Regulations of international business

Some governments impose various regulations on businesses in their countries. Sometimes these regulations discourage foreign companies from entering home markets. In some countries all international businesses must have local partners. In other countries a foreign firm must have at least one native in the top management of a branch or a subsidiary. Some governments, for example in Mexico, insist that the local partners have the controlling interest. However, big firms like IBM refuse to do business on these grounds and usually manage to find the way out.

Government regulations limit what a company may do. For example, some countries demand that the company files a plan indicating what it is going to produce, how many local workers it is going to hire and how much it will pay the workers. This plan must also fit into the government economic master plan. If the country changes its master plan, the foreign firm must change its plans, too.

 

VOCABULARY

 

from entering – от вхождения

at least – по меньшей (крайней) мере

insist - настаивать

interest – здесь: пакет акций

controlling interest – контрольный пакет акций

However – тем не менее, вместе с тем

refuse - отказываться

way out - выход

demand - требовать

files a plan – представить план

indicate - указывать

indicating - указывающий

hire - нанимать

fit - соответствовать

master – хозяин, мастер, глава

master plan – главный план

native – местный житель; здесь: местный бизнесмен

QUESTIONS

1.How do the government regulations affect the foreign companies? 2. What must foreign companies have in some countries? 3. Whom must foreign companies have in their subsidiaries' top management sometimes? 4. What does the government in Mexico insist on? 5. How do big firms react to government regulations? 6. What do some governments demand a foreign company should file? 7. What must this plan indicate? 8. What must the company's plan fit into? 9. What happens if the government changes its master plan?

 

 

Texts for supplementary reading

Section 1

 

Text №1. WHAT IS BUSINESS?

 

Business is a word which is commonly used in many different languages. But exactly what does it mean? The concepts and activities of business have increased in modern times. Traditionally, business simply meant exchange or trade for things people wanted or needed. Today it has a more technical definition. One definition of business is production, distribution and sale of goods and services for a profit. To examine this definition we will look at its various parts.

First, production is the creation of services or the changing of materials into products. One example is the conversion of iron ore into metal car parts. Next these products need to be moved from the factory to the marketplace. This is known as distribution. A car might be moved from a factory in Detroit to a car dealership in Miami.

Third is the sale of goods and services. Sale is the exchange of a product or service for money. A car is sold to someone in exchange for money. Goods are products which people cither need or want; for example, cars can be classified as goods. Services, on the other hand, are activities which a person or group performs for another person or organization. For instance, an auto mechanic performs a service when he repairs a car.

However, there is one other important factor. This factor is the creation of profit or economic surplus. A major goal in the functioning of an American business company is making a profit. Profit is the money that remains after all the expenses are paid. Creating an economic surplus or profit is, therefore, a primary goal of business activity.

 

Questions:

1. What did business mean traditionally?

2. What aspects does the meaning of the word "business' include today?

3. What is the first stage of business called?

4. What is done on the first stage of business?

5. What are the other stages of business?

6.  What is business set up for?

 

Text №2. MARKS & SPENCER

   

Marks & Spencer, the British food and clothes company, is the most famous British shop in the world. At the moment, there are 283 M&S shops in Britain, and other shops in France, Belgium, Holland, Spain and Portugal. Currently, they are building a large new store in Paris on the rue de Rivoli. In North America the company owns Brooks Brothers, and there are about fifty stores in Canada. More and more people, from Hong Kong to Lisbon, are buying their clothes and food from M&S.

The company employs about 50,000 people worldwide. Sales have increased by 80% over the last ten years, mainly due to expansion overseas. Many of the shops abroad are franchises. Owners of franchises buy all their stocks from Marks & Spencer and pay the company a percentage of their turnover.

The clothes vary from country to country. In Thailand, for example, M&S sell more short sleeved shirts because of the climate. In Japan, they set smaller sizes because of the average size of the population. In Austria, they stock very large clothes. Food departments sell typically British food: tea, cake, biscuits, etc., and the shops in Pans are very popular at lunchtime for the sale of sandwiches.

Why is Marks & Spencer so successful? The standards of quality are very high. All suppliers have regular inspections. All customers can return any item which they think, is unsatisfactory. Stocks are limited. Shelf lives are short. This means that items only stay in the shop for six to seven weeks. Eighty percent of the suppliers are British, in fact. M&S buy twenty per cent of the total clothes produced in Britain.

What about the future? At the moment, the company is studying plans for development in Eastern Europe, Japan, and even China. Next century, it is possible that one Chinese in five will wear Marks & Spencer's suits. That's a lot of suits!

 

Questions:

1.How many people worldwide does the company employ?

2. What do owners of franchise buy from Marks & Spencer?

3. Is M&S successful? Prove it.

4. What are the company's plans for the future?

 

Text №3. UNEMPLOYMENT

 

We say that unemployment exists where people capable and willing to work are unable to find suitable paid employment. But where an economy is adapting to changing conditions, there will always be some persons unemployed as they change jobs or as seasonal work comes to an end.

Unemployment may occur for many different reasons. There will always be some people changing jobs. In certain occupations, e.g. unskilled labour in the construction industry, workers are not employed regularly by one employer. When a contract is completed, labour is not required. Occasionally workers are discharged when a factory is being reorganized.

Unemployed workers usually register at the local employment exchange from which employers can hire them. The unemployed are paid certain benefits.

Employment in some industries, e.g. building, fruit picking is seasonal in character. Seasonal employment can be reduced out of "season" and admit such persons as students and housewives during the busy period. Sometimes there are unemployed workers of a particular occupation in one part of the country but a shortage of the same type of work in other parts. Thus today there is a surplus of unskilled and manual labourers in the north of England, whereas firms in the London area have vacancies unfilled. Two main reasons can be suggested for this type of unemployment — ignorance of opportunities and immobility of labour.

Workers may be in "between jobs". Some of them are looking for better jobs, others are seeking better salaries. Young people search for their first jobs. This is called "frictional unemployment". This type is usually short-term and regarded as inevitable. In some situations workers find that their skills and experience are unwanted by these changes. This type of employment is more long-term and regarded as more serious. It is known as structural unemployment.

The full-employment or natural rate of unemployment ranges between 5 and 6 percent.

 

Questions:

1.Why does unemployment exist in transitional economy?

2. What are the reasons for unemployment?

3. How can the unemployed get paid benefits?

4. What is seasonable unemployment?

5. What is unemployment caused by?

6. What is considered to be a natural rate of unemployment?

 

Text №4. WHOLESALING

 

Wholesalers are the institutions which stand between the manufacturer and the retailer. A wholesaler buys goods in bulk from producers and sells them in small quantities to retailers. In doing so he helps the production process. If you had an intention to be a successful manufacturer, you would make high quality products at a reasonable price for selected markets. If you intended to be a wholesaler, you would learn how to serve the market.

Wholesaler economizes the distribution. The most important function of a wholesaler is to contact manufacturers and potential customers. Thus nine contacts and deliveries arc necessary if three firms supply directly three retailers, where each producer deals only with a wholesaler, reducing the total number of transactions to six.

Wholesalers are used for information and advice. Suggestions which customers make to the retailer are passed to the wholesaler who conveys them to the manufacturer. Thus the latter can improve his product.

A wholesaler keeps stocks. Shoppers like to obtain goods immediately. This requires stocks. Often, however, neither the producer nor the retailer has extensive storage facilities, and responsibility falls on the wholesaler.

Moreover, he arranges imports from abroad. Foreign manufacturers can rarely bother to ship small parcels to individual retailers abroad. They prefer to deal with a wholesaler, an import merchant with established trade connections.

Manufacturers can establish their own wholesaling office or branch, the latter providing more services to its customers. Depending on the industry or geographical location merchant wholesalers are called distributors, jobbers, or dealers. Among merchandise agents there are selling agents, brokers, commission agents and action companies. They are all compensated by either a commission or a brokerage fee.

