Unit 9 – Exercises

I. Match the words on the left with the words on the right.

1. make / reject / accept / improve / a. a code of practice

retract f
b. a controlling interest
1. buy up some
c. a deal
2. subscribe to / follow / ignore
d. activity / industry
3. an unregulated
e. unwanted subsidiary
4. do / close
f. an offer / a bid
5. gain
g. our position in the market
6. consolidate
h. shares / smaller companies
7. sell off an
1. make / reject / accept / improve / retract an offer / a bid
2. buy up some shares / smaller companies
3. subscribe to / follow / ignore code of practice
4. an unregulated activity / industry
5. do / close a deal
6. gain a controlling interest
7. consolidate our position in the market
8. sell off an unwanted subsidiary
II. Choose the best word from each pair in bold type.
1. Anderson Accounting has been taken over / taken up by Berlin Brothers.
2. Collins Corporation has made a bid / play for Dacher Deutsche
3. The board of Dacher Deutsche rejected / denied Collins Corporation's offer.
4. Eastern Electricity has joined / merged with Grampian Gas
5. Inter-tek has been sold by its father / parent company, Harrison Holdings.
6. Inter-tek has been acquired / got by Johnson & Johnson
7. Harrison Holdings is expected to sell more of its subsidiaries / children in the future.
III. Put the words below into the correct spaces.

conditional bid controlling interest hostile takeover

merger "poison pill" shareholder
target company unconditional bid "white knight"

Takeover bids
In a takeover bid, another person or business makes an offer to the (1)
shareholders to buy their shares at a fixed price. The aim of this is to take control of the
(2) target company.
If it is a welcome takeover bid, the directors of the company advise the shareholders to
accept the offer. If the shareholders accept the offer, the result is usually called a (3)
merger.
If the bid is unwelcome, the directors advise the shareholders against accepting it. The
bidders may then write to the shareholders explaining the advantages of the takeover, and
perhaps improving the offer for the shares. This is known as a (4) hostile takeover bid.
To avoid an unwelcome takeover bid, the directors may devise a (5)
"poison pill" a tactic that will mean the company is worth much less if the takeover bid
is successful.
Alternatively, they may look for a (6) "white knight", an alternative bidder for the
company whose takeover would be more welcome.
In an (7) unconditional bid, the bidder offers a price for each share regardless of how
many shares it can buy. In a (8) conditional bid, the offer price depends on the bidder
being able to buy enough shares to gain a (9) controlling interest in the target company.

IV. Choose the best word to go into space.

1. Berlin Brothers bought a shareholding in Anderson Accounting.
a. more-than-half b. biggest c. majority
2. In the UK, mergers and acquisitions are not by the government.
a. controlled b. checked c. regulated
3. However, they are subject to a voluntary .
a. code of conduct b. code of practice c. way of doing things
4. Buying a company for less than the value of its assets, then selling those assets to
make a profit is called .
a. asset stripping b. profiteering c. exploitation
5. Sometimes a controlling interest in a company is bought by its managers. This called a
management .
a. buy-out b. buy-up c. buy-in
6. In the past, a lot of small banks were by larger ones.
a. bought up b. eaten up c. chewed up
7. In other words, there was in the banking industry.
a. amalgamation b. combining c. consolidation
8. A takeover of a foreign company is known as a deal.
a. cross-boundary b. cross-border c. cross-state

