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Family Matters

For a scientist a family is a group of people, relatated to each other, who fulfill certain economic, social and cultural functions. For me it is the only place in the universe where I can always find peace, understanding and support, where I don’t have to conceal my thoughts, where my failures aren’t laughed at. Family is a symbol of tolerance and sincerity, free of cruel pragmatic relations, typical for our daily routine. Family is a unique social institute, which dates back to the dawn of civilized society. It has changed dramatically during all these centuries, but the core features remain the same. For most people it is a sacred union, giving birth to children and bringing them up. Within a family we get acquainted with a mother tongue and the outer world, we learn basic rules of social interaction and develop our own principles and world outlook. Through a family we become a part of our nation, share its heritage: culture, customs, even holidays.

Unfortunately, the global tendencies are not so bright and picturesque. The meaning of a family is constantly shrinking, which is quite obvious. Many young men and women stay single or change partners often, avoiding long-term relations. Divorce, which was a shameful act for spouses a hundred years ago, is considered to be absolutely ordinary nowadays! Such instability finds its display in family problems. I will speak on them a bit later.

And now let’s get down to work! Both happy and not so happy families begin with the same thing, this is surely love, passion to be exact. Passion cannot last long, and if it doesn’t transform into love, the family is doomed to collapse. But the first period looks charming: movie dates and romantic meetings, nice presents and exquisite compliments. Courtship may last many years and usually ends with a proposal, followed by a wedding. A colorful ceremony begins a new stage of relationships: friends become mates, which implies new rights and new duties! The further development of relationships is unpredictable: a couple may reach marital bliss or part during their honey-moon. Choosing a partner is a complicated task, and mistake is always possible.

However, many people get marriage certificates but do not get love. Marriages of convenience have become a mark of the modern world, indicating the triumph of market, where you can buy whatever you desire. I think this question should be discussed in the topic”Money matters”, as such” unions” are nothing but poor shadows of real families. Still, I know the prices for premises in Minsk. Exchanging rings for getting a cheap loan is a fair bargain…

In such cases it is better part without doing harm to each other. Americans, who are experts in financial affairs, have developed a solution. I mean the prenuptial agreement, helping spouses to divide their assets. Well, considering that about 50% of American families part, signing such a contract doesn’t seem a mad idea, although it entirely kills the romantic spirit within a family. Such unions cannot be called ideal. But is there one we can name perfect? Once I read an American story called “The perfect match”. It tells us a story of a man, who turns to an agency specializing in finding partners. They do their job well, and find a suitable woman, who has the same interests, listens to the same music and reads the same books. They like each other; they marry…The story ends with their divorce. The last phrase was:”I cannot stand it anymore!” The conclusion is obvious: perfect match is impossible; we should be ready to accept our partner’s faults as all of us are far from perfection, especially children.

Yes, children, the main source of cries and tears in a family. Today parents are unable to draw much attention to their upbringing as they spend too much time outside the home earning money. In the past women would stay at home and look after children. Nowadays most of them are employed, and their children are educated in the yard, that causes misunderstanding and misbehaving. Some people are too strict with their children, which results in escapes from home, the others are too permissive. Such behavior leads to juvenile delinquency. The dividing line between these two manners of upbringing is very faint, but there lies the optimal solution.

Other well-known problems may result from divorce, re-marriage or adopting children. They occur often, but not as typical as the generation gap. It is described by all well-known writers and considered to be an eternal problem.

World is changing, and the younger generation is likely to accept these changes, both positive and negative. Their parents usually neglect such tendencies, contradicting to their life experience, and accuse the behavior of their offsprings, which is influenced by contemporary standards. I suppose we should defend our ideas, but respect our parents’ opinion at the same time. They love us and they won’t do us harm.

To summarize, I want to say that love and mutual respect are great powers helping a family to overcome difficulties. Live in harmony with your relatives – and you will never feel alone in this huge world.

Money Matters

“Money is a good servant and a poor lord”. This idea clearly describes the contradictive nature of money. Since prehistoric times it has been an object of numerous arguments. Some people claimed that money is the Devil’s invention, driving us mad, letting well-off people control the poor. The others opposed, stating that money is the most civilized way of exchange, having no visible alternative. In spite of all this discussions it has always remained a powerful tool, an engine, motivating people and peoples to fight, to conquer and to develop. We can deny the role of crispy banknotes and cheques; we can accuse those who practice penny-pinching, but none of us will refuse to establish a profitable firm or to accept an expensive gift. Anyway, money is an irreplaceable part of the modern world, and owning it is much more preferable than owing it.

There is one problem left: everybody wants money, but money doesn’t want everybody! Earning money is a challenge; it requires creative thinking, decisiveness and ample amount of luck. Dare I say that market economy is the worst system invented by man, except all other systems! It encourages us to work, but doesn’t care about the loser of the competitive struggle. In order to roll in money we need to watch every step, take reasonable risks and anticipate the consequences of our actions. Every prosperous business begins with a sensible and simple idea, all wealth begins in mind.

Unfortunately our abilities differ. This results in a considerable gap between the rich and the poor. The existing system causes a number of negative aspects. Many families part due to economic difficulties, some have to exist beyond the poverty level. People, who are short on money, often fall into despair and even break law to make ends meet. Those who lose their job and house join the army of the homeless. Even highly developed western societies are unable to defeat poverty. Politicians cry out loud promises during election campaigns, but they remain unrealized too often. Kind-hearted rich people and charitable organizations have always done their best to help the homeless, but their achievements are rather modest. To fight the disease we should not hide its outer symptoms, we should destroy its source. Of course I don’t mean we ought to create communism: this way leads to nowhere and history has already proved it! To my mind, raising money and sharing them among the homeless is a poor idea as well, although it is widely spread. The only obvious “cure” is creating new working places and establishing re-training courses for those, who lost or didn’t have qualification, and providing the homeless with temporary dwelling. This is a matter of everybody’s concern. Even millionaires and billionaires should forget their haughtiness as luck is a lady with a poor sense of humor: it may ruin your empire in a single day.

If I had enough money I would certainly create a fund to finance different social programmes and medical research institutes. You see, I have always dreamt of becoming a doctor, but I am allergic to many medicines. However I want to contribute to this noble science! Many people while answering the question mention a private island, a 5-storey mansion a modern sea yacht and an account in the Bank of Switzerland. A waste of money, as I view it. I really detest showing off. I don’t mean I would live in a poor flat on the outskirts, but the excessive luxury leads to envy, to the loss of your friends and finally –to complete frustration, when you don’t have an idea where to spend your money! Well, there’s always an opportunity to save them!

