ECONOMISCHE VAKTAAL ENGELS 1e BA

HANDELSINGENIEUR
1) Industries en companies
- Industry groups
First way to classify an economy:
Primary industries: agriculture, forestry and mining.
Secondary industries: construction and manufacturing.
Manufacturing: capital goods (equipment and machinery to
produce goods), durable goods (cars, washing machines)
and non-durable goods (food, clothing).
Service industries: banking, entertainment, tourism.
Second way:
The private sector: large corporations, SMEs (=small and
medium-sized enterprises) and individuals working on a
self-employed basis.
The public sector: schools, hospitals and SOEs (= stateowned enterprises, railway,..)
Third way:
Industry groups
- Types of business
Sole trader: Busineess owned by one person, selfemployed, unlimited liability (personally responsible for any
debts). Self-employed professional freelancer
A partnership: Two or more people. Examples: lawyers,
architects,..
A limited liability: a legal distinction between the company
and the owners, company is responsible for any debts,
owners have limited liability, the company is private. Ltd
= limited, Llc = limited liability company. Example: familybusiness

A public limited company: company is owned by

shareholders (large finanacial institutions (banks,..), other
companies and members of the public), shareholders
receive a share of profits, capital gain or loss by selling the
shares, run by managers, supervision of the Board. Plc or
Inc or Corp.
A frachise: The business owner allows other people
(=franchisees) to set up in business using the companys
brand name, products and reputation.
- Business expansion
Internal growth: stay private. Everything increases but the
company stays private.
Internal growth: IPO (=initial public offering) process of
issuing shares for the first time. Company: small large.
Internal growth: trade sale to a larger company in the
same sector. The original small company is absorbed and
the name often disappears.
Merger: 2 companies join to form one.
Acquisition (=takeover): One company buys another. Starts
with buying a large amount of shares. The company often
keeps his nme, becoming a subsidiary of the parent
company.
- Vocabulary
Venture: a new business activity.
Enterprise: a company or any large important project.
Debt: an amount of money that somebody owns.
Liability: the amount of money that a company owns.
Firm: synonym for company.
2) Globalization and economic policy
- Forces driving globalization

Cost factors: cheeper labour and manufacturing costs,

outcourcing to other countries. Low costs major
competitive advantage.
Market factors: emerging markets offer new opportunities,
BRICs (= Brazil, Russia, India and China) dominate the
world. Need to establish a global presence for global
costumers.
Technology factors: the internet, mobile communication
and software tools.
Global business cycle: recovery (= upswing) growth (=
expansion, boom) recession (= contraction, downturn)
depression (= slump).
- Companies strategy in the face of globalization
Three basic strategies:
Import/ Export: lowest risk, lowest profit potential.
Outsourcing: deeper level of involvement, with a long-term
contractual agreement. outsource manufacturing
Foreign direct investment (FDI): highest risk, gives the
most control, shows the most commitment to the global
market. Companies buy property and businesses in the
foreign nation. Acquisitions to create overseas divisions
(subsidiaries), joint venture and strategic alliances.
- Politcal strategy in the face of globalization
2 basic responses:
Being in favour of market forces and deregulation: labour
markets more flexible, lower taxes to encourage private
investment and spending, encourage free trade an cut red
tape (bureaucracy) to make it easier to start a new
business.

Being in favour of subsidies and protectionism: protect the

job security and social benefits, high taxes in order to pay
for social programmes and other government spending and
protect national business with measures such as tariffs
(=taxes) and quotas (=limits) on imports.
- Measuring and analyzing global trade
Three concepts:
Balance of trade: difference between a nations imports
and exports. More export than import trade surplus, less
trade diflict.
Balance of paiements: balance of trade + balance of
investments and services.
Exchange rates: Currencies fluctuate according to supply
and demand. Value falls exports increase and foreign
investment is stimulated, imported goods more
expensive feel like a drop in their living standards.
- Vocabulary
Joint venture: 2 or more companies share costs and profits
but keep their separate identities.
WTO = World Trade Organization (reducing tariffs and
quotas)
IMF = International Monetary Fond (short term loans to
countries)
World Bank = lends money to developing countries
NAFTA, EU, ASEAN = regional blocks that promote
economic integration
Royality: A company gives the right to manufacture its
product to a foreign company for a fee.
3) Corporate strategy and structure
- Strategy and planning
SWOT analysis: Strengths, Weaknesses, Opportunities and
Threats.