Unit 9 - Practice
I. Gap-Filling
1. A merger is a combination of two or more firms, often comparable in size, in which all
but one ceases to exist legally.
2. Firms are merged in the same industries (horizontal) or different industries
(conglomerate) and on their positions in the corporate value chain (vertical).
3. A vertical merger is when a company merges with another company in an immediately-
related stage of production and distribution
4. The acquisition of a food products firm by a computer firm would be considered a
conglomerate acquisition.
5. The combination of Coca-Cola and Pepsi would be a horizontal merger.
6. Acquisition of a target company by an acquirer/bidder with the consent or approval of
the management and board of directors of the target company is called friendly acquisition.
7. Unfriendly takeover attempt by a company or raider that is strongly resisted by the
management and the board of directors of the target firm is called hostile acquisition.
8. Reverse acquisition means that a smaller firm will acquire management control of a
larger and/or longer-established company and retain the name of the latter for the post-
acquisition combined.
II. Q&A
1. Why is there a high percentage of failure in mergers and acquisitions?
● Overpayment due to over-estimating synergy: acquiring company pays too much for
the target company based on expected synergies that may not materialize as
projected.
● Slow pace of integration: Refers to difficulties in merging the operations, systems,
and cultures of the two companies
● Poor strategy
● Differences in culture: cultural barriers, clash of cultures.
● Over-optimism: managers are just too optimistic about prospects for the enlarged
group;
● Unrealistic expectations about the future success of the new company: unrealistic
assumptions about the future performance, growth, or market position of the
combined entity.
● The way the two companies are combined: methods used to integrate the operations,
resources, and personnel of the two companies.
2. What are the reasons behind a horizontal merger?
● To reduce competition: By merging with a competitor, a company can reduce the
number of competitors in the market.
● To increase market share: Merger helps a company quickly expand its customer base
and market presence
● To acquire additional plants and equipment: This can enhance production capacity
and efficiency without expense of building new facilities
● To achieve synergy and economies of scales: Synergy: combined company will be
more efficient than the individual companies operating separately. Economies of
scale occur when increased production leads to lower fixed costs per unit
3. What are the reasons behind a vertical merger?
● To guarantee the supply and cost of raw materials and components.
● To be closer to the customers, by cutting out the wholesaler for example and dealing
directly with the retail trade.
III. Essay Writing
1. What are the reasons for companies to merge with each other?
To gain market shares
To reduce costs of production (economies of scale)
● Larger companies enjoy cost savings and competitive advantages that smaller
companies usually don't.
Acquire new technologies/expertise
● Acquisition of knowledge in the form of intellectual property in technology
companies.
 ● Companies are often on the lookout to acquire other companies which give them
new technologies and expertise.
● In the next decade, as the energy transition continues, we can expect many of the oil
and gas majors to begin investing in renewable energy firms, for example.
● Examples: Over the course of the last decade, Google has acquired over 30 artificial
intelligence (Al) startups, acquiring a range of capabilities in a technology that is set
to be hugely influential in the years ahead
Expand to new territories-geographical diversification
● acquire a cash-generating entity that already exists and use it as a platform for your
own company's growth in a foreign country
● It is easier to gain a foothold in a different geography by M&A rather than starting
from scratch
Synergies
● market expansion, production diversification, and R&D activities are only a few
factors that can create revenue synergies
● a successful merger may result in economies of scale, access to new technologies,
and even elimination of certain costs. All these events may improve the cost
structure of a company.
Increase efficiency and profits
Grow revenues
● a consolidated entity will secure a higher financial capacity that can be employed in
further business development processes.
Taxation purpose
If a company generates significant taxable income, it can merge with a company with
substantial carry forward tax losses. After the merger, the total tax liability of the
consolidated company will be much lower than the tax liability of the independent
company.
 REVISION (Unit 4 - Unit 9)
Part 1: GAP FILLING
Unit 4:
1. Export/ import financing in which a bank acts as an intermediary without accepting
financial risk is called documentary collection.
2. A document ordering an importer to pay an exporter a specified sum or money at a
specified time is called a (an) draft/bill of exchange.
3. Export/ import financing in which the importer's bank issues a document stating that the
bank will pay the exporter when the exporter fulfills the terms of the document is called
(an) letter of credit.
4. A contract between the exporter and carrier that specifies destination and shipping
costs of the merchandise is called a(n) bill of lading.
5. Export/import financing in which an exporter ships merchandise and later bills the
importer for its value is called open account.
6. Export/import financing in which an importer pays an exporter for merchandise before
it is shipped is called advance payment.
Unit 5:
1. Efforts by a company to reach distribution channels and target customer through
communications such as personal selling, advertising, public relations, and direct
marketing are called its promotional mix
2. A promotional strategy designed to create buyer demand that will encourage channel
members to stock a company's product is called a pull strategy
3. A push strategy is a promotional strategy designed to pressure channel members to
carry a product and promote it to final users.
4. The process of sending promotional messages about products to target markets is
called marketing communication.
5. Dual extension method extends the same home-market product and marketing
promotion into target markets.
6. Under product extension, communication adaptation method, a company extends the
same product into new target markets but alters its promotion.
7. Under product adaptation, communication extension method, a company adapts its
product to the requirements of the international market while retaining the product's
