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Dap an sach Porfolio

Financial Economics (Université d'Etat d'Haiti)

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UNIT 1: INTERNATIONAL TRADE

I. Vocabulary
Match up these words and expressions with the definitions below
1. Trade in goods: visible trade (GB) or merchandise trade (US)
2. Trade in services (banking, insurance, tourism, and so on): invisible imports and exports
3. Direct exchanges of goods, without the use of money: alter or counter-trade
4. The difference between what a country receives and pays for its exports and imports of
goods: balance of payments
5. The difference between a country’s total earnings from exports and its total expenditure
on imports: balance of trade
6. The (impossible) situation in which a country is completely self – sufficient and has no
foreign trade: autarky
7. A positive balance of trade or payments: surplus
8. A negative balance of trade or payments: deficit
9. Selling goods abroad at (or below) cost price: dumping
10. Imposing trade barriers in order to restrict imports: protectionism
11. Taxes charged on imports: tariffs
12. Quantitative limits on the import of particular products or commodities: quotas.

1. K 2. H 3. L 4. D 5. G 6. A
7. F 8. B 9. E 10. M 11. I 12. C
II. Reading
Reading 1:Read the text and answer the following questions
1. Why do most economists oppose protectionism?
- Because they think protectionism would prevent countries from raisin their living
standard and income.
2. Why do most governments impose import tariffs and/or quotas?
- Improve balance of trade/payment
- Competing with foreign companies
- Protect strategy industries and infant industries
- Reduce a balance of payment deficit
- Protect against dumping
3. Why were many developing countries for a long time opposed to GATT?
- Because they would industrialize in order to counteract what they saw as a inevitable
fall in commodities pace and to protect the infant industries.
4. Why have many developing countries recently reduced protectionism and increased
their international trade?
- Because of IMF pressure on the obligation to export as much as possible and export
leads to growth.

Reading comprehension tasks

Write question, relating to the text, to which these could be the answer.

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1. What are factors which help countries have an absolute or a comparative

advantage in producing goods?
 Factors of production, most importantly raw materials, but also labor and capital,
climate, economies of scales, and so on.
2. Why does the theory of comparative advantage seem not to explain the
international trade?
 Because it doesn’t explain why the majority of the exports of advanced industrialized
country go to other very similar countries.
3. What is infant industries?
 A recently developed one that has not yet grown to the point where it benefits from
economies of scale, and can be internationally completive.
4. What is the advantage of tariff for government?
 Unlike quotas, they produce revenue.
5. What are the advantages of quotas in quantity of goods?
 Unlike tariffs, you know the maximum quantity of goods that will be imported

Reading 2:
1. What is a structure of production and trade of LCDs? What about MDCs?
- LDCs produce and export primary products and import manufactures goods,
intermediate inputs – durable consumer goods, machinery, transport equipment,
chemical petroleum and so on, while MDCs export what LDCs import and import what
LDCs export.
2. Give three examples of the current reliance of LCDs on primary products for export.
- They were heavily dependent on the production and export of a limited range of primary
commodities (foodstuffs, fuels and industrial raw materials) going mainly to the
developed capitalist economy.
3. What are the arguments which suggest that there were no advantages to be gained by
LCDs from their structure of production and trade?
- Orthodox economists tended to argue that this structure of production and trade was
consistent with the LDCs’ comparative advantage and that they enjoy significant gains
from trade. The critics of this view, however, maintain that the gain from trade were
mostly more likely, for variety of reasons, to be appropriated by the developed capitalist
economies. The unequal exchange thesis espoused by some neo-Marxists, went further
and suggested that trade was actually carried out at the expense of the LDCs, producing
the condition of under development and poverty.
4. Give a definition of the net barter terms of trade.
- The commodity, or net barter, terms of trade are the ratio of the unit price of export to
the unit price of import and the deterioration in the index implies that a given volume of
exports is exchanged for a smaller volume of imports.
III. Exercises
Exercise 1: Replace the underlined words and expressions in the text with the words and
expressions below.
1. Countries = Nations

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2. Raw materials and goods = Commodities

3. Difference between total earnings from visible exports and total expenditure on visible
imports = Balance of trade
4. Difference between total earnings from all exports and total expenditure on all imports =
Balance of payments
5. Direct exchanges of goods without the use of money = Barter or counter-trade
6. The favoring of domestic industries = Protectionism
7. Inputs = Factors of production
8. Weather conditions = Climate
9. Specialization of work into different jobs = Division of labour
10. Savings in unit costs arising from large-scale production = Economies of scale
11. Taxes charged on imports = Tariffs
12. Restrictions on the quality of imports = Quotas
I E B A C K
H D F 10. G 11. M 12. L
Exercise 2:There is a logical connection among three of the four words in each of the
following groups. Which is the odd one out, circle it and explain why?
1. Absolute advantage – barriers – comparative advantage – free trade
2. Autarky – counter trade – invisible trade – visible trade
3. Balance – deficit – dumping – surplus
4. Banking – insurance – merchandise – tourism
5. Comparative advantage – protectionism – quotas – tariffs
6. Non-tariff barriers – normes – quotas – taxes
7. Barter – import substitution – infant industries – tariff barriers
8. Debt – reschedule – protect – subsidize – substitute
9. Liberalize – protect – subsidize – substitute
Exercise 3 :Complete the summary using the list of words, A-K, below.
1. Trade (G)
2. Components (B)
3. Container ships (C)
4. Tariffs (A)
Exercise 4: Which paragraph contains the following information?
1. A suggestion for improving trade in the future
2. The effects of the introduction of electronic delivery
3. The similar cost involved in transporting a product from abroad or from a local supplier
4. The weakening relationship between the value of goods and the cost of their delivery
I F E D
Decide if these statements are true (T) or false (F) or not given (NG)
1. International trade is increasing at a greater rate than the world economy.
2. Cheap labor guarantees effective trade conditions.
3. Japan imports more meat and steel than France.
4. Most countries continue to prefer to trade with nearby nations.
5. Small computer components are manufactured in Germany.

