Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

UNIVERSITA’ DEGLI STUDI DI BARIDipartimento di Studi Aziendali e Giusprivatistici

Cattedra di Lingua Inglese

Prof. Domenico Torretta

PROGRAMMA PER L’A.A. 2013-2014

Corso di Laurea in Economia Aziendale (5 CFU)

Sede di Bari

Obiettivi del corso sono:

conoscenza e uso corretto orale e scritto delle strutture morfo-sintattiche e del lessico di base della lingua inglese in un contesto comunicativo generale;

apprendimento della terminologia specialistica comprensione di testi parlati e scritti di carattere economico, commerciale e finanziario; uso appropriato della lingua per discutere e trattare per iscritto argomenti di contenuto specialistico.Il raggiungimento di questi obiettivi sarà perseguito mediante lezioni ed esercitazioni in aula e in laboratorio, in particolare:

a) Corso istituzionale, basato sulla lettura, traduzione e discussione in lingua inglese di brani di argomento economico/commerciale/finanziario, teso ad un progressivo ampliamento del lessico specialistico e all’approfondimento delle abilità linguistiche di base;

b) esercitazioni di lettorato, in aula e in laboratorio linguistico, con attività di ascolto, pronuncia, conversazione e scrittura sotto la guida degli esperti linguistici, mirate soprattutto ad una revisione sistematica del lessico e delle strutture morfosintattiche di base e all’acquisizione di una buona competenza comunicativa in lingua inglese;

c) attività di tutorato individuale nelle ore di ricevimento.

Gli studenti potranno inoltre fare esercizio pratico della lingua attraverso attività di autoapprendimento utilizzando i materiali multimediali disponibili presso il Centro Linguistico della Facoltà.

L’esame finale, con verbalizzazione unica, è articolato in una prova scritta e una prova orale da sostenere nello stesso appello. Entrambe le prove verteranno su tutto il contenuto del programma. Per la valutazione lo studente può optare, al momento della prova scritta, tra esame con voto o prova di idoneità.

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

Corso istituzionale

DOSSIER (v sotto, pagg. 3-50)

Esercitazioni

L. HASHEMI - B. THOMAS, All in One Grammar, Cambridge University Press - Loescher, 2008

B. MASCULL, Business Vocabulary in Use - Intermediate, Cambridge University Press, 2010

Dizionari consigliati

I dizionari consigliati sono disponibili per consultazione presso la Biblioteca dell’Area Linguistica. Sarebbe tuttavia ottimale possederne almeno uno di lingua di base, monolingue o bilingue, ed uno specialistico.

Dizionari bilingue:

G. Ragazzini, Dizionario Italiano-Inglese / Inglese-Italiano, Zanichelli, 2002

Grande Dizionario di Inglese Rizzoli-Larousse, Sansoni, 2003

Dizionari specialistici:

F. Picchi, Economics and Business, Dizionario enciclopedico economico e commerciale Inglese-Italiano / Italiano-Inglese, Zanichelli, 2000

L. Codeluppi, A New Dictionary of Economics, Cisalpino-Goliardica, 2001

Dizionario giurieconomico American-English-Italian – Italiano-Inglese

Dizionari monolingue:

Cobuild Dictionary of the English Language, Collins, 2001

Macmillan English Dictionary for Advanced Learners, Macmillan, 2003

Cambridge International Dictionary of English, C.U.P.,2000

Longman Dictionary of Contemporary English, Longman,2003

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

1 - CorporationA corporation is an institution that is granted a charter recognizing it as a separate legal entity having its own privileges, and liabilities distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business.

Corporations exist as a product of corporate law, and their rules balance the interests of the management who operate the corporation, creditors, shareholders, and employees who contribute their labour. In modern times, corporations have become an increasingly dominant part of economic life.

An important (but not universal) feature of a corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment, and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors.

Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like natural persons ("people"). Corporations can exercise human rights against real individuals and the state, and they are often responsible for human rights violations. Just as they are "born" into existence through its members obtaining a certificate of incorporation, they can "die" when they are "dissolved" either by statutory operation, order of court, or voluntary action on the part of shareholders. Insolvency may result in a form of corporate 'death', when creditors force the liquidation and dissolution of the corporation under court order, but it most often results in a restructuring of corporate holdings. Corporations can even be convicted of criminal offences, such as fraud and manslaughter.

Although corporate law varies in different jurisdictions, there are four core characteristics of the business corporation:

Legal personality Limited liability

Transferable shares

Centralized management under a board structure

History

The word "corporation" derives from corpus, the Latin word for body, or a "body of people." Entities which carried on business and were the subjects of legal rights were found in ancient Rome. The alleged oldest commercial corporation in the world, the Stora Kopparberg mining community in Falun, Sweden, obtained a charter from King Magnus Eriksson in 1347. Many European nations chartered corporations to lead colonial ventures, such as the Dutch East India Company or the Hudson's Bay Company, and these corporations came to play a large part in the history of corporate colonialism.

During the period of colonial expansion in the 17th century, the true progenitors of the modern Corporation emerged as the "chartered company". Acting under a charter sanctioned by the Dutch monarch, the Dutch East India Company, defeated Portuguese forces and established itself in the Moluccan Islands in order to profit from the European demand for spices. Investors in the Dutch East India Company were issued paper certificates as proof of share ownership, and were able to

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

trade their shares on the original Amsterdam stock exchange. In the late 18th century, Stewart Kyd, the author of the first treatise on corporate law in English, defined a corporation as,

a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.

Mercantilism

Labeled by both contemporaries and historians as "the grandest society of merchants in the universe", the British East India Company would come to symbolize the dazzlingly rich potential of the corporation, as well as new methods of business that could be both brutal and exploitive. On 31 December 1600, the English monarchy granted the company a fifteen-year monopoly on trade to and from the East Indies and Africa. By 1611, shareholders in the East India Company were earning an almost 150% return on their investment. Subsequent stock offerings demonstrated just how lucrative the Company had become. Its first stock offering in 1613-1616 raised ₤418,000, and its first offering in 1617-1622 raised ₤1.6 million.

In the United States, government chartering began to fall out of vogue in the mid-19th century. Corporate law at the time was focused on protection of the public interest, and not on the interests of corporate shareholders. Corporate charters were closely regulated by the states. Forming a corporation usually required an act of legislature. Investors generally had to be given an equal say in corporate governance, and corporations were required to comply with the purposes expressed in their charters. By the beginning of the 19th century, government policy on both sides of the Atlantic began to change, reflecting the growing popularity of the proposition that corporations were riding the economic wave of the future. In 1819, the U.S. Supreme Court granted corporations a plethora of rights they had not previously recognized. Corporate charters were deemed "inviolable", and not subject to arbitrary amendment or abolition by state governments. The Corporation as a whole was labeled an "artificial person," possessing both individuality and immortality.

At around the same time, British legislation was similarly freeing the corporation from the shackles of historical restrictions. In 1844 the British Parliament passed the Joint Stock Companies Act, which allowed companies to incorporate without a royal charter or an Act of Parliament. Ten years later, limited liability, the key provision of modern corporate law, passed into English law: in response to increasing pressure from newly emerging capital interests, Parliament passed the Limited Liability Act of 1855, which established the principle that any corporation could enjoy limited legal liability on both contract and tort claims simply by registering as a "limited" company with the appropriate government agency.

Modern corporations

The 20th century saw a proliferation of enabling law across the world, which helped to drive economic booms in many countries before and after World War I. Starting in the 1980s, many countries with large state-owned corporations moved toward privatization, the selling of publicly owned services and enterprises to corporations. Deregulation (reducing the regulation of corporate activity) often accompanied privatization as part of a laissez-faire policy. Another major postwar

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

shift was toward the development of conglomerates, in which large corporations purchased smaller corporations to expand their industrial base. Japanese firms developed a horizontal conglomeration model, the keiretsu, which was later duplicated in other countries as well.

Corporate law

The existence of a corporation requires a special legal framework and body of law that specifically grants the corporation legal personality, and typically views a corporation as a fictional person, a legal person, or a moral person (as opposed to a natural person). Corporate statutes typically empower corporations to own property, sign binding contracts, and pay taxes in a capacity separate from that of its shareholders (who are sometimes referred to as "members").

The legal personality has two economic implications. First it grants creditors (as opposed to shareholders or employees) priority over the corporate assets upon liquidation. Second, corporate assets cannot be withdrawn by its shareholders, nor can the assets of the firm be taken by personal creditors of its shareholders. The second feature requires special legislation and a special legal framework, as it cannot be reproduced via standard contract law.

The regulations most favorable to incorporation include:

Limited liability

Unlike a partnership or sole proprietorship, shareholders of a modern business corporation have "limited" liability for the corporation's debts and obligations. As a result, their losses cannot exceed the amount which they contributed to the corporation as dues or payment for shares. This enables corporations to "socialize their costs" for the primary benefit of shareholders; to socialize a cost is to spread it to society in general. The economic rationale for this is that it allows anonymous trading in the shares of the corporation, by eliminating the corporation's creditors as a stakeholder in such a transaction. Without limited liability, a creditor would probably not allow any share to be sold to a buyer at least as creditworthy as the seller. Limited liability further allows corporations to raise large amounts of finance for their enterprises by combining funds from many owners of stock. Limited liability reduces the amount that a shareholder can lose in a company. This increases the attraction to potential shareholders, and thus increases both the number of willing shareholders and the amount they are likely to invest. However, some jurisdictions also permit another type of corporation, in which shareholders' liability is unlimited, for example the unlimited liability corporation in two provinces of Canada, and the unlimited company in the United Kingdom.

Perpetual lifetime

Another advantage is that the assets and structure of the corporation may continue beyond the lifetimes of its shareholders and bondholders. This allows stability and the accumulation of capital, which is thus available for investment in larger and longer-lasting projects than if the corporate assets were subject to dissolution and distribution. However a corporation can be dissolved by a government authority, putting an end to its existence as a legal entity. But this usually only happens if the company breaks the law, e.g. fails to meet annual filing requirements, or in certain circumstances if the company requests dissolution.

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

Ownership and control

Persons and other legal entities composed of persons (such as trusts and other corporations) can have the right to vote or receive dividends once declared by the Board. In the case of for-profit corporations, these voters hold shares of stock and are thus called shareholders or stockholders. When no stockholders exist, a corporation may exist as a non-stock corporation (in the United Kingdom, a "company limited by guarantee"). If the non-stock corporation is not operated for profit, it is called a not-for-profit corporation. In either category, the corporation comprises a collective of individuals with a distinct legal status and with special privileges not provided to ordinary unincorporated businesses, to voluntary associations, or to groups of individuals.

There are two broad classes of corporate governance forms in the world. In most of the world, control of the corporation is determined by a board of directors which is elected by the shareholders. In some jurisdictions, such as Germany, the control of the corporation is divided into two tiers with a supervisory board which elects a managing board. Germany is also unique in having a system known as co-determination in which half of the supervisory board consists of representatives of the employees. The CEO (Chief Executive Officer), president, treasurer, and other titled officers are usually chosen by the board to manage the affairs of the corporation.

In addition to the limited influence of shareholders, corporations can be controlled (in part) by creditors such as banks. In return for lending money to the corporation, creditors can demand a controlling interest analogous to that of a member, including one or more seats on the board of directors. In some jurisdictions, such as Germany and Japan, it is standard for banks to own shares in corporations whereas in other jurisdictions such as the United States and the United Kingdom banks are prohibited from owning shares in external corporations. Upon the Board's decision to dissolve a for-profit corporation, shareholders receive the leftovers, following creditors and others with interests in the corporation. However shareholders receive the benefit of limited liability, so they are liable only for the amount they contributed.

