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module A

THE CONSUMER SOCIETY

Basic needs to survive: food, drink, shelter, clothing...

Once these needs are satisfied or fulfilled we want other things like TV, cars, fashionable clothes... these are called wants rather than needs and they are virtually unlimited.

Needs and wants create the opportunity for business and keep the economy turning.

New features are constantly added by designers to make people want the newer models when the market becomes stagnant. Older models are considered obsolete and people are encouraged to buy again.

Consumption of mass-produced goods is encouraged through mass communication (ads or TV commercials)

Our capacity to consume is growing at a rapid rate.

Explain the difference between a need and a want and give examples of each.

FACTORS OF PRODUCTION

Or resources required to produce the goods that people need and want: land, labour, enterprise and capital.

Land refers to the natural resources available in a country such as agricultural land, sea, rivers, mines, gas fields and forests.

Labour refers to the people available to assist in the production and to the qualifications and skills available within the labour force.

Enterprise is the act of bringing together elements of land, labour and capital to develop an opportunity and provide a product or service with a view to making profits. The person who develops the enterprise (or sets up the business) is known as an entrepreneur.

TYPES OF ECONOMIC SYSTEMS

Each country has to decide which type of economic system to adopt to make the best use (to exploit or to harness) of its resources or factors of production. The main differences between the three main types relates to the extent to which the government intervenes in the economy.

Free market economy:

All decisions concerning (or regarding) the production of goods and services are made by the citizens with very little interference from the government. The market law of supply and demand dictate which goods or services are produced. Great choice is created and competition make producers supply goods at lower prices. On the negative side, the wealthier sectors of society hold most of the economic and political power. Essential services such as education and health may be endangered if they are not profit-making.

Competition is one of the driving forces of the economy

Letting the market / trade alone and self-regulating (A. Smith, in The Wealth of Nations, 1776, advocated the ending of all government regulation (laissez-faire doctrine).

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Centrally planned economy:

All decisions made and controlled by the state: what goods to produce, how to produce them, to whom to distribute them and at what price to sell them.

Social equality is a major goal. The equal distribution of wealth is a priority.

The state plays an important or key role in the decision-making process.

Lack of competition may lead to bad management, inferior products and supply problems; a lot of bureaucracy slows down the decision-making process;

e. g. the communist systems have recently become more market-based or oriented.

Mixed economy:

A combination of the two systems (the former and the latter)

In most areas citizens (individuals) are free to set up businesses (firms).

Accumulating personal wealth is considered to be a positive goal that, in the end, benefits all of society. In certain areas such as education, public transport, electricity generation... the government takes control to guarantee essential services at prices all citizens can afford.

It enjoys the ‘best of both worlds’. Almost all the major economies in the world are mixed systems.

THE WORLD OF PRODUCTION

It can be divided into three main branches: primary, secondary and tertiary sectors.

Primary including extractive industries to get raw materials from land, sea, air (wind power).

Secondary including manufacturing industries making finished products for the consumers.

Tertiary including service industries such as insurance, banking, communication, legal services, transport, accounting and medical services.

Vertical integration

Firms operating in different sectors.

THE IMPACT OF NEW TECHNOLOGY (on the business world)

New technological advances allowing companies to penetrate the global market.

Technology has helped farmers to cultivate stronger crops.

New products, new businesses like Microsoft and the online auction eBay have been created.

The whole of the commercial transaction (including ordering, transport and delivery, invoicing and payment cycle can be supported electronically)

Tele-working allowing employee to work from their homes or when travelling

Companies can use the Internet to find the best suppliers, regardless of their geographical location, and to sell to a global market.

All administration transactions can be carried out electronically.

Computers are used to control machines in the production process and to design products(CAM and CAD).

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Bar codes and readers have speeded up (made faster) the supermarket checkout system and simplified inventory operations.

Cash machines, credit cards and online banking have revolutionised the banking services.

