rapid proof ofpayment for the goods before they are shipped.



Miscellaneous support

Banks exchange foreign currencies according the official rates.

Clients may rent the custody of their valuables in the banks safe.

Banks perform automatic payments for their clients utility bills, insurance premiums, etc

They also inform on the financial status of businesses at their clients request.

They may provide advice on investments.

Credit cards

Banks or even retail stores can issue credit cards in order to enable a client to charge payments.The client pays a fee for this service and pays back the amount that he or she used in credit bymonthly instalments of an agreed sum.

A credit card becomes very convenient when travelling, as it can be used in shops, restaurants,theatres, etc... For example the VISA or the AMERICAN EXPRESS cards can be used all over theworld.



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2. THE FINANTIAL MARKET

There are two main kinds of exchanges: commercial exchanges and stock exchanges. Both of themare markets where goods and securities are bought or sold at prices that are constantly fluctuatingaccording to the law of supply and demand.

If there are too many commodities for the number of potential buyers, then prices fall.

If products are scarce, then prices rise. The same rule applies to the number of buyers and itscorrespondence with demanded goods and securities.

Commercial exchanges

They are also known as commodity markets. There, raw materials such as agricultural produce, ormetals are offered to buyers, who bid.

The most important exchanges set the trend in market prices, or quotations for all the othercommodity markets. For example, Chicago exchange which sets the quotations for wheat andgrains; Sydney sets them for wool exchange; New Orleans for cotton; Malaysia for rubber.

These transactions are achieved on the spot market or the futures market.

The spot market concerns goods for immediate delivery. This implies that they must be availablewithin a few days or even at once. Buyers pay the spot price quoted at the very moment the saletakes place. The daily press informs about the fluctuations in commodity prices.

On the futures or forward market contracts are made to sell goods that will only be available at afuture date, but at a price agreed on at the time of purchase. It cannot be altered whatever thefluctuations in prices may be. Payment is settled at later date called term.

The main advantage of buying commodities on a futures market is a speculation on rising prices forwhatever materials a manufacturer or supplier may want. Speculators always hope that operationswill be profitable to the buyer or seller because of a probable rise or fall in prices.

If a speculator expects a rise in prices, then he buys goods at a low price planning to sell them at aprofit on the day of the term. His profit margin is the difference between what he paid for the goodsand the sale he later achieved at a higher rate. After this, he is considered a speculator for the riseand is called a bull. Nevertheless, if his expectations fail he may want to postpone delivery in orderto avoid losses. He will have to pay a continuation charge known as a contango.

If there is a speculation on a fall in prices, the seller contracts to sell today hoping to be able to buylater at an even lower price. His profit margin is the difference between the two quotations. He isthen considered a speculator for the fall and is called a bear. If he is wrong then he will have to paya backwardation.

Speculation tends to be either abusive or fraudulent. To prevent it from falling into these twoextremes, futures markets are strictly regulated by law, and any operation must be made throughcommission agents or sworn brokers.



Stock exchanges

Their transactions deal with securities: stocks, shares, bonds, debentures.

Shares

Shares are a part of a company. They are sold whenever there is a need to raise a companysauthorised capital and must be fully paid up.

The investors who buy them are called shareholders who are entitled to profits in the form ofdividends. Nevertheless, dividends may be partly or totally reinvested into the business organisationaccording to specific needs for capital.

They are numbered and cannot be divided up.

There are several kinds of shares:

Preference shares: they have a fixed rate of dividend. They must be repaid before theothers should the company be wound up.

Ordinary shares: They have no fixed dividend and are paid after the preference shares.

Deferred shares: They can only get their share of dividends after preference shares andordinary shares have been paid.

Founders shares: only companys promoters and founders are entitled to them. Theynormally yield no dividends throughout the first years of a companys life. Once thisperiod is over, they may yield substantial revenues.

Stocks

They have the same characteristics as shares but differ in two points: Stocks can be divided up andthey have no numbers.

Subscribers are called stockholders.

Bonds

The government issues them in order to raise money for public expenditure such as treasury bonds.Subscribers are called bondholders.

Bonds can be redeemable if the company agrees to refund them at a certain date. They may also beperpetual if they are not paid off at any fixed term.



39

Debentures

They are issued whenever the state intends to develop a sector of the economy, such astelecommunications, energy production, or even when a company needs to increase its capital, orenlarge its business scope.

Subscribers are called debenture holders.

Debentures can be either redeemable or perpetual.

Securities have fluctuating prices and cause even greater speculation than do commodities. Theyfollow the companies performance and adapt quotations consequently: the bigger the profits, thehigher the quotation.

The stock exchange publishes an official index every afternoon. It shows the opening and theclosing prices. The first figure that is quoted represents the buying price, the second represents theselling price.

Stockbrokers

They are agents who buy or sell securities on the stock exchange on behalf of their clients.

Jobbers

They can only be found in the London Stock Exchange.

