Four contradictions between different economic schools.

ACCOUNTING

A. is the art to organizing, maintaining, recording and analyzing financial activities. It’s main function is to provide and analyze information about the economic entity of the company. It’s generally know as a ‘language of business’.

Everyone uses accounting information. (managers, investors, bankers and supplies, customers and employees)

The actual record-making phase of accounting is usually called bookkeeping. Actually, bookkeeping is just a part of accounting and it can be defined as writing down the details of transactions (debits and credits). The three main steps in making records in bookkeeping are: 1.recording every purchase and sail that a business make in Journal; 2.entering these temporary records in the ledger; 3. transferring all the relevant totals to the profit or loss account.

Double-entry principle- each transaction must be recorded as 2 separate entries(debit, credit)/ The total of the account on debit and credit referred to the trial balance. Bookkeeping-task-oriented function, recording day-to-day financial transactions/Accounting-results-oriented function, not the actual preparation, function-tha interpretation of the accounting info.

Human aspect- reports are made on peoples options, estimates and decisions/

Financial accounting information is intended primarily for external use. Managerial accounting information is intended for internal use.

Basic accounting concepts: Business entity concept. The main idea of that concept is that each business has separate existence from its owners, creditors, employees, other interested parties and other businesses. In order not to distort the financial position or profitability of the business the reports of a business should be parted from transaction or assets of another business. Continuity concept stands on the assumption that the business entity keeps on operating into the indefinite future. It allows to value long-term assets at cost on the balance sheet – so they are used rather than supposed to be for sale. Money measurement concept economic activity is recorded and reported in terms of a common monetary unit of measure – dollar US that is treated as a stable unit of measure. Periodicity concept according to which entity’s life can be subdivided into time periods for reporting the results of its economic activities.

Basic accounting principles: cost principle that is concerned mainly with recording all goods and services purchased at cost. Objectivity principle requires that accounting records should be based on provable events such as business transactions that involve exchanges of economic consideration between two or more independent parties. Accounting information must be based on objective data. Revenue principle assumes recording the revenue at the time it is earned, the services are rendered or at the time sold goods are transferred to its buyer but not before. Matching principle expenses and the revenues earned as a result of expenses should be reported on the income statement in the same account period.

Further principles: Materially principle requires the effort of recording a transaction should be worthwhile (дающий результат). To determine what is material and what is not – is the priority of the firm to fix its rules. Full-disclosure principle proclaims that financial statement should include only relevant, important data about the operations and financial position of the entity. Consistency principle comes to avoid constant changing of the accounting methods. A company uses the same accounting methods period after period. Prudence principle means that an accountant while making his choice to which figure a given item to be taken will likely understate rather than overstate the profit. The capital of the firm is shown at a lower amount rather than a higher one.

Revenues – is one component that permits the recognition of profit. Expences – cost of doing business (certain costs that must be incurred by every business). Profit represents the income that a business has earned after certain deductions have been made from revenues.

Basic accounting equation ASSETS = EQUITY + LIABILITIES. Assets basically are the things – money, properties, or goods that belong to the company. Liabilities are those moneys, properties, or goods that must be paid out, such as taxes, debts, interest and mortgage payments, or the money owed to others, which are grouped together on the balance sheet as creditors. The owners’ (shareholders)equity is what remains of the assets once all the liabilities have been serviced provided that something does remain. An alternative term for owners or shareholders’ equity is Net Assets. This includes share capital (money received from the issue of shares), sometimes share premium (money realized by selling shares at above their nominal value), and the company’s reserves, including the year’s retained profits.

Financial statement – financial document giving certain financial information. There are three basic reports that the business organization uses on a regular basis: Profit and loss account or Income statement; Cash flow statement or statement of cash flows; Balance Sheet.

The balance sheet shows a company’s financial situation on a particular date, generally the last day of the financial year. It lists the company’s assets, its long-term and short-term liabilities and shareholders’ funds.

Types of assets: tangible (current – cash; fixed – property; investment – stock and shares) and intangible (goodwill; copyright; trademark). Types of liabilities: current (taxes, dividends, wages) and long term (bonds, mortgages, notes)

Income statement or profit and loss account. It shows revenue and expenditure, net income or net loss. It usually gives figures for total sales or turnovers and costs, expenses and overheads for a period of time.

The flow of funds and cash statement shows the flow of cash in and out of the business between balance sheets dates.

If a company has a majority interest in other companies, the balance sheet and profit and loss account of the parent company and the subsidiaries are normally combined in consolidated accounts – the account reflecting activity of several business entity and accumulating operations, spent by them

Public accounting – work in public concerns and charge a fee for their services. Private accounting – help an individuals to file his tax returns. Government accounting – as a rule are salaried and work in government offices.

 

THE BUSINESS CYCLE

I. The business cycle describes the phases of growth and decline in an economy.

We can define four stages in business cycle. The first stage is upturn. It is a period of expansion and recovery. The second stage is peak. It is highest point in business cycle, which is followed by a downturn and downswing or a period of contraction. The third stage is recession. During a recession, the demand for goods and services declines and the economy begins to work at below its potential. Investment, output, employment, profit, commodity and share prices, and interest rates generally fall. And the fourth stage is trough. It is the lowest point on the business cycle, which is followed by a recovery or an upturn or upswing or a period of expansion.

