ESP - English for Science Professions

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Table of contents. I

Foreword.. II

Acknowledgements III

UNIT1 Getting Started? ... 1

UNIT2 The Basics Of Business ........ 17

UNIT3 Operations ..... 39

UNIT4 Marketing ............. 59

UNIT5 Finance And Accounting . 77

UNIT6 Leadership . 91

UNIT7 Information Systems .. 97

UNIT8 Systems Analysis .... 115

UNIT9 Programming .... 127

UNIT10 Decision Support Systems 143

UNIT11 I.T. Security ... 151

Project 159

References 161


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s

his book serves a dual purpose: to give students of English an introduction

to the English terminology of the Engineering professions, to improve their

overall use of the language, and to enable them to participate actively in

their prospective courses. The contents of our Engl ish for Science Professions

have been designed for high, intermediate and beginner level students who are

supposed to be already familiar with the basic and common structural patterns of

the language. We believe it aptly fits with our students of the Preparatory Year

who have now emerged from their past experience of General English ready to

embark on a more advanced and specialty-oriented learning experience in their

academic life.

The book focuses on important terminologies that are commonly used in

academic business and information technology courses. Key concepts and theories

are covered in from the two disciplines, giving students an opportunity to familiarize

themselves with what they can expect in their respective majors. Reading and writing

are the main skills that are covered in this course.

Pictures and illustrations are used to provide students with a clear

understanding of the course material. Each UNIT is divided into four parts. The first

three parts constitute material related to the discipline. The fourth part of each UNIT

contains either four or five exercises to test students abilities and understanding of

the material. At the end of each chapter, there is a glossary of the most important

words required for the students. The students are responsible for filling in the

definitions and any notes.

The English focus section at the end of each UNIT is crucial for enhancing the

students abilities in writing and academic research. The sections are developed

based on the difficulties faced by students in their disciplines. At the end of the book,

a group project should be carried out throughout the semester. Each UNIT

contributes to the completion of this project. It is left to the teachers discretion on

whether lower level students will participate in the project.

T


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His book came to fruition through the efforts of the English Language

Department and the Deanship of the Preparatory Year Programme at

the University of Dammam in collaboration with the faculty of the College of Business

Administration.

ESP Committee

English Language Department

T


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GETTING STARTED

Key Terminologies:

Classify Income

Multinational Intangible

Literature International

Analysis Outcome

Process Transformation

Annotate Unlimited

Business Nondurable

Employees Competitive

Customers Subcontractor

Overestimate

After reading this chapter you will be able to:

1. Break words down to their basic form2. Find the meaning of a word from context3. Annotate an article4. Understand the writing process5. Do a basic literature review


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1.1.Vocabulary

Business has been around as long as man walked the earth. Without business,

we would not be where we are today. Have you ever thought of what life would belike without doing business? Business is a part of

our nature as people. Imagine you were on an

Island with another person. You have some food

but no water, and he has some water but no food.

What would you be inclined to do?

USING THE TERM BUSINESSThe word business in English has different uses. It is important to know when

and how to use the term businesswhen writing and speaking. The word business

can be used as a general word. For example, Mind your own business! In this

example, the word business is a non-count noun. The word business can also be

used to refer to a company, for example, She owns her own business. Here, the

term business is a count noun. Another way to use the word business is in relation

to working or doing some type of work. For example, He decided to go into business.

Business, in this example, is a non-count noun.

Is the italicized word a count/non-count noun?

1. He always gets himself into other peoples business. count-Non

2. I would like to do businesssomeday. .

3. Omar is good at business. .

4. Do you think that we can go into businesstogether? .

5. A bookstore is a good businessto open. .

Business is pronouncedbiz-nis, not busy-ness.The word businesspredates 950 A.D. andcomes from the Old Englishword Bisignes.


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What are the prefixes and suffixes in the following words?

Transformation Classify International Intangible

Organization Outcome Management Income

Overestimate Nondurable Unlimited Subcontractor

Competitive Multinational Ownership

Look at the words in the practice box above. What do they mean? Use a

dictionary, or go to www.dictionary.com, to find the meanings of these words. Try to

form sentences with these words and share it with your class.

Reading!

Wal-Mart is reported to be the second largest company in the world and is

second only to Exxon-Mobil based on revenue. The company has reported sales

which amounts to a larger number than the GDP of countries like Norway. This

comparison of Wal-Mart as a company to countries of the world exemplifies the

magnitude of the corporation. In comparison to competitors, Wal-Mart recorded sales

higher than Target, K-Mart, and Sears combined. William Cody reported that Wal-

Marts day after Thanksgiving sales were $1.5 billion, which is higher than the GDP

of 36 countries. Wal-Mart also employs 1.7 million people which makes it the secondlargest employer in the United States, the first being the government. The work force

of the company is larger than General Motors, Ford, and IBM combined. It is

estimated that 138 million people shop at Wal-Mart every week. Wal-Marts annual

sales were reported at $285.5 billion in January 2005.

The Wal-Mart business model is about higher sales volume and technological

innovations coupled with lower labor costs. The company achieves higher sales

volume by offering low prices, which reduce costs by two effective methods, a moreeffective distribution system and low labor costs. Wal-Mart has a high employee

turnoverand this is used to the companys advantageas high turnover means that

more employees do not qualify for benefits. In order to sustain low price, the


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GETTING STARTED

company has to reduce supplier costs. Wal-Mart revolutionized supply chain

management in the business world.

Wal-Mart operates in the retail industry, which is one of the largest contributors

to the economy. The company maintains roughly 20 percent of the grocer retail

industry in the United States. The retail industryis the second largest industry in the

United States and it generates roughly $ 4 trillion annually. The retail industry

accounts for 12 percent of the business establishments in the United States and this

shows that the industry is a high capacityindustry.

Writing

Write down a full definition of business.

Answer the following questions about the previous reading.

1. According to the article, which company is the largest company in the world?

2. Why is a high employee turnover good for Wal-Mart?


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3. Based on the passage, roughly how much does Wal-Mart contribute to theAmerican Economy? (HINT: You have to calculate the answer based on the details givenin the passage)

4. Give an example of a sentence that provides supporting evidence.

5. Complete the sentence: "Wal-Mart made more money in one day than..made in one year. (HINT: The passage shows acomparison of Wal-Mart to companies and countries).

Use the words provided to fill in the blanks.

Customers Employees Managers

Intangible Tangible Income

Goods, or products, are ..,which means they can be touched

and held. Unlike services, which are .. Companies generate

.. through selling their products and services to .. who

buy their products. .. companies sell their products all over the world,

whereas local companies sell only in their countries or even cities.

Big companies, like Wal-Mart, have many .. that work for them.

Hiring people is not an easy thing to do, companies will often have human resource

.. who spend many hours trying to find qualified people to work for them.


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GETTING STARTED

Business writing can take many different forms. You may be writing a business

plan, a strategic plan, organizational goals, an employee handbook, or a business

article. It is important to practice your business writing skills. What should you

consider when writing business-related topics?

It is important to know your subject before you begin writing. Ask yourself the

question, what am I writing about? Are you supposed to be defining, explaining,

analyzing, or arguing? Are you supposed to research, report, or interpret? What are

the limits of your paper?