original marketing communication.
8. Dual adaptation method adapts both the product and its marketing communication
to suit the target market.
9. Planning, implementing, and controlling the physical flow of a product from its point of
origin to its point of consumption is called distribution.
10. The physical path that a product follows on its way to customers is called a
distribution channel.
11. An exclusive channel is one in which a manufacturer grants the right to sell its product
to only one or a limited number of resellers.
12. An intensive channel is one in which a producer grants the right to sell its product to
many resellers.
13. A/An channel length refers to the number of intermediaries between the producer
and the buyer.
14. The value of a product relative to its weight and volume is called its value density.
15. A pricing policy in which one selling price is established for all international markets
is called worldwide pricing.
16. A pricing policy in which a product has a different selling price in export markets
than it has in the home market is called dual pricing.
17. A(An) transfer price is the price charged for products sold between a company's
divisions or subsidiaries.
18. A free-market price that unrelated parties charge one another for a specific product is
called a(n) arm's length price.
19. Counter marketing is the attempt to destroy unwholesome demand for products that
are considered undesirable, e.g. cigarettes, drugs, handguns, or extremist political parties.
20. Conversional marketing is the difficult task of reversing negative demand, eg. for
dental work, or hiring disabled people
21. Stimulational marketing is necessary where there's no demand, which often happens
with new products and services.
22. Developmental marketing involves developing a product or service for which there is
clearly a talent demand, eg. a non-polluting and fuel-efficient car.
23. Synchro marketing involves altering the times pattern of irregular demand, eg. for
public transport between rush hours, or for ski resorts in the summer.
24. Remarketing involves revitalizing falling demand, for example, for churches, inner
city areas, or aging film stars.
25. Demarketing is the attempt (by governments rather than private businesses) to reduce
overfull demand, permanently or temporarily, eg. for some roads and bridges during rush
hours.
26. Maintenance marketing is a matter of retaining a current (may be full) level of
demand, in the face of competition or changing tastes.
Unit 6:
1. Outbound logistics is the process related to the storage and movement of the final
product and the related information flows from the end of the production line to the end
user.
2. Inbound logistics is the flow, or management, of goods into a production unit or
warehouse.
3. Logistics is the management of the flow of goods, information and other resources,
between the point of origin and the point of consumption.
4. Supply chain is a network of facilities that performs the function of procurement of
materials, transformation of these materials into finished products, and the distribution of
these products to customers.
5. Logistics management is a part of supply chain management, which plans, implements,
and controls the flow and storage of goods between the point of origin and the point of
consumption.
6. Custom clearance is the act of passing goods through customs so that they can enter or
leave the country.
7. Inventory contains the raw materials, the work in process and all the finished products
of a supply chain.
8. Transportation is the movement of product from one location to another as it makes its
way from the beginning of a supply chain to the customer's hand.
9. Supply chain management is the management of materials, information, and finances as
they move in a process from supplier to consumer.
10. Reverse logistics is the process of moving products from end-user back to the origin to
recover value or for proper disposal.
Unit 7:
1. The company will indemnify the policy-holder against loss of or damage to the insured
vehicle
2. Ships' cargoes are covered by marine insurance policies.
3. Insurance policy is a standard form contract between the insured and the insurer, which
determines the claims that the insurer is legally required to pay.
4. Premium is payment to the insurance company to buy a policy and to keep it in force.
5. General average is the losses/ damages caused by special expenses and sacrifices that
intentionally and reasonably conducted to save the vessel, cargo and freight from a threat in
the common ocean voyage.
6. The party to an insurance arrangement who undertakes to indemnity for losses is the
insurer.
7. The insured is the person or entity buying the insurance and receiving indemnity on
happening of unforeseen events.
8. The person, group, or property for which an insurance policy is issued is the subject
matter insured.
9. Insurance is a contract whereby, in return for the payment of premium by the insured,
the insurers pay the financial losses suffered by the insured as a result of the occurrence of
unforeseen events.
10. Marine insurance covers the loss or damage of ships, cargo, terminals, and any
transport or property by which cargo is transferred, acquired, or held between the points of
origin and final destination.
Unit 9:
1. A merger is a combination of two or more firms, often comparable in size, in which all
but one ceases to exist legally.
2. Firms are merged in the same industries (horizontal) or different industries
(conglomerate) and on their positions in the corporate value chain (vertical).
3. A vertical merger is when a company merges with another company in an immediately-
related stage of production and distribution
4. The acquisition of a food products firm by a computer firm would be considered a
conglomerate acquisition.
5. The combination of Coca-Cola and Pepsi would be a horizontal merger.
6. Acquisition of a target company by an acquirer/bidder with the consent or approval of
the management and board of directors of the target company is called friendly acquisition.
7. Unfriendly takeover attempt by a company or raider that is strongly resisted by the
management and the board of directors of the target firm is called hostile acquisition.
8. Reverse acquisition means that a smaller firm will acquire management control of a
larger and/or longer-established company and retain the name of the latter for the post-
acquisition combined.
Part 2. Questions
Unit 4
1. What are the roles of banks in the four common payment methods?
- Active role: Banks get involved in the payment process, supporting both exporters
and importers - L/C - check the accuracy of documents and guarantee payment.
- Passive role: Transfer documents and funds - Open Account, DC, Advance payment

