English Test for Business

Advanced Level

Reading Comprehension SAMPLE

You can spend 60 minutes on the Reading test.

Write all the answers on the Answer sheet.

Reading passage 1

PULLING SUPERGA UP BY ITS BOOTSTRAPS

Can a Swatch veteran make the shoemaker a global player

AAcrobats cavort onstage, while stylish Milanese visitors nibble chocolate strawberries and examine displays of footwear in imitation crocodile. It's the opening of a flagship store for Italian shoemaker Superga, and at the center of the scene is the company's 46-year-old chief executive, Franco Bosisio. The former marketing director for watchmaker Swatch is channeling his creative energies into remaking the $72 million company. "There is very little difference between selling a watch, a pair of shoes, or anything else," he says.

BSuch confidence is driving Bosisio's Superga strategy. He's betting he can turn the tiny company's mundane product into a hot global brand, just as he did with plastic Swatch watches more than a decade ago. Superga's canvas sneakers have long been known in Italy. For decades, they were manufactured by a unit of tiremaker Pirelli. Then, Milan's Sopaf investment-banking group bought the company and invited Bosisio to become CEO in 1995. After halving the workforce and shifting production to lower-cost Asia, he has set a firm goal: to double sales within the next four years by boosting exports to the rest of Europe, the U. S., and Japan.

CTo liven up Superga's range of sneakers, Bosisio is relying on the design system he pioneered at Swatch. Every six months, he forms teams of artists who work out new footwear designs. He also has developed a sportswear collection, which now accounts for 20% of sales. And he soon expects to sign agreements with sunglass, perfume and children's apparel manufacturers to produce Superga lines.

D"LOVE us." The company is building an international chain of stores to showcase its shoes, which run from $40 to $80 a pair. After opening seven stores in Italy this year Bosisio plans to open wholly owned outlets or franchises in France, Spain, Germany, and Japan in 1999. He's also rolling out an advertising campaign under the slogan "Superga: Hate us. Or Love us." One ad shows a woman and a python nose to nose above the caption "I hate sin. I love the original."

EThat marketing subtlety may be lost on some consumers, Bosisio's sceptics say. Indeed, for all his flair, Bosisio faces problems. Sportswear giants such as Donna Karan and Ralph Lauren are expanding into shoes. And doing battle with cash-rich companies such as Nike Inc., which expects to spend $1 billion on advertising next year could prove suicidal. Says Stefano Mascioni, a director of Milan's National Chamber of Italian Fashion: "If Bosisio intends to go head to head with big names, he should save time and shoot himself right now."

FWhat's more, Superga's margins are weak. The company earned 9% on sales last year-up from less than 1% in 1995 but below Bosisio's target of 20% by 2000. Some analysts doubt the Swatch strategy can be repeated in such a basic item as shoes.

GNevertheless, Bosisio insists he'll be able to spread his passion for Superga shoes around the globe. "People all over the world like the same things," he argues. Now it's up to consumers to vote him right or wrong - with their feet.

By Tom Mueller in Milan

BUSINESSWEEK June 2.1998

Questions 1-5

The reading passage has 7 paragraphs marked A-G. Answer questions 1-5 by writing the letter A-F in boxes 1-5 on the Answer Sheet.

1. Which paragraph describes Bosisio's effort to expand the range of his products?2. Which paragraph speaks about the competition Bosisio has to face?3. Which paragraph mentions Bosisio's dispositions after becoming CEO of Superga?4. Which paragraph mentions several types of retail outlets?5. Which paragraph describes Bosisio's position at Swatch?Questions 6-10

Choose the best answer A, B or C that matches the ideas in 6.-10. Write your answers on the Answer Sheet:

A Bosisios past and present Superga policy

B Bosisios future strategy

C Neither

6. tyremaker Pirelli produces sneakers

7. reducing local production of sneakers

8. widening the scope of Superga's activity

9. introducing Swatch design for Superga sneakers

10. producing sport outfit

Questions 11-15

Find the expressions in the text which have the same meaning. Write your answer on the Answer Sheet:

11. ordinary, common ( par. B)

12. clothing, dress (par. C)

13. goods, merchandise (par. C)

14. to display (par. D)

cleverness, expertness ( par. E)

15. Reading passage 2

Acquisitive egos

AIf the world's managers agree on anything, it is that, on the whole, managers are out for the long-term welfare of their companies, whereas shareholders are obsessed with short-term gain. Put in the mouth of the average over-paid senior manager, this argument sounds a trifle self-serving. Yet in the wake of the 1980s takeover boom, it has found powerful support from a host of leading management thinkers, including Peter Drucker and Michael Porter.

BBut is it true? Two of the fiercest controversies surround companies' commitment to long-term innovation and their thirst for short-term glory through takeovers. Two papers presented to the annual meeting of the American Academy of Management, held in Vancouver on August 6th-9th, suggest that it is often investors not managers who have the long-term welfare of their companies at heart.