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T F NG T 5.NG
IV. Extension activities
1. Does your country have a trade surplus?
 Yes, in the last two years.
2. Does it have a balance of payments surplus or deficit?
 It has a balance of payments deficit.
3. What are its chief exports?
 Agricultural products, raw materials
4. Which industries or sectors are protected?
 Electricity, clear water, car manufacture.
5. Which do you think should be protected?
 Infant industries
6. Give example of Vietnam, which can apply the theory of comparative advantage in
importing and exporting?
 Vietnam has comparative advantage in producing rice compared to many countries.
Shoes and foot wear products need a huge number of labour which is abundant in
Vietnam, so our industry has a comparative advantage.
7. Does Vietnam gain or loss from trade? Give your explanation.
 Vietnam gains from trade, because we have comparative advantage of agricultural
products to export.
UNIT 2: FOREIGN DIRECT INVESTMENT
I. Vocabulary
1. Define foreign portfolio investment. How does it differ from foreign direct investment?
 Foreign Portfolio Investment (FPI) is the purchase of shares andlong-term debt
obligations form a foreign entity. Portfolio investor do not aim to take control of a
corporation. They can liquidate their investment at market value anytime.
Compared with FDI:
Foreign Direct Investment (FDI) is the establishment of a plant or distribution
network abroad. Investors can acquire part or all of the equity of an existing foreign
corporation either to control or share control over sales, production, and research and
development.
FPI FDI
Method Gainpart or all of ‘equity’, Buying house’s
of an foreign company debentures
Controlling or sharing Seeking profit from
Aim control investment
Long-term commitment or Liquidate the
Liquidity cannot withdraw the investment any time
capital easily
Limitation of Limit up (higher than FDI) Limit down
capital

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2. Foreign direct investment decisions are normally based on clear business strategies.
Name at least three categories that companies are looking for.
 The categories are: raw materials, markets, product efficiency, know-how,…
3. Give some examples of investment incentives. What are they supposed to achieve?
 Examples of investment incentives are: cash grants, lower taxes, accelerated
depreciation, training allowance,… They are supposed to attract foreign investment.
4. What is non-exclusive distributor called? What does this mean?
 It is called multiple-distributor, which means a sales agent who represents for more than
one manufacturer.
5. What are royalty payments?
 It is payment made by a foreign manufacturer to a company that has licensed the
manufacturer to produce its products.
6. Define joint venture.
 It is a subsidiary formed by more than one corporation.
II. Reading
1. When foreign direct investors acquire a company, what do they normally seek to
control?
 They normally seek to control over production, R&D, sales,…
2. In considering foreigninvestment, what is an MNC’s first strategic objective?
 Their first strategic objective is the market for its present or future products. In addition,
they are also raw materials, product efficiency and know-how.
3. What are some financial considerations in making a foreign direct investment?
 They are: interest rates, cash flow projection, sources of working capital …
4. When is a foreign project said to be viable? What is a nonviable project?
 A foreign project is said to be viable when it has a availably reliable access to outside
financing, while a non-viable project has a lower rate of return compared to the project
in the host country.
5. Name two kinds of legislation that foreign investor study closely prior to making an
investment?
 They are: antitrust legislation and labor laws.
6. Why are investment incentives highest in a depressed area?
 Because these areas need to attract foreign investment to solve the problems like low-
income and living standard or unemployment.
7. When a corporation starts to export for the first time, how will it organize its sales?
 It will usually engage distributors who receive a commission on products sold.
8. What is a drawback of licensing or authorizing foreign distribution?
 The drawback of licensing or authorizing foreign distribution is that manufacturer gives
up the control over their product so if licensed product lacks quality, the exporter’s
reputation suffers.
9. If a company does not want complete manufacturing responsibility for a foreign market,
what ownership possibility remains?
 It isthe original manufacturer gives up control over the product so if licensed product
lacks quality, the exporter’s reputation suffers.

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III. Exercises
Exercise 1:Fill in the blank in the sentences below with the correct word or phrase
1. When investors establish a plant overseas, it is called FDI. If they buy shares or long-
term debt obligations, this is called portfolio investment.
2. The amount of cash that remains after a company has paid taxes and other cash
expenses is profit.
3. Rate of return is often measured in terms of profits realized on assets employed.
4. A cash grant is called an investment incentive whose purpose is to support foreign
investment.
5. Prior to making a foreign direct investment, exporters can make a contract with a
distributoror with a foreign manufacturer, who will be engaged to manufacture their
products. For this, the foreign manufacturer pays commission.
Exercise 2:Picture yourself as a corporation president who is about to decide on making a
foreign direct investment. What questions would you ask yourself?
- Which country should I invest into? What is its investment incentives?
- Should I invest in type of joint venture or wholly foreign company? How about the
legislations of that country?
- What am I seeking for in that country? Resources, market or efficiently strategic assets?
UNIT 3: FOREIGN EXCHANGE TRADING
I. Vocabulary
1. What is foreign exchange?
 It is money or currency of foreign country.
2. Explain how the gold standard represented the beginning of a foreign exchange system.
 The value of currencies could, on request of the owner, be converted into gold at a
country’s central bank.
3. Name three functions of a country’s central bank. Who owns it?
 Three functions are: regulating the commercial banks; holding gold and foreign currency
reserves; intervening actively by buying and selling its own currency. Government owns
it.
4. Under a floating exchange rate system, what normally determined the value of
currencies?
 Supply and Demand determined the value of currencies.
5. Under what circumstances is an exchange rate system fixed?
 Buying the currency when it reaches its low point.
Selling the currency when it reaches its high point.
6. What is a spot transaction? When does delivery take place?
 Spot transaction is the currency bought or sold today with delivery two business days
later.
7. On the forward transaction, when is the payment made? When is the delivery of funds
made?
 Payment and delivery are made at future date.
8. Define hedging

