I. Read the following text and be ready to summarise the main idea.
Text 1. Giant Leap Forward For The Sportswear Outsider
When Italy played the Czech Republic in the football World Cup one man had a smile on his face whatever the outcome. For Jochen Zeitz, chief executive of Puma, the meeting of the two teams - both with a leaping cat logo on their kit - marks the entry for the German group into football's mainstream.
World Cup affords Puma its greatest ever level of exposure. Amazingly it has trumped its two far larger rivals - Nike and Adidas - and sponsors the highest number of teams in the competition: 12 of the 32 (Nike has eight, Adidas six). Irrespective of results, this means Puma's teams are guaranteed to be in at least half of all games.
All this is extraordinary progress for a company that was all but dead in 1993 when Mr Zeitz took over at the age of 29, making him Germany's youngest chief executive. Its products were found mainly in discount stores and sports retailers found it hard to take the company seriously.
Like the marathon runner he is, Mr Zeitz took the long route, quickly putting the group on an even keel before beginning the slow job of rebuilding the brand and taking the bold step of repositioning it for more fashion-focused consumers.
Puma, with annual sales of about 2bn (£1.4bn), now has the highest profit margins in the industry - at a level more normally identified with luxury goods groups.
"It is night and day," Mr Zeitz says comparing the company as he found it with the company Puma is now. Speaking at its headquarters in Herzogenaurach, the tiny Bavarian town it shares with rival Adidas, he adds: "We are a global company now, no longer German. I mean, can you imagine, when I got here we had what was called an 'export manager' and he couldn't even speak English."
Mr Zeitz lets out a small laugh, something fairly unusual for this serious, often almost dour, manager. He obviously prefers to get on with things rather than sitting around explaining them. For example, Mr Zeitz will go to only a couple of World Cup games as he views all the travelling and waiting as a poor use of his time.
Nevertheless, the story of how he revolutionised Puma and made it one of the world's best known brands sounds remarkably straightforward on retelling.
When he took over, the company was close to going bust and was controlled by its 12 creditor banks. It had not stuck to a budget in eight years and the idea of a profit was an elusive one.
"It was pretty bad. Morale was down a lot. The brand was sleeping," he says.
The first step - before he could tackle the brand issues - was to stop the cash bleed and turn a profit. Mr Zeitz cut costs brutally and moved most of Puma's production swiftly out of Europe to Asia. Within six months - a year ahead of schedule - Puma was in profit.
The restructuring was the initial part of what Mr Zeitz called phase one. Like the Soviet Union, he is a fan of five-year plans. The difference at Puma - currently at the start of phase four, where the aim is to double sales to 3.5bn and possibly make some small acquisitions - is that they have worked.
Four years of record earnings followed the restructuring and by 1998 Mr Zeitz was prepared for phase two - investing in the brand again.
"We invested pretty much all our profitability in marketing. It was during the Asian crisis and others were pulling out but that just meant we could do more," he says.
What came out of intensive discussions on how to position Puma was an entirely new concept in the sporting goods sector - that of sports lifestyle.
Previously brands such as Nike and Adidas had been focused on getting the best athletes to wear their products. Puma's goal was to keep a sporting element but add fashion to the mix.
The first coup was getting Jil Sander to become the first fashion designer to design for a sporting goods company. This was accompanied by Puma's assumption of full control over its US subsidiary.
"Of course when you do something new you take a risk, but it paid off big time, and that is what you do when you try to be an entrepreneur," says Mr Zeitz.
Puma's marketing goal, he explains, was always to make the biggest impact with as small an outlay as possible. It used sponsorships deals with selected athletes - such as the sleeveless football shirts worn by Cameroon or branding the contact lenses worn by runner Linford Christie - to gain huge exposure. Puma got involved in skateboarding contests and disc-jockey events to target a new type of consumer for sporting goods.
The outsider approach continues to this day. For the World Cup, Puma is resisting the high levels of marketing expenditure of its rivals Adidas and Nike, each committed to an estimated 200m for the tournament. Instead its promotional activity includes a tram travelling round Berlin emblazoned with "United for Africa" - a nod to Puma's sponsorship of all five African teams in the competition.
There is sound marketing rationale behind all this, Mr Zeitz says. As a relatively small company the best way to grow the brand is to attract the trendsetters first. "You have to convince the innovators, the early adopters. Then the brand gets to a tipping point," he says. Once these are on board you can, in the marketing jargon, sell your products on to the early majority. Mr Zeitz puts himself in this category, saying he often gets overruled on whether a product is cool or not.
