Reading Comprehension Home Exercise – 15 PASSAGE – A

The modern multinational corporation is described as having originated when the owner – managers of nineteenth- century British firms carrying on international trade were replaced by teams of salaried managers organized into hierarchies. Increases in the volume of transactions in such firms are commonly believed to have necessitated this structural change. Nineteenth- century inventions like the steamship and the telegraph, by facilitating coordination of managerial activities, are described as key factors. Sixteenth- and seventeenth –century chartered trading companies, despite the international scope of their activities, are usually considered irrelevant to this discussion: the volume of their activities, are assumed to have been too low and the communications and transport of their day too primitive to make comparisons with modern multinationals interesting.

In reality, however, early trading companies successfully purchased and outfitted ships built and operated offices and warehouses, manufactured trade goods for use abroad, maintained trading posts and production facilities overseas, procured goods for import, and sold those goods both at home and in other countries. The large volume of transactions associated with these activities seems to have necessitated hierarchical management structures well before the advent of modern communications and transportation. For example, in the Hudson’s Bay Company, each far- flung trading outpost was managed by a salaried agent, who carries out the trade with the Native Americans, managed day- today operations, and oversaw the post’s workers and servants. One chief agent, answerable to the Court of directions in London though the correspondence committee was appointed with control over all of the agents on the bay.

The early trading companies did differ strikingly from modern multinationals in many respects. The depended heavily on the national governments of their home countries and thus characteristically heavily on the national governments of heir home countries and thus characteristically acted aboard to promote national interests. Their top managers were typically owners with a substantial minority share, whereas senior managers’ holdings in modern multinationals is are usually insignificant. They operated in a preindustrial world, grafting a system of capitalist international trade onto a premodern system of artisan and peasant production. Despite these differences, however, early trading companies organized effectively in remarkably modern ways and merit further study as analogues of more modern structures.

1.       The author’s main point is that

A.      Modern multinationals originated in the sixteenth and seventeenth centuries with the establishment of chartered trading companies

B.      The success of early chartered trading companies, like that of modern multinationals depended primarily on their ability to carry out complex operations.

C.      Early chartered trading companies should be more seriously considered by scholars studying the origins of modern multinationals.

D.      Scholars are quite mistaken concerning the origins of modern multinationals

2.       According to the passage, early charted trading companies are usually described as

A.      Irrelevant to a discussion of the origins of the modern multinational corporation

B.      Interesting but ultimately too unusual to be good subjects for economic study

C.      Analogues of nineteenth – century British trading firms

D.      Rudimentary and very early forms of the modern multinational corporation

3.       It can be inferred from the passage that the author would characterize the activities engaged  in by early chartered trading companies as being

A.      Complex enough in scope to require a substantial amount of planning and coordination enough in scope to require a substantial amount of planning and coordination on the part management

B.      Too simple to be considered similar to those of a modern multinational corporation

C.      As intricate as those carried out by the largest multinational corporations today

D.      Often unprofitable due to slow communications and unreliable means of transportation

4.       The author lists the various activities of early chartered trading companies in order to

A.      Analyze the various ways in which these activities contributed to changes in management  structure in such companies

B.      Demonstrate that the volume of business  transactions of such companies exceeded that of earlier firms

C.      Refute the view that the volume of business undertaken by such companies was relatively low

D.      Emphasize the international scope of these companies’ operations

Answer:

1.       C      To understand the main point of the whole passage, review what the author does in each paragraph. The first paragraph presents the genera; view that he conditions in which early trading companies operated were too primitive to make a comparison to modern multinational corporations interesting. The second paragraph corrects this impression by citing their complex activities, and the third paragraph, after reminding the reader of important differences between them, closes by saying that early trading companies merit further study as analogues of more modern structures. The author’s main point is to show that an interesting comparison between early trading companies and modern multinational companies exists and deserves further study.

2.       A   The question uses the phrase according to the passage, indicating that he answer is explicitly states in the passage. In the first paragraph, early trading companies are called irrelevant to at discussion about the origins of modern multinational corporations.

3.       A     Look at the beginning of the second paragraph. The previous paragraph had ended with the prevailing dismissal of these companies as unimportant. The author begins the second paragraph with a transitional expression, in reality, however, to emphasize a contrasting point of view. The first sentence lists an impressive array of complex activities and then the author notes that the large volume of transactions associated with these activities seems to have necessitated hierarchical management structures. The author believes the complex activities of the early companies required a multi- leveled management structure to oversee them.

4.       C    The previous paragraph closes with the point of view, not shared by the author, that the volume of transaction of these early companies is assumed to be low. The author immediately contradicts this evaluation and counters it by listing the activities the trading companies actually engaged in, noting the large volume of transactions associated with these activities. Thus, the author includes this list in order to attack the common assumption that the volume of business transactions was low.