Revisi Modul Bahasa Inggris

ENGLISH FOR ECONOMICS

By

Dr. Drs. Djuwari, M.Hum

Kartika Marta Budiana, S.S., M.Pd.

Textbook for the Students of Economics of Semester One

Published by

STIE PERBANAS SURABAYA

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 FOREWORDS

This book is designed for providing the materials of English for the students of

economics in the first semester. The reading texts are intended to strengthen the

students both for reading skill and vocabulary building.

In reading skill, the students are requested to read not only by scanning

but also by reading between the lines and even beyond the lines. For the

vocabulary, students are provided with some exercises for understanding all the

terms in economics.

By having such skills both reading and vocabularies, the students are

finally equipped with the competencies in both reading and the semantic

meanings of the words related to the science they are learning, economics.

Surabaya, Agustus 20, 2018

Kartika Marta Budiana, S.S., M.Pd

Dr. Drs. Djuwari, M.Hum

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 Table of Content

UNIT 1 SUPPLY AND DEMAND ................................................................................... 5

UNIT 2 INTRODUCTION TO ECONOMICS (1) ............................................................ 8
UNIT 3 INTRODUCTION TO ECONOMICS (2) .......................................................... 14
UNIT 4 RECRUITMENT OF STAFF ............................................................................. 19
UNIT 5 CUSTOMERS AND YOUR SERVICE ............................................................ 27
UNIT 6 THE DEVELOPMENT OF THE TRANSNATIONAL CORPORATION....... 30
UNIT 7 WHAT IS BUSINESS ETHICS? ....................................................................... 37
UNIT 9 THE XM COMPANY ......................................................................................... 50
UNIT 10 PROTECTING AGAINST EXCHANGE RISK .............................................. 59
REFERENCE .................................................................................................................... 66

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 UNIT 1
SUPPLY AND DEMAND

Banana is a typical example of perishable goods. By “perishable,” we mean goods which

cannot be stored for any length of time without going bad. Most foodstuffs are in the

perishable category. Such goods are offered for sale as quickly as possible, and so the

supply of perishables and the stock of perishables available at any time are usually the

same in quantity.

This is not true in the case of non-perishable goods like coal, steel and cars, which do not

deteriorate easily. The supply of cars on the market may not be the same as the actual

number of cars in the factories. Economists talk about the law of supply, in which a rise

in prices tends to reduce it. If prices rise for particular commodity, the rise will of course

encourage producers to make more. On the other hand, if prices fall either locally or

throughout the world, producers will reduce productions. This can result in serious

difficulties for many producers, and may cause them to go out of business completely.

Over production of any commodity can also create difficulties, because it can lead to a

glut on the market, which may cause prices to fall sharply.

Supplies of many commodities can generally be adjusted to suit market condition. This

means that changes in prices lead to changes in the quantity of a particular commodity

which is made available to consumers. Household goods and furniture belong to this

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category. In much instances supply is said to be “elastic”, because it can be increased or

decreased rapidly in response to market prices.

Elasticity of supply, as a response to changes in price, is related to demand. Economists

define “demand” as a consumer or want, together with his willingness to pay for what he

wants. We can say that demand is indicated by our willingness to offer money for

particular goods or services. Money has no value in itself, but serves as a means of

exchange between commodities which do have a value to us.

People very seldom have everything they want. Usually we have to decide careful how

we spend our income. When we exercise our choice, we do so according to our personal

scale of preferences. In this scale of preference essential commodities come first (food,

clothing, shelter, medical expenses etc.), then the kind of luxuries which help us to be

comfortable (telephone, special furniture, insurance etc.), and finally those non-essentials

which give us personal pleasure (holiday, parties, visits to theatres or concerts, chocolates

etc.). They may all seem important, but their true importance can be measured by

deciding which we are prepared to live without. Our decisions indicate our scale of

preferences and therefore our priority.

Elasticity of demand is a measure of the change in the quantity of a good, in response to

demand. The change in demand results from a change in price. Demand is inelastic when

a good is regarded as a basic necessity, but particularly elastic for non-essential

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commodities. Accordingly, we buy basic necessity even if the prices rise steeply, but we

buy other things only when they are relatively cheap.

A. Glossary

1. Glut = oversupply 6. Elastic = flexible

2. Perishable = spoil quickly 7. Steep = excursively high

3. Available = obtainable 8. Adjusted = adapted

4. Deteriorate = grow worse 9. Instance = case

5. Encourage = give hope 10. Demand = requirement

B. Questions :

1. What are perishable goods?

2. What two things are usually the same in quantity?

3. What does a rise in prices encourage?

4. What does a fall in prices cause?

5. What serious effect may a fall in prices have on some producers?

6. How is demand indicated?

7. What is money?

8. What do we do when exercise choice?

9. What is our third priority?

10. When is demand inelastic?

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II. Vocabulary Exercise

State what the words in column A remind you of !

Find the answers in column B

Column A Column B

1. Adjusted = lodged, gene, plagued, adapted.

2. Available = ready, lovable, musty, tower, obtainable

3. Glut = oversupply, custard, gnarl, mistral

4. Demand = requirement, claim, exact, request

5. Encourage = emit, mid town, give hope, emote

6. Deteriorate = grow worse, lodge, locust, heed

7. Steep = plop, excessively high, scrawl, vent

8. Perishable = spoil quickly, permanent, permissions, snook

9. Instance = sativa, case, shred, example

10. Elastic = mitosis, sissy, flexible, mock

III. Language Usage.

SIMPLE PRESENT

(a) Water consists of hydrogen and The simple present says that something
oxygen. was true in the past, is true in the present,
(b) The average person breathes and will be true in the future.
21,600 times a day. It expresses general statements of fact
x x x x x x x x x (c) The world is round. and timeless truths.
(d) I study for two hours every night.
(e) I get up at seven every morning. The simple present is used to express
(f) He always eats a sandwich for habitual or everyday activities.
lunch.

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 Exercises:
A. Put the verb into the correct form.
boils
Examples: Water ……………. (boil) at 100 degrees Celcius.
doesn’t go .(notgo) to the movie very often.
George …………………..
do you speak (you/speak)?
How many languages ……………………..
1. The swimming pool ……… (open) at 9:00 and …….. (close) at 6:30 every day.
2. What time ………… (the banks/close) here?
3. I have a car, but I ……….. (not/use) it very often.
4. How many cigarettes …………. (you/smoke) a day?
5. “What ………….. (you/do)?” “I’m an electrical engineer.”
6. “Where …………. (your father/come) from?” “He …………. (come) from Mexico.”
7. It …………. (take) me an hour to get to work. How long ……… (it/take) you?
8. I ………...... (play) the piano, but I ……….. (not/play) very well.
9. I don’t understand the word “deceive.” What …………… (“deceive”/mean)?
B. Read these sentences and correct them. The English is correct but the information
is wrong. Write two correct sentences each time.
Example: The sun goes around the earth. The sun doesn’t go around the earth. The earth
…………………………………………..
goes around the sun.
…………………………………
1. The sun rises in the west. ………………………………………………………
………..
………………………………………………………………………………….
2. Mice catch cats. ………………………………………………………………..
………………………………………………………………………………….
3. Carpenters make things from metal. …………………………………………...
………………………………………………………………………………….
4. The Amazon River flows into the Pacific Ocean. ……………………………..
………………………………………………………………………………….
C. Use these sentences to make questions. Begin your questions with the word(s) in
parentheses (. . .).
Examples: Tom plays tennis. (How often?) How often
……………………………………
does Tom play Tennis?
….
I jog in the morning. (What time/usually?) ……………………………
What time do you usually jog?
.
1. Ann watches television. (How often?) How often …………………………………

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2. I write to my parents. (How often?) ………………………………………………..
3. I have dinner in the evening. (What time/usually?) ………………………………..
4. Tom works. (Where?) ……………………………………………………………...
5. I go to the movies. (How often?) …………………………………………………..
6. People do stupid things. (Why?) ……………………………………………….…..
7. The car breaks down. (How often?) ………………………………………………..

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 UNIT 2
INTRODUCTION TO ECONOMICS (1)

Reading

Most people work to earn a living, and produce goods and services. Goods are either

agricultural (like maize), or manufactured (like cars). Services are such things as

education, medicine and commerce. Some people provide goods; some provide services.

Other people provide both goods and services. For example, in the same garage a man

may buy a car or some service which helps him maintain his car.

The work people do is called economic activity. All economic activities taken

together make up the economic system of a town, a city, a country or the world. Such an

economic system is the sum total of what people do and what they want. The work

people do either provides what they need or provides the money with which they can buy

essential commodities. Of course, most people hope to have enough money to buy

commodities and services which are non essential but which provide some particular

personal satisfaction, such as toys for children, visits to the cinema and books.

The science of economics is based upon the facts of our everyday lives.

Economists study our everyday lives and the general life of our communities in order to

understand the whole economic system of which we are part. They try to describe the

facts of the economy in which we live, and to explain how it works. The economist’s

methods would of course be strictly objective and scientific.

We need food, clothes and shelter. We probably would not go to work when we

could satisfy these basic needs without working. But even when we have satisfied such

basic needs, we may still want other things, such as the toys, visits to the cinema and

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books mentioned above. Our lives might be more enjoyable if we had such things.

Human beings undoubtedly have a wide and very complex range of wants. The science of

economics is concerned with all our needs; with the desire to have radio as well as the

basic necessity of having enough food to eat.

