Fundamental changes take place in many industrial societies. The main factors are the following:
The raw materials cost increases. Shortages and the high cost of raw materials produce an economic and moral pressure to avoid wastes.
Advertising and marketing men can expect rapid changes in a variety of markets and industries. In energy, there will be a decrease in competitive advertising between the various types. We will probably see a switch to more educational advertising for coal, gas and electricity. Advertising campaigns will be directed towards eliminating waste rather than increasing consumption. In consumer durables there will be a move a way from planned obsolescence. Cars, for example, will be replaced every five to ten years rather than every three. Total consumer expenditure will fall and price will become an even more important factor. In manufacturing, smaller companies will be squeezed out of existing markets.
In. packaging, many products, like personal deodorants with their excessive use of raw materials, will change or disappear as paper and aluminum shortages push up the cost of packaging.
As advertising budgets are cut, advertising agencies themselves will be involved even more into marketing and management consultancy. And in marketing, manufacturers will demand quicker returns on less capital investment. Innovations will be marketed much faster (and copied much faster by competitors). Brand life cycles will be much shorter. Agencies will have to be much faster in their response to marketing problems and work longer hours for less money.
Unit 10
Risk Management
Risk management is an accepted practice in business activities. Risk is the possibility of loss or injury. It is a part of everyday life for businesses and individuals. Individuals and businesses must evaluate the risks they face, and they should minimize the costs involved with those risks.
Risk management is not simply a matter of insuring against risk. It involves, first of all, surveying all the areas of risk to a company and then preparing a series of recommendations to minimize potential losses from them. This is often done by risk management consultants. But some major companies have now appointed their own risk managers.
1. Fire is still the greatest potential risk. The risk manager can simply recommend bricking up a doorway or a hole in the wall of a warehouse to prevent fire from spreading. Or he can suggest a safer method of stacking. On the other hand, he can recommend installing a very expensive sprinkler system. This could save a company huge sums in insurance premiums.
2. Industrial espionage is another, constantly increasing risk. Computer security is particularly important, and it is absolutely vital that only authorized persons should have access to the information stored in the computer. The risk manager will suggest methods of selecting computer staff and restricting access to it inside and outside working hours.
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3. Working conditions are another area of risk management; even such ordinary things as ventilation, heating and lighting are important. These can expose a company to personal claims from staff for damage.
4. Accident prevention and a company's increased liability because of new consumer protection legislation are other, obviously important areas.
5. A great many recommendations fall into the 'common sense' category. Suppose a company relies on only one supplier for a vital raw material. If that supplier suffers a total loss of production because of a fire, strike or some other reason, the company faces huge losses, and even more important, a permanent loss of market share. To prevent this, the risk manager or consultant might recommend coming to a two-way agreement with a competitor that in such a case the competitor would supply raw materials to the assembly line. The agreement might even stipulate supplying the end product if that were necessary. Another example of this 'common sense category' is that all the top executives should never travel together in the same jet, or that valuable goods should not all be stored in one building but spread over a number of sites. Risk management is becoming more and more important as a concept.
Exercises
I. Translate into Russian.
Costs; fire; warehouse; sprinkler; insurance premium; industrial espionage; vital; important; computer staff; heating; lighting; claim of damage; accident; legislation; protection; liability; total loss; common sense; market share; strike; top executive; the same; agreement; spread; restrict; select; suggest; prevent; accept; evaluate; appoint.
II. Find the English equivalents.
; ; ; () ; ; ; ; ; , ; ; , ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; (), ; ; ; ; ; ; (); ; ; .
III. Fill in the blanks.
1. Risk is the possibility of....
2. Risk management involves... all the areas of risk to a company and preparing a series of... to minimize potential losses.
3. Fire is still the greatest....
4. Computer security is particularly important, and it is absolutely vital that only... should have access to the information... in the computer.
5. Working conditions are another... of risk management.
6. If a supplier of a vital raw material for a company suffers a total loss of his production, the company faces....
7. Valuable goods should not all be stored in one building but... over a number of sites.
IV. Answer the questions.
1. What is risk?
2. What does risk management involve first of all?
3. What can a risk manager recommend to avoid () fire?
4. How can a risk manager provide () computer security?
5. Are working conditions another area of risk management?
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6. What main recommendations fall into the "common sense" category? Give some examples.
V. Retell the above text.
VI. Read and translate.
WHEN A FIRM IS IN TROUBLE
Sometimes firms are in trouble. It is necessary to pay attention to the following symptoms in order to save a firm:
1. There is no real plan for the future. The company is merely reacting to events as they occur. For example, the company depends entirely on one supplier for an important component and has
not found an alternative supplier in case the first one is closed by a strike or goes bankrupt.
2. There is a chronic shortage of working capital. Payments to suppliers and even payrolls are delayed.
3. Employee' morale is low, with frequent absenteeism, and high turnover in the work force.
4. Profits are low or non-existent because sales are weak costs are higher than expected.
5. Shipments are chronically late as a result of raw material shortages or a lack of them, poor work scheduling or low productivity.
6. Inventory turnover is low as a result of poor work scheduling or lagging sales.
7. There is a lack of timely and adequate management information; intra-company communications are poor.
8. Orders from major customers are lost and no effort is made to find or correct the cause.
9. Executives work overtime but never catch up with their workload. Foremen have so many petty day-to-day problems that they have no time to plan better working procedures.
10. Pricing is done by guesswork instead of by good cost accounting.
11. There is far more waste left after production than in other plants with similar operations.
12. There is too much reworking of products after final inspection as a result of poor work along the assembly line.
