Page 197 - DECO303_INDIAN_ECONOMY_ENGLISH

Indian Economy

Notes a fraction of the marketing budgets of its larger rivals, Adidas and Nike, is indicative of the
fresh approach of its entrepreneurial CEO, Jochen Zeitz, who took over the company in
1993. Then, the company was losing money, and its products were more likely to be found
in discount stores than in the kit of sports personalities. He was 29 at the time, becoming
Germany’s youngest chief executive. His twin strategy to revive the company involved
cutting costs and building the brand. Production was moved out of Europe to Asia. He is
aware that his competitors, who also outsource in Asia, have faced criticisms for sweatshop
conditions in sportswear manufacturing, but he points to the fact that Puma uses
independent NGOs to monitor conditions, and has had no complaints for years. Zeitz has
transformed Puma into a global brand by focusing on sports lifestyle, rather than getting
leading athletes to wear its products, as Nike and Adidas have done. It aimed to add a
fashion element, to excite the consumer, paying less attention to matching competitors’
products head on. Puma now has annual sales of 2 billion, and enjoys the highest prot
margins in the industry. It has added two other headquarters, one in Boston, USA, and one
in Hong Kong. Its workers come from all over the world. Zeitz says of Puma: ‘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 speak English’ (Milne, 12 June
2006). As indicated in the gure, the Americas and Asia together now account for a slightly
larger proportion of Puma’s revenue than Europe, the Middle East and Africa.
Figure: Percentages of Puma’s Global Revenue by Region

The Puma brand today relies in large measure on trends in fashion, which can be ephemeral
and are notoriously hard to predict. The leaping cat logo has become widely recognised,
but Adidas and Nike are also seeking to win over consumers with exciting new products.
Adidas has hired Stella McCartney, the fashion designer, to design new sportswear. Puma’s
potential in sports fashion caught the attention of PPR, the French group which owns
Gucci and other upmarket labels, as well as large retailers. Having taken a 27% stake in
Puma, PPR is contemplating taking it over, with a view to exploiting the growing luxury
sports sector. Puma would gain from increased capital investment, helping to boost its
sports products as well as luxury fashion products. In the past, Zeitz has been sceptical
about mergers, but the backing of a strong luxury and retailing group should strengthen
Puma’s competitive position.
Questions

1. How did Puma manage to recover its protability?
2. What is distinctive about Puma’s brand strategy in global markets?
Source: http://www.palgrave.com/business/morrisonib/pdfs/sample.pdf

192 LOVELY PROFESSIONAL UNIVERSITY