II. The traditional theory of the business cycle is that is caused by upturns and downturns in the behavior of companies in terms of mostly their investments and stocks, and in particular the fact that when demand pressure is very strong that companies are running at their high levels of capacity they are using their plant to the full and then they tend to invest overmuch and if demand weakens a little bit you have an overreaction inn investment, people stop investing completely that feeds right back into the stock cycle and pushes the economy down to a low level until companies have to invest to replace investment rather than investing to increase capacity. It’s a standard theory of the cycle.

III. Internal theories consider the business cycle to be self-generating, regular and indefinitely repeating. A peak is reached when (or just before) people begin to consume less, for whatever reason. When economic times are good or when people feel good about the future, they spend, and run up debts. If interest rates rise too high, a lot of people find themselves paying more than they anticipated on their mortgage or rent, and so have to consume less. If people are worried about the possibility of losing their jobs in the near future they tend to save more. A countries output, investment, unemployment, balance of payments, and so on, all depend on millions of decisions by consumers and industrialists on whether to spend, borrow or sale.

IV. External theorie s, on the contrary, look for causes outside economic activity: scientific advances, natural disasters, elections or political shocks, demographic changes, and so on. Joseph Schumpeter believed that the business cycle is caused by major technological inventions (the steam engine, railways, electricity…) which lead to periods of “creative destruction”.

There is a substantial body of evidence suggesting that price surprises and money disturbances do not affect real economic activity. If this is true, then where does the business cycle come from? A clue comes from the fact that changes in investment spending have played a large role in recent business cycles. What is significant is that these increases in investment spending do not appear to come from more money being made available (as the Keynesian and monetarist models suggest). If they were caused by more funds being made available, real interest rates would fall in expansions. However, interest rates rise with rising investments. So, by using simple demand and supply analysis, these increases must come from investment projects be­coming more profitable.

V. KONDRATIEFF WAVE theory of the Soviet economist Nikolai Kondratieff in the 1920s says that the economies of the Western capitalist world were prone(склонны) to major up-and-down "supercycles" lasting 50 to 60 years. He claimed to have predicted the economic crash of 1929-30 based on the crash of 1870, 60 years earlier. The Kondratieff wave theory has adherents, but is controversial among economists. IT is also called Kondratieff cycle.

VI. Political business cycle theory - Where there is no independent central bank the business cycle is caused by governments beginning their periods of office with a couple of years of austerity programmes followed by tax cuts and monetary expansion in the two years before the next election.

VII. Why did the Great Depression last so long ? T he simple fact is that we do not know. It is hard to believe that people did not eventually become aware that prices and wages were too high at some point in the 1930s. It is equally hard to believe it was caused by falling productivity. One ex­planation is that during the Great Depression, the economy was hit by successive waves of bad shocks that kept the economy down. It was a period of protectionism and trade wars, which devastated the export sec­tor of the U.S. economy. Also, the income tax was raised several times and the new social security tax was introduced. Another policy discourag­ing investments was the passing of the Wagner Act in 1936, which made unions stronger. Also the introduction of many new regulations slowed recovery.

VIII. "Supply-side" theorists agree with Keynesians that there is a role for economic policy, but they argue that it should focus on aggregate supply or potential output rather than on aggregate demand. They recommend boosting supply in a stagnant economy by lowering taxes on capital and business profits, which will lead to an increase in the supply of inputs, namely capital and labour.

MONETARISM AND KEYSIANISM.

I. The major economic argument for the past 60 years has been whether governments can effectively intervene in the business cycle and move economies away from recessions more quickly than would otherwise happen.

Classical economists in the 18^th and 19^th century (Adam Smith in "The wealth of Nations") argued in favour of "laussez-faire". They argued that economies tended towards ageneral equilibrium in which all resources were fully and efficiently used. They insisted that in an economy which is powered by free enterprise (= private enterprise) and individualism natural forces such as self-interest and competition naturally determine prices and incomes. They were sure that in the long run economies tend to a full employment equilibrium. Classical economic theory also states that in the long run if people save a lot of money, interest rates will fall. It will encourage business to borrow money and invest.

II. Yet the depression of the 1930s showed that, at least in the short term, this was untrue, that the market system does not automatically lead to full employment. John Maynard Keynes In his book «The General Theory of Employment, Interest and Money»: 1) He argued that there was a certain interconnection (interdependence) between national income and savings;2)He developed the idea of composite (aggregate) demand and supply;3)He worked out a theory of state regulation in the economy, including the sphere of increasing the level of employment 4) He argued that market forces might provoke a high unemployment equilibrium.

So Keynes was convinced that market economies are unstable and without a self- correcting mechanism, except perhaps in the long run, but as he put it, " in the long run we are all dead".

Keyns therefore recommended governmental intervention on the economy, in order to counter the business cycle. The Keynesian theory doesn’t certainly argue that it can dispose of the business cycle altogether and eliminate(устранить) recessions, it can only make the business cycle a little bit flatter. Keynes believed that if the government borrows and spends more money, economic activity will increase, this will affect interest rates and business investments.

During a period of inflation(an inflationary boom) recommended governments to decrease their spending or increase taxation.

During a period of recession, on the contrary, he recommended them to increase their expenditure or decrease taxation, or increase the money supply and reduce interest rates, so as to stimulate the economy and increase output, investment, consumption and employment. According to the traditional Keynesian theory even a small increase in government spending and private investment leads to a larger increase in output.