So far we have suggested that economic systems are the same everywhere. This is

not entirely true. Not all economic systems in the world are the same. The economic

system of the USA differs greatly from the system in the Russian (it used to be USSR).

The American system is based on private enterprise and is essentially capitalistic, while

the Russian system is communistic and based on the principles of Karl Marx, the 19th

century political economist. The economic systems of these two nations contrast very

strongly.

Britain is similar to the USA. It has an economic system based on private

enterprise and private supplies of capital. An important form of capital is surplus income

available for investment in new business activities. Property in both the USA and Britain

can be and is owned by individual citizens and these citizens exercise considerable

economic freedom of choice. They can choose what they want to do and how they want

to earn a living, but are not of course entirely free to do as they wish. They must obey the

law. Otherwise, however, they can use their time, money and energy as they wish. If a

person can do this, then economists say that he is economically free. In all communities,

of course, limits are imposed upon personal freedom, limits which are sometimes very

complex.

Complete economic freedom of action can create great difficulties; because the

freedoms exercised by various individuals inevitably conflict. If citizens were completely

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free, some landowners might build factories in unsuitable places, while some factories

owners might make their employees work too long each day. If they were completely free

workers might stop working when they got first pay and come back only when they

needed more money. Such economic anarchy could create instability in their entire

economy of a country.

Laws which relate to economic conditions are sometimes concerned with

worker’s health, wages and pensions, and sometimes with location of workers, while at

others they may be beneficial to the employers. The government policy towards both

employees and employers will depend very much on the political and economic ideology

which the government adopts, and may be biased towards employers and capital on the

one hand, or workers and the problems of labors on the other.

EXERCISES FOR UNDERSTANDING

1. Make a summary of each paragraph related to the main idea.

2. Find some terms of economics in the text and get the definitions by looking them

up in a dictionary!

3. Make another sentences by using the same terms in your own sentences!

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 Language Usage

SIMPLE PAST

(a) I walked to school yesterday.

The simple past indicates that an activity
(b) John lived in Paris for ten years, but
or situation began and ended at a
now he lives in Rome.
particular time in the past.
(c) I bought a new car three days ago.
X (d) Rita stood under a tree when it began to
If a sentence contains when and has the
rain.
simple past in both clauses, the action in
(e) When Mrs. Chu heard a strange noise,
the when clause happens first. In (d): 1st:
she got up to investigate.
The rain began.
(f) When I dropped my cup, the coffee
2nd: She stood under a tree.
spilled on my lap.
A. Read a sentence about the present and then write a sentence about the past.
Example: Carol usually gets up at 7:30. Yesterday she got up at 7:30
…………………
1. Carol usually wakes up early. Yesterday morning …………………………………..
2. Carol usually walks to work. Yesterday ……………………………………………..
3. Carol is usually late for work. Yesterday …………………………………………….
4. Carol usually has a sandwich for lunch. Yesterday ………………………………….
5. Carol usually goes out in the evening. Yesterday evening …………………………..
6. Carol usually sleeps very well. Last night ……………………………………………
B. Put one of these verbs in each sentence:
hurt teach spend sell throw fall catch buy cost
Example: I was hungry, so I ………
bought something to eat at the store.
1. Tom’s father …………..…. him how to drive when he was 17.
2. Don ……………. down the stairs this morning and ……………. His leg.
3. We needed some money, so we …..………. our car.
4. Ann ……………….. a lot of money yesterday. She ………….. a dress that
……………. $80.
5. Jim ………….. the ball to Sue, who …………. It.

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C. Write questions. A friend has just come back from vacation and you are
asking about it.
Examples: where / go? ……………………..
Where did you go?
Food / good?……………………..
Was the food good?
1. How long / stay there? ..........................................................................
2. Stay in a hotel? .....................................................................................
3. Go alone? …………………………………………………………....
4. How / travel? …………………………………………………………
5. The weather / nice? ………………………………………………….
6. What / do in the evenings? ………………………………………….
7. Meet any interesting people? ……………………………………….
D. Put the verb into the correct form. Use the simple past.
didn’t go (not/go) to work yesterday because I …….
Example: I ……. wasn’t (not/be) well.
1. Tom …............. (not/shave) this morning because he ……… (not/have) time.
2. We …………. (not/eat) anything because we ………. (not/be) hungry.
3. I …........... (not/rush) because I ………. (not/be) hungry.
4. She ….. (not/be) interested in the book because she …… (not/understand) it.

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 UNIT 3
INTRODUCTION TO ECONOMICS (2)

In states which have a communistic system, private property and private

enterprise are reduced to a minimum. They exist, but are limited to a small area of

economy. Karl Marx conceived of a world in which there would be no private property

whatsoever. Communism in theory states that all property should belong to the State. In

practice, however, the citizens of states like the Russian are permitted to have personal

effects.

The important thing about the communist system is central planning. The State

organizes the whole economic effort of the nation. A central authority with complete

power decides what goods and services will be produced. The authority decides what

quantities of goods will be produced, and also controls their quality, and decides where

they will go and what prices will be charged for them. Additionally, the State provides

all (or most of) the services which the citizens require. It is responsible for the economy

and is therefore concerned with methods of production as well as quality and quantity.

The national economy must be planned ahead over a number of years.

Marxist economies are planned. The system is related to the needs of the State as

a whole, not the needs of the private person. The emphasis is collective and not

individual, so that the individual is subordinated to the needs of collective State.

The central authority in communist countries performs the function of the price

system in capitalistic economies. Under capitalism the prices of goods and services are

related to supply and demand. The system operates freely, dependent upon the quantities

available and what people want. Therefore, we say that in private enterprise systems the

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production of goods tends to follow price movements, to rise when prices rise and fall

when prices fall. This rise and fall is not however normal in communism countries. The

control exercised by the State prevents any such fluctuation of prices. Government

planners under communism therefore, know what goods are available and what prices

will be charged, but economists in non-communist system do not always know this.

No state today is completely communistic or completely capitalistic. The various

national economic systems tend towards one type or the other, but many are difficult to

classify. It has been found necessary in many countries to exercise some degree of

control over national economic conditions, and under-developed nations particularly are

interested in long-term plans. Countries like India have a number of plans guided by the

government. India makes a clear distinction between the public sector and the private

sector of its economy and so has a system called a mixed economy.

Britain today has a mixed economy. In the public sector are the nationalized

industries like coal and steel, British Rail and BOAC. In the private sector are the

majority of the nation’s industries, from giants like ICI and BP down to small family

businesses. In 1962 the British government set up an official planning body known as the

National Economic Development Council, a body which would help plan national

production and set up production targets. The members and the NEDC are representatives

of both the employer’s federations and the TUC, together with members of the

government, eminent industrialists and leading economists.

It is however a very difficult matter to plan ahead in mixed economy. It is not

possible to plan ahead with any certainty even in changes and other factors can affect the

general plan in unexpected ways.

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Questions

Answer these questions. They relate to the text.

a. What performs the function of the

capitalistic price system in

communist countries?

b. What are prices in capitalistic

system related to?

c. What does the price system

depend upon?

d. In a capitalistic system, what does

production follow?

e. When does production fail?

f. In a communistic system, what

does the control exercised by the

State prevent from happening?

g. What do economists in communist

countries usually know?

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II. Vocabulary Exercise

Below are 45 words taken from earlier units. Make each word negative by adding a

suitable prefix : non-, un- or in- (or il-, im-, ir-as required).

economic available organic

active probable sufficient
distinct regular conditional
legal mobile complete
systematic productive desirable
public legible essential
definite important usual
dependent logical stable
secure adequate equal
industrial proper communist
practical rational solvent
scientific suitable conclusive
relevant personal political
satisfactory enjoyable expert
frequent responsible necessary

III Language Usage:

Present Continuous (I am doing)

A. Study this example situation:
Ann is in her car. She is on her way to work. She is driving to work.
This means: She is driving now, at the time of speaking.
This is the present continuous tense:
I am ( = I’m)
He/she/(it) is ( = he’s, etc.) driving
We/they/you are ( = we’re, etc.)
We use the present continuous when we talk about something that is happening at
the time of speaking:
 Please don’t make so much noise. I’m studying. (not I study)
 “Where is Peggy?” “She’s taking a bath.” (not she takes)

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  Let’s go out now. It isn’t raining anymore.
 (at a party) Hello, Ann. Are you enjoying the party? (not do you enjoy)
B. We also use the present continuous when we talk about something that is
happening around the time of speaking, but no necessarily exactly at the time of
speaking. Study this example situation:
 Tom and Ann are talking and having coffee in café. Tom says: “I’m reading
an interesting book at the moment. I’ll lend it to you when I’ve finished it.”
Tom is not reading the book at the time of speaking. He means that he has begun
the book and hasn’t finished it yet. He is in the middle of reading it. Here are
some more examples:
 Maria is studying English at a language school. (not studies)
 Have you heard about Brian? He is building his own house. (not builds)
But perhaps Maria and Brian are not doing these things exactly at the time of
speaking.
C. We often use the present continuous when we talk about a period around the
present. For example: today, this week, this season, etc.:
 “You’re working hard today.” “Yes, I have a lot to do.”
 Tom isn’t playing football this season. He wants to concentrate on his
studies.
D. We use the present continuous when we talk about changing situations:
This population of the world is rising very fast. (not rises)
Is your English getting better? (not does . . . get)

Exercise:
A. Put the verb into the correct form.
Examples: Please don’t make so much noise. I am studying (study).
…………….
…………….
Let’s go out now.………………. …………….
It isn’t raining (not/rain) anymore.
Listen to those people. What language....……………….
are they speaking (they/speak)?
1. Please be quiet. I …………. (try) to concentrate.
2. Look! It …………….. (snow).
3. Why …………….. (you/look) at me like that? Did I say something wrong?
4. You ……………. (make) a lot of noise. Can you be a little bit quieter?
5. Excuse me, I ……………. (look) for a phone booth. Is there one near here?
6. (at the movies) It’s a good movie, isn’t it? …………… (you/enjoy) it?

