STRATEGIC MANAGEMENT

Core business: greeting cardsComplementary business: gifts and perfumes. Vision of ANILMOOLCHANDANI TO BE THE WORLD LEADERIN POSTERS AND GREETINGCARDS.“BUT FAILED TO RETAIN THAT VISION AFTER THE INTRODUCTION OF E-CARDS”

D

10/7/2012

HISTORY

Archie’s Limited earlier called Archie’s Greetings and Gifts Ltd.

is an Indian company based in New Delhi. It was started in 1979 by Anil

Moolchandani. Initially it sold song books, posters and leather patches.

The company's main product, greeting cards, was introduced in

1980.Cards were introduced for major Indian festivals such as HOLI,

DIWALIand RAKHI apart from the usual new year, birthday and

anniversary occasions. The company went public in 1995. In 1998, it was

listed on the National Stock Exchange of India and Bombay stock

exchange. Archie’s Limited is in the business of manufacturing and selling

greeting cards and other social expression products such as gifts and

posters. Archies has a market share of about 50% of India's greeting cards

market. Archie’s has about 2000 outlets and franchisees, called Archies

Galleries, spread across 120 cities and 6 countries. It has tie-ups and

licensing arrangements for merchandising characters such as Dennis the

Menace and Disney characters. It has arrangements with Paramount

Cards Inc.,Anne Geddes, and American Greetings, for greeting card design

and name use. Following the increasing popularity of e-cards, Archies

started its online portal

archiesonline.com

in 2000 the company expanded its product range to include artificial

jewellery, crystal ware, chocolates and perfumes, and accordingly

changed its name to Archie’s Limited in 2002.

ITS JOURNEY

Founder Anil Moolchandani started his business career in a family owned

sari shop in Delhi, after graduating from college. One day a customer

presented him with two posters brought from the US which he displayed

in his shop. When visitors expressed interest in buying them, he seize

upon a business opportunity. He started putting up posters for sale and, in

a deft move, set up Archies as a mail order operation. His first order,

worth Rs. 12 (now US$ 0.25) came from a customer in Lucknow. As sales

picked up, Archies introduced its first greeting cards. Initially, these were

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simply miniaturised copies of posters. The success of the P-Series, which

still sells, led to the creation of a distribution channel. The business

mounted, and in 1981,

thecompany held its first distributors' meet in New Delhi. In 1984, Archies

acquired its first foreign license from Walt Disney. Mickey Mouse and

Donald Duck began appearing on Indian greeting cards. The products

soon attained international lustre and appeal. In a short few years, Archies

had become a recognised brand and a household name. Tie-ups with

global players enabled Archies to present a range of special-occasion

cards. The Archies Gallery chain came next. This first-of-its kind concept-

store opened in Kamla Nagar, Delhi, in 1987 and was an instant success.

By introducing organized franchising, Archies continued to grow by leaps

and bounds. The year 1993 marked the opening of the Archies Gallery

store. By the mid 1990s, the brand had not only become a public limited

company; it had also established itself as a clear leader. As the market

environment continued to evolve and internet became an important

aspect of urban life, Archies kept pace by introducing e-cards and offering

online gifting opportunities through its e-commerce portal.

ARCHIES PRODUCT RANGE

ARCHIES MUGS

ARCHIES PHOTO FRAMES

ARCHIES WRIST WATCHES

ARCHIES SCHOOL BAGS

ARCHIES SOFT TOYS

ARCHIES BABY SETS

ARCHIES CLOCKS

ARCHIES EXCLUSIVE GIFTS

STORE STRUCTURE

A typical Archies store is 1000 to 3000 sq ft. in area.

GROWTH STRATEGY

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Targeting malls and other prime retail space for opening new store.

Planning to increase the Stupid Cupid jewellery store in India.

Company is planning to tap Rs 1000 cr corporate gifting sector in India.

Company is planning to tie-up with local grocery or chemist shops to sell

greeting cards and gifts

SYNOPSIS

Archie’s started with an investment of Rs. 1000 for selling posters through

mail order. But, over a period of 25 years, the growth in the greetings

segment slowed down, while the market for gifts was picking up.

gifts rather than greetings, he could continue profitably in the Business

of Emotions or would that take the business away from its vision

and mission.

Archie’s proactively responded to technology changes inform of e-cards,

SMS and MMS, which were taking the market away from traditional greeting

card by diversifying into gifts as they were another means of expressing

emotions.