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 Hedging is to offset a ‘buy’ contract with a ‘sell’ contract and vice versa, matching the
amounts and the time span exactly.
9. What does premium mean? How is it determined? What is the opposite of premium?
 Premium is the additional amount it will cost to buy or sell a currency at a given future
date.
10. What is involved in arbitraging? How many markets are entered?
 Arbitraging is the transfer of funds from one currency to another to benefit from
currency differentials or disparities in interest rates. In arbitraging, at least two markets
are entered.
II. Reading
1. Name a payment mechanism used in earlier times. What was it later replaced by?
 Gold standared – after that was replaced by Breton Wood Systems.
2. Briefly describe the importance of the gold standard.
 Determining the value of all currencies based on gold.
3. Under the gold standard, currencies were convertible into gold. This convertibility was
abolished for most currencies. Which currency remained convertible into gold until
1971?
 United States dollars.
4. What is the system of fix exchange rates? Which conference agreed upon this system?
 When central banks intenvene in the foreign exchange markets at the intervention
points – Breton Wood Agreement
5. What does devaluation mean? Name the countries in the Western industrialized world
that devalued their currencies between 1967 and 1973?
 Devaluation means lowering the value of a currency interms of gold.
Three countries are: England, France and United States.
6. Name two countries that revalued their currencies in the early 1970s.
 West Germany and Holland
7. Are intervention points applicable in a system of floating exchange rates? Explain your
answer.
 No, because central banks were no longer required to support their own currencies.
8. What is the snake? Why is it called the snack and which Common Market members are
outside it?
 Snake is the system where a country can keep its fixed – rate system but allow a
widering of the intervention points to within 2.25% of the par value of the currencies.
9. Where and how does the foreign exchange market take place?
 It is not an actual marketplace but a system of telephone of telex communications
between banks, customers and middlemen.
10. What is the function of a foreign exchange broker?
 Acting for a client (customer) vis – a – vis the bank.
11. Name at least five active participants in the foreign exchange market.
 Tourists, investors, exporters, importer, governments…
12. Briefly describe spot and forward transactions. Give an example of each.

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 Spot transaction in a transaction when currency is bought or sold today with delivery
two business days later.E.g: a French father transfer money to his son in New York.
Forwarding Transaction means buying or selling a currency in the future with payment
and delivery at that future date. E.g:Japanese exports on Toyota cars to the US from the
SC that they will receive a specified US dollar amount in 6 months.
13. When does delivery of the foreign exchange take place in a spot transaction and
why?
 2 days later – a sufficient time to consumate the transaction.
14. When does payment and delivery of foreign exchange take place in a forward
transaction? At what point is the exchange rate determinate?
 Couples of month later – on the date of contract.
15. What causes an open position?
 A forward contract.
16. An open position is either long or short. Describe both types.
 Long – open positon is when a tracker buy currency forward without selling it forward at
the same time. Short – open positionis when a trader sell currency forward at the same
time.
17. What is the difference between a bid and an offer.
 A bid is the price dealers will pay to acquire pounds (buying) while an offer is the price
they will sell the pounds for (sell price).
18. What is arbitrage? Is this usually a very profitable transaction for a bank?
 Arbitrage is the practice of transfering funds from one currency to another to benefit
from rate differentials.
19. Give an example of interest arbitrage. In which case is interest arbitrage not
possible?
 If Internet rates in England are 2 % higher than in the US money market and a US
investor would dowell to change USD into pounds sterling at the English interest rate in
present of foreign exchange regulation.
III. Exercises
Exercise 1:Complete the following statements with the appropriate word or phrase
1. Bartering is based on the exchange of goodsfor goods.
2. The Bretton Woods Agreement stipulated that all members would express their
currencies in gold.
3. When central banks intervene in the foreign exchange markets at the intervention
points, this is called the system of fixedexchange rates. The opposite is called the system
of floatingexchange rates.
4. If dealers buy currencies forward but do not sell forward simultaneously, their position
is said to be long.
5. Dealers using two foreign exchange markets to benefit from rate differentials are said to
engage in arbitrage.
Exercise 2:Match the dates with the events 1944,01971, 1973, 1992, 2002

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1. Most industrialized countries switched to a system of floating rates. However,

governments and central banks occasionally attempted to influence exchange rates by
intervening in the markets. So there was a system of managed floating exchange rates.
2. The Bank of England lost over £5 billion in one day attempting to protect the value of the
pound sterling. After this, governments and central banks intervened much less, so there
was almost a freely floating system.
3. A fixed exchange rate system was started. The value of many major currencies were
pegged to the value of the US dollar. The American central bank, the Federal Reserve,
guaranteed that it could exchange an ounce of gold for $35.
4. Twelve states of the European Union introduced a single currency, the euro, to replace
their national currencies.
5. Gold convertibility ended because the Federal Reserve no longer had enough gold to
back to dollar, due to inflation.
1. 1973 2. 1992 3. 1944 4. 2002 5. 1971
UNIT 4: PAYMENT IN INTERNATIONAL TRADE
I. Vocabulary
Match these terms with their definitions.
1. Invoice: Lists of goods sold as a request for payment.
2. Clean collection: Payment by bill of exchange to which documents are not attached.
3. Documentary collection: Payment by bill of exchange to which commercial documents
(and sometimes a document of title) are attached.
4. Bill of exchange: Signed document that orders a person or organization to pay a fixed
sum of money on demand or on a specified date.
5. Bill of lading: Document that shows details of goods being transported; it entitles the
receiver to collect the goods on arrival.
6. Document of title: Document allowing someone to claim ownership of goods.
7. Issuing bank: Bank that issues a letter of credit (i.e. the importer’s bank).
8. Collecting bank: Bank that receives payment of bills, etc. for their customer’s account (i.e.
the exporter’s bank).
9. Confirming bank: Bank that confirms they will pay the exporter on evidence of shipment
of goods.
10. Letter of credit: Method of financing overseas trade where payment is made by a bank
in return for delivery of commercial documents, provided that the terms and conditions
of the contract are met
b f j g a
e c d h 10. i
II. Reading
Before you read
1. What are some of the risks involved in trading internationally?
 They are: non-payment, late payment, late delivery, wrong documents …
2. What payment methods do you know that are used when exporting or importing goods?
 There are 4 methods: open account, documentary credit, documentary collection and advanced
payment.