Formation

Historically, corporations were created by a charter granted by government. Today, corporations are usually registered with the state, province, or national government and regulated by the laws enacted by that government. Registration is the main prerequisite to the corporation's assumption of limited liability. The law sometimes requires the corporation to designate its principal address, as well as a registered agent (a person or company designated to receive legal service of process). It may also be required to designate an agent or other legal representative of the corporation.

Generally, a corporation files articles of incorporation with the government, laying out the general nature of the corporation, the amount of stock it is authorized to issue, and the names and addresses of directors. Once the articles are approved, the corporation's directors meet to create bylaws that govern the internal functions of the corporation, such as meeting procedures and officer positions.

The law of the jurisdiction in which a corporation operates will regulate most of its internal activities, as well as its finances. If a corporation operates outside its home state, it is often required

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

to register with other governments as a foreign corporation, and is almost always subject to laws of its host state pertaining to employment, crimes, contracts, civil actions, and the like.

Naming

Corporations generally have a distinct name. Historically, some corporations were named after their membership: for instance, "The President and Fellows of Harvard College." Nowadays, corporations in most jurisdictions have a distinct name that does not need to make reference to their membership. In Canada, this possibility is taken to its logical extreme: many smaller Canadian corporations have no names at all, merely numbers based on their Provincial Sales Tax registration number (e.g., "12345678 Ontario Limited").

In most countries, corporate names include the term "Corporation", or an abbreviation that denotes the corporate status of the entity (e.g. "Incorporated" or "Inc." in the United States), or the limited liability of its members (e.g. "Limited" or "Ltd."). These terms vary by jurisdiction and language. In some jurisdictions they are mandatory, and in others they are not. Their use tells everybody that they are dealing with an entity whose liability is limited, and does not reach back to the persons who own the entity: one can only collect from whatever assets the entity still controls when one obtains a judgment against it.

Financial disclosure

In many jurisdictions, corporations whose shareholders benefit from limited liability are required to publish annual financial statements and other data, so that creditors who do business with the corporation are able to assess the creditworthiness of the corporation and cannot enforce claims against shareholders. Shareholders therefore sacrifice some loss of privacy in return for limited liability. This requirement generally applies in Europe, but not in the United States, except for publicly traded corporations, where financial disclosure is required for investor protection.

(Adapted from Wikipedia, the free encyclopedia)

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

2 - Types of corporation

Most corporations are registered with the local jurisdiction as either a stock corporation or a non-stock corporation. Stock corporations sell stock to generate capital. A stock corporation is generally a for-profit corporation. A non-stock corporation does not have stockholders, but may have members who have voting rights in the corporation.

Some jurisdictions separate corporations into for-profit and non-profit, as opposed to dividing into stock and non-stock.

For-profit and non-profit

In modern economic systems, conventions of corporate governance commonly appear in a wide variety of business and non-profit activities. Though the laws governing these creatures of statute often differ, the courts often interpret provisions of the law that apply to profit-making enterprises in the same manner (or in a similar manner) when applying principles to non-profit organizations — as the underlying structures of these two types of entity often resemble each other.

Closely held corporations and publicly traded corporations

The institution most often referenced by the word "corporation" is a publicly traded corporation, the shares of which are traded on a public stock exchange where shares of stock of corporations are bought and sold by and to the general public. Most of the largest businesses in the world are publicly traded corporations. However, the majority of corporations are said to be closely held, privately held or close corporations, meaning that no ready market exists for the trading of shares. Many such corporations are owned and managed by a small group of businesspeople or companies, although the size of such a corporation can be as vast as the largest public corporations.

Closely held corporations do have some advantages over publicly traded corporations. A small, closely held company can often make company-changing decisions much more rapidly than a publicly traded company. A publicly traded company is also at the mercy of the market, having capital flow in and out based not only on what the company is doing but the market and even what the competitors are doing. Publicly traded companies also have advantages over their closely held counterparts. Publicly traded companies often have more working capital and can delegate debt throughout all shareholders. This means that people who have invested in a publicly traded company will each take a much smaller hit to their own capital as opposed to those involved with a closely held corporation. Publicly traded companies though suffer from this exact advantage. A closely held corporation can often voluntarily take a hit to profit with little to no repercussions (as long as it is not a sustained loss). A publicly traded company though often comes under extreme scrutiny if profit and growth are not evident to stock holders, thus stock holders may sell, further damaging the company. Often this blow is enough to make a small public company fail.

Often communities benefit from a closely held company more so than from a public company. A closely held company is far more likely to stay in a single place that has treated them well, even if going through hard times. The shareholders can incur some of the damage the company may receive from a bad year or slow period in the company profits. Closely held companies often have a better

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

relationship with workers. In larger, publicly traded companies, often when a year has gone badly the first area to feel the effects are the work force with lay offs or worker hours, wages or benefits being cut. Again, in a closely held business the shareholders can incur this profit damage rather than passing it to the workers.

The affairs of publicly traded and closely held corporations are similar in many respects. The main difference in most countries is that publicly traded corporations have the burden of complying with additional securities laws, which (especially in the U.S.) may require additional periodic disclosure (with more stringent requirements), stricter corporate governance standards, and additional procedural obligations in connection with major corporate transactions (e.g. mergers) or events (e.g. elections of directors).

A closely held corporation may be a subsidiary of another corporation (its parent company), which may itself be either a closely held or a public corporation.

Most United States businesses are closely held corporations. Ninety-five percent are family owned, and provide employment for approximately fifty percent of the nation's population. However just twenty percent of family-owned businesses survive longer than a generation.

Multinational corporation

Following on the success of the corporate model at a national level, many corporations have become transnational or multinational corporations: growing beyond national boundaries to attain sometimes remarkable positions of power and influence in the process of globalizing.

The typical "transnational" or "multinational" may fit into a web of overlapping shareholders and directorships, with multiple branches and lines in different regions, many such sub-groupings comprising corporations in their own right. Growth by expansion may favor national or regional branches; growth by acquisition or merger can result in a plethora of groupings scattered around and/or spanning the globe, with structures and names which do not always make clear the structures of shareholder ownership and interaction.

In the spread of corporations across multiple continents, the importance of corporate culture has grown as a unifying factor and a counterweight to local national sensibilities and cultural awareness.

Italy

The Italian Republic recognizes three types of company with limited liability: "S.r.l", or "Società a responsabilità limitata" (a private limited company), "S.p.A" or "Società per Azioni" (a joint-stock company, similar to a Public Limited Company in the United Kingdom), and "S.a.p.a" ("Società in Accomandita per Azioni"). The latter is a hybrid form that involves two categories of shareholders, some with and some without limited liability, and is rarely used in practice.

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

United Kingdom and Republic Of Ireland

In the United Kingdom, 'corporation' most commonly refers to a body corporate formed by Royal Charter or by statute, of which few now remain. The BBC is the oldest and best known corporation within the UK that is still in existence. Others, such as the British Steel Corporation, were privatized in the 1980s.

In the private sector, corporations are referred to in law as companies, and are regulated by the Companies Act 2006. The most common type of company is the private limited company ("Limited" or "Ltd."). Private limited companies can either be limited by shares or by guarantee. Other corporate forms include the public limited company ("PLC") and the private unlimited company, and companies limited by guarantee.

The Republic of Ireland, since 1922 has its own sovereign company law which is broadly similar to that of Britain, since it evolved from the British laws.

United States

Several types of conventional corporations exist in the United States. Generically, any business entity that is recognized as distinct from the people who own it (i.e., is not a sole proprietorship or a partnership) is a corporation. This generic label includes entities that are known by such legal labels as ‘association’, ‘organization’ and ‘limited liability company’, as well as corporations proper.

Only a company that has been formally incorporated according to the laws of a particular state is called ‘corporation’. A corporation was defined in the Dartmouth College case of 1819, in which Chief Justice Marshall of the United States Supreme Court stated that " A corporation is an artificial being, invisible, intangible, and existing only in contemplation of the law". A corporation is a legal entity, distinct and separate from the individuals who create and operate it. As legal entity the corporation can acquire, own, and dispose of property in its own name like buildings, land and equipment. It can also incur liabilities and enter into contracts like franchising and leasing. American corporations can be either profit-making companies or non-profit entities. Tax-exempt non-profit corporations are often called “501(c)3 corporation”, after the section of the Internal Revenue Code that addresses the tax exemption for many of them.

Corporations are created by filing the requisite documents with a particular state government. The process is called “incorporation”, referring to the abstract concept of clothing the entity with a "veil" of artificial personhood (embodying, or “corporating” it, ‘corpus’ being the Latin word for ‘body’). Only certain corporations, including banks, are chartered. Others simply file their articles of incorporation with the state government as part of a registration process.

The federal government can only create corporate entities pursuant to relevant powers in the U.S. Constitution. For example, Congress has constitutional power to provide postal services, so it has power to operate the United States Postal Service.

Once incorporated, the corporation has artificial personhood everywhere it may operate, until such time as the corporation may be dissolved. A corporation that operates in one state while being incorporated in another is a “foreign corporation.” This label also applies to corporations incorporated outside of the United States. Foreign corporations must usually register with the secretary of state’s office in each state to lawfully conduct business in that state.

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

A corporation is legally a citizen of the state (or other jurisdiction) in which it is incorporated. Corporate business law differs from state to state, and many prospective corporations choose to incorporate in a state whose laws are most favorable to its business interests. Many large corporations are incorporated in Delaware, for example, without being physically located there because that state has very favorable corporate tax and disclosure laws. Companies set up for privacy or asset protection often incorporate in Nevada, which does not require disclosure of share ownership.

Corporate taxation

In many countries corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate. Such a system is sometimes referred to as "double taxation", because any profits distributed to shareholders will eventually be taxed twice. One solution to this (as in the case of the Australian and UK tax systems) is for the recipient of the dividend to be entitled to a tax credit which addresses the fact that the profits represented by the dividend have already been taxed. The company profit being passed on is therefore effectively only taxed at the rate of tax paid by the eventual recipient of the dividend. In other systems, dividends are taxed at a lower rate than other income (e.g. in the US) or shareholders are taxed directly on the corporation's profits and dividends are not taxed.

(Adapted from Wikipedia, the free encyclopedia)

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

3 - Business AdministrationIn business, administration consists of the performance or management of business operations and thus the making or implementing of major decisions. Administration can be defined as the universal process of organizing people and resources efficiently so as to direct activities toward common goals and objectives.

Administrator can serve as the title of the general manager or company secretary who reports to a corporate board of directors. This title is archaic, but, in many enterprises, this function, together with its associated Finance, Personnel and management information systems services, is what is intended when the term "the administration" is used.In some organizational analyses, management is viewed as a subset of administration, specifically associated with the technical and mundane elements within an organization's operation. It stands distinct from executive or strategic work.In other organizational analyses, administration can refer to the bureaucratic or operational performance of office tasks , usually internally oriented.The world's first business school, the Ecole Supérieure de Commerce de Paris, France, was established in 1819. The first business school in the United States, the Wharton School of the University of Pennsylvania, was founded in 1881 while Harvard Business School was founded in 1908.

