This is a re-examination of the action of American Greetings to buy back shares in 2012. It looks into whether the move of repurchasing shares is a good one and how to move on, considering that the card making industry is declining in revenues with the emergence of technology and online cards. How could the company establish a strong international presence despite these challenges and the problem of competition?
Michael J. Schill
Harvard Business Review (UV6643-PDF-ENG)
March 28, 2013
Case questions answered:
- Executive Summary
- Statement of the Problem(s)
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Case answers for American Greetings
Executive Summary – American Greetings Case Study
Technological advancements have changed the way we, as a society, interact with one another. The use of cards to show love on someone’s birthday, graduation, or sympathy to the loss of a loved one has been traditionally practiced for ages now. As technology continues to advance and new markets continue to appear, these card companies need to change old ways to stay alive. And such was the challenge being faced by American Greetings.
American Greetings, the second-largest card-manufacturing company in the United States, is one of those trying to continue to innovate. Customers are now using digital alternatives to interact with others as well as using picture messages on most platforms for social media.
Card companies are now trying to establish an online presence as the card market has decreased. American Greetings stock price has fallen, and top officials in the company are looking for ways to get that price up. The company has 75 million dollars to either buy back shares or hold on to that 75 million for future needs.
A problem with American Greetings includes the fact that the card market is decreasing as alternatives continue to grow in the digital card market. Having optimism about the market, I believe American Greetings should buy back shares. With a bullish market scenario, the stock price will be undervalued.
As technology continues to be a massive part of the world, card companies need to continue to innovate to stay alive. American Greetings is BB+ rated company looking to increase the stock price. American Greetings is trying to spend a lot of money on marketing, which is helping revenue grow.
The company is establishing an online presence as well as digital cards to move with market trends. They have 75 million dollars to either hold on to or buy back shares of the company if they believe these shares are undervalued.
Statement of the Problem(s)
Significant problems that American Greetings is concerned with is the market for card makers and card companies decreasing. Also, another problem for the card-manufacturing company is the price per share dropping as well as spending so much money marketing their product.
Also, another problem the company is facing is trying to innovate to compete with new market trends and not having a competitive advantage due to Hallmark being the bigger of the two companies and having a very strong presence in international markets.