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3. What is the role of the banks in international trade?

 They can either be active or be passive.
Understanding main points
Write the four methods in the correct positions according to their risks for the exporter. Least
secure -> Most secure.
- The order is: open account – bill for collection – documentary credit – advanced payment.
Understanding details
True (T) or false (F)
1. The importer pays for the goods after receiving the documents.
2. There is no contract involved.
3. The exporter must be able to trust the buyer.
4. If a letter of credit is issued, the importer’s bank agrees to pay for the goods without
conditions.
5. If a letter of credit is confirmed, the exporter’s bank takes responsibility for payment.
6. Commercials documents and the document of title are always enclosed with a bill of
exchange.
7. Importers may not accept the bill of exchange until the goods arrive.
8. Exporters can keep control of goods by sending bills of lading through the banking
system.
9. Exporters reduce risk if documents are released against acceptance of the bill rather
than payment.
10. This means that the importer has to pay before any goods are dispatched.
T F T F T
F T T F 10. T
Word search
1. Promise or guarantee given to or by a bank = Undertaking
2. Load of goods sent to a customer = Consignment
3. Person or company that acts as a middleman in a transaction = Intermediary
4. Date when a bill of exchange is due for payment = Maturity
Reading 2:How a letter of credit works
1. The applicant (the buyer) completes a contract with the seller.
2. The buyer fills in a letter of credit application form and sends it to his or her bank for
approval.
3. The issuing bank (the buyer’s bank) approves the application and sends the letter of
credit details to the seller’s bank (the advising bank).
4. The advising bank authenticates the letter of credit and sends the beneficiary (the seller)
the details. The seller examines the details of the letter of credit to make sure that he or
she can meet all the conditions. If necessary, he or she contacts the buyer and asks for
amendments to be made.
5. When the seller (beneficiary) is satisfied with the conditions of the letter of credit, he or
she ships the goods.

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6. The seller presents the documents to his or her bankers (the advising bank). The
advising bank examines these documents against the details of the letter of credit and
the International Chamber of Commerce rules.
7. If the documents are in order, the advising bank sends them to the issuing bank for
payment or acceptance. If the details are not correct, the advising bank tells the seller
and waits for corrected documents or further instructions.
8. The issuing bank (the buyer’s bank) examines the documents from the advising bank. If
they are in order, the bank releases the documents to the buyer, pays the money
promised or agrees to pay it in the future, and advises the buyer about the payment. (If
the details are not correct, the issuing bank contacts the buyer for authorization to pay
or accept the documents.) The buyer collects the goods.
9. The issuing bank advises the advising (or confirming) bank that the payment has been
made.
10. The advising/confirming bank pays the seller and notifies him or her that the
payments has been made.
III. Exercises
Exercise 1:Information search
Match the risks (a-g) with the payment methods.
1. Open account
2. Documentary
3. Bills for collection
4. Advance
a) Exporters must comply with the conditions of the credit documents.
b) Importers may delay payment.
c) Importers may not pay at all.
d) It takes a long time to process payment in some countries.
e) Importers may not accept the bill of exchange.
f) Bank charges may be high.
g) Exporters must take care to present the correct documents.
c, b, d a, d, g b, c, d, f f
Exercise 2:Complete the sentence
1. The first step the exporter takes is to ask his bank to draw a bill of exchange on the
overseas buyer.
2. The exporter’s bankforwardsthe bill of exchange, together with the commercial
documents, to the importer’s bank.
3. At the same time, the exporterdispatchesthe goods.
4. The exporter must take care topresent the correct documents to the bank.
5. When the importeracceptsthe bill of exchange, the bank willreleasethe documents of
title to the goods.
6. If the importerdishonoursthe bill, the exporter may have to find an alternative buyer or
ship the goods back again.
7. In some parts of the world, banks may be slow toremit payment to the exporter’s bank.
UNIT 5: MARKETING

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I. Vocabulary
Match the terms with their definition.
1. Distribution channel: All the companies or individuals involved in moving a particular
good or service from the producer to the consumer.
2. To launch a product: To introduce a new product onto the market.
3. Market opportunities: Possibilities of filling unsatisfied needs in sectors in which a
company can profitably produce goods or services.
4. Market research: Collecting, analyzing and reporting data relevant to a specific market
situation (such as a proposed new product).
5. Market segmentation: Dividing a market into instinct group of buyers who have different
requirements or buying habit.
6. Packaging: Wrappers and containers in which product are sold.
7. Point of sale: Places where goods are sold to the public – shops, stores, kiosks, market,
stalls, etc.
8. Product concept: An idea for a new product, which is tested with target consumers
before the actual product is developed.
9. Product feature: Attributes or characteristics of a product: quality, price, reliability, etc.
10. Sales representative: Someone who contacts existing and potential customers and
tries to persuade them to buy goods or services.
A I F H D
J E B C 10. G
II. Exercises
Exercise 1:Categorize the following aspects of marketing according to the well-known
“4P’s” classification of the marketing mix.
Product Optional features, after-sale service, line – filling, packaging, brand
name, sizes, characteristics, quality, guarantee, style.
Inventory, credit terms, market penetrations, going – rate, list price,
Price market skimming, payment period, prestige pricing, cash discount,
production costs, quantity discounts.
Advertising, commercials, franchising, public relations, free sample,
Promotion poster, publicity, sponsorship, mailing, media plan, personal selling.
Place Point of sales, transportation, rending machines, ware housing
distribution channels, wholesaling.
Exercise 2:Complete the eight sentences below, by adding an example from the second box.
1. Conversional marketing is the difficult task of reversing negative demand, eg. for dental
work, or hiring disable people.
2. Stimulation marketing is necessary where there’s no demand, which often happens with
new products and services.
3. Developmental marketing involves developing a product or service for which there is
clearly a talent demand, eg. a non-polluting and fuel-efficient car.
4. Remarketing involves revitalizing falling demand, in the face of competition or changing
tastes.