E-commerce ...

THE INTERNET REVOLUTION

The Internet has revolutionised the business world by changing the way companies, suppliers and customers interact, by creating new business opportunity, intensifying competition, creating new businesses and transforming the existing ones, becoming the fastest growing marketplace in the world economy.

Companies use the Internet to communicate more efficiently, order supplies, trade in international markets, attract new customers, sell products, recruit staff (to find new staff).

Consumers use the internet to find more competitive prices and greater product selection (wider choice), to find better customer service, to benefit from 24-hour shopping and to get made-to-order (customized/tailored/bespoken) products.

E-commerce / Click and brick businesses

Electronic commerce (e-commerce) is the process of buying and selling products and services over an electronic network, the web. Internet facilitates commerce, using electronic means for promoting, selling and distributing products. We can think of the web as a huge mall that is open seven days a week, day and night, 365 days a year. You can go shopping whenever you want and, by just clicking on your mouse, you can browse online catalogues and choose from a wide range of goods. According to several surveys, shopping online is one of the favourite activities for surfers. The others are searching for information, reading news and sport sites, managing careers, learning something new, downloading software, travel, socializing in chat-rooms, social networks and forums.

Dotcom companies are businesses that exist only on the Internet. They have several advantages over their

traditional rivals or competitors: reduced shipping costs; reduced delivery cost for goods that can be

delivered electronically like software programmes, music or video; equal access to markets for small

companies and large corporations; access to global markets; 24-hour shopping.

What are the main advantages related to the use of the web to buy and sell products?

What are dotcom companies? Why are they referred to as “dotcom” companies or “click” businesses?

Have you ever had any personal experience of e-commerce? Can you think of any drawbacks or cons related to shopping online?

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E-MAILS AND NETIQUETTE

Advantages and drawbacks (pros and cons)

Advantages:

Msgs. can be sent very quickly at virtually no cost

A large number of people can be contacted any time and anywhere; you can send the same msg. In CC or BCC (courtesy or circulating copy and blind courtesy copy) to different people.

Files can be attached

As the subject and sender appear in your inbox, at a glance you can decide which one to read first and how important the message is

Msgs. Can be stored in files which saves you research time and enormous amounts of paper

Drawbacks:

You can be overwhelmed with emails; people feel the pressure of keeping up with e-mail messages, and replying quickly (don’t feel obliged to reply immediately!)

People tend to write without care (no well structured, clear and correct messages); msgs. packed with spelling errors

They reduce the opportunities for human contact (pick up the phone now and again!)

Messages need to be deleted or stored frequently , otherwise they may cause confusion (mailboxes is frequently full to capacity)

Computer viruses are commonly spread through emails (protect your computer with a virus scan!)

You risk to throw important things away with just a click

Computer systems can be down from time to time and everything gets stuck.

Netiquette

Conventions of behaviour or etiquette in personal relationships (propriety)

A set of rules and guidelines for using emails properly and effectively:

Keep it short

Don’t use abbreviations unless you are sure your reader will understand them

Don’t use capital letters, they look as if you are shouting

Put a complete line space between each paragraph

Make sure your grammar and spelling are correct

Make sure your message is clear and includes all relevant info.

Make sure you have attached any file you want to send

Make sure you are sending it to the right person (double-check the address)

Always write a subject heading to give your reader a general idea of the gist or contents of the message. This will also capture your reader’s attention

Keep copies of your messages.

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module B

HOW BUSINESS IS ORGANISED

The internal structure of a company

Most companies are organised by function. They divide their work in a series of key departments and one specialist manager in charge of each department. All the employees, from the Managing Director down, know where they fit in and to whom they are responsible (they report).

