Business English and Business Correspondence

1. Костанайский государственный университет им. А Байтурсынова СамамбетМензадаКалмагамбеткызы Business English and business correspondence

2. 1.The economy GDP growth for different countries Gross domestic product (GDP) measures the size of a country's economy. It represents the total value of all goods and services produced over a specific time period. Growth in GDP is one of the primary indicators used to gauge (= measure) the health of a country's economy. Usually, GDP is expressed as a comparison to the previous quarter or year. Government trade policy The two poles of government policy are liberalization and protectionism. * 'Liberalization' is associated with free markets, open borders, deregulation and the free movement of capital around the world. 'Protectionism' is associated with government intervention, subsidies, quotas and tariffs, and restrictions on the movement of capital. *National governments do have some genuine choices here, even if they are constrained by the policy of their regional trading bloc (eg the EU, NAFTA, ASEAN). In the end most countries have a mixed economy which is somewhere between the two extremes. Generally speaking, free markets promote growth in the world economy, and protected markets slow down the process (although they may have a beneficial effect on particular industries inside a country).

3. Consumer confidence If consumers are confident about tomorrow, they will spend more. The main factors affecting consumer confidence are the level of unemployment - if people's jobs are at risk, or they don't have a job, they will spend less - and house prices - if people's houses are worth more than they paid for them, they feel rich and will spend more freely. Interest rates Interest rates are set by Central Banks. When interest rates are low, consumers and businesses can borrow money cheaply and there is a stimulus to the economy. But the cheap credit also causes inflation and too much liquidity in the system. This liquidity leads to bubbles in stock markets, housing markets, etc. When the Central Bank sees the need to control inflation and cool growth a little, it raises interest rates. Exchange rates Currencies fluctuate against each other: the euro against the dollar, the yen against the yuan. This is due to many complex factors such as the underlying strength of the economy, interest rate differentials and speculation. Having a strong currency makes imports cheap for domestic consumers, but hurts exporters (whose products become more expensive overseas). The business cycle Economies go through cycles of growth and contraction.

4. 2. The business cycle History shows that there is a business cycle that repeats again and again, although of course the details vary each time. Look at the diagram below. The outer circle is the cycle of economic expansion and contraction. The next circle inside shows some sectors of the economy that tend to do well at particular times during this cycle. The circle inside that shows interest rates and inflation. Finally, the inner circle shows the stock market cycle.

6. Growth • Let's go round the diagram, starting at twelve o'clock. This point marks the end of weakness in the economy and the early signs of growth. What has caused these green shoots? The clue is interest rates, which bottomed out around eleven o'clock. Low interest rates mean cheap borrowing for individuals and companies. Amongst the quickest sectors to respond are consumer discretionary (eg restaurants, leisure, travel) and technology. • Once there are early signs of growth, transportation picks up (more goods are being shipped), and industry spends more on capital goods (eg machinery). During this period, inflation starts to rise, and so bonds suffer. Bonds pay a fixed rate of interest to their bondholders, and the value of this interest is eroded over time as inflationgoes up. The peak of the cycle • All good things must come to an end. It's six o'clock on the diagram. By now inflation has become a problem, and Central Banks have raised interest rates to deal with it. That means that credit is tight, and borrowing is expensive. The stock market recognizes that the end is coming, and peaks just before the final peak in the economy. Investors now switch to more defensive stocks like consumer staples (eg food, household products) and utilities.

7. Contraction • Now it's seven o'clock and we've entered the period of contraction. Stock markets are falling. But Central Banks see the danger and are lowering interest rates, to encourage spending and avoid a recession. Bonds respond positively to the drop in rates, and they also benefit from a 'flight to safety' effect as investors become cautious about stocks. The bottom of the cycle • Eventually, financials start to recover as they anticipate more borrowing, and then the general stock market finds a bottom about six to nine months in advance of an upturn in the real economy. Just like at the top of the cycle, the market seems to know that a turn in the real economy is coming. Now the economy is starting to show signs of strength and the whole cycle repeats again.

8. 3. International trade Deciding to export • Why export? The two most important reasons are likely to be: To increase sales and revenue. Exporting will allow you to take advantage of any under-used capacity, increase production, reduce unit costs through economies of scale and increase profits if things go well. To diversify. Relying on just your own domestic market is risky. Selling to other countries allows you to spread the risk. But before deciding to export there is a lot of research to be done on the foreign market: • Background: economic situation, political stability/ currency risk. • Market size and likely product demand. • Competition: similar products already in the market. • Distribution channels: agents (who act on your behalf and receive a commission, but don't buy goods on their own account), or distributors (who actually purchase goods from you for resale, like a wholesaler). • Promotional material: sales and support material needed in the local language. • Customer service: procedures for enquiries, complaints, warranty claims, servicing, etc. • Legal requirements: technical, safety and environmentalstandards.