 

Questions:

1. What kind of institutions are wholesalers?

2. What is the most important function of a wholesaler?

3. How can a manufacturer improve his product?

4. Does a wholesaler import from abroad?

5. How can wholesalers be classified?

 

Text №5. RETAILING

 

The retailer performs thelast stage of the production process, for it is he who puts the goods in the hands of the actual customers. His work is "to have the right goods in the right place at the right time."

There are four types of retail institutions: 1) speciality stores; 2) supermarkets, 3) general merchandise stores, 4) nonstore retailing.

Often speciality stores sell one type of product, such as clothing, jewelry, furniture, books. These stores having a better feeling of their market, they compete against giant department stores. They can adjust more quickly to market conditions.

Big supermarkets are usually well located. All the goods are arranged on trays and shelves. All the prices are clearly marked. The goods are ready-weighed and beautifully packed. There you can find everything you need. The prices are reasonable.

General merchandise stores (GMS) carry a wide variety of products. There are three types of GMS: a) department stores, b) discount stores, c) hypermarkets. Big department stores started in America more than 50 years ago, and then the idea was brought to European countries. These stores are wonderful places. People can do all their shopping under one roof. All the things for sale are displayed so that they can be easily seen, and the customers walk around and choose what they want.

The store is divided into departments: women's clothes, men's clothes, shoes, toys, sports goods, china and glass, etc. There may be a restaurant with an orchestra and sometimes a tea-room as well.

Low price is the major attraction of the discount stores. These stores self the most popular items, colors and sizes. The stores keep long hours and are usually open on Sundays. Hypermarket is a type of discount store that was developed in Germany. They are very large stores with low-price and high-turnover products. Hypermarkets achieve cost savings by simplifying their unpacking and display.

There are three major types of nonstore retailing: a) vending machines; b) door-to-door sales, and c) catalogue sales.

Questions:

1. What is the function of a retailer's work?

2. How can retail institutions be classified?

3. What can you say about the speciality stores and big supermarkets?

4. What did you come to know about discount stores?

5. What types of nonstore retailing do you know?

 

Text №6. HISTORY OF MONEY

(part 1)

 

These days money is hi-tech. We have notes and coins which are specially made. We use credit cards. Banks and stock exchanges can move millions at the touch of a button. But how did money develop? Where, for example, were notes and coins first produced? Why? What did people use as money before that?

Each country has its own individual culture. That's as true today as it was thousands of years ago. But although nations vary enormously, in some ways they're all the same. Each has developed its own language, for example - its own religion, arts, form of government; and of course, its own money.

So money is universal - but why? The answer's very simple. Without it trade would be impossible/and people in any society need to exchange goods in order to survive.

OK, so money is necessary, but what kind of money? Well, in the past most societies used objects. Some of these were valuable because they were rare and beautiful — others because they could be eaten or used. There are some examples...

(and where they were used)

Animal skins..................Alaska/Canada/Russia/Scandinavia

Beads.............................Africa/Canada

Feathers.........................North America

Fish hooks.....................Gilbert Islands*

Grain.............................India

Knives...........................China

Rats...............................Easter Island*

Salt................................Nigeria

Shells.............................Thailand/Paraguay

Stones............................Yap*

Tobacco.........................America

Whale teeth...................Fiji*

* Islands in the Pacific Ocean.

 

Question:

1. What commodities served as means of exchange?

(part 2)

BEFORE COINS

Early forms of money were used to buy goods. They were also used to pay for marriages, fines, and debts. But although everyday objects were extremely practical kinds of cash in many ways, they had disadvantages, too. For example, it was difficult to...

• measure their value accurately.

• divide some of them into' a wide range of amounts.

• keep some of them for a long time.

• use them to make financial plans for the future.

For reasons such as these, some societies began to use another kind of money. This consisted of precious metals which were cut into small pieces and weighed. People in Mesopotamia (now part of Iraq) began doing this about 4,500 years ago. Later, gold and silver money appeared in Ancient Egypt, China and elsewhere, too.

