Berlitz International, Inc.

1872–1993

Berlitz International Inc. is a languages services firm providing language instruction, cross-cultural training, translation services, and publishing products in 50 countries. For language instruction, the company employs its proprietary Berlitz Method, which avoids tedious memorization exercises and grammar drills in favor of a conversational, usage-driven approach to virtually all living languages. Berlitz's publishing division produces pocket-size travel guides and language phrase books, as well as bilingual dictionaries, trade paperback travel guides, and self-teaching language guides from audio cassettes to interactive compact discs. The company's translation services provide technical translation, interpreting, software localization, electronic publishing, and other services that are related to foreign languages.

Maximilian Berlitz Emigrates to America in 1872

Berlitz's origins date back to 1872, when 20-year-old Maximilian D. Berlitz emigrated from Germany to America in 1872 to teach Greek, Latin, and six other European languages. Employing the traditional grammar-translation approach, he served as a private instructor for several years, then, in 1878, accepted a position as professor of French and German at the Warner Polytechnic College in Providence, Rhode Island. The position turned out to be nothing less than immediate ownership of the 'college,' where he also served as dean, principal, and sole faculty member. In desperate need of an assistant, Berlitz hired Nicholas Joly directly from France, based solely on a letter of application. When Joly arrived in Providence, Berlitz was surprised to learn that his new assistant spoke no English. To make matters worse, Berlitz had fallen ill from the strain of running the school alone and was unable to teach for several weeks. Joly had no choice but to take over and conduct classes strictly in French, instructed by Berlitz to name objects and act out verbs, essentially, to make the best of it. When Berlitz recovered, he discovered that the students had made remarkable progress in French. Berlitz's main tenet of language instruction--the transfer of usage by actually using no language other than the one being studied--thus gained credibility, sparking development and fine-tuning of the young school's trademark pedagogy, the Berlitz Method.

Though Berlitz was convinced that his 'direct' method of language instruction was the most effective available, the public and academic community at first viewed it with suspicion. Starting with the first greeting by the instructor, the Berlitz Method dictated that only the target language was to be spoken in class. The method emphasized the spoken word, with students learning to read and write only what they had already learned to say and understand. In the place of formal grammar instruction, students absorbed a grammatical system naturally, by using it. Above all, to develop fluency, students learned to think in the new language, not to translate&mdashø associate new words with objects and ideas, rather than with the distractingly familiar words of their mother tongue. To encourage students in the use of the target language, instructors typically employed question-and-answer techniques to prompt dialogue while expanding vocabulary.

However unconventional, the young company, known as the Berlitz School of Languages, produced results that simply couldn't be ignored. Berlitz opened his first language center in Boston in 1880, followed soon after by centers in New York City and Washington, D.C. He then expanded to other American cities as well as Europe. By the turn of the century, an explosive tourist industry prompted Berlitz to develop travel guides, self-teaching materials, and interpretation services to meet this growing demand. Berlitz died in 1921, but the company he founded, and his method, were carried on by his son-in-law and associate, Victor Harrison. Victor Harrison, Jr., briefly assumed control in 1932, but was replaced by a long-time Berlitz employee, Jacques Strumpen-Darrie, who guided the company for 20 years, before his son, Robert, took charge. The younger Strumpen-Darrie ran Berlitz until his retirement in 1970, even after the company was sold to Macmillan in 1966.

