AMERICAN GREETINGS Harvard Case Solution & Analysis

INTRODUCTION:

American Greetings is the second largest publisher of greeting cards in the United States. The company is currently serving its customers in two ways. The first way is the use of the traditional retail channel while the second one which is the more modern approach is electronica via number of company’s websites. The company not only deals in greeting cards, but it is also marketing gift-wraps, candles, party goods, candles, and other Gift ware.

The strength is mostly due to its strong branding. The founder of the company is Sapirstein family, after immigrating to the United States in 1905. Despite of strong family association, the company is trading in public with more than 11000 shareholders. The management of the company has positioned American Greetings as a leader in social expression products. The company has a strong competition from its rival named “Hallmark”.

PROBLEM STATEMENT:

Despite of being the largest greeting card producer in the United States, Hall markis currently dominating this industry with more than $4 billion. The share price of American Greetings has currently declined to half, which equals to $12.51 per share. The EBIDTA multiple is 3.5 times. The downfall in the valuation of the company is due to the overall decline in the industry. Due to this the company is currently concerned over this decline. In the past, the company had an experience of repurchasing of its stock, but at that time the market was stable. The current situation is different as it has already been discussed. The company is again seeking to repurchase its stock with the value of $75 million. Now, the main problem, which the company needs to address,is that whether it can repurchase its stock without facing any troubles.

ANALYSIS:

In order to provide an appropriate recommendation for the following problem discussed earlier, the following step that is necessary for the CFO of the company is to evaluate the strengths, weaknesses, opportunities and threats through the SWOT analysis, and evaluation of the company’s current EBITDA multiple by comparing it with the market average. Moreover, the analysis also includes the two foldscenario analysis, which includes“bullish” and “bearish” trends.

The use of two folds scenario will also determine the enterprise value of the company in both cases that will be discussed later. The bullish trend estimates the favorable terms while bearish trend estimates the unfavorable terms. The valuation of the equity is determined through the method “free cash flows of the firm”.

SWOT ANALYSIS

Strengths:

The strength of the American Greetings includes its largest production ability; ownership of the major brands like AG, Carlton Cards; generated additional revenues by licensing of the rights of the characters like “Get along Gang” and “Nickelodeon”; availability cards on the internet, and kiosks retail stores to allow creation of custom cards. Moreover, it creates products with innovative features, and has a strong retail partnership. The portfolio is diversified. Also, it rolls out the technological enhancement to improve sales.

Weaknesses:

The overall market of greeting cards is in a decline. The sales are also declining due to more availability of substitute products.

Opportunities:

The acquisition of the potential rivals that has a strong reputation in other areas which are across the border. The acquisition and sales also provide them the opportunity to reach potential customers on the large scale. It can expand its licensing of popular characters like Nickelodeon. It can also develop additional electronic offerings.

Threats:

The competition is strong. Currently, hallmark is its major rival and is operating as a leader in this industry. The rapid expansion of social media can divert the concentration of its customers. Too many substitutesare approaching the market like the use of digital communication for greeting cards....................

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