2 main types of planning:

Strategic planning: longer term, big picture, defining the
company mission, determing the overall goals and allocate
resources to reach these goals. Done by top and middle
managers.
Operational planning: translate the long-term goals into
concrete objectives, day-to-day work. Done by middle and
supervisory managers.
- Company structure
Organization by function: company is divided into
departments as production, finance,..
Organization by product: staff who is involved in the same
product line.
Organization by customer type: different sectors. Large
customers = key accounts.
Organization by geographical area: organized according to
regions.
Best way to organize the management hierarchy (=chain if
command):

CEO = Chief Executive Ofcer

COO = Chier Operating Ofcer
Vice presidents or directors of different departments
Vision of the company
Managers of departments, divisions,..
Develop detailed plans and procedures
Team leader, supervisor, Section Chief
Responsible for assigning non-managarial employees

Top =
senior
managers
Middle
managem
ent
Supervisor
y
managem
ent

Cross-functional teams: employees from different parts of

the organization work together.

Board with the President or Chairman choose the CEO

Board members: not involved with the running of the
company, elected by and responsible to the shareholders.
- Centralization vs Decentralization
Centralization = authority kept at Head Ofce: strong
company image, decisions made by experienced managers
and standardized procedures economy of scale (lower
costs) and simpler distribution channels.
Decentralization: lower-level managers are more familiar
with local conditions -> stronger customer focus,
delegation of decision making -> higher level of morale at
the grassroots.
Vertical or flat structure?
- Vocabulary
SMART= Specific, Measurable, Agreed, Realistic and Time
Specific.
Pairs:
Market research
Core business: main activity of the company
Shareholder value: financial benefits
Product portfolio: whole range of products the company
sells
Brand loyality: faithful to a product
Cost centre: business unit that spends money but not
generate revenue
Earnings growth: continuing increase in profits
Management hierarchy: organogram
Mission statement: senior management vision
Distribution channel: how a product gets from the
manufacturer to the end-user
4) Managing people
- Motivation

 Maslow: Hierachy of needs:

Self-actualization needs
Self-fulfilment: to achieve, to develop to our fullest potentional

Ego (self-esteem) needs

Recognition and acknowledgement, sense of status or importance

Social needs
Feel accepted and part of a group

Security needs
Not an issue in business

Physiological needs
Not an issue in business

Herzberg
Similar ideas, most important: sense of achievement,
earned recognition and interest in the job. But also:
hygiene, maintenance can cause dissatisfaction: salary,
job security, working conditions and good relations with
co-workers.
McGregor: 2 categories of managers

Theory X

Theory Y

People dislike work

People like work

Must be: controlled,

directed to achieve
the organization
goals.

Seek responsibility
believe in:
empowerment (make
decisions without
managerial approval),
enabling (giving them
the tools).

Drucker:
MBO= Management By Objectives
Formulate clear
Ambitious but achievable goals
Monotoring and measurement: ensure objectives are
being met
Rewarding: pay rise, bonus
- Communication
Three ways: top down or bottom-up or external (PR)
Informal communication:
All the time
Picking up information on the grapevine (from one
person to another in a conversation)
Discussing ofce politics
Formal communication
Meetings, presentations, reports
Not to practice in a book:
I. Active listening
Full attention

II.

Not interrupting except to ask for clarification

Giving consideration to another point of view
Assertiveness
Stating your needs and opinions confidently and
clearly
NOT: being indirect or suffering in silence, being
aggressive or rude.

- Teamwork
Team (or taskforce/working party) personality types
Head: thinking and problem-solving
Hand: doing and acting
Heart: networking and resolving conflicts
5 stages of development:
Forming: get to know eachother
Storming: ideas get suggested, conflicts arise (clarify their
roles and expectations)
Norming: working together and own or share team
objectives
Performing: solving problems and doing tasks. (Milestones:
events that mark an important stage in a process)
Adjourning: finished, public recognition and celebration of
achievement.
- Vocabulary
Autocratic: instructions given
Democratic: sharing responsibility and decision-making
Laissez-faire: Minimal supervision

5) Operations management
- Operations
= The use of resources that are devoted to the production
and delivery of products and services.