Board of Directors: establishes goals, chooses managing director

Managing Director [or CEO (chief executive officer; similar to Italian amministratore delegato)]: runs the company day-to-day, chooses dept. Managers, make sure the various depts.. work together

Finance Manager: takes care of firm’s finance, makes and receives payments, prepares budgets for each dept

Production Manager: sees that goods are produced on time, supervises (oversees) quality, ensures machinery is in working order, control costs to stay within the dept. Budget

Sales Manager: supervises sales team, sets sales targets, keeps in contact with the production manager to make sure there is sufficient amount of goods produced to fulfil orders, deals with customer complaints

Marketing Manager: is responsible for the public image and make sure the product is well known and immediately recognisable; organises market research and advertising; devises marketing strategies

Purchasing Manager: buys the correct quantity and quality of materials the company requires; keeps in contact with the production dept. To make sure they have all the material they require

Human Resources (HR) Manager: chooses staff; trains staff; maintain good industrial relations; works out wages and conditions, holidays and promotion, and redundancy (lay off)

Forms of business ownership

Sole trader

The sole trader is the cheapest and easiest type of business to set up. A sole trader owns and runs his own business, he has unlimited liability so he is responsible for his own business debts; if the business goes bankrupt (fails) he may lose personal assets and possessions. Advantages and drawbacks to being a sole trader: the owner is his own boss, profits are not shared with others, decisions can be made quickly, the owners knows his employees and customers well; cons are the unlimited liability, limited financial resources because all capital must be provided by one person, there is nobody to share the workload.

Typical sole traders are shop owners (keepers), taxi drivers, publicans, electricians, plumbers, mechanics, florists, carpenters, hairdressers and butchers.

Sole trader

If your father owned a launderette and you would like to continue his business without employing other people or relying on external capital, you

will be the owner of a sole trader company.

The advantages are the freedom to take decisions and the profit you’ll make won’t be shared with anyone. This means, however, that if business is

not good, you will be responsible for your losses. You might run into debt, or go bankrupt. You might therefore lose your personal assets because

you have unlimited liability. As for drawbacks, it also may be difficult to obtain a bank loan because small businesses are c onsidered risky

businesses.

It is considered an easy way to start a business and is not too complex from a legal viewpoint. Examples of sole traders are electricians, plumbers,

mechanics, florists, carpenters, hairdressers and butchers.

1.How can you define a sole trader?

2.Why is it difficult for sole traders to obtain bank loans?

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3.Why might a sole trader be stressed? If you should set up a business yourself, which form of business ownership would you c hoose and why?

Partnership

A partnership is a legal agreement between two or more people (up to a maximum of twenty), to set up a business together, and share the responsibility for managing it. The initial capital investment is made by all the partners. If a partner leaves or a new one joins it, the partnership is dissolved and a new one starts. Partnerships are common among doctors, solicitors, architects and accountants.

There are two types of partnership: unlimited partnerships (similar to Italian snc) and limited partnerships (similar to Italian sas) where some partners contribute only capital to the business and do not have an active role in the running of the business; they are liable only for the amount of money they initially invested and are known as limited or sleeping partners. However, at least one partner, the general or unlimited partner, must have liability without limitation. Pros and cons: risk and responsibilities shared, each partner may specialise in their own area of the business, more finance can be raised; cons: profits are shared, the decision-making process can be slow due to other partners disagreement, a partnership is terminated when a partner dies and therefore the process of forming a new partnership has to be undertaken.

Limited companies (autonomia patrimoniale perfetta)

A limited company (similar to Italian srl) is owned by shareholders, investors who have bought shares in the company. Profits are divided among the shareholders in proportion to the amount they invested: these payments are called dividends. Liability is limited to the amount of the original or initial investment so, in case of bankruptcy, the shareholder’s private possession will not be touched. Shareholders cannot make decisions in the running of the company, it is the directors elected at the Annual General Meeting that control the decision-making process.

There are Private limited company (Ltd or Inc., standing for ‘Incorporated’, in America) and Public limited companies (Plc).

