What is the French and German plan to create bi-national champions really about? 7 страница

•Better and cheaper cars. Foreign auto makers have used their toehold in the U.S. and favorable currency rates to greatly heighten competition. That has given consumers higher quality, more choice, and lower prices from U.S. as well as foreign carmakers. The pressure has sparked a creative, more disciplined approach to product development that prizes quality and efficiency.

•Factory innovation. When Honda built its first Accord in Marysville in 1982, the point was to dodge import quotas and political pressure. But the transplant factories opening now represent a huge advance in flexibility and efficiency. U.S. companies are beginning to follow, but with little hope of beating foreign-owned factories on costs, they must innovate or die a slow death.

•Job redistribution. The new car factories now employ about 50, 000 people, replacing thousands of jobs lost in textiles, steel, and other dying industries in the South. The billions of dollars invested by Honda, Toyota, Mercedes, BMW, Hyundai, and others is raising wage and skill levels and pressuring states to improve educational standards,

On the losing side of the ledger, of course, are die Big Three's old-style factories and their unionized workers. For years, the U.S. industry has been suffering a steady drip of lost market share to overseas rivals. But today, it is under attack on all sides: European luxury brands have roared past once mighty Cadillac and Lincoln, and Japanese carmakers are plowing into the lucrative truck market. Even those once-flimsy Korean cars have moved up the value chain and arc winning first-time customers. The result has been a dizzying drop in U.S. market share for Detroit auto makers. Since 1995, they've lost a full 10 points to foreign-based rivals.

If this feels like deja vu, that's because 20 years ago, Motown was pushed to the brink by an earlier wave of Japanese and European imports. The ultimate victory by Toyota, Honda, Nissan, BMW, and Mercedes was so complete that an entire generation of car buyers stopped considering American cars. GM, Ford, and Chrysler fought back, attacking their bloated costs and embracing many of the lean manufacturing principles that made the transplants so efficient. It was a painful reckoning, resulting in 150, 000 jobs lost from 1979 to 1991. But by the mid-'90s profits were up, and the cloud over Motown seemed to lift.

It has become clear, though, that what bailed out Detroit was not a profound new appreciation for global competition. Instead, it was a roaring U.S. economy and shifting consumer tastes. Americans had fallen in love with bulky minivans, SUVs, and pickups, all uniquely American concepts. With scant foreign competition, the Big Three feasted on those fat truck profits through most of the '90s, barely noticing that they had surTranslateed the car market to import brands. Detroit's swagger returned, and with it, bad old habits. Rather than conducting a housecleaning, Detroit shoved its problems to the back of the garage for a decade. " We have absolute collective amnesia in this business, " says Ford Motor Co. Chairman William C. Ford Jr. " We can't handle success. We do our best as a company when our back is to the wall."

He'd better hope so: Foreign auto makers are unveiling a slew of impressive products aimed squarely at Detroit's profit base. Having long since ceded the car market, Detroit is in danger of losing' a big chunk of the lucrative SUV and minivan markets. Japanese, European, and South Korean companies have already grabbed more than seven points of share in tracks just in the past five years, cutting Detroit's dominance from 83 % to 76%.

There's a danger that Detroit will keep slipping — right off the edge. The result: in a decade or so, the U. S. auto industry may no longer be dominated by domestic player; that's remarkable considering that 40 years ago. General Motors Corp. alone had a 50.7% market share and looked like a prime target for a government-ordered breakup. There's no chance of that happening now — America's biggest carmaker slipped to just a 28%. share through May. What's more likely is that the U.S. could end up looking like Europe with five or six players splitting roughly equal shares. " It's no longer the Big Three; it's the Big Five, " says George Peterson, president of Autopacific Group Inc., a Tustin (Calif.) consulting firm.

The transplant invasion is a sensitive topic in Detroit G. Richard Wagoner Jr., GM's CEO, points out that the Japanese and Koreans can invest so heavily here because they dominate their home markets with virtually no outside competition. In a May speech in New York, Wagon said, " Once these manufacturers establish a foothold in the U.S., they begin to mimic our broad product lines, eventually become accepted by the public as a 'domestic' brand, and suddenly, we lose our home-field advantage."