2. What is the difference between documents against payment (D/P) and documents
against acceptance (D/A)?
- D/P: The buyer can only receive the documents once he has paid the sight draft.
The seller retains title to and control over the goods until he gets paym ent.
- D/A: The buyer can get the documents just by accepting payment on a future date.
The buyer writes the word “ACCEPTED” on the draft and signs it

3. How does a documentary collection differ from a letter of credit as a means of

financing international trade?
- Documentary Collection: The bank acts as an intermediary. The banks do not verify
documents, take risks, nor guarantee payment. The banks just control the flow of
documents
- L/C provides increased to both exporters and importers so long as they fulfill their
obligations. The bank not only verifies the document accuracy and authenticity but
also guarantees payment

4. When do people use the 4 payment methods?

- Open Account: 2 sides have long-established trading relation
- Advance Payment: 2 sides are unfamiliar
- L/C: The issuing bank’s credit is questionable. The exporter needs an L/C to obtain
financing
- DC: There is ongoing business between the parties

Unit 5:
1. What is the difference between selling concept and marketing concept?
- Selling: Persuading the customers to buy products that you already have, rather
than producing new products which customers may want
- Marketing: Finding out what kinds of products customers want and then produce
them (Finding wants and filling them)

2. Distinguish need, want, demand.

- Needs are basic human requirements
- Wants are needs for specific objects which might satisfy the need
- Demands are wants for specific products backed by an ability to pay

3. Identify at least four factors that influence a company's product policies in

international markets.
- Companies adapt their products to suit cultural differences
- Although companies keep their brand name consistent across markets, they often
create new product names or modify the existing ones to suit local preferences
-The image of a nation where a company is located that designs, manufacturers, or
assemble a product influences buyer’s perceptions of quality and reliability
- Shortened product life cycles are affecting the timing of when to market
internationally
4. Briefly describe the difference between a push strategy and a pull strategy. What
are some factors that affect the choice of an appropriate strategy?
- Pull strategy: A promotional strategy designed to create buyer demand that will
encourage channel members to stock a company’s product
Eg: Creating customer demand through direct marketing techniques is a common
example of a pull strategy
- Push strategy: A promotional strategy designed to pressure channel members to
carry a product and promote it to the final users of the product
Eg: A push strategy is used by manufacturers of all sorts products commonly sold
through grocery and department stores