The new metal money was an important advance for four reasons.

1. It was easy to carry.

2. It lasted a long time.

3. It could be divided into lots of different values.

4. It made planning for the future much easier.

But although pieces of silver or gold were an advance, they still weren't exactly coins. They had no fixed shape and weren't clearly marked so that everyone could recognize them.

Questions:

1. What were the reasons for usage of metal money?

2. What disadvantages did the things used as money have?

 

(part 3)

 

EARLY COINS

The first coins were made in Turkey around 100 ВС, but paper notes didn't appear at the same time. They weren't produced until 1400 years later — In China. This report looks at the history of modern money's early ancestors.

The ancient kingdom of Lydia was in the country now known as Turkey. That's where the first coins — called "staters" - were produced around 2,700 years ago. They were made of electrum (a mixture of silver and gold) and had a lion's head stamped on them. This snowed that they were official Lydian coins and made them easy to recognize. It also meant that each coin's value was "guaranteed", so it didn't need to be weighed.

Not only that - there were lots of different values, too. Lydian people used coins worth one-sixth, one-twenty-fourth and even one-ninety-sixth of a stator.

The idea of a metal money system with fixed values, a clear identity, was successful. So successful that it soon spread to other countries. By 600 ВС, in fact coins were used all around the Mediterranean region. Greek coins of this period are particularly beautiful. Some are marked with the.heads of gods and scenes from ancient myths. Others have pictures of objects or animals on them, such as owls, vases or beetles. These show which part of Greece the coins came from. Athenian 'silver owl', coins, for example, soon became famous all over Europe.

The first king to have his portrait on a coin came from Greece, too. Alexander the Great died in 33 ВС. Coins with his face on them appeared the following year.

 

Questions:

 

1. What was the name of the country?

2. What occupied the territory of Turkey?

3. What objects were stamped on ancient coins?

(part 4)

 

EARLY NOTES

 

Today's paper money is produced and controlled by governments through a system of banks. That's why we talk about bank-notes. Originally, though, paper money had nothing to do with banks because

1. Metal coins were heavy. It was difficult to carry and use large numbers of them.

2. They were easy to steal.

3. China only had limited amounts of precious metals. It couldn't use them to make coins.

To solve these problems, goldsmiths and silversmiths of the Tang dynasty (618—907) began to produce special receipts. These were printed notes, which showed that their customers owned a certain amount of money. The result? Suddenly it was possible to do business with paper instead of using metal coins.

The oldest Chinese notes which still survive come from the Ming dynasty (1368—1644). They're made of tree bark and some of them are very large.

The introduction of notes like these changed economic history. And not just in China, paper money soon became popular in Europe, too. For a long time, though, it wasn't made and controlled by governments. In fact, the first official European bank notes (issued by the Swedish Stockholm Bank) didn't appear until 1661.

 

Questions:

1. Why did early notes appear?

2. What was the first country to use them?

(part 5)

 

COINS

Modern-day coins are produced in special factories called mints. Before any coin can be produced, though, it has to be designed. This is done by an artist and the design is usually very complex. Why? To make it harder for criminals to copy. Once the design has been completed and approved, a large plaster model of the coin is made. This has the design cut into it with metal cools. The model is then attached to a reducing machine. What does that do? Well, it copies the artist's work onto a small piece of very hard steel.

Each coin needs two dies — one for the front, one for the back. These are then fitted another machine — the coining press. This is where the coins themselves are actually produced. In the past it was common for coins to be made of gold or silver. These days, metal money consists of cheaper metals — for example copper, nickel, zinc or tin. To make money, these are first heated and then mixed together in the right amounts. After that, the mixture is rolled into long, thick blocks which are

(a) softened

(b)cut into coin-shaped pieces called "blanks". It's these blanks which are squashed (under enormous pressure and very quickly) between the two dies on the coining press to make coins.