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5. Synchro-marketinginvolves altering the times pattern of irregular demand, eg. for public
transport between rush hours, or for ski resorts in the summer.
6. Maintenance marketing is a matter of retaining a current (may be full) level of demand,
eg. for churches, inner city areas, or ageing film stars.
7. De-marketing is the attempt (by governments rather than private businesses) to reduce
overfull demand, permanently or temporarily, eg. for some roads and bridges during
rush hours.
8. Counter-marketing is the attempt to destroy unwholesome demand for products that are
considered undesirable, eg. cigarettes, drugs, handguns, or extremist political parties.
f h a g
e c d b
Exercise 3:Match up these marketing actions with the eight tasks described above
i. Alter the pattern of demand through flexible pricing, promotion, and other incentives.
j. Connect the benefits of the product with people’s needs and interests.
k. Find new target markets, change product features, develop more effective
communication.
l. Find out why people dislike the product, and redesign it, lower prices, and use more
positive promotion.
m. Increase prices, reduce availability, make people scared.
n. Keep up or improve quality and continually measure consumer satisfaction.
o. Measure the size of the potential market and develop the goods and services that will
satisfy it.
p. Raise prices, reduce promotion and the level of service.
l g o k
i n p m
Exercise 4:Complete the text with the words in the box
The classic product life cycle is Introduction, Growth, Maturity and Decline. In the
Introduction stage the product is promoted to create awareness. It has low sales and
will still be making a loss. If the product has few competitors, a skimming price strategy
can be used (a high price for early adopterswhich is then gradually lowered). In the
Growth phase sales are rising rapidly and profits are high. However, competitors are
attracted to the market with similar offerings. The market is characterized by alliances,
joint ventures and takeovers. Advertising budgets are large and focus on building the
brand.
In the Maturity phase sales growth slows and then stabilizes. Producers attempt to
differentiate productsand brands are key to this. Price wars and competition occur as
the market reaches saturation. In the Decline phase there is a downturn in the market.
The product is starting to look old-fashioned or consumer tasteshave changed. There is
intense price-cutting and many products are withdrawn from the market.
III. Extension activities

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1. Boston Matrix is useful for a company to analysis how successful a range of its products or
services are by looking at the percentage of sales it has in the market share and how fast the

sales are growing.

2. Star products are products that have both earliest market share and highest market growth.
Some potential products to name are smart phones, laptops,…
UNIT 6: TRANSPORT
I. Vocabulary
1. Group-age: Packing together more than one consignment.
2. Barges: Barge-type boat.
3. Bulk: Loose, unpackaged cargo.
4. Canal: Man-made waterway.
5. Navigable: Allowing the passage of ships.
6. Lighter: Flat-bottomed freight boat for shallow waters.
c e d a b f
II. Reading
Vocabulary extension
Find the words in the text which mean the opposite of the words listed below
1. Ill-informed>< Well-informed
2. Shallow>< Deepwater
3. To lift>< To lower
4. Coastal>< Inland
5. Expensive>< Inexpensive
6. In the past>< Nowadays
Reading comprehension tasks
1. Give each paragraph a heading
Paragraph 1: Transport
Paragraph 2: Terms of Trade
Paragraph 3: Sea transport
Paragraph 4: Air transport
Paragraph 5: Road transport
Paragraph 6: Rail transport
Paragraph 7: Transport on special vehicles
Paragraph 8: Transport by post
Paragraph 9: Consulting an expert

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2. What are some of the advantages and disadvantages of air transport?

- Advantages: high speed, low risk, cheaper insurance.
- Disadvantages: costly, limited in quantity.
3. Why do some buyers prefer FOB terms?
- Because they have the option of handling the transport themselves or instructing an
agent to arrange things on their behalf.
4. What is:
a) Ro-Ro ship?
- It is a big vessel designed to carry bulky goods.
b) Ra-Ra ship?
- It is a special ferry that can take railway wagon by sea for part of the journey.
c) A LASH ship?
- It is a specially designed barge-carrying ship.
5. Explain the meaning of the following:
a) ‘will be in a stronger position’ means to have more advantages.
b) ‘will add a margin to his costs’ means to add an amount of money to the total cost to
allow increase in freight or insurance.
c) ‘suitable handling facilities’ means tools and equipment for easy handling some kinds of
goods.
d) ‘the options open to them’ means available options.
e) ‘a viable option’ means a good and efficient option.
6. Write a 60-word summary of the text.
Transport plays an important role in the goods expense. Involved parties may share the
control of risk and title through different Terms of Trade such as FOB, EXW, CIF … The
most common methods of transport is by sea due to low cost and large quantity. There are
many other methods air, road, rail, post,… which has advantages and disadvantages each.
Choosing what methods to use is very important, and parties are advised to consult an expert
in this field to make the right decision.
III. Exercises
Exercise 1:Describing Uses and Applications
Types of Vessel
1. Ro-Ro vessels are designed to carry trailers and trucks - are designed to carry goods
packed together in containers.
2. The LASH carrier has been developed for carrying barges – has been developed for
unloading goods at the sea port or at a point further up am inland waterway.
3. Ra-Ra ships are equipped to take railway wagons – are equipped to carry bulk liquids.
4. Bulk carriers are suited to carrying solid materials in bulk – are suited to transporting,
unpacking bulk cargo such as grains, coals, oil or its cargo holds.
5. Tankers are used for carrying liquid cargo – are used for transporting liquids as gases in
bulk.
6. Oil-ore carriers are suitable for solids or liquids – are suitable for being capable of
carrying wet or dry cargoes, transporting dry, high densely coal.
Exercise 2:Order of Adjectives

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1. 40 portable Japanese calculating machines

2. 100 round Spanish wooden salad bowls
3. A fleet of new British cargo planes
4. A group of experienced Italian engineering experts
5. Two large eight-wheeled Swedish refrigerated trucks
Exercise 3:Which mode of transport?

