2b: Analyze Greeting Card Industry - Essay Example

Analysis of Greeting Card Industry The overall structure of the industry Five companies dominate the greeting card industry. Low entrybarriers and low degree of product differentiation account for a high degree of competition in the industry. Product innovation and market expansion are possible solutions to prolong the industry’s maturity stage. A description of each competitor Around 2,000 companies currently play in the greeting card industry of which five control 97% of total retail sales.

Hercules, the current market leader, holds more than half of the total retail sales. Hercules’ strong distribution channel, expansive retail outlets, high brand recognition, and numerous freestanding stores lend many advantages over other competitors. Atlas Cards, having efficient management team, exclusive licensing rights, and strategic acquisitions, captures almost a third of retail sales and is the strongest competitor of Hercules. Other key competitors are Shomei Cards, Snapadoo, and Felicita Cards.

The degree of product differentiation The greeting card industry has a low degree of product differentiation. In the US, there are only two major types of greeting cards (seasonal and everyday) which leaves very little room for variation. This is evident in the similar range of selling price among manufacturers of greeting cards. In effect, competitors lower their selling price and give discounts just to attract consumers who only have few types of greeting cards to choose from. Although companies like Felicita Cards and Shomei Cards, for instance, offer variations in their greeting cards, they only cater to a small segment of the market.

The “little” degree of differentiation they offer does not affect competition since they control only a tenth of retail sales. The lifecycle stage the industry is in The greeting card industry is currently on the maturity stage which signals the stability and the slowing down of an industry’s further growth. Centuries after its introduction stage and decades after its growth stage, the greeting card industry now faces flat growth rates. Recent US market figures indicate a slowing growth rate which in the next years will decline to 2.7%. These minimal growth rates, however, do not translate into profit because they merely reflect inflation or the overall growth rate of the economy.

The degree to which firms engage in direct or indirect competition The greeting card industry has a high degree of direct competition and minimal degree of indirect competition. Around 2,000 companies are currently offering a product (i.e. greeting card) with low degree differentiation to an already mature or saturated greeting card market. This trend leads to tougher competition and lower prices. Indirect competition is mainly posed by new entrants and substitute products such as balloons, postcards, and the ones offered in the internet.

The existence of entry and exit barriers The greeting card industry has low entry and exit barriers which is why about 2,000 companies are inside it. The industry’s mature market and low start-up costs encourage competitors to enter without hassle. To keep up with competition, industry players promote product innovations and market restructuring.