Berlitz Internationalization at Mid-Century

Through both world wars of, the number of Berlitz schools multiplied with growing demand for language skills. After World War II, Berlitz seized emerging opportunities in language training and translation services brought on by multinational companies expanding their business around the world. Such expansion was fueled by the rise of computer information systems starting in the 1970s. With the advent of digitized communication networks, increasing amounts of information could be conveyed almost instantaneously between virtually any points on the globe, intensifying the need--and the market--for effective cross-cultural and cross-linguistic communication. Moreover, the 1980s saw the crumbling of key international trade barriers, as markets in the former Soviet Union, China, and various developing nations increasingly moved toward free trade. Indeed, the company's 1993 annual report described cutbacks in Western European nations that were experiencing economic stagnation. Meanwhile, the company aggressively moved into rapidly growing markets in Central and Eastern European countries, establishing new facilities in the Czech Republic, Slovakia, Poland, and Eastern Germany. A December 5, 1993 article in The Warsaw Voice heralded the arrival of a new Berlitz school in Warsaw and plans for another in February, as well as other schools in such cities as Poznan, Cracow, and Gdansk. To exploit global markets in the 1990s, Berlitz also opened new language centers in Brazil, Colombia, and Venezuela, as well as Mexico, where NAFTA brought new language-training needs.

Revenues in 1995 stood at $351 million, a significant increase over 1994's $300 million.

1988–1995

From the 1980s onward, Berlitz's language instruction division increasingly developed options and additions to its classroom instruction facilities. The Berlitz Study Abroad (BSA) Program offered students a complete travel package and the opportunity to study their new language in its country of origin. The Berlitz Jr. program provided special foreign language teaching service for U.S. elementary, middle, and high school students both at schools or camps and at the Berlitz Language Centers. For slightly older students, Berlitz acquired the Language Institute for English (L.I.F.E.) in 1988, providing intensive English instruction, recreation, and accommodations to foreign students on campuses in Boston, New York, Miami, Orlando, San Diego, San Francisco, and Chicago.

Berlitz developed several products and programs to that combined language and social skills. The company also expanded on its popular Cross-Cultural Division, designed to instruct students in business and social etiquette and day-to-day activities to supplement language skills. In 1994, the company acquired Cross-Cultural Consultants of Brooklyn, New York, to ensure a stronger future in that growing market. Led by noted author and lecturer Dean Foster, the division held seminars and briefings designed to sensitize businesses to the intricate social, political, and cultural issues that can determine a company's effectiveness in foreign markets.

In the spirit of a skilled language teacher, the company itself listened to the talk around it and continued to develop linguistic solutions to accommodate changing market trends. Joining forces with the University of Phoenix in 1991, for example, Berlitz put together a custom-designed language program for the McDonnell Douglas Helicopter Company, which wanted the program to enhance its employees' global competitiveness.

In 1995, Berlitz's language-instruction division responded to the needs of contemporary language enthusiasts by introducing Club Berlitz, a network of groups that enabled members to speak the foreign language of their choice with groups of people at similar proficiency levels. Participants honed their language skills while engaging in activities ranging from international dinner parties to cultural evenings, theme events like plays and movies, and study abroad programs. 'Club Berlitz reflects the growing interest in the study of language and culture for both business and personal use,' said Hiromasa Yokoi, vice-chairman, chief executive officer, and president of Berlitz International in a March 20, 1995 Business Wire article.

Berlitz's dedication to world languages for 'both business and personal use' spurred the development of two other business segments: publishing and translation. Since the early 1970s, Berlitz Publishing has produced language and travel-related publications recognized internationally for their accuracy and ease of use. By the 1990s, the division was publishing more than 1,000 titles, ranging from a European Menu Reader to inexpensive pocket paperbacks and state-of-the-art interactive CD-ROMs.

To maintain its stature as a premier, single-source provider of language services, Berlitz Publishing continued to develop innovative products into the 1990s. A 1991 joint venture with Sphere Inc. (doing business as Spectrum Holobyte), resulted in the co-development of a language learning game based on CD-ROM technology. The game 'El Grito del Jaguar,' or 'The Cry of the Jaguar,' taught users the Spanish language and Mexican culture through an adventurous computer-driven challenge, setting the ground for similar projects in other languages. That same year, Berlitz's parent company, Maxwell Communications Corporation, in conjunction with the European industrial and electronics giant, N.V. Philips, announced a joint venture publishing company, Maxwell Multi Media. The new company planned to produce and sell self-teaching language courses for the home, office, and school using interactive compact disks (CD-I) as well as other formats.

