Vocabulary for describing business relationships exercise

All companies work with other companies in some way when either buying, producing or selling the products or services which they create.

Being able to explain the relationship which either your business or the company which you work for has with other companies is important when speaking in English in many different situations (e.g. speaking with a client, in a job interview etc...).

In this online exercise on business vocabulary, I'll both show you and explain the English vocabulary used for describing the different business relationships which companies have when they work together.

Exercise: Talking about their companies

In the following conversation, two friends (Simon and John) are talking about the different relationships that the companies they work for have with other companies.

From the context, try to guess what the meaning of the words/phrases in bold are. Then do the quiz at the end to check if you are right.

Simon:'You work for a company that makes televisions, don't you John?'

John:'That's right. The fifth largest television manufacturer in the world.'

Simon:'Does your company manufacture all the parts it uses to make a television itself? You know, the electronic components and the screens etc...'

John:'The company used to make all the different parts it uses to make a television in the past. But now, apart from manufacturing the screens and the plastic cases, we purchase all the electronic components used in them from suppliers, other companies which manufacture or produce them.'

Simon:'But why does your company buy the components from suppliers?'

John:'It's basically cheaper than manufacturing them ourselves. So we have contracts with these companies, Legal agreement with them to supply us with parts we need to make our TVs.'

Simon:'So, apart from the electronic components, your company does everything else itself? It assembles all the TVs itself?'

John:'Yeah, unlike many other companies we assemble/put the TVs together in-house. We do it within the company, in our own factories, with our own employees/staff.'

Simon:'And other TV manufacturers don't assemble their televisions themselves? I can see why they would pay third-party companies to do things that they don't specialize in. But I would have thought that assembling TVs is something they would want to do themselves!'

John:'Most don't. They normally outsource the assembly to other companies to do. It sounds strange, but it's cheaper for them to pay another company to do it.'

Simon:'Where I work, they have outsourced some of the important operations as well. Human resources and accounting for the company is now done by an external company.'

John:'I know you work in a web design company. What do you do if you suddenly need more staff to work on a project?'

Simon:'We don't outsource it to another company. Normally, we temporarily contract people or a small company to help us finish it. These external contractors work with us for a couple of weeks or months until the project is done.'

John:'How do you find the external contractors to hire?'

Simon:'A lot of the times, it's people or small companies we know or have worked for us before. But sometimes we use intermediaries to find them. A company who specialise in finding external contractors with the right skills and experience for companies.'

John:'We sometimes use intermediaries at my company when we urgently need some parts or materials. It's easier and quicker for them to put us in contact with the suppliers who have them available than it is for us to do it ourselves. But they do charge a lot for the service they provide.

And if you have a large project, do you hire external contractors to help you do it?'

Simon:'We often hire them. The problem with the web design industry is that sometimes you have a lot of work and other times you have little. So to help us when we are busy, we have a verbal agreement with a couple of other web design companies that we can use some of their staff if they don't need them.'

John:'So you have a contract with them?'

Simon:'No, it's not a contract. It's like a promise. We'll help them if we can and they'll help us if they can.

But on very large projects, we normally have to work together with another company to do it. So, it's a project for both companies. We often do these joint ventures when we are doing a large project in a country we are not based in or we don't have the expertise to do all the project ourselves. So, it's better to partner with a company who does.

Does your company sell its TVs directly to customers?'

John:'No, we don't. We normally sell our products directly to retailers, like electronic stores, supermarkets etc... They order them directly from us. They then sell our televisions to customers.

Does your wife still work for McDonald's?'

Simon:'She doesn't work for McDonald's, she owns a McDonald's restaurant.'

John:'How can she own a McDonald's restaurant?'

Simon:'She owns a franchise of McDonald's. McDonald's like many other restaurant companies (and some retail chains) don't own most of the places which use their name and sell their products. Instead other people or companies both own and run them.'

John:'So how does McDonald's make any money?'

Simon:'The people who own the restaurants both have to pay McDonald's to use their brand name and purchase all the products they sell directly from McDonald's.'

Quiz:

Below is a definition/description of each of the words or phrases in bold from the above text. Now choose the word/phrase from the question's selection box which you believe answers each question. Only use one word/phrase once. Click on the "Check answers" button at the bottom of the quiz to check your answers.

When the answer is correct, two icons will appear next to the question which you can press/click on. In the first icon, , you can find extra information about the word/phrase (e.g. when, where and how to use etc...) and a Spanish translation. In the second, , is where you can listen to the word/phrase.

When two companies work together on either a project or to produce a product, they are called

Joint ventures:
(noun) A 'joint venture' is when two or more separate companies work together in partnership on something. This can be on a single project or product (e.g. building the Channel Tunnel between England and France), or they set up a separate company (e.g. Sony Ericsson before Sony took control of the company).

There are two main reasons why 'joint ventures' between companies happen. The first is because a project is too large or too risky for one company to do it by itself (e.g. the Channel Tunnel). The other reason is government intervention. Some countries (China in particular) require a foreign company to set up a 'joint venture' with a company from their country if they want to produce or sell their product in the country. A example of such a 'joint venture' in China is BMW Brilliance.

In Spanish: "operaciones/empresas conjuntas".

Joint ventures:

People hired to work within a company for a short time who are not employees, are called

External contractors:
(noun) Also called 'independent contractors', 'contractors' or sometimes 'freelancers' (but only for individuals). These are individuals or employees from another business who temporarily work in a company (within a department, team or on a project) but are not employees of that company. They are contracted, not employed by the company.

Normally, companies hire 'external contractors' when they need extra staff for a short period of time (e.g. 2 months). This could be because they are busy or they need somebody who has certain skills or expertise for one particular piece of work or project they are doing.

