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Unit 1 The Three Sectors of the Economy

There are two extracts which talks about the threee sectors of the economy. The first one
is from Nice Work by David Lodge. Robin Penrose, the protagonist, looking out of the
window during her business trip in Germany, realizes that the ground looks like a printed
circuit, scattered overa mosaic of thiny field connected by thin wires of motorways and
railways. She sees farm, industrial estate, house, shops and looking at these she thinks
how people are fitted into the total picture. Starting from this tought she tinks how common
object are made, such as a simple eletric kettle,usetd to have a simple cup of tea. Behind
it there are a lot of components like rivets, nuts, rubber, wires, screws. But all these are
made by row materials: iron, rubber, alluminium. Row materials must turn into finisched
products by someone and then, the product, must be sell. But kettle, to been used, needs
of electricity thats produced by an energy plant. In conclusion the extract describes,
through this example, the three sectors of the economy. The primary sector:agriculture and
the extraction of the raw materials from the earth; the secondary sector: manufacuring
industry, in which raw materials are turned into finished products; the tertiary sector: the
commercial services that help industry produce and distribute goods to the final
consumers, as well as activities such as education, healt care, leisure, tourism If we look
at a chart that shows employement in the European Union in the last thirty years we can
see that the distribution of labour unit changed in the years. According to Galbraith, and its
the second extratc, we should not be worried about the loss of manufacturing industry. It
happened in the USA in the past and it is an inevitable process. According to him, after a
countrys people are supplied with the physical objects of consumption, they go on to
concern about their design. They go on to an enormous industry pesuading people they
should buy these goods; they go on the arts, entertainment, music because these become
the further, later stages of employement.

Unit 2 Management
According to Peter Drucker, the work of managers can be divided into five activities:
1. they plan and set objectives and decide the right strategy (panning)
2. they analize and classify tha activities, dividing work into manageable and into
individual job (organizing)
3. they motivate and communicate, supervise and organize the work of their
subordinates (integrating)
4. they measure the performances of their staff to see whether the objectives set are
being achieved (measuring)
5. they develop people, being them subordinates or themselves (developing people)
Managers have to decide how best allocate the human, physical and capital resources
available to them, have to supervise their subordinates, improve their performance, check
wheather objectives and targets are beeing achives. The task of a manager is not entirely
scientific. It is a mix of science and art. You can not be a good manager if you do not own
innate good qualities; competence, skills and techniques can be acquired while friendly,
motivation, efficience, intuition do not.
The second extract take the example of management style at IBM. In IBM every
employees ambition is apparently become a manager and company helps them out in this
area by making management the company s single biggest business. IBM managers dont
design hardware or write softwartes. Trainees, do it. Managers and everyone else, simply
go to meeting, is busy managing or learning to be a mangaer. Because of it IBM products
often are not very competitive. Moreover in IBM the chain of control is too complex that it is
hard to make a bad decisione, in general any decision at all!

Unit 3 Company Structure

There are different ways of organizing companies. Most business organizations have a
hierarchy consisting of several levels and a clear line of command. At the top of the chain
of command there is the board of director with a chairman (in USA is president) from which
the managing director (in USA chief executiveofficier) depends. Under there may be staff
positions that are not integrated into the hierarchy or the organization might also be
divided into functional departments, such as production, finance, marketing Functional
organization is efficient but there are two standard criticism:1) firstly people, in most of
cases, are more concerned with the successof their department than that of the company
(so there are permanent battles between functional divisions) 2) secondly, separating
function is unlike to encourage innovation. Larger organizations are often further divided
into autonomus divisions (because having a single production department is generally
inefficient), each with its own functional sections. They followed the model of Alfred Sloan
who divided General Motors into separate competing autonomus divisions, in 1920.
Because of people at lower levels of the chain, are unable to make important decision but
have to pass on responsibility to their boss, Tomas Peter and Robert Waterman, in their
book In Search of Excellence, insist on the necessity of pushing authority and
authonomy down the line improving comunication among divisions: it is the matrix
management according to which teams, combinedby people from different functions keep
decision-making at lower levels.

Unit 7 Labour Relations

Unit seven focus on labour relations starting from an extract from Bill Brysons book notes
from a small island and it talks about the newspaper industry in the 80s. Printers union
decided how many employer were needed and paid the management accordingly.
According to Mr Bryson in 1985 there were 300 extra printing staff at Telegraph and this
fact shows how many printers trade union were powerful in England. On top of plump
salaries, printers received special bonus payment for handling type of irregular size or
setting white space at the end of lines or words in other languages different from English.
Moreover if work was done out of house they were compensated for not doing it. Although
in this case Unions abuse of their power. Generally they are very important in particular in
industrial relations. Workers are often organized in labour unions, which attempt to ensure
fair wages, reasonable working hours and safe conditions. Unions are necessary because
management can consult workers on matters will concern them and has a counterpart to
negotiate with. For this reason a number of politicians and managers are beginning to
regret the weakness of unions caused by deregulation of labour market (in accordance
with the ideal of free markets) and actively encourage unionization because they insist that
a big company need someone to represent workers. Provided workers believe that the
Unions are able of doing it.