= Core business and support functions (Marketing, HR,

finance)
= Product development, managing the supply chain,
production planning and control, billing and shipping.
administration
5 basic performance objectives:
Quality

Cost
Dependability
Flexibility

Speed

For the organization For the customer

Error-free process
Products that are
on-spec (having the
required
specifications)
High level of
Competitive price
productivity
Operational
Reliable delivery
stability
(quantity & on time)
Ability to respond
Volume and
to change
delivery
adjustments, wide
and frequently
updated product
range
Fast trough-put
Short lead-time
(time between
placing order and
delivery)

- Developing new products

Ideas from marketing/operations concept brief (=clear
statement describing the form, function, purpose and
benefits of the product)
Operational issues:
Feasibility: Can we make this? (skills, capacity,
resources..)
Vulnerability: What can go wrong? Downside risk?
Materials, parts and components will be needed?
Reduce production costs by reducing design complexity?
opportunities for:
Standardization (restricted variety)?

Commonality (using the same components)?

Modularization (using subcomponents that can be put
together in different combinations)?
How can we reduce time-to-market (time between
concept brief and launch) and roll-out (phased
introduction)?
- Managing the supply chain
First-tier supplier: A component maker
Second-tier supplier: The component makers supplier
Together upstream or supply side
First-tier customer: A distributor
Second-tier customer: The distributors customer
Together downstream or demand side
Supply chain management:
Procurement (sourcing + purchasing) from first-tier
suppliers
Material management inside the plant: inventory (stock)
management + production planning and control
Logistics (distribution) to first-tier customers
Strategic issues:
Company directly own any part of the supply chain? Yes?
vertical integration
Opting for single or multi-sourcing?
One supplier
+ good communication, economies of scale (= cost
savings from buying in large quantities)
- risks of failure of supply, supplier got the chance to
give upward pressure on prices
How much of the process can migrate to the web
(finding the best price, delivery time and specifications
trough e-procurement)?
Virtual operation: Buying a range of functions needed for a
particular project, after the project this network disappears.
speed and flexibility, but the company is left with very

few core competencies (= key areas of technical expertise)

where it retains a competitive advantage.
- Vocabulary
RFID tags: radio frequency identification
EPOS: electronic point-of-scale
OEM: original equipment manufacturer
6) Production
- Managing the production process
A plant: where manufacturing takes place (factory/facility)
Capital-intensive: requiring a lot of finance
Labour-intensive: requiring a lot of manpower
Inputs (materials, labour and informations) finished
goods, efcient? High level of productivity
Key stages:
Planning: Bring together customer demand with
operational issues of volume, timing and the purchase of
materials. Bill of materials is produced and compared
with the existing inventory purchases are made
Sequencing: Which workstation will carry out which tasks
in which order
Scheduling: When should tasks start and finish
Dispatching: The supervisor authorizes tasks to begin
Loading: Materials or parts are introduced to an
operation so it can begin
Monitoring: Checking process, eliminating bottlenecks
and identifying and solving problems
Key issues:
Control of capacity: There might be a need to ramp up
(increase) the production
Control of inventory

- Lean operations and JIT

= meet demand instantaneously with perfect quality and
no waste
How?
Minimizing the inventory (stock and WIP= Work-InProgress)
Delivering raw materials, components,.. just as they are
needed.
The throughput (rate at which work goes through the
system) is fast.
! the capacity utilization is often low (= ratio of actual
output to potential output)
Techniques (JIT Just-In-Time):
Every effort to eliminate waste
Developing working practices which support continuous
improvement
Involving all staff in quality initiatives
Using machines that are small, simple, robust and
flexible
Reducing set-up and change-over times
Incorporating manufacturing into the design process
why using them? Materials, WIP and finished goods
that are not being used = waste of time
- Quality management
What is quality? Functionnality, appearance, reliability,
durability, ease of recovery from problems and contact with
the company staff.
Measured? Quality control (taking samples and doing tests)
+ quality assurance (customer service) = TQM (Totally
Quality Management): covers the whole organization, from
more traditional areas like process control and product
testing to determining customer needs and dealing with
complaints.
International standards: ISO 9000 family and Six Sigma