But globalization began blurring national auto identities years ago. Today, the concept of a purely American carmaker seems quaint. Even the term Big Three no longer seems appropriate, since Chrysler Corp. was acquired in 1998 by Daimler Benz. Japan, which had five major independently owned auto companies in 1998, now has only two: Toyota and Honda Motor Co. And just as Asian and European carmakers have been expanding in North America, U. S. companies have been looking for growth overseas. As the world's largest manufacturing companies jockey for power in the U.S., the tectonic shifts are only starting to ramble through the industry.

BusinessWeek

Note

cluster - кластер, группа тесно связанных между собой компаний

Exercise 1. Give the Russian equivalents.

a) high-paying factory jobs; to boost production capacity; to cluster around smth; hot-selling brands; to resume production; foreign players; to represent a big advance; to put intense pressure on smb; to be under assault by foreign auto makers; flexibility; assembly line, to challenge a notion; overseas ownership; to be sidetracked; shifting consumer tastes; to cede control; to enjoy a massive infusion of talent and investment; to move up the value chain; to spark a new approach to product development; to arrive by container ship; to embrace many new manufacturing and
marketing principles; bloated costs; bloated personnel departments; first-time customers; injection of state aid; influx of capital

b) to have one's back to the wall; to feast on fat oil profits; to suffer a steady drip of lost market share to overseas rivals; to take root; to shove one's problems to the back of the garage; to be on the losing side of the ledger

Exercise 2. Translate the following examples into Russian.

1.He said the market's strong gains were unusual in light of bellwether IBM's weakness.

2.Now that IBM Corp is in the long decline, market-makers are looking for another bellwether to signal the direction of the entire market.

3.A recent surge in debt downgrades has hit bellwether borrowers such as J.P. Morgan Chase & Co. and General Mills Inc.

4.Firms who were early adopters of new technology get a greater benefit than do laggards.

Exercise 3. Translate the following into English.

1.Всем известно, что сборочный конвейер является основой любого автомобильного завода.

2.Прошли те дни, когда американская компания «Дженерал Моторс» могла похвастаться, что может «предложить автомобиль для любого кошелька и для любой цели», чего не могли сделать друтие участники рынка.

3.Автомобильная отрасль перестраивается в то время, когда происходит обострение конкуренции, и Детройту, возможно, придется довольствоваться (settle for) уменьшающейся долей на рынке.

4.Кластеры — это группы фирм в связанных между собой отраслях, которые успешно развиваются, используя близость и взаимную поддержку.

5.Даже неэффективная автомобильная компания является воплощением национальной гордости. Государство вливает в нее средства, веря в то, что она играет ведущую роль для самых различных предприятий в других отраслях обрабатывающей промышленности и определяет направление их развития.

6.Неоспоримо, что автомобильные компании имеют обширную сеть поставщиков и субпоставщиков, и поэтому огромные ресурсы уходят на обработку счетов к оплате.

• Text 2. Translate the text orally. Speak on new developments in branding.

Fallen Icons

Coca-Cola and McDonald's seemed ready to take over the world. But global branding has lost its appeal. Richard Tornkins looks at the rise of local brands and the decline of the big names

Thirty years ago, Coca-Cola made one of the most memorable commercials in advertising history when it stood 200 multi-ethnic youngsters on a hilltop in Italy and had them sing: " I'd like to buy the world a Coke." In a sense, it was a defining moment for the notion of the global brand — the idea that the whole world could be united in its desire for a single product. But what is that idea worth today as Coca-Cola begins the biggest restructuring in its 113-year history?

A couple of years ago, buying shares in big consumer goods companies looked the nearest thing in life to a one-way bet. As the barriers to world trade had fallen, the argument went, vast new markets had opened up, offering the prospect of almost limitless growth for the owners of powerful global brands.

Coca-Cola liked to point out that the annual consumption of its soft drinks in the US was 376 drinks a head. In China, it said, the figure was only six drinks a head — and the market was five times as large. Procter & Gamble came up with a similar refrain in 1997, when John Pepper, then chief executive, said the number of consumers within its reach had shot up from 1 bn to 4.5bn in a decade, adding that the opportunities for growth were now " literally unprecedented."