Keyns suggests that if the government increases its budget deficit, or the amount of money in circulation, it boosts domesticdemand and stimulates a contracting economy. People start spending more money that influences the economy through the multiplier effect. Keynesian policy is often described as «demand management». It means attempting to reduce the level of demand during an inflationary boom, and increasing it during a recession.

III. Many countries began to experience "stagflation" - a prolonged recession or stagflation at the same time as high inflation. This showed that Keynesian attempts to increase demand and reduce unemployment worked in the short term, and didn't work in the long term. As far back as in the 1950s and 1960s monetarists, most notably Melton Friedman criticized the Keynesian fiscal policy.

Unlike Keynesians, monetarists insisted that money is neutral. By the neutrality of money the mean that in the long run the only effect of changing the money supply (the amount of money in circulation) are сhanges in price and that the money supply doesn't influence demand, output or employment. So governments should guarantee that there is a constant and non-inflationary growth in the money supply.

According to monetarist, recessions are not caused by long-term market failures. They're caused by short-run errors by firms and workers who don't reduce their prices and wages quickly enough when demands fall. But the government is usually not able to recognize a coming recession more quickly than the companies. Consequently, its intervention and fiscal measures come too late and take effect when the economy is already recovering. So it can easily do more harm than good. It can make the next swing in the business cycle even greater, accentuate the cycle and make it worse.

IV. ‘Supply-side’ theorists agree with Keynesians that there is a role for economic policy, but they argue that it should focus on aggregate supply or potential output rather than on aggregate demand. They recommend boosting supply in stagnant economy by lowering taxes on capital and business profits, which will lead to an increase in the supply of inputs, namely capital and labour.

VI. Keynesians today are often called neo-Keynesians. They argue that wages are inflexible or ‘sticky’ because of: Labour union contracts and Government regulation

Moreover, business can't change their prices too frequently because there are many costs involved known as 'menu costs'.

Neo-Keynesians believe that individuals and firms are unable to find right prices. This leads to rising output and high or full employment. Economies can get locked into disequilibrium for long periods. So they believe that there is still a role for expansionary and deflationary government policies.

VII. Keynes argued that people’s economic expectations about the future were erratic and random, and could consequently be wrong. In the 1970s, the Rational Expectation School, led by Robert Lucas and Thomas Sargent, began to argue that, on the contrary, people make rational choices according to information available to them. If people anticipate that the government will cut taxes or allow the money to grow or interest rates to fall, so as to boost employment and stimulate demand, they will plan and behave accordingly. Even before the government announces such measures, companies will plan price rises, and trade unions will demand higher pay. This means that predictable and systematic policies to stabilize the business cycle (monetary expansion or tax cuts) will instantly be compensated for and thus become ineffective, in other words, fiscal and monetary policy will only affect output and employment if it’s unpredictable and comes in a surprise.

 

BUSINESS ETHICS

Social responsibility, in contrast to legal responsibility, involves a degree of voluntary response from the organization. This response is above and beyond what is specified by a law or regulatory agency.

ARGUMENTS FOR AND AGAINST SOCIAL RESPONSIBILITY 1. Favorable long-run results for business. 2. Costs of social involvement 3. Violates profit maximization. 4. Moral obligation to be socially responsible. 5. Changing public needs and expectations. 6. Lack of skills to deal with social concerns. 7. Availability of resources to help with social problems. 8. Lack of accountability to the public.

Whatever conclusions we could reach on the social responsibility arguments, it is clear that organizations are increasingly committing themselves to act responsibly. We can classify these actions into four types, recognizing that they really form a continuum of behavior from obstructive to proactive. Since the actions are deliberate, they can rightly be called social responsibility strategies.

Obstructive An organization following an obstructive strategy will tend to deny responsibility for its actions and resist change that it can only see as disadvantageous. The policy is also known as stonewalling or a reactive policy.

Defensive Using a defensive strategy, a company proceeds not by denial but by manoeuvring to justify its position and avoid being saddled with extra responsibility. The stance is to do everything that is legally required and no more. The strategy uses legal actions and public relations campaigns to prove compliance.

Adaptive Under an adaptive social responsibility strategy, the company accepts that it is accountable for its actions, although this acceptance is often the result of pressure brought by external groups.

Proactive The proactive company takes the lead. It looks carefully at the relationships between its activities and the interests of its stakehold­ers. Then it responds to these interests without pressure being applied.

The four responsibility strategies, represent organizations whose attitude varies from "the business of business is business" to "we are responsible for all the consequences of our actions".

II. Ethics in business Ethics is concerned with the code of values and principles that enables a person to choose between right and wrong and there­fore select among alternative courses of action. APPROACHES TO ETHICAL DECISION MAKING Business owners often face difficult ethical dilemmas, such as whether to cut corners on quality to meet a deadline or whether to lay off workers to enhance profit. A current ethical debate concerns the use of extremely low-wage foreign workers, especially in the garment industry. The subject of business ethics is complex. Fair-minded people sometimes have significant differences of opinion regarding what constitutes ethical behavior and how ethical decisions should be made.