Unit 10 Marketing
Marketers have to identify or foresee a consumer need.They persuade target costumers
to try the product or service designing a particular features, attractive packagingThe aim
of marketing is to know and understand costumers need. To do it marketers combine
market research, new product development, distribution channel, advertising, promotion,
product improvement and so on. We can immagine that costumers are the core of a
circle, around which marketing is built and production, finance and personel are related to.
Sometimes companies limit themselves to attempting to satisfy the needs of a particular
market segment and their choice of action is often the result of market research. Once a

product concept has been established, marketers have to define the marketing mix.This
means to identify productsfeatures, its distribution,the way of promotion and the price too.
Quite apart from costumer markets, where people buy products for direct consumption,
there is a great deal of marketing of industrial goods consisting of all the individuals and
organizations that acquire goods and services used in production of other goods or in the
supply of service to others. Because of it contains all the raw materials, manifactured parts
and components that go into consumer goods, it is more important than the marketing of
consumer and there is consequently more industrial than consumer marketing, even
though costumers are seldom exoposed to it.

Unit 11 Advertising
Advertising informs consumers about the existence and benefits of products and services
and attempts to persuade them to buy them. Themost famous form of advertising is
probably word of mouth advertising, when satisfied costumers recommend products to
their friend. Althought large companies could easily set up their own advertising
departments, write their own advertisement, and buy media space themselves, they tend
to use the services of large advertising agencies. These have more resources and more
knowledge about all aspects of advertising than a single company. In general the client
gives the advertising agency an agreed budget and a brief, thats a statement of objectives
of the advertising campaign and a strategy concerning the message to be communicated
to the target costumers. The agency creates advertisement, also said ads, develops
amedia plan specifying which media will be used. Sametimes it produces alternative ads
that are pretested in newspapers, tv station, in different parts of the country before the
national campaign. Who plans the campaign have to decide what percentage of the target
they want to reach, the OTS, thats the opportunities to be seen, and the time of the
campaign. How much a company want to spend on advertising its always problematic:
some companies use the comparative-parity method, matching competitors spending,
others set an advertising budget at a certain percentage of current sales renvenue. In any
case it is clear that any method is very expensive and may be counter-productive. In fact,
excessive advertising, too many exposures, lead people to stop noticing ads or to find
them irritating.

Unit 14 Banking
There are three types of banking. We can distinguish between commercial bank,
investment bank and universal bank. Talking about commercial bank we can say that it
trades in money, receiving and holding deposits. Commercial banks make a profit from the
difference, known as spread or margin, between the interest rate that pay to lenders or
depositors and those they charge to borrowers. They also create credit because money
they lent, from their deposits, is generally spent.
Investment banks, the so called merchant banks, raise funds for industry on the various
financial markets, finance international trade. They underwrite securities, deal with
takeovers and mergers and issue government bonds too. Their banking facilities also
include stock broking and portfolio management. Investment banks make profits from the
fees and commissions they charge for their services.
The last one type of banking is the universal bank. Notably it is born in Germany and
developed in Switzerland and Austria too. Universal banks combine deposit and loan
banking with share and bonds dealing and investment services. Because of American
legislation enforced a strict separation between commercial and investment banks, this
type of bank will be able to spread on USA only from 1999 when the act was repealed.

Deregulation, so, in USA and UK, has led to the creation of financial conglomerates similar
to the universal banks.
The interest rates that banks charge is made up the minimum interest rate thats fixed by
the central bank: banks lend blue chip borrowers at the base rate or the prime rate; all
other borrowers pay more, depending on their credit standing. This minimum interest rate
is the discount rate.
Many banks also do Eurocurrency business. This means that they make loans in foreign
currency, notably dollars, at lower rates than in the currencies home countries. This is
possible because central bank can determinate the minimum lending rate for its national
currency but it has no control over foreign one. The first significant Eurocurrency market
was for US dollar in Europe after the Second World War but the name is now used for
foreign currencies held anywhere in the world.