Core business: greeting cards

Complementary business: gifts and perfumes

Vision of ANILMOOLCHANDANI

TO BE THE WORLD LEADERIN POSTERS AND GREETINGCARDS.“BUT

FAILED TO RETAIN THAT VISION AFTER THE INTRODUCTION OF

E-CARDS”

“We are in the business of selling emotions”

Re-quoted his statement in 2000

The statement says:

"Archie’s is all set to satisfy untapped potential. With brand launches and

new products, the thrust is on reaching every individual, satisfying various

emotions and being within varying budgets. Basing its operations on this

vision, Archie’s is charting a new course of action. With the product, place,

price, promotion and distribution synergies working in tandem, it won't be

long before we

4

ARCHIES

strategy over time

Innovation was a continuous process.

offers and promotional schemes were introduced.

Tap all the Indian festivals and occasions.

Popularize western occasions in India.

Associated with HELPAGE INDIA,CRY

for shaping its corporate value Promoted their props through Bollywood

movies.

“Business of Emotions”

The key to Archies' success is the fact that the company has consistently

focussed on emotions and feelings, which is summed up in its marketing

strap line:

'The most special way to say you care'

. Archies' product portfolio contains all-occasion greeting cards, gift items

such as curios, photo albums, photo frames, soft toys, mugs,

quotations, key chains and a wide range of stationery. Emotions are at the

heart of the Archies collections.Archies has played a significant role

in advancing the social expressions market by creating a special collection

of greeting cards and gifts for different occasions. Today the main aim of

Archies in the next three to four years to be present in every

significant shopping real estate in the country. With a view to better

control the ultimate experience for the customer, the focus will be on

company owned or company managed stores as opposed to the pure

franchising route that has been followed so far.

Promotions and advertisements

Props used in movies

Changing franchise stores into galleries

Organizing events and honouring winners

Providing online service

MARKET

Before the advent of Archies, the Indian social expressions industry as

gifting has come to be defined and was controlled entirely by the

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unorganized sector. The gifts comprised such standard offerings as

flowers, books, sweets, garments and in some exceptional cases silver

and semi-precious stone trinkets. The arrival of Archies began to slowly

change this predictable Indian mindset. A whole new range of unique

items were now available and lent a dash of élan and colour to gifting. At

the same time the quality of merchandise, too, underwent a complete

transformation. The evolving consumer base with its increasing exposure

to developed markets, rising per capita and disposable incomes, a more

liberal view of western cultural practices and the sheer joy of being alive

that Indians are wont to display, have added a whole new dimension to

social occasions. For every one of these, Archies has developed a range of

merchandise designed to best express the sentiment. Today, Archies is

India's apex market leader in the social expressions industry with over

50% market share in the organized sector. Having championed the path-

breaking concept of branded retailing in India, Archies has expanded its

operations in sync with market needs. The brand currently operates 120

company stores in fourteen states and 36 cities across India, in addition to

more than350 franchise outlets in 100 Indian cities and five countries.

Though still in its formative years per capita consumption of greeting

cards is estimated at a low 0.5 compared to over 32 in the UK and about

22 in the US the social expressions market is growing at 12%-15% per

annum .Archies had a turnover of Rs. 118 crore (US$ 24.60

million)in2007/08 and Rs. 138 crore (US$ 29.80 million) in 2008/09.

The company's strategic tie-up with Paramount Cards in1988 led to the

introduction of newlines of everyday cards such as 'Thinking of you

','Hello', 'Miss you' and 'Get well soon', among others. To give buyers a

truly intercontinental experience, Archies has successfully maintain edits

licensing arrangement with American Greetings a US$ 1.70 billion(Rs.

8160 crore) company since 1993. In addition, it has exclusive distribution

tie ups with Keel Toys (UK), Paper Island (UK) for Fizzy Moon, Xpressions

Gifts Co (UK), Russ Berrie (US) and Gund (US). Each of these is an

internationally recognised brand and Archies' arrangement simply means

that Indians now have access to them. A unique programme in the Archies

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product portfolio is 'Gift of the Month.' In this marketing initiative a

product is chosen and sold at Rs. 99 (US$2.10) well below its normal

printed price for an entire month. The idea was to create excitement

within the store and thus attract customers to the outlet.

