Text 15. Basic forms of business organization
All businesses are known to take one of three basic forms: the sole proprietorship, the partnership and the corporation. Which of these forms of organization you choose depends on such questions as the size of your business, whether you are the only owner of your business or you have partners.
A sole proprietorship is a business that is owned, and often run, by one person (usually taking the title of President) who receives all the profits and bears all the liabilities of the business. Such kinds of business are in the service industries such as repairing shops, restaurants, etc.
A partnership is a voluntary legal association of two and more people for the purpose of running a business. And each partner declares his or her share of profit or loss on the personal income tax return. Partnership has some disadvantages. This business fails when one of the partners loses his interest or disagrees with the other.
A corporationis a firm that exists as an independent legal entity, with ownership divided into shares. The owners of the shares are known as stockholders or shareholders. A key feature of the corporation is the limited liability. It means that the liability of the stockholders for debts of the firm is limited to the amount of money they paid to buy shares. There are some advantages such as being able to attract financial resources, and to attract talented specialists and managers due to high salaries. In general, this form is economically better for business when its profit reaches a great amount of money.
Since no one form of business organization is perfect, the so-called hybrids have been devised like: franchises, limited partnerships, cooperatives and joint ventures.
By the end of 1987 over 250 foreign firms had expressed an interest in setting up joint ventures in the territory of the ex-USSR. It was decided that joint ventures would contribute to further development of the country’s trade, economic, scientific and technical cooperation. A lot of joint ventures have been set up in different branches of industry and in the service sector since Russia started carrying out major economic reforms. Joint ventures play an important role in attracting foreign technology, management experience and additional material and financial resources. There are certain legal requirements for Russian and foreign participants wishing to set up a joint venture. A joint venture must be a legal entity to have the right to conclude contracts in its name.
Text 16. International Business Relations
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What am I going to do after school or university? Maybe I should consider a job in the financial world. There is a surprisingly wide range to choose from. For example, I could work for a big international company, run my own International business research Agency or write about economics as a financial journalist.
What features are characteristic of the world economy? You are about to begin an exciting, important and necessary task – the exploration of international business. It is exciting because it combines the science and the art of business with many other disciplines, such as economics, geography, history, language, jurisprudence, statistics and demography. International business is important and necessary because economic isolation has become impossible.
Failure to become a part of the global market assures a nation of declining economic influence and a deteriorating standard of living for its citizens. Successful participation in international business, however, holds the promise of improved quality of life and a better society, even leading to a more peaceful world.
As a nation we must take on the challenge of competing aggressively in the international arena or risk of becoming a second-rate power in today’s borderless economy.
The system of accounting between countries provides useful information to policy makers, international authorities, and business people by presenting data in consistent form. An informed user of international accounting data can analyze the financial position of one country relative to others.
The foreign market opportunity analysis is very important. When a firm starts its international activities, basic guidelines must be found quickly and at a low cost.
Major stock markets don’t just affect the financial life of their own countries, they also play a vital role in the total world economy. These days, banks and stock exchanges can move millions at the touch of a button. So, this speciality or “narrow specialization” is unique, challenging but very promising.
Text 17. Marketing
Originally marketing was meant to help to avoid overproduction. Now marketing is considered to be a system of all business activities of a company in respect of coordinating supply and demand for the goods produced.
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Before producing and selling the goods, one must do a lot of market research. Information for this purpose can be obtained from embassies, consulates and foreign trade representatives, from trade magazines or from specialized consultant agencies, which will do a professional market research job for a certain fee.
The information needed is whether there is any demand for your goods, what is the market potential, what sort of competition is to be met ( that is what price of the goods, including those produced locally, is considered to be competitive), what domestic preferences, local trading customs and seasonal factors should be taken into account.
Actually marketing covers not only market research, but also planning the assortment of goods, price policy, advertising and promotion of sales and post-sale servicing. So nowadays general marketing strategy includes such essential elements as planning, market research, new product development, sales, communications and advertising.
Planning. While speaking of marketing planning, one should think first of all of the so-called controllable and uncontrollable factors. The controllable factors are the following: product, price, place and promotion; the uncontrollable ones are environmental factors. Both these types are very important when one starts analysing the market situation.
Research. Market research is concerned first of all with product choice study and the study of competitors’ interests and their claims. The most popular methods of conducting marketing research are observation, survey, experiment and public opinion polls through different channels.
Production. Attitudinal research should affect the product to be produced, so production is inevitably based on marketing intelligence study. Marketing investigates stages before, during and after production and also stages following sales.
Sales. Sales are always involved with customers service of all kinds. Markets for consumer products are segmented on the basis of demographical and psychographic data research.
Communications and advertising.The communications mix comprises advertising, public relations, direct mail and special events such as product shows, conferences and exhibitions. Advertising is an important means of promoting the goods that have been produced already as well as new lines in business. Nowadays there are special departments and agencies dealing with advertising. Different kinds of mass media – TV, radio, newspapers, cinemas, magazines and posters – are used for advertising aims. Special leaflets, booklets and other printed matter with the information about goods may be published for the same purpose. The choice of media for advertising depends on the kind of goods and on the local conditions and people’s habits.
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