Harvard Case - American Greetings
"American Greetings" Harvard business case study is written by hael J. Schill. It deals with the challenges in the field of Finance. The case study is 14 page(s) long and it was first published on : Mar 28, 2013
At Fern Fort University, we recommend that American Greetings pursue a strategic shift towards a more digital-centric business model, focusing on leveraging technology and analytics to enhance its product offerings, expand its reach, and improve operational efficiency. This strategy involves a multi-pronged approach encompassing:
- Investing in digital platforms and e-commerce: Developing a robust online presence, expanding e-commerce capabilities, and integrating digital channels into its existing sales and marketing efforts.
- Developing innovative digital products and services: Creating interactive and personalized digital greeting cards, leveraging augmented reality (AR) and virtual reality (VR) technologies, and exploring subscription-based services.
- Optimizing its supply chain and manufacturing processes: Implementing activity-based costing to identify cost-saving opportunities, streamlining its manufacturing processes, and exploring partnerships with third-party logistics providers.
- Embracing data analytics and customer relationship management (CRM): Leveraging data analytics to gain insights into customer preferences, personalize marketing campaigns, and optimize pricing strategies.
2. Background
American Greetings, a leading greeting card company, faced significant challenges in the late 1990s and early 2000s. The rise of digital communication and the declining popularity of traditional greeting cards threatened its core business. The case study explores the company's efforts to adapt to these changes, including its strategic acquisitions, investments in technology, and attempts to diversify its product portfolio.
The main protagonists of the case study are:
- The American Greetings management team: They are responsible for navigating the company through a period of significant disruption and formulating a strategy to ensure its long-term viability.
- The company's shareholders: They are interested in maximizing their return on investment and are concerned about the company's future prospects.
- The company's employees: They are affected by the company's strategic decisions and are looking for job security and opportunities for growth.
3. Analysis of the Case Study
The case study highlights several key issues facing American Greetings:
- Declining market share: The rise of digital communication and the availability of free online greeting cards eroded the company's market share in the traditional greeting card market.
- Increased competition: American Greetings faced intense competition from both traditional and digital players in the greeting card industry.
- Changing consumer preferences: Consumers were increasingly turning to digital channels for communication and were seeking more personalized and interactive greeting card experiences.
To analyze the situation, we can apply the Porter's Five Forces Framework:
- Threat of new entrants: The barrier to entry in the digital greeting card market is relatively low, making it easier for new players to enter the market and compete with established players like American Greetings.
- Bargaining power of buyers: Consumers have a wide range of options available to them, giving them significant bargaining power.
- Bargaining power of suppliers: The bargaining power of suppliers is relatively low, as there are multiple suppliers of paper, ink, and other materials used in greeting card production.
- Threat of substitute products: Digital communication channels and online greeting card services pose a significant threat to traditional greeting cards.
- Competitive rivalry: The greeting card industry is highly competitive, with numerous players vying for market share.
4. Recommendations
To address these challenges, American Greetings needs to implement a comprehensive strategic plan that focuses on:
- Digital Transformation: Investing heavily in developing a robust online presence, creating interactive and personalized digital greeting cards, and exploring subscription-based services.
- Innovation: Continuously developing new and innovative products and services to meet evolving consumer preferences.
- Operational Efficiency: Streamlining its manufacturing processes, optimizing its supply chain, and exploring partnerships with third-party logistics providers.
- Data Analytics: Leveraging data analytics to gain insights into customer preferences, personalize marketing campaigns, and optimize pricing strategies.
- Strategic Partnerships: Collaborating with other companies in the digital space to expand its reach and access new technologies.
Specific Actionable Steps:
- Develop a comprehensive digital strategy: This should include a detailed plan for developing a robust online presence, expanding e-commerce capabilities, and integrating digital channels into its existing sales and marketing efforts.
- Invest in technology and analytics: This includes developing a state-of-the-art digital platform, investing in data analytics tools, and hiring skilled personnel in digital marketing, e-commerce, and data analytics.