 

Questions:

1. Why is it necessary to make a plaster design?

2. How are coins usually produced?

(part 6)

NOTES

 

There are four main elements in the production of bank-notes: • design • paper • ink • printing. Let's look at them in that order.

Design. Like coins, notes are also designed by artists. In the case of notes, though, the designs are much more complex. Each one contains thousands of tiny lines. This is done deliberately to make the notes as hard as possible to copy. First, the artist produces a sketch. Then, when that has been accepted, he or she engraves the design onto a steel plate. The design is engraved back-to-front with special, extremely sharp tools. Why back-to-front? So that when it's printed, it will be the right way round on the • notes themselves. Paper bank-notes have to last a long time. Because of this fact they're made with extra strong paper which contains cotton. But that's not the only unusual thing of back-note paper. In most cases it also contains a very thin piece of metal which runs from top to bottom, faint drawings. (These can only be seen clearly if you hold them up to day light.)

Ink. The inks printed on bank-notes aren't used anywhere else. They're specially made and lots of different colours are combined in each note. Again this is done for reasons of security.

Printing. Three different kinds of printing are needed to produce any bank-note. The first is called intaglio and prints the main elements in the design (faces, objects, etc.), Next, all the complex patterns in the background are printed by a process called lithography. Finally, a third system, letterpress, adds the serial number(which you can usually find in the bottom right-hand corner). This has to be done separately because each note needs an individual number.

 

Questions:

1. What are the four principal elements in making banknotes?

2. What does a designer do to produce coins & notes?

3. What is done for security?

Text №7.

THE WORLD BANK

 

There are two parts оf the World Bank: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The latter has a further affiliate, the International Finance Corporation (IFC). Set up in 1945, the World Bank seeks to help raise standards of living in developing countries by channeling resources from developed countries to the developing world. Its original capital was contributed by the 146 countries that own the Bank, but its loans are largely financed by borrowing on the world's money markets. In the past it has played a large part in financing major projects around the world. Today the emphasis has shifted to more grassroots projects, particularly labour-intensive projects aimed at helping the poorest sections of the world's population, by raising their productivity and integrating them into the developing process as active partners in progress.

The World Bank has an office in London, but its head office is in Washington DC.

 

Questions:

1.What parts does the World Bank consist of?

2. When was the World Bank set up?

3. How many countries are members of the World Bank?

4. What projects does the World Bank give financial support to?

5. Where is its main office located?

 

 

Text №8. BANKS, LOANS

 (part 1)

 

Banks make their profits by lending the money which customers deposit with them to others who need it for personal or business reasons. Most people need more money than they have currently.

To be a borrower you must be a customer of the bank because the money will be lent to you through a bank account. There are two ways in which you may borrow. The first, and easy, is to spend more money than you have in your current account — to overdraw. The second, and the normal way of borrowing larger amounts or for a long period of time is the loan, If a loan is granted it will be a fixed sum immediately available for a fixed period of time. The principal and the interest on it may all become due for payment at the end of that period but for personal loans it is common to arrange that the loan and interest are repaid in equal regular installments over the period of the loan. A separate account is opened to record the repayments as they are made.

Whether you are seeking money for business or personal reasons there are a number of things that the manager will want to know before he is prepared to grant your request. The obvious facts will be the amount that you seek and the arrangements for repayment that you are able to suggest. You need to tell him something about the purpose of the loan.

Questions:

1. How do banks make their profit?

2. Who are loans granted to?

 

(part 2)

 

THE PURPOSE OF THE LOAN

 

For many personal customers applications for a loan are straightforward because the purpose is clear — to buy a car, to double glaze the house, to build an extension, etc. For many small businesses requests will be equally obvious — to purchase a plain paper copier, a computer or other machine. Other business schemes may not be nearly so clear-cut. They may involve long-term commitments, and the present loan may only be forerunner of other similar requests. A bank manager needs to be able to assess such schemes on their merits, and to probe the customer's ideas with searching questions. The applicant may in fact be unsure of certain aspects of the proposal and reveal flaws, in planning which would, if not solved, eventually mean failure. Only if the manager understands the project and the risks he assessed fair terms for the loan be agreed.

