Fill in the missing words from the box below

competitiveness survival cutting operating expenses

profits cut turnover growth dividend

expansion invest

The …… of our company is growing. With the increased turnover, our …. have grown too. This is the result of our police of ….. …… During the past year they have been ….. by almost third. So now there is no question of our company’s ….. as there was last year. I can even speak about expecting every stockholder to receive a very handsome ….. Bit it should be understood that now is the time to …. Money. I mean investing in the ….. and ….. of the company. Otherwise, our ….. will fall and we’ll be back to where we were.

Topic 2. CLASSIFICATION OF BUSINESS BY THE TYPE OF ENTERPRISE

Businesses can be classified not only by their form (sole proprietorship, partnership, or corporation), but also by the type of enterprise in which they are engaged.

A business organization that is concerned with the production of goods is an industrial organization. For instance, a giant corporation manufacturing cars, such asGeneral Motors, is an industrial organization. Every industrial organization sells its goods, usually through some other companies that buy the goods wholesale. Then the goods are sold to the general public in retail trade

Business organizations, such as retailers, are commercial organizations. Sellin 5g - not production - is their main concern. For instance, in many countries, men's ties are sold in special stores calledTie Rack. Tie Rackis a commercial business organization engaged in retail trade. Also it can be Mark and Spencer, Primark, Victoria Secret and other

There are also financial business organizations such as banks and insurance companies. They only deal with money. It may be said that they trade in money. Every bank that you can think of (likeChase Manhattan Bank ) and every insurance company (likeLloyds ) is a financial business organization.

1. What are the organizations engaged in the following activities called?

a)............................................. are engaged in retail trade

b)............................................. are engaged in production of goods

c)............................................. are engaged in dealing with finance

2. Fill in the missing words:

a) When a company tries to make as much profit as possible, it is called...............

b) When a company is the principal supplier of certain products on the market, it is said this company has achieved...............

c)..............means the expansion of the company, its influence, and activities.

d) Some government and..............organizations do not make profit maximization objective.

e) Workers are.............when they are replaced by machines.

f) Market domination gives stability and.......to business.

g) Businesses can be.......according to what they are engaged in.

h) Organizations principally..............production of goods are called industrial organisations.

I Commercial organizations are mainly concerned with.......trade.

Industrial organizations usually sell their products........

3. Complete the dialogue between a professor (P) and a student (S) of a business school ' g an exam.

P: What is the principal objective of any private sector organization?

S: __________________________________________________

P: And what types of private sector organizations do you know?

S.___________________________________________________

P.___________________________________________________

S. They deal with money. Good examples are banks and insurance companies.

P. ____________________________________________________________

S. They are engaged in retail trade.

P.____________________________________________________________

S. I think three ways of achieving profit maximization are most common. These are minimizing production costs, market domination, and corporate growth. But sometimes corporate growth results in lower profits.

P. Could you give an example of how the cost of production could be minimized?

S._______________________________________________________________

P. Does that mean laying off workers?

S._______________________________________________________________

P. Well, thank you. Your answers were quite correct.

Topic 3. WAYS OF PROFIT MAXIMIZATION

Every private sector business organization tries to maximize its profits.

Profit maximization means that a business organization will not only try to make a profit, but it will try to make as large a profit as possible. This is often not true for government organizations and other public-sector organizations. When we speak about maximizing profits as being the principal objective of a business, we should remember that we are talking about private sector organizations only.

There are many ways to maximize profit. Which method and how many are used depends on the situation and chosen strategy. One way is to minimize the cost of production. For instance, it may be cheaper to use machines instead of workers. In this case, workers will usually be laid off and machines will start doing what people did before.

Another way is to dominate the market, as for instance, when one company basically holds a monopoly on the market in supplying certain goods. Often there are several giant companies competing, each one trying to dominate as great a share of the market as possible. Domination of the market can itself become one of the principal business objectives. That is so because such domination not only increases profits, but also gives stability and security to the business.

Corporate growth is also a way of maximizing profits, for a company's expansion helps it to gain market domination. But growth, as an objective in itself, may actually work against maximizing profit, especially if all the money is constantly invested into growth and profits are considered of secondary importance.

Topic4. BUSINESS STRATEGY

Every company or firm develops its strategy, i.e., its overall method of achieving its objectives. The strategy must be very flexible, because only a flexible strategy permits taking into account market conditions, which are constantly changing.

Strategy depends on long-term and short-term objectives and prospects. The long-term objective is always profits. But a company may be ready to cut its profits for some time to have a greater share of the market to sell its products. Greater market share means greater profits in the future. So, a company may put gaining market share as its short-term objective. To achieve this, the company has to reduce its prices. But then, the margins will be lower. Margins are the differences between what it costs to manufacture a product and the price at which it is sold. Lowering the margins means cutting the profits.

In this case, in order to increase profits over the long term, the company needs to increase production. Gaining market share allows it to increase production, and that increase cuts the unit cost (i.e., the cost to manufacture one unit of what the company produces),

Thus, gaining market share provides the company with a long-term prospect of increasing profits.

On the other hand, increasing production may cut profits as well, because the increased production requires new investments into machinery and technology.

The strategy, then, has to be oriented in two directions - the market and the manufacturing process. If we focus on the market, then the strategy is to gain market share. If we focus on manufacture as a source of profitability, then the quality of products should be improved. In that case, prices may be raised as well, in their turn raising the profits.

But this strategy does not work well if the market is competitive. Price increases, whatever the quality, may result in a drop in sales. A firm that does not increase prices, or that even reduces them, adapts to the market more easily.

To reduce costs without increasing (or even reducing) prices, companies often have to sub-contract some of their production. That means job losses inthe company itself, though the remaining jobs become more stable and secure.

It may be said that developing a sound and flexiblestrategy is very difficult, because every strategy has its advantages and disadvantages.Many factors have to be taken into account. In most (large) corporations there are several levels of management. Corporate strategy is the highest of these levels in the sense that it is the broadest – applying to all parts of the firm – while also incorporating the longest time horizon. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are typically business-level competitive strategies and functional unit strategies.

Corporate strategy refers to the overarching strategy of the diversified firm. Such a corporate strategy answers the questions of " which businesses should we be in? " and " how does being in these businesses create synergy and/or add to the competitive advantage of the corporation as a whole? "

Business strategy refers to the aggregated strategies of single business firm or a strategic business unit (SBU) in a diversified corporation.

Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies. Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have reengineered according to processes or SBUs.

A strategic business unit is a semi-autonomous unit that is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters. A technology strategy, for example, although it is focused on technology as a means of achieving an organization's overall objective(s), may include dimensions that are beyond the scope of a single business unit, engineering organization or IT department.

An additional level of strategy called operational strategy was encouraged by Peter Drucker in his theory of management by objectives (MBO). It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategies are informed by business level strategies which, in turn, are informed by corporate level strategies.

This notion of strategy has been captured under the rubric of dynamic strategy, is considered as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets.