yale case 08-010

American Greetings
An Automation versus Outsourcing Dilemma
Andrea R. Nagy1 Gene Lee 2 Arthur Swersey3

As part of an industry with generous profit margins and high barriers to entry, American th Greetings had spent decades in a comfortable position. Beginning at the turn of the 20 century, it had helped to create a mass market for the greeting card and had presided over its growth into a multi-billion-dollar industry. Because the manufacturing of cards—especially those with special designs or attachments—could be complex, and because customers were used to choosing from a large selection of cards, it was difficult for new players to offer the big, established card companies any serious competition. By the end of …show more content…

In 1967 the company created Holly Hobbie, the first “licensed character,” a girl in a blue bonnet whose image was imprinted not just on cards but also on clothing, gift wrap, coffee mugs, toys, and other products. A number of other licensed characters followed, the most profitable being Care Bears and Strawberry Shortcake. These properties generated tremendous levels of loyalty and sales: for example, in less than a year, the company created more than 600 different Strawberry Shortcake products, and the character appeared in two television specials and numerous magazines. As American Greetings approached its 100-year anniversary, it was a flourishing company. By 1986 the business that began by selling penny postcards had reached one billion dollars of revenue. By 2005 the company boasted annual sales of $1.8 billion. (See Exhibit 2 for American Greetings financial data and Exhibit 3 for American Greetings stock performance.) In 2005 American Greetings employed 20,000 2 american greetings th associates; approximately 8,000 were full-time employees and 12,000 were part-time merchandisers who supplied the cards and displays for a particular retail outlet. American Greetings was one of the largest players in a large and successful industry. At the start of the 21 century, the market was dominated by two companies, Hallmark and American Greetings, but there were some 3,000 greeting card publishers in