- Create innovative digital products and services: This could include interactive and personalized digital greeting cards, augmented reality (AR) and virtual reality (VR) experiences, and subscription-based services that offer personalized content and exclusive offers.
- Optimize its supply chain and manufacturing processes: This could involve implementing activity-based costing to identify cost-saving opportunities, streamlining its manufacturing processes, and exploring partnerships with third-party logistics providers.
- Embrace data analytics and customer relationship management (CRM): Leveraging data analytics to gain insights into customer preferences, personalize marketing campaigns, and optimize pricing strategies.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: American Greetings has a long history of creating innovative and engaging greeting cards. This digital transformation strategy leverages these core competencies while adapting to the changing market landscape.
- External customers and internal clients: The recommendations are designed to meet the evolving needs of consumers while also providing opportunities for employees to develop new skills and contribute to the company's success.
- Competitors: The recommendations are designed to help American Greetings compete effectively with both traditional and digital players in the greeting card industry.
- Attractiveness ' quantitative measures if applicable (e.g., NPV, ROI, break-even, payback): The digital transformation strategy is expected to generate significant returns on investment, as it will allow American Greetings to reach a wider audience, increase sales, and improve operational efficiency.
- Assumptions: The recommendations are based on the assumption that the digital greeting card market will continue to grow and that American Greetings can successfully adapt to the changing landscape.
6. Conclusion
American Greetings has a unique opportunity to leverage its strong brand recognition and its history of innovation to become a leader in the digital greeting card market. By embracing a digital-centric business model, investing in technology and analytics, and developing innovative products and services, the company can secure its future and continue to create value for its shareholders, employees, and customers.
7. Discussion
Other Alternatives:
- Merging with or acquiring a digital greeting card company: This could provide American Greetings with immediate access to technology, expertise, and a customer base in the digital space. However, this option could be expensive and could lead to integration challenges.
- Focusing solely on the traditional greeting card market: This would be a risky strategy, as the traditional greeting card market is declining. However, it could be a viable option if American Greetings can find ways to differentiate its products and services in this market.
Risks and Key Assumptions:
- The digital greeting card market may not grow as expected.
- American Greetings may not be able to successfully develop and launch innovative digital products and services.
- The company may face challenges in integrating digital channels into its existing sales and marketing efforts.
Options Grid:
| Option | Advantages | Disadvantages |
|---|---|---|
| Digital Transformation | Strong growth potential, access to a wider audience, improved operational efficiency | High initial investment, risk of technological obsolescence, integration challenges |
| Merging with or acquiring a digital greeting card company | Immediate access to technology, expertise, and a customer base | Expensive, integration challenges |
| Focusing solely on the traditional greeting card market | Lower risk, leveraging existing infrastructure | Declining market, limited growth potential |
8. Next Steps
- Develop a detailed digital transformation strategy: This should include a timeline, budget, and key milestones.
- Invest in technology and analytics: This includes selecting and implementing the necessary software and hardware, as well as hiring skilled personnel.
- Develop and launch innovative digital products and services: This should be done in a phased approach, starting with pilot projects and then scaling up successful initiatives.
- Optimize its supply chain and manufacturing processes: This could involve implementing activity-based costing, streamlining manufacturing processes, and exploring partnerships with third-party logistics providers.
- Embrace data analytics and customer relationship management (CRM): This includes developing a data analytics strategy, implementing CRM software, and training employees on how to use these tools.
By taking these steps, American Greetings can successfully navigate the challenges of the digital age and secure its future as a leading greeting card company.
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Case Description
This case is used in Darden's first year Finance course, but it would be appropriate in any course introducing firm valuation. A teaching note is available for instructors. This case examines the 2012 decision by American Greetings (AG), the greeting card company, to repurchase shares. At the time of the decision, the greeting card industry was facing an important structural shift; AG stock was trading at valuation multiples that were the lowest among its peer group. Students are invited to build a simple model of the company's future cash flows and derive an implied value. Because the company is arguably in a state of maturity or decline, a discussion of steady-state economics is particularly germane.
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