They sell and buy securities in large quantities on their own account and contrarily to stockbrokersthey are not in direct contact with the general public.

The most influential Stock Exchanges

The London Stock Exchange (LSE) started in the 17th century because the government and tradingcompanies needed to raise money by public subscription. Stockjobbers met in the Royal Exchange,or in coffeehouses in the City and acted as brokers.

In 1773, a new building was acquired, the Stock Exchange.

Today, the Stock Exchange building is a more recent one and is commonly called The House.

The London Stock Exchange (LSE) motto is: Dictum Meum Pactum, which means, My word isbond.

The New York Stock Exchange (NYSE) superseded its supremacy. Indeed, most speculators preferto deal with Japanese or American investment companies, which are cheaper and more efficientthan their British counterparts.



In 1982, the British Chancellor of the Exchequer, Mr Nigel Lawson, opened the City to internationalcompetition, in order to protect investors and extend the London market share in the world so as toincrease the volume of British invisibles.

In order to compete with important foreign companies such as Merryl Lynch, which actssimultaneously as a broker, a jobber and a bank, many London brokerage companies decided tomerge thereby increasing their capital.

As a result of all these changes, international dealerships are allowed to be members of the LSE.

Another important exchange is the National Association of Securities Dealers Automated Quotation(NASDAQ). It links dealers all over the USA and Europe through computerized systems.Competition has become fiercer and fast-moving as it tends to use computer-based trading systemssuch as the NASDAQ or even the Stock Exchange Automated Quotation International (SEAQInternational) located in London. These systems reduce transaction costs considerably and they arealso less regulated than the conventional stock exchanges.



41

3. THE STRUCTURE OF A BUSINESS ORGANISATION

A business organisation requires a departmental share of operational tasks and responsibilities.Even though changes are occurring in the organisational structure, the pyramidal business concernstill prevails.

The Chief Executive Officer stands at the top of the organisation, then come several departments,such as the Finance, Statistics, Sales, Personnel, Legal, Production and many more. Meetings areregularly held in order to discuss problems, exchange ideas and information, plan projects, andmake decisions.

CEO

This title can also be known as general manager or managing director.

A Chief Executive Officers basic part within the business organisation is to make importantdecisions at the whole organisational level, and to implement the decisions previously voted by theBoard of Directors.

He decides which strategy would be most adequate for the organisation. In order to achieve this aimsuccessfully, he has to be aware of economic and financial trends that may affect the companypolicy either positively or negatively.

He also coordinates departmental activities, represents the company when meeting importantcustomers, suppliers or when dealing with bankers, trade union officials, etc For this, he needs theassistance of efficient executive secretaries who schedule meetings, make practical arrangements,pass onto him all the necessary information he might require at a precise moment for a givencircumstance.

He has no fixed working hours as his social relations play an important part in his managing life.

The Finance Department

Its main role is to manage the business organisation financial resources in the most profitable waypossible.

It is in charge of investing the companys money in profitable opportunities. It also secures loans,supervises credit operations and handles all the banking matters.

Its consulting intervention is fundamental before any large-scale plan is drawn.

It is in charge of the financial report for shareholders meetings.



The Statistics Department

It compiles and organises all the information that refers to productivity levels, input and output. Then,it draws a comparative analysis relying on previous results, or even on competitors records. Itsstudy is valuable to estimate future performance levels and correct strategies, to check the efficiencyof production lines or teams and to accurately enable any manager to make decisions.

Nowadays, specifically adapted computer programmes perform practically all these tasks,presenting graphs and tables, speeding up and simplifying intricate calculations.

The Sales Department

It deals with the clients directly, attending their calls, informing them on the products or new lines, onthe terms of payment and delivery. They stand between production and customer service.Sometimes if there is no separate marketing department, the sales department is also in charge ofthe promotion of new products or lines.

Its sales force may represent the company at international fairs or exhibitions.

The Personnel Department

It deals with any matter involving the companys employees.

It selects staff members thanks to interviews, tests, medical examinations, and motivational reasons.

It also plans and organises on-the-job or outside training sessions or courses.

It is in direct contact with employees requests and any kind of people-related problems. That is, theyhave to fix wages and salaries. They have to reckon overtime, sick or pregnancy leave, paidholidays, work accidents. They might strive in order to obtain group rates for employees, mainlycomplementary insurance, life insurance or any other social benefits.

In general, they supervise the infirmary or medical support operating in the company.

They also organise entertainment events or sports activities for the whole staff.

They manage the companys canteen or restaurant.

The Legal Department

It only exists in large companies and attends to legal matters affecting the company, such aslawsuits that can arise with customers or suppliers, as one of the most common cases is to obtainpayment for debts owed to the firm. It might also deal with liability laws, involving the companysresponsibility as to manufacture flaws and the damages that they may cause.



43

The Production Department

It is responsible for the relation between input and output and thus for profitability rates, performancelevels.

It also has to deal with the maintenance of the equipment, as on it depends all the productivityresults, the product quality levels, the delays of delivery and consequently customers satisfactionlevels.