As more investors became persuaded by arguments such as these, a perception set in that almost no price was too high to pay for a share in a global brand company, because their profits could only go up. It was re-run of the " nifty fifty" era of the early 1970s, when a similar belief in the power of the top 50 global companies took hold.

Confidence in this new investment paradigm took a drubbing in the third quarter of 1998, when emerging markets were battered by the Asian financial crisis. But even before the crisis struck, brand owners had been discovering that the apparent potential of emerging markets was less easy to realise than expected. To justify the heavy cost of building distribution systems and marketing their brands, consumer goods companies needed to achieve high volumes. In 1990, the sight of long queues outside the first McDonald's restaurant in Moscow led to the assumption that these were easily available.

But local cultures around the world have not, as some commentators feared, been annihilated by the onward march of Coca-Cola and McDonald's. Instead, big consumer goods companies have been surprised at the speed with which indigenous brands have evolved, creating a much more competitive market than expected.

To some extent, this is a matter of affordability. For many people in emerging markets, a McDonald's meal, an everyday purchase in the US, is an expensive luxury. But it also turns out that many people take pride in their national identity, and prefer a domestic product.

The multinationals have responded by trying to build, or buy, more local brands. In Russia, before the financial crisis, the international tobacco division of RJR Nabisco had more success with a new cigarette brand named Peter I than it did with Winston and Camel, its big US brands.

Coca-Cola says it plans to go further in this direction, decentralising the company to get a better understanding of local markets and introducing more local brands than in the past. It is a logical response, but a troubling one: for investors might justifiably ask why high price/earnings multiples should be attached to companies with global brands if they then need local brands to expand in overseas markets.

Meanwhile, global brands are also facing challenges closer to home. In the US and other industrialised countries, brands have become more important than ever over the last decade or so, but their function has changed.

Originally, brands were simply a means of differentiating one product from another. Then, many of them acquired a more aspirational function: people drank Martini in the hope of conveying the idea that they were sophisticated jet-setters. But as people have become more individualistic, they no longer want to keep up with the Joneses: instead, they want to be as different from the Joneses as possible. One way they seek to achieve this is by adopting brands that in some way reflect their values and self-image.

The worry for big brand owners is that this is leading to a fragmentation of brands as people try to express their individuality by moving away from the mass market. McDonald's, facing a saturated market for its hamburgers in the US, has gone on an acquisition spree, buying fast-food chains in the US and in Britain. But like Coca-Cola, the parent company is not putting its brand name on any of the chains.

As with the decision to launch local brands in overseas markets, the diversification away from existing brand names may be logical. But again, it raises the question of why high price/earnings multiples should be attached to global brand companies if it turns out that not everyone wants to drink Coke or eat a McDonald's burger. Former Coca-Cola boss Roberto Goizucta used to say he would never rest until the С on the cold tap in English-speaking countries stood for Coke. But being a global brand owner was never as easy as it may have appeared in the 1990s, and it is getting harder all the time.

The Financial 'Times Notes

jet-set — «реактивная публика», узкий круг богатых путешественников (летающих на реактивных самолётах на фешенебельные курорты и т. п.); избранные, элита jet-setter — завсегдатай модных курортов, человек, принадлежащий к узкому кругу богатых путешественников, к элите

Useful Words and Phrases

• Text 3. Translate the text orally.

Exercise 1. Translate the following word combinations into Russian.

to suffer a severe downturn in sales; market saturation; sagging earnings; tumbling prices; to cut one's global workforce; to meet the company's revenue targets; to revise one's growth targets; consumer products; glut; manufactured goods, a global brand owner, long-term outlook, after-tax profits, to rebuff a tentative takeover approach, to abandon merger talks, to be battered by a crisis, to face a challenge, to keep up with the demand, a mass-market retailer, price/earnings multiple; to go on an acquisition spree; to go on a shopping spree; consumer spending; defence bill; import bill; wage bill; to bolster a company's position; spin and image management; to command a high price; a lower consumer price index; ubiquity and power of brands; to make the bulk of the users; genuine partners; in-house prices; to have one's job outsourced

Exercise 2. Translate the following adjectives into Russian and give nouns that can be used with them.