Saving money is absolutely necessary in everyday life; it helps us purchase costly things and be ready for unexpected troubles. It is often mentioned that all people are misers, and saving money is their primary objective. Well, we often buy goods in bulk or in the Internet to pay less, but economists would name this behavior rational. Unfortunately, there are people who view penny-pinching as a sense of their life. Some millionaires give up rich life and fill their chests with useless gold, some ordinary people visit weddings and birthday parties without a present! “We are not stingy, we are thrifty!” they say. On the other hand, some people do not accept this lifestyle and become shopaholics. They always owe money, their accounts are always overdrawn, but this doesn’t really bother them. To my mind, both categories should consult a psychoanalyst.

As usual, the truth lies in the middle. We should find pleasure in the things money can buy, and not in money itself. Wealth is not a vice if it remains a tool, giving you possibilities to explore, to expand and to realize your potential!

^ It takes all sorts to make the world

Philosophers claim that every person inhabiting Earth is a small universe, having no copies and no equivalents, and I entirely share this point of view. It may sound unbelievable, but our planet hosts more than 6 billion unique people who form our society and our civilization. Points of difference are countless and include race, nationality, appearance, character, manners, social position, economic and marital status. All these features descend from natural and social factors. However I do think that diversity is the key to global progress, as every nation contributes to the development of the humanity and considerably enriches the world’s culture.

Still, most people consider appearance to be the main distinguishing feature, and this idea is rather logical, as while getting acquainted we always draw our attention to the looks, which form our first impression of the person. We may evaluate appearance using different criteria; some of them are obvious (height, figure, complexion, color of skin, hair and eyes), the others are really subjective, especially standards of beauty. I think that beauty and standard are incompatible concepts as beauty inevitably includes charisma, charm and other faint, but really important components. An attempt to describe those using standard words is a waste of time. I appreciate both tall and short people, pale and tanned faces, curly and straight hair! Of course a person should pay attention to his/her appearance in order to look smart and impress other people.

However not everyone supports my ideas. Actually each society has developed its ideal, and people often do their best to reach it. As a result some of them turn to plastic surgery to improve, as they think, their appearance. In my humble opinion, this decision is wrong. Nature is stronger than science, and poor Michael Jackson proved it! I am sure; it is easier to realize your potential through sport exercises and clothing style.

Unfortunately, appearance may be deceptive, and my personal experience includes such events. People often become victims of those, who use their appearance just to show off. That’s why I want to develop other important issues – character and personality.

These features always lay the foundation of successful long-term interaction. In comparison with appearance, which is given by nature, characters are formed by outer factors, such as upbringing, education, social environment and circle of friends. It undoubtedly depends on cultural and religious conditions. And preferable features of character vary from country to country. For example, Japanese appreciate hard-working and good-mannered people, and Belarusians are thought to be hospitable and tolerant. Some traits, for example intelligence, courage, warm-heartiness and honesty, are globally accepted. A proverb says that contrasts attract each other, but in everyday life we try to find a partner with similar ideals, beliefs and interests. It is a real challenge, as character may be deceptive as well, and even nowadays many people find its solution in astrology!

Horoscopes have gained tremendous popularity recently. We can observe them both in popular tabloids and respected broadsheets! Some people are crazy about it and believe that space rules our world. For me it sounds a bit queer as I do not believe in higher forces and mystical facts. Success or failure is a result of your activities, that’s it! Still, everyone has a chance to choose between being a master of life or a slave of stars…

But both “masters” and “slaves” face similar problems while establishing contacts abroad. Prejudices and stereotypes are hard barriers preventing us from making foreign friends or even finding business partners. All Italians are still thought to be passionate and romantic persons, all the French are perfect cooks and all the Germans are careful drivers. This facts date back to the remote facts, to the periods of isolated societies. Now, in the epoch of globalization, they lose their meaning and seem to be inaccurate. Still, they are a deep source of jokes and anecdotes, and laughter makes our life longer!

Racism is still alive in highly-developed western countries, including the USA and Germany. Women, even hardcore professionals, have serious troubles in finding a job in Eastern countries, so businessmen should be careful, choosing a foreign representative. The price for a mistake may be too high.

And to conclude I want to say that there is always a way out. The key to success is tolerance which lets us ignore cases of misunderstanding. And I believe that all the conflicts, caused by national, ethnical or religious factors, will vanish soon, and the Earth will truly become our common home!

Economics. The history of economics

Economics is truly considered to be one of the most ancient social sciences. In the prehistoric era people didn’t use to explain natural phenomena or psychological features, but they undoubtedly tried to sustain their lives using limited resources. That is the main idea of economics.

Actually, economics has a rich and complicated history, dating back to the Ancient East times. Hammurabi, a king of Babylon, offered some legal restrictions on trade or exchange operations and created laws that protected slavery. Though ancient Greeks defended the idea of natural economy, they used scientific approach to prove this position. Xenophon was the first to express the idea of the divi

sion of labor – a basic element of capitalism. Aristotle introduced the word ‘economics’ into science. He defined ‘economia’ as a correct way of producing things in agriculture and craft. He criticized wholesale trade and money-lending, saying they contradict with the natural order of things.

Mercantilism was the leading trend in the 16th-17th centuries. Usually mercantilists were rich mer

chants, who did suppose that the only source of wealth was foreign commerce. Governments affected by this theory used to imply different custom laws to protect their domestic market, which conse

quently led to conflicts and colonial wars. During the Enlightenment French philosophers created the school of physiocracy, which denied the decisive role of trade. They stated that land and productive la

bor were the keys to prosperity. They underestimated the meaning of industry as in the middle of the 18th century it wasn’t mechanized and occupied a secondary position.

The first systematic research of capitalism was done by the Scottish professor of philosophy, Adam Smith. In 1776 he published ‘^ The Wealth of Nations’, where he described the idea of the ‘invisible hand’, meaning that people, pursuing their self-interest, tend to satisfy the needs of their society as well. He developed a concept of economic man, driven by economic interest and rationality. He stud

ied international trade and demonstrated its necessity using the theory of relative advantages.

Throughout the 19th century many scientists continued Smith’s work. Among them were Thomas Malthus, John Stewart Mill, David Ricardo and Karl Marx. In fact, all of them were more than econo

mists; they were social philosophers who covered all aspects of social science. Our contemporaries usually call them Classical economists. Alfred Marshall changed the question economists ask: he fo

cused on a graphical supply-demand model, which still remains the most vivid presentation of the ex

isting economic reality.

The 20th century gave birth to many contradictory schools. One of the most influential is the one devel

oped by J. M. Keynes, a famous English economist. He was inspired by the Great depression and sug

gested that interference of state is required to overcome the failures of market economy. He studied mac

roeconomic processes (inflation and unemployment) and supposed that the best way to cope with them is to stimulate aggregate demand through governmental orders. These ideas are still very popular in many countries including Belarus, where we have a developed public sector. Monetarism is also worth being mentioned. Representatives of this school defend the idea of the uncontrolled market economy. They think government should only control the emission of money and provide public goods. Actually, modern economists often combine the ideas of these schools in their practical activity in order to achieve better results.