Although Berlitz would leave the Maxwell empire within a year, some of the strategy from the Philips venture would contribute to later developments. In 1993, for example, Berlitz Publishing Company signed a licensing agreement with Sierra On-Line Inc., through which Bright Star Technology, a wholly owned Sierra subsidiary, would develop, manufacture, and market a new CD-ROM-based foreign language and culture series called 'Berlitz Alive!' Using patented lip-synching technology and animated personal tutors, as well as Berlitz's teaching methodology, Bright Star launched its first foreign-language educational series, 'Japanese Alive!,' in September 1993. 'Combining Sierra's interactive multimedia technology with Berlitz's language content, name recognition, and proven learning methodology opens new markets for our educational products, expanding into adult education and foreign language,' said Alan J. Higginson, president of Bright Star Technology, in an August 4, 1993 PR Newswire article.

1984–1995

Riding the growing wave of digital media, Berlitz also moved onto the Internet in 1995, as it assumed management of Prodigy Inc.'s Foreign Languages bulletin board. On-line customers could learn about a foreign country, talk in a native tongue, secure translation services, and obtain instant information on all Berlitz products and services.

Into the 1990s, the company's translation segment, Berlitz Translation Services (BTS) maintained its reputation as a world leader in technical documentation translation and software/multimedia localization, as well as full production capabilities in desktop publishing and graphics, audio visual services, and simultaneous and consecutive interpretation.

Founded in 1984, BTS quickly gained an excellent reputation for its accuracy and its ability to integrate linguistic services and versatile project management. Starting in the late 1980s, the translation segment greatly expanded its international scope through a series of acquisitions, including: the Institute for Fagspneg in Copenhagen (June 1989), Able Translations Ltd. in Baldock, England (Fall 1990), Kayer Coll. Technical Translators in Sindelfingen, Germany (December 1990), Nordoc A/S (1991), and Softrans International Limited (1991). By the mid-1990s, the BTS International Network provided translation-related services in more than 37 locations across 16 countries.

New Parentage in the 1990s

In the late 1980s and early 1990s, Berlitz underwent several dramatic reorganizations that seemed to threaten the company's stability. Ultimately, however, they left it in a strong position to enter the 21st century. In 1989, Berlitz's main business divisions--Berlitz Languages Inc., Editions Berlitz, S.A., Berlitz Publications Inc., and other affiliates--were acquired by Maxwell Communication Corporation plc (MCC). The new entity was renamed Berlitz International Inc. With the unexpected death of media magnate Robert Maxwell in late 1991, much of his media empire crumbled and fell into the hands of bankruptcy courts, casting doubt over Berlitz's future. Berlitz, however, insisted that it maintained control of its assets and operated independently of the Maxwell chaos. Two days after Maxwell's death, MCC sold its 56 percent stake in Berlitz for $265 million to Fukutake Publishing Company, Ltd., a leading Japanese publisher specializing in correspondence classes and publication of related materials, which had already purchased a 20 percent stake in Berlitz Japan in 1990. By 1992, Fukutake's share in Berlitz had grown to 67 percent, with the remaining stock held by public shareholders. Fukutake combined its resources with those of Berlitz to provide optimal language services worldwide.

Fukutake planned to boost its services throughout the world, with special emphasis on regions of Asia where Berlitz was not as well positioned. With services in Taiwan (since 1989) and South Korea (since 1991), Fukutake announced plans to begin test-marketing in the People's Republic of China in the mid-1990s. 'Economic development and a rise in willingness to learn supplement each other,' the company's president said in a November 21, 1994 article in the Nikkei Weekly.