9. The first step in exporting is likely to involve an intermediary (eg local agent, distributor). They will have local knowledge and contacts in the unfamiliar market. Tf things go well, the exporter may then decide to establish its own presence in the foreign market such as setting up a sales office and warehouse. This allows direct contact with customers, faster delivery and more control of the local market. • Two key issues for an exporter are a) the method of payment - see the table below - and b) who pays for transportation. This latter issue is covered in the contract by specifying the relevant Incoterm {International Commercial Term) for that particular consignment (= quantity of goods shipped at the same time).

10. 3. FINANCING INTERNATIONAL TRADE Cash-in-advance (Pre-payment) The importer pays the invoice in advance, before shipment. Where they only pay a part in advance, it's called a 'down payment' Letter of credit (L/C) One bank guarantees payment to another bank. The importer pays when the exporter presents certain listed documents to their bank. Typical documents needed are; transportation documents (eg bill of lading), insurance documents, commercial documents (eg invoice). Documentary collection A cheaper variation of an L/C. The two banks make no guarantees, but simply handle the exchange of documents.

11. Open account The supplier ships the goods, and the importer pays later, according to the terms of the contract. This is more risky, and is only used if the importer has established a good credit history. Consignment purchase The importer receives the goods and holds them in stock, but only pays for them after they have been sold to the end users.

12. Setting up and growing a business Initial idea • Someone has an idea for a new business (a 'start-up'). Maybe they spot a gap in the market, or maybe they have an idea that is similar to existing offers, but with a competitive edge. Potential sources of finance for this new business include self-funding, backers such as friends and family members, a bank loan, and a venture capital firm. • A bank will want some sort of security in case the loan is not repaid, and sometimes the person's house is offered as collateral. The fourth option, venture capital (VC), is attractive for businesses with a high profit potential in the medium term, but high start-up costs. A VC company will offer funds and take on the risk of the business failing, but in exchange will want a large number of shares. They aim to sell these later, when the business goes public. • When financing is in place, the business is registered as a legal entity: sole trader, partnership, limited company, etc. Early months and growth phase • Now the business can start trading. The risk of failure in the first two years is very high. Often the problem isn't sales, but cash flow: the company has to wait for its invoices to be paid, and meanwhile the debts are piling up. The bank will only extend its line of credit up to a point. • But hopefully the business achieves a critical mass of customers, and establishes itself in the marketplace. It enters a growth phase. This early growth tends to be organic - turnover increases, the company employs more staff, it develops a supply network, etc. The majority of small companies just continue in this way - growing or shrinking year by year depending on their managerial skills and general market conditions.

13. Selling the business Cause: behaviour of some employeesHowever, there are other possibilities. The founder of the business may decide to sell the business as a going concern. They might sell to a competitor, or to a company wanting to expand into that market. The buyers here are looking to grow through a strategy of acquisitions (- takeovers), an alternative to the strategy of organic growth. IPO Another possibility is that the founders may decide to go public (= float/list on the stock exchange). Here, they sell their original privately-held shares at an IPO (initial public offering). This brings in a huge amount of money, some going directly to the owners as reward for their hard work, the rest going back into the business as reinvestment.

14. TEN REASONS WHY A NEW BUSINESS CAN FAIL 1. Poor initial market research Cause: Starting a business with a good idea, some money and a lot of enthusiasm - but no serious research Solution: Take time to research the market thoroughly before you start trading 2 Cash flow problems Cause: buying too much stock, customers paying late or not at all, suppliers needing to be paid on time Solution: produce realistic cash flow forecasts and pay strict attention to budgets 3 Failure to listen to customers Cause: Sticking with your own original ideas for too long Solution: Actively seek the views of customers, and act on what they say 4 Bad business location Cause: false economy - a cheap lease in the wrong is neighbourhood Solution: remember that accessibility for customers is 5 Ineffective marketing Cause: thinking that a good product will sell itself Solution: be creative, constantly review the marketing plan

15. 6 Overexpansion Cause: being too ambitious Solution: be realistic 7 Overspending Cause: spending your seed money too soon Solution: planning, keeping some cash in reserve 8 Poor customer service Cause: behaviour of some employees Solution: training, monitoring, company culture 9 Underestimating the competition Cause: assuming that you have customer loyalty Solution: watch competitors closely 10 Failure to change Cause: complacency after initial success, lack of innovation Solution: be flexible, recognize opportunities, adapt

16. 5. Company types and corporate governance Company types • In law, there are various types of business entity. For each one there are different legal arrangements to register the company, different requirements for presenting accounts, etc. The main business types are; • Sole trader (UK) / Sole proprietorship (US) • A single person owns and operates a business. Legally, the business has no separate existence from its owner (proprietor). This means that all the debts of the business are the debts of the owner. • Partnership (UK and US) • Two or more people work together and share the risks and profits. Just like a sole proprietor, the partners are fully liable for (- responsible for) any debts the business has. This is referred to in law as 'unlimited liability'. • Company (US and UK) / Corporation (US) • The business is a legal entity that is separate from its owners - the shareholders. The owners are not fully liable for the debts of the business. Instead, their liability (= potential risk) is restricted to their share capital. This is the amount of cash that they have contributed to the company. This is referred to in law as 'limited liability'. • There are two main types of companies: • Private company: the shares (AmE stocks) are private in the sense that they cannot be bought by members of the public. The vast majority of companies fall into this category. They're often smaller companies, with shares held by a few business associates or family members. Public company: the shares are openly traded on a public stock exchange. These are the large, often well-known businesses. The word 'public' should not be confused with 'state-owned'. A 'state-owned enterprise' (SOE) is owned by the government.