A private limited company (Ltd) has between 2 and 50 shareholders, is usually a small company, buys and sells its shares privately, cannot be quoted on the Stock Exchange, usually only sells its shares with the permission of the other shareholders.

A Public limited company (Plc) has at least two shareholders but has no upper limit on the number of shareholders, is usually a very large company, it can be quoted on the Stock Exchange, sells its shares with no restrictions.

http://www.incorporatetime.com/FaqCorp.htm

http://www.merriam-webster.com/dictionary/corporation

Main Entry: corporation

Function: noun

Date: 15th century

1 : a group of merchants or traders united in a trade guild b : the municipal authorities of a town or city 2 : a body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession 3 : an association of employers and employees in a basic industry or of members of a profession organized as an organ of political representation in a corporative state

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Cooperatives

Or cooperative societies

In a cooperative, or co-op, the workers are masters of their own trade: the business is owned and run by its members. All members have a vote, no matter how much work or money they put into the co-op; this means that no one can dominate. They decide who the manager is, how much they will earn and how much they will invest every year. All members have limited liability.

Cooperative societies might be an opportunity for unemployed people to enter the world of work; that’s why the government usually supports them: tax rebates and low interest loans are a means to help cooperative societies. Cooperatives, however, might face problems such as the need to train workers, the lack of qualified managers, the lack of investment and the need to distribute profits among the workers to make ends meet1.

There are three types of cooperatives: worker cooperatives, retail cooperatives and producer cooperatives.

Why do cooperative societies have more freedom?

How can the government support a cooperative society?

Is the number of votes each member holds proportional to the amount of money he/she invests? Why?

To buy out: rilevare la quota, assorbire

Franchising

A franchise is the authorisation given by a company, the franchisor, to another business, the franchisee, to sell its goods or services in a certain geographical area. In return, the franchisee pays the franchisor a fee plus a percentage of its profits.

The benefits for the franchisors are that they create a network of distribution outlets without investing capital; the franchisee are generally highly motivated and work hard to make a success of the franchise.

The advantages for the franchisees are that they acquire a well known product, trading name and reputation; they receive marketing support, training and commercial advice from the franchisor.

Franchising reduces the risk of business failure because the franchisee is supported by the successful business record of the franchisor.

HOW BUSINESSES GROW

Takeover, merger and joint venture

Companies try to grow by taking over (rilevare, acquisire, subentrare) or merging with existing businesses. A takeover occurs when one company, the holding company, buys enough shares in another company, the target company, to acquire control of it. The target company may try to oppose the takeover but may be powerless to stop it; in this case it is referred to as a hostile takeover.

A merger takes place between two companies through their agreement; the two companies are usually completely reorganised following the merger.

1 To make ends meet: sbarcare il lunario, arrivare a fine mese con lo stipendio.

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There are three types of takeover/merger according to stage of production (primary, secondary or tertiary sectors) and the business activities involved:

vertical integration involving companies at different stages of production in the same industry

horizontal integration involving companies in the same industry and at the same stage of production

conglomeration or lateral integration involving companies with completely different business activities

A joint venture occurs when two or more companies collaborate in a separate business project; it is not a merger but simply an association to carry out a specific activity.

Multinationals

A company that has its headquarters in one country (home country)and carries out its business activities in other countries (host countries). They have developed because (advantages for the multinational company or corporation) they can gain from low-cost labour and cheap raw materials in low wage countries which cut production costs and make the multinational’s products more competitive; by setting up their businesses in foreign countries they can often avoid (dodge) trade barriers; by diversifying into different countries’ markets they are able to spread risk.

There are several advantages and drawbacks to multinational for the host country: the advantages: they provide jobs and therefore reduce unemployment, they introduce new ideas, successful work practices, new technologies and expertise, they provide work for local suppliers, imports are reduced as goods are now available locally, exports are increased by the multinational’s overseas sales efforts. The cons: profits are sent to the home country, because of their size and power, they can exert strong political pressure in the host country, they may exploit the local labour force by operating with low healthy and safety levels and inadequate pollution control, they can cause economic problems and local unemployment if they close down business.