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 7. Listen! Can you hear those people next door? They ……………. (yell) at
each other again.
8. Why ……………. (you/wear) your coat today? It’s very warm.
9. I …………….. (not/work) this week. I’m on vacation.
10. I want to lose weight. I …………….. (not/eat) anything today.
B. Complete these sentences using one of these verbs:
get become change rise improve fall increase
Example: The population of the world is rising very fast.
1. The number of people without jobs ……………. at the moment.
2. He is still sick, but he ……………… better slowly.
3. These days food ………………. more and more expensive.
4. The world …………………. . Things never stay the same.
5. The cost of living …………………. . Every year things are more expensive.
6. George has gone to work in Spain. At first, his Spanish wasn’t very good, but
now it ……………………
7. The economic situation is already very bad, and it …………………… worse.
C. Read this conversation between Brian and Steve. Put each verb into the
correct form.
Brian and Steve meet in a restaurant.
Brian: Hello, Steve. I haven’t seen you for ages. What (1)....……………
are you doing (you/do)
these days? ….
Steve: I (2) ……………….. (work) in a department store.
Brian: Really? (3) ……………… (you/enjoy) it?
Steve: Yeah, it’s OK. How about you?
Brian: Well, I (4) ………………… (not/work) at the moment, but I’m very busy.
I (5) …………………… (build) a house.
Steve: Really? (6) ………………. (you/do) it alone?
Brian: No, some friends of mine (7) …………………. (help) me.

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 UNIT 4
RECRUITMENT OF STAFF

A business man will take endless trouble in the selection of machines and equipment,

but hardly any in the selection of his staff. He may be of the opinion that staff can be

more easily replaced than expensive equipment, but he forgets the cost of advertising

and of interviewing, as well as the cost of training, and of loss of efficiency where the

work is being continually performed by beginners.

The first thing to be considered is: Where can staff be found ? There are many

sources, some of which are more suitable for one kind of staff than for another, and

many of which are more suitable for one kind of business than for another. A brief list

of the sources of recruitment is as follows.

Advertising. Inquiry may be made through the medium of national and local

newspapers, as well as in trade professional journal. Advertisements should be brief,

specific and well set-up: many firms prefer to advertise under box number, for it saves

the annoyance of telephone calls, collates all the relevant post together, does not give

notice to competitors that staff are wanted and facilitates the advertisement of posts in

the firm before they are vacant. Critics of “blind” advertisements say that it is unfair

on the applicant. That the firm seems to be ashamed of its name, and that the box

number is used as a "“hield"”for not replying to all applicants.

Department of Employment. This agency may be approached either through the

local office or for professional posts through their Professional and Executive

Registers. This source is usually more fruitful for certain types of staff than for others.

22
Private employment bureau. The use of such bureau saves the time and trouble of

advertising, and is extremely useful when staff are wanted at short notice. It depends

generally on the bureau and on the category of staff required as to whether the

employer or the employee pays the bureau commission.

Friends, relatives and job-seekers. Many old established firms still rely on the

personal introduction, and there is no reason why the job-seeker, either in person or

through the post, should not be a useful source.

Ex-employees. People who have once worked in a concern are known quantity, and if

they have left through no fault of their own may be a valuable source of contact.

Many women leave a business on getting married and are subsequently re-engaged on

a part-time basis.

Office appliance companies. Many of the firms manufacturing calculating,

accounting and other machines will supply trained staff, or alternatively will train

staff in the firms own office for them.

Hospitals and ex-Service organizations. Under the Disabled Persons (Employment)

Act, 1994, all businesses are under a legal obligation to employ a certain proportion of

disabled persons (at present 3 per cent), and hospital almoners and ex-Service

organizations are useful contacts here.

Professional organization. If a professional man is wanted, such as an accountant,

company secretary, or buyer, most of the appropriate professional organizations

23
maintain employment registers where applications can be made for qualified men who

wish to improve their positions.

Schools, colleges and universities. Academic, commercial, engineering and technical

colleges will assist in planning their “school”-leavers. For office juniors, the

appropriate official is to approach in the Youth Employment Officer at the local

branch of the Ministry of Labour.

Circulars, posters, etc. For staff in short supply, it may be as well to display posters

outside the factory or office, or even to distribute circulars or display slides at the

local cinema.

A. Glossary

1. recruitment = employment

2. staff = group of employees

3. annoyance = irritation

4. collate = arrange

5. vacant = unoccupied

6. well set-up = well built – up

7. bureau = office

8. alternatively = as a change

9. almoners = fund collectors

10. appropriate = suitable

B. Questions !

1. Which one is more easily replaced, equipment or staff ?

2. Where does a business man suffer love of efficiency ?

24
3. What is forgotten by him ?

4. What is the first thing he has to do ?

5. Are there many or few sources of ?

6. How many sources of recruitment do you have in the text ?

7. What is the 7th source of recruitment in the text ?

8. What is meant by “school leavers” ? explain !

9. Do you think “collages” and “universities” are the same ? explain !

10. What do “blind advertisement” imply ?

III. Language Usage

In the text, you have many underline prepositions which relate words and other

words

Prepositions

A preposition is a word indicating a relationship between one part of speech and

another part of speech specifying a particular meaning.

There are kinds of prepositions. They are :

a. Simple preposition, such as : on, to, by, above, below, under, down, near, among,

between, with, within, without, etc.

b. Preposition phrases, such as : in school, in my opinion, with my pencil, within a

short time, for several days, etc.

c. Phrasal preposition, such as : because of, on account of, by means of, instead of,

in place of, as far as, a part from, along with, together with, contrary to, etc.

Prepositions are used after certain words

a. Verb + Preposition b. Adjective + Preposition

to agree with person to be angry with persons

to agree to something to be angry at a thing

25
 to arrive at a place to be afraid of a person / thing

to arrive in a country to be ashamed of (manners)

to buy a thing from a shop to be familiar with

to call on a person to be fond of

to come by a thing to be free from

to come by a place to be jealous of

to glance at an object to be responsible for

to look at a person or thing to be useful of

c. Noun + Preposition

arrival at a place competition with a person

arrival in a country opportunity for

exception to a rule request for

key of the door a slave to drugs

key to exercise slave to strong drink

Exercises

1. I go ….. school everyday

2. My sister stays ….. home

3. The train arrived ….. waterloo ….. 6 p.m.

4. Meet me ….. noon ….. Thursday

5. I haven’t seen you ….. a week

6. I have been away ….. Saturday

7. Hamlet was written ….. Shakespeare

8. I was born ….. London, but I now life ….. Lynton, a small village ….. devonshire

9. Cat like to sit ….. the riff

10. Write ….. pencil

26
 UNIT 5
CUSTOMERS AND YOUR SERVICE

Organizations may welcome customer complaints. However, the customers can’t be

bothered making difficulty. For example, how many times has a waiter or waitress

asked:”How was your meal?” and a customer simply responds:”Fine, thanks”. That is

a standard response to a standard question, even if the meal was not good or worse.

Service-focused organizations go out of their way to solicit customer

comments and then act on those suggestions. They recognize that customer service is

not the responsibility of the complaints department but involves every employee in

the organization.

Service-focused organizations welcome all customer comments. They go out

their way to obtain them. In the United States, the number of toll-free number

installed is growing 25 % annually. This makes it easy for customers, at no expense,

to complain and offer suggestions to head office. Many of these phone lines are

staffed 24 hours a day. Seven days a week to make it easy for customer to speak their

mind whenever a thought occurs to them.

Many organizations send surveys to customers. Most people are too busy to

fill them in, but the percentage of responses is often indicative of the feeling of other

customers. Some organizations have surveys at the point of sale. Local gymnasiums

have questionnaires on the quality of the workout, asking for suggestions on how the

instructor might improve.

A focus group is a collection of small number of customers who are asked

many questions about the organization. Focus groups take more time than a survey

27
 but can provide more in-depth information on the perception customers have of

service provided by your company.

1. Referring to paragraph one, why is it less proper to ask the customers many times

about their lunch?

2. Why does a service-focused company need to solicit of the customer comment?

3. How do companies in the USA welcome their customer complaints ?

4. How can surveys-on-group customers represent the whole customer.

5. What is the benefit of doing focus Group for the question.

Vocabulary Exercise

Complete the sentences with words from the list. You don’t have to use all words.

a. recognize e. involve i. complain

b. suggestion f. obtain j. research
c. provide g. reach
d. Welcome h. complaints

1. Thank for your _________. I think I’ll take that way.

2. We must discuss the customer _________with the management. Unless we’ll lose

our customers.

3. The company will _______ a car for the new manager.

4. How will we _______ the real comments from our customers ?

5. I’m sorry I didn’t tell you about thia matter. I just didn’t want to _______ you into

this problem.