Knowing who is going to read your paper is an important step to writing. Ask

yourself questions about your audience. Who is going to read your paper? (Most

likely your teacher), who is supposed to read it? You should find out what is

expected of your paper. What do you know about your readers? What will they look

for?

1.2. Introduction to Writing

Subject Analysis Audience Analysis

Purpose

WritingStyle

Research Format

Fig 1-1The Writing Process


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At this level, you are expected to learn academic writing for business and

information technology studies. We will only cover the basics of academic writing

for business.

Your teacher asks you to write about the meaning of business.

Is this information enough to begin writing your paper? Without a doubt,

the answer is no! How long should my paper be? What exactly am I writing

about? Do I need research?

How should you start writing this paper? You should stop, think, and ask

questions before you start writing.

The first step in the writing process is to identify the subject. Ask the teacher

for details. Ask what the purpose of the paper is, are you supposed to explain what

businesses do? Are you supposed to define the term business?

The second step is the format. How should I format this paper? APA style?

MLA? Chicago? What font should I use? The size? Double-spaced?

The third step is to identify the audience. You know that your teacher is reading

this paper, but is this paper supposed to be written for someone else? What sort of

research do I need? Should I cite the textbook? Should I research on the Internet?

When these questions have been answered, you will have a clearer view of

how to start your paper.

Exam le


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GETTING STARTED

Technical reading can be a difficult job for anyone. The greatest difficulty that

students face after writing is reading. Textbook reading can be difficult and take lots

of time. If you learn to read smarter, you can read faster and understand more. Start

by getting a notebook! Yes, a notebook.

The first step in reading should be to skim (quickly read) the article or material.

Skim reading is simple, read the titles and sub-titles, first and last sentences of every

paragraph, and any caption, figure, or table. Write down some notes on what you

read.

After you have skimmed the material, start reading carefully. Look for details,

examples, and main ideas. Annotate and take notes in the reading. Highlight or

underline important points or examples. Look for specific information that explains

ideas or theories. Take note of words you do not know, and look these words up in

the dictionary. Use your notebook to create a summarized guide to this reading.

The PC industry has faced a decline in profitability even though the industry

has seen growth over the observed years. Increasing competition is a cause of

reduced profitability. Since the costs of production and distribution have substantially

decreased due to many factors, such as economies of scale, the industry has

attracted a lot of competition. The PC industry is one that requires fast change and

constant upgrades since new technology is invented and old technology is improved

upon in a matter of months. Therefore, the prices of the products devalue as new

products and technology enter into the market and this reduces the profitability of the

firms present.

1.3. Introduction to Reading

Industry information Changes in CostsThesis Statement


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With more companies indulging in a wider product and service selection, the

competition has become fiercer. This industry relies heavily on effective channels of

distribution, and many firms face problems with perfecting their business model to

create value in their distribution channels. Many companies have turned tooutsourcing due to the low costs involved, and generally, lowering costs should give

room for increased profit margins. However, the PC market does not reap this benefit.

The problem with the PC market is with the major competitors within it. Many

of the competitors lack a flexible and efficient business model that creates value.

Research and development plays an important role in the industry. Research and

development are undertaken by the two largest processor manufacturers in the

supply chain. Therefore, the companies in the industry are given low cost parts and

low cost labor, which should increase the profit margins. However, the companies

are experiencing losses in profitability due to their inability to out-perform Dell. This

is due to the effectiveness and efficiency of Dell's business model.

A literature review is a method used to examine published scholarly

information on a specific topic. In order to do a literature review, the author should

gather several reliable sources on a particular field. Literature reviews are an

excellent way to help create well-written papers. A literature review is not a collection

of articles or a summary of articles. Literature reviews are critical analyses of the

information related to a topic.

A literature review should include an introduction and a conclusion. The

introduction should provide the reader with a general idea why the articles or material

Competition

Problems with the PC market Dells strategy


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GETTING STARTED

was chosen for review by the author. The author should provide background

information to the reader before he starts to analyze the articles.

Literature reviews are always written in past tense because the research or

articles have already been completed. When reviewing literature, the author should

look for patterns, strengths, weaknesses, sources, and methods. The most difficult

part of a literature review is evaluating and interpreting the information in relation to

the topic.

Source:Lambert _Pandraud, R., & Laurent, G. (Sep. 2010). Why Do Older

Consumers Buy Older Brands? The Role of Attachment and Declining

Innovativeness. Journal of Marketing, 74(5), 104-121. Doi: 10.1509/jmkg.74.5.104

Literature Review:The authors studied how age affects consumer behavior

specifically based on perfume products. They found that younger consumers have a

greater tendency to change their preferred brands to newer products and brands.

They behave innovatively, with frequent changes. On the other hand, older

consumers tend to remain attached for a longer period to the same preferred brand.They found that among all ages, some consumers frequently change their preferred

brand, whereas others remain attached to it for long periods. This implies that older

consumers are attractive targets because they likely remain attached to a brand

longer. This research is important for consumer research because it shows how age

affects buying power.


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Source:Sriram, S., & Arbor, A. Investigating consumer purchase behavior in

related technology product categories. Marketing Science, 29(2), 291-314. doi:

10.1287/mksc.1090.0506

Literature Review:The authors of investigating consumer purchase behavior

in related technology product categories studied the purchase behavior of consumers

to technology product. This suggests that consumer behavior differ based on the

product being taken into account. They found that consumers would delay purchasing

a technology product in anticipation of declining prices. They also found that

consumers compare the prices as well as the quality of all similar technology products

before purchasing. They found a complementary relationship between three

categories-personal computers, digital cameras, and printers. Consumers acted

differently with technology products because of perception of price decline. This

research is important because it shows that there is no one consumer behavior

pattern for all products, but rather consumer behavior changes depending on what

the product is.


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GETTING STARTED

Exercise 1: Short-Answer Quest ions

1. What is the writing process?

2. How do you annotate a reading?

3. How do you review literature for a paper?

Exercise 2: Cri t ical Thinking Quest ion

What are the reasons students conduct literature reviews?

Exercise 3: Terminologies

Search for the terminologies in the chapter to fill in the blanks for the following

passage:

Wal-Mart is an company that operates in the

industry in America and Europe. Wal-Mart is reported to be

the second largest company in the world because of its Byusing technological Wal-Mart is able to beat their competition.

Another method that they use to costs is by not keeping

employees working at Wal-Mart for a long time, this is known as employee

1.4. Exercises


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Exercise 4: Reading Comprehensio n

Look at the reading exercise in 1.1 and answer the following questions.

1. Find a word in the reading passage that is similar to the word sales.

2. What was the size of Wal-Marts revenue in the year 2004?

3. What is the second largest company in the world according to the passage?

4. Why does the author compare Wal-Mart to Norway?

5. According to the passage, how does Wal-Mart make so much money?

6. Compare and Contrast Wal-Mart to Panda or Tamimi.


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GETTING STARTED

Terms You Should Know

Word Definition Notes

Income

Intangible

International

Outcome

Transformation

Unlimited

Nondurable

Competitive

Subcontractor

Overestimate

Classify

Multinational

Literature

Analysis

Process

Annotate

Business

Employees

Customers


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Writing should be thought of as a process. Many students find writing difficult

because of the time it takes to complete this process properly. If you master the tools

that can help you improve your writing, you will find your assignments easier and will

complete them faster.