(see globalisation and anti-globalisation)

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module C

INTERNATIONAL TRADE / IMPORT AND EXPORT TRADE

It refers to the importing (buying from other countries) and exporting (selling to other countries) of goods and services. It is made of visible (physical goods) and invisible (e.g. holidays, transportation, insurance) trade

Pros: no country is self-sufficient; individual nations have a tradition in the production of certain goods; the domestic market is too small so firms go onto the export market to increase their sales/profits/employment; surplus production can be sold abroad; consumers like to choose from a wide range of products

Cons: higher transport and insurance costs; the value of the foreign currency may fluctuate and commission charges must be paid; difficulties in getting paid; dealing with complicated documentation and time-consuming bureaucracy procedures; greater risk that goods will be stolen or damaged in transit; cultural and language differences that may lead to misunderstandings

Restrictions on international trade: introduced to protect local industry against foreign competition, to safeguard employment, raise revenue for the government through customs tariffs, to sanction countries for political or ethical reasons, to improve the balance of trade. Tariffs are import duties that raise the price of imported goods making them less competitive.

Subsidies are financial help given by the government to home producers to assist business, protect jobs and make locally produced goods cheaper and therefore more competitive.

Anti-dumping legislation prohibits countries from operating in a foreign market in an unfair manner: dumping is the practice of selling large quantities of goods at a price that is below the cost of production or lower than the home market price. This strategy is often used to reduce surpluses or to win foreign customers. To dump: scaricare

Many economists support free trade (no barriers in the movement of goods and services between countries) and deregulation (the relaxing or removal of regulations and trade barriers) as it facilitates the movement of goods and promotes world trade.

Trading blocs

The forming of trading blocs where a group of countries in close geographical proximity, promotes free trade among members to ensure their economic growth.

Some experts oppose the creation of trading blocs because they fear the world economy will be dominated by three groupings (European Union or EU, the NAFTA and Mercosur and Asia) and nations outside them may find it hard to trade with them.

The European Union

It is a trading bloc made up of 25 countries that have organized a free trade area in which:

No tariffs are imposed

There is free movement of capital and labour

Common workers and consumers rights have been established

There is an increased standardisation and recognition of professional qualifications and titles

There is a common tariff on imports from outside, the Common External Tariff or CET

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Subsidies are provided for agriculture and industry

The European Investment Bank provides loans to promote development in economically disadvantaged areas

Common standards of quality and safety are established for example in food labelling

Cross-border formalities have been eliminated

The euro

Adopted as a single currency by the Eurozone countries in 1999, it began to circulate on the 1st of January 2002. For the twelve Eurozone countries monetary policies, such as setting the interest rate, are decided by the European Central Bank based in Frankfurt.

There have been several advantages to using the euro: citizens can travel more easily without the trouble of exchanging currencies and it is easier for travellers to compare prices; the euro is an international currency and therefore, it is accepted in many tourist destinations; it makes international trade more stable and cheaper by eliminating exchange rate fluctuations and the costs of changing from one currency to another; it is a symbol of European integration.

Those who reject the euro believe that it increases the cost of living and creates unemployment; they are also opposed to giving control of their national economies to European bodies such as the ECB.

The countries who joined the euro had to fulfil the Maastricht criteria (economic and political conditions).

In recent time it has grown stronger particularly against the dollar making imports to the EU cheaper and exports more expensive.

Organisations promoting international trade

Organisations created to ensure that international trade is conducted in a fair and orderly way; most of them support the principle of free trade and promote the idea that all nations will benefit by exchanging the things they produce efficiently for the goods they produce less efficiently.

The WTO

A permanent intergovernmental body that deals with the global rules of trade between nations. Its headquarters are in Geneva. It was set up in 1995, it has 147 members and covers trade in goods, services and intellectual properties (copyrights, patents...)