At the centre of this approach stands the consumer. This may sound self-evident but too often the real focus of consumer companies are competitors and winning market share.
"We always define our goals not by comparing ourselves against our competitors but by asking what you want to achieve with the consumer. You can't sustain market share if you don't excite the consumer."
To make that work, Mr Zeitz says, first you have to have the brand position absolutely clear. "The brand is like a human being - you can't rationalise it. But what you say is 'What do I want to do with Puma as a personality?', and then with each idea you think, 'Do I like that? Does it make sense?' "
Ideas for new products can come from anywhere. Puma employs brand scouts around the world to check out the latest fashions, marketing people bring another perspective (Cameroon's sleeveless shirts came out of a query by Filip Trulsson, head of football marketing, as to whether football jerseys needed sleeves under the rules). Mr Zeitz says the role of management is to channel creativity.
"There should be at most two steps before a product is judged rather than endless controlling of it. The people who design can very quickly get a decision whether to go ahead with it or not."
Part of Puma's success is also down to its internationalisation. Workers come from all over the world and it has three headquarters - in Herzogenaurach, Boston in the US and Hong Kong. Manufacturing is entirely in Asia - something that Mr Zeitz is unapologetic about. "What is the alternative? The good news is that allegations over cheap labour haven't been made against Puma for years. We have independent NGOs who do the monitoring."
So what is next for Puma? The World Cup offers it a good platform and Mr Zeitz is setting his sights high, given that the Puma brand is now so widely recognised: "The brand has grown up. Now we have to make it an iconic brand, something only a few have achieved."
II. Answer the following questions:
1. How has Puma trumped its two far larger rivals - Nike and Adidas?
2. What is implied by the underlined phrases in the following sentence Like the marathon runner he is, Mr Zeitz took the long route, quickly putting the group on an even keel?
3. What is meant by the phrase 'export manager'?
4. Why had not Mr. Zeits stuck to a budget in eight years and the idea of a profit was an elusive one for him?
5. What was the first step before he could tackle the brand issues?
6. What was the initial part of what Mr Zeitz called phase one?
7. What was Puma's goal and what was Puma's marketing goal?
8. What is the best way to grow the brand?
9. Does the consumer stand at the centre of this approach?
10. Can a company sustain the market share if it doesn't excite the consumer?
11. Is the part of Puma's success also down to its internationalisation?
III. Match the word from column A with its explanation in column B:
a. to reverse the decision of a person or organisation with less power
b. something acquired, often to add to a collection
c. to maintain or continue for a period of time
d. difficult to find or catch
e. checking a broadcast for acceptable quality or content
f. sullen and unfriendly
g. to deal with the problem or task in a determined way
h. model, exemplary
i. money gained in business or trade
j. an unproved assertion or accusation
k. to decorate with a coat of arms, slogan, etc.
l. something expended, esp. money
m. something that is taken for granted
n. person who sells goods individually or in small quantities
IV. Read text 1 once again and pay attention to details then complete the sentences
1. The most serious rivals of Puma are . which lead in sponsoring of sports events.
2. Many retailers faced with selling of . production, since it has been almost dead since 1993
3. Mr. Leits started . the brand to lead Puma out in the international market. Now Puma is a . Company.
4. . Puma occupies one of the major places in the market of sports wearing.
5. The first attempt in . brand issues was to stop cash flow.
6. Puma's production went over the frames of . .
7. Puma tried to keep sports tendency but add some . .
8. Puma put the goal to verify measures in . .
9. To gain huge . Puma used sponsorship deals with selected athletes.
10. Only when you convince the innovators the brand gets to a . .
11. If you don't excite the consumer, you won't take place in a market share.
12. There should be several .. before the product is finally checked.
13. Nowadays Puma is . Brand. Not everybody has achieved it.
V. Read the text and point out the main ideas which are discussed in it.
Text II. Adidas Earns Fashionable Stripes
For decades sportswear companies such as Adidas and Nike have prospered by linking their brands to athletes and sports stars such as Michael Jordan and David Beckham.
But in what is a fairly radical move for an industry averse to moving from tried and tested formulae, Adidas has enlisted a star from the fashion world to help it sell more sports clothing and footwear. Recently, the German group has unveiled a new collection from its collaboration with Stella McCartney, the fashion designer it has enlisted to produce a range of women's sportswear that could change the way sports goods are sold and marketed.