6. “_______ to the new millenium” is the sign put in front of the ice cream counter.

I don’t think it has something good for the business.

7. “Hello, is that you, Carl ? Sorry, I didn’t _______ your voice”.

28
LANGUAGE USAGE

SIMPLE FUTURE: WILL AND BE GOING TO

(a) Jack will finish his work tomorrow. Will or be going to is used to express
(b) Jack is going to finish his work future time.* In speech, going to is often
X
tomorrow. pronounced “gonna.”
(c) Anna will not be here tomorrow. In (d): The contracted form of will + not is
(d) Anna won’t be here tomorrow. won’t.

Exercises:

Put the verb into the correct form, using will or going to.

Examples: A: Why are you turning on the TV?

I’m going to watch (watch) the news.
B: ……………………
….
A: Oh, I just realized – I don’t have any money.
B: Don’t worry – that’s no problem. I’ll lend (lend) you some.
…….
Those clouds are very black, aren’t they? I think it ………………
is going to rain (rain).
…
1. A: I’ve got a terrible headache.
B: Do you? Wait here and I ………… (get) you some aspirin.
2. A: Why are you filling that bucket with water?
B: I …………. (wash) the car.
3. A: I’ve decided to repaint this room.
B: Oh, you have? What color ………….. (you/paint) it?
4. A: Look! There’s smoke coming out of that house. It’s on fire!
B: Oh no! I ………… (call) the fire department right away.
5. A: The ceiling in this room doesn’t look very safe, does it?
B: No, it looks as if it ………… (fall) down.
6. A: Where are you going? Are you going shopping?
B: Yes, I …………. (buy) something for dinner.
7. A: I can’t figure out how to use this camera.
B: It’s easy. I ………… (show) you.
8. A: What would you like to have – coffee or tea?
B: I …………… (have) coffee, please.
9. A: Has George decided what to do when he finished school?
B: Oh yes. Everything is settled. He ………… (take) a vacation for a few weeks,
and then he ……….. (start)
10. A: Did you mail that letter for me?
B: Oh, I’m sorry. I completely forgot. I ………. (do) it now.

29
 UNIT 6 THE DEVELOPMENT OF THE TRANSNATIONAL
CORPORATION

There are five stages in the evolution of the transnational corporation. These stages

describe significance in the strategy, world view, orientation, and practice of

companies operating in more than one country.

Stage one is Domestic. The stage-one company is domestic in its focus,

vision, and operation. This company focuses upon domestic markets, domestic

suppliers, and domestic competitors. The company operates domestically because it

never considers the alternative of going international. The growing stage-one

company will, when it reaches growth limits in its primary market, diversity into new

markets, products, and technology instead of focusing on penetrating international

markets.

Stage two is International. The stage-two company extends marketing,

manufacturing, and other activity outside the home country. When a company decides

to pursue opportunities outside the home country, it has evolved into the stage-two

category. In spite of its pursuit of foreign business opportunities, the stage-two

company remains home-country oriented in its basic orientation. The focus of the

stage-two company is on the home-country market. Because there are few people in

the stage-two company with international experience, it typically relies on an

international division structure where people with international interest and

experience can be grouped to focus on international opportunities. The marketing

strategy is extension, that is, products, advertising, promotion, pricing, and business

practices developed for the home-country market are extended into markets around

the world. Almost every company begins its global development as a stage-two

international company.

30
 Stage-three is Multinational. The stage-two company discovers that

differences in markets around the world demand an adaptation of its marketing mix in

order to succeed. For example Toyota discovered the former when it entered U.S.

market in 1957 with its Toyopet, it got market criticism: they were underpowered,

overpriced , and built like tanks. So the unsold models were shipped back to Japan.

The market rejection of the Toyopet was recorded by Toyota as a learning experience

and as a source of invaluable intelligence about market preferences. When a company

decides to respond to market differences, it evolves into a stage-three that pursues a

multidomestic strategy. The focus of the stage-three company is multinational or in

strategic term, multidomestic: that is , this company formulates a unique strategy for

each country in which it conducts business. The orientation of this company is from

ethnocentric to polycentric.

Stage four is Global. The global company will have either a global marketing

strategy or a global sourcing strategy, but not both. It will focus either on global

markets and source from the home or a single country to supply these markets, or it

will focus on the domestic market and source from the world to supply its domestic

channel. The example of the stage-four company are Harley Davidson and the Gap.

Harley is an example of a global marketing company. Harley designs and

manufactures super heavy motorcycles in the United Stated and targets world

markets. The key engineering and manufacturing assets are all located in the home

country. The only Harley investment outside the home country is in marketing. The

Gap is an example of a global sourcing company. The Gap sources worldwide for

product to supply its U.S. retail organization. Each of these companies is operating

globally, but neither of them is seeking to globalize all of the key organization

functions.

31
 Stage Five is Transnational. The stage-five transnational corporation is much

more than a company with sales, investment, and operations in many countries. This

company is geocentric in its orientation: it recognizes similarities and differences and

adopts a world view. This is the company that thinks globally and acts locally. It

adopts a global strategy allowing it to minimize adaptation in countries to that which

will actually add value to the country customer. This company does not adapt for the

sake of adaptation. It only adapts to add value to its offer. Knowledge in the

transnational is created by all functions at all locations and is jointly developed and

shared globally. In a transnational, experience and knowledge are shared globally. If

this is done effectively, this is a source of great power and competitive advantage for

the transnational.

Questions:

1. What are the focuses of the domestic company?

2. What will the growing domestic company do if it has reached growth limit in its

primary market ?

3. What sign that indicates a company as a stage-two category ( an international

company ) ?

4. Why does international company remain home-country-oriented in its basic

orientation ?

5. The marketing strategy of a stage-two company is extention. What does it mean ?

6. When is a company categorized into a stage-three company ?

7. The focus of the stage-three company is multinational. What can you explain

about it ?

8. What is the focus of the global company ?

9. Explain about global marketing and global sourcing companies ?

10. The stage-five company thinks globally and acts locally. What does it mean ?
32
Vocabulary
General words:

Stages

Significance

To consider
Instead of
Penetration
Home country
To pursue opportunities
To evolve
In spite of
To remain
To rely on
Interest
To succeed
Market Preferences
To formulate
To conduct
For the sake
SPECIFIC TERMS:

Marketing Mix

Vocabulary Exercise

Complete the sentences with words from the list. You don’t have to use all words.

a. Instead of e. market preferences i. interest

b. formulate f. evolve j. conduct
c. marketing mix g. evolve
d. remains h. domestic

A. It needs comprehensive consideration for a ____1___ company to ___2____ into

an international company. ____3____considering the product quality, it has to

33
 adjust what marketing strategy will be used. Usually it ____4___ country

orientation, because they are still lack of international experience.

B. One point of _____5____ is Price which can be above the market, with the market

and below the market prices.

C. A company can ___6___rely on its product design, but they can’t deny ___7___

on which we know what the customers actually want.

D.

LANGUAGE USAGE

Present Perfect

A. Study this example situation :

Tom is looking for his key. He can’t find it. He has lost his key.
“He has lost his key” means that he lost it a short time ago and he still doesn’t
have it. This is the present perfect (simple) tense:
I/we/they/you have ( = I’ve, etc.)
lost
He/she has ( = he’s, etc.)
I (etc.) haven’t have you (etc.)
lost Lost?
He/she hasn’t has he/she
We form the present perfect with have/has + the past participle. The past
participle often ends in –ed (opened, decided), but many important verbs are
irregular (lost, written, done, etc).
B. When we use the present perfect, there is a connection with the present:
 I’ve lost my key. ( = I don’t have it now)
 Jim has gone to Canada. ( = He is in Canada or on his way there now.)
C. We often use the present perfect to give new information or to announce a
recent happening:
 I’ve lost my key. Can you help me look for it?
 Did you hear about Jim? He’s gone to Canada.
You can use the present perfect with just ( = a short time ago):
 “Would you like something to eat?” “No, thanks. I’ve just had lunch”
 Hello, have you just arrived?

34
 Use the present perfect with already to say something has happened sooner
than expected:
 “Don’t forget to mail the letter.” “I’ve already mailed it.”
 “When is Tom going to start his new job?” “He has already started.”
Note that you can also use the simple past (I did/ I lost, etc.) in the above
situations:
 I lost my key. Can you help me look for it?
 “Would you like something to eat?” “No, thanks. I just had lunch.”
 “Don’t forget to mail the letter.” “I already mailed it.”
D. Study the difference between gone to and been to:
 Beth is on vacation. She has gone to Italy. ( = She is there now or she
is on her way there.)
 Tom is back from his vacation. He has been to Italy. ( = He was there,
but now he has come back.)
Exercises:

A. You are writing a letter to a friend and giving news about people you both know.

Use the words given to make sentences and put the verb into the correct form.

Example: Phill / find a new job Phil has found a new job
…….................................
..
Dear Chris,

Lots of things have happened since I last wrote to you.

1. Fred / go / Brazil Fred ……………………………………

2. Jack and Jill / decide / to get married …………………….

3. Suzanne / have / a baby …………………………………..

4. Liz / give up / smoking ……………………………………

5. George / pass / his driving test …………………………….

B. Read the situation and then write an appropriate sentence. Use the verb given.

Example: Tom is looking for his key. He can’t find it (lose) He has lost his key
………………..
1. Sue’s hair was dirty. Now it is clean (wash) She ………………………...