- Vocabulary
/
7) Marketing strategy and product development
- Marketing strategy
Analysis of the wider business environment:
political/legal, economic, social/cultural and
technological factors (PEST)
Identification and analysis of target markets
Sales goals
Marketing budget
Marketing mix (four Ps) and their timing
Product, price, place and promotion.
Sometimes a fifth packaging: attracts the attention,
explains the benefits of the product, describes the
contents, protects the product and contributes to
convenience and ease-of-use.
Sometimes a sixth people: knowledge, skills and
personality of the pre-sales and after-sales staff who
come in contact with the customer.
Total product offer: diversity of elements that make up a
product like value-for-money (balance quality and price),
brand name and image, packaging, convenience of sales
channel, store surroundings, service, speed of delivery, the
guarantee,..
- Market research
collecting data using market research
Secondary data: information that is already available
The companys sales figures according to different
categories: customers, product lines,..
Extrernal data found in published sources like reports
from government agencies, trade associations,..
Looking at the customers buying patterns in markets
where the product is already available.
Primary data: data collected for the first time
Difcult and expensive
Efcient: exact answers to questions
Quantitative information (carrying out a survey)

Qualitative information (face-to-face interviews)

Looking at the activity of the competitors (=
benchmarking)
product range and marketing strategy
Ethnography: studying peoples behavior in natural
environments
- Market segmentation
Target market?
Industrial product: B2B Business-To-Business
Consumer product: B2C Business-To-Consumer
Products for use in hospitals, schools: B2G Business-ToGovernment
Mass market: specific market segments
Product-related: comfort, safety, luxury, good value-formoney, convenience, durability,
Demographic: age, gender, education, family,
Psychographic: attitudes, lifestyle, opinions,
Geographical: region, post code,
- Vocabulary
/
8) Distribution and promotion
- Distribution
Final link in companys supply chain
Getting the right products to the customer at the right time
Physical handling of goods, warehousing, choice of
distribution channel, choice of retail outlet and order
fulfillment (= doing something that is promised)
- The promotional mix
Personal selling:
o Prospecting: identifying the potential customer
o Approach: contacting the prospect and preparing for
the sales interview

o Presentation: features of the product, highlighting the

advantages and giving examples of satisfied
customers
o Demonstration: see the product in use
o Answering objections: customers have a chance to
express their doubts
o Closing: asking to buy
o Follow-up: processing the order quickly and efciently
o Long-term relationship: regular contact with the
customer
Advertising: use of different media
Public relations: managing publicity (information that
makes people notice a company)
Events: memorable occasions
Sponsorship: sportteams, opera,
Endorsements by celebrities
Trade promotions to retailers: stock a new product
Other: product placement in films, word-of-mouth (personal
recommendations), viral marketing (online social networking)
Guerilla marketing: all unconventional techniques (viral
marketing, free products)
- Building customer relationships

Promotion for long-term relationships with customers

Tools for developing customer relationships:
Building a brand identity: sponsorships
Frequency programmes: flyer programmes on airlines
Forming communities of buyers: chatrooms on the
internet
Afnity marketing (= attracting customers on the basis
of their other interests)
Individualized advertising: based on previous purchases
Co-marketing: toy at McDonalds that links to a new
Disney film
Using CRM software to give more personal experience
during the contact with the company

- Vocabulary
/

9) Accounting and financial statements

- Preparation of the accounts
INPUTS (= documents, purchasing documents, payroll
records, bank records, travel and entertainment records)

DATA
Processed by specialized software
recorded chronologically into journals
information from the journals transferred into ledgers (=
grootboeken), there it accumulates in specific categories
a trial balance: at the end of each accounting period
A summary of the ledger information to check whether
the figures are accurate
Used directly to prepare the main financial statements
(income statement, balance sheet, cash flow statement)
In large companies: checked by external firm that sign
off the accounts (they declare theyre correct)
Also publicly available and appear in annual reports
- Profit and Loss account
= income statement, P&L
Summarizes business activity over a period of time
Total sales (revenue) during a period and deduct the
costs related to producing that revenue
- Balance sheet
= reports the companys financial condition on a specific
date
ASSETS = LIABILITIES + SHAREHOLDERS EQUITY
Assets: anything of value owned by a business
Liabilities: amount owned to a creditor