CA study of 135 randomly chosen manufacturing firms by two academics at Texas A&M University, Rahul Kochiar and Parthiban David, suggests that institutional investors are often responsible for encouraging research and development in firms in which they have substantial holdings. This is not true of all investors: those with close business dealings with firms in which they have invested (such as banks) tend to be reluctant to put pressure on managers. But firms that lack such close links (such as pension funds) are increasingly acting as champions of innovation.

DSenior managers base many of their claims to being forward-thinking on their ability to spot and acquire "synergistic" companies. This reasoning has helped IBM's Lou Gerstner and Walt Disney's Michael Eisner to justify paying over the odds for Lotus Development and Capital Cities/ABC respectively. However, it is contradicted by studies that have demonstrated that takeovers are usually bad for acquiring companies, depressing their share prices and reducing their long-term profitability. They have also shown that, as a rule, the higher the premium paid, the greater the losses for the acquiring firm's shareholders.

ESo why do managers do it? Another study, by two academics at Columbia University, Matthew Hayward and Donald Hambrick, suggests that acquisitions may have less to do with a cunning business calculation than with inflated managerial egos. On the basis of research into all 106 publicly traded American companies involved in acquisitions costing $100m or more in 1989 (a boom year for acquisitions) and 1992 (a bust year), Messrs Hayward and Hambrick conclude that four things, above all, predispose managers to pay high premiums for an acquisition.

FThe first is inexperience: newly appointed bosses are particularly keen on takeovers, in order to make their mark. The second is a recent history of outstanding corporate performance, which often gives bosses an inflated notion of their organisational genius, as well as a pile of cash with which to foist that genius on the wider world. The third is self-esteem, measured by the gap between the bosses' salaries and that of other members of their peer group. People who think that they are worth an inordinate amount of money also tend to believe that they can make a profit out of an acquired company, however much it costs.

GThe fourth, and perhaps most important, factor is a spate of glowing press profiles in the months before a takeover. Messrs Hayward and Hambrick reckon that each highly favourable story about a company boss in a big national newspaper or magazine results, on average, in a 5.4% increase in the premium paid. So if your company has a strong record of growth over the past few years, and if your recently arrived boss has an inflated salary and a taste for glowing press profiles, get ready for a foolhardy acquisition or two - washed down with a lot of spurious talk about synergy.

The Economist

Questions 16-20

Answer the questions with NOT MORE THAN EIGHT WORDS from the text. Write your answers on the Answer Sheet.:

16. How does the argument that "managers are out for the long-term welfare of their companies" sound from the mouth of the average over-paid senior manager?

17. What are institutional investors often responsible for?

18. On what do senior managers base many of their claims to being forward-thinking regarding "synergistic" companies?

19. Why are (by certain studies) takeovers usually bad for acquiring companies?

20. What is the most important factor that predisposes managers to pay high premiums for an acquisition?

Questions 21-24

Read the following arguments and write on the Answer Sheet where they come from. (DO NOT MENTION NAMES)

21. Managers are out for the long-term welfare of their companies, whereas shareholders are obsessed with short-term gain.

22. It is often investors not managers who have the long-term welfare of their companies at heart.23. Institutional investors are often responsible for encouraging research and development in firms in which they have substantial holdings.24. Acquisitions may have less to do with a cunning business calculation than with inflated managerial egos.Questions 25-30

Find the expressions from the text to the definitions and write your answers on the Answer Sheet:

25. the act of gaining control of a company by buying up its shares (par. A)

26. a large organisation such as an insurance company, unit trust, pension fund and trade union, that has large sums of money to invest and is therefore much more powerful in influencing financial policy than single private investors (par. C)27. a company organised in work-groups (par D)28. paying a higher price for something that they should (par D)29. good opinion on one's own character and ability (par. F) giving enthusiastic praise (par. G)

English Test for Business

Advanced Level

Reading Comprehension ANSWER SHEETKEYSAMPLE

1.C

2.E

3.B

4.D

5.A

6.C

7.A

8.B

9.C

10.A

11.mundane

12.apparel

13.lines

14.to showcase

15.subtlety

16.a trifle self-serving

17.encouraging research and development

18.their ability to spot and acquire ("synergistic" companies) them

19.they depress share prices and reduce long-term profitability

20.a spate of glowing press profiles

21.a host of leading management thinkers

22.two papers presented to the annual meeting of the American Academy of Management

23.a study by two academics at Texas A&M University

24.a study by two academics at Columbia University

25.takeover

26.institutional investor

27.synergistic company

28.paying over the odds

29.self-esteem

30.glowing

English Test for Business

Advanced Level

Reading Comprehension ANSWER SHEETSAMPLE

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