CARGO Transport mode

Regular deliveries of Seaway
10,000t scrap metal
(Darwin to Kobe)
2500 day-old chicks Airway
(Antwerp to Algiers)
50 air-conditioning Seaway
units
(Milan to New Delhi)
Materials for training Airway
course
(London to Maputo)
1200t beef Airway
(Auckland to Nairobi)
3 diesel locomotives Seaway
(Marseilles to Gabon)
2 kg platinum Airway
(London to Riyadh)
UNIT 7: MARINE CARGO INSURANCE
I. Reading
Reading 1:CARGO INSURANCE
Reading comprehension tasks
1. Key words:
You will find the meanings for most of these words in the text. Write the meaning beside
each word.
- Insurance policy: The document which defines the terms of the contract and the right of
each party.
- Premium: (the insurer pays) an agreed amount of money
- Assured party: Other party which an insurance company undertakes to indemnity.
- Indemnify: The insurer pays when loss or damage is suffered due to a specified event.
- Cover: The terms of the agreement define what risks have been insured against.
- Marine insurance: Insurance for goods carried by sea.
1. According to text, answer the following questions:
a. Why do buyers or sellers insure cargoes?
- To protect themselves against risks of loss and damage.
b. Between which two parties is an insurance contract made?

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- An insurance company & Importer (Exporter)

c. What agreement is usually made in an insurance contract?
- Cover insurance
d. Does the buyer or the seller insure the cargo?
- Yes.
e. Explain the following:
- ‘undertakes to indemnify’ means giving money back.
- ‘has been largely standardized’ means complying with rule.
- ‘follow marine insurance practices’ means applying marine insurance practices.
- ‘obliged to’ means compulsory.
- ‘a party with insurance contract’ usually means an insurance company undertakes.
f. What is the actual insurance contract?
- It is Marine cargo insurance.
Reading 2:Some articles of Marine Insurance On Goods
Reading comprehension tasks
1. Why do we have to buy Marine Insurance on Goods?
- To protect goods against risks of loss or damage.
2. Give some examples of loss which are within scope of insurance for each condition A, B
or C.
- Fire, explosion
3. What does ‘exclusion’ mean?
- It means effect something from risk insured.
4. Name the items of insurance contract only relating to goods.
- Name of the goods to be insured.
- Nature and type of packing, marks of the goods to be insured.
- Weight or quantity of the goods to be insured.
- Value of the goods to be insured.
5. The insured amount is 900,000 USD and goods is covered with three insurance
companies. If total loss happens, how much will each insurance company be liable for?
- Each insurance company will be liable for proportion part.
UNIT 8: MULTINATIONAL CORPORATIONS
I. Vocabulary
1. What is a multinational corporation?
- It is a corporation controlling production and marketing system in several countries
besides its own.
2. In what aspect does a transnational corporation differ from an MNC?
- Nations of the country of origin no longer dominate as in the multinational corporation.
3. What is the importance of innovation for a company?
- Innovation is an important ingredient for a company is growth in sale and profit.
4. What determines whether a company is referred to as subsidiary or an affiliate?
- A corporation in which over 50% the capital belongs to a multinational corporation is
subsidiary. If less than 50%, it is called affiliate.
5. Name three important resources available to corporation.

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- Raw materials
- Man power
- Capital
6. What two structures do MNCs use to communicate with their oversea companies?
- International Division Structure
- Global Structure
7. What is the difference between decentralization and centralization?
- Decentralization: a system in which foreign subsidiaries have a significant voice in
making crucial decisions.
- Centralization: a system whereby a parent company retains decision-making power,
maintains direct and tight control over subsidiaries, and establishes nearly all policies.
II. Reading
Reading 1:MULTINATIONALS
1. Which fact in the first paragraph emphasizes the size of multinationals?
- The fact is: their turnover is huge, being greater in some cases than the national income of
countries such as Switzerland or the Netherlands.
2. According to the multinationals, they bring certain benefits to poor and developing
countries. What, briefly, and those benefits?
- Those benefits are: providing capital for economic growth; sharing the technologies with local
business; increasing worker’s productivity; solving unemployment.
3. What criticism of Latin American banks is made in the paragraph 5?
- They accused multinationals of using money from local banks and investors without returning
capital back to the country.
4. Agricultural workers in the Third World often find their condition is made worse by the
actions of multinationals. Explain this statement.
- Multinationals bring new technologies that reduce labour need, such as cranes, bulldozers in
building industry and tractors in agriculture. Therefore, many workers are unemployed again.
5. What are the following tools or machines used for?
a) A hoe: used for digging soil
b) An ox-plough: used for digging and mixing soil
c) A tractor: used for digging soil even more quickly and efficiently than hoe and plough
d) A crane: used for lifting heavy objects
e) A bulldozer: used for straightening roads
Reading 2:
Understanding the main points
1. Read the text about two car companies’ global strategies and say which of these
statements apply to Ford and which to Honda.
a) Now has a strategy of decentralization: HONDA
b) Now works in multi-disciplinary terms for car design and development: FORD
c) Has always worked in multi-disciplinary teams: HONDA
d) Produces more cars abroad than in its home country: HONDA
e) Used to be very decentralized: FORD
f) Used to be very centralized: HONDA