2. Tom weighed 190 pound. Now he weighs 170. (lose weight) …………….

35
 3. The car has just stopped because there isn’t any more gas in tank. (run out of

gas) …………………………….

4. This morning Bill was playing football. Now he can’t walk and his leg is in a

cast. (break) ……………………..

C. Use just. Answer the questions using the words given.

Example: Would you like something to eat? (no thank you / I /just /have /dinner)

No thank you. I’ve just had dinner.

….………………………………….
1. Have you seen John anywhere? (yes/ I/ just/ see/ him) ……………………………

2. Has Ann called yet? (yes /she /just /call) …………………………

3. Would you like a cigarette? (no thanks/ I/ just/ put/ one out) ……………………..

D. Write sentences with already.

Example: Don’t forget to mail the letter. I’ve already mailed it.
……………………..
1. Don’t forget to call Eric. I ………………………………..

2. Why you don’t read the paper? …………………………..

3. Shall I pay the waiter? No, I ………………………………

E. Fill in been or gone

Example: “Where’s Amy?” “She’s on vacation. She has gone to Italy”

……..
1. Hello! I have just ……….. to the store. Look at all the things I’ve bought.

2. Jim isn’t here at the moment. He’s …………………. to the store.

3. “are you going to the bank?” “No, I’ve already ……………. to the bank.”

36
 UNIT 7
WHAT IS BUSINESS ETHICS?

When we speak of business ethics we refer to the rightness and wrongness of the

behavior or actions of people who work in business organizations. It becomes

immediately obvious why questions of business ethics are so difficult to deal with.

Questions arise such as “Who determines what is right or wrong?” “Are there degrees

of right?” “Are there degrees of wrong?”

Unfortunately, we can raise the questions but cannot provide clear answers.

However, we can conclude that ethical behavior is a kind of social responsibility

expected by society or specific groups over legal requirements. That still is not the

whole solution, but it brings our focus. If society in general had a clear concept of

appropriate business behavior, we would have an answer.

When decisions are made about what is ethical (right), there are three key

things that go into the decision. First, we have the behavior or act that has been

committed. Second, we compare the act with prevailing norms of acceptability, that is,

society’s standards of what is right or wrong. Third, we must recognize that value

judgments are being made by someone as to what really occurred ( the actual

behavior) and what society’s norms of acceptability really are. What this means is that

two different persons may look at the same behavior, compare it with their concept of

what society’s norms are, and reach different conclusions as to whether the behavior

was ethical or not.

As a whole, members of society generally agree at a very high level of

abstraction that certain behaviors are wrong, but consensus tends to disintegrate as we

move from abstract to specific situation. Let us make illustrate with a business

example. We might all agree with the general dictum that “You should not steal
37
someone else’s property”. At a high level of abstraction ( as general precept) we

would have consensus on this. But as we look at specific questions, our consensus

tends to disappear: Is it acceptable to take pencils home from work ? Pens? Paper

clips? Paper? Staplers? Calculator? Is it acceptable to use the company gasoline for

private use? What if everyone else is doing it ?

What is interesting in this example is that we would let more consensus in

principle than in practice : a number of people who would say these practices are not

acceptable would privately engage in them. Furthermore, a person who would not

think of shoplifting from a local store would take paper home from work on a regular

basis.

Determinations of what is ethical and what is not, then, involve judgment

being made on three counts:

1. What is the true nature of the event, act, or decision that occurred?

2. What are society’s prevailing norms of acceptability?

3. What value judgments are being made by someone about the event, and what are

that person’s perceptions of society’s norms?

Thus, the human factor in the situation introduces the problem of perception and

values.

Questions:

1. What does the word “Business Ethics” refer to?

2. What is Ethical Behavior?

3. What are the three keys used in considering something ethical or right?

4. What is Prevailing Norms of Acceptability?

5. “People tend to let consensus more in principle than in practice”. Explain this

statement using examples.

6. What introduces the problem of perception and value in ethics?

38
Vocabulary

General words:

Refer : Merupakan, menunjukkan

Obvious : Jelas

Arise : Muncul

Determine Menentukan

Has been committed : Telah disepakati

Occure : Terjadi

Reach different conclusion : Mempunyai kesimpulan berbeda

Privately engage : Melakukan secara diam-diam (Sesuai

: konteks)

Would not think of shoplifting Tidak berpikir untuk mencuri di toko

On regular basis : Secara teratur

Specific terms: : Etika Bisnis

Business ethics : Perilaku etis

Ethical behavior : Tanggungjawab sosial

Social responsibility : Norma/ nilai yang diakui

Prevailing norms : Pertimbangan moral

Value judgements : Keputusan

Dictum Aturan, ajaran

Precept

Vocabulary Exercise

Which words on the right column that have close meaning with the word on the left

column?

39
1. Refer : (be) relevant, discuss, hate
2. Obvious : straight, complicated, clear
3. Arise : argue, appear, agree
4. Determine : decide, embark, stop
5. Occur : note, happen, vote
6. Conclusion : end, opening, title
7. Ethic : polite, moral, ethnic
8. Behavior : belief, honesty, manners
9. Responsibility : exercise, practice, task
10. Judgment : test, evaluation, decision

LANGUAGE USAGE

Past Perfect

A. Study this example situation:

I went to a party last week. Tom went to the party too. Tom went home at 10:30. So,

when I arrived at 11:00, Tom wasn’t there. When I arrived at the party, Tom wasn’t

there. He had gone home.

This is the past perfect (simple) tense:

I/he/she (etc) had (= I’d / he’d / she’d. etc.) gone

I/he/she (etc.) hadn’t gone

Had you/he/she (etc.) gone?

We form the past perfect with had + the past participle (gone/opened/written, etc).

Sometimes we talk about something that happened in the past:

 I arrived at the party.

We use the past perfect to say that something had already happened before this time:

 When I arrived at the party, Tom had already gone home.

Here are some more examples:

40
  When I got home, I found that someone had broken into my apartment and

had stolen my fur coat.

 George didn’t want to come to the movies with us because he had already

seen the film twice.

 It was my first time in an airplane. I was very nervous because I had never

flown before.

B. The past perfect (I had done) is the past of the present perfect (I have done).

Compare these situation:

Present Past

I’m not hungry. I’ve just had lunch. I wasn’t hungry. I’d just had lunch.

The house is dirty. We haven’t The house was dirty. We hadn’t

cleaned it for weeks. cleaned it for weeks.

C. Compare the past perfect (I had done) and the simple past (I did):

 “Was Tom there when you arrived?” “No, he had already gone home.”

But: “Was Tom there when you arrived?” “Yes, but he went home soon

afterward.”

 Ann wasn’t home when I called her. She was at work.

But: Ann had just gotten home when I called her. She had been at work.

Exercises:

A. Complete these sentences using the verbs in parentheses ( . . . ). You went back to

your home town after many years, and you found that many things were different.

Example: Most of my friends were no longer there. They ………

had left (leave)
.
1. My best friend, Kevin, was no longer there. He ………….. (go) away.

2. The local movie theater was no longer open. It …………... (close) down.

3. Mr. Johnson was no longer alive. He …………… (die).

41
4. I didn’t recognize Mrs. Johnson. She …………….. (change) a lot.

5. Bill no longer had his car. He …………… (sell) it.

B. Make sentences using the words in parentheses.

Example: I wasn’t hungry. (I / just / have / lunch) I had just had lunch.
……………………..
1. Tom wasn’t home when I arrived. (he / just / go / out) ………………..

2. We arrived at the theater late. (the movie / already / begin) …………..

3. They weren’t eating when I went to see them. (they / just / finish / their

dinner) ……………………

4. I invited Ann to dinner last night, but she couldn’t come. (she / already / make

/ plans / to do something else) ……………….

5. I was very pleased to see Diane again after such a long time. (I /not / see/ her

for five years) ………………..

42
 UNIT 8

STOCK EXCHANGES

A STOCK EXCHANGE is a voluntary organization of individuals formed to provide

an institutional setting in which stock can be bought and sold. The exchange

formulates certain rules to govern trading activity on the exchange, and it enforces

these rules on its membership.

Most stock exchange are nonprofit corporations that exist to serve their members. To

become a member of a stock exchange, an individual must purchase one of a limited

number of memberships-called “seats” – on the exchange. Only exchange members,

or their representatives, are allowed to trade on the exchange. In this sense, the

members have a monopoly, because all orders to buy or sell securities on a given

exchange must flow through an exchange member. Memberships on stock exchange

can be bought and sold like other assets.

Each exchange regulates the places and times at which trading may occur. Trading is

allowed only on the TRADING FLOOR of each exchange, an actual physical

location. The floor of the exchange is equipped with a vast array of electronic

communications equipment, some of which is used to convey buy and sell orders to

the floor and to confirm trades with important information about world and national

events as well as business developments. Any change in these factors will be swiftly

reflected in share prices.

Some of the people working on the trading floor are employed by the exchange;

others trade stock for themselves. But a large number of those working on the trading

43
floor are brokers. A BROKER receives buy and sell orders from nonexchange

members and executes these orders. In return, the broker earns a commission from the

person who has placed the order. Table 22.1 lists some of the largest brokerage firms

in the United States and shows how the securities industry has changed in the last few

years.

NEW YORK STOCK EXCHANGE:

For many people, the stock market is simply the New York Stock Exchange (NYSE).