Administrative functionsAdministrators, broadly speaking, engage in a common set of functions to meet the organization's goals. These "functions" of the administrator were described by Henri Fayol as "the 5 elements of administration":Planning is deciding in advance what to do, how to do it, when to do it, and who should do it. It maps the path from where the organization is to where it wants to be. The planning function involves establishing goals and arranging them in logical order. Administrators engage in both short-range and long-range planning.Organizing (or Coordinating) involves identifying responsibilities to be performed, grouping responsibilities into departments or divisions, and specifying organizational relationships. The purpose is to achieve coordinated effort among all the elements in the organization. Organizing must take into account delegation of authority and responsibility and span of control within supervisory units.Staffing means filling job positions with the right people at the right time. It involves determining staffing needs, writing job descriptions, recruiting and screening people to fill the positions.Directing (Commanding) is leading people in a manner that achieves the goals of the organization. This involves proper allocation of resources and providing an effective support system. Directing requires exceptional interpersonal skills and the ability to motivate people. One of the crucial issues in directing is to find the correct balance between emphasis on staff needs and emphasis on economic production.Controlling is a function that evaluates quality in all areas and detects potential or actual deviations from the organization's plan. This ensures high-quality performance and satisfactory results while maintaining an orderly and problem-free environment. Controlling includes information management, measurement of performance, and institution of corrective actions.Budgeting, exempted from the list above, incorporates most of the administrative functions beginning with the implementation of a budget plan through the application of budget controls.

(Adapted from Wikipedia, the free encyclopedia)

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

4 - Management

Management in all business areas and organizational activities is the whole of the acts of getting people together to accomplish desired goals and objectives efficiently and effectively. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources.Management can also refer to the person or people who perform the act(s) of management.

History

The verb manage comes from the Italian maneggiare (to handle — especially tools), which in turn derives from the Latin manus (hand) agere (to do, to act). Some definitions of management are:

Organization and coordination of the activities of an enterprise in accordance with certain policies and in achievement of clearly defined objectives.

Management is often included as a factor of production along with machines, materials, and money.

According to the management guru Peter Drucker (1909–2005), the basic task of a management is twofold: marketing and innovation.

Directors and managers who have the power and responsibility to make decisions to manage an enterprise.

As a discipline, management comprises the interlocking functions of formulating corporate policy and organizing, planning, controlling, and directing the firm's resources to achieve the policy's objectives.

The size of management can range from one person in a small firm to hundreds or thousands of managers in multinational companies. In large firms the board of directors formulates the policy which is implemented by the chief executive officer.

Nature of managerial work

In for-profit work, management has as its primary function the satisfaction of a range of stakeholders. This typically involves making a profit (for the shareholders), creating valued products at a reasonable cost (for customers), and providing rewarding employment opportunities (for employees). In nonprofit management, add the importance of keeping the faith of donors. In most models of management/governance, shareholders vote for the board of directors, and the board then hires senior management. Some organizations have experimented with other methods (such as employee-voting models) of selecting or reviewing managers; but this occurs only very rarely.

In the public sector of countries constituted as representative democracies, voters elect politicians to public office. Such politicians hire many managers and administrators, and in some countries like the United States political appointees lose their jobs on the election of a new president/governor/mayor.

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Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

Difficulties arise in tracing the history of management. Some see it as a modern conceptualization. Others, however, detect management-like-thought back to Sumerian traders and to the builders of the pyramids of ancient Egypt. Slave-owners through the centuries faced the problems of exploiting/motivating a dependent but sometimes unenthusiastic or recalcitrant workforce, but many pre-industrial enterprises, given their small scale, did not feel compelled to face the issues of management systematically. However, innovations such as the spread of Arabic numerals (5th to 15th centuries) and the codification of double-entry book-keeping (1494) provided tools for management assessment, planning and control.

Given the scale of most commercial operations and the lack of mechanized record-keeping and recording before the industrial revolution, it made sense for most owners of enterprises in those times to carry out management functions by and for themselves. But with growing size and complexity of organizations, the split between owners (individuals, industrial dynasties or groups of shareholders) and day-to-day managers (independent specialists in planning and control) gradually became more common.

Early writing

While management has been present for millennia, several writers have created a background of works that assisted in modern management theories.[4]

Written by Chinese general Sun Tzu in the 6th century BC, The Art of War is a military strategy book that, for managerial purposes, recommends being aware of and acting on strengths and weaknesses of both a manager's organization and a foe's.[4]

Believing that people were motivated by self-interest, Niccolò Machiavelli wrote The Prince in 1513 as advice for the leadership of Florence, Italy. Machiavelli recommended that leaders use fear—but not hatred—to maintain control.

Written in 1776 by Adam Smith, a Scottish moral philosopher, The Wealth of Nations aims for efficient organization of work through Specialization of labour. Smith described how changes in processes could boost productivity in the manufacture of pins. While individuals could produce 200 pins per day, Smith analyzed the steps involved in manufacture and, with 10 specialists, enabled production of 48,000 pins per day.

19th century

Classical economists such as Adam Smith (1723–1790) and John Stuart Mill (1806–1873) provided a theoretical background to resource-allocation, production, and pricing issues. About the same time, innovators like Eli Whitney (1765–1825), James Watt (1736–1819), and Matthew Boulton (1728–1809) developed elements of technical production such as standardization, quality-control procedures, cost-accounting, interchangeability of parts, and work-planning. By the late 19th century, marginal economists Alfred Marshall (1842–1924), Léon Walras (1834–1910), and others introduced a new layer of complexity to the theoretical underpinnings of management. Joseph Wharton offered the first tertiary-level course in management in 1881.

20th century

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By about 1900 one finds managers trying to place their theories on what they regarded as a thoroughly scientific basis. Examples include Henry R. Towne's Science of management in the 1890s, and Frederick Winslow Taylor's The Principles of Scientific Management (1911). J. Duncan wrote the first college management textbook in 1911.

The first comprehensive theories of management appeared around 1920. The Harvard Business School invented the Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (1841–1925) and Alexander Church described the various branches of management and their inter-relationships.

Peter Drucker (1909–2005) wrote one of the earliest books on applied management: Concept of the Corporation (published in 1946). It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of the organisation. Drucker went on to write 39 books, many in the same vein.

H. Dodge, Ronald Fisher (1890–1962), and Thornton C. Fry introduced statistical techniques into management-studies. In the 1940s, Patrick Blackett combined these statistical theories with microeconomic theory and gave birth to the science of operations research. Operations research, sometimes known as "management science", attempts to take a scientific approach to solving management problems, particularly in the areas of logistics and operations.

Some of the more recent developments include the Theory of Constraints, management by objectives, reengineering, Six Sigma and various information-technology-driven theories such as agile software development, as well as group management theories such as Cog's Ladder.

Towards the end of the 20th century, business management came to consist of six separate branches, namely:

Human resource management Operations management or production management

Strategic management

Marketing management

Financial management

Information technology management responsible for management information systems

21st century

In the 21st century observers find it increasingly difficult to subdivide management into functional categories in this way. More and more processes simultaneously involve several categories. Instead, one tends to think in terms of the various processes, tasks, and objects subject to management.

Branches of management theory also exist relating to nonprofits and to government: such as public administration, public management, and educational management. Further, management programs related to civil-society organizations have also spawned programs in nonprofit management and social entrepreneurship.

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Note that many of the assumptions made by management have come under attack from business ethics viewpoints, critical management studies, and anti-corporate activism.

Management topics

Basic functions of management

Management operates through various functions, often classified as planning, organizing, leading/directing, and controlling/monitoring.

Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next 5 years, etc.) and generating plans for action.

Organizing: (Implementation) making optimum use of the resources required to enable the successful carrying out of plans.

Staffing: Job Analyzing, recruitment, and hiring individuals for appropriate jobs.

Leading/Directing: Determining what needs to be done in a situation and getting people to do it.

Controlling/Monitoring: Checking progress against plans.

Motivation : Motivation is also a kind of basic function of management, because without motivation, employees cannot work effectively. If motivation doesn't takes place in an organization, then employees may not contribute to the other functions (which are usually set by top level management).

Formation of the business policy

The mission of the business is the most obvious purpose—which may be, for example, to make soap.

The vision of the business reflects its aspirations and specifies its intended direction or future destination.

The objectives of the business refers to the ends or activity at which a certain task is aimed.

The business's policy is a guide that stipulates rules, regulations and objectives, and may be used in the managers' decision-making. It must be flexible and easily interpreted and understood by all employees.

The business's strategy refers to the coordinated plan of action that it is going to take, as well as the resources that it will use, to realize its vision and long-term objectives. It is a guideline to managers, stipulating how they ought to allocate and utilize the factors of production to the business's advantage. Initially, it could help the managers decide on what type of business they want to form.

Multi-divisional management hierarchy

The management of a large organization may have about five levels:

1 - Senior management (or "top management" or "upper management") Top-level management They require an extensive knowledge of management roles and skills.

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They have to be very aware of external factors such as markets. Their decisions are generally of a long-term nature Their decisions are made using analytic, directive, conceptual and/or

behavioural/participative processes They are responsible for strategic decisions. They have to draw up the plan and see that the plan may be effective in the future. They are executive in nature.

2 - Middle management Mid-level managers have a specialized understanding of certain managerial tasks. They are responsible for carrying out the decisions made by top-level management. They make decisions about finance, marketing, etc.

3 - Low-level management, such as supervisors or team-leaders This level of management ensures that the decisions and plans taken by the other two are

carried out. Lower-level managers' decisions are generally short-term ones.

4 - Foreman / lead hand They are people who have direct supervision over the working force in office factory, sales

field or other workgroup or areas of activity.

5 - Rank and File The responsibilities of the persons belonging to this group are even more restricted and more

specific than those of the foreman.

(Adapted from Wikipedia, the free encyclopedia)

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5 - Human resourcesHuman resources is a term used to describe the individuals who comprise the workforce of an organization, although it is also applied in labour economics to, for example, business sectors or even whole nations. Human resources is also the name of the function within an organization charged with the overall responsibility for implementing strategies and policies relating to the management of individuals (i.e. the human resources). This function title is often abbreviated to the initials 'HR'.

Human resources is a relatively modern management term, coined as early as the 1960s - when humanity took a shift as human rights came to a brighter light during the Vietnam Era. The origins of the function arose in organizations that introduced 'welfare management' practices and also in those that adopted the principles of 'scientific management'. From these terms emerged a largely administrative management activity, coordinating a range of worker related processes and becoming known, in time as the 'personnel function'.

History

The early development of the function can be traced back to at least two distinct movements. One element has its origins in the late 19th century, where organizations such as Cadburys at its Bournville factory recognised the importance of looking after the welfare of the workforce, and their families. The employment of women in factories in the United Kingdom during the First World War lead to the introduction of "Welfare Officers". Meanwhile, in the United States the concept of human resources developed as a reaction to the efficiency focus of Taylorism or "scientific management" in the early 1900s, which developed in response to the demand for ever more efficient working practices within highly mechanised factories, such as in the Ford Motor Company.

During the middle of the last century, larger corporations, typically those in the United States that emerged after the Second World War, recruited personnel from the US Military and were able to apply new selection, training, leadership, and management development techniques, originally developed by the Armed Services, working with, for example, university-based occupational psychologists. Similarly, some leading European multinationals, such as Shell and Phillips developed new approaches to personnel development and drew on similar approaches already used in Civil Service training. Gradually, this spread more sophisticated policies and processes that required more central management via a personnel department composed of specialists and generalist teams.