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g) Has divided the world into four regions: HONDA

h) Designs and develops all its small cars in Europe: FORD
i) Has always been flexible and able to respond to change: HONDA
2. According to the ideas in the text, why do car companies now need to have a global
strategy?
- To exploit the perceived strengths of other rivals
3. How did the two companies change their strategies?
- Ford became more centralized, replacing old functional departments with new multi-
disciplinary product teams.
- Honda became more decentralized, having the “glocalization” strategy – a global strategy with
local management.
4. How the text is organized?
a) One reason for changes in Honda’s strategy: Paragraph 8
b) Honda’s original strategy: Paragraph 3
c) Ford’s new strategy: Paragraph 5
d) Conclusion: Paragraph 10
e) Honda’s new strategy: Paragraph 7
f) Ford’s original strategy: Paragraph 2
g) The advantage of Honda’s original strategy: Paragraph 4
h) Introduction: Paragraph 1
i) Ford’s new strategy in detail: Paragraph 6
j) Another reason for Honda’s new strategy: Paragraph 9
Vocabulary tasks
Synonyms:
1. The word ‘headquarters’ is used to describe the central, controlling part of a large,
international company. What other word is used in the same paragraph with a similar
meaning?
- Parent
2. Honda and Ford manufacture cars. What other phrase is used to describe what they do?
- Production unit.
3. Honda produces both cars and motorcycles. What is a general word for both of these?
- Individual
Word search: Find a word or phrase in the text that has a similar meaning
1. When a company makes a product in big volumes to reduce costs = Economies of Scale.
2. Factory in which cars are produced = Production unit.
3. Independence = Autonomy.
4. Needs or demands = Requirements.
5. Head of a company responsible for strategy rather than day-to-day management =
Chairman.
6. Consist of or be made up of = Comprise.
7. Financially independent= Self-sufficient.
8. Total of a company’s production = Output.
Complete the sentences

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1. The company comprisesthree divisions – cars, trucks and commercial vehicles.

2. Each division has a lot of individualsto decide its own strategy.
3. Companies seem to change their chairmanevery few years in response to changing
economic and market conditions.
4. Our total output of cars from all our factories in Europe went down last year.
5. We need to develop products that meet the requirementsof the market.
6. Big cars makers now produce different models based on the same platform in order to
achieve economies of scale.
7. All the main Japanese car makers have production unitsin Europe.
Expressing degree of meaning
1. For many years Ford’s products differed sharplyfrom region to region.
2. Individual countries had a large degreeof autonomy.
3. Honda grew rapidly from its early days as a motorcycle manufacturer.
4. For many years Honda was run very firmlyout of Japan.
5. The use of multi-disciplinary teams allowed development work at Honda to take place
simultaneouslyin different parts of the company.
6. Honda expects its four regions to become increasinglyself-sufficient.
7. No other car maker has such a high proportionof foreign output as Honda.
III. Exercises
Exercise 1:Complete the passage by using the word in italics
Countries in the Third World have different approaches to foreign investment. Some
welcome foreign firms, encouraging them to set up subsidiaries by offering them tax
incentivesor cheap loans. These countries believe that the foreign firms will provide
jobs, pay good wages, employ local workers, bring new technology, and contribute to
their prosperity.
Other countries have a different attitudeto foreign investment. They know that they
need the multinationals, but they do not want these firms dominate important sectors
of their economies. Therefore, they bring out law which force foreign companies to sell
shares to local investors. They insist that local businessmen own a certain percentage of
the foreign firm’s equity. Some governments also make the foreign firm train a certain
percentage of local workers at all levelsin the company.
Exercise 2:Complete the passages
a) Most multinational companies are vast enterprises with networks of subsidiaries or
agents throughout the world. Originally, they expanded overseas because trade barriers
such as tariffs and quotas had been set up against their goods.
b) When incomes are rising and business is thriving, in other words, when there is an
economic boost in a country, a multinational may decide to establish a subsidiary there.
Later, however, the government of the country may only allow the company to operate
on a joint venture basis, in which case it will compel the company to reduce its share to
a fixed percentage. It could even restrict the subsidiary by allowing only a fixed
proportion of profits to be registered.
c) The OECD code gave guides on how multinationals should behave. None of its provisions
were legally effective and therefore some say it lacked legal teeth.

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Exercise 3:Complete each sentence using an appropriate form of the word in italics.
a) What we need at the moment is an enterprising manager.
b) The two products look, taste and feel the same. It is impossible to differentiatebetween
them.
c) She needs more experience, but basicallyshe is a first class buyer.
d) When I asked for an increase in salary, the atmosphere here became somewhat tense.
e) The leaking of the results of our market survey poses a serious threat to company
security.
f) The oil richness of certain Arab states are known to all.
g) Our sales director doubts whether this ingenious but complex toy is really marketable.
h) The lack of job opportunities for young people is very worrying.
i) Hesitant! Vacillating! Never making up his mind! What an indecisive chairman.
j) It is not remotely possible that I shall become head of this department.
k) A good chairman in a meeting should not be too intrusive.
l) Unfortunately, our involvement in this deal has now become public knowledge.
m) This area is of great strategicimportance in our promotional campaign.
UNIT 9: MERGERS AND ACQUISITIONS
I. Reading
1. Understanding the main points
Read the text and match the titles to the paragraphs
a. Disadvantages of takeovers
b. Raiders and assets-stripping
c. Raids and bids
d. The ‘make-or-buy’ decision
e. The role of banks
d e b a c
2. Understanding details
Find words or phrases in the text that mean the following:

1 Adding new and different products or Diversify

services
2 A company’s sales expressed as a Stock
percentage of the total sales in a market
3 Reductions in costs resulting from increased Economies of scale
production
4 Money paid to investment banks for work Fee
done
5 All the individuals or organizations that Customer
regularly or occasionally purchase goods or
services from a company.
6 Best, perfect or idea (adjective) Optimum
7 Combined production or productivity that is Synergy
greater than the sum of the separate parts

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8 People or companies that try to buy and sell Raider