Unit 15 Stocks and Shares

Individuals, and group of people doing business as a partnership, have unlimited liability
for debts, unless they form a limited company. A limited company is a legal entity separate
from its owners, and is only liable for the amount of capital that has been invested in it. If a
limited company goes bankrupt, it is wound up and its assets are liquidated to pay the
debts and, in case the assets dont cover the liabilities, or the debts, they remain unpaid.
Most companies begin as private limited companies: their owners have to put up the
capital themselves and have to write a Memorandum of Association (UK) or a Certificate of
Incorporation (USA) which states the companys name, its purpose, its registered office or
premises and the amount of the authorized share capital. They also write Articles of
Association (UK) or Bylaws (USA), which set out the duties of directors and the rights of
shareholders (stockholders in USA).
Growing company can apply to a stock exchange to became a public limited company
(UK) or a listed company (USA). Newer and smaller companies usually join over the
counter markets such as Nasdaq in NY. Very successful business can apply to be quoted
or listed, to have their shares trade, on major stock exchanges.
The act of issuing shares (or stocks USA) for the first time is known as floating a company
(making a flotation in UK, public offering in USA). Companies generally use an investment
bank to underwrite the issue: in this way they guarantee to purchase all securities at an
agreed price on a certain day, if they cannot be sold to the public. Companies wishing to
raise more money for expansion can issue new shares, generally offered first to existing
shareholders at less than their market price (it is known as rights issue). They can also
choose to capitalize their profit turning it into capital by issuing news shares instead of
paying dividends (known as bonus issue, script issue, subscription certificate or
capitalization issue in UK, stock dividend or stock split in USA).
Shares are also known as equities because all the shares of a company have equal value
that is called nominal value (or face value or par value). Shareholder can sell their shares
on secondary market at any time but the market price of a share may be different from its
nominal value. Who buys share holds a part of the ownership of a company and it is
entitled to vote at a companys Annual General Meeting (UK) or Annual Meeting of
Stockholders (USA), and to receive a proportion of distributed profits in the form of

Unit 16 Bonds
Companies finance most of their activities by way of internally generated cash flow. If they
need more money they can either sell shares or borrow from banks or issuing bonds.
Nowadays companies prefer issue their own bonds rather than borrow from banks

because this is often cheaper: this is not a good thing for banks which have to lend large
amounts of money to borrowers that are much less secure than blue chip companies.
Bond issuing companies are rated by private rating companies such as Moodys or
Standard & Poors, and given an investment grade according to their financial situation and
performance, AAA being the best an C the worst.
Most bonds are barer certificates, so they can be traded on the secondary bond market
until the mature. They are therefore liquid, although their price, on the secondary market
fluctuates according to changes in interest rates. The amount of the interest that bond
pays is known as coupon and it is the yield expressed as a percentage of its price on the
secondary market.
For companies, the advantage of debt financing aver equity financing is that bond interest
is tax deducible. This means that a company deducts its interest payment from its profits
before paying tax, whereas dividends are paid out of already taxed profits.
Bond issuing is a sign of good health and anticipate higher future profits if a company
borrows. On the other hand, increasing debt increases financial risks: bond interest has to
be paid while companies are not obliged to pay dividends. Thus companies have a debtequity ratio that is determined by balancing tax saving against the risk of being declared
bankrupt creditors.
Government, unlike companies, do not have the option of issuing equities. It can issue
long term bonds, knows gilts (in UK) and Treasury Bonds (in USA), and short term bonds.
The last one are three month Treasury Bills and are a way of regulating the money supply:
to reduce the money supply they sells these bills to commercial banks and withdraw the
cash received from circulation; to increase the money supply they buy them back paying
with newly creating money.

Unit 29 Information technology and electronic commerce

Most people think that information technology and internet represent progress, and are
clearly a change for the better. Some people disagreed, likes Ian Angell, the Head of the
Department of Information System at the London School of Economics. According to him
information technology, that will bring knowledge and power to the dispossessed making
life easier for everyone, will disenenfranchise large sections of society underminind politics
and economics. Everything is changing, electronic commerce is reality: products and
services that have traditionally delivered physically are transferred electronically, people
buy by internet from places where taxes are lowes, contributing to tax deficit growth.
Another problem is how governaments will control and supervise companies that produce
and sell in several different contries. Globalization sets more difficults to keep track of the
activities of companies. Because of it is an handy technology it will turn upside poor
countrys economies, like India or China. Their economies could take off or caould be cast
into the obscurity. In this way, information technology, will accelerate inequality and
information warfare will be commonplace beteween individuals. The internet makes it very
difficult to police rogue traders because buyer and sellers dont live in the same
jurisdiction. Drugs, crime, terrorism will be no more localized problems, unemployement
among the semi-skilled will increase and, like in natural selection, society will mutate and
people with computer skills are likely to end up winers. For this reasons who invests in
communication technologies, countries, companies or single persons, will thrive.