However, most theories have the same definition of the subject. Economics is the study of how people, individually and collectively, allocate their limited resources to solve the problem of scarcity. It is a complex science, combining mathematical, logical and psychological methods. Economics analyses the allocation of resources, the processes of production, distribution and consumption, finds economic laws and principles, offers practical ways to solve economic problems. Economic theories follow the development of market structures, which are becoming more and more complex every year, which is caused by technological advancements, competition and globalization. Researchers and businessmen offer new ways to reduce costs and to increase profits, but the application of these methods is a real challenge, requiring talent, ambition and patience. That’s why modern economists specialize in different areas of the science in order to achieve better performance. Nowadays we speak of nanoeconomics (studies the behavior of a single consumer), microeconomics, mesoeconomics (analyses large branches of industry), macroeconomics, international economics etc.

Macroeconomics is the study of behavior of the economy as a whole with emphasis on the factors that determine growth and fluctuations in output, employment and the level of prices. The mentioned features form what is called ‘business climate’. Events studied by macroeconomics are largely beyond the control of individual decision makers and affect the entire economic system. Macroeconomics enables to predict financial booms, recessions and business cycles, to plan strategic policy. Specialists in macroeconomics are deeply interested in understanding those factors that determine instability factors: inflation, unemployment and economic growth. This knowledge is extremely important, as many negative consequences descend from insufficiently considered actions taken by the government. Among them are economic problems (low demand, devaluation of savings and bank accounts) and social troubles (increase in crime, deskilling and political crises). All this determines the great role of macroeconomics.

Nevertheless, we cannot forget about the second main sector of economic theory. Microeconomics may be defined as the study of behavior of individual units within the economy. So, the main objects of analysis are firms, enterprises and households. Microeconomics tries to explain the decisions taken by economic units and to create a scheme of adequate actions. It solves the basic questions each society faces: ‘what to produce?’ ‘how to produce?’ ‘how to distribute goods?’ in the most efficient way.

Of course, these two approaches and the topics they cover are interdependent. Households and businesses make their decisions in the context of the economic environment, which has an impact on the constraints the decision makers face as well as their expectations about the future. Macroeconomic equilibrium provides an inflow of foreign and domestic investment stimulates the financial system, raises the standards of living. At the same time, when taken as a whole, the decisions of individuals determine the condition of the overall economy: taxes paid by entrepreneurs and custom duties form the state budget which is used to support social programs, rational behavior of a single producer or trader boosts the entire system. A good understanding of economic events and an ability to forecast them require knowledge of both individual decision making and the way in which individuals react to changes in the economic environment.

Systems. Economic system

Actually, the word ‘system’ is an irreplaceable part of our daily vocabulary. People use it to express different meanings: we may speak of medical systems, communication systems, economic systems, defense systems, educational systems. All of us exist within cultural and social systems. But we hardly think of the very meaning of the word ‘system’. It originates from the Greek word ‘systema’, which meant ‘a whole made of parts’. Nowadays it is a strict logical notion denoting things, made of parts which somehow interact with each other for some purpose or reason. A system is an organized or complex whole - an assemblage or combination of things or parts performing as a complex or unitary whole. Systematic approach is a universal scientific method, which can be easily applied to animate or inanimate objects, that’s why both social and natural sciences use this concept, and economics is no exception.

There are many ways to characterize systems. Mathematicians divide them into 4 groups: small systems (up to 1000 components; a group of students), complex systems (up to 10.000.000 components; a phone net in a city), ultra complex systems (up to parts, economic and social systems) and super systems (planets, galaxies etc). There are systems with parallel and sequential structure, with hard or soft connections of the elements. In fact, all these classifications are rather relative, as real-world systems combine features of the opposite theoretical models.

The definition of a system implies several important ideas. First it the concept of interdependency. If a change occurs in one part or set of parts, it affects all other parts of the system. This affect on each part may be direct on indirect. Still, there are some systems where this influence is considerably reduced. It concerns parallel manufacturing systems, in which a damage of one link is not a fatal accident.

A second implication of the definition of a system is the concept of wholism. This means that the system should be considered as a functioning whole. Changes in parts of the system and in the functioning of elements of the system should be considered from the standpoint of the system's overall performance.

A third concept implied by the definition is synergism. This refers to the interactive effect of the parts of the system working together. The actual interaction of the parts creates an effect which is greater than the effect of the parts acting separately. However, sometimes we come across systems, which weaken the individual potential of their components due to poor organization.

Economic system may not be called an independent formation. It is a multidimensional space, a crossing of two greater systems – natural and social. Economic system is a certain combination of interconnected and specifically regulated elements of economy. Societies use economic systems to allocate scarce resources and to distribute goods in the most efficient way. Economic systems vary from region to region; they depend on the legislation and historical tradition. The main distinguishing features are the dominating form of property, the mechanism, regulating economic choices and the level of governmental interference. Using these criteria we may speak of private enterprise (it means that decisions about what and how much to produce are left to the discretion of owners and managers) and controlled economies, in which such decisions are the responsibility of some governmental institution. It is quite obvious, that real economies are neither fully-free nor fully-controlled. Even the countries with highly-developed market structures accept the necessity of the public sector. There are many beneficial services and protections available from the government. Those include equal conditions and fair competition, subsidies, long-term loans and the policy of protectionism. Government is an influential player in the game of life.

However, market economy may be unambiguously named the basis of economic prosperity. But what makes this system so effective? One of the answers was suggested more than 200 years ago by Adam Smith, a founder of modern economics. He used to analyze the interaction between demand for and supply of goods, and came to a striking conclusion. Smith proved that all people, while maximizing their own satisfaction, achieve the best good for society. The philosopher compared this law with an ‘invisible hand’, driving the whole market economy. The idea became really popular among his contemporaries, who developed the concept of economic man. This notion holds that each person is motivated by economic forces. Such people try to obtain the greatest amount of satisfaction for the least amount of sacrifice. This attempt may take the form of greater profits for a businessman, higher wages for a worker and greater pleasure from goods purchased for a consumer. Economic man is able to risk, to predict opportunities and threats, to think rationally and innovatively in order to get competitive advantages. Of course, all these assumptions are not entirely correct. People may be motivated by forces other than self-interest; they may have limited access to information or personal preferences. Still, the idea of economic man is a reasonable approximation of a prevailing pattern of economic behavior in a capitalistic society.