The new range is the latest example of how Adidas has tried to differentiate itself from its rivals by organising itself into three divisions - each with its own branding and its own version of the group's iconic three-stripe logo. The divisions comprise a performance sport business, a sports fashion division and a retro division, to capitalise on continued interest in so-called "old school" Adidas trainers and clothing, as worn by hip-hop artists.
The strategy appears to be paying off, with the group yesterday reporting better-than-expected first-quarter results. Operating profits were up by 27 per cent to 179m ($230m) and the group said it expected full-year earnings growth to be at the upper end of its previous 10-15 per cent range.
Unlike its previous campaigns, the company is not using famous sports stars to publicise the McCartney collection, relying instead on the strength of the McCartney brand to attract fashion-conscious women who also like to keep fit.
Adidas has worked with fashion creators before - notably Yohji Yamamoto, the Japanese designer, on its Y3 range, which was aimed at modish consumers rather than active sportsmen and women. The McCartney range is, however, designed with sport in mind and belongs to the group's "sports performance" division. Taking fabrics normally used in Adidas' sportswear, Ms McCartney has created a fashion line targeted at women who want to look good while they are exercising.
"Stella felt women's sportswear was not stylish enough," says Bill Sweeney, head of global apparel at Adidas' sports performance division. "Women are becoming a lot more vocal about what they buy - previously they had put up with whatever was out there. But as a consumer purchasing group they are a lot more discerning these days. We thought there was a gap in the market."
Ms McCartney was given access to the group's "performance fabric library" which includes fabrics designed to feel like cotton but which dry more quickly. "It's dry-release fabric and uses what we call 'moisture whicking' to make sure the athlete stays dry," says Mr Sweeney.
Adidas originally believed that limiting a designer used to working with natural fabrics to high-tech, man-made materials would be "more of a limitation than it was", he says. In fact, he says Ms McCartney made the group think about its materials in a different way.
Adidas is hopeful the latest collection will be as successful as an earlier spring-summer range, which was initially launched in the US and Japan with limited availability in Europe. At Bloomingdales in New York the range sold out in one day. "We're starting to think about it as the best launch in the history of the company," says Mr Sweeney.
The collection is more expensive than other Adidas women's products and, although womenswear is a relatively small part of the group's portfolio, the company sees it as a fast growing market. "It's still relatively small when compared with the core business," says Mr Sweeney. "But having said that, we could have sold four times the amount of product [of the first collection] than we did. We don't want to overexpose it."
The group is also limiting the range to specific outlets, which Michael Michalsky, Adidas' global creative director, says will protect the brand. "We have to take into account where the consumers we want to attract are shopping," he says.
In marketing terms, the company is in uncharted territory, introducing sporting products to an audience more likely to read Vogue than Runner's World. At the same time, linking its credibility as a sports brand to a fashion designer could arguably lose it some kudos among athletes and keep-fit fanatics. "Stella McCartney is an innovative choice," says Karen Earl, managing director of Karen Earl Sponsorship, the sports marketing consultancy. "She has credibility in the fashion world but I'm not sure how much she has in sport."
Yet Ms Earl says the deal is taking Adidas in the right direction. "It would seem that Adidas has realised that to broaden their reach they are going to have to add to the technical credibility that they have always relied on."
Mr Sweeney says he is confident that the "brand can stretch. We can get into a conversation with a buyer at Selfridges or Isetan [in Tokyo] and they want to carry a range that bears the Adidas logo."
Its rivals take a slightly different approach. Reebok, for instance, has enlisted hip-hop artists such as 50 Cent to wear its shoes and appear in its television commercials. Nike, however, continues to stress its sports credentials - although the latest interactive campaign on its website features unknown footballers performing a bewildering array of tricks in a street setting.
Adidas and Nike are vying to be the number one sports brand and are in a permanent race to sign up the hottest young sporting talents. The latest Adidas television commercial for its F50 football boot has Chelsea's Arjen Robben and Arsenal's Ashley Cole chasing a ball through a park. Nike's campaign for its new "Free" shoe stars tennis champion Roger Federer, Manchester United's Wayne Rooney and the Kenyan marathon team.
Adidas has recognised the need to keep refreshing its sporting credentials and has created innovative commercials. Last week the group won a prize for best television sports commercial at the annual Sports Industry awards for "Laila", which showed boxing legend Muhammad Ali sparring with his daughter Laila. Previous commercials have shown Ali training with the likes of David Beckham and Zinedine Zidane, who are also sponsored by Adidas.
Ms Earl says Adidas has got its marketing message right. "When I first came into this industry, which was years ago, Adidas was the leading sports brand. Hörst Dassler [the son of the group's founder, Adi] was the first one to get Adidas boots worn by football teams at the World Cup.