Its objectives are reducing or eliminating barriers to free trade, promoting fare trade among its members, mediating disputes, deregulating markets, encouraging international investment, promoting the spread of technical expertise, supervising the implementation of trade agreements, helping developing countries by providing technical assistance and training programmes, reducing or eliminating subsidies to agriculture.

IMF

Established after the Second World War in 1946 to provide short-term loans for countries suffering serious economic problems; promote international monetary cooperation; encourage stability in exchange rates and orderly systems for exchanging money between countries; facilitate economic growth and high levels of employment.

The World Bank

It provides low interest loans to poor countries for development projects, such as transport, health, education and natural resource management. It brings finance and technical expertise to help developing

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countries reduce poverty. It is made up of 184 member countries. Most of its funds come from Western Europe, the US and Japan.

Globalisation

Term used to define the increased flows of goods, services, capital, people and information in the modern world.

Several factors have contributed to the globalisation process: the end of the Cold War and the collapse of the centrally planned economy of the Soviet Union; the elimination of protectionist barriers and implementation of free trade policies; the technologies advancements, the increases in international trade; the world has entered a new economic phase.

Pros: distance is no longer an obstacle, there is more choice and greater spending, rise in living standards and more international travel.

Supporters claim that the benefits have not only been for the West: in addition to providing jobs in the host developing countries, companies have exported better working conditions reducing poverty and improving living standards. The supporters see it not only as an economic process, but also as a philosophy that promotes international understanding and cultural awareness and hope to finally achieve the goal of a global village (Marshall McLuhan).

Critics or anti-globalisation promoters (such as Naomi Klein, No Logo) say that globalisation favoured the West at the expense of developing countries. They claim that the share of the global income of the poor has dramatically dropped. They also believe that corporations or multinational companies are becoming more powerful and influential than democratically elected governments putting shareholders’ interests above those of communities. Fifty-one of the 100 largest economies in the world are not countries but multinational corporations: GM, GE, Sony, Nissan...

In the race for mega-profits and supremacy they cause environment destruction; they promote cultural homologation.

Anti-globalisation in an umbrella term covering a group of different protests causes including environmentalism, anarchism, anti-capitalism, opposition to multinationals, third world debt abolition, child protection and workers’ rights. The targets of anti-globalisation protests are: the WTO, the IMF and The World Bank; they believe that these institutions have acquired too much control, are destroying democracy and are controlled by big, global companies; multinational corporations that force developing countries to lower their standards in workers’ rights and environmental protection.

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module D

What happens on the Stock Exchange?

Stock Exchanges are organisations that allow people to buy or sell bonds or shares.

When a company wishes to expand its activities it has two ways of raising finance: it can apply to a bank or other lending institutions for a loan which it will pay back with interest, or it can sell shares in the company on the Stock Exchange. In return for the money the company raises from the sale of shares, it must give its shareholders part of its profits; the share of the profits received by the shareholders is called dividend and it is directly proportionate to the number of shares the shareholder owns. It is usually paid annually or twice a year and varies according to how much profit the company has made.

A bond is issued either by the government or a company as a means of borrowing money. The bondholder receives a fixed rate of interest plus repayment of the loan at the expire date. Unlike a shareholder, a bondholder is not an owner of part of the company’s capital, he or she is simply one of its creditors. Most experts advise investors to create a portfolio of shares from several different industries: by spreading investments over a wide range of industries the investor has a greater chance of counter-balancing losses in one area with gains in another.

http://iate.europa.eu/iatediff/SearchByQuery.do (eurodicautom)

Società, Investimento [COM] Voce

completa

IT

fondo comune di investimento a capitale variabile

fondo d'impiego capitali

fondo d'investimento

fondo commune d'investimento

EN

unit trust

mutual fund

http://www.incorporatetime.com/FaqCorp.htm

Prof. Ermanno Maggi