There are five approaches that business owners can use to consider ethical questions. 1. Utilitarian

The utilitarian approach to ethical decision making focuses on taking the action that will result in the greatest good for the greatest number of people. Considering our example of employing low-wage workers, under the utilitarian approach you would try to determine whether using low- wage foreign workers would result in the greatest good. 2. Moral Rights The moral rights approach concerns itself with moral principles,' regardless of the consequences. Under this view, some actions are simply considered to be right or wrong. From this standpoint, if paying extremely low wages is immoral, your desire to meet the competition and keep your business afloat is not a sufficient justification. Under this view, you should close down your business if you cannot operate it by paying your workers a "living wage", regardless of the actions of your competitors. 3. Universalism The Universalist approach to ethical decision making is similar to the Golden Rule. This approach has two steps. First, you determine whether a particular action should apply to all people under circum­stances. Next, you determine whether you would be willing to have someone else apply the rule to you. Under this approach, for example, you would ask yourself whether paying extremely low wages in response to competition would be right for you and everyone else. 4. Cost-Benefit Under the cost-benefit approach, you balance the cost and benefits of taking a particular action. 5. Gamesmanship One more approach is gamesmanship. Ethics of business is a game which is different from the Judeo-Christian ethics. It compares business ethics to the strategy of playing a game. For instance, is it considered unethical to bluff in a game of poker? Obviously, bluffing in a game of poker docs not reflect on the morality of the player. It is merely a strategy of playing a game. This approach does not offer any specific guideline for this determination.

At present time the application of ethics in business seems to be an evolutionary state. However, the importance of ethics in business is best summarized as follows: those who treat management and ethics apart will never understand either one.

Also there are 4 ways of improving ethical performance in organizations: Developing codes of ethics

Organising ethics committees, Conducting social audits, Providing ethical training

 

 

Classifications of cultures

Interaction between different peoples involves methods of communication as well as the process of gathering information. This brings us to the question that several hundred national and regional cultures of the world can be roughly classified into three groups.

Task-oriented, highly organised planners (linear-active/data oriented): do one thing at a time, concentrate hard on that thing and do it within a scheduled timescale. These people think that in this way they are more efficient and get more done. A data-oriented culture is one that relies on research based on gathering solid information;

People-oriented, loquacious interrelators (multi-active/ dialogue-oriented): they are very flexible. They follow a multi-active time system, that is, they do many things at once, often in an unplanned order. Multi-active people think they get more done their way;

Introvert, respect-oriented listeners (reactive/ listening): they have large reserves of energy. They are economical in movement and effort and do not waste time reinventing the wheel. Reactive cultures as a rule listen carefully, establish understanding of the other’s intent, allow a period of silence in order to evaluate, query further, react in a constructive manner and try to attain perfection.

Trompenaars cluster analysis. Although countries vary widely, analysis can show that each is more similar to some and more distant from other. These cultures have different attitudes to the most important issues of management.

Status. The largely Protestant cultures on both sides of the North Atlantic are essentially individualist. In such cultures, status has to be achieved. In most Latin and Asian cultures, on the contrary, status is automatically accorded to the boss, who Is more likely to be in his fifties or sixties than in his trirties. This is particularly true in Japan, where companies traditionally have a policy of promotion by seniority.

Pay-for-performance principle. In northern cultures, the principle of pay-for-performance often successfully motivates sales people. The more you sell, the more you get paid. A Dutch researcher Fons Trompenaars gives the example that Singaporean and Indonesian managers objected that pay-for-performance caused salesman to pressure customers into buying products they didn’t really need, which was not only bad for long term business relations, but quite simply unfair and ethically wrong.

Matrix management. Another example of an American idea that doesn’t work well in Latin countries is Matrix management. You can’t have two bosses like you can’t have two fathers. French managers, for example, would rather see an organization die than tolerate a system in which a few subordinates have to report to two bosses.

Welfare and safety of staff. Many organizations espouse standard policies for issues such as the welfare and safety of staff. Scientists compared perceptions of safety at three plants of a United States MNE. They found that it was perceived differently in Argentina, France and The USA. In the last two countries, the individualist culture was reflected in the expectations for managers to take control.

Universalists versus Particularists. In distinguish people ‘s relationship with their boss and their colleagues and friends, Trompenaars distinguishes between universalists and particularists. The former believe that rules are extremely important; the latter believe that personal relationships and friendship should take precedence. Consequently, each group thinks that the other is corrupt. Universalists say that particularists “cannot be trusted because they will always help their friends”, while the second group says of the first “you cannot trust them; they would not even help a friend”. According to Trompenaars’ data, there are many more particularists in Latin and Asian countries than in Australia, the USA, Canada, or north-west Europe.

 

 

Human Resource Managment

Human resources are people. The phrase “ appropriate human resources ” refers to those individuals within the organization who make a valuable contribution to organizational goal attainment. Productivity in all organizations is determined by how human resources interact, and combine and use all other management system resources. Such factors as background, age job-related experience, and level of formal education all have some role in determining the degree of appropriateness of the individual to the organization. Although the process of providing appropriate human resources for the organization is involved and somewhat subjective, the following section attempts to furnish clear insights concerning how to increase the success of this process. Appropriate human resources must be provided for the organization as various positions become open. The process of providing them involves four main steps: 1. Recruitment; 2 Selection; 3 Training; 4. Performance appraisal.

Recruitment is the initial screening of the total supply of prospective human resources available to fill a position. The purpose of the recruitment is to narrow a large field of prospective employees down to a relatively small number of individuals from which one person can eventually be hired.