The role of what became known as Human Resources grew throughout the middle of the 20th century. Tensions remained between academics who emphasized either 'soft' or 'hard' HR. Those professing so-called 'soft HR' stressed areas like leadership, cohesion, and loyalty that play important roles in organizational success. Those promoting 'hard HR' championed more quantitatively rigorous management techniques in the 1960s.

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In the later part of the last century, both the title and traditional role of the personnel function was progressively superseded by the emergence, at least in larger organizations, of strategic human resources management and sophisticated human resources departments. Initially, this may have involved little more than renaming the function, but where transformation occurred, it became distinguished by the human resources having a more significant influence on the organizations strategic direction and gaining board-level representation.

Human resources purpose and role

In simple terms, an organization's human resource management strategy should maximize return on investment in the organization's human capital and minimize financial risk. Human Resources seeks to achieve this by aligning the supply of skilled and qualified individuals and the capabilities of the current workforce, with the organization's ongoing and future business plans and requirements to maximize return on investment and secure future survival and success. In ensuring such objectives are achieved, the human resource function purpose in this context is to implement the organization's human resource requirements effectively but also pragmatically.

Human resources management trends and influences

In organizations, it is important to determine both current and future organizational requirements for both core employees and the contingent workforce in terms of their skills/technical abilities, competencies, flexibility etc. The analysis requires consideration of the internal and external factors that can have an effect on the resourcing, development, motivation and retention of employees and other workers.

External factors are those largely out of the control of the organization. These include issues such as economic climate and current and future labor market trends (e.g., skills, education level, government investment into industries etc.). On the other hand, internal influences are broadly controlled by the organization to predict, determine, and monitor - for example - the organizational culture, underpinned by management style, environmental climate, and the approach to ethical and corporate social responsibilities.

Major trends

To know the business environment an organization operates in, three major trends must be considered:

1. Demographics: the characteristics of a population/workforce, for example, age, gender or social class. This type of trend may have an effect in relation to pension offerings, insurance packages etc.

2. Diversity: the variation within the population/workplace. Changes in society now mean that a larger proportion of organizations are made up of "baby-boomers" or older employees in comparison to thirty years ago. Advocates of "workplace diversity" simply advocate an employee base that is a mirror reflection of the make-up of society insofar as race, gender, sexual orientation, etc.

3. Skills and qualifications: as industries move from manual to more managerial professions so does the need for more highly skilled graduates. If the market is "tight" (i.e., not enough staff for the jobs), employers must compete for employees by offering financial rewards, community investment, etc..

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Individual responses

In regard to how individuals respond to the changes in a labour market, the following must be understood:

Geographical spread: how far is the job from the individual? The distance to travel to work should be in line with the pay offered, and the transportation and infrastructure of the area also influence who applies for a post.

Occupational structure: the norms and values of the different careers within an organization. Mahoney 1989 developed 3 different types of occupational structure namely craft (loyalty to the profession), organization career (promotion through the firm) and unstructured (lower/unskilled workers who work when needed).

Generational difference: different age categories of employees have certain characteristics, for example their behaviour and their expectations of the organization.

Framework

Human Resources Development is a framework for the expansion of human capital within an organization or (in new approaches) a municipality, region, or nation. Human Resources Development is a combination of training and education, in a broad context of adequate health and employment policies, that ensures the continual improvement and growth of both the individual, the organization, and the national human resourcefulness. Adam Smith states, “The capacities of individuals depended on their access to education”. Human Resources Development is the medium that drives the process between training and learning in a broadly fostering environment. Human Resources Development is not a defined object, but a series of organised processes, “with a specific learning objective” (Nadler,1984). Within a national context, it becomes a strategic approach to intersectoral linkages between health, education and employment.

Training

At the organizational level, a successful Human Resources Development program prepares the individual to undertake a higher level of work, "organized learning over a given period of time, to provide the possibility of performance change" (Nadler 1984). In these settings, Human Resources Development is the framework that focuses on the organizations competencies at the first stage, training, and then developing the employee, through education, to satisfy the organizations long-term needs and the individuals’ career goals and employee value to their present and future employers. Human Resources Development can be defined simply as developing the most important section of any business, its human resource, by attaining or upgrading employee skills and attitudes at all levels to maximise enterprise effectiveness. The people within an organization are its human resource. Human Resources Development from a business perspective is not entirely focused on the individual's growth and development, "development occurs to enhance the organization's value, not solely for individual improvement. Individual education and development is a tool and a means to an end, not the end goal itself" (Elwood F. Holton II, James W. Trott Jr). The broader concept of national and more strategic attention to the development of human resources

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is beginning to emerge as newly independent countries face strong competition for their skilled professionals and the accompanying brain-drain they experience.

Recruitment

Employee recruitment forms a major part of an organization's overall resourcing strategies, which identify and secure people needed for the organization to survive and succeed in the short to medium-term. Recruitment activities need to be responsive to the ever-increasingly competitive market to secure suitably qualified and capable recruits at all levels. To be effective these initiatives need to include how and when to source the best recruits internally or externally. Common to the success of either are; well-defined organizational structures with sound job design, robust task and person specification and versatile selection processes, reward, employment relations and human resource policies, underpinned by a commitment for strong employer branding and employee engagement and onboarding strategies.

Internal recruitment can provide the most cost-effective source for recruits if the potential of the existing pool of employees has been enhanced through training, development and other performance-enhancing activities such as performance appraisal, succession planning and development centres to review performance and assess employee development needs and promotional potential.

Increasingly, securing the best quality candidates for almost all organizations relies, at least occasionally if not substantially, on external recruitment methods. Rapidly changing business models demand skill and experience that cannot be sourced or rapidly enough developed from the existing employee base. It would be unusual for an organization to undertake all aspects of the recruitment process without support from third-party dedicated recruitment firms. This may involve a range of support services, such as; provision of CVs or resumes, identifying recruitment media, advertisement design and media placement for job vacancies, candidate response handling, shortlisting, conducting aptitude testing, preliminary interviews or reference and qualification verification. Typically, small organizations may not have in-house resources or, in common with larger organizations, may not possess the particular skill-set required to undertake a specific recruitment assignment. Where requirements arise, these are referred on an ad hoc basis to government job centres or commercially run employment agencies.

Except in sectors where high-volume recruitment is the norm, an organization faced with sudden, unexpected requirements for an unusually large number of new recruits often delegates the task to a specialist external recruiter. Sourcing executive-level and senior management as well as the acquisition of scarce or ‘high-potential’ recruits has been a long-established market serviced by a wide range of ‘search and selection’ or ‘headhunting’ consultancies, which typically form long-standing relationships with their client organizations. Finally, certain organizations with sophisticated HR practices have identified there is a strategic advantage in outsourcing complete responsibility for all workforce procurement to one or more third-party recruitment agencies or consultancies. In the most sophisticated of these arrangements the external recruitment services provider may not only physically locate, or ‘embed’, their resourcing team(s) in the client organization's offices, but work in tandem with the senior human resource management team in developing the longer-term HR resourcing strategy and plan.

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Ethical management

In the very narrow context of corporate "human resources" management, there is a contrasting pull to reflect and require workplace diversity that echoes the diversity of a global customer base. Such programs require foreign language and culture skills, ingenuity, humour, and careful listening. These indicate a general shift through the human capital point of view to an acknowledgment that human beings contribute more to a productive enterprise than just "work": they bring their character, ethics, creativity, social connections and alter the character of a workplace. The term corporate culture is used to characterize such processes at the organizational level.

(Adapted from Wikipedia, the free encyclopedia)

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6 - AssetsIn financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset).

The balance sheet of a firm records the monetary value of the assets owned by the firm. It is money and other valuables belonging to an individual or business. Two major asset classes are tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, while fixed assets include such items as buildings and equipment.

Intangible assets are nonphysical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place. Examples of intangible assets are goodwill, copyrights, trademarks, patents and computer programs, and financial assets, including such items as bonds and stocks.

Asset characteristics

The probable present benefit involves a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organizations, to provide services;

The firm can control access to the benefit;

The transaction or event giving rise to the firm's right to, or control of, the benefit has already occurred.

In the financial accounting sense of the term, it is not necessary to be able to legally enforce the asset's benefit for qualifying a resource as being an asset, provided the firm can control its use by other means. It is important to understand that in an accounting sense an asset is not the same as ownership. Assets are equal to "equity" plus "liabilities."

The accounting equation relates assets, liabilities, and owner's equity:

Assets = Liabilities +Stockholder's Equity (Owner's Equity)

The accounting equation is the mathematical structure of the balance sheet.

Assets are listed on the balance sheet. Similarly, in economics an asset is any form in which wealth can be held.

Probably the most accepted accounting definition of asset is the one used by the International Accounting Standards Board . The following is a quotation from the IFRS (International Financial

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Reporting Standards) Framework: "An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise." Assets are formally controlled and managed within larger organizations via the use of asset tracking tools. These monitor the purchasing, upgrading, servicing, licensing, disposal etc., of both physical and non-physical assets. In a company's balance sheet certain divisions are required by generally accepted accounting principles (GAAP), which vary from country to country.

Current assets

Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle (whichever is longer), without disturbing the normal operations of a business. These assets are continually turned over in the course of a business during normal business activity. The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities.

Long-term investments

Often referred to simply as "investments". Long-term investments are to be held for many years and are not intended to be disposed of in the near future. This group usually consists of four types of investments:

1. Investments in securities such as bonds, common stock, or long-term notes.2. Investments in fixed assets not used in operations (e.g., land held for sale).

3. Investments in special funds (e.g. sinking funds or pension funds).

4. Different forms of insurance may also be treated as long term investments.

Fixed assets

Also referred to as PPE (property, plant, and equipment), these are purchased for continued and long-term use in earning profit in a business. This group includes as an asset land, buildings, machinery, furniture, tools, and certain wasting resources e.g., timberland and minerals. They are written off against profits by charging depreciation expenses (with exception of land assets). Accumulated depreciation is shown in the balance sheet or in the notes. These are also called capital assets.

Intangible assets

Intangible assets lack physical substance and usually are very hard to evaluate. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are (according to US GAAP) amortized over 5 to 40 years with the exception of goodwill. Websites are treated differently in different countries and may fall under either tangible or intangible assets.

Tangible assets

Tangible assets are those that have a physical substance and can be touched, such as currencies, buildings, real estate, vehicles, inventories, equipment, and precious metals.

(Adapted from Wikipedia, the free encyclopedia)

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7 - Corporate financeCorporate finance is the field of finance dealing with financial decisions business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize corporate value while managing the firm's financial risks.

The discipline can be divided into long-term and short-term decisions and techniques. Capital investment decisions are long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. On the other hand, the short term decisions can be grouped. This subject deals with the short-term balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers).

The terms corporate finance and corporate financier are also associated with investment banking. The typical role of an investment bank is to evaluate the company's financial needs and raise the appropriate type of capital that best fits those needs.

Capital investment decisions

Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure. Decisions are based on several inter-related criteria:

1. Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate.

2. These projects must also be financed appropriately.

3. If no such opportunities exist, maximizing shareholder value dictates that management must return excess cash to shareholders (i.e., distribution via dividends). Capital investment decisions thus comprise an investment decision, a financing decision, and a dividend decision.

The investment decision

Management must allocate limited resources between competing opportunities (projects) in a process known as capital budgeting. Making this investment, or capital allocation, decision requires estimating the value of each opportunity or project, which is a function of the size, timing and predictability of future cash flows.