While reading and studying, make sure you take a lot of notes. Notes can

reduce the time it takes to write your assignment. When you read or study, group

your notes into main ideas, topics, or connections that you find within the material.

Do not forget to record your citations (author, year, title, publication source, and page

numbers). You want to make sure that you avoid any kind of plagiarism.

Look for connections and trends in your notes. Build on ideas that you have

developed from the course and the notes you took in class. Consider how you can

use them to develop a topic that interests you. Academic writing should be clear and

provide the readers with a well-stated purpose.

Look at the terminologies covered in this chapter; can you construct a few

paragraphs using those words? Try to use the different forms of these words while

writing. Ask your instructor for help if you have difficulty using these words correctly

while writing.

English Focus


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THE BASICS OF BUSINESS

Key Terminologies:

Ownership Partnership

Public Company Stakeholders

Private Company Shareholders

Liability ResourcesOrganization Resource Allocation

Structure Layers

Hierarchy Functional

System Frontline

Sole Proprietorship Management

Chart


1. Understand the types of businesses2. Define stakeholders3. Define organizational structures4. Explain the types of organizations5. Explain management6. Define motivation


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2.1. Types of Businesses

Starting your own business can be a rewarding experience. Before you decide

to start a business, one of the first decisions you will have to make is what type ofbusiness to open. You should consider several factors before you open a business,

especially if you are not planning on going into business alone.

Fig 2-1The types of ownership

Ownership

Public

(Government)

Private

For-Profit Non-Profit

Limited

Liability

Unlimited

Liability

SoleProprietorship

Partnership

Figure 2-1 shows basic types of ownership. The types of ownership can be

different based on the laws of the country that you decide to operate in. Companies

are either public (or governmental) or private. Public, or governmental, companies

are owned and operated by the government. Private companies are not owned by

the government, and are operated by people who are not representing the

government.


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Non-profit organizations are companies that use their profits for their services

instead of their investors. Non-profit organizations often get support from the

government. For-profit organizations are businesses that are started to make money

for investors.

Limited liability companies are protected by the amount of money they have

invested into the business. This means if the company owes money, the owners cant

lose their personal property, like their cars or houses. Unlimited liability companies

are not protected. A sole proprietorship, or sole trader, is owned by one person. A

partnership is owned by two or more people who share in the profits.

Use figure 2-1 to help you answer these questions:

6. The Saudi Electricity company is an example of a ..company.

7. Ali decides to open up a small business by himself, what can you say abouthis business?

8. Ahmed started an organization that promotes safe driving. The profits hemakes goes back into his company. What kind of business does Ahmedown?

9. When Kareem went into debt and owed the bank money, they took hisbusiness and everything that he owned, including his own house. Why canthe bank do that?


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Stakeholders are people or organizations that have an interest, or stake, in a

company. The types of stakes, or interests, that they have in the company are

different. For example, an employee has different interests than customers, but both

of them are stakeholders in a company. Do not get confused between stakeholders

and shareholders. Shareholders are people who own a part of the company. In other

words, they share ownership. Shareholders are always stakeholders, but

stakeholders are not always shareholders.

Explain why each of these groups or people is considered stakeholders in acompany.

The

Employees

Local communities

Customers Distributors

Creditors Suppliers

Shareholders

Fig 2-2Stakeholders


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Look at the descriptions below and choose the words that describethe company

Public Private Limited Liability Unlimited Liability

Non-Profit Non-Profit Partnership Sole Owner

Ahmad and Naif own a company that sells fast food. Ahmad owns 40% and

Naif owns 50%. At the end of the year, Ahmad will take 40% of the profits and Naif

takes 50%.

Omar started a business that sells clothes. At the end of each month, Omar

takes the money he earns and uses it to feed the poor.

Yahya works for a company that his father started. After 5 years, his father

gave him a share of the company.

Khalid took a loan from the bank to start up his company. After 2 years, the

bank took back Khalid's house and car because he could not pay the company back.

Ahmad and Zaid bought a business together. They took a loan from the bank

and could not pay it back. The bank only took their business because they couldn't

pay the loan.


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Fill in the blanks with the words provided below. (Verb Usage)

Prioritize

Identify

Analyze

Affected

Planning

The first step in stakeholder analysis is to .. who your

stakeholders are. The best way to do this is to think about all the people who are

..by your work. The second step is to ..the stakes they

have in your company to figure our what their interests are. The third step is to

..the importance of your stakeholders by choosing the ones who have

the biggest interest in your business. It is important to follow these steps when you

are ..for new projects.


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Often in technical language, you will find that some terms are compounded

from different words. Before we look at the definition of the term organizational

architecture, let us try to create a definition from what we know of the basic words.

What is the base word of Organizational? Remove the suffix -al and you are left

with organization. Can we break this word down further? We can break this word

further to the base word organize, which means, to put things in its proper place.

When you add the suffix -ation to the base word (verb), it makes it a noun. The

general meaning is, the act or process of organizing.

The word architecture can be broken down to the base word architect. An

architect is a person who designs buildings or structures. When you add the suffix -

ure, the word architecture means, the art or process of designing structures.

The technical meaning of organization refers to a company or a business.

When you compound the word architecture with organization, we can guess the

meaning to be the design of a business. The definition of the term organizational

architecture is, the totality of an organization, including the organizational structure,

control systems, incentives, people, and culture. A simpler definition would be, All

of the companys systems. What do we mean by systems? A system is a formal

process used to complete a task.

An organizational structure is a chart that shows the decision-makers,

divisions or units, and hierarchy, of an organization. The organizational structure

shows how the different parts of a company are connected together. Figure 2-3

shows an example of an organizational structure. Tall structures will have many

layers while flatter structures have less.

2.2. Organizational Architecture


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Use figure 2-3 to help you answer these questions:

1. How many positions do you see in this chart?

2. How many divisions do you see in this organization?

3. How many subdivisions do you see in this organization?

4. Who is the leader of this firm?

5. Whom does the factory manager report to?

Fig 2-3Organizational Structure


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The managing director is a general manager. This means that he is

responsible for the organization as a whole. The next layer of managers is made up

of functional managers. Functional managers are responsible for specific jobs or

tasks and manage other managers who are below them in the organizational

structure. In the picture, the factory manager is a frontline manager. He does not

have any other managers under him and only manages employees. These positions

in the organizational structure are known as a hierarchy. A hierarchy is a system that

ranks people above each other according to their positions. For example, the

production manager has a higher position and more power than the factory manager

does.

Reading!

TYPES OF ORGANIZATIONAL STRUCTURES

Businesses are organized in different ways based on their goals.

Organizational structures can be different from company to company. A type of

structure used in a small company may not work in a large company; in fact, it may

even hinder its progress to achieving its goals. There are many types of

organizational structures, but the most common types are functional, divisional, and

matrix.

Functional structuresgroup each part of the organization based on their

purpose. For example, the marketing and advertising employees will be placed in a

marketing department because they have similar functions. The finance and

accounting employees will be placed in the finance department because they have

similar functions. This type of structure works well with small, medium, and large

companies. The functional structure is very popular, but may have some faults.

Communication can become difficult between departments, especially if the

organization follows a rigid hierarchy. In a rigid hierarchy, employees must report

to their immediate managers and cannot go above them. If an employee has a


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problem with his salary, he has to report this problem to his manager in his own

department and he cannot go straight to the finance director.

In a divisional structure, the company is divided by the business activities.

For example, a car manufacturing company may divide the business into engine

manufacturing, assembly, etc. Divisional structures are often used in large

companies. As with the functional structure, divisional structures are limited by

communication.

Matrix structures are a mix, or hybrid, of the functional and divisional

structures. They are often used in very large firms that operate internationally. The

problem with matrix structures is that there may be overlapping job functions or

power strugglesbecause of dual management.


1. Are all organizational structures the same? Why or why not?

2. Based on the passage, what are some types of organizational structures?

3. What is a rigid hierarchy?

4. Try to apply the organizational structures defined in the passage to theuniversity, which fits best? Why?

5. Complete the sentence: "The army follows a Soldiers have to report to their immediate officers and cannot go straight tothe general.


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Hierarchies Top Matrix

Overlapping Structures Function

Organizational .. show the jobs and tasks that

specific people in the company have to do. If you want to know who runs the

company, you should look for the person at the ..of the

chart. Most companies have .. that show who reports to

who. There are many different types of organization structures. The most common

type of structure is based on .. rather than division. A

..structure is one that combines two other structures. The

problem with this type of structure is that it creates problems with

..jobs.

CEO

Healthcare

Lighting

Products

Consumer

Lifestyle

CEO

Finance Production Marketing

Fig 2-5Divisional Structure

Fig 2-4Functional Structure

Fig 2-6Matrix Structure


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Look at the diagram on the right. Each box in the picture shows a position in

the company. Some positions have more employees that answer to them than

others. For example, the second layer of the picture shows one manager with five

employees who report to him. This manager has a wide span of control. The

manager in the fourth layer has only three employees who answer to him; he has a

less span of control.

Fig 2-7Span of Control


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Some words in business may have multiple meanings. The term

management can be used in different ways and have different meanings. The base

word for management is manage, which means to take control, handle, and

influence something or someone.

Management can mean:

The activity of managing a company

The people in charge of a company

A skill in controlling or leading

Management is the process of getting work done through people in an

organization. A manager is a person who is responsible for planning, organizing,controlling, and leading. Managers have a difficult job of distributing resources in a

firm.

Resources are a source of supply used in

businesses. Money, people, and machinery are

all examples of resources. However, there are

different types of resources. Oil, gas, water, and

air are all natural resources. Wealth and property

are capital resources. Employees and managers

are human resources. The job of the manager is to allocate limited resources to the

unlimited demand from the organization.

2.3. Introduction to Management

Can you write down someexamples for each of thesemeanings?

Test yourself

Have you noticed how

the words organization,firm, company, andbusiness are used with thesame meanings? Thesewords are all synonyms.


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Behavior Process Science Art

We say management is a ..because it has steps and

rules. We say management is an ..because managementstyles are unique. It is also a .. because it follows the

scientific process of using knowledge, experience, testing, and evidence for

decision-making. We also consider management to be a ..

because it involves personality and interaction with people.


1. The CEO ..resources to the finance department.

2. The company's .. resource department is responsiblefor hiring and firing employees.

Allocate Allocation Allocated

Capital Human

Fig 2-8Allocation of Resources


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3. The manager's job is to .. limited resources todifferent divisions.

4. .. resources refers to the financial resources of acompany.

5. Resource ..is the process of distributing resources.

Fill in the blank for each verb

Reading!

In 1943, Abraham Maslow published a theory of motivation (the desire to

complete a task) in the Psychological Review journal (issue 50, 370-396). Maslow

described five levels of needsthat every person requires in order to be motivated to

complete a task. The most basic need is known as the physical needs(sometimes

referred to as physiological needs). These needs are the things we need to survive,

like food, water, shelter. Once these physical needs are satisfied, the need for

safetyarises. If a person does not feel safe, then he will not be motivated to do his

job.

After satisfying the need to feel and be safe, people desire social interaction.

Social needsare the need to be around other people, communicate, and socialize.

After fulfilling social needs, people require self-esteem to do their jobs. Self-esteem

refers to the way people feel about themselves. If a person feels that his job makes

Managers can... Verb Fill in the blank

allocate Resources to different departments.

hire .

spend .

provide .

create .

organize .

Fire .

pay .

transfer .

sell .


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him look bad, he will not feel motivated to perform well. After gratifying self-esteem

needs, people reach the highest level of motivation in the hierarchy, which is self-

actualization.

Maslow describes self-actualization as the need to be what you must be. It

is a desire to do something because you feel that you want to do it and not for any

extrinsic, or external, rewards. Self-actualization is intrinsicmotivation, meaning

that it comes from a person, and is not affected by what others say or do. It is difficult

for managers to create intrinsic motivation in their employees because they cannot

simply give it to people. An artist who paints for money is not motivated in the same

way as an artist who paints because he loves painting. Both artists may be

motivated, but one is motivated by extrinsic rewards while the other is motivated byintrinsic rewards.

Maslows hierarchy of needs can be used for personal and professional uses.

How can you apply Maslows hierarchy of needs to yourself and your education?

Fig 2-9Maslows Hierarchy of Needs


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1. Based on the information in the passage, describe Maslow's Hierarchy of

Needs

2. What is a self-actualization?

3. According to the passage, what is the difference between intrinsic andextrinsic motivation?


1. Ahmed his employees by paying them a bonus.

2. Omar is not to study for his class.

3. Naif does not feel good about the type of job he does, he has very little

4. Nourah does not like the people she works with, so her needs are not met.

5. Abdullah was given a hardhat when he started his new job as a constructionworker, his needs are met.

6. Aisha paints on her free time because she enjoys it, she has reached

Motivates Self-Actualization Self-Esteem

Safety Social Motivated


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1. Write a definition of business.

2. How do businesses use organizational structures?

3. What is the difference between organizational architecture and organizationalstructure?

4. What makes a manager different from a regular employee?


Ismail is a front-line manager and hopes to one day become a functional

manager. What are some ways Ismail can move up the hierarchy to reach his goal?


Search for the business terminologies in the chapter to fill in the blanks for

the following passage:

Many people these days want to become and influence

employees. Nobody wants to stay as just an employee all his life. Many businesses

have an organizational that allows employees to move upwards and

become a part of Some of them may become

2.4. Exercises


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managers. Most likely, they will start as this type of manager because they are the

lowest on the After experience, they will move up to become divisional

managers, also known as managers. The highest levels they can

reach are managers.


Using the reading in section 2.2, answer the following questions (short

answer).

1. How many types of organizational structures are there? What are the mostcommon?

2. Explain the three most common types of organizational structures.

3. Think about your university, what structure do you think it follows?

4. In your opinion, which of the three structures is better to use for a small shopthat sells groceries, a fast food restaurant, an international car manufacturer,and an oil company?

5. What are the problems faced by each structure?


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answer).