RECENT DEVELOPMENTS

Gifting isn't an expression restricted to individuals. Gradually even

corporate India is falling prey to its charms and seeking out innovative

products that match their brand identity. Under the Gift works brand,

launched in 2007, Archies has custom-made a wide selection of innovative

and compelling items such as wine boxes, exquisite chesssets, candle

stands as also traditional wares such as desk sets, executive table clocks

and photo frames. In its traditional role of satisfying the needs of

individuals, Archies upped the ante; it has tied up with Carte Blanche

Greetings of the UK for Me to You the grey bear with a bluenose. This

bear, with about US$ 1 billion (Rs. 4800 crore) in retail sales globally, is

the world's most successful non-media teddy bear. The character has

been extended into keepsakes, key chains, umbrellas and a vast range of

social expression stationery. Archies has also produced the MTV Roadies

merchandise. This range of products includes boldly designed bags,

sippers, caps, mugs, photo frames, wallets and key rings.

The latest addition to the Archies greetings cards range is the singing

card. This electronic chip embedded collection of greeting cards, when

opened, plays an original licensed soundtrack. These cards are then west

rage to hit India.

PROMOTION

Archies utilizes the complete media canvas. Its partnership with MTV has

led to building an even stronger relationship with its consumer base.

Archies-sponsored MTV Roadies 6.0 is a cult programme on Indian

television which, in a very brief span of time, has generated a huge

following. The programme is iconic in its appeal, enjoys high television

rating points (TRPs) and caters to the most adventurous of the young

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generation. The company has also worked out strategies like direct

mailers and contact systems for corporate houses. Archies

communications using radio, print and POP directly highlights its brand

proposition. In recent times Archies advertising campaign carrying the

message 'When you love someone your heart celebrates ‘has garnered a

very affirmative response from its customers and associates. As a Super

brand, Archies has contributed significantly towards its corporate social

responsibility. Its tie-up with Help Age and CRY both charitable

organizations has helped bring smiles to many underprivileged adults and

children. Its stores market greeting cards and social expressions

stationery bearing the Help Age and CRY logos. Both the organisations

receive royalty from the sale of these products.

BRAND VALUES

Adorability and sentiment drive the brands' appeal to all age groups and

demographics. The key to Archies' success is the fact that the company

has consistently focused on emotions and feelings. Sentiments lend

effervescence to the brand. Although a market leader with no serious

competition, Archies never lets its guard down. It has always explored

ways to successfully keep the brand young and desirable. No other brand

evokes the same feelings of love and romance that Archies does. It is

unlikely that any other brand, in the near future, will.

ARCHIES CAPTURES HALF OF INDIA'S GREETINGCARDS MARKET

Let's rejoice together, and strive to make each day in the year joyous and

promising, wishing you a very happy new year. Sounds like an extract

from an Archies card?

Founded by Anil Moolchandani in 1979 with only two employees to help

him, Archies Ltd today is considered a one-stop solution for greetings and

gifts. "We want Archies to be a part of everyone'scelebration," says

Pramod Arora, joint managing director of thecompany, adding, "The thrust

is on reaching every individual and addressing various emotions."

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A COMPANY IN TROUBLE!

In February 2002, the Delhi High Court dismissed an application for

injunction filed by leading Indian greeting card and gift company, Archies

Greetings & Gifts Ltd. (Archies). The company wanted a stop order to

restrain Hindu fundamentalist groups - the Shiv Sena, the Vishwa Hindu

Parishad (VHP) and the Bajrang Dal - from 'interfering in the Valentine's

Day celebrations and sales promotions in its showroomsand outlets.

'Archies filed the application fearing that the groups willvandalize their

outlets as they had in February 2001.

The Court's decision shocked Archies 'management, for any disruption of

business on Valentine's Day would translate into huge revenue losses for

the company. Director Vijayant Chhabra said, "Everyone knows what

happened last year. Our outlets were targeted in Mumbai, Delhi and other

parts of the country. Our business has been affected severely

However, by late 2001, the company made archiesonline.com a

paidservice. Youhan Darrab Aria (Aria), Chief Officer (Logistics and

Finance)of the portal commented, "E-commerce was not happening from

our site as expected and ads were also not forthcoming. We wanted to

increase our revenue and charging users was the solution." As expected, a

large number of the 0.6 million registered users stopped using the service.

Aria admitted, "We have suffered massive drops in our registered user

base since we became a paid site." In addition to these problems ,Archies'

initiatives to convert its network of franchisee outlets into company-

owned outlets and its distributor setup into a carrying and forwarding

(C&F) setup were proving to be major burdens on its finances. As a result,

in 2000-01, for the first time in it's over 20-yearhistory, the company

experienced a negative growth. Turnover declined from Rs 710 million in

1999-2000 to Rs 680 million in 2000-01, while net profits for the same

period declined by around 32% from Rs 130 million to Rs 91 million.

Archies' market share remained at 45%between 1998 and 2000. Analysts

remarked that the company’s leadership status in the Indian greeting card

9

and gifts market seemed to be doing it no good in increasing its market

share and sustaining profitability .The dismissal of the injunction appeal

came at a time when thecompany was facing a host of problems on

various other fronts that were taking a toll on its performance. In the late-

1990s, e-cards became very popular. Archies was forced to launch its own

e-greetings website,archiesonline.com, through its wholly owned

subsidiary ArchiesOnline.com Ltd. in mid-2000.

CODE OF CONDUCT AND ETHICS FOR DIRECTORS AND

MANAGEMENT FOR ARCHIES LIMITED

This Code of Conduct and Ethics is made pursuant to Clause 49 (Corporate

Governance) of the Listing Agreement with Stock Exchanges.

The objective of the Code is to promote and uphold the high standards of

ethics observed by the Company in conducting its business. The Code lays

down a broad policy for one's conduct in dealing with the Company, fellow

directors and employees and the external environment in which the

Company operates.

The Company believes in conducting its business with responsibility,

transparency, empowerment, honesty and environmental consciousness.

All concerned are expected to read and understand the Code, uphold the

standards prescribed therein in letter and spirit and to act within the

bounds of the authority conferred upon them with duty to make and enact

10

informed decisions and policies which result in enhancement of the value

of the Company to its shareholders and simultaneously enable the

Company to fulfill its obligations to other stake holders such as customers,

employees and financers and to the society in general.

1. Compliance with applicable laws, rules and regulations

The Company is committed to comply with all applicable laws, rules,

regulation and guidelines in every jurisdiction where it operates.

Directors / Senior Management shall ensure due compliance for every

activity undertaken under their supervision and authority.

Directors / Senior Management shall extend full co-operation to regulatory

authorities, and disclose information as may be required.

2. Conflict of Interest

The term "conflict of interest" pertains to situations in which personal,

financial or other consideration (s) may compromise, or have the

appearance of compromising the professional judgment of Directors /

Senior Management. A conflict of interest exists where the interests or

benefits of Directors or Senior Management or of people or entities related

to them conflicts with the interests or benefits of the Company.

Directors / Seniors Management are prohibited from engaging in any

activity that interferes with the performance or discharge of

responsibilities towards the Company or is otherwise in conflict with the

interest or prejudicial to the Company.

In addition to mandatory disclosures all Non - Executive and Independent

Directors shall disclose their association with any other company which, in

their judgment, may lead to conflict of interest with the Company.

If a proposed transaction or situation raises any question or doubt, the

Compliance officer should be consulted.

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3. Corporate Opportunities

Directors, officers and employees owe a duty to Company to advance its

legitimate interests when the opportunity to do so arises. Directors,

officers and employees are expressly prohibited from:

� Taking for themselves personally, opportunities that are discovered

through the use of Company's property, information, or position.

� Competing directly with the business of the Company or with any

business that Company is considering.

� Using Company's property, information, or position for personal gain. If

the Company has finally decided not to pursue an opportunity that relates

to the Company's business activity, he/she may pursue such activity only

after disclosing the same to the Board of directors or the nominated

person / committee.

4. Confidentiality of Information The directors, officers and employees

shall maintain the Confidentiality of information of the Company or that of

any customer, supplier or business associate of the Company to which

Company has a duty to maintain confidential, except when disclosure is

authorized or legally mandated. The Confidential information includes all

non-public information (including private, proprietary, and other) that

might be of use to competitors or harmful to the Company or its

associates. The use of confidential information for his / her own advantage

or profit is also prohibited.5. Protection and proper use of company's

assets and resources, honest and ethical conduct

Directors/ Senior Management shall as far as practicable, protect the

Company's assets from loss, damage, misuse or theft and ensure that the

assets are only used for business purposes and other purposes specifically

approved by Management and must never be used for unauthorized

purposes.

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Directors/Senior Management shall not apply the company's

assets/resources and /or proprietary information for personal benefit

and /or for the benefit of any other related party.

6. Prohibition of Insider Trading

The Company's securities are listed on the major Stock Exchanges. The

Company is committed to comply with securities laws in all jurisdictions in

which its securities are listed.

The Company prohibits its directors / Senior Management from any

fraudulent and unfair trade practices in the securities market, with regard

to the securities of the Company or of any other company with whom the

Company has business dealings to the best of their knowledge.