But both capitalistic and socialistic systems perfom the same principal functions. First, a system provides some means of recourse allocation. In a private enterprise this function is basically performed by the price mechanism. This simply means that demand for and supply of goods and services interact to set their market price. Price is the source of information, telling a consumer about the costs required to manufacture this or that object. In the case of regulated utilities, there are governmental agencies such as public service commissions that determine the rates that may be charged by utility companies. These rates are set at the level that will allow a fair return on investments made by the companies. This form of regulated monopoly is considered, on balance, preferable to unchecked competition, from society’s standpoint. This is true because of efficiency reasons. Sometimes governmental monopolies are allowed to set higher prices, in this case the state usually takes indirect measures to provide help to its citizens. In taking actions in the area of employment, government is attempting to control the economy in such a fashion as to help the business community operate at the level of production that will yield full employment. Actually, full employment doesn’t mean that all the people have jobs. Full employment implies the existence of frictional and structural unemployment.

Without a system of distribution economy simply could not exist. A major part of this distribution system is credit. Economy flourishes on credit or extended methods of payment. Such a system literally affects every link in the distribution chain from the supplier of raw materials to the ultimate consumer. Without this vital financing function being performed, the economy would doubtless be forced to a lower order of production. Credit system is a complex construction. It combines private and state finance, accumulated by banks, investment funds or insurance companies. Unfortunately, this system is not very stable and sensitive to political and social events. Economic crises are usually initiated by crashes of banks or stock exchanges, what makes credit system a matter of governmental concern.

Economic goals for a nation include price stability, full employment, economic growth, equitable distribution of income, economic liberty, economic efficiency and many others. Each country has developed its set of prior objectives and carries out a specific economic policy. Besides, some of the goals are contradictive, and a society should be ready to sacrifice. Price stability contributes to the efficient allocation of credit resources and facilitates long-term planning. Full employment means that jobs are available for those seeking work, and these jobs correspond to the employees’ qualification. Higher standards of living require increased output per person (economic growth per capita). An equitable distribution of income means that the fruits of the economy are divided in a way that seems fair to the majority of the people. Unfortunately, we can observe numerous results of badly-prepared economic decisions, emanating from political ambitions and lack of knowledge. While creating a long-term policy, a government should analyze the experience of other countries and the business environment in their own state. Only carefulness and intelligence can lead a nation to well-being and prosperity.

Business Environment

Subjects of any economic system are linked with many structures, institutions and relations, which belong to other complexes. With the long-run trend toward a more sophisticated, highly integrated economic system, it is becoming increasingly important for an individual decision maker to be aware of the macroeconomic environment.

^ Macro environment is the network of systems composed of culture, political and economic forces, technology, skill, mixes-and consumer groups. Widely speaking it’s a set of interdependent systems which makes a region more or less suitable for a particular way of economic activity. Macro environment is a source of opportunities, prospects and constraints for organizations and consumers. Once the organization has launched its product or defined its service, it must distribute it to consumer client groups who have wants and needs that they attempt to satisfy through the consumption of such products and services. Every organization exists within an extensive and complex environmental network. Organizational environment refers to all groups, norms, and conditions with which an organization must deal. It includes such things as the political, cultural, economic, religious, educational, and like systems that affect an organization and which in turn affected by it.

Culture, composed of values, norms, artifacts, and accepted behavior patterns, affects the way the organization is formed and how it operates once in existence. Indeed, one must recognize that all of the decisions made in an organization are culture bound, which means, they are a reflection of all these components of culture. Societal norms are those standards that mold behavior, attitudes, and values of those members who constitute a society. They come from laws customs, religious teachings, and common practice. They are standards because members lake them into account in their decisions and behavior. Dress, speech, what is considered to be in good taste, and the general understanding of what is right and wrong are all affected by societal norms. At the same time, almost every institution in a society is capable of transfusing some of its values, norms, and behavior patterns into its environment. Organizations can hardly afford to ignore such a vital ingredient in its macro environment. It seems ridiculous to sell ultra-fashionable women clothes in a Muslim country or to establish a network of beefsteak shops in India, where most people don’t consume meat due to religious reasons. Modern multinational companies take it into consideration and organize their marketing policy in the way which better corresponds to cultural and ethical traditions.

Political forces are classified as the form and role of government in a society. The source of law and other regulations that restrict or at least affect the organization, the political system also is the source of a rich variety of services for the organization. These services range from fire and police protection to the provision of recreational areas. When one thinks of the governmental sector, one might be likely lo think of its negative connotation and red tape. Although there is an element of restriction originating from the political sector, it is by no means dominant in most countries. The experience of the Soviet Union and other controlled economies has revealed that excessive governmental interference inevitably leads to economic collapse.

Even though the presence of the political system has served to complicate management's job, it has also made it easier at the same time. By knowing that all similar organizations must observe the same rules and regulations, managers can experience an element of certainty in their activity. They know that they have a source of protection and redress when violations do occur. They also receive support during economic recessions and continue functioning without bearing losses. The political system usually encourages international cooperation and attracts reliable partners.

The political system is coupled with the economic system. The type of economy a society has can range from private enterprise to planned economy. Whatever its form, the economic system is concerned with the allocation of scarce resources and (lie provision of some form of distribution. It is, in practice, quite difficult to separate the political and economic systems from each other. Large corporations often influence political leaders and give a push to the most profitable economic solutions. Politicians also interfere with the economic system in order to achieve best good for the society. Scientists speak about so-called state-monopoly capitalism, meaning that state is an integrate part of modern economies.

The macro environment is also the source of technology—the machines, techniques, and methods required for production and distribution. To be able to compete successfully, organizations must have access to modern technology. It is simply not feasible or an organization to compete unless 

an adequate level of technology is available to it. It can be safely stated that organization success is measured by the ability of the organization to adjust to and to employ technological innovations.

Among their responsibilities, managers today must count the obligation to maintain a spirit of creativity and ingenuity among members so that continued progress on the technological front can be made. The ever-growing shortages of resources of all types are but one indication of the seriousness of this obligation. Of course, technological improvements require financial infusions, but in most cases it is the only way to achieve manufacturing efficiency and protect your position on the market.

Skill mix in the labor force is likewise an important facet of an organization's macro environment. All organizations depend to some extent on a supply of labor that possesses the skill and ability to perform the work necessary to attain objectives. Consequently, labor market conditions and skill mixes are crucial to success. Many western businesses allocate their industries in the 3rd world countries, where they have access to cheaper labor force. The others believe in quality and image and employ qualified specialists. The decision strongly depends on the style of management.

The consumers are the ultimate arbiters of the organization's success, for it is they who make the critical choices to consume or not to consume an organization's output. Without the income (in whatever form) that results from this consumption, the organization is doomed to a relatively short life. This means that managers must be more aware of and sensitive to the total environmental complex of their organization in order to develop and implement plans for successfully coping with it.