 Shareholders equity: what remains from the assets after

all creditors theoretically been paid (share capital =
original investment and retained profit)
- Cash flow statement
Companies need a separate record of cash receipts and
cash payements
Why? Shows the real cash available to keep the business
running day to day (profits only on paper until the money
actually comes in many techniques to manipulate the
profit)
Problems:
Unexpected late payements and non payements
Unforseen costs
Unexpected drop in demand
Invested too much in fixed assets
Solutions:
Credit control: chasing overdue accounts
Stock control: keeping low levels of stock, minimizing
WIP and delivering more quickly
Expenditure control: delaying spending on capital
equipment
A sales promotion
Factoring: using an outside company to recover a debt
- Vocabulary
Revenue: income
Cost of goods sold (=direct costs): manufacturing costs,
salaries of manual workers
Operating expenses (=indirect costs): salaries of sales and
ofce staff, marketing costs
Non-operating income: profits from investments in other
companies
EBITDA: Earnings Before Interest, Tax, Depreciation and
Amortization

Earnings: profit
Depreciation: loss in value of a tangible asset
Amortization: loss in value of an intangible asset
written off
Interest: money paid to the bank for loans
Dividends: money paid to shareholders
Retained profit: -> balance sheet, joins the amounts from
previous years
Accounts receivable: amount owned to the business by
customers (creditors)
Inventory: value of raw materials and stock
Current assets: marketable securities (= shares intended
for disposal within one year)
Fixtures: part of a building that cannot be moved (eg. Light)
Fixed assets: long-term financial investments
Intangible assets: patents, trademarks and goodwill
(=reputation, contacts and expertise of companies that
have been bought)
Bank debt (=loan capital): includes overdraft (=temporary
negative balance)
Account payable: money owned to suppliers
Accrued: an expense has been incurred, but the money is
not yet paid
Provisions: appear under current liabilities. Amounts set
aside for anticipated one-time payments that are not part
of the regular operations

Mortgage: long-term bank loan to buy a property

Principal (=amount raised by issuing the bonds): repayable
to the bond holders at maturity
Share capital: amount raised at initial flotation on the stock
market
Retained profit: reserves
10) Financial markets
- Securities
= stocks, bonds and money market instruments
a. Stocks: Individual investors and financial institutions can
buy them.
Shares = stocks + privately held stakes in small firms that
are not publicly traded
Basket of stocks
Picked up by a fund manager +
put together into
A mutual fund
invest in particular countries or different sectors
track ( follow) a particular index
has an investment objective: regular income (dividend),
long-term capital growth (increase share price) or a
balance between the two.
Stock exchange ( bourse): buy and sell shares
physical location: ex. Wall Street, New York
no location: ex. NASDAQ (electronic exchange)
small selected group of stocks, brought together to
make an index: ex. Dow Jones (30 companies)
Financial analysts do research on the price, when is it
worth buying? Three main tools:
Analysis of individual companies: market position
Analysis of the national and global economy

 Technical analysis: using charts and internal market

statistics
b. Bond market:
Government of company wants to borrow a large sum of
money.
I
Issues a bond: receives the money as a loan (from an
institution or individual = the bondholder)

Original amount (= principal) is paid back over a period of

time (= maturity/ the term of the loan) + interest (=
coupon)
Entirely electronic
US government bonds: 30-year T-bond (treasury bond)
10-year T-note
European government bonds: German bond
Two grades, depending on the risks:
Investment grade: safe
High-yield or junk bonds: high-risk
Traded in open market, their price goes up & down
according to:
Inflation
Currency movements
c. Money market: short-term loans that pay interest. Buying:
T-bills from the US government
Certificates of deposit from a bank
Commercial paper from a company
- Other markets

Foreign exchange: bigger than all the securities markets

together.
buy and sell currency pairs (ex. EUR/USD)
players:
Commercial banks: the bank and client companies
Central banks: governments, trying to maintain
stability
Pension funds
huge amount of speculation if a currency fluctuates in
value:
Buying or selling foreign equities and bonds
Inflation
International trade
dealing to protect against such risks
commodity markets:
Energy
Metals
Soft commodities
- Vocabulary
US: Dow Jones, S&P 500, Nasdaq
Europe: FTSE (UK), DAX (Germany), CAC (France), MIB
(Italy) and SMI (Switzerland)
Asia: Nikkei (Japan) and Hang Seng (Hong Kong)
A booming bull rising strong bear depressed
failing weak market
To acquire buy purchase have hold own