17. The Board Public companies are controlled by a board of directors ('the Board'), elected by the shareholders. Not all Boards are fully independent, but in general their role is to: • Set long-term strategy. • Appoint a Chief Executive Officer (CEO) and other • members of the senior management team to run the • company day-to-day. • Ask questions about any short- or medium-term strategy • developed by the CEO, and then support it once they have • agreed. • Oversee the preparation of the financial statements. • Appoint and ensure the independence of the company’s • auditors. • Oversee and manage risk. • Set an annual dividend, Who chooses the Board? In theory, it's the shareholders. At the Annual General Meeting (AmE Annual Meeting of Stockholders) the shareholders can question Board membersvote to accept or reject the dividend, vote on replacements for retiring Board members, etc. But, in practice, the situation may be different. In particular, most shares are held by large institutions, and these may simply sell their stake if they aren't happy, instead of trying to change the Board. In reality many Board members are chosen by the CEO and the shareholders simply approve these members.

18. Corporate governance

19. Corporate governance This whole issue of the role of the Board, how senior managers are responsible to shareholders, and how the company is run, is referred to as 'corporate governance'. Traditionally, different regions of the world have had different models of corporate governance Nowadays this traditional pattern is breaking down, and the situation is more mixed. However, the following basic principles of corporate governance are widely accepted: Respect for the rights of shareholders. A clear definition of the roles and responsibilities of Board members. Integrity and ethical behaviour. Disclosure (- giving full information) and transparency

20. Global issues for the 21st century Geopolitics and the world economy • What big-picture issues are likely to dominate geopolitics and the world economy in the coming decades? Here are some suggestions: • 1 The growth of the BRICs • The big story of the 21st century is the growth of Brazil, Russia, India and China (plus the Middle East). This is certain to translate into increased geopolitical influence for these countries. • The decline of the dollar • One impact of the previous trend is that the dollar will lose its status as the world's reserve currency. Central banks will hold fewer dollars, and oil will be priced in a range of currencies. But what else will happen in the currency area? Will a common Asian or Latin American currency emerge? And what about the internal conflict over the euro - should it be strong to fight inflation or weak to help exporters? • Climate change • Global warming is happening. However, any solution that holds back the progress of developing countries is likely to be resisted. Developing countries can accuse the developed nations of hypocrisy - western countries have already been through their industrial phase and now have the luxury of thinking about sustainable growth. Developing nations don't have this luxury.

21. Global issues for the 21st century • Peak oil • Global oil production is going to peak very soon -there's just not enough left in the ground. So supply is shrinking. Also, developing nations are hungry for oil - for transport, industry, etc. So demand is rising. Put together falling supply and rising demand and you get one thing: much higher prices for the foreseeable future. • Energy security and alternative energy • Some countries have a lot of energy resources, others don't. And if you don't, you have a major geopolitical problem. It's called dependency. Put this issue together with peak oil, and it points in one direction: alternative energy. But some green activists are unrealistic about this - solar, wind, tidal, etc can only meet a fraction of the world's energy needs. The one technology that might make a difference is nuclear. And that, of course, is controversial.

22. Management and business • Managers were asked, 'What do you think will be the key business issues of the 21st century?' Read their replies below. • For me, branding and design are the key issues. Customers can easily find good quality and value-for-money - all our competitors offer this. To survive, you need more than this, you need branding. Without a strong brand, you have no customer Loyalty and no pricing power. And linked to branding is design - customers will pay for design. These are the major battlefields in modern business, not cost or quality. • In our organization, finding and developing talent is going to be a major issue. There's a declining birthrate, and the increased mobility of Labour means that workers can choose where they work and for whom. So talent is going to be in short supply. And that's particularly true for knowledge workers and creatives. We will need to find ways to motivate them and retain them inside our organization.

23. Management and business • In the modern workplace, managing diversity is going to become increasingly complex. We've got issues of gender, ethnicity and age. We try to make equal opportunities work, but we haven't done as well as we'd Like. And now we have new problems of multicultural management across national borders. Imagine the problems when team members from different cuLtural backgrounds hold virtual meetings on the web without the chance to get to know each other in person. • The issue that we talk about more and more these days is CSR - corporate social responsibility. I'm talking about fair trade, the environmental impact of business, the effect on local communities, sustainable development, labour practices and stuff Like that. Campaigns by activists can affect your profits and destroy your brand. • Win many industries a major issue is the threat caused by the • Internet. Basically, if it can be digitized, it can be pirated. The music and software industries have already been hit badly by this, the film industry is next and publishing will follow. • Generally speaking, globalization has been good for business. But now there is a backlash against globalization amongst the public. This is creating political pressures for protectionism and for Local sourcing to protect jobs. For us that means reduced access to world markets and higher costs.