Otherwise, there is little chance for success, for no longer will yesterday's methods based on a placid environment serve in today's turbulent outside world.

Organizations. Organizational Climate.

If you define man as a social creature, you won’t be mistaken. The most vivid distin

guishing feature we possess is the ability to interact and to cooperate. Our ancestors, as well as our contemporaries, had no sharp teeth, strong paws or night-vision. They had to put up with the idea that they were unable to accomplish many tasks that required more than in

dividual effort, e.g. hunting predators or making a fire. Still cave people managed to struggle with the hostile environment using intellingence and group work. The result was that many impressive goals could be attained. The necessity for group activity, discovered at dawn of our history, evolved together with the humanity, and nowadays we may claim that the en

tire social structure is based on numerous organizations.

So, people cooperate and create compound unions, which give an increase in both quantity and quality aspects. Such a system of group relationships built upon and fostering coopera

tion, then, is basically the meaning of an organization. We may also define the sys

tem through its parts: the human element, the physical element, the work ele

ment, and the coordination element. The most general description sounds like this: “Organization is an open, dynamic, purposeful so

cial system of cooperation designed to enhance individual effort aimed at goal accomplishment, which transforms resources into out

puts for users.

Good understanding implies meticulous research. To penetrate into the whole configura

tion we should pay attention to its separate parts. The most typical list of components in modern conceptions is as follows: goals, work, power and authority, delegation, structure.

Sometimes we come across wrong opinions that organization is any accidental gathering of interacting people. Chaotic crowds or packs unite people, who undoubtedly interact, but they are subordinate to blind will or fear and on no account should we call them organizations. Organizations are intermediaries for pooling talent and ability into an effective whole that can accomplish some desired objective, or a goal. The goal or purpose is an imaginary state or condition that the members of some unit do not possess but which they find desirable. It is imperative that goals be clearly defined to all members who are to be affected by them; otherwise we may observe the lack of motivation or interpersonal conflicts within a company. Goals are the starting point for the development and further functioning of the organization itself. At the same time, supply is affected by demand, and any goals must meet a need that society has defined as important. Commercial and “not-for-profit” organizations have to comply with basic social values, political and cultural traditions; otherwise their existence will be useless and won’t last long.

Once the goal of an organization is established, it is time for its participants to develop an optimal algorithm of operations, maximizing its efficiency. Basi

cally, any organization must perform two fundamental types of work: primary and secondary. The division is not very strict and, to some extent, subjective as modern organizations may focus on a great number of interdependent problems and the only criterion enabling to succeed is equal attention paid to all the elements involved. However, the primary, or line work includes pro

duction and distribution of goods and services that directly satisfy consumer needs. The secondary work (it is often termed staff work) consists of all those activities that maintain and extend the operations of primary work. For ex

ample, in a manufacturing firm, the secondary work would include accounting, personnel and quality control, asset management and security. The complexity of this structure is not so rigid and may vary for different entities.

Technology itself is nothing without a proper set of controlling actions. No theoretical model of organizations would be complete without a treatment of the roles that power and authority play in or

ganizational activity, and practice tells this idea is correct. Even communists, who are great admirers of equality, accept the idea that different functions within a company must be shared in accordance with personal abilities. These two notions help to explain the network of relationships that tie the other components of an organization together into some logical pattern.

Power is the ability to influence others successfully. It descends from any single or combination of possible sources. For example, one can have power over others because of one's intelligence, education, social status, physical strength, skill or money. Regardless of its source, power enables its holder to exercise one's will over others. In fact, everyone who is influenced by an outer factor like power becomes an object of manipulation. In some cases (I mean absolute power) people may be viewed as “talking tools”, and the analysis of such groups ends in the leader’s tactical and strategic preferences, without taking the others’ opinions into consideration.

Authority can be defined as power that has been given formal support by the organization. Once an organiza

tion legally authorizes an individual to act on its behalf, that person is said to possess authority. Every member of the organization has, or at least should have some amount of authority to 

perform necessary actions to carry out his responsibility. Surely, many organizations insist on centralizing authority in order to stick to the chosen course and to act decisively in critical situations, but the others provide their members with a broad range of rights, which is essential for development and creativity. Both ways have pros, contras and side effects, and the final decision strongly depends on a vast number of factors.

An effective system of power may lead to economic success and consequential rise in level of production. The processes of growth and expansion do result in the ne

cessity to divide the work of the organization into sub-units or groups. Each of these groups will be under the guidance of a manager or managers. Each manager is granted appropriate responsibility and authority to put the company’s strategy into practice. This policy is usually termed delega

tion. In general, delegation may be defined as the process of transferring an obligation (responsibility) and an accom

panying right (authority) from a superior to a subordinate position within the organization. It is this basic process that enables an organization to grow and not to bury itself in bureaucratic affairs. Delegation allows people to reveal their managerial abilities; it is the way to transfer specialized duties to hardcore professionals and to boost the firm’s performance. Without delegation, an organization transforms into a lying log: it can exist, but cannot move, and the example of the USSR, where delegation was not spread, has proved it.

The last, but not the least important issue is structure. Structure is the hierarchical pattern of authority responsibility, and accountability relationships designed to provide coordination of the work of the organization. It can be compared with the skeleton of the organizational body. The ideas of hierarchy of authority and the differentiation of responsibility of the line (doers) and the staff (the advisors) are fairly ancient and origin from the clergymen and military leaders, who were faced with the need to manage large aggregations of human and material capital. Organizations create an officially sanctioned structure known as the formal organization or de jure organization, specified in the official documents.

A formal organization doesn’t provide us with all the interactions in a company. There is a series of informal or de facto relationships, which are not imposed by the management. These include informal work groupings of employees, informal leaders, informal channels of com

munication and informal power and status differentials. The meaning of such formations sometimes overcomes the official structure, as people always tend to break artificial restrictions. As I view it, companies may use these informal relations, as violence never ends in success, and cooperation may greatly improve the psychological atmosphere in the company. Of course, I don’t mean that managers should encourage collective sabotage or absenteeism initiated by informal chiefs…

The structure I described above is rather stable, but in some cases a temporary, ad hoc, or

ganization may be created. The organization exists to reach a certain goal or set of goals and disbands once the goal is achieved. The scale of such groups differs from international financial consortiums to student clubs, designed for mutual copying at the exam…

All these elements are interconnected and create specific long-term patterns of organizational behavior - organizational climate. It is the overall favorability of member attitudes and percep

tions with reference to specific activities and features of an organization.