II. Exercises other companies to make a profit
Exercise 9 Large corporation or groups of companies Conglomerate
1:Reading offering a number of different products or
comprehen services
sion 10 Buying a company in order to sell its most Asset-stripping
Read the valuable assets at a profit
first two
paragraphs of the article. According to the Consultancy KPMG’s research about mergers:
a) How many are successful?
- 17% are successful.
b) What effect do they have on the value of a company?
- It reduces the share’s price enormously.
c) What are two key reasons for their failure?
- Over-optimism and management egos are the 2 main reasons.
Read the rest of the article. Who believes:
d) That mergers fail because of:
- The way the two companies are combined? ->John Kelly believes that mergers fail because
of the way 2 companies are combined.
- Differences in culture? ->John Thorp believes that mergers fail because of cultural
differences.
- Unrealistic expectations about the future success of the new company? ->James Montier
believes that mergers fail due to unrealistic expectation about the future success of the new
company.
e) That companies merger essentially:
- From fear of competition? ->John Kelly believes that companies merge essentially from fear
of competition.
- To ensure their survival in a global market place? ->John Thorp believes that companies
merge essentially to ensure their survival in a global marketplace.
Read the text again and answer the questions:
f) Why is the writer so surprised at the money spent on mergers?
- Because so many evidence has shown the failure of mergers yet lots of money is still spent on
it.
g) What motivated Daimler-Benz to merge with Chrysler?
- The merger was to survive and sell more products.
h) What were the direct consequences of the culture clash?
- The clash led to misunderstanding among leaders and many have quit because confident
financial targets were not met.
i) How important are individual personalities in mergers?
-
j) Why has the BP Amoco merger succeed when others have failed?
- Because it merge with businesses that can produce ongoing cost efficiencies instead of one-off
savings.

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Exercise 2:Vocabulary
The writer uses idiomatic language throughout the text.
1. Find examples of words and expressions which are related to marriage. Why do you
think the writer uses this metaphor?
- Examples: marriage, altar, doom, nuptial,…
2. Take a word from box A and combine it with word from box B to form collocations.
A B
cost efficiency
share price
job cuts
stock market
investment strategy
financial target
share options
takeover bid
UNIT 10: ARBITRATION
I. Reading
1. Understanding the main points
Read the text on the opposite page about how international disputes between companies
are resolved and answer these questions.
a) Why might you prefer not to go to court in the country of your business partner?
- Because I fear that they will have home-team advantages or local bias.
b) What are the three main business areas which have traditionally been resolved by
arbitration?
- They are: construction, shipping and commodities.
c) How is a forum made up for a neutral arbitration?
- Three arbitrators will be selected to form a neutral forum, with one chosen by each party and
the third chosen either by the parties or the appointed arbitrators.
d) What is the main difference between arbitration and litigation, according to the text?
- Arbitration takes place privately, while litigation publicly.
e) Which are the main arbitration centers?
- Stockholm, London, Singapore,…
f) In which city would you choose to arbitrate an east-west trading dispute?
- Stockholm.
g) What do clients look for from an arbitration service?
- They look for speed, cost effectiveness, confidentiality and reliability.
h) What examples of expert witnesses are given in the text?
- Accountants and engineers.
i) Do all the venues share the same arbitration rules?
- No.
2. Understanding details
Mark these statements T (true) or F (false) according to the information in the text. Find
the part of the text that gives the correct information.

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1. Disputes only arise in commercial transactions.

2. Commodities are things traders buy and sell, usually raw materials, like coffee, wool or
copper.
3. A neutral forum has a balanced composition to ensure fairness to both parties.
4. New York is the only American arbitration venue named in the text.
5. Arbitration is a business in itself, for lawyers and their associates.
6. Name recognition for arbitration is like brand awareness for consumer goods.
7. International business depends on rapid resolution of contractual disagreements.
8. The courts of law in each country are less powerful than arbitration panels.
F T T T T T T F
II. Exercise
Exercise 1:Match these terms with their definitions
1. Dispute resolution: Settling disagreements
2. A money-spinner: Something that makes profits for everyone
3. Have recourse to the courts: Reverse something already decided
4. Home-team advantage: Benefit from being local or on home ground
5. Local bias: Unfair treatment
6. Financial crisis: Serious money problems
7. Delaying tactics: Ways of making things take a long time
8. Speed things up: Accelerate
9. Interfere: Meddle or get involved with
10. Overturn decisions: Become operational
11. Take steps: Institute action
12. Come into force: Make use of the legal system
d h c f a k
i b g 10. j 11. l 12. e
Exercise 2:Terms of disagreement and dispute
Use an appropriate word or phrase to complete each sentence.
1. There is a serious problem we must try to resolve.
2. He was a distinguish lawyer who was an expertarbitrator.
3. The process took far longer than the parties had expected arbitration.
4. This was due to the delaying tactics employed by one of the companies involved.
5. The question is: how are we going to arbitratethis dilemma?
6. When the goods arrived in poor condition, a disputearose over whose fault this was, and
who should bear the cost.
7. The best way is not to go to court, which is public and costly, but to settlean agreement.
8. I believe you are wrong on that point – we disagree on the interpretation.
9. There is always an answer if you try hard to find it: every difficulty has aresolution.
10. You cannot assume he will agree to those terms: you must check with him first.
Exercise 3:Parties to an agreement
1. Everyone promises to obey the treaty-all major countries are signatories to it.
2. In the civil case, theplaintiff brought an action against the defendantfor damaging his car
on purpose.

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3. The price was negotiated between the buyer and thesellerof the house, in a private sale.
4. The bank agreed that theborrower should pay 12% on the loan, so the lender made a
fair profit!
5. Manufacturers sell their goods towholesaler and in turn, retailerbuy from them.
6. The relationship between a lawyer and clientis bound by confidentially.
7. The beer can be produced under license but the licensee must fulfill all the
requirements imposed by thelicensor.
8. Some clothes companies sell their products on a franchise basis: each country has a main
franchiser, with numerous people working asfranchisees.
9. A letter was sent to the manager complaining about working conditions. All the
members wrote their names. The letter read: ‘We, the undersigned strongly protest
about conditions at work’.
10. Many projects require the cooperation of various partners. If they all agree to work
together, they become parties to the agreement.

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