Located at the corner of all U.S. stock exchanges is the model for exchanges world

wide. Over 80 percent of all shares traded on U.S. exchanges are traded at the NYSE,

with an average of 160 million shares changing hands each day.

Table 22.1 Top 10 Brokerage firms in the United States, 1985 and 1990

1985 1990

Firm (ranked Capital Firm (ranked Capital

by capital) (millions of $) by capital) (millions of $)

Merrill Lynch $2,214.6 Merrill Lynch $10,048.4

Shearson Lehman Shearson Lehman

Brothers 1,896.0 Hutton 6,152.0

Salomon Brothers 1,576.8 Goldman Sachs 4,018.0

Dean Witter

Financial Services 1,237.0 Salomon Brothers 3,619.8

E.F. Hutton Group 1,019.9 Morgan Stanley Group 2,648.0

Goldman Sachs 859.0 First Boston 1,568.2

First Boston 658.9 Paine Webber Group 1,523.1

Prudental-Bache

44
 Securities 617.8 Bear Stearns 1,444.1

Paine Webber Group 564.4 Dean Witter Reynolds 1,429,0

Drexel Burnham Prudental-Bache

Lambert Group 561.2 Securities 1,322.1

Only firms meeting certain minimum requirements in terms of earning power, total

value of outstanding stock, and number of shareholders are eligible for listing on the

NYSE. About 2,300 listings, including AT&T, Alcoa, Avon, Clorox, K mart, and

Texaco, are traded on the NYSE. Exxon Corporation’s common shares have the

largest market value, $94 billion. NYSE trading volume in 1990 was nearly 40 billion

shares.

The NYSE currently has 1,366 seats; their value fluctuates widely. In 1990, NYSE

seats sold for a low of $250,000 and a high of $480,000.

THE AMERICAN STOCK EXCHANGE :

The second-largest US stock exchange, the American Stock Exchange (ASE or

AMEX). Also located in New York City, accounts for 5 percent of the shares traded

on U.S. exchanges. Like the NYSE, the AMEX has minimum requirements for

listings, but the AMEX minimums are less stringent than those of the NYSE. The

minimum number of publicly held shares, for example, is 500,000 for the AMEX

versus 1.1 million shares for listing on the NYSE. The AMEX currently list more than

1,000 stocks, including the stock of corporations based in Africa, Canada, Denmark,

France, Israel, Greece, the Netherlands, and Bermuda. In 1990, stock from foreign

countries made up 27 percent of the total market value traded on the American Stock

45
Exchange. As firms grow, they often transfer their listings from the AMEX to the

NYSE. Well-known companies with stocks listed on the AMEX include Lines, Inc.,

and Sotheby’s Holdings.

REGIONAL STOCK EXCHANGES :

The regional stock exchanges, established long before today’s modern

communications became available, were organized to meet the needs of investors in

places other than New York. Among the seven regional exchanges, the largest are the

Midwest Stock Exchange in Chicago and the Pacific Stock Exchange in Los Angeles

and San Francisco. Other regional exchanges are the Philadelphia Stock Exchange

and exchanges in Boston, Cincinnati, and Spokane. The stocks of many corporations

are listed on both a regional exchange and either the NYSE or AMEX.

FOREIGN STOCK EXCHANGES:

As recently as 1980, the U.S. stock market accounted for over half the market value of

the world market. In 1975, for example, the equity of IBM alone was greater than the

national market equities of all but four countries! As Figure 22.1 shows, however,

stock market activities have begun to shift. The market value of shares listed on stock

exchanges out side the United States is growing. And, as Table 22.2 shows, the annual

dollar value of trades on exchanges in London, Tokyo, and other cities is in the

trillions of dollars. In number of stocks listed, the London exchange exceeds even the

NYSE. In market value, transactions on the United States exchanges are second to

those on Japanese stock exchanges.

Foreign stock exchanges have become increasingly important to U.S. port folio

managers. Foreign exchanges allow investors to DIVERSIFY – that is, to spread

46
inevitable funds among a variety of investments in order to reduce risk. Astute

managers have also been able to achieve higher returns by investing internationally.

Table 22.2 Volume of Stock Trading in International Stock Exchanges, 1990

Stock Exchange Volume of Trading

(billions of U.S. $)

New York (U.S.) Stock Exchange $1,325.3

Tokyo (Japan) Stock Exchange 1,313.2

London (UK) Stock Exchange 544.3

Federal German Stock Exchange 539.4

Osaka (Japan) Stock Exchange 249.3

Zurich (Switzerland) Stock Exchange 187.5

Paris (France) Stock Exchange 129.0

Toronto (Canada) Stock Exchange 54.9

American (U.S.) Stock Exchange 37.7

THE OVER-THE COUNTER MARKET :

Only about 4,000 stock issues are listed on the organize stock exchanges. But nearly

28,000 issues are traded in the over-the-counter (OTC) market. Newer firms are often

listed on the OTC. T. Rowe Price Associates, Mack Trucks, Apple Computer, and

Yellow Freight are among the more widely known assured trading there.

The market value of OTC listings is much smaller than that of the organized

exchanges, however. NYSE volume was $1.32 trillion in 1990, compared to $452

billion for the OTC. The OTC market got its name because early its participants were

somewhat like retailers. They kept a supply of shares on hand and sold them to buyers

across the counter, just like a piece of cloth in a general store.

47
Even today, the OTC market has no trading floor. Instead, it is made up of many

people in many locations that are linked by electronic communications, including the

National Association of Securities Dealers Automated Quotation (NASDAQ) system.

The privilege of trading in the OTC market is granted by government securities

regulators and by the National Association of Securities Dealers (NSAD) Traders

must meet certain Standards for finical soundness and pass qualification exams.

Figure 22.2 shows the number of shares trades on the various exchanges.

Figure 22.2 World Figure 22.2 Millions

Stock Markets: of Shares of Stock
Stock Values, Traded on U.S. Stock
1980 and 1991 Exchanges
QUESTIONS
Stock markets: in The number of shares

countries around traded on U.S. stock

the world are exchanges has

1.becoming
What ismore
a stock Exchange ? Explain briefly ? increased steadily

2.active
Whatin must over the last
listingan individual do to become a member of a Stock Exchange ? decade.

3.stocks
What is the floor of the exchange equipped with ?
available

4.forWhat is the model exchanges world wide ?

trading

5. What kind of firms are eligible for listing on the NYSE ?

6. Explain what is meant by the regional stock exchange !

7. Explain the following statement: “Foreign Stock Exchanges have become

increasingly important to U.S. portfolio managers.”

8. How did OTC market get its name ? How did the keep a supply of shares ?

9. How is OTC made up & linked ?

10. What do NASDAQ & NASD stand for ?

48
Language Usage

OVERVIEW OF BASIC VERB FORMS USED IN

CONDITIONAL SENTENCES
SITUATION IF-CLAUSE RESULT CLAUSE EXAMPLES

If I have enough time, I watch TV

Simple present
True in the simple every evening.
present/future present If I have enough time, I will watch
Will + simple form
TV later on tonight.
Untrue in the If I had enough time, I would watch
simple past
present/future Would + simple form TV now or later on.

If I had had enough time, I would

Untrue in the past past perfect Would have + past
have watched TV yesterday
participle

Structure Exercise

Combine these pairs of sentences by means of if, in order to make new conditional

sentences. It may be necessary to change some words in some of the sentences in

order to make complete sense.

a. We have a car. / We can be much more mobile.

b. You want to get a new house. / You must earn a lot of money.

c. You will complete the work more rapidly. / You all work together on it.

d. We buy these goods this week. / We may be able to sell them next week, and

make some extra money.

e. You buy your essential commodities from us. / Perhaps we shall be able to sell

them to you more cheaply than other shops.

f. There is no system of control. / Certain people may decide to build factories in

unsuitable places and employ workers for long hours.

g. They may increase their output. / Their employers provide better working

conditions.

h. We may provide some help now. / You undertake to help us later.

49
 UNIT 9 THE XM COMPANY

International trade takes place when companies either find new markets to sell

their products in foreign countries or find new sources of supply of products in other

countries. Exports and imports combined for the United States equal about 20% of

GNP (gross national product), and the percentage is even higher for most other

countries.

A very important factor in determining which countries will be able to compete in

exporting different products is the cost of production. For example, if steel costs $300

per ton to make in Japan and $400 per ton to make in the United States, then U.S.

customers should buy (import) steel from Japanese companies. By the same

reasoning, if an airplane costs $4 million to build in the United States and $5 million

in Japan, then Japanese customers should buy (import) airplanes from the United

Stated. In this example, the United States produces and exports airplane, while Japan

produces and exports steel. Each country has a comparative advantage in producing

one product relative to the other.

Obviously, countries do not export and import-companies do. A company should

utilize comparative advantage to decide where to produce its products. In the case

below, a U.S.-based company sells many products in several different national

markets. The problem is to choose whether to obtain fertilizer in the United States or

France, and perhaps to consider buying phosphate for resale as well.

The Case

XM Company is a Miami-based corporation involved in buying products from

U.S. manufacturers for sale in Latin American and Caribbean countries. The company

also finds U.S. markets for products imported from both Europe and Latin America.

XM has twelve employees, including the general manager, a marketing vice president,
50
a treasurer/controller, two sales managers, four operations people, and three

secretaries. The firm’s annual sales have run at about $5.7 million during the past

three years, after growing from $200,000 in 1976, the first year of operations. Despite

the various business-cycle problems that have occurred, this small firm has survived

and is looking for ways to expand.