Organizations tend to have a kind of internal culture: a mix of values, attitudes, norms, habits, traditions, behaviors and rituals. In Belarus, due to the soviet past, such traditions are nearly neglected, but many foreign companies view their culture as a powerful strategic tool, used to direct all units and individuals toward common goals, motivate employees to create, ensure loyalty, and fa

cilitate communication. They aim at creating a culture of their own and making sure that all employees understand it and adhere to it. This culture may involve many elements, the most important of which are:

the organization's mission (high technolo

gies and innovations, superior quality, ecological and ethical policy);

the treatment of people (concern for people and their needs, equitable treatment, re

spect for individual rights, training and promotion oppor

tunities, the means of motivating people);

the importance of different management positions, style of management (importance of different vice-presidents' positions; the role of middle and line management; respective role and authority of research and development);

decision making process (who decides; who has to be consulted; individual or collective decision making; need to reach consensus);

circulation and sharing of information (employees amply or poorly informed; information readily shared or not);

communication pattern (preference for oral or written communication; rigidity or flexibility in 

using established channels, use of meetings);

socialization patterns (who socializes with whom during and after work; facilities such as separate dining rooms or reserved clubs);

identification with the organization (manager and staff adherence to company objectives and policies; enjoying working with organization).

So, we are able to observe that corporate culture reminds the typical social organization, and large organizations can even impose their traditions to the society. This proves that organizations form an irreplacible part of contemporary world, as each of us is a mere link in the great chain of production.

People in organizations. Entrepreneurs.

One can hardly argue with the statement that our planet host a great number of unique residents. Actually, all people considerably differ in intelligence, skills, appearance, character, manners, motivation, social position, economic and marital status, affected by inborn or external factors. Although philosophers proclaimed the idea of global equality many centuries ago, it still remains a tempting myth, as it doesn’t correlate with the true human nature. The unexpectedly long list of points of diversity is sometimes considered as the key to global evolution, but for an economist it is a source of opportunities, prospects and potential threats, as businesses co-exist in a hostile competitive environment, where the human capital can easily tip the balance. We already mentioned that an organization is a community of different people who work on the same problem. Therefore, many scientists have developed some abstract models, describing a typical person, which explain how to control large aggregations of people effectively and with maximum gain. Douglas McGregor systematized their conclusions and offered two main theories, which defend different approaches, concerning the human nature and, in turn, the optimal managerial style.

The first theory (or even a class of theories) is usually referred to as theory X. The theory supports the traditional view on our psychology and claims that negative attitude to work is a universal people’s quality. Developing the thought, we may say the average person is innately lazy, irresponsible, selfish, ignorant and security oriented. It allows to conclude that most people are fully indif

ferent to the needs of the entity they work for, and their independent actions inevitably lead to undesirable consequences. Because of these characteristics, the average person must be threatened, co

erced, and controlled. In fact, the vast majority of people prefer to be di

rected and controlled in exchange for security and complete absence of responsibility. Because people are basically cunning and immature, management should experience lit

tle difficulty in using an authoritative and manipulative style of overall supervision.

Still, putting this exquisite sequence of actions into practice, many directors faced some obvious difficulties. The facts were relentless: the theory had to be upgraded. That’s why McGregor offered another solution, now known as theory Y. It is based on the opposite initial assumptions – people hate work because of the excessive interference of managers into their activity! According to theory Y, everyone has a capacity for developing interest in his/her work and for working effectively without external control. At first sight the concept may sound revolutionary, but with every new year it is becoming more and more popular with managers of different levels.

Referring to these theories, we should always bear in mind: statistic calculations rarely meet real-world situations, and Average is a statistical concept, and while creating staff policy we should not forget about individual approach – probable, the most feasible variant available.

Nevertheless, choosing a managerial style doesn’t put an end to all problems. The labor market is overfilled with millions of CVs and offers. To find a necessary candidate in this torrent of information, a company needs to develop a system of requirements, which can shorten the list of applicants. The most widely accepted patterns are a job description and job speci

fication. The former is a broad statement of the purpose, scope, duties and responsibilities of a particular job, whereas the latter includes a detailed statement of the physical and mental activities involved in the job. The specification usually includes concrete terms of behaviour the worker should follow. As I see it, a job description helps to attract initial applicants, and a job specification helps to differentiate among them and to employ the most suitable ones.

Creating a job specification in the Middle Ages, where only 100 crafts existed, was not a bothering task. But nowadays a great variety of specializations makes it a real challenge. Usually we speak of 5 categories, covering a considerable part of this range of skills.

Unskilled. Many jobs do not require any special training or previous experience, for example cargo carrying, dishwashing or assem

bly work. These occupations are often repetitive and boring, whereas the wages are relatively low.

Mechanical or motor skills. Some types of actions cannot be performed by people who lack these qualities. I mean operating industrial machinery, blacksmithing, tailoring and many other jobs.

Still nowadays manufacturing processes are becoming more complex, and some workers need intelligence and knowledge, which is the 3rd group. Also people with such skills are often employed in the non-productive sector and work as teachers, lawyers, scientists. The importance of knowledge is very high, as it leads to innovation and creativity, which results in better performance.

The skills I described above may be developed by training or attending an educational institution. But managerial skill is truly a rare inborn ability. It requires not only pure knowledge, but some creative ways to motivate people and organize their work effectively. That is why a good manager is often an irreplaceable specialist, hunted by a number of respectable firms.

The last type of skills is closely connected with the previous one. Making decisions is a daily routine of a top-level manager; it requires rationality, ability to risk, to calculate various options and to foresee the consequences of your actions. What can be said exactly is that such specialists (stock traders, anti-crisis managers etc.) are widely demanded in many economic areas, especially in the private sector.

When saying “private sector” we usually mean companies, owned by entrepreneurs. They are people who organize and manage their own business. Entrepreneurs form a limited social group, and not due to legal restrictions (most governments encourage entrepreneurship!). A great deal of people are satisfied with a nine-to-five exis

tence, security and assured weekly paychecks. The entrepreneur desires financial independence, achieved by a well-thought strategy and calculated risks. They usually enjoy freedom and even become addicted to it. In order not to go out of business, entrepreneurs do scrupulous planning, establish contacts with partners or competitors and consider all factors which may have potential impact on their firms. Such an active way of life is simply unacceptable for an average person, and entrepreneurship remains a privilege of creative and decisive people.

Activities performed by entrepreneurs are uncountable, as they are stimulated by demand, which tends to fluctuate, following macroeconomic situation, fashion or customers’ preferences. So are the personal features of the businessmen. Actually, entrepreneurs are a thick layer, uniting people of different age, sex, religion, people with different education and starting opportunities. Business may bring prosperity to a 15-yar old boy, an owner of an internet-shop, or to a 90-year old man, an owner of an insurance company. Still, the research, carried out by American investigators, helps to fathom the factors crucial for success.