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In general, each project's value will be estimated using a discounted cash flow (DCF) valuation, and the opportunity with the highest value, as measured by the resultant net present value (NPV), will be selected. This requires estimating the size and timing of all of the incremental cash flows resulting from the project. Such future cash flows are then discounted to determine their present value. These present values are then summed, and this sum, net of the initial investment, is the NPV.

The NPV is greatly affected by the discount rate. Thus, identifying the proper discount rate - often termed, the project "hurdle rate" - is critical to making an appropriate decision. The hurdle rate is the minimum acceptable return on an investment — i.e. the project appropriate discount rate. The hurdle rate should reflect the riskiness of the investment, typically measured by volatility of cash flows, and must take into account the financing mix. Managers use models such as the CAPM (Capital Asset Pricing Model) or the APT (Arbitrage Pricing Theory) to estimate a discount rate appropriate for a particular project, and use the weighted average cost of capital (WACC) to reflect the financing mix selected.

Given the uncertainty inherent in project forecasting and valuation, analysts will wish to assess the sensitivity of project NPV to the various inputs (i.e. assumptions) to the DCF model. In a typical sensitivity analysis the analyst will vary one key factor while holding all other inputs constant.

Using a related technique, analysts also run scenario based forecasts of NPV. Here, a scenario comprises a particular outcome for economy-wide, "global" factors (demand for the product, exchange rates, commodity prices, etc...) as well as for company-specific factors (unit costs, etc...). As an example, the analyst may specify various revenue growth scenarios (e.g. 5% for "Worst Case", 10% for "Likely Case" and 25% for "Best Case"), where all key inputs are adjusted so as to be consistent with the growth assumptions, and calculate the NPV for each.

A further advancement is to construct stochastic or probabilistic financial models – as opposed to the traditional static and deterministic models.

The financing decision

Achieving the goals of corporate finance requires that any corporate investment be financed appropriately. Since both hurdle rate and cash flows (and hence the riskiness of the firm) will be affected, the financing mix can impact the valuation. Management must therefore identify the "optimal mix" of financing—the capital structure that results in maximum value.

The sources of financing will, generically, comprise some combination of debt and equity financing. Financing a project through debt results in a liability or obligation that must be serviced, thus entailing cash flow implications independent of the project's degree of success. Equity financing is less risky with respect to cash flow commitments, but results in a dilution of ownership, control and earnings. The cost of equity is also typically higher than the cost of debt, and so equity financing may result in an increased hurdle rate which may offset any reduction in cash flow risk.

Management must also attempt to match the financing mix to the asset being financed as closely as possible, in terms of both timing and cash flows.

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The dividend decision

Whether to issue dividends, and what amount, is calculated mainly on the basis of the company's unappropriated profit and its earning prospects for the coming year. If there are no NPV positive opportunities, i.e. projects where returns exceed the hurdle rate, then management must return excess cash to investors. These free cash flows comprise cash remaining after all business expenses have been met.

This is the general case, however there are exceptions. For example, investors in a "Growth stock", expect that the company will, almost by definition, retain earnings so as to fund growth internally. In other cases, even though an opportunity is currently NPV negative, management may consider “investment flexibility” and decide to retain cash flows.

Management must also decide on the form of the dividend distribution, generally as cash dividends or via a share buyback. Various factors may be taken into consideration: where shareholders must pay tax on dividends, firms may elect to retain earnings or to perform a stock buyback, in both cases increasing the value of shares.

Working capital management

Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities.

As above, the goal of Corporate Finance is the maximization of firm value. In the context of long term, capital investment decisions, firm value is enhanced through appropriately selecting and funding NPV positive investments. These investments, in turn, have implications in terms of cash flow and cost of capital.

The goal of working capital management is therefore to ensure that the firm is able to operate, and that it has sufficient cash flow to service long term debt, and to satisfy both maturing short-term debt and upcoming operational expenses. In so doing, firm value is enhanced when, and if, the return on capital exceeds the cost of capital.

Decision criteria

Working capital is the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (Current Assets), and cash requirements (Current Liabilities). As a result, the decisions relating to working capital are always current, i.e. short term, decisions.

In addition to time horizon, working capital decisions differ from capital investment decisions in terms of discounting and profitability considerations; they are also "reversible" to some extent.

Working capital management decisions are therefore not taken on the same basis as long term decisions, and working capital management applies different criteria in decision making: the main

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considerations are: (1) cash flow / liquidity and (2) profitability / return on capital (of which cash flow is probably the more important).

Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.

Financial risk management

Risk management is the process of measuring risk and then developing and implementing strategies to manage that risk. Financial risk management focuses on risks that can be managed using traded financial instruments (typically changes in commodity prices, interest rates, foreign exchange rates and stock prices). Financial risk management will also play an important role in cash management.

This area is related to corporate finance in two ways. Firstly, firm exposure to business risk is a direct result of previous investment and financing decisions. Secondly, both disciplines share the goal of enhancing, or preserving, firm value. All large corporations have risk management teams, and small firms practice informal, if not formal, risk management.

Derivatives1 are the instruments most commonly used in financial risk management. Because unique derivative contracts tend to be costly to create and monitor, the most cost-effective financial risk management methods usually involve derivatives that trade on well-established financial markets. These standard derivative instruments include options, futures contracts and swaps.

(Adapted from Wikipedia, the free encyclopedia)

1 In finance, a derivative is a financial instrument (or, more simply, an agreement between two parties) that has a value based on the expected future price movements of the asset to which it is linked—called the underlying asset—such as a share or a currency. Derivatives are a form of alternative investment.

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8 - MarketingMarketing is the process by which companies create customer interest in goods or services. It generates the strategy that underlies sales techniques, business communication, and business developments. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves.

Marketing is used to identify the customer, to satisfy the customer, and to keep the customer. With the customer as the focus of its activities, it can be concluded that marketing management is one of the major components of business management. Marketing evolved to meet the stasis in developing new markets caused by mature markets and overcapacities in the last 2-3 centuries. The adoption of marketing strategies requires businesses to shift their focus from production to the perceived needs and wants of their customers as the means of staying profitable.

The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors.

Marketing practice tended to be seen as a creative industry in the past, which included advertising, distribution and selling. However, because the academic study of marketing makes extensive use of social sciences, psychology, sociology, mathematics, economics, anthropology and neuroscience, the profession is now widely recognized as a science. The overall process starts with marketing research and goes through market segmentation, business planning and execution, ending with pre and post-sales promotional activities. It is also related to many of the creative arts. The marketing literature is also adept at re-inventing itself and its vocabulary according to the times and the culture.

Evolution of marketing

The marketing orientation evolved from earlier orientations namely the production orientation, the product orientation and the selling orientation.

OrientationProfit driver

Western European timeframe

Description

Production Production methods

until the 1950s

A firm focusing on a production orientation specializes in producing as much as possible of a given product or service. Thus, this signifies a firm exploiting economies of scale, until the minimum efficient scale is reached. A production orientation may be deployed when a high demand for a product or service exists, coupled with a good certainty that consumer tastes do not rapidly alter (similar to the sales orientation).

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ProductQuality of

the product

until the 1960s

A firm employing a product orientation is chiefly concerned with the quality of its own product. A firm would also assume that as long as its product was of a high standard, people would buy and consume the product.

SellingSelling

methods1950s and

1960s

A firm using a sales orientation focuses primarily on the selling/promotion of a particular product, and not determining new consumer desires as such. Consequently, this entails simply selling an already existing product, and using promotion techniques to attain the highest sales possible.

MarketingNeeds and wants of

customers

1970 to present

day

The 'marketing orientation' is perhaps the most common orientation used in contemporary marketing. It involves a firm essentially basing its marketing plans around the marketing concept, and thus supplying products to suit new consumer tastes. As an example, a firm would employ market research to gauge consumer desires, use R&D to develop a product attuned to the revealed information, and then utilize promotion techniques to ensure persons know the product exists.

Recent approaches in marketing are:

the relationship marketing with focus on the customer the business marketing or industrial marketing with focus on an organization or institution

the social marketing with focus on benefits to the society.

New forms of marketing also use the Internet and are therefore called internet marketing or more generally e-marketing, online marketing, search engine marketing, desktop advertising or affiliate marketing. It tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing.

Orientation Profit driverWestern

European timeframe

Description

Relationship marketing / Relationship management

Building and keeping good

customer relations

1960s to present

day

Emphasis is placed on the whole relationship between suppliers and customers. The aim is to give the best possible attention, customer services and therefore build customer loyalty.

Business marketing /

Industrial marketing

Building and keeping

relationships between

1980s to present

day

In this context marketing takes place between businesses or organizations. The product focus lies on industrial goods or capital goods than consumer products or end products. A different form of marketing activities like promotion, advertising and communication

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organizations to the customer is used.

Social marketing

Benefit to society

1990s to present

day

Similar characteristics as marketing orientation but with the added condition that there will be a curtailment on any harmful activities to society, in either product, production, or selling methods.

Branding Brand value2000s to present

day

In this context, "branding" is the main company philosophy and marketing is considered an instrument of branding philosophy.

Customer orientation

A firm in the market economy survives by producing goods that persons are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and even existence as a going concern. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.

In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.

A formal approach to this customer-focused marketing is known as SIVA (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, placement, promotion) of marketing management.

Product → SolutionPrice → ValuePlace → AccessPromotion → Information

If any of the 4Ps had a problem or were not there in the marketing factor of the business, the business could be in trouble and so other companies may appear in the surroundings of the company, so the consumer demand on its products will become less.

The concept of marketing mix shows the relations between Company and Customers: 5P&5C model.

Product → Consumer desirePrice → CostPlace → ConveniencePromotion → CommunicationPeople → Customer approach

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The human factor is becoming a key competitive advantage and therefore the model 5C&5P is becoming significant in the 21st Century.

In this sense, a firm's marketing department is often seen as of prime importance within the functional level of an organization. Information from an organization's marketing department would be used to guide the actions of other departments within the firm. As an example, a marketing department could ascertain (via marketing research) that consumers desired a new type of product, or a new usage for an existing product. With this in mind, the marketing department would inform the R&D department to create a prototype of a product/service based on consumers' new desires.

The production department would then start to manufacture the product, while the marketing department would focus on the promotion, distribution, pricing, etc. of the product. Additionally, a firm's finance department would be consulted, with respect to securing appropriate funding for the development, production and promotion of the product. Inter-departmental conflicts may occur, should a firm adhere to the marketing orientation. Production may oppose the installation, support and servicing of new capital stock, which may be needed to manufacture a new product. Finance may oppose the required capital expenditure, since it could undermine a healthy cash flow for the organization.

Herd behavior in marketing is used to explain the dependencies of customers' mutual behaviour. The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behaviour. It shared mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct." The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are used. A "swarm-moves" model was introduced by a Florida Institute of Technology researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts."Other recent studies on the "power of social influence" include an "artificial music market in which some 19,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon, eBay).

Marketing research

Marketing research involves conducting research to support marketing activities, and the statistical interpretation of data into information. This information is then used by managers to plan marketing activities, gauge the nature of a firm's marketing environment and attain information from suppliers. Marketing researchers use statistical methods such as quantitative research, qualitative research, hypothesis tests, Chi-squared tests, linear regression, correlations, frequency distributions, binomial distributions, etc. to interpret their findings and convert data into information. The marketing research process spans a number of stages including the definition of a problem, development of a research plan, collecting and interpretation of data and disseminating information formally in form of a report. The task of marketing research is to provide management with relevant, accurate, reliable, valid, and current information.