"When he died, though, the company took a bit of a dive and other brands like Nike began to catch up. But in the last five or 10 years it has gained a lot of credibility and the McCartney deal is obviously a step in the right direction."
VI. According to the text, are the following statements true or false?
1. Adidas has chosen a famous designer to improve their sales.
2. The peculiar feature of new collection differentiates the line according to three divisions.
3. Head of global apparel at Adidas thinks that this collection will correct all past mistakes.
4. Stella McCartney designed new collection for both men and women.
5. McCartney considers the quality of the clothes as well as fashion.
6. Mr Sweeney supposes that it is possible to widen new brand.
VII. Read text 2 attentively and finish the statements choosing the best variant.
1. Adidas developed its industry because
a) they created a unique cloth, which can resist water and heat
b) head of Y-3 rate gave a range of recommendations how to improve production
c) Adidas' heads attracted one of the most famous designer to work out a new collection
d) sportswear became very popular in Japan
2. Previous collection was differentiated according to
a) different tendencies
b) special type of cloth for each line
c) types of people who wear these clothes
d) names of designers, who were attracted for creating new collection
3. New collection is created for people who
a) go in for sport, taking no consideration what to wear
b) chose sport and pay attention to fashion
c) for people who visit sport gym
d) only to boast of their new clothing
4. All the units are made of
a) pure polyester for clothes to fit well
b) cotton with woollen lining for winter
c) pure cotton for people who train a lot
d) cotton, polyester and lycra for clothes to be comfortable
5. Rivals of Adidas
a) made an attempt to create similar collections
b) did not pay any attention to Adidas' innovations
c) tried to blend with Adidas
d)created their own lines, attracting singers and sport stars for advertising
VIII. Find the words and phrases in text 2 corresponding to the following definitions:
1. to be successful
2. to make a secret known
3. people who follow the fashion novelties
4. to see, to be aware of something clearly
5. selected examples such as drawings of photographs, that show an artist's recent work
6. personal name and glory
7. something that entitles a person to credit or confidence
8. to fight, using light punches for practice
You are going to hear an interview with John Williams, Account Executive for Reebok at Welbeck Public Relations. Listen and complete the following fact file.
I. Work in pairs and take it in turns to give a mini-presentation to each other, one on Reebok's Insta-Pump shoe and one on Puma's Disc System shoe. Each time, the student who is listening to the presentation should take the role of an interested buyer, asking questions as appropriate. Prepare for your presentation carefully, using information from the unit. Design any support materials you feel may be helpful.
II. Read the following information and discuss the questions that follow.
Manufacturers of sports goods often use sports celebrities to help to sell their products. Sportsmen and sportswomen who agree to endorse a company's range of products usually sign a contract outlining the exact terms of their agreement.
Contracts vary depending on how well-known the person is and the nature of the endorsement. Typically, a company might expect a person to:
· make promotional appearances in person e.g. in-store, at trade fairs or other events;
· wear a company's product or logo when 'in action' in their sport;
· appear in advertising and/or mail-order catalogues;
· personalise products with their signature or photograph.
In return, a company might offer:
· fees in the form of e.g. lump sums, retainers, stage payments;
· free products;
· bonuses e.g. for winning, setting a new record etc.;
· royalties on product sales.
Endorsements can be very profitable, both for the sports stars and for the companies which sign them. Take the case of the famous American basketball player, Michael Jordan, one of the most graceful and charismatic players ever to appear on a basketball court. In one year alone, his endorsement of Nike helped sell one and a half million pairs of shoes and earned him an estimated $20 million.
Answer the questions:
1. Which sports celebrities do you associate with different sportswear manufacturers?
2. What are the possible drawbacks of endorsement to a company? Can you give some examples?
3. What are the advantages and disadvantages of using famous people in advertising?
4. How can endorsing a product be bad for a celebrity's reputation?
I. As a public relations officer at a famous department store, you think it would be a good idea to invite a well-known sports star to promote your own brand of sports products. Choose a suitable sports celebrity and write a letter, indicating how he or she might be able to help you e.g. by personal appearances in the store, training sessions for young people, photo opportunities and /or radio/ TV advertising.
II. You work in the marketing department of a small US-based sportswear company. At present, the firm only manufactures sports clothing and accessories, but a proposal to diversify into sports shoes is under consideration. Your marketing director asks you to set down on paper the advantages and disadvantages of entering the sports shoe market to help them prepare for a meeting next week to discuss the proposed diversification.