The Company has formulated a Code of Internal Procedure and Conduct

for Prevention of Insider Trading and all concerned are required to comply

with requirement of the said Code. The Directors and senior management

personnel and their close relatives shall not directly or indirectly derive or

attempt to derive any benefit or assist other to derive benefit when in

possession of any price sensitive/unpublished information.

7. Fair Dealing

Each director, officer, and employee shall be fair with customers,

suppliers, competitors and employees of Company. They shall not take

any undue advantage of anyone through manipulation, concealment,

abuse of confidential, proprietary or trade secret information,

misrepresentation of material facts, or any other unfair practices.

Director / member of the Senior Management shall not take any

discriminatory stance towards or give unfair advantage to the Company's

employees, customers, suppliers, or competitors through manipulation,

concealment, abuse of privileged information, misrepresentation of

material facts, or any other unfair- practice.

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No discrimination shall be done on the basis of caste, religion, sex,

nationality or disability of any kind towards any employees, customers,

suppliers, or any business partner.

8. Intellectual property

Intellectual Property Rights (IPR) broadly covers patented or potentially

patentable inventions, trademarks, service marks, trade names,

copyrightable subject matter, and trade secrets.

Directors / Senior Management shall make their best efforts to protect all

such intellectual properties related to the Company.

9. Safety, health and environment

The Company is committed to environment protection, pollution control

and maintenance of ecological balance. The company shall maintain high

standards of pollution control, environmental protection and safety.

The Directors/ Senior Management shall ensure compliance with all

applicable environmental, safety and health laws and regulations and

internal policies.

10. Applicability of the CodeThe Code applies to all the members of the

Board of Directors and to senior management personnel of the Company.

Senior management personnel shall mean personnel of the Company who

are members of its core management team excluding Board of Directors

and shall comprise of all the members of management one level below

the executive director, including all functional heads.11. Modification of

the CodeThe Board of Directors of the Company shall have power to

modify or replace the Code in part or in full, as they may deem fit from

time to time in their absolute discretion.

Swot analysis

Strength: few competitors people of India associate well with brand image of archies developed a strong corporate image

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Weakness: better supplements available.(e-cards)excess inventory continuous need for variety

Opportunity: new product category variety in merchandise industry

Threat: rapid changing demand piracy over the internet low margins in merchandise industry

MARKET SHARE

Archies enjoys 50% share of the organized greeting cards market.

SHAREHOLDING PATTERN

NO.OFSH

ARES

%

PROMOTERS 4212500 62.35%

Institution 15500 0.23%

PUBLIC 2528000 37.42%

TOTAL 6756000 100%

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CHANGE IN OPERATING PROFIT: CAGR IN OPERATING PROFIT IS

12.6%.

FINANCIAL: 31/03/05 31/03/06 31/03/07 31/03/08

TOTAL INCOME 74.75 85.58 106.03 119.39

EXPENDITURE -63.04 -72.69 -90.92 -102.67

OPERATING

INCOME

11.71 12.89 15.11 16.72

DEPRECI ATION -1.62 -2 -2.41 -2.73

INTEREST -0.43 -0.47 -0.83 -1.28

TAX -3.62 -3.7 -4.05 -4.52

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PBT 9.66 10.42 11.87 12.71

PAT 6.04 6.72 7.82 8.19

17

CHANGE IN NET PROFIT: CAGR IN NET PROFIT IS 10.7%.

RATIO 31/03/05 31/03/06 31/03/07 31/03/08

EPS 8.940201 9.946714 11.5749 12.12256

OPM 15.66555 15.06193 14.25068 14.00452

NPM 8.080268 7.852302 7.375271 6.859871

IC 23.46512 23.17021 15.3012 10.92969

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Relationship betweenstrategical performance andfinancial analysis

Such analysis has two components:

It provides important evidence of total organizational effectivness.

The efficiency and effectivness of thefinance function can be assessed interms of the management of financial resources.