1. Explain the five needs of Maslows hierarchy.

2. How can you apply Maslows hierarchy of needs to yourself?

3. Can we describe Maslows hierarchy as steps or a ladder? Why?

4. What is self-esteem?

5. Why do people require self-esteem to be motivated?


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Ownership

Public Company

Private Company

Liability

Organization

Structure

Hierarchy

System

Sole Proprietorship

Partnership

Stakeholders

Shareholders

Resources

Resource Allocation

Layers

Functional

Frontline

Management

Chart


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Paraphrasing is writing your own explanation of another persons work or

ideas. Paraphrasing is the best method to use when you want to write a paper using

sources. In academic writing, you should reduce the number of quotations in the

paper. The easiest way to do this is to paraphrase. However, paraphrasing can be

difficult if you do not practice. It is easy to fall into plagiarizing if you are careless

while paraphrasing.

Switch or change a few words in someone elses sentence and use it in yourown paper (this is considered plagiarism and is very easy to catch).

Paraphrase without citing the source. Even if you write a persons ideas in

your own wording, you have to source where you took the information.

Otherwise, you have plagiarized.

Use exact wording without quotations. If you use an authors exact words, you

must use quotations.

Plagiarism can get you kicked out of university or fired from a job. Plagiarism is stealing.

If you use common knowledge without sourcing, it is not plagiarism.

Read the original passage several times until you fully understand it. Look up

words that you do not know.

Cover the passage and write it down from memory as if you were explaining it

to your friend.

Compare what you wrote to the original and check whether you haveaccurately represented the information without copying the text.

Always cite a source that you use!

English Focus


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Key Terminologies:

Operations Productivity of Labor

Raw Materials Productivity of Capital

Job Production Total Quality

ManagementBatch Production

Continuous FlowProduction

Just-in-Time

Jidoka

Customer Poka Yoke

Labor Intensive Supply Chain

Time Consuming Economies of Scale

Efficiency Productivity

Kaizen


1. Define operations2. Explain Gantt charts3. Understand production types4. Explain efficiency5. Define supply chain management


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Operations refer to the different activities involved in creating products and

services. It is the process of converting raw materials into a final product or service.

Operations follow an input-transformation-

output model. Inputs are the raw materials that are

used to create the final product. Transformation is

the process of converting inputs into outputs, the

final product or service. This model, input-

transformation-output, is a simple form of an

organizations process in creating their finalproduct. Organizations will generally have models that are more complex.

Operations managers are in charge of this

process. Managers will often use Gantt charts to

help them organize and handle the operations

process. Henry Laurence Gantt, a mechanical

engineer in the early 20th century developed a

chart to show the activities and inputs involved inoperations and projects.

A Gantt chart can also be used for project

management. Project managers use Gantt chartsto make their jobs easier and more efficient. You

will need to create a Gantt chart for your class

project. Programs like Microsoft Project can help you plan and follow your projects.

Read more about project management at www. pmi.org

3.1. Production

Did you know thatservice industries alsohave the input-transformation-outputmodel? Inputs are labor,transformations areprocessing labor, and

Choose 5 differentcompanies/industries.Write down the input-transformation-outputfor each of them.

Test yourself

Fig 3-1Operations Model


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OPERATIONS

INPUTS TRANSFORMATIONS OUTPUTS

MaterialsRaw MaterialsPurchased PartsSuppliesEnergy

PeopleWorkersTechniciansSupervisorsManagersMaintenanceCustodial

EquipmentLandBuildingsMachinesToolsOffice EquipmentComputers

PhysicalLocationalStorageExchangeInformationalEducational

AttitudinalPhysiological

ProductsServices

Physical or ChemicalManufacturing, chemical processing, oil refining, etc.

LocationalAirline companies, trucking companies, package delivery services.

StorageWarehousing operations, banks.ExchangeWholesale and retail operations.

InformationalT.V. news departments, newspapers, computer information services

EducationalSchools, colleges, universities.

AttitudinalEntertainment industry, movie companies, theme parks.

PhysiologicalHospitals and healthcare institutions.

Activities Time frame

bar

Fig 3-2Gantt chart

Table 3-1Examples of the Operations Model


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Look at these five companies and explain the transformationprocess in each one (there maybe more than one transformation type):

1. Saudi Aramco.

2. SABIC.

3. Saudi Airlines.

4. King Fahad University of Petroleum and Minerals.

5. Saad Specialist Hospital

Writing!

Using the words in table 1, describe the operations process for acomputer manufacturer.


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Production, from the verb produce, is the process of producing the final

products (outputs). There are many different systems of production used in

businesses. In this section, we will look at three types of production (1) job production,

(2) batch production, and (3) continuous flow production.

Job production, also known as job shop, is

used when the products are ordered individually

and are customized to the customers

specifications. When you order a tailor-made suit

or thobe, the tailor designs the product for your

requirements. This production is known as job

production. Job production is highly customized

and slow. When a customer orders a super car,

like a Lamborghini, it is only built after the order is

made. It is labor intensive and time consuming.

Each product may be different from the other as it is built after the order is placed.

Batch production systems are used when

the products are ordered in batches, rather than

individually. Each batch will differ from the other

batches. For example, a baker makes a batch of

10 chocolate chip cookies and another batch of

plain cookies. Batch production could be used

when orders are not very large. Within the batch,

the products are identical and only differ with

products in other batches.

Fig 3-3Job production

Fig 3-4Batch production


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Continuous flow production, also known as

assembly-line production, uses technology to

mass produce products. The concept of

assembly-line production was developed by

Henry Ford in the 1920s with the Model T Ford.

Products that are mass-produced, like the Toyota

Camry, are built with continuous flow systems.

Technology plays an important role in this type of

production to maintain uniformity in the results.

Match the type of production with the descriptions

1. A company that produces a sports car after you make the order. ..

2. A bakery that makes cookies for a party. ..

3. What kind of production is used to make the Toyota Camry? ..

4. A professor writes a textbook for his university. ..

5. A gaming laptop built for your specifications. ..

Fig 3-5Continuous flow production


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Make complete sentences with the following set of words

1. batch cake order

. 2. job shop car production

.

3. tailor suit Production

.

4. continuous flow production pen

.

5. advantages continuous production

.

6. nowadays companies produce orders

.

7. mass production continuous

.

8. specifications computer Job

.

9. labor intensive Job

.

10. Model T uniformity cars

.


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Efficiency is the process of getting work done with minimum waste, effort, and

cost. In technical terms, efficiency is using less input to create more output. We cansimply say that efficiency is doing things right. In operations management, efficiency

refers to keeping the cost of production as low as possible to receive the highest

profits while maintaining quality. Effectivenessis completing the tasks that help you

fulfill the organizational goals. We can also say that effectiveness is doing the right

things.

Productivityis the measure of efficiency.

Productivity is the output produced by a giveninput (=Output/input).

Productivity of labor is the unit output

divided by the measure of labor input (=Unit

output/ labor input).

Productivity of capitalis the sales divided

by the total capital invested in the business

(=Sales/totalinvestment).

Total quality management is an approach to long-term success through

customer satisfaction. The concept of TQM is always to make the customer the focus

of every aspect of the business. The simple objective of TQM is do the right things,

right the first time, every time.