The general manager of XM is reviewing the profitable business that his

company has had from importing fertilizers for central Florida farmers since the mid-

1970s. The French supplier of XM’s fertilizers (Agricosa) has always shipped high-

quality merchandise, with few delays or other logistical problems. Recently, the

possibility of competition from other supplier has begun to worry the general

manager. Fertilizer sales have been such a dependable part of XM’s total sales that the

does not want to lose that business.

Pricing, however, is becoming a problem. During the second major oil price hike

in 1970-80, raw materials prices rose dramatically, such that XM’s costs tripled by

year-end 1981 to $120 per ton for its medium-grade fertilizer. This price reflects only

the f.o.b. cost of the fertilizer at shipment from the port of Le Havre, France,

Fortunately for XM, demand for fertilizer by the firm’s main customers in central

Florida has remained high, even at the higher prices that XM passes on.

Recently the company has been notified by the U.S. Treasury Department that

fertilizers probably will be added to the list of products valued at the “American

Selling Price” for customs purposes. (Under American Selling Price valuation, the

tariff charged on an imported product is calculated as a percentage of the current U.S.

price, rather than as a percentage of the stated price of the shipment.) Such a policy

could raise the tariff payment significantly, because U.S. prices are about 15 percent

higher than the f.o.b. price from France.

51
 Competitive problems for XM have intensified since another French firm,

Gardinier, set up a phosphate mine and processing facility near Tampa, Florida.

Phosphates are a major component in most kinds of fertilizer. So far, Gardinier has

been exporting the phosphates back to its French fertilizer plant, but it is expected that

the company will soon begin making fertilizers in Florida. Gardinier ranks among the

largest fertilizer producers in the world. At the present time, this French firm sees a

cost of production of phosphates in Florida which undercuts the approximately $20

per ton cost in France by 30 percent. (All of these numbers are from 1981; the French

franc has been devaluing relative to the dollar by about 8 percent per year during the

last eight years.)

The general manager of XM is quite concerned by these developments in his

fertilizer importing business, which constitutes 25 percent of XM’s total sales.

Though no major problems have arisen yet, the future looks rather clouded. Demand

for fertilizer seems likely to remain substantial, but price competition is becoming an

important factor.

COMPREHENSION QUESTIONS

Scanning

Scanning means reading very quickly in order to find key facts or figures that are

contained within a text. Scan the case to determine whether the following statements

are TRUE or FALSE.

______ 1. XM Company is a large corporation located in Miami, Florida.

______ 2. Agricosa supplies XM Company with fertilizer.

______ 3. XM Company has been in operation since 1976

52
______ 4. XM had to pay three times as much for its medium-grade fertilizer in

1981 as it paid in 1980

______ 5. Fertilizers have already been added to the U.S. Treasury Department’s

list of products valued at the “American Selling Price”.

______ 6. Gardinier is selling fertilizer in Florida

______ 7. The general manager of XM is worried about the major competitive

problems that his company is facing now in the fertilizer importing

business.

______ 8. Competition in fertilizer sales in Florida may come eventually from

Gardinier.

Understanding Facts and Figures

The XM Company case presents many figures concerning annual sales, price

increases, tariffs, and costs of production. Check your understanding of the numerical

facts that you read in the case. Scan the case study to find the correct answers to the

following questions.

1. What were the annual sales of the XM Company in 1976? What have their annual

sales been over the past three years?

2. How many people are employees by XM Company?

3. How much did XM have to pay for medium-grade fertilizer after the 1979-80 oil

price increase?

4. Explain what the effect would be of placing fertilizers on the list of products

valued at the “American Selling Price” for customs purposes.

5. What percentage of XM Company’s total sales comes from the fertilizer importing

business?

53
 VOCABULARY DEVELOPMENT

Word Guess

Readers often use contextual clues to help them understand the meaning of

unfamiliar words. By looking at how the unknown word fits into the sentence and by

examining the meaning of surrounding words, a reader can learn to make an educated

guess about the meaning of the unknown word. Work on the valuable reading skill of

guessing the meaning of unknown words by choosing the correct meaning of the

underline words.

1. The U.S. government charges a tariff on imports in order to protect goods

produced in the United States. Typically, the tariff is equal to 20 percent of the

current U.S. price for the product.

a. tax

b. price

c. savings

2. The area around Tampa, Florida, is the site of several important phosphate mines.

Phosphates are a major component of most fertilizers. Gardinier, one of the largest

fertilizer producers in the world, operates a phosphate mine and processing facility

near Tampa.

a. part

b. chemical

c. example

3. Demand for phosphates is likely to remain substantial for the next decade, since

fertilizer is an essential part of the agricultural industry worldwide.

a. small

b. superficial

54
 c. quite high

4. Gardinier ranks among the largest producers of fertilizer in the world. With its

mine and processing plant in Florida, this French firm takes advantage of the

lower cost of production of phosphates in the United States.

a. sells to

b. is one of the

c. counts as its customers

5. The major oil price hike in 1979-80 caused the price of importing raw materials to

rise by 200 percent. As a result, XM’s costs tripled by the end of 1981.

a. devaluation

b. increase

c. support

Language Usage

CONJUNCTIONS

Conjunction: kata yang digunakan untuk menghubungkan kata dengan kata, frasa

dengan frasa, klausa dengan klausa, yang memiliki grammatical function yang

sama.

 Merilyn and Susy are attending a seminar on a new cosmetic.

Noun + Noun

 James spoke angrily and bitterly.

Adverb and adverb

Exercise 1: Underline the parallel structure in each sentence, and give the

pattern used, as in the example.

1. That rich young man is extremely kind and generous.

Adjective + and + Adjective

55
2. He received a pocket calculator and a wool sweater for his birthday.

3. I looked for my book but I couldn’t find it.

4. I hope to go to that university and study with Dr. Anita

5. He will leave at eight and arrive at nine.

Exercise 2: Find the conjunctions in paragraph two of the above reading, and do

the same way as exercise 1.

PARALLEL STRUCTURE

Fungsi Conjunction seperti di atas disebut Parallel Structure yang berupa kata and,

but, or, nor. Parallel Structure ini dapat menghilangkan bagian kalimat yang sama,

sehingga dapat membuat kalimat yang lebih efisien.

Contoh: Please talk about it to my father.

Please talk about it to my mother.

* Please talk about it to my father and mother.

Exercise 3: Combine the sentences into one concise sentence. No. 1 and 5 are the

examples for the next sentences.

1. Mary opened the door. Mary greeted her guests.

* Mary opened the door and greeted her guests.

2. Mary is opening the door. Mary is greeting her guests.

3. Mary will open the door. Mary will greet her guests.

4. Alice is kind. Alice is generous. Alice is trustworthy.

5. I like coffee. I don’t like tea.

* I like coffee but not tea.

6. I have met his mother. I haven’t met his father.

56
 7. Jake would like to live in the village.He wouldn’t like to live in a big city.

PAIRED CONJUNCTIONS

Paired Conjunction merupakan conjunction yang dipakai bersama dengan kata yang

lain. Yang termasuk Paired Conjunction adalah:

Both …. And …..

Not only … but (also)….

Either … or …..

Neither … nor …..

Catatan: Subyek yang paling dekat dengan kata kerja adalah yang menentukan

apakah kata kerjanya singular atau plural.Ini berlaku untuk paired conjunction di

atas selain Both … and ….

Contoh: (Perhatikan kata kerjanya)

1. Both my brother and sister are working for Richfield Bank.

2. a. Not only my sister but (also) my friends come in.

b. Not only my sister but (also) my friend comes in.

3. a. Either mother or her friend was disappointed.

b. Either mother or her friends were disappointed.

4. a. Neither you nor she is writing the story .

b. Neither you nor they are writing the story.

Exercise 4: Supply is or are in the following

1. Both the teacher and the student _______here.

2. Neither the teacher nor the student _______here.

3. Not only the teacher but also the students _______here.

57
4. Not only the teacher but also the student _______here.

5. Either the students or the teacher _______planning to come.

6. Either the teacher or the students’ _______ planning to come.

Vocabulary Building

You can increase your business vocabulary by learning to recognize the

multiple forms of a word stem. For example, if you understand the word

competition, you should recognize the related forms competitive, to compete, and

competitively. Knowing how the word acts in the sentence will give you an even

clearer understanding of its meaning. Fill in the chart with the appropriate forms

of the commonly used business terms. Use a dictionary to check your answers, or

exchange work with a partner to check his or her work.

Noun Verb Adjective Adverb

Competition

supplier (none) (none)

logistics (none)

shipment (none)

devalue (none) (none)

Significantly

intensify

58
 UNIT 10 PROTECTING AGAINST EXCHANGE RISK

Foreign-exchange risk is a major concern to managers of companies involved in

international business. The risk exists whenever the company has to make or accept a

payment in a foreign currency. The risk exists because the number of dollars (for U.S. firms)

or pesos (for Mexican firms) or yen (for Japanese firms) in a contract may vary if the account

is payable or receivable in foreign currency and the exchange rate changes. For example, a

contract by XM Company calls for payment of 1 million yen in 180 days to buy computer

chips. Today, the exchange rate is 200 yen per dollar, so the contract would cost $5000 if paid

today. If the dollar devalues to a rate of 167 yen per dollar in 180 days, the cost of the

contract would be $6000 in 180 days. We cannot know the dollar cost of the contract for sure

until time passes and the new exchange rate is known. The possible devaluation of the dollar

creates an exchange-rate risk that the firm would like to avoid.

