Unit 7 b

BASIC FACTORS AND IDEAS IN INTERNATIONAL BUSINESS

Exercise 1

Pronunciation Practice.

Practise saying the words.

u – [Λ, ə]
fluctuate	unskilled
dumping	abundant
subsidiary	production
subsidy	agriculture
supply	industry
currency	consumption
support	number

Text

Basic Factors and Ideas in International Business

Pre-reading task: Skim the text and give the headings to parts of the text.

Part I

1.Most countries realize the advantages of the world trade. Countries have developed their economies, increased production of goods, and met market demands through increased world trade. The interdependence among trading nations has provided increased business opportunities.

2. International trade develops because certain countries are able to produce some goods more efficiently than other countries. They exchange goods to satisfy their needs and wants. Efficient production may be the result of several factors. A certain climate in a particular country may allow that country to grow agricultural products in abundance, e.g., the climates in the United States and Canada. Natural resources such as oil or coal are abundant in other countries. Countries with a large pool of unskilled laborers are able to produce products which are labor intensive (requiring a lot of labor) more cheaply than countries with highly paid, skilled labor forces. Another factor is geographical location. Countries like Singapore and Panama engage in (deal with) banking and trading because they are located on world trade routes.

3. There are several reasons why governments try to control the imports and exports of a country. One reason is that a country enjoys an advantage if it exports more than it imports. Some countries have special programs to encourage exports. They may be programs that provide marketing information, establish trade missions, subsidize exports, and provide tax benefits or incentives (reduce taxes). Government subsidies (financial support) allow companies to sell products cheaply. Sometimes these subsidized companies export their products and sell them cheaply overseas (in foreign countries). This practice is known as dumping. Dumping is selling on a foreign market at a price below the cost of production.

1. On the other hand, governments impose taxes and quotas to restrict (limit) imports of certain products. For example, to protect Japanese farmers, Japan limits the amount of produce that can be imported. Sometimes governments want to protect a domestic industry because that industry provides employment for the population. The labor unions also encourage the government to enact (establish) protectionist controls.

Part II

1. Protectionist measures (controls) are in the form of duties which eliminate the comparative advantage, or quotas which restrict the import of the product altogether. There are two forms of import tariffs (taxes): specific and ad valorem. A specific tariff is a certain amount of tax for each unit of the product, for example $500 for each automobile. An ad valorem tariff is based on the value of the product, for example 5% of its value. Thus, under an ad valorem tax a Rolls Royce imported to the United States would be taxed more than a Nissan. The imposition of the ad valorem tax depends upon first determining the value of the product. The United States uses the free on board (FOB) method, which is the cost of the product as it leaves the exporting country. European countries have adopted the cost insurance freight (CIF) method, which adds the value of place utility to the cost of the product. A tariff increases the price of the item, raises revenue for the government, and controls consumption through market forces. A quota has a different effect on the market because it limits the number of the items imported. While under a quota there may be a higher price because of a limited supply, under a tariff it is the tax that creates a higher price: the supply is not limited.

8. 2. In order to import and export products, there needs to be a system of international monetary exchange. While a few products like oil are always priced in dollars, most products must be paid for with the legal tender (currency) of the producing country. International trade involves the exchange of one currency for another. Most currencies are now exchanged on a floating (variable) rate basis. There are no official exchange rates. The rates fluctuate (change) according to market forces. If large amounts of a country's currency are being exchanged, the exchange rate may vary greatly because of demand, and therefore, the price of a currency is either rising or falling. Sometimes these great fluctuations in value threaten economic stability; then central banks change market forces by purchasing a foreign currency to support its price and maintain stability.

9. 3. Exporting countries sometimes set up subsidiaries (branches of companies) in the market countries. The larger company is referred to as the parent company. Some countries have laws restricting the foreign ownership of factories or other production facilities, while others encourage foreign investment. A large company that sets up production facilities in different countries is referred to as a multinational. Multinational corporations develop a global philosophy of management, marketing, and production. They choose to operate in those countries that afford them comparative advantage.

Exercise 2

a) Comprehension questions:

Part I

1. What advantages do countries derive from world trade?

2. How does efficient production give rise to world trade?

3. How could climate affect a country's production efficiency?

4. How could unskilled laborers be an advantage to a country?

5. Why do governments encourage exports?

6. How do governments encourage exports?

7. Why do governments try to control imports?

Part II

1.What groups sometimes encourage protectionism?

2.What are the most common types of protectionist measures?

3. Why is the system of international monetary exchange necessary?

4. What are the features of a multinational?

b) True/false statements

1. International monetary exchange is necessary for world trade.

2. The more a country imports, the richer it becomes.

3. International trade encourages economic development.

Exercise 3

Determine the part of speech and give derivatives:

theorized competition specialization manufacture comparative efficient

Exercise 4

The following words can be both verbs and nouns. Translate them into Russian. Make up words-combinations with these words (both as verbs as nouns).

Nouns and verbs: produce, export, import, supply, trade, benefit, result, market, control, guarantee, price, value, support.

Exercise 5

Make up word combinations: adjective + noun. Find the sentences with these w/c in the text above.

Efficient	a. market
Free	b. producer
International	c. country
Comparative	d. measures
Exporting	e. advantage
Protectionist	f. specialization

Exercise 6

Make up word combinations: verb + noun or adverb. Find the sentences with these w/c in the text above.