One method that managers use to improve efficiency in operations is to

implement the Just-in-Time inventory system. Inventory refers to the stock of

products that the company has available at their location at any time. Just-in-Time

systems only start the production process just in time for the order. This means that

3.2. Efficiency

Fig 3-6Efficiency


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the supplies needed to manufacture the product arrive on time for the product to be

processed.

The Japanese developed a system of efficiency known as kaizen. In the kaizen

system, every part of the production process is continually improved. The process

involves identifying waste and eliminating it for improved operations.

Jidokais another Japanese quality control method that involves the automatic

identification of a defect in the manufacturing process and stopping production until

the fault is fixed. Every machine or worker is provided with the ability to immediately

stop the production once a fault is detected.

Poka Yoke, or error proofing, is a system that is known in America as Zero

Quality Control (ZQC). Poka Yoke is a system or device that prevents errors or

mistakes from occurring in the production process. It is a preventive method for

stopping mistakes before they happen.

Which method(s) of efficiency is/are best for the following?

1. Making burgers at McDonald's.

2. Producing the Toyota Camry

3. Developing software

4. Writing a book on MS Word

5. Making cardboard boxes

6. Bottling milk

7. Building customized computers

8. Making the iPhone

9. Manufacturing steel

10. Building an Air Plane


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Match the definitions

1. Total Quality Management ..... a. Error Proofing

2. Jidoka ..... b. Continuous improvement

3. Poka Yoke ..... c. Customer focus

4. Kaizan ..... d. Identify defects

5. Effectiveness ..... e. Reduce waste to do things better

6. Efficiency ..... f. Doing the right things

7. Just-in-time ..... g. Measuring output through input

8. Productivity ..... h. Receiving inventory in time for production

Economies of scale occur when companies buy in large amounts to lower

costs. Capacity utilization is a method that organizations use to measure how well a

company uses its resources. It can be calculated by dividing the actual output by the

maximum potential output multiplied by 100 (= Actual output / (maximum potential

output * 100)).

Reading!

Six Sigma, Kaizen, Lean, and other variations on continuous improvement can

be hazardous to your organization's health. While it may be heresy to say this, recent

evidence from Japan and elsewhere suggests that it's time to question these

methods. Admittedly, continuous improvement once powered Japan's economy.

Japanese manufacturers in the 1950s had a reputation for poor quality, but through

a culture of analytical and systematic change Japan was able to go from worst to first.

Starting in the 1970s, the country's ability to create low-cost, quality products helped

them dominate key industries, such as automobiles, telecommunications, and

consumer electronics. To compete with this miraculous turnaround, Western


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companies, starting with Motorola, began to adopt Japanese methods. Now, almost

every large Western company, and many smaller ones, advocate for continuous

improvement.

But what's happened in Japan? In the past year Japan's major electronicsfirms have lost an aggregated $21 billion and have been routinely displaced by

competitors from China, South Korea, and elsewhere. As Fujio Ando, senior

managing director at Chibagin Asset Management suggests, "Japan's consumer

electronics industry is facing defeat. Similarly, Japan's automobile industry has been

plagued by a series of embarrassing quality problems and recalls, and has lost

market share to companies from South Korea and even the United States.

Looking beyond Japan, iconic six sigma companies in the United States, such

as Motorola and GE, have struggled in recent years to be innovation leaders. 3M,

which invested heavily in continuous improvement, had to loosen its sigma

methodology in order to increase the flow of innovation. As innovation thinker Vijay

Govindarajan says, "The more you hardwire a company on total quality management,

[the more] it is going to hurt breakthrough innovation. The mindset that is needed, the

capabilities that are needed, the metrics that are needed, the whole culture that is

needed for discontinuous innovation, are fundamentally different."

So should we abandon continuous improvement? Absolutely not! It has

created tremendous value and still drives competitive advantage in many companies

and industries. But perhaps it's time to nuance our approach in the following ways:

Customize how and where continuous improvement is applied.One size

of continuous improvement doesn't fit all parts of the organization.

Question whether processes should be improved, eliminated, or

disrupted.Too many continuous improvement projects focus so much on gaining

efficiencies that they don't challenge the basic assumptions of what's being done.

Assess the impact on company culture.Take a hard look at the cultural

implications of continuous improvement. How do they affect day-to-day behaviors?

Read the full article: http://blogs.hbr.org/ashkenas/2012/05/its-time-to-rethink-continuous.html


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Use the previous passage to answer the following questions

1. What is the main idea of this passage?

a. We should stop imitating the Japanese methods of efficiency.

b. We should imitate the Japanese methods of efficiency.

c. We should never continuously improve.

d. We should strictly follow six sigma.

2. What can you infer from this passage?

a. The author thinks that the Japanese methods do not work in U.S.

businesses anymore.

b. That companies are too obsessed with continuous improvement.

c. That continuous improvement is a Japanese idea.d. That we should abandon continuous improvement.

3. Which of the following is not a recommendation from the author?

a. Abandon continuous improvement completely.

b. Continuous improvement should be customized.

c. Challenge what is already being done.

d. Consider the effects on the company's culture.

4. Which of the following would be a good topic statement for this passage?

a. Six Sigma is a better method to use for continuous improvement.b. Continuous improvement does not always work.

c. Continuous improvement cannot save us.

d. Companies should not focus all their efforts on continuous improvement.

5. Which of the following is a supporting evidence found in the passage?

a. "But what's happened in Japan?"

b. " Six Sigma, Kaizen, Lean, and other variations on continuous

improvement can be hazardous to your organization's health "

c. It has created tremendous value and still drives competitive advantagein many companies and industries."

d. Take a hard look at the cultural implications of continuous improvement.
http://en.wikipedia.org/wiki/Six_Sigmahttp://en.wikipedia.org/wiki/Kaizenhttp://en.wikipedia.org/wiki/Lean_manufacturinghttp://en.wikipedia.org/wiki/Continual_improvement_processhttp://en.wikipedia.org/wiki/Continual_improvement_processhttp://en.wikipedia.org/wiki/Continual_improvement_processhttp://en.wikipedia.org/wiki/Continual_improvement_processhttp://en.wikipedia.org/wiki/Lean_manufacturinghttp://en.wikipedia.org/wiki/Kaizenhttp://en.wikipedia.org/wiki/Six_Sigma


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A supply chain is the chain that provides the raw materials, partly finished or

completed products to the organization. The supply chain also includes the delivery

of the products to the consumer. Supply chain management is the organization of

the process of getting the product from conception to the consumer. The process of

the supply chain management is to add value for the customers. Value-added is the

process of making the raw materials into a product that the consumers will buy. To

calculate value-added, the cost of raw materials is subtracted from the price the

product is sold (= Price - Cost of Raw Materials). If a company can increase the value

of the product, they can sell it for a higher price.

3.3. Supply Chain Management

Customers

Neighborhood Panda Store

Local Panda Distribution Center

Regional Panda Distribution Center

Dairy Processing Plant (Nada)

External

Internal

Dairy

Farm

Cardboard

Container

Label

Com an

Plastic

Container

ExternalTier One

Paper Plastic FilmFeed & GrainTier Two

Chemical

ChemicalLumberTier Three

ARAMCOTier Four

Grain

Fig 3-7Supply Chain for a Dairy Plant


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Writing!