The General Office

It regroups all the administrative support to the whole company. It includes secretaries, accountants,assistants to the different departments, data-processing personnel, receptionists, etc

Their basic duties are: sorting and opening incoming mail, preparing outgoing mail, receiving andsending memos and letters, filing duplicates of any letter or document, scheduling meetings orinterviews, organising business trips, taking care of all the details concerning the companysparticipation in international fairs, collecting and processing data from and to specific departments.



Exercises

1. What is the role of banks in our society?

2. Write an essay on the use and abuse of financial forces and credit facilities in the businessworld today. Mention a few examples to defend your points of view.

3. What are the differences between commercial and stock exchanges?

4. Explain which is the role of credit in a retail department business (supermarket)?

5. How are most business organisations structured and which improvements or changes couldbe undertaken in order to make their structure even more efficient?

Resolutions

1. Banks are essential business organisations that offer financial support to their clients. Thesemay be individuals or business organisations. Their services include the safekeeping of theirclients money, the granting of credits, investments, the transfer of funds, the exchange ofmoney, the financial support in business transactions, the issuing of money and cheques andmany others.

2.

3. The commercial and stock exchanges are both markets where goods and securities arebought or sold at prices that are constantly fluctuating according to the law of supply anddemand. Their differences reside in the goods and services they provide. The commercialexchange deals with commodity products. The stock exchange market deals with securities,such as stocks, shares, bonds and debentures.

4. In a retail department business (supermarket) consumers generally pay in cash or in a shortnotice (max. 30 days), while the owner of the supermarket buys all products in bulk and paysfor them at a substancial greater period of time (three to six months). The difference in theterms of payments allows the supermarket a way to finance the overall business andcontributes as well to the profit margin in a very substancial way.

5. The structure of a organisation depends on its objectives and business. Therefore, the morecomon elements are the CEO (also known as General Manager ou Managing Director); theFinance Department; the Statistics Department; the Sales Department; the PersonnelDepartment, the Legal Department; the Production Department and the General Office.


IV. INTERNATIONAL TRADE

IV. INTERNATIONAL TRADE IEFP

Accounting English II Guia do Formando 47IV

Objectives

At the final of this chapter students should fully understand the mechanisms of international trade,the export activity and all associated finantial requirements.

Topics

1. How to Export and Import Goods and Services

2. International transportation

3. The Role of the insurance Activity

4. The Balance of Trade

Exercises

Resolutions

IV. INTERNATIONAL TRADE IEFP

Accounting English II Guia do Formando 49IV

1. HOW TO EXPORT AND IMPORT GOODS AND SERVICES

There are various reasons for firms to export or import: trade deficit, need to expand market share,economies of scale, getting higher profits, etc

This can only be undertaken after an adequate market research both at a domestic level and at aninternational level. The collected data enables to accurately target a marketing mix, to organisedistribution and supply chains, to define pricing strategies and global business policies.

Target a marketing mix

Several questions must be answered in order to target a marketing mix:

Is it a profitable market for the product?

What is the growth rate of the market?

Are there any competitors and who are they?

How have the prices changed and what are the causes for these changes?

Where can the product be stronger?

Governmental or private institutions, like Chambers of Commerce, ICEP, COFACE, or marketresearch firms may answer these questions.

Distribution and supply chains

There are several factors to take into consideration before choosing any available distributionchannel:

direct selling to the foreign importer: it requires no middleman, but it is necessary to have aspecialised shipping department.

selling through an agent or intermediary of the importer in the exporters country: if themarket has profitable opportunities, the exporting firm may merge with local agents,distributors or even retailing networks. Later on it may even acquire its own distributionsystem.

selling to export merchants who would attend to marketing matters in the importing country.

selling through the exporters own agent in the international market.

IEFP IV. INTERNATIONAL TRADE


The role of the export manager

His or her responsibilities cover market research, sales promotion, price quotation, shippingservices, defining terms of payment and delivery.

An export manager has to check if all the technical requirements are complied with, whether theused systems of weights and measures are locally recognized, whether the safety norms arerespected for a particular market, if the packaging is suitable, not forgetting the use of the nativelanguage when necessary.

This manager is in charge of all the documentation and insurance policies, the sending of a pro-forma invoice, certificates of origin, shipping notes, bills of lading, invoices, when necessary exportlicenses as well.

Export financing

Finding the money to finance exports is quite as important as choosing the right financing system.

Affiliates of multinationals may use an open account financing. Other trading partners who do notusually do business together may require a confirmed letter of credit from a commercial bank.

There are programs such as the Working Capital Guarantee in the United States of America thatenable exporters to purchase or produce a product for export as well as finance short-term accountsreceivable. This particular program can be used either to support ongoing export sales or to meet atemporary cash flow demand arising from a single export transaction.

Several private companies offer export credit insurance covering political and commercial risks.

Another help may be provided from Overseas Private Investment Corporation (OPIC). It is anAmerican organizati

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