5. What are the five generic strategies for blending product and promotional policies
for international markets? Describe each briefly.
- Product, communications extension (dual extension) extends the same home-
market product and marketing promotion into the target market
- Product extension, communication adaptation extends the same product into the
target market but alters its promotion
- Product adaptation, communications extension adapts its product to the
requirements of the international market while retaining a product’s original
marketing communication
- Product, communications adaptation (dual adaptation) adapts both its product and
marketing communication to suit the target market
- Product invention requires that an entirely new product be developed for the target
market

6. What is the difference between exclusive and intensive channels of distribution?

Give an example of a product sold through each.
- An exclusive channel is one in which a manufacturer grants the right to sell its
product to only one or limited number of resellers
Eg: New car dealerships, for example, in most countries reflect the exclusive
distribution. Thus Honda dealers cannot normally sell Toyotas, and Chysler dealers
cannot sell Fords
- An intensive channel is one in which a producer grants the right to sell its product
to many resellers
Eg: Large companies whose products are sold through department and grocery
stores typically take an intensive channel approach to distribution

Unit 6:
1. What are the major benefits of efficient logistics operations
- Cost-savings
- Faster fulfillment of orders
- Improved cash flows
- Optimized distribution

2. What may cargo handling services include?

- Cargo collection and consolidation
- Cargo forwarding
- Transit warehousing
- Cargo tracing and tracking
- Documentation handling
- Customs clearance

3. What are the five major logistics activities?

- Demand forecasting/Planning
- Material handling
- Logistics communications
- Inventory management
- Customer service

4. What business functions does the supply chain involve?

- These functions involve not only logistics, transportation, and warehousing but also
sourcing and procurement, manufacturing, materials handling, forecasting, order
processing, inventory management, and customer service

Unit 7
1. Why is marine insurance required?
- Exporters and importers face all the time uncertainties of their goods
- Insurance is used to protect their financial interests against such risks and actual
losses
- Without adequate insurance and protection of the interests of those with goods in
transit, international trade would be negatively affected
- Liability of carriers to the goods is very limited

- High probability of risks occurring in voyage

- Carrier’s liability is very limited
- Marine cargo insurance is a custom in international trade
- It provides insurance cover in respect of loss of or damage to the goods during
transit

2. What are the risks excluded from a marine insurance policy?

- delay
- Wear and tear
- Inherence vice
- Ullage
- Willful misconduct of the assured

3. What documents are typically requested for marine insurance claims?

- original policy or certificate
- Invoices and packing specifications
- Original bill of lading or other transport document
- Survey report or other evidence of loss or damage
-Landing account/weight notes at destination
- Any correspondence with the carrier/other parties

Unit 9:
1. Why is there a high percentage of failure in mergers and acquisitions?
- Overpayment due to over-estimating synergy
- Slow pace of integration
- Poor strategy
- Differences in culture: cultural barriers, clash of cultures
- Over optimism: managers are too optimistic about prospects for the enlarged group
- Unrealistic expectations about the future success of the new company
- The way the two companies are combined

2. What are the reasons behind a horizontal merger?

- To reduce competition
- To increase market share
- To acquire additional plants and equipment
- To achieve synergy and economies of scales

3. What are the reasons behind a vertical merger?

- To guarantee the supply and cost of raw materials and components
- To be closer to customers, by cutting the wholesaler for example and dealing
directly with the retail trade

Part 3: Essay
Unit 4: Why is letter of credit the commonest method of payment in international trade?
Unit 5: How important is Marketing to society?
Unit 6: What are the benefits of supply chain management?
Unit 7: Why do businesses insure their goods against risks?
Unit 9: What are the reasons for companies to merge with each other?