First, most prosperous businessmen are men. The quantity of women in this area is growing, as it is an attractive way to get rid of men, on which women traditionally depended, but the total number is still low. Then, most of them have positive relation with their parents (who else can provide you with advice or financial assistance?) and began business at the early age (an arguable statement for our country, where starting business by a young pupil is a miracle). Moreover, businessmen raised their start-up capital with the help of bank loans and received proper fundamental education, adding theoretical knowledge to their practical skills.

Other features are much less determined and may vary in different regions. So, most entrepreneurs are middle-aged people, who already have experience and still possess creativity. Probably, they are active and sociable people, who like ventures and who are always ready to act in fast-changing circumstances. Their initial investments may vary from $100 to $1000000; a common sum is between $20000 and $50000 (although nowadays these statistics seem wrong due to constant inflation and weakening of the US dollar). Normally such start-up capital is not enough to establish a manufacturing firm, so the most popular sphere for newcomers is retailing (it’s chosen by 50% of businessmen). Retailing is not only cheap to start, but also offers stable demand, minimized risks and fast payback, but the high competition makes entrepreneurs improve their business, which sometimes results in expanding to a manufacturing or service company.

To conclude we may say that entrepreneurship is an engine of modern market economies, a source of original ideas, innovation and lower prices for customers. We don’t have to worry, whether our demands may be satisfied, till initiative people keep entering a dangerous, but very attractive sphere of business.

International Business and Trade

International business relations are much older than we usually think. The epoch of global economy began, when prehistoric hunters first reached a tribe of prehistoric farmers and exchanged their products. Nowadays we define international business as all business transactions, involving 2 or more countries, and such a wide notion brings us to the idea, that international business is an extremely complex system, including different types of activities. Typically for market economy, people or organizations, involved in foreign business affairs, aim to maximize their profits, but the rule doesn’t work when we speak about governments, which may be motivated not only by profit prospects, but by other forces, like supporting financial stability or acquiring irreplaceable goods, needed to satisfy some vital social needs.

When describing a phenomenon, we should analyze its reasons. Fortunately, economic theory has already completed this task, and signed out three major factors, making firms to pursue international business. They are sales expansion, resource acquisition and diversification.

The first reason is easily explained, as even in huge countries domestic market is limited by the number of population, and for some categories it’s much narrower. Many developing states have constructed high-tech industries with the help of western investments and sell the products to other countries, as local population simply cannot afford them! Generally, even if you have a plenty of rich customers, you are still interested in entering a foreign market. There an organization may become a monopolist, which allows to set price above the market. Another strategy is applicable, when the demand for the particular good is elastic. By reducing its price and expanding its sales, a company makes a higher profit, and customers are satisfied with cheap goods available on the market. Many TNCs follow this business scheme and sell more than 50% of their production abroad.

But before selling goods, you need to produce them. Process of production implies combining different resources and transforming them into the output. Internal resources markets may offer an unacceptable price, and some kinds of resources may inaccessible at all! That’s why large companies, like petroleum refiners, fully exist on imported raw materials. However, in most cases, searching for outer supplies is motivated by making higher profits. Multinationals establish their plants in the 3rd world countries, due to the cheaper labor force and favorable legislation. It can surely poorly affect the quality of goods, but for the manufacturer the potential use exceeds this small disadvantage.

And even having a reliable supplier or market, a company should be aware of unexpected troubles. A strike or a natural cataclysm may put an end to its prosperity. To avoid wild swings in their sales and profits, many companies start international activity. For example, some companies use the fact, that business cycles in different countries don’t match and always keep their sales stable. Another reason to diversify the sources of supplies is a potential probability of a resource shock, when a monopoly supplier can set any price, and your company will have to accept it or just go out of business. In case a company cooperates with a number of foreign partners, they are likely to reduce the price in the competitive struggle.

I already mentioned that international business includes an impressive number of economic activities. Companies must choose among them, and in making these choices, the companies' own objectives and resources as well as the environments in which the firms operate should be considered.

The major sources of interna

tional revenue and expenditure for most countries are exporting and importing of goods, also known as merchandise exports and imports. These goods are often called visibles due to their material nature. Most companies operating in the international sphere chose this operational form, as it requires the least commitment and implies fewer risks. This activity brings stable income and rarely abandoned when a firm adopts other business form.

Service exports and imports refer to international earnings other than those from goods sent to another country. It is a very wide concept, as many types of services are available on the market. The most well-known is tourism and transportation. Transportation may bring revenues not only to private airlines or railways, but to entire states, which own transit ways or pipelines. For some countries tourism is the main way of forming a state budget.

Fees are another form of earnings from international activities. They are payments for the per

formance of such services as banking, insur

ance, rentals, engineering, and management. For example, a country may rent land abroad to construct military facilities on it, and order constructing these objects to a foreign company, which will later transfer the ready buildings to the owner. Providing international managerial consulting has also become a popular trend recently.

Surprisingly, but a company can make profits without performing any actions! I mean receiving royalties – payments for use of assets from abroad (copyrights, trademarks, patents etc.) Royalties are also paid for franchising, a way of doing business in which one party (the franchisor) sells an independent party (the franchisee) the use of a trademark that is an essential asset for the franchisee's busi

ness. In addition, the franchisor assists on a continuing basis in the operation of the business, such as by providing components, manage

rial services, or technology. Franchising is a good way of expansion for an exporting firm, as it requires much less investment.

In case a company needs investment, it may also turn to the international community. Foreign investors provide financial infusions in exchange for control of an organization. The degree of control may vary from supervision to complete ownership, if an investor purchases a controlling interest. Some companies may combine their efforts and form a joint venture, in order to increase profits and share risks.

The highest rank a company may achieve in foreign business is the multinational enterprise. They are huge companies with incredible financial resources, which employ thousands of people and act worldwide. Modern economies are greatly influenced by TNCs, which often have enough power to affect governments and impose their corporate philosophy.

Discussing the facts, connected with international business, we hardly think of the fact that many millenniums our ancestors lived without any trade relations. So why do nations trade? The answer lies in the principle of rationality – production of goods should be as effective as possible and should consume the minimum amount of resources. Really, nations have different quantities and qualities of economic resources and different ways of combining them. Theoretically, we may grow bananas in Minsk or produce gold from air, but the alternative costs of such actions will be too high. A country should specialize on goods and services; it can produce with relatively low alternative costs and imports the others from abroad. Sometimes governments try to beat fundamental laws of economics and order to produce all types of goods within their country’s economy, which may result in tremendous expenditures and low quality of these substitutes.