Gone Flat

When former Coca-Cola Co. executive Neville Isdell agreed last May to come out of retirement and become chief executive of the beleaguered soda giant, he brimmed with confidence.

As late as the 1990s, Coca-Cola Co. was one of the most respected companies in America, a master of brand-building and management in the dawning global era. Now the Coke machine is badly out of order. The spectacle of Coke's struggles has become almost painful to watch: the battles with its own bottlers; the aged, overbearing board; the failed CEOs and failed attempts to recruit a successor; the dearth of new products; the lackluster marketing. " They've been their own worst enemy, a casualty of their own success, " says an analyst who has followed Coke since 1970s.

Yet as grave as those problems are, they only hint at the real dimensions of Coke's woes. The Coca-Cola organization is stuck in a mindset formed during its heyday in the 1980s and '90s, when Goizueta made Coke into a growth story that captivated the world. An unwillingness to tamper with the structures and beliefs formed during those glory years has left the company unable to adapt to consumer demands for new kinds of beverages, from New Age teas to gourmet coffees, that have eaten into the cola king's market share. " The whole Coke model needs to be rethought, " says Tom Pirko, president of BevMark LLC, a Santa Barbara (Calif.) consulting firm. " The carbonated soft-drink model is 30 years old and out of date."

Business Week

• Text 4. Translate the text orally.

Rag-Trade Deals

One of the certainties of visiting an American department store - and stores in many other countries too - is the familiar offerings from some of the world's most recognised clothing brands: stacks of Levi jeans, shirts from Polo Ralph Lauren, collections from Liz Claiborne and, of course, lots and lots of Tommy Hilfiger. All this sameness is a big problem for the apparel business. Department stores are increasingly being squeezed by specialist retailers on one side and discount chains on the other. At the same time, prices everywhere are falling as many items of clothing become commodities. For the brands concerned, this loss of sparkle could lead to yet more consolidation.

One company rumoured to be a takeover target is Hilfiger, which despite annual sales of close to $2 billion has been struggling. The firm insists that it wants to retain its independence, and on August 4th appointed David Dyer as its new chief executive. Mr Dyer has plenty of retail experience to help Hilfiger: he built Lands' End into a highly successful mail-order and e-commerce business before selling it to Sears, Roebuck last year.

Few of Hilfiger's problems are unique. If clothing prices were denominated in end-1992 dollars, prices would have tumbled below many other products, such as food and drink.

Most firms have already adjusted to global competition, which has seen a big shift in garment production to low-wage countries and a subsequent glut of cheap manufacturing capacity. Hilfiger is based in Hong Kong, where the eponymous founder, Mr Hilfiger, now the firm's chief designer, formed a partnership with Silas Chou, a member of a wealthy Hong Kong textile family, who helped the firm list on the New York Stock Exchange in 1992.

According to A.T. Kearney, the strongest defence against price erosion is to support a clothing brand, especially a mature one such as Hilfiger, with innovative products. To boost profits, the brand can be spread to other products, such as home furnishings, perfumes and fashion accessories. Hilfiger already does this through a variety of licensing agreements. But spreading the brand too widely can dilute its value.

An alternative tactic is to build a portfolio of brands aimed at different segments of the market. This has led some clothing firms to buy, license or invent new brands. With powerful discounters, such as Wal-Mart and Target, rapidly taking the place of many traditional department stores, it is becoming vital for companies to have products for the mass-market chains. " Consumers are looking for greater value, and increasingly more fashion, in their clothing offerings, and they are finding discounters' wide aisles and large shopping areas more convenient and 'shopper friendly', " according to a recent report by Susan Ding, an analyst with Standard & Poor's, a credit-rating agency.

The Economist

CHAPTER 2. WHERE IS THE STICK? HOW TO MOTIVATE AND MANAGE THE PERSONNEL AND THE EXECUTIVES

UNIT 10

• Text 1.

WHERE'S THE STICK?