The sources of potential human resources: internal ( the organization will try to find a prospective employee among the members of the organization to fill a position) and external sources (there are a number of sources of prospective human resources outside the organization): competitors this type has become a common practice. The main point is that a company takes some actions to lure human resources away from another company — competitors in fact; employment agencies these agencies are specialized in matching individuals seeking a position with the organizations in need for them. Employment agencies can be classified into two types: public and private. Public agencies are created to assist the public in the employment process and the private agencies – exist to make profit, as it is their private enterprise. They collect a fee, either from the person hired or the organization; certain publications the recruiter simply places an advertisement in a suitable publication. It is very important to take into consideration that a publication you’re going to put your advertisement in would be interested in filling the position for the readers; educational institutions. Recruiter go directly to educational institutions to interview students close to graduation as prospective human recourses. Headhunting. Headhunters are specialists, consulters who search for high level, often board-level executives, and try to persuade them to leave their jobs in order to go to work for another company. Executives may be persuaded to move from a company by promise of a ‘golden hello’: a large sum of money or some other financial enticement offered by the company they moved to.

Executive pay compensation. It can refer to two different things: what top-executives get for running a company and what they get on leaving a company. A compensation package for an executive leaving a company is also known as ‘golden good-bye’ / ‘golden hand-shaking’/ or ‘golden parachute’. A compensation for someone leaving a company may be referred to as a compensation payment, compensation payoff or compensation payout. These payments may form part of a severance package. Severance payment can be a subject of complex negotiations when an executive leaves or is ousted (forced to leave). When executives are ousted, people may talk about the company giving them ‘a golden boot’. That’s just the point.

It is highly important aspect of recruitment process – Knowing the Law. Modern legislation has a crucial impact on organizational recruitment practices. The Equal Employment Opportunity Commission (EEOC) was created to enforce the law to prohibit discrimination based on race, color, religion, sex or national origin. Discriminatory employment practices are comprised of recruitment, hiring, firing and other factors involved in employment. Speaking to the point, equal opportunity legislation protects the rights of a citizen to work and get a fair wage rate.

Knowing the Job. In order to be effective, recruiters must thoroughly understand the job they are trying to fill. A recruiter who did not have an understanding would find it extremely difficult to attract the right organization members. Job analysis is one procedure that can help recruiters gain this understanding. Job analysis determines which activities a job entails (влечь за собой) and the type of individual needed to perform the job. Job description is the term used to refer to these activities and Job specification is the term used to refer to the type of individual needed to perform the job.

Selection is the second step in providing appropriate human resources for an organization. Selection involves choosing an individual(s) to hire from all those who have been recruited.The selection process is represented in a number of stages prospective employees must pass in order to be hired. The first one might be: education and past performance in other jobs. Then they can be given intelligence or aptitude (ability/ quickness to learn) tests. And, finally, an interviewer can talk to them to evaluate their personality, examine their personal ambitions and even their physical appearance.

Training it is the process of developing qualities in employees that will ultimately enable them to be more productive and, as a result, to contribute more to organizational goal attainment. It’s significant to mention that training in organizations can focus on both: workers and managers. In that case, training programs can be classified into: management development programs and employees development programs.

Performance appraisal – is a judgement on how well a person is doing his/her work. Why do organizations carry out appraisals? First of all, appraisals assist (помогать) organizations to reward staff properly. It comes useful when it’s concerned with the bonuses and increasing the salary. The second reason is: they are needed when managers are transferring/promoting staff and appraisals provide them with up-to-date information related to individual’s performance, skills and career objectives. Furthermore, the necessity of appraisals is in giving the subordinate feedback on how he/she is performing. The manager can talk to the subordinate over the strengths and weaknesses of his/her performance and discuss how to work more efficiently. And, eventually, subordinates can also seek guidance from the manager who may help him to think more realistically about the goals are to be obtained. Besides, it gives the subordinate the opportunity to ask the manager for further training.

Forms of appraisal: ‘rating’. The subordinate’s evaluation is based on traits/qualities such as knowledge of the job, reliability, initiative, sense of responsibility, productivity and attendance that he/she demonstrates in his/her work. Management by Objectives. This kind of appraisal is concentrated mainly on a person’s performance and how well he/she is achieving his/her goals. The focus is on results, not personality traits. It is different from the previous one, because here both the manager and the subordinate agree on certain number of objectives, which should be achieved in a given period of time. The Critical Incident Method. It is the system when the manager keeps a file or a record of good and unsatisfactory examples (incidents) of a person’s work. An advantage of this system is that manager has to think about the subordinate’s work throughout the year

 

Management skills.

The mix of skills differs depending on the level of the manager in the organisation. Theorists usually identify three different kinds of basic managerial skills: technical, human and conceptual, needed by managers at all levels.

Human skill is the ability to communicate, motivate and lead individuals and group(middle ranks). Technical skill is the ability to use the techniques, procedures and tools of specific field(lower levels). Conceptual skill is the ability to plan, coordinate and integrate all of the organisation’s interests and activities (upper levels).

Marketing

Market – a set of conditions permitting buyers and sellers to work together. A market for a product is the people or organizations who buy it or may buy it, that is all the potential customers sharing a particular need or want. A market-driven (market-led or market-oriented) company is a company that responds quickly to the needs of a market. Marketing is the process of developing, pricing, distributing and promoting the goods or services that satisfy such needs. Salesmanship is the art of manufacturing something and making another person want it. Marketing is the art of finding out what the other person wants, then manufacturing it for him. The ‘selling concept’ assumes that resisting consumers have to be persuaded (убеждать) by hard-selling techniques to buy non-essential goods or services. Products are sold rather(а не) than bought. On the other hand, the ‘marketing concept’ assumes that the producer’s task is to find wants and fill them. In other words, you don’t sell what you make – you make what will be bought. The marketing concept rests on the importance of customers to a firm and states that: 1) All company policies and activities should be aimed at satisfying customer needs, and 2) Profitable sales volume is a better company goal than maximum sales volume. In a market of multiple choice, it is no longer sufficient to produce a product and show your customers that it satisfies one of their basic needs. You must show them it provides benefits other products fail to provide, that it can be supplied at a competitive price and above all, supplied reliably.