 

Questions:

1. What is the purpose of individuals applying for a loan?

2. Who makes a decision about giving a loan?

3. What do many small businesses receive loans for?

(part 3)

PERSONAL LOANS

 

The personal loan is the commonest type of loan to ordinary customers and is frequently available over the telephone to credit-worthy customers. Interest is added either at a fixed rate for the duration of the loan — which gives an annual percentage rate (APR) of well over 20 per cent for such loans at the time of writing — or monthly on the outstanding balance. With flat-rate loans there is a doubling-up of interest to give this APR, the repayments are spread evenly over the period of the loan and, consequently, the whole sum is not borrowed for the full loan period. On average the money is borrowed for half the time only, so the true interest rate is roughly double the nominal rate used in the calculations. Under the Consumer Credit Act 1974 the APR must be clearly stated as well as the fixed rate of interest, so that borrowers can assess the savings to make by postponing the purchases the loans seek to finance, and can compare the loan proposed with other sources of credit. With monthly rate loans interest is charged in arrears on the amount outstanding at the end of the month.

 

INTEREST RATES

 

The Bank's influence on short term interest rates arises from its role in the domestic money markets. As banker to the government and to the banks, the Bank is able to forecast fairly accurately the pattern of flows between the government's accounts on the one hand and the commercial banks on the other, and acts on a daily basis to smooth out the imbalances which arise. When more money flows from the banks to the government than vice versa, the banks' holdings of liquid assets are run down and the money market finds itself short of funds. When more money flows the other way, the market can be in cash surplus, but the pattern of government and bank operations usually results in a shortage of cash in the market each day — a shortage which the Bank then relieves. Because the Bank is thus, on a day-to-day basis, the final provider of liquidity to the system, it can choose the interest rate at which it will provide funds each day.

Questions:

1. How is the personal loan usually available?

2. What is an annual percentage rate?

3. What act regulates the rate of interest?

 

Text № 9. MEANS OF PAYMENT

 

CREDIT CARDS

The idea behind credit cards is simple. When you buy something you give your card to the shop assistant. He or she fills in a form. You sign it. Then, at the end of the month you receive a bill from the credit company. This lists everything you've bought on credit in the past four weeks. You can pay the bill in two different ways, either all at once, or a little at a time. If you pay a little at a time, the bill obviously grows month by month. But that's not all. You also pay a high rate of interest on top of the unpaid amount. Why? Because in reality you're borrowing money from the credit company. For some people this can become a real problem. They spend too much, can't afford to pay it back, and get into debt. For some people, though, credit cards are 'flexible friends' — a useful and convenient alternative to cash.

FANTASTIC PLASTIC

Already some credit cards include tiny computers. These smart cards make and word each payment electronically. But scientists are also developing even smarter cards with mini calculators and keyboards. This means it will not possible to give 'the card instructions' and ask its questions, e.g. 'Make this payment in yen' or 'How much money have I spent'. Soon, hitech cards like these will be a part of all our lives.

TELE-SHOPPING

Computers are going to play a major role in twenty-first century shopping. As a matter of fact, with computerized 'tele-shopping'' you'll soon be able to buy goods without even leaving home. Here's how it works:

(a) You call a shop via your personal computer.

(b) You order the goods you need,

(c) You give the shop your credit number.

(d) Money is taken electronically from your bank account to pay the bill.

(e) The goods are delivered to your home.

 

CHEQUE GUARANTEE CARDS

These are called cheque cards for short and they're a form of identification. When you give someone a cheque, you show them the card, too. This proves you're the person whose name is on the cheque. It also means that your bank guarantees to pay the cheque (up to a certain amount). Banks advise their customers to keep cheque books and cheque cards separately. Why? Because if a card is stolen, it can't be used without the cheque book and vice versa.

 

Questions:

1. Is paying with a credit card easy or difficult?

2. How can you make purchases using your check book?

3. What are the advantages of using teleshopping?