Exchange risk can be avoided by doing business only in the company’s domestic

currency. This possibility often does not exist, because the foreign customer or supplier has

other choices of suppliers or customers who will deal in the foreign currency. U.S. firms

doing business in Germany usually have to work in Germany marks (MD) rather than dollars.

Similarly, if a U.S. supplier in Brazil will not accept local currency (cruzeiros, abbreviated

Cr$*) for a sale, then the Brazilian buyer may find a German or Japanese firm that will. Thus,

this strategy of risk avoidance often does not work.

Another strategy to cope with foreign-exchange risk is to use a forward contract. A

forward contract is an agreement with a bank to exchange one currency for another at some

future date at a price chosen today. Most multinational banks offer forward contracts to

clients using the major trading currencies (such as the U.S. dollar, German mark, Swiss franc,

French franc, British pound, and Canadian dollar). In the example above, the XM Company

can ask a bank for a forward contract to buy 1 million yen in 180 days. This contract would

enable XM to guarantee that it will have the 1 million yen needed to pay for the computer

chips in 180 days at known price, the forward rate. If the forward rate is 182 yen per dollar,

59
then XM knows that the cost will be $5495 in 180 days. By using a forward contract with a

bank, XM avoids exchange risk; the number of dollars to be paid for the computer chips is

known from the start.

A third way to avoid exchange risk is to attempt to balance the company’s accounts

payable and accounts receivable in each currency used. For example, the company may try to

make a sale in the same currency in which it already has an account payable. That way, when

the payment is made, a receipt in the same currency will be obtained, approximately canceling

the risk that existed. In a previous case, the XM Company bought fertilizer from a French

company. In order to eliminate the exchange risk due to having an account payable in French

francs. XM could attempt to find French customers for some product that it would export

from the United States to France. XM would receive French francs for this sale, to balance the

francs payable to its fertilizer supplier.

Several other methods are available to cope with exchange risk. Again, in the event that

the firm has an account payable in foreign exchange, it may look for some other asset such as

a bank deposit or another investment that is payable at the same date and in the same currency

as the account payable for the same amount of money. Or, if the firm has an account

receivable in some currency, it can take out a loan for the same time period and amount of

money in that currency. In every case, the goal is to find some asset (to cancel a liability) or

some liability (to cancel an asset) denominated in the same currency with the same maturity

date. In this may, exchange risk can be avoided. The process of protecting against exchange-

rate risk is called hedging or covering.

The Case

The financial manager of XM Company in Miami has been bothered by a relatively low

return (in dollars) on his export sales to Brazil since 1978. XM’s sales office in Sao Paulo has

experienced a healthy growth of revenues at about 15 percent per year, though local-currency

(cruzeiro) profits have only grown by 12 percent per year. (Cruzeiro profits were Cr$500

million in 1983.) Also, the cruzeiro has devalued substantially relative to the dollar. At the

60
end of 1978 the exchange rate was Cr$21 = US$1, but in January of 1984 the rate was

Cr$1200 = US$1, and the trend seemed likely to continue.

Having some familiarity with foreign-exchange markets, the financial manager has

decided to cover his next contract (that is, protect it against exchange-rate risk), which is a

sale of Cr$30 million of tractor parts, payable in 180 days, to a firm in Sao Paulo. Despite

calls to several banks in Miami and Brazil, he could not obtain a forward contract for

cruzeiros. He did, however, discover that a local-currency loan was available to cover the full

receivable at a cost of 105 percent per year. At this time, he was not certain whether any other

cruzeiro liability was available to create the hedge.

In a separate transaction, a purchase of DM 250,000 worth of agricultural chemicals

will be imported from the German company Bayer Chemical in 120 days. The financial

manager wants to plan now to have sufficient funds available to pay this bill on time. He

knows that the spot exchange rate is DM1 = $0.416, and that the forward rate for a 120-day

contract is DM1 = $0.421 in Miami. Considering “riskless” securities in which to hold the

funds until needed, the manager finds that 120-day U.S. Treasury bills offer 8.5 percent per

year, while West German Central Bank bills offer 7.1 percent per year. The manager was

satisfied with this information as a basis for making his decision to hedge the risk in German

marks.

As he reflects on the foreign-exchange problem in each of the transactions above, XM’s

financial manager sees a serious inefficiency in his piecemeal approach to risk avoidance. At

present, however, he sees no easy solution.

COMPREHENSION QUESTIONS

Scanning

Read the following statements and mark them TRUE or FALSE.

Reword the false statements so that they are true. Scan the case description to confirm your

answers.

_______ 1. A Japanese company can avoid exchange risk by dealing only in yen.

61
 _______ 2. Managers of companies that are engaged in international business must

cope with foreign-exchange risk

U.S. FOREIGN EXCHANGE MARKETS

_______ 3. Foreign-exchange risk exists when a contract is payable or receivable

in a foreign currency and the exchange rate for that currency is variable.

_______ 4. Company managers usually know how much the rate of exchange for

a foreign currency will vary over a period of time.

_______ 5. A forward contract is an agreement with a bank to exchange one

currency for another at some time in the future at the spot rate of exchange.

Read for Understanding of Key Concepts

Answer the following questions on the basis of your reading of the case description. Scan the

text to find the information that you need.

1. Explain how a company can use a forward contract to avoid exchange-rate risk.

2. Give examples of how a company can avoid exchange risk by balancing accounts payable

with accounts receivable.

3. What is hedging? Why do companies do it?

4. Is the sale of tractor parts to a firm in Sao Paulo an account receivable or an account

payable for the XM Company?

5. Is the purchase of agricultural chemicals from the Bayer Company in West Germany an

account payable or an account receivable for the XM Company?

6. What is the trend in the exchange rate of U.S. dollars for Brazilian cruzeiros?

62
VOCABULARY DEVELOPMENT

Sentence Completion

Demonstrate your understanding of the underline business phrases by completing the

sentences below with your own words. Work with a partner and take turns doing the exercise.

Refer to the case description for clarification of any terms that are unfamiliar.

1. An import-export company can avoid foreign-exchange risk by ……

2. One of the reasons that a company buys riskless securities is ……

3. A forward contract guarantees that ……

4. Hedging against foreign-exchange risk means ……

5. The accounts payable of a company often include ……

6. In a forward contract, the forward rate is ……

7. The forward rate is typically _______ than the spot exchange rate because …

Matching

The business terms below are used in the case description. Match the terms with their correct

meanings. Refer to the case description when you are in doubt about the meanings of any

words. Compare your answers with those of another student and discuss any discrepancies.

______ 1. Foreign exchange a. income from an investment

______ 2. Maturity date b. account receivable

______ 3. Revenue c. covering

______ 4. Liability d. when payment is due

______ 5. Asset e. trade in currencies

______ 6. Hedging f. possibility of losing money

______ 7. Risk g. account payable

______ 8. Riskless security h. U.S. Treasury bill

63
 Business Terminology; Assets and Liabilities

Decide whether the following financial terms refer to an ASSET or a LIABILITY.

Remember that an asset is a balance-sheet item such as cash, accounts receivable, inventories,

and equipment. A liability represents the obligations of a firm, such as accounts payable,

notes payable, long-term debt, and taxes due.

1. 30,000 tractors _______

2. a loan of $400,000 _______

3. a bank deposit of DM6,000,000 _______

4. $1,000 U.S. Treasury bill _______

5. a forward contract to pay 10,000 yen in 120 days _______

6. a contract to buy DM20,000 worth of chemicals _______

Currencies

Name the local currency of the following countries.

1. France _______

2. Brazil _______

3. West Germany _______

4. United States _______

5. Japan _______

6. Great Britain _______

7. Mexico _______

8. Saudi Arabia _______

9. Spain _______

10. Switzerland _______

Language Usage

64
 Adjective clauses

Relative Clauses (who, whom, which, that, whose) are used as noun modifiers

A. Who, which and that are for subject pronouns

- I thanked the woman I thanked the woman

- She helped me who helped me

-The book is mine The book which / that is on

- It is on the table the table is mine

B. Who (m). which and that are for object pronouns

- I saw the man The man whom, who, that I saw

- The man was Mr. Brown was Mr. Brown

C. Whose is used for possessive pronouns

- I save my money at the bank I save my money at the bank

- Its liquidity is good whose liquidity is good

IV. Exercise

Combine the following pairs of sentences that adjective clauses are found !

1. The girl is happy. She won the race.

2. English is important. We study is every day.

3. The book was good. I read it last week

4. I apologized to the women. I spilled her coffee.

5. I live in a dormitory. I like its residents very much.

###

65
 REFERENCE

Azar, Betty Scrampfer. 2002. Undestanding and Using English Grammar.

New York : Longman.
Brieger, Nick& Jeremy Comfort. 1994. Early Business Contacts. UK : Prentice
Hall
Grosse E., Robert & Groesse Uber Christine. 1988. Case Studies in
International Business. London : Prentice Hall.
Mas`ud Fuad. 1987. Essentials of English Grammar. Yogyakarta : BPFE
Yogyakarta.
McArthur, Tom. 1975. A Rapid Course in English for Students of Economics.
London : Oxford University Press.
Norman, Susan. 1985. Export English. Jakarta : Gramedia

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