Market research – collecting, analyzing and reporting data relevant to a specific marketing situation (such as a proposed new product). Relevant information includes size of potential market, consumers’ reaction to a product or service, trends that affect sales, population shifts, local economic situation, competitors’ activity and strategies.

Market segmentation means dividing a market into distinct into segments or, in other words, into separate groups of consumers with different needs according to different variables. These can include geographical factors region, population density, country size and climate; demographic factors such as age, sex, family life cycle; and other variables as income, occupation (профессия), education, social class, and personality. The major ways to segment a market are: 1 ) Geographical segmentation – specializing in serving the needs of customers in a particular geographical area (for example, a neighborhood convenience store may send advertisements only to people living within one-half mile of the store). 2) Customer segmentation – identifying and promoting to those groups of people most likely to buy the product. In other words, selling to the heavy users before trying to develop new users.

Market opportunities – profitable possibilities of filling unsatisfied needs or creating new ones in areas (sectors) in which the company can profitably produce goods or services and enjoy a differential advantage due to its distinctive competencies (the things it does particularly well). Market opportunities are generally isolated by market segmentation.

Marketing mix – the set of all the various elements of a marketing program, their integration and the amount of effort that a company can expend on them in order to fill the target market

There are four principal factors that provide the most effective choice for the consumer – known as the 4 P’s: product, price, place and promotion. Aspects to be considered in marketing a produc t include its quality, its features, style, brand name, size, packaging, services and guarantee; price includes consideration of things like the basic list price, discounts, the length of the payment period and possible credit terms; place in a marketing mix is comprised of such factors as distribution channels, coverage of the market, locations of points of sale, inventory size and so forth; and eventually, promotion groups together advertising, publicity, sales promotion and personal selling.

Marketing strategies – sets of principals designed to achieve long-term objectives.Marketing strategy encompasses(вкл. В себя) identifying customer groups (Target Markets), which a business can serve better than its larger competitors, and tailoring its product offerings, prices, distribution, promotional efforts and services towards that particular market segment.

Marketing strategies of: 1)Market leaders. The aim of a market leader is obviously to remain the leader. There are two main ways to achieve this goal. The first way is to increase market share even further. The second way is to protect a current market share. 2)Market challengers. Market challengers can either attempt to attack the leader, or to increase their market share by attacking various market followers. 3)Market followers. Market followers are in a difficult position. One possibility for followers is to imitate the leaders’ products. The innovator has borne the cost of developing the new product, distributing it, and making the market aware of its existence. The follower can clone this product (copy it completely), depending on patents and so on, or improve, adapt or differentiate it. Whatever happens, followers have to keep their manufacturing costs low and the quality of their products and services high.

Company marketing strategies often address long-run activities for the next three to five years. But the marketing manager who implement these strategies are usually rewarded for short-run sale, growth_, or profits.Some companies are taking steps to attain a better balance between short- and long-run goals. They are making managers more aware of strategic goals, evaluating managers on both long-run and short-run performance, and rewarding managers for reaching long-run objectives.

The “SBU-concept” means breaking the company into business units. There are four classifica­tions of SBUs that can be identified:

1. Star – is an SBU that has a high share of a high-growth market. Obviously, stars need a great deal of financial resources because of their rapid growth. When growth slows, they become cash cows and become important generators of cash for the organization.

2. Cash cow – is an SBU that has a high share of a low-growth market. They produce a great amount of cash for the organisation but, since the market is not growing, do not require a great amount of fi­nancial resources for growth and expansion. As result, the cash they gener­ate can be used by the organisation to satisfy current debt and to support SBUs in need of cash.

3. Question mark – is an SBU that has a low share of a high-growth market, the organisation must decide whether to spend more financial resources to build it into a star, or to phase it down or eliminate it altogether.

4. Cash trap – is an SBU that has a low-growth market, it may generate enough cash to maintain itself, or it may drain money from other SBUs. The only certainty is that cash traps are not great sources of cash.

After classifying each SBU according to the business portfolio matrix, management must then decide which of the four alternative strategies should be pursued for each.

If an organisation has an SBU that it believes has the potential to be a star, “ building ” would be an appropriate objective. On the other hand if an SBU is a very successful cash cow, a key objective would cer­tainly be to hold or preserve the market share so that the organisation can take advantage of the very positive cash flow.

Question marks and cash traps arc particularly suited for the divesting. This objective helps the company to get rid of SBUs with low shares of low-growth markets.

The last objective is acceptable for all SBUs except those classified as stars – harvesting. It is especially worthwhile when more cash is needed for a cash cow whose long-run prospects arу not good because of a low market growth rate.

 

METHODS OF FOREIGN TRADE

There are five forms of International Business: International trade An exchange of goods, results of intellectual labour, services and work force on the international level. The main reason for people and nations to trade is the benefit derived from specialization. International production cooperation Production relations for joint activities in terms of international labour division. Joint ventures and multinationals are the examples of this form. International services Economic goods which do not take a tangible and storable form but bring benefit to the consumer. They include consulting, transport, insurance, scientific and technical, tourist and other services. International finance and credit relations World business related to the operations with money and securities. International investments The activity based on international capital transfer from one country to another aiming at profit gaining and social effect.