The company experienced some lean years during the recession of the early 1990s. Under the management of Mr. Soichiro Fukutake, chairman, and Mr. Hiromasa Yokoi, vice-chairman, CEO, and president, Fukutake took aggressive steps to expand its services in tandem with those of Berlitz, as well as to streamline operations while improving the use of technology in the classroom to increase customer satisfaction. In 1995, the company launched a campaign to maximize its customer services across the board. As part of that effort, in 1995 Fukutake changed its name to the Benesse Corporation. The new name combined the Latin words 'bene' and 'esse,' meaning well being, to drive home the company's commitment to support customers' personal aspirations for a better life, according to company materials.

1994–2001

In 1995, Berlitz launched a campaign to refresh its own identity. The company introduced a new, clean-lined logo and a new, company-wide tagline, 'Helping the World Communicate.' Berlitz remodeled the retail stores at its language centers and began a new franchising program, its first in more than 35 years. The company was determined to make itself more consumer-friendly as it moved away from its typical office locations to stores. Revenues in 1995 stood at $351 million, a significant increase over 1994's $300 million. Earnings jumped from $900,000 to $2.3 million over the same period.

Berlitz began to reach out in several directions at once. In 1996 it established Berlitz Kids, to enter the children's market, a move that it had been planning for some time. The goal was to expand from a series of books using fictional characters to offering language-based reference books, games, and CD-ROMs, as well as other ancillary products. To supplement its adult business, in 1997 Berlitz purchased ELS Educational Services Inc., an English-language instruction service, for $95 million. The ELS deal brought with it 25 language centers in the United States and two in England, located mostly on or near colleges and catering to foreign students. To bolster Berlitz GlobalNet's translation business and establish a foothold in Latin America, the company purchased operating subsidiaries, assets, and key personnel of Language Management International, with locations in Brazil and Argentina, as well as the United States and Singapore. In 1999 Berlitz created a new Internet translation service called BerlitzIt that provided timely person-to-person translation that replaced software-translation programs. Not intended to replace its corporate translation and localized services, Berlitz, it was designed for smaller jobs and the general public through an 'off the shelf' version.

Berlitz Kids joined forces with a powerful partner in 1999 when it reached an agreement with the Children's Television Workshop, creators of Sesame Street, to produce Sesame English, a 15-minute program using a new Muppet named Tingo to teach children how to speak English. Starting in China, Taiwan, and Japan, where demand for English instruction high, the partners had plans to eventually bring the program to Europe, Latin America, and North America. With possible home sales and Internet distribution of an entire line of Sesame language products, Berlitz was not reticent about projecting a potential $4 billion global market for the partnership, a figure that would be ten times the total revenue Berlitz achieved in 1998. By the spring 2000, Sesame English was ready to air in its first markets, to be followed by Germany and Austria in May; Hong Kong, Korea, Thailand, and Israel in July; Peurto Rico in August; Colombia, Mexico, and the United States in September; and Venezuela in October. An equally ambitious rollout to other countries in Latin America, Europe, and Asia was planned for 2001. At the same time, Sesame Espanol was being prepared, with an early 2001 airing date scheduled for the United States.

Its ambitious plans notwithstanding, Berlitz stock dropped by 30 percent in 1999, and the company's yearly results only reinforced investors' concerns. Total revenues rose just 2.3 percent over the previous year, to $446.2 million, with a reported net loss of $13.1 million. In March 2000 the company announced that Yokoi would retire and be replaced by James Kahl, chairman and chief executive officer of Le Petite Academy. Furthermore, the company would be restructured into two divisions: Berlitz Language Services and Berlitz GlobalNET. In January 2001 Berlitz announced an initiative to cut operating expenses by $20 million for fiscal 2001 and by $12 million each year after that. The work force would be trimmed and underperforming operations eliminated. The book-publishing division would also be consolidated with product development and Berlitz Kids.

Despite disappointing financial results, Berlitz retained enviable brand-name recognition. Partnered with an even more recognizable brand of Sesame Street, Berlitz and its children's program still held the potential to float the entire company and launch it into a promising and highly profitable future.