To determine	goods
To supply	price
To export	domestically
To produce	products
To manufacture	abroad

Exercise 7

Match the words in the left column with equivalents in the right column.

1. dumping	a. a company with a worldwide management and production philosophy
2. free market	b. supply and demand
3. division of labor	c. company which owns a subsidiary
4. market forces	d. below cost foreign sale
5. subsidy	e. without government restrictions regulating trade
6. protectionism	f. trade restrictions to benefit domestic producers
7. parent company	g. branch company
8. a multinational	h. money given to cover losses and assist non-profit enterprises
9. subsidiary	i. labor specialization

Exercise 8

Replace the words and expressions in italics with expressions from the text which have the same meaning.

1. Workers with very little training are able to produce goods which require a lot of hand work.

2. Adam Smith suggested that in a market without government interference countries would produce what had the greatest advantage to them.

3. In a free market different work would be performed in different countries.

4. Countries sell abroad the goods produced most efficiently at home.

5. Governments try to regulate the imports of a country.

6. Some governments give money to companies that export.

7. Governments try to protect their home industries.

8. Governments can limit imports by imposing an import tax.

9. An import duty raises money for the government.

10. Most goods must be paid for in the currency of the producing country.

Exercise 9

Fill in the gaps in the passage with words given below in brackets. The initial letter of the words is provided.

1. When a country imports goods, it spends its currency abroad. When a country exports goods, it is paid in foreign c............... The difference between the money a country earns for goods and the amount it s...............on goods is called its balance of trade (or t........... balance.) Countries also trade abroad in things like insurance, tourism, foreign investment etc. which are known as invisible imports and e..............

When a country receives money from abroad for the things other than goods, the transaction is called an I..............export. When a country s............money abroad on things other than goods, the t...............is called an I.............i........... . The difference between the total amount of money a country s.............and the total a...............it e.............is its b..............of payments, (amount, balance, currency, earns, exports, invisible, invisible, import, spends, spends, spends, trade, transaction)

2.If a country earns more than it s..., it has a favorable balance of p.............. A f............balance of payments is also called a b..............of payments surplus. If a country spends more than it e................, it has an unfavorable balance of payments. This is also called a b.............of payments deficit, (balance, balance, earns, favorable, payments, spends)

3.In order for international t..............take place, countries have to buy and sell foreign c............. This is done on the f..............exchange market. The value of a c...............on the foreign exchange m..............changes frequently and the price at which money can be exchanged at a particular time is called the e rate (or r............of exchange.) The changes in the e.............rate are influenced by many political and economic factors.

The v...........of a currency will probably fall, for example, if a country has a large trade balance d.............(currency, currencies/currency, deficit, exchange, exchange, foreign, market, rate, trade, value).

4.The e..............rate can affect the price of exported goods. If the v................of the exporter's c.............falls he will make more profit. On the other hand, if the value of the f.................currency takes a f..........., the exporter may have to raise his prices abroad in order to make a p............... Alternatively the exporter can take out forward exchange cover. Forward exchange c..............is a form of insurance. The exporter arranges to sell f.............(e.g. in three months time) at an agreed r............of exchange the foreign c.............he will receive from the sale of goods. This quads the exporter against losing money if the foreign currency falls in v...........(cover, currency, currency, exchange, fall, foreign, forward, profit, rate, value, value).

Exercise 10

Speaking. Give a brief report on the advantages and disadvantages of international business. Give your reasons.

Exercise 11

Writing. Present the results in writing (180 words). Use the following expressions:

First of all / Firstly

In adition / Moreover / Furthermore

So / As a result / Therefore

However / Nevertheles / In contrast

On the one hand / On the other hand

One of the advantages / disadvantages of .... is …

The main advantage / drawback / problem (with) … is …

In conclusion / To sum up / On the whole

Exercise 12

Grammar focus 12. Third conditional

If+HAD+Participle II

Would+Have+Participle II

e.g. If I had got up earlier I wouldn’t have missed my train

Disneyland Paris, formerly Euro Disney, the France-based team park, has recently had problems in different areas (share prices, costs, decline in visitors, etc.). Complete each of the following sentences relating to Disneyland Paris by putting the verbs in brackets into third conditional structures.

1. Disneyland Paris personnel executives would have avoided (avoid) disputes with trade unions if they had paid (pay) closer attention to the sensitive issue of personal appearance in the workplace in France.

2. If the company ------------------(lower) prices of hotels and restaurants earlier, perhaps this ------------------(encourage) more visitors.

3. Some analysts believe if Disneyland Paris ----------------- (implement) a new marketing strategy and changes in management at an earlier stage, the visitors ------------------ (spend) more money on food and souvenirs while in the park.

4. Some people say that if Europeans -------------- (understand) more about the concept of Disneyland before it opened in April 1992, attendance figures ------------- (increase).

5. Disneyland Paris's chairman, Philippe Bourgignon, said that if there ---------------------- (not be) so much negative publicity about the traumatic restructuring of the company, the number of visitors ------------------- (not drop).

6. Disneyland Paris ------------------------- (follow) its initial development plans if the recession ------------- (not hit) the real estate market so hard.

7.If the Bundesbank ---------------------- (not keep) European rates so high in the early 1990s, Euro Disney's debt ------------------------------------- (not jump) to more than 20 billion French francs.