However, despite the fact the international trade can bring considerable benefits, all countries impose restrictions of one form or another to protect some of their domestic industries. Governments have to provide employment, stable salaries and sufficient living standards, whereas the motto of the free market is “Let the loser cry”. International practice usually includes the following types of restrictions: tariffs, import quotas, nontariff barriers. Tariffs are customs duties or taxes imposed by a government on the importation of a good. Tariffs maybe specific, in the form of a tax per unit of the commodity, or ad valorem, based on the value of the commodity. Reasonable taxes, as well as moderate inflation, are useful for economies, but I don’t know how to explain the 50- 100% taxes on goods, which are not produced in a country. Fortunately, it usually concerns luxurious goods and may be viewed a tax on the rich. Import quotas are laws that limit the number of units of a commodity that may be imported during a specified period. Practice says they are often violated with the help of shadow economy. The most exquisite way to say “no” to foreign traders is to impose nontariff barriers. They are laws or regulations, other than tariffs, that nations impose in order to restrict imports. For instance, many countries establish higher standards of quality or ecological standards for various kinds of imported goods than for similar goods produced domestically.

So, international business is a maelstrom, where different people, nations and views interact. This process is contradictive, but we know that the truth is always born when contrasts meet. Let us hope, that people continue to multiply their wealth by trade, and not by missiles and machine guns.

Types of Business Organizations.

Western world designed the system of market economy, and nowadays we are not only its masters, but also its products. Modern outlooks are strongly affected by Smith’s ideas of ‘economic man’, but the behaviour of consumers not always plays the conclusive role. Our demands are satisfied through a system of governmental and commercial institutions, which have different objectives, different form and content.

A business organization is frequently referred to as a business entity. A business entity is any business organi

zation that exists as an economic unit. In fact, it unites 2 narrower concepts: an enterprise and a firm. When we say enterprise we usually mean the production facility which fulfils one or more specific functions concerning manufacturing and distribution of goods. A firm is an organization which owns an enterprise or a network of enterprises. Business entities can be groupped according to the assortment of goods/services, to the area of capital application etc. Still all the firms may be separated with the help of three criteria: type of business activity they perform, pattern of ownership and concentration of capital.

Modern capitalist enterprises are highly specialized and always aim to diversify their product. However, they may be subdivided into three categories:

-^ Service companies perform services for a fee. This group includes companies such as accounting firms, law firms, repair shops, and many others. This sector employs most people in highly developed countries but is poorly developed in the third world.

-Merchandising companies purchase goods that are ready for sale and sell them to customers. They include such companies as auto dealerships, clothing stores, supermarkets and retail outlets, E-commerce firms. Most newcomers, especially with the limited start-up capital, begin their career in the sphere of trade.

-^ Manufacturing companies buy materials, convert them into products, and then sell the products to the com

panies or to the final customer. Examples are steelworks, auto manufacturers or milk plants. Actually, it has a very important role, as its products satisfy people’s primary needs and provides them with comfortable surroundings. Nowadays the number of people employed by such businesses is constantly shrinking as they prefer to reduce salary costs and automatize their conveyer lines.

The business entity concept applies to all forms of busi

nesses. About 150 years ago almost every firm belonged to single individuals, but in the end of the 19th century an industrial boom happened, and the need for financial infusion caused people to join their capital and form larger firms. This processes created the structure we observe today, where different types of businesses co-exist in a competitive struggle.

A single (sole) proprietorship is still widely spread. It is a business owned by an individual and often managed by that same individual. Single proprietors include traders, physicians, lawyers, electricians, plumbers, drivers and other people who are 'in business for themselves'. In a single proprietorship, the owner is responsible for all debts of the business. Operating as a proprietorship is the easiest way to get started in a business activity. The process of organization and liquidation is quite simple, and the owner is ready to react to this or that market situation very fast. All they need to launch a business is a local license, and the system of taxation is more than favorable. Despite this perks, sole proprietors often experience difficulties in getting a bank loan or expanding their business, that’s why they form another firm called a partnership.

A partnership is a business owned by two or more persons associated as partners. Partnerships are created by an agreement. Included in the agreement are such terms as the initial investment of each partner, the duties of each partner, and the means of dividing profits or losses between the partners each year, and the settlement to be made upon the death or withdrawal of a partner. Sometimes entrepreneurs unite and form a legal entity, but in most cases their partnership is just an expansion of the sole proprietorship. It inherits both positive and negative aspects. Still, partnerships produce at lower costs due to the larger output and may share managerial functions among the members. The most vivid negative side is a potential probability of conflicts, which often results in bankruptcy. Accountants, attor

neys, and other professionals frequently operate their firms as partnerships.

Sometimes partnerships evolve into limited liability companies, which provide much more opportunities and reduce threats. In case this entity goes bankrupt, its founders only lose the capital 

they invested in the firm, without risking their personal assets. Such businesses are widespread in most countries, including Belarus.

^ A corporation is a business owned by a few persons or by thousands of persons. The owners of the corporation are called shareholders or stockholders. They buy shares of stock, and the company’s profit (or losses) is shared among these people. If the corporation fails, the owners lose only the amount they paid for their stock. The personal assets of the owner are protected from the creditors of the corporation. The stockholders usually do not directly manage the corporation (although in some cases they do); they elect a board of directors to represent their in

terests. The board of directors select the president and vice-president, who manage the corporation for the stockholders and are accountable to them.

Sometimes economists speak of state enterprises, defining its 2 specific features:

  • they are owned and controlled by governmental structures

  • they not only maximize profit, but also aim to satisfy public needs, which may even lead to constant losses

Sometimes these entities are fully unprofitable and are financed from the state budget. Schools, hospitals, jails and orphanages belong to this category.

As we see, all companies operate in the system, where the possibility of a failure is undoubtedly high. That is why larger businesses prefer to act as limited liability companies. That means that their owners are only responsible for the investment they have done, and in case of going bankrupt they won’t lose their personal assets. Sometimes businessmen still risk their savings, but only to a certain degree, which makes a form of a limited liability company very popular and widespread. In Great Britain another form of limited companies are companies limited by guarantee. They are usually non-profit organizations like sport unions, students’ clubs and charities, which actually do not have shareholders, but have members, who guarantee the company’s financial stability. It is not spread in other countries.

We already mentioned such type of business as a corporation. However, it includes many sub-categories, and the most vivid distinguishing criterion is the way it gains its share capital. Most firms are public limited companies, whose shares can be bought or sold publicly. When forming a plc, you should have at least 50000 pounds of share capital, 2 shareholders, 2 directors and the trading certificate, allowing you to do business and borrow capital. Nowadays the process of registration is very simple and most companies are formed through the electronic systems. Public limited companies are often large corporation, which enter stock markets in order to gain additional financial resources. Another widespread type of business is a private limited company, whose shares cannot be freely distributed. Transfers of shares are usually regulated by individual agreements, and the initial share capital may be very low – 1 pound in Britain, i.e. Private companies have limited possibilities for further development, that’s why they are often reorganized into public companies. Fortunately, the legislation of the Western world doesn’t complicate this process.

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