Direct sales imply trade based on continual ties between a producer and an ultimate consumer of the product without any intermediary. Such sales mean direct delivery from the seller to the buyer and are practiced by well-established large companies which have good experience of foreign trade and which can gain from the economy of scale. Indirect sales are sales through intermediaries or mediators. This method is used by less experienced or smaller firms because of absence of their own sales network abroad. Associations and companies at the government level deal in raw materials such as oil, gas, ores and some foodstuffs and consumer goods, as well as carry out all kinds of construction work. Commodity exchanges are the places where raw materials, some manufactured goods and some items of produce, such as cotton, wheat, vegetable oils, etc. are bought and sold. The goods that can be accurately graded are bought and sold at commodity exchanges according to grades or standards, and on the basis of standard contract terms. An auction is the way of buying and selling things by offering them up for a bid. It is the sale where the price is fixed by an auctioneer who invites bids and awards the article being auctioned to the highest bidder. Competitive tendering trade bytendersimplies one buyer and a number of sellers. Trade fairs and exhibitions are also very important tools of promoting goods in international trade. They usually attract thousands of visitors and many prospective buyers among them. They provide a great variety of services, such as stands to display, warehouses, etc.

Selling firms turn to commercial agents for their services mostly when they try to develop a new market for their goods in a foreign territory. Agents are instrumental in distributing the principal’s product as they know the commercial conditions and changes in the market of their country. They have their own storehouses, showrooms, repair workshops, or service stations for providing after-sales services. However, sales through agents have certain disadvantages as sellers are not in a direct contact with the market. They also completely depend on agents’ diligence, efficiency and experience in handling business. The main purpose of an agent is seeking out customers and contracting with them on the principal's behalf for the sale of the principal's products in their country. A sales agent comes as an intermediary between the principal who sells and the customer who buys. The relations between commercial agents and their principals can be determined by agency agreements either on a commission or a consignment basis. The commission agent buys and sells goods in the principal’s name and for the principal’s account and charges a commission for their work. The consignment agent also sells goods in the principal’s name and for the principal's account and operates like a commission agent but the consignment agent performs a wider range of functions

D istributor operates on their own account as an independent purchaser for sale of the supplier's products As the distributor is a specialist trader, their knowledge of local trading conditions and possession of a distributive network in a given territory will be of invaluable assistance to the supplier wishing to enter into or expand in that market.

A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activities together. A joint venture is created on the basis of capital of two or more countries. Internal reasons for forming a joint venture are as follows: build on company's strengths;spreading costs and risks; improving access to financial resources; economies of scale and advantages of size; access to new technologies and customers; and access to innovative managerial practices; Joint ventures are established on the basis of joint capital with the share of foreign participation not exceeding 49%, and with being normally 51% of capital belonging to residents

 

 

EXCHANGE RATES

An exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency.

The Bretton Wood agreement of 1944 established fixed exchange rates. Defined in terms of gold and the US dollar. Main features of the Bretton Wood system are:

1) Currencies were pegged against the US dollar (US dollar was a promissory note issued by the United States Treasury)

2) Gold convertibility. $35 could be could be exchanged for one ounce of gold.

3) Overvalued or undervalued currencies could only be adjusted with the agreement of the International Monetary Fund, Such adjustments are called devaluation and revaluation.

 

In 1971 the Bretton Wood system was replaced by a system of floating exchange rates because the Federal Reserve didn’t have enough gold to guarantee the American currency due to huge inflation. A freely floating exchange rate is determined by supply and demand only. There are economists who think that, in most circumstances, floating exchange rates are preferable to fixed exchange rates. As floating exchange rates automatically adjust, they enable a country to dampen the impact of shocks and foreign business cycles, and to preempt the possibility of having a balance of payments crisis. Proponents of floating exchange rates claimed that currencies would automatically establish stable exchange rates which would reflect true economic realities. However speculation has a great impact, and companies and investors often follow short-term money market trends even if these are contrary to their own long-term interests.

In the late 1970s and early 1980s all exchanged controls were abolished which led to the current situation when most of currency transactions are purely speculative. Huge amounts of money move around the world, chasing high interest rates or capital gains.

However most governments do not leave exchange rates without any control at all. When necessary, most of them influence of their currency. Managed (dirty) floating exchange rates are more common than freely floating ones.

In reality speculators can be much more powerful than governments which was proved in 1992 when British currency was withdrawn from the ERM and allowed to float, losing about 15% its value against the D-mark because of actions of speculators. The next year again because of actions of speculators the European Monetary System was suspended and introduced again later in a looser form.

Many business people in fact would prefer a single currency because it would make planning future contracts much more easier. It would help business a lot if a random element such as currency fluctuations was removed because it greatly influence profits.

The example of attempts to make a single currency may be the euro. The euro came into existence as a real currency in 2002, when the old notes and coins in the twelve member countries were withdrawn. Although the beginning of the euro was somewhat glorious, it’s not feeling so well now.