A distinction should be made between marketing research and market research. Market research pertains to research in a given market. As an example, a firm may conduct research in a target

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market, after selecting a suitable market segment. In contrast, marketing research relates to all research conducted within marketing. Thus, market research is a subset of marketing research.

Market segmentation pertains to the division of a market of consumers into persons with similar needs and wants. As an example, if using Kellogg's cereals in this instance, Frosties are marketed to children. Crunchy Nut Cornflakes are marketed to adults. Both goods aforementioned denote two products which are marketed to two distinct groups of persons, both with like needs, traits, and wants.

The purpose for market segmentation is conducted for two main issues. First, a segmentation allows a better allocation of a firm's finite resources. A firm only possesses a certain amount of resources. Accordingly, it must make choices (and appreciate the related costs) in servicing specific groups of consumers. Furthermore the diversified tastes of the contemporary Western consumers can be served better. With more diversity in the tastes of modern consumers, firms are taking note of the benefit of servicing a multiplicity of new markets.

Types of marketing research

Marketing research, as a sub-set aspect of marketing activities, can be divided into the following parts:

Primary research (also known as field research), which involves the conduction and compilation of research for the purpose it was intended.

Secondary research (also referred to as desk research), is initially conducted for one purpose, but often used to support another purpose or end goal.

By these definitions, an example of primary research would be market research conducted into health foods, which is used solely to ascertain the needs/wants of the target market for health foods. Secondary research, again according to the above definition, would be research pertaining to health foods, but used by a firm wishing to develop an unrelated product.

Primary research is often expensive to prepare, collect and interpret from data to information. Nonetheless, while secondary research is relatively inexpensive, it often can become outdated and outmoded, given it is used for a purpose other than for which is was intended. Primary research can also be broken down into quantitative research and qualitative research, which as the labels suggest, pertain to numerical and non-numerical research methods, techniques. The appropriateness of each mode of research depends on whether data can be quantified (quantitative research), or whether subjective, non-numeric or abstract concepts are required to be studied (qualitative research).

There also exists additional modes of marketing research, which are:

Exploratory research, pertaining to research that investigates an assumption. Descriptive research, which as the label suggests, describes "what is".

Predictive research, meaning research conducted to predict a future occurrence.

Conclusive research, for the purpose of deriving a conclusion via a research process.

Marketing planning

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The area of marketing planning involves forging a plan for a firm's marketing activities. A marketing plan can also pertain to a specific product, as well as to an organization's overall marketing strategy. Generally speaking, an organization's marketing planning process is derived from its overall business strategy. Thus, when top management are devising the firm's strategic direction or mission, the intended marketing activities are incorporated into this plan. There are several levels of marketing objectives within an organization. The senior management of a firm would formulate a general business strategy for a firm. However, this general business strategy would be interpreted and implemented in different contexts throughout the firm.

The field of marketing strategy encompasses the strategy involved in the management of a given product. A given firm may hold numerous products in the marketplace, spanning numerous and sometimes wholly unrelated industries. Accordingly, a plan is required in order to manage effectively such products. Evidently, a company needs to weigh up and ascertain how to utilize effectively its finite resources.

Marketing specializations

With the rapidly emerging force of globalization, the distinction between marketing within a firm's home country and marketing within external markets is disappearing very quickly. With this occurrence in mind, firms need to reorient their marketing strategies to meet the challenges of the global marketplace, in addition to sustaining their competitiveness within home markets.

Buying behaviour

A marketing firm must ascertain the nature of the customers buying behaviour, if it is to market its product properly. Buying behaviour is usually split into two prime strands, whether selling to the consumer, known as business-to-consumer (B2C) or another business, similarly known as business-to-business (B2B).

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9 - International trade lawInternational trade law includes the appropriate rules and customs for handling trade between countries. This branch of law is now an independent field of study as most governments have become part of the world trade, as members of the World Trade Organization (WTO). Whereas "International Commercial Law" deals with transactions between companies and individuals. Since the transaction between private sectors of different countries is an important part of the WTO activities, this latter branch of law is now a very important part of the academic works and is under

study in many universities across the world.

Overview

International trade law should be distinguished from the broader field of international economic law. The latter could be said to encompass not only WTO law, but also law governing the international monetary system and currency regulation, as well as the law of international development.

The body of rules for transnational trade in the 21st century derives from medieval commercial laws called the lex mercatoria and lex maritima — respectively, "the law for merchants on land" and "the law for merchants on sea". Modern trade law (extending beyond bilateral treaties) began shortly after the Second World War, with the negotiation of a multilateral treaty to deal with trade in goods: the General Agreement on Tariffs and Trade (GATT)1.

International trade law is based on theories of economic liberalism developed in Europe and later the United States from the 18th century onwards.

World Trade Organization

In 1995, the World Trade Organization, a formal international organization to regulate trade, was established. It is the most important development in the history of international trade law.

The purposes and structure of the organization is governed by the Agreement Establishing The World Trade Organization, also known as the "Marrakesh Agreement". It does not specify the actual rules that govern international trade in specific areas. These are found in separate treaties, annexed to the Marrakesh Agreement.

Trade in goods

The GATT has been the backbone of international trade law throughout most of the twentieth century. It contains rules relating to "unfair" trading practices — dumping and subsidies.

1 The General Agreement on Tariffs and Trade (typically abbreviated GATT) was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was formed in 1949 and lasted until 1993, when it was replaced by the World Trade Organization in 1995.

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Trade and Human Rights

The World Trade Organisation Trade Related Intellectual Property Rights (TRIPS) agreement required signatory nations to raise intellectual property rights (also known as intellectual monopoly privileges). This arguably has had a negative impact on access to essential medicines in some nations.

Dispute settlement

Since there are no international governing judges the means of dispute resolution is determined by jurisdiction. Each individual country hears cases that are brought before them. Governments choose to be party to a dispute. And private citizens determine jurisdiction by the Forum Clause in their contract.

Besides forum, another factor in international disputes is the rate of exchange. With currency fluctuation ascending and descending over years, a lack of Commerce Clause can jeopardize trade between parties when one party becomes unjustly enriched through natural market fluctuations. By listing the rate of exchange expected over the contract life, parties can provide for changes in the market through reassessment of contract or division of exchange rate fluctuations.

(Adapted from Wikipedia, the free encyclopedia)

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10 - ExportThe term export is derived from the conceptual meaning of shipping goods and services out of the port of a country. The seller of such goods and services is referred to as an exporter who is based in the country of export whereas the overseas based buyer is referred to as an importer. In International Trade, "exports" refers to any good or commodity, or service transported from one country to another country in a legitimate fashion, typically for use in trade.

Export of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import. The advent of small trades over the internet such as through Amazon and e-Bay have largely bypassed the involvement of Customs in many countries because of the low individual values of these trades. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export. An export's counterpart is an import.

In national accounts "exports" consist of transactions in goods and services (sales, barter, gifts) from residents to non-residents. The exact definition of exports includes and excludes specific "borderline" cases. A general delimitation of exports in national accounts is given below:

An export of a good occurs when there is a change of ownership from a resident to a non-resident; this does not necessarily imply that the good in question physically crosses the frontier. However, in specific cases national accounts impute changes of ownership even though in legal terms no change of ownership takes place (e.g. cross border financial leasing, cross border deliveries between affiliates of the same enterprise). Also smuggled goods must be included in the export measurement.

Export of services consist of all services rendered by residents to non-residents. In national accounts any direct purchases by non-residents in the economic territory of a country are recorded as exports of services; therefore all expenditure by foreign tourists in the economic territory of a country is considered as part of the exports of services of that country. Also international flows of illegal services must be included.

National accountants often need to make adjustments to the basic trade data in order to comply with national accounts concepts; the concepts for basic trade statistics often differ in terms of definition and coverage from the requirements in the national accounts:

Data on international trade in goods are mostly obtained through declarations to customs services. If a country applies the general trade system, all goods entering or leaving the country are recorded. If the special trade system (e.g. extra-EU trade statistics) is applied goods which are received into customs warehouses are not recorded in external trade statistics unless they subsequently go into free circulation in the country of receipt.

A special case is the intra-EU trade statistics. Since goods move freely between the member states of the EU without customs controls, statistics on trade in goods between the member states must be obtained through surveys. To reduce the statistical burden on the respondents small scale traders are excluded from the reporting obligation.

Statistical recording of trade in services is based on declarations by banks to their central banks or by surveys of the main operators. In a globalized economy where services can be rendered via electronic means (e.g.the Internet) the related international flows of services are difficult to identify.

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Basic statistics on international trade normally do not record smuggled goods or international flows of illegal services. A small fraction of the smuggled goods and illegal services may nevertheless be included in official trade statistics through dummy shipments or dummy declarations that serve to conceal the illegal nature of the activities.

The theory of international trade and commercial policy is one of the oldest branches of economic thought. Exporting is a major component of international trade, and the macroeconomic risks and benefits of exporting are regularly discussed and disputed by economists and others. Two views concerning international trade present different perspectives. The first recognizes the benefits of international trade. The second concerns itself with the possibility that certain domestic industries (or labourers, or culture) could be harmed by foreign competition.

Methods of export include a product or good or information being mailed, hand-delivered, shipped by air, shipped by boat, uploaded to an Internet site, or downloaded from an Internet site. Exports also include the distribution of information that can be sent in the form of an email, an email attachment, a fax or can be shared during a telephone conversation.

International Trade Barriers

Trade barriers are generally defined as government laws, regulations, policy, or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services. Examples of trade barriers are tariffs, subsidies, import quotas, embargoes as well as product standards, packaging and labeling conditions, language, cultural aspects and many others.

Tariffs

A tariff is a tax placed on a specific good or set of goods exported from or imported to a country, creating an economic barrier to trade.

Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there exist strategic reasons for retaining a domestic production capability. Some failing industries receive a protection with an effect similar to a subsidy in that by placing the tariff on the industry, the industry is less enticed to produce goods in a quicker, cheaper, and more productive fashion. The third reason for a tariff is related to the issue of dumping. Dumping involves a country producing highly excessive amounts of goods and dumping the goods on another foreign country, producing the effect of prices that are "too low". Too low can refer to either pricing the good from the foreign market at a price lower than charged in the domestic market of the country of origin. The other reference to dumping relates or refers to the producer selling the product at a price in which there is no profit or a loss. The purpose (and expected outcome) of the tariff is to encourage spending on domestic goods and services.

Protective tariffs sometimes protect what are known as infant industries that are in the phase of expansive growth. A tariff is used temporarily to allow the industry to succeed in spite of strong competition. Protective tariffs are considered valid if the resources are more productive in their new use than they would be if the industry had not been started. The infant industry eventually must incorporate itself into a market without the protection of government subsidies.

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Subsidies

To subsidize an industry or company refers to a governmental providing supplemental financial support to manipulate the price below market value. Subsidies are generally used for failing industries that need a boost in domestic spending. Subsidizing encourages greater demand for a good or service because of the lowered price.

The effect of subsidies deters other countries that are able to produce a specific product or service at a faster, cheaper, and more productive rate. With the lowered price, these efficient producers cannot compete. The life of a subsidy is generally short-lived, but sometimes can be implemented on a more permanent basis.