Ratio analysis

Four major areas may be defined as being of particular importance tostrtegical performance:

 accountancy terms1. Is the business profitable? Profitability

2. Is the trading position satisfactory? Trading

3. Is the business solvent? Liquidity

4. Are shareholders earning satisfactory return? Shareholders ratios

Profitability1.Return on capital employed(ROCE):

Mar 05 Mar 06 Mar 07 Mar 08 Mar 09Return on capital employed(%)

17.22 17.19 15.99 13.74 10.19 archies

Return on capital employed(%)

-6.09 -36.97 -- -44.3 -80.06 vintage

2.Return on investment (ROI)

Mar 05 Mar 06 Mar 07 Mar 08 Mar 09Return on investment

6.96 6.63 6.79 6.14 -- archies

Return on investmen

-5.77 -19.66 -48.61 -29.38 -34.6 vintage

19

t 

Trading position

Mar 05 Mar 06 Mar 07 Mar 08 Mar 09Operating profit margin(%)

15.77 15.29 13.95 13.64 8.61 archies

Operating profit margin(%)

-27.35 -86.13 -- -59.02 -123.68 vintage

Liquidity position

Current ratio:

Mar 05 Mar 06 Mar 07 Mar 08 Mar 09Current ratio

1.81 2.05 1.77 1.78 2.47 archies

Current ratio

0.91 1.05 2.67 1.95 1.35 vintage

Quick ratio:

Mar 05 Mar 06 Mar 07 Mar 08 Mar 09quick ratio

1.15 1.92 1.03 1.05 1.12 archies

Quick ratio

1.48 1.58 1.25 -0.84 0.54 vintage

Shareholders ratios

Earnings per share:

Mar 05 Mar 06 Mar 07 Mar 08 Mar 09Earnings per share

9.28 10.32 12.03 12.14 -1.61 archies

Earnings per share

-2.34 -6.03 -10.67 -6.64 -9.79 vintage

20

BCG MATRIX

21

Diagram of Porter's 5 ForcesSUPPLIER POWER 

Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industryBARRIERSTO ENTRY Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products

THREAT OFSUBSTITUTES -Switching costs-Buyer inclination to substitute-Price-performance trade-off of substitutes

BUYER POWER Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs. Industry Substitutes available Buyers' incentives

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DEGREE OF RIVALRY -Exit barriers-Industry concentration-Fixed costs/Value added-Industry growth-Intermittent overcapacity-Product differences-Switching costs-Brand identity-Diversity of rivals-Corporate stake In the traditional economic model, competition among rival firms drives profits to zero. But competition is not perfect and firms are not unsophisticated passive price takers. Rather, firms strive for a competitive advantage over their rivals. The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences. Economists measure rivalry by indicators of industry concentration. The Concentration Ratio (CR) is one such measure. The Bureau of Census periodically reports the CR for major Standard Industrial Classifications(SIC's). The CR indicates the percent of market share held by the four largest firms (CR's for the largest 8, 25, and 50 firms in an industry also are available). A high concentration ratio indicates that a high concentration of market share is held by the largest firms - the industry is concentrated. With only a few firms holding a large market share, the competitive landscape is less competitive (closer to a monopoly). A low concentration ratio indicates that the industry is characterized by many rivals, none of which has a significant market share. These fragmented markets are said to be competitive. The concentration ratio is not the only available measure; the trend is to define industries in terms that convey more information than distribution of market share .If rivalry among firms in an industry is low, the industry is considered to be disciplined. This discipline may result from the industry's history of competition, the role of a leading firm, or informal compliance with a generally understood code of conduct. Explicitcollusion  Changing prices - raising or lowering prices to gain a temporary advantage.

 Exploiting relationships with suppliers - for example, from the 1950's to the 1970's Sears, Roebuck and Co. dominated the retail household appliance market. Sears set high quality standards and required suppliers to meet its demands for product specifications and price.

 

23

The intensity of rivalry is influenced by the following industry characteristics:

A larger number of firmsincreases rivalry because more firms must compete for the same customers and resources. The rivalry intensifies if the firms have similar market share, leading to a struggle for marketleadership.2.Slow market growthCauses firms to fight for market share. In a growing market, firms are able to improve revenues simply because of the expanding market.3.High fixed costsresult in an economy of scale effect that increases rivalry. When total costs are mostly fixed costs, the firm must produce near capacity to attain the lowest unit costs. Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results in increased rivalry.4.High storage costs or highly perishable productscause a producer to sell goods as soon as possible. If other producers are attempting to unload at the same time, competition for customers intensifies.Low switching costsIncreases rivalry. When a customer can freely switch from one product to another there is a greater struggle to capture customers.6.Low levels of product differentiationis associated with higher levels of rivalry. Brand identification, on the other hand, tends to constrainrivalry.7.Strategic stakes are highwhen a firm is losing market position or has potential for great gains. This intensifies rivalry..High exit barriersplace a high cost on abandoning the product. Thefirm must compete. High exit barriers cause a firm to remain in an industry, even when the venture is not profitable. A common