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Harvard Business School Essay

4536 words - 19 pages

Harvard Business School

9-293-135
Rev. June 18, 1993

Friendly Cards, Inc.
In early 1988, Wendy Beaumont, President of Friendly Cards, Inc., met with Amy McConville, a friend and financial consultant. They had been discussing the future of Friendly in relation to the research Ms. McConville had been doing on the firm. Mrs. Beaumont commented: Money is tight and, quite frankly, the cost of financing growth is now so high that I wish we could sit still for a year. But we really can’t do that. You know the record and you saw our growth for last year. We’re projecting a 20% increase in sales and an even larger increase in earnings for next year (see Exhibits 1 and 2 for the company’s ...view middle of the document...

In order to compete successfully, all firms had to deal effectively with high fixed costs. Companies ran large inventory costs because of the necessity of keeping stock for reorders. In addition, many retailers could return unsold or soiled cards to the manufacturer, who would have to bear the expense. Production was costly and long lead times prevented rerunning successful designs. Because of these high fixed costs and the overall competitiveness of the industry, distribution costs were very important to overall firm profitability. The large companies used their own sales force to sell directly to various outlets. Often companies would try to increase sales by expanding the
This case has been prepared as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1993 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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Friendly Cards, Inc.

distribution network. Sales trends within the industry were often characterized (especially in the case of smaller companies) by seasonal peaks, as most of the actual sales occurred in a short period of time even though cards were in production all year. As an example, for the industry as a whole 32% of dollar sales occurred at Christmas, with Valentine’s Day (7% of sales), Mother’s Day (5%), and Father’s Day (2%) being other examples where the selling season was short but the revenues were large. Within the industry, companies had been placing an increasing emphasis on a larger variety of cards and the rapid replacement of slow sellers to encourage more impulse buying of everyday cards. This had been successful to the extent that in 1969 40% of card volume was represented by everyday sales and in 1987 this figures was above 50%. Within the industry, trends included a conscious move away from relying solely on greeting card sales. Hallmark, for example, also marketed glassware, jewelry, candles, silverware, and giftbooks; American Greetings diversified into gift wrap and stationary goods, such as playing cards, giftbooks and college study guides.

Friendly Cards, Inc.
In 1978 Wendy Beaumont founded Beaumont Greeting Card Co. in New York City with $15,000. Shortly thereafter she acquired the bankrupt Lithograph Publishing Co. of Reading, Connecticut and moved all operations to the new plant. A year later the renamed firm, Friendly Cards, Inc., went public through a stock offering at $3 per share. In the years...

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