The agricultural industry is commonly subsidized, both in the United States, and in other countries including Japan and nations located in the European Union (EU).

Exports and free trade

The theory of comparative advantage materialized during the first quarter of the 19th century in the writings of 'classical economists'. David Ricardo is most credited with the development of the theory that states that all parties maximize benefit in an environment of unrestricted trade, even if absolute advantages in production exist between the parties. The key objective of trade was to promote a "favorable" balance of trade, referring to a time when the value of domestic goods exported exceeds the value of foreign goods imported. The "favorable" balance in turn created a balance of trade surplus.

In contrast Mercantilism, the first systematic body of thought devoted to international trade that emerged during the 17th and 18th centuries in Europe advocated that government policy directly arrange the flow of commerce to conform to their beliefs. They sought a highly interventionist agenda, using taxes on trade to manipulate the balance of trade in favor of the home country.

Ways of exporting

The company can decide to export directly or indirectly to a foreign country.

Direct selling involves sales representatives, distributors, or retailers who are located outside the exporter's home country. Direct exports are goods and services that are sold to an independent party in a foreign country. Mainly the companies are pushed by their core competencies and the goal of improving their performance of value chain.

A distributor in a foreign country is a merchant who purchases the product from the manufacturer and is compensated by the profit he makes upon the resale of the products to his customers. A distributor is authorized to sell products in designated territory and bears all commercial risks associated with the sale. Distributors usually carry stock inventory and service the product, and in most cases distribute the goods to retailers rather than selling them to end users. Direct selling through distributors is considered to be the most popular option to companies, to develop their own international marketing capability. Direct selling also gives the company greater control over the marketing function and the opportunity to earn more profits. When choosing distributors the manufacturer should evaluate their size and capabilities of sales force, sales records, current product mix, facilities and equipment, marketing polices, promotional strategy.

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Regardless of the type of products they sell, sales representatives' primary duties are to make customers interested in their merchandise and to arrange the sale of that merchandise. Some work for a single organization, while others represent several companies and sell a range of products. Rather than selling goods directly to consumers, sales representatives deal with retailers, businesses, government agencies, and other organizations. Sales representatives have several duties beyond selling products. They analyze sales statistics, prepare reports, and handle administrative duties such as filing expense accounts, scheduling appointments, and making travel plans. They also read about new and existing products and monitor the sales, prices, and products of their competitors.

Exporters can also sell directly to foreign retailers; usually, products are limited to consumer lines. They can also sell directly to end users. A good way to generate such sales is by printing catalogues or attending trade shows.

Direct selling over the Internet

Electronic commerce is an important means to small and big companies all over the world, to trade internationally. We already can see how important E-commerce is for marketing growth among exporters companies in emerging economies, in order to overcome capital and infrastructure barriers.

E-commerce eases engagements, provides faster and cheaper delivery of information, generates quick feedback on new products, improves customer service , accesses a global audience, levels the field of companies, and supports electronics data interchange with suppliers and customers.

Indirect exports selling, is simply selling goods to or through an independent domestic intermediary in the manufacturer’s home county. Then intermediaries export the products to customers in foreign markets.

Making the export decision

Once a company determines it has exportable products, it must still consider other factors, such as the following:

What does the company want to gain from exporting? Is exporting consistent with other company goals?

What demands will exporting place on the company's key resources - management and personnel, production capacity, and finance - and how will these demands be met?

Are the expected benefits worth the costs, or would company resources be better used for developing new domestic business?

Challenges

Exporting to foreign countries poses challenges not found in domestic sales. With domestic sales, manufacturers typically sell to wholesalers or direct to retailers or even direct to consumers. When exporting, manufacturers may have to sell to importers who then in turn sell to wholesalers. Extra layer(s) in the chain of distribution squeezes margins and manufacturers may need to offer lower prices to importers than to domestic wholesalers.

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(Adapted from Wikipedia, the free encyclopedia)

11 - Electronic commerceElectronic commerce, commonly known as e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. The use of commerce is conducted in this way, spurring and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as e-mail as well.

A large percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on a website, but most electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web.

Online shopping is a form of electronic commerce where the buyer is directly online to the seller's computer usually via the Internet. There is no intermediary service. The sale and purchase transaction is completed electronically and interactively in real-time such as Amazon.com for new books. If an intermediary is present, then the sale and purchase transaction is called electronic commerce such as eBay.com.

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of the business transactions.

History

Originally, electronic commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK.

From the 1990s onwards, electronic commerce has additionally included enterprise resource planning systems (ERP), data mining and data warehousing.

In 1990, Tim Berners-Lee invented the web browser and transformed an academic telecommunication network into a worldwide everyman everyday communication system called the Internet or www. Commercial enterprise on the Internet was strictly prohibited until 1991. Although the Internet became popular worldwide around 1994 when the first internet online shopping started, it took about five years to introduce security protocols and DSL (Digital Subscriber Line) allowing continual connection to the Internet. By the end of 2000, many European and American business companies offered their services through the World Wide Web. Since then people began to

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associate the word "ecommerce" with the ability of purchasing various goods through the Internet using secure protocols and electronic payment services.

Forms

Contemporary electronic commerce involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce.

On the consumer level, electronic commerce is mostly conducted on the World Wide Web. An individual can go online to purchase anything from books or groceries, to expensive items like real estate. Another example would be online banking, i.e. online bill payments, buying stocks, transferring funds from one account to another, and initiating payment to another country. All of these activities can be done with a few strokes of the keyboard.

On the institutional level, big corporations and financial institutions use the Internet to exchange financial data to facilitate domestic and international business. Data integrity and security are very hot and pressing issues for electronic commerce today.

Impact on markets and retailers

Economists have theorised that e-commerce ought to lead to intensified price competition , as it increases consumers' ability to gather information about products and prices. Research by four economists at the University of Chicago has found that the growth of online shopping has also affected industry structure in two areas that have seen significant growth in e-commerce, bookshops and travel agencies. Generally, larger firms have grown at the expense of smaller ones, as they are able to use economies of scale and offer lower prices. The lone exception to this pattern has been the very smallest category of bookseller, shops with between one and four employees, which appear to have withstood the trend.

Convenience

Online stores are usually available 24 hours a day, and many consumers have internet access both at work and at home. Other establishments such as internet cafes and schools provide access as well. A visit to a conventional retail store requires travel and must take place during business hours.

In the event of a problem with the item – it is not what the consumer ordered, or it is not what they expected – consumers are concerned with the ease with which they can return an item for the correct one or for a refund. Consumers may need to contact the retailer, visit the post office and pay return shipping, and then wait for a replacement or refund.

Price and selection

One advantage of shopping online is being able to quickly seek out deals for items or services with many different vendors (though some local search engines do exist to help consumers locate products for sale in nearby stores). Search engines, online price comparison services and discovery shopping engines can be used to look up sellers of a particular product or service.

Shipping costs (if applicable) reduce the price advantage of online merchandise, though depending on the jurisdiction, a lack of sales tax may compensate for this.

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Shipping a small number of items, especially from another country, is much more expensive than making the larger shipments bricks-and-mortar retailers order. Some retailers (especially those selling small, high-value items like electronics) offer free shipping on sufficiently large orders.

Fraud and security concerns

Given the lack of ability to inspect merchandise before purchase, consumers are at higher risk of fraud on the part of the merchant than in a physical store. Merchants also risk fraudulent purchases using stolen credit cards or fraudulent repudiation of the online purchase. With a warehouse instead of a retail storefront, merchants face less risk from physical theft.

Secure Sockets Layer (SSL) encryption has generally solved the problem of credit card numbers being intercepted in transit between the consumer and the merchant. Identity theft is still a concern for consumers when hackers break into a merchant's web site and steal names, addresses and credit card numbers. A number of high-profile break-ins in the 2000s has prompted some U.S. states to require disclosure to consumers when this happens. Computer security has thus become a major concern for merchants and e-commerce service providers, who deploy countermeasures such as firewalls and anti-virus software to protect their networks.

Phishing is another danger, where consumers are fooled into thinking they are dealing with a reputable retailer, when they have actually been manipulated into feeding private information to a system operated by a malicious party.

Quality seals can be placed on the Shop web page if it has undergone an independent assessment and meets all requirements of the company issuing the seal. The purpose of these seals is to increase the confidence of the online shoppers; the existence of many different seals, or seals unfamiliar to consumers, may foil this effort to a certain extent. A number of resources offer advice on how consumers can protect themselves when using online retailer services. These include:

Sticking with known stores, or attempting to find independent consumer reviews of their experiences; also ensuring that there is comprehensive contact information on the website before using the service, and noting if the retailer has enrolled in industry oversight programs such as trust mark or trust seal.

Before buying from a new company, evaluate the website by considering issues such as: the professionalism and user-friendliness of the site; whether or not the company lists a telephone number and/or street address along with e-contact information; whether a fair and reasonable refund and return policy is clearly stated; and whether there are hidden price inflators, such as excessive shipping and handling charges.

Ensuring that the retailer has an acceptable privacy policy posted. For example note if the retailer does not explicitly state that it will not share private information with others without consent.

Ensuring that the vendor address is protected with SSL when entering credit card information. If it does the address on the credit card information entry screen will start with "HTTPS".

Using strong passwords, without personal information. Another option is a "pass phrase". These are difficult to hack, and provide a variety of upper, lower, and special characters and could be site specific and easy to remember.

Although the benefits of online shopping are considerable, when the process goes poorly it can create a thorny situation. A few problems that shoppers potentially face include identity theft, faulty

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products, and the accumulation of spyware1. Even though the efforts of most large online corporations are making it easier to protect yourself online, it remains a constant fight with criminals. It is advisable to be aware of the most current technology to fully protect yourself and your finances.

One of the hardest areas to deal with in online shopping is the delivery of the products. Most companies offer shipping insurance in case the product is lost or damaged; however, if the buyer opts not to purchase insurance on their products, they are generally out of luck. Some shipping companies will offer refunds or compensation for the damage, but it is up to their discretion if this will happen. It is important to realize that once the product leaves the hands of the sellers, they have no responsibility (provided the product is what the buyer ordered and is in the specified condition).

Lack of full cost disclosure

The lack of full disclosure with regards to the total cost of purchase is one of the concerns of online shopping. While it may be easy to compare the base price of an item online, it may not be easy to see the total cost as additional fees such as shipping are often not visible until the final step in the checkout process. The problem is especially evident with cross-border purchases, where the cost indicated at the final checkout screen may not include additional fees that must be paid upon delivery such as duties and brokerage. Some services such as the Canadian based Wishabi attempts to include estimates of these additional cost, but nevertheless, the lack of general full cost disclosure remains a concern.

Privacy

Privacy of personal information is a significant issue for some consumers. Different legal jurisdictions have different laws concerning consumer privacy, and different levels of enforcement. Many consumers wish to avoid spam and telemarketing which could result from supplying contact information to an online merchant. In response, many merchants promise not to use consumer information for these purposes, or provide a mechanism to opt-out of such contacts.

Many websites keep track of consumers shopping habits in order to suggest items and other websites to view. Many larger stores use the address information encoded on consumers' credit cards (often without their knowledge) to add them to a catalog mailing list. This information is obviously not accessible to the merchant when paying in cash.

Payment

Online shoppers commonly use credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

Billing to mobile phones and landlines Cash on delivery (C.O.D., offered by very few online stores)

Check

Debit card

1 A spyware is a computer software that obtains information from a user's computer without the user's knowledge or consent.