In the long term, living with a fixed exchange rate demands wage and price flexibility. Fiscal policy can help. Under fixed exchange rates, governments should tighten fiscal policy when money floods in, in order to dampen aggregate demand. But rigid exchange-rate rules do not always promote fiscal prudence. Indeed, Brazil’s currency regime may have made much-needed fiscal adjustment harder: now that Brazilians have conquered inflation, they are loth to push through painful budgetary reforms. And therein lies the rub. Fixed exchange rates make fiscal prudence that much more important. If a country does not improve its fiscal policy, a fixed-rate system may simply store up trouble.

But surely, their fans may say, fixed exchange rates have one important advantage: they are less volatile than floating rates. And this matters especially in the thin currency markets of emerging economies. However, this risk can be overblown. In industrial countries, remarkably little evidence exists to suggest that the volatility of floating exchange rates does in fact harm trade or investment. Both traders and investors can learn to hedge. Indeed, a forced devaluation may do much more harm to investor confidence than continuous exchange-rate fluctuations. And “pure” floating is rare: central-bank intervention can limit volatility and yet allow more flexibility than a fixed system.

Neither fixed nor floating rates are substitutes for sound macroeconomic policies. Either can work if a country shows sufficient commitment. And for countries with an acute history of inflation, the rigour of a currency board may be the best medicine. But for those with less historical baggage, more flexibility may make sense. Flexible rates will not eliminate the volatility that emerging economies face. But they may make it easier to deal with.

 

 

Motivation

Motivation is the combination of internal process and external forces that direct and sustain behaviour toward a goal.

Motive is a general term applying to the entire class of drivers, desires, needs, wishes and similar forces that cause people to do things

The motivation process centers on needs which are caused by imbalances. We can look at motivation as a chain reaction. It starts out with an unsatisfied need.Need-want-satisfaction chain. Needs give rise to wants which cause tensions which give rise to actions which result in satisfaction.

The traditional theory of motivation is based on the assumption that money is the primary motivator – employees will produce more for greater financial gain.

Content theories focus on the wants and needs that individuals are trying to satisfy within the situation. Maslow’s needs hierarchy- Maslow identified certain basic human needs and classified them in an ascending order of importance. The needs of an individual are said to exist in a hierarchy as follows: physiological (pay, pleasant work environment, welfare, nourishment), safety (job security, pension, and safe working conditions), social needs (acceptance by work groups, clients or wider associations), esteem (recognition, status, job title and responsibilities), and self-actualization (challenge, creativity, personal development). Herzberg’s Two Factor Theory- Herzberg conducted a number of studies and concluded that the degree of satisfaction and the degree of dissatisfaction felt by an organisation member as a result of performing a job are two different variables that are determined by two different sets of items.

The set of items that influences the degree of job dissatisfaction is called hygiene or maintenance factors. They concern the work environment and include interpersonal relations, supervision, company policy and administration, job security, working conditions, salary, status and personal life. The group of factors bringing about satisfaction is called motivators.

Only if both the hygiene factors and motivators are properly maintained will motivation occur.

Hygiene factors are essential if workers are to be motivated and they deal with the question “Why work here?”, while motivators deal with the question “Why work harder?”

If Herzberg’s theory is true, it means that managers must pay great attention to job content. They must find ways of making jobs more challenging and interesting. As a result, managers show great interest in job enrichment programmes.

Process Theories try to explain and describe the process of how behaviour is energized, directed, sustained and stopped. These theories are necessary for explaining choice, effort and persistence. Equity theory is based on the belief that employees will take whatever actions are necessary to produce feelings of equity with respect to their jobs. All employees bring a certain set of inputs to their jobs in the form of education, previous work experience, etc., and all employees receive certain outcomes in the form of pay, benefits, job satisfaction, prestige, etc.

Preference-Expectancy Theory -Vroom suggested that an employee’s performance is based on individual factors such as personality, skills, knowledge, experience, and abilities.

The effort-performance expectancy is a belief that effort will lead to the successful performance of some task. In other words, “If I try to hard enough, can I do it?”

The performance-outcome expectancy is the belief that a certain outcome, usually a reward, will follow performance. “If I do it, will I be rewarded?”

Reinforcement theory Reinforcement is any effect that causes behavior to be repeated or inhibited.

1)Do not reward everyone in the same way. Give more rewards to the better performers.2)Recognize that lack of reward can also influence behavior.3)Tell people what they must do to be rewarded. Employees should have standards against which to measure the job.4)Tell people what they are doing wrong. A manager should give them a clear idea of why the rewards are not forthcoming.5)Do not punish anyone in front of others because it lowers the individual’s self – respect and self – esteem.6)Be fair. Make the consequences equal to the behavior.

Job Design is the identification and arrangement of tasks, which together form a job. There are 2 basic approaches to achieving a balance- matching people to jobs and matching jobs to people.

-Job rotation is periodically rotating work assignments. Job rotation entails moving a worker from job to job, thus it does not require the worker to perform only one simple and specialised job over the long run.

Matching jobs to people

The limitations of adapting people to jobs have led many to the reverse view. Jobs must match people`s capabilities and the nature and boundaries of the job must be considered alongside the needs of the people. Productivities and needs satisfaction are dual aims of the two policies- enlargement and enrichment.

-Job enlargement is a strategy developed to overcome the boredom of more simple and specialised jobs.

-Job enrichment- а dding responsibility is one of the most common ways of «enriching» a job. It means redesigning the job with the express intention of increasing its motivational content. Job design is placed at the core of motivation and key all job characterized can be changed.

Skill variety: the range of skills in use can be increased. (For example, planning, lead