Explain and describe the supply chain for a fast food restaurant likeMcDonalds.

Describe the supply chain for the following companies.

1. McDonalds

2. Tamimi

3. Toyota

4. Toshiba Laptops

5. Clothing retailer

6. Book publisher


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Match the terms with the correct definitions

Correct and rewrite the sentences below

1. Supply chain management is process of add value.

2. Consumers buy product from retailers. Who get it from suppliers?

3. Materials Raw are needed make products.

4. To calculate, value added subtract cost of raw materials from price.

1. Supply Chain ..... a. An idea

2. Value Added ..... b. The organization of the product from manufacture to sale

3. Consumer ..... c. The steps to complete an action

4. Raw Materials ..... d. Turning raw materials to a product

5. Conception ..... e. Materials needed to make a product

6. Process ..... f. Person who may buy the product


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1. Why is supply chain management important?

2. What are the types of methods used to increase efficiency?

3. Explain the three types of production methods mentioned in this chapter.


Khalid owns a popular restaurant. He wants to increase his production

capacity while improving his efficiency. Write a letter to Khalid explaining how he can

meet his goals.


Search for the business terminologies in the chapter to fill in the blanks for the

following passage:

The first step in production is obtaining .. which are

unprocessed. There are three different types of production. ..is when a

product is made as the customer orders it, and is made according to the customers

requirements. ..is when a customer orders a group of products with the

same specification, like cookies. The goal of operations management is to make the

entire production process ..in order to reduce waste.

3.4. Exercises


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answer).


2. Explain the three suggestions made by the author in the passage.

3. What examples does the author give to support his argument?

4. Is the author completely opposed to continuous improvement?

5. What is the thesis statement in this passage?

Writing!

How can you apply the concepts of efficiency in a factory that makesPepsi?


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Discuss!

How would you make your university more eff icient?


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Operations

Raw Materials

Job Production

Batch Production

Continuous Flow Production

Customer

Labor Intensive

Time Consuming

Efficiency

Productivity

Productivity of Labor

Productivity of Capital

Total Quality Management

Just-in-Time

Kaizen

Jidoka

Poka Yoke

Supply Chain

Economies of Scale


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A topic sentence is like a thesis statement for a paragraph. Think of aparagraph like an essay, with a thesis statement, a body, and conclusion. The topic

sentence is like the thesis statement in an essay. The body of the paragraph is the

sentences that provide the explanations, supporting details, and analysis. The

conclusion of the sentence is the transition or conclusion of the paragraph.

A strong topic sentence should be at the start of the paragraph, but this is not

required. The topic sentence can be the second or third sentence. It is better to keep

the topic sentence early in the paragraph so that the reader can be focused on theinformation of the paragraph. This sentence focuses on a specific issue that is

discussed in the paragraph. The topic sentence does not contain any quotations.

In this article, Breaking the Bandwidth Barr ier, Chen clearly explained the

effect iveness of op t ica l Ethernet wi th th e use of the charts that expla ined how capi ta l

expenditur e and direct op erating costs are affected with th e use of MAN in metro areas.

The topic sentence should provide the reader with an introduction to the details

in the paragraph. You should not mistake the topic sentence for a hook. A hook is a

sentence captures the readers attention and keeps them interested in reading the

remainder of your paper. The hook will appear in the same paragraph as the thesis

statement.

English Focus


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Key Terminologies:

Marketing Withdraw

Advertising Niche Marketing

Sales Decline

Marketing Mix (Four P's) Mass Marketing

Customer Needs Product Life Cycle

Target Market Prototype

Product Placement Advertising Campaign

Market Map Market Share

Strategy Boston Matrix

Market Segmentation


1. Define marketing terms2. Understand product strategies3. Explain product placement and market

mapping


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Marketing is the process of advertising and selling a companys products or

services to the consumer. There is a difference between marketing, advertising, and

selling. Marketing is the process of developing the brand, the packaging, and

everything involved in the appearance of a company, product, or service. Advertising

is the activity involved in conveying the message of the product to the consumers. In

other words, we can say that advertising is the process of convincing the consumer

to purchase your product. Advertising is a function of marketing and can take many

forms. Sales are a direct approach that is centered on the process selling the product

to the consumers.

The four main parts of marketing is known as the marketing mix. The

marketing mix is also referred to as The four Ps:

1. Product- the final output of the company.

2. Promotion- the method that the product is promoted.

3. Price- the amount that the product is sold.

4. Place- where the product is sold.

Marketers must make sure that the

product meets the customers needs. In order

to know what the customers need, marketers

have to conduct market research. The first

step is to identify the target market. Once a

company decides whom they will target their

product to they will have to conduct a product

placement. In order to do this, they will use a

market map. A market map is a tool that

4.1. Fundamentals of Marketing

Fig 4-1The Marketing Mix


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businesses use to help them decide how they want their product to be seen by the

consumers.

Reading!

Businesses rely on solid marketing strategies to boost salesyet the toolsused to evaluate these strategies often provide misleading results, leaving managers

with the inability to accurately measure how they can get the best bang for their

marketing buck. Thomas J. Steenburgh, an associate professor in the Marketing Unit

at Harvard Business School, has developed a new analytical tool that more

accurately measures the effectiveness of various marketing efforts. He created the

model with Qiang Liu, an assistant professor of marketing at Purdue University, and

Sachin Gupta, the Henrietta Johnson Louis Professor of Management and professor

of marketing at Cornell University.

Steenburgh believes that the model could help brand managers determine

which marketing strategies work best to invest in. "Companies really need to pay

attention to the effectiveness of their marketing instruments," Steenburgh says. "They

Fig 4-2Market Map


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comes from what is called the Invariant Proportion of Substitution (IPS) property,

which implies that the proportion of demand generated by taking business away from

a competitor is the same, no matter which marketing activity is used.

"These models get run all the time in academics," Steenburgh says. "There

has been some talk at conferences where there seems to be an understanding that

these models are too restrictive."

Read the entire article: http://hbswk.hbs.edu/item/6828.html

Answer the following questions using the previous reading

1. What is the main idea of the passage?a. Companies need to understand the marketing mix correctly.

b. Companies need more cash cows.

c. Businesses need more models that run all the time in academics.

d. There is a lot of talk at conferences on the marketing mix.

2. Steenburgh believes

a. That his model is better than Qiang Liu's model.

b. That his model can make it easier for managers to develop their

strategies.

c. That his model can make more cash cows for people.

d. That his model gets run all the time in academics.

3. The author states that

a. Steenburgh, Liu, and Gupta are always arguing about strategy.

b. Different marketing strategies should be measured to make better

decisions.

c. It is a waste of time to use the marketing mix.

d. The "Got Milk" is the best advertising campaign.


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Use the information in the previous pages to answer the following

1. The marketing mix is not made up of

a. Price.

b. Product.

c. Labor.

d. Promotion.

2. A target market is

a. The group of people that the company wants to sell to.

b. The store that the company wants to sell to.

c. The name of a store.

d. A place companies sell their products.

3. A market map is used for

a. A treasure hunt.

b. Product placement.

c. Satisfying consumer needs.

d. Nothing.


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A strategy is an action plan that managers use to reach their goals. One

important strategy that marketing managers use to place their products in the marketis called market segmentation. Segmenting the market simply means categorizing,

or dividing, the market into parts based on different types of consumers (segments).

For example, wealthy, older, popular culture, luxury, etc. Consumer markets can be

segmented on many different characteristics, such as geographic (location),

demographic (age, gender, etc.), psychographic (the way people think), and

behaviorist (how people act).

Managers can choose to serve a small or

limited group of segments. This type of strategy is

known as focus strategy or niche marketing. A

Lamborghini Diablo is not advertised or priced for

a large market, only a few people would buy one.

Managers can choose to serve an entire market. This type of strategy is known

as broad strategy or mass marketing. The Toyota Camry is marketed to a mass

market. The advertising strategy, prices, promotions, etc. are all targeted to a very

broad, or wide, market.

Every product and service has a life cycle. The product life cycle is the stages

that the product goes through from its development to withdrawal from the market. In

other words, the product life cycle is the life of the product from birth to death. The

product life cycle chart shows the sales of the product over time. There are six stages

of a products life cycle. Figure 6-4 shows these stages.

4.2. Marketing Strategies

Fig 4-3A niche market appeals to a smaller group of

consumers.


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In the development stage of the product life cycle, the product is created. The

company studies different ideas by doing market research. The company will

conceptualize, they will think up new ideas, and try to create a product that meets the

demands, or needs, of the consumers. The company will also test the product and

create a prototype (a test product). In this stage, costs are high and the companydoes not make money.

The product is launched at the introduction stage. Businesses spend a lot of

money in this stage because of their advertising campaigns. A lot of money is

invested into marketing the product to introduce the product and convince consumers

to purchase it. In this stage, the costs are high and the company makes less money.

After the product has been launched and people become more familiar with it,

the product experiences growth in sales. More people start to purchase the product,

which makes it cheaper to produce. As the supply (amount available to sell) goes up,

Sales

Time

Development Introduction Growth Maturity Saturation Decline

Fig 4-4A typical product life cycle


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the cost of production is lower. At this stage, the costs are lower and the company

makes more money.

By this stage, competition has entered into the market. Other companies will

now want to make their products to compete. The companys product is established

in the market. We can say that the market has stabilized, meaning the consumers

are aware of the product and our market share is high. Sales may peak (stop

growing). The company should break-even (Costs = Profits).

In the saturation stage, the market is likely to be flooded. As more companies

enter the market, there may be too many competitors fighting for market share. Theamount of profit made will start to fall and the margins will be lower. By this stage, the

company has to decide whether to leave the market (exit) or develop the product

further.

In the final phase, fewer people will buy the product. Sales will decline and the

cost to keep the product in the market will increase. The company will have to

withdraw the product from the market or develop it.

Fig 4-5A detailed product life cycle


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The Boston Matrix is a tool that was developed by the Boston Consultancy

Group in 1968. It is also known as the BCG Matrix. The Boston Matrix is a tool used

to analyze the product portfolio and inform marketing managers about possible

marketing strategies. The Boston Matrix links the growth rate, market share, and cash

flow in a matrix.

Star products are in markets that are experiencing high growth rates (more

customers entering in the market) with increasing market share (the amount of sales

a company has in the market). Star products require investment to keep the market

share high. If the market share falls, the product will become a problem child. An

example of a star product is the iPad.

Cash cows have high market shares in markets that are not growing. A product

that is a cash cow is often in the maturity stage of the product life cycle and requires

very little financial support. Companies want to have cash cows because they make

money with little investment. Coca Cola classic is an example of a cash cow.

4.3. Boston Matrix

Fig 4-6The Boston Matrix


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Problem children, also known as question marks, are products that have a low

share in a growing market are known as problem children. Companies must spend a

lot of money in advertising and development to turn the problem child into a star. An

example of a problem child product is the Blu-ray disc.

A dog is a product that has low market share in a stagnant market. A dog is in

a market that is not growing (possibly in the decline stage of the PLC) and loses

money. Managers have to either sell the product or discontinue it. Windows Vista is

an example of a product that is a dog.

Reading!

The growth share matrix is a framework first developed by the Boston

Consulting Group (BCG) in the 1960s to help companies think about the priority (and

resources) that they should give to their different businesses. Also known as the

Boston matrix, it puts each of a firm's businesses into one of four categories. The

categories were all given memorable namescash cow, star, dog and question

mark, which helped to push them into the collective consciousness of managers all

over the world. The two axes of the matrix are relative market share (or the ability to

generate cash) and growth (or the need for cash).

Cash cows are businesses that have a high market share (and are therefore

generating lots of cash) but low growth prospects (and therefore a low need for

cash). They are often in mature industries that are about to fall into decline.

Stars have high growth prospects and a high market share.

Question marks have high growth prospects but a comparatively low market share

(and have been known as wild cats).Dogs, by deduction, are low on both growth prospects and market share.

The conclusions drawn from such an analysis are to transfer the surplus cash

from a conglomerate's cash cows to the stars and the question marks, and to close

down or sell off the dogs. In the end, question marks reveal themselves as either


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dogs or stars, and cash cows become so drained of finance that they inevitably turn

into dogs. The trouble with this colorful schema is that classifying businesses in this

way can be self-fulfilling. Knowing that you are working for a dog is not particularly

motivating, whereas working for an acknowledged star usually is. Moreover, somecompanies misjudge when industries are mature. This may lead them to decide that

businesses are to be treated as cash cows when they are in fact stars. One such

industry was consumer electronics. Considered by many to be mature in the 1970s,

it rebounded in the 1980s with the invention of the CD and the VCR. Not, however,

before some companies had consigned their electronics businesses to the fate of the

cash cow.

The growth share matrix has been blamed for persuading companies to focus

obsessively on market share. In a world where markets are increasingly fluid, this can

blind them to the bigger picture. If Lego, for example, considered its market to be

mechanical toys, it would miss the fact that it also competes with companies such as

Nintendo for a share of young boys' attention. The growth share matrix started a

fashion for matrices among management consultants. For a while, no self-respecting

report or theory was complete without one. Like many leading figures in the world of

management theory, Bruce Doolin Henderson, the founder of the Boston Consulting

Group (and the man most responsible for the Boston matrix), was an engineer. One

of his favorite quotations was a saying of Archimedes: Give me a lever and a place

to stand, and I'll move the world. He believed that while most people understand

first-order effects, few deal well with second-and third-order effects. Unfortunately,

virtually everything interesting in business lies in fourth-order effects and beyond.

Henderson worked for Westinghouse Electric Corporation before joining the

Arthur D. Little management consultancy. He left ADL in 1963 to set up the Boston

Consulting Group, which rapidly established a reputation as the prime strategic

consultancy. On his death in 1992, the Financial Times said: Few people have had

as much impact on international business in the second half of the 20th century.

Adapted from: Hindle, T. Management Ideas and Gurus. The Economist.


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Answer the following questions using the previous reading passage


a. The Growth Share Matrix was developed by BCG.

b. The Cash Cow is the best prod

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