Although 'external contractors' are normally paid more per hour than employees of a company (and sometimes a lot more), there are many advantage to companies of hiring them. For example, they can be quickly hired, companies don't have to pay taxes for them, they don't have to train them and once their contract is over they are gone.

Using 'external contractors' is different to 'outsourcing'. With 'external contractors', they work within the company on something. With 'outsourcing', an operation or process is done outside of a company by another business.

In Spanish: "contratistas externos".

External contractors:

The different 'activities' which companies do (e.g. manufacturing, selling, paying and hiring staff etc...), are called

Operations:
(noun) Also called 'business operations' or 'business activities'. This is basically all the activities which a company does or has to do. Advertising, marketing, training, designing, manufacturing, customer services are all examples of different 'operations' that companies do.

In Spanish: "operaciones".

Operations:

When a business pays to use the brand name and sell the products of a well-known company (e.g. McDonalds), it is called a

Franchise:
(noun) Some well-known companies allow other companies (normally smaller ones) to operate under their name. For a payment/fee, a smaller company can use the brand name, sell the products and use the business model of the well-known company. When small businesses do this, they are called 'franchises'.

Each 'franchise' is a separate business and not owned by the company whose brand it is using. All profits that the 'franchise' makes go to the owners of the 'franchise' and not to the company that owns the brand name.

'franchises' are very common in the restaurant and retail sectors. Chains like Spar, McDonald's, 7-Eleven are some well-known examples of companies who use 'franchising'.

In Spanish: "franquicia".

Franchise:

Companies that sell products or services to people (e.g. Zara), are called

Retailers:
(noun) This is the name for companies who sell products directly to customers. They can either sell somebody else's products or their own. Although most 'retailers' are businesses like shops/stores (e.g. Wal-mart, Tesco, Zara etc...), some manufacturers also act as retailers (for example, Apple, Sony, Adidas etc...).

When a company sells products or services directly to another company, it is not called a 'retailer', but a 'supplier'.

In Spanish: "minoristas".

Retailers:

When an operation/activity is done inside a company by its own employees, it is called

In-house:
(adjective) This basically means that a company does something itself with its own employees. Companies have to do a lot of different operations/activities (e.g. accounting and finance, marketing, customer services, manufacturing etc...). If these operations are done by the company itself, then these would be said to be done 'in-house'. For example, 'customer services is done in-house'.

The opposite of 'in-house' is 'outsourced'. When a company 'outsources' an operation/activity, they pay another company to do it for them.

In Spanish: "en la empresa/interno".

In-house:

An arrangement/promise between between companies or people that they should do something which is not written down, is called a/an

Verbal agreement:
(noun) This is an agreement made verbally between two or more parties (companies or people) to do something. In most cases, 'verbal agreements' are not legally bidding (they are not forced to do what they agreed to by law). It's more like a promise to do something.

Unlike a 'contract' (a written legal agreement), there tend to be no legal consequences of breaking (not doing) a 'verbal agreement'.

In Spanish: "compromiso/acuerdo verbal".

Verbal agreement:

When a company pays another company to do some of its business operations/activities for them, they

Outsource:
(verb) The infinitive is 'to outsource'. This is when a particular activity/function which is normally done in a company (e.g. accounting and finance, marketing, customer services, manufacturing etc...), is given to an external company to perform/do. This external company is paid to do this business operation.

The main reason why companies 'outsource' some of their operations, is because it is cheaper. The external company who is doing the 'outsourced' operation may specialise in doing it or operate in a country where the costs are lower (e.g. India and China).

'outsourcing' (which is the noun) is different to using 'external contractors'. With 'external contractors', individuals or employees from a business work within the company on something. With 'outsourcing', an operation or process is removed and done outside of the company.

In Spanish: "externalizar".

Outsource:

Companies that sell products or services directly to other companies, are called

Suppliers:
(noun) This is the name for companies who sell products or services directly to other companies to use. They can either sell somebody else's products or their own (things they produce or manufacture).

When a company sells products or services directly to people, it is not called a 'supplier', but a 'retailer'.

In Spanish: "proveedores".

Suppliers:

10.

A legal written down agreement between companies or people that they have to do something, are called

Contracts:
(noun) This is a legal agreement between two or more parties (companies or people) that they will do something (e.g. sell/buy a quantity of a product at a certain price etc...). Most 'contracts' are written, created by legal professionals (e.g. lawyers or solicitors/attorneys) and signed by each of the parties involved.

In business, 'contracts' are commonly used to reduce the risk that companies won't do things that they have promised to each other. To ensure that they do what they promise, there are normally consequences written into the 'contract' of not abiding/complying (e.g. a payment of money).

In Spanish: "contratos".

Contracts:

11.

Companies that provide a service that connects different businesses together, are called

Intermediaries:
(noun) An 'intermediary' is a company or person that provides a service of connecting two parties (either people or companies) together. Their purpose is to enable some trade (either of goods or services) between the two. For this service, they charge a fee.

Companies normally use 'intermediaries' to find some product or service that they need (e.g. new staff etc...) or get new customers for their own products or services. Although companies can do this themselves, they often don't have the connections or expertise in doing this that 'intermediaries' do. As result, it is normally quicker and easier to just use them.

Some 'intermediaries' help both parties reach an agreement (e.g. on price), while others just connect the two and do nothing else.

In Spanish: "intermediarios".

Intermediaries:

Click to see more general business English exercises

Practice

Now that you understand this business vocabulary, practise it by creating your own sentences in English with the new words/phrases.

This is me, Chris Clayton, the owner and main writer for Blair English. I'm also a part-time English teacher in sunny Spain. I have a love of history and the web. I hope you find the website useful.