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Direct debit2 in some countries

Electronic money of various types

Gift cards

Postal money order

Wire transfer /delivery on payment

Product delivery

Once the payment has been accepted the goods or services can be delivered in the following ways.

Downloading : This is the method often used for digital media products such as software, music, movies, or images.

Drop shipping : the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. This supply chain management technique allows to bypass the retailer's physical location to save time, money, and space.

In-store pickup : The customer orders online, finds a local store using locator software and picks the product up at the closest store. This is the method often used in the bricks and clicks business model.

Printing out, provision of a code for, or emailing of such items as admission tickets and scrip1 (e.g., gift certificates and coupons). The tickets, codes, or coupons may be redeemed at the appropriate physical or online premises and their content reviewed to verify their eligility (e.g., assurances that the right of admission or use is redeemed at the correct time and place, for the correct amount of money, and for the correct number of uses).

Shipping : The product is shipped to the customer's address or that of a customer-designated third party.

Will call , COBO (in Care Of Box Office), or "at the door" pickup: The patron picks up pre-purchased tickets for an event, such as a play, sporting event, or concert, either just before the event or in advance. With the onset of the Internet and e-commerce sites, which allow customers to buy tickets online, the popularity of this service has increased.

(Adapted from Wikipedia, the free encyclopedia)

2 A direct debit is an order given to a bank or building society by a holder of an account, instructing it to pay to a specified person or organization any sum demanded by that person or organization

1 A scrip is any substitute for currency which is not legal tender and is often a form of credit.45

Lingua Inglese – a.a. 2013-2014 - Corso di Laurea in Economia Aziendale Prof. Domenico Torretta

12 - European Union

Flag

Motto: United in diversity

Anthem: Ode to Joy

Political centres: Brussels, Luxembourg, Strasbourg

The European Union (EU) is an economic and political union of 27 member states. Committed to regional integration, the EU was established by the Treaty of Maastricht in 1993. With over 500 million citizens, the EU generated an estimated 28% share (US$ 16.5 trillion) of the nominal gross world product in 2009. The EU has developed a single market through a standardised system of laws which apply in all member states, and ensures the free movement of people, goods, services, and capital, including the abolition of passport controls by the Schengen Agreement between 22 EU states. It enacts legislation in justice and home affairs, and maintains common policies on trade, agriculture, fisheries and regional development. Sixteen member states have adopted a common currency, the euro, constituting the eurozone.

Having a legal personality, the EU is able to conclude treaties with countries. It has devised the Common Foreign and Security Policy, thus developing a limited role in European defence and foreign policy. Permanent diplomatic missions of the EU are established around the world and representation at the United Nations, WTO, G8 and G-20 is maintained. EU delegations are headed by EU ambassadors.

The EU operates through a hybrid system of supranationalism and intergovernmentalism. In certain areas, decisions are taken by independent supranational institutions, while in others, they are made

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through negotiation between member states. Important institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, and the European Central Bank. The European Parliament is elected every five years by EU citizens.

History

1945–1957

After World War II, moves towards European integration were seen by many as an escape from the extreme forms of nationalism which had devastated the continent. One such attempt to unite Europeans was the European Coal and Steel Community which, while having the modest aim of centralised control of the previously national coal and steel industries of its member states, was declared to be "a first step in the federation of Europe". The originators and supporters of the Community include Jean Monnet, Robert Schuman, Paul Henri Spaak, and Alcide de Gasperi. The founding members of the Community were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany.

In 1957, these six countries signed the Treaties of Rome, which extended the earlier cooperation within the European Coal and Steel Community and created the European Economic Community, (EEC) establishing a customs union and the European Atomic Energy Community (Euratom) for cooperation in developing nuclear energy. In 1967 the Merger Treaty created a single set of institutions for the three communities, which were collectively referred to as the European Communities (EC), although commonly just as the European Community.[25]

1957-1993

In 1973, the Communities enlarged to include Denmark, Ireland, and the United Kingdom. In 1979, the first direct, democratic elections to the European Parliament were held.[27]

Greece joined in 1981, and Spain and Portugal in 1986. In 1985, the Schengen Agreement led the way toward the creation of open borders without passport controls between most member states and some non-member states. In 1986, the European flag began to be used by the Community and the Single European Act was signed.

In 1990, after the fall of the Iron Curtain, the former East Germany became part of the Community as part of a newly united Germany. With enlargement towards Eastern and Central Europe on the agenda, the Copenhagen criteria for candidate members to join the European Union were agreed.

1993-2010

The European Union was formally established when the Maastricht Treaty came into force on 1 November 1993, and in 1995 Austria, Sweden, and Finland joined the newly established EU. In 2002, Euro notes and coins replaced national currencies in 12 of the member states. Since then, the Eurozone has increased to encompass sixteen countries. In 2004, the EU saw its biggest enlargement to date when Malta, Cyprus, Slovenia, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovak Republic, and Hungary joined the Union.

On 1 January 2007, Romania and Bulgaria became the EU's newest members. In the same year Slovenia adopted the euro, followed in 2008 by Cyprus and Malta, and by Slovakia in 2009. In June

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2009, the 2009 Parliament elections were held leading to a renewal of Barroso's Commission Presidency. On 1 December 2009, the Lisbon Treaty entered into force after a protracted and controversial birth. This reformed many aspects of the EU but in particular created a permanent President of the European Council.

Governance

The institutions of the EU operate solely within those competencies conferred on it upon the treaties and according to the principle of subsidiarity (which dictates that action by the EU should only be taken where an objective cannot be sufficiently achieved by the member states alone). Law made by the EU institutions is passed in a variety of forms, primarily that which comes into direct force and that which must be passed in a refined form by national parliaments.

Competencies in scrutinising and amending legislation are divided equally, with some exceptions, between the European Parliament and the Council of the European Union while executive tasks are carried out by the European Commission and in a limited capacity by the European Council. The interpretation and the application of EU law and the treaties are ensured by the Court of Justice of the European Union.

Economy

The EU and the next seven largest economies in theworld by nominal GDP. (IMF, 2009)

Since its origin, the EU has established a single economic market across the territory of all its members. Currently, a single currency is in use between the 16 members of the eurozone. If considered as a single economy, the EU generated an estimated nominal gross domestic product (GDP) of US$16.45 trillion (14.794 trillion international dollars based on purchasing power parity) in 2009, amounting to over 21% of the world's total economic output in terms of purchasing power parity, which makes it the largest economy in the world by nominal GDP. It is also the largest exporter, and largest importer of goods and services, and the biggest trading partner to several large countries such as China and India.

161 of the top 500 largest corporations measured by revenue (Fortune Global 500 in 2010) have their headquarters in the EU.

In May 2007 unemployment in the EU stood at 7% while investment was at 21.4% of GDP, inflation at 2.2% and public deficit at −0.9% of GDP. There is a great deal of variance for annual per capita income within individual EU states, these range from US$7,000 to US$69,000.

Single market

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The signing of the Maastricht Treaty in 1992 established the EU single market. It ensures the free movement of goods, capital, people and services.

Two of the original core objectives of the European Economic Community were the development of a common market, subsequently renamed the single market, and a customs union between its member states. The single market involves the free circulation of goods, capital, people and services within the EU, and the customs union involves the application of a common external tariff on all goods entering the market. Once goods have been admitted into the market they cannot be subjected to customs duties, discriminatory taxes or import quotas, as they travel internally. The non-EU member states of Iceland, Norway, Liechtenstein and Switzerland participate in the single market but not in the customs union. Half the trade in the EU is covered by legislation harmonised by the EU.

Free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries. Until the drive towards Economic and Monetary Union the development of the capital provisions had been slow. Post-Maastricht there has been a rapidly developing corpus of ECJ judgements regarding this initially neglected freedom. The free movement of capital is unique insofar as it is granted equally to non-member states.

The free movement of persons means citizens can move freely between member states to live, work, study or retire in another country. This required the lowering of administrative formalities and recognition of professional qualifications of other states.

The free movement of services and of establishment allows self-employed persons to move between member states in order to provide services on a temporary or permanent basis. While services account for between sixty and seventy percent of GDP, legislation in the area is not as developed as in other areas. This lacuna has been addressed by the recently passed Directive on services in the internal market which aims to liberalise the cross border provision of services. According to the Treaty the provision of services is a residual freedom that only applies if no other freedom is being exercised.

Monetary union

The creation of a European single currency became an official objective of the EU in 1969. However, it was only with the advent of the Maastricht Treaty in 1993 that member states were legally bound to start the monetary union no later than 1 January 1999. On this date the euro was duly launched by eleven of the then fifteen member states of the EU. It remained an accounting currency until 1 January 2002, when euro notes and coins were issued and national currencies began to phase out in the eurozone, which by then consisted of twelve member states.

All other EU member states, except Denmark and the United Kingdom, are legally bound to join the euro when the convergence criteria are met, however only a few countries have set target dates for accession. Sweden has circumvented the requirement to join the euro by not meeting the membership criteria.

The euro is designed to help build a single market by, for example: easing travel of citizens and goods, eliminating exchange rate problems, providing price transparency, creating a single financial market, price stability and low interest rates, and providing a currency used internationally and protected against shocks by the large amount of internal trade within the eurozone. It is also intended as a political symbol of integration and stimulus for more. Since its launch the euro has

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become the second reserve currency1 in the world with a quarter of foreign exchanges reserves being in euro.

The euro, and the monetary policies of those who have adopted it in agreement with the EU, are under the control of the European Central Bank (ECB). There are eleven other currencies used in the EU. A number of other countries outside the EU, such as Montenegro, use the euro without formal agreement with the ECB.

Competition

The EU operates a competition policy intended to ensure undistorted competition within the single market. The Commission as the competition regulator for the single market is responsible for antitrust issues, approving mergers, breaking up cartels, working for economic liberalisation and preventing state aid.

The Competition Commissioner is one of the most powerful positions in the Commission, notable for the ability to affect the commercial interests of trans-national corporations. For example, in 2001 the Commission for the first time prevented a merger between two companies based in the United States (GE and Honeywell) which had already been approved by their national authority. Another high profile case against Microsoft, resulted in the Commission fining Microsoft over €777 million following nine years of legal action.

Languages

Among the many languages and dialects used in the EU, it has 23 official and working languages: Bulgarian, Czech, Danish, Dutch, English, Estonian, Finnish, French, German, Greek, Hungarian, Italian, Irish, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slovak, Slovene, Spanish, and Swedish. Important documents, such as legislation, are translated into every official language. The European Parliament provides translation into all languages for documents and its plenary sessions. Language policy is the responsibility of member states, but EU institutions promote the learning of other languages.

German is the most widely spoken mother tongue (about 88.7 million people as of 2006), followed by English, Italian, and French. English is by far the most spoken foreign language at over half (51%) of the EU population, with German and French following. 56% of EU citizens are able to engage in a conversation in a language other than their mother tongue. Most EU official languages are written in the Latin alphabet except Bulgarian, written in Cyrillic, and Greek, written in the Greek alphabet.

(Adapted from Wikipedia, the free encyclopedia)

1 A reserve currency, or anchor currency, is a currency which is held in significant quantities by many governments and institutions as part of their foreign exchange reserves. It also tends to be the international pricing currency for products traded on a global market, and commodities such as oil, gold, etc. This permits the issuing country to purchase the commodities at a marginally lower rate than other nations, which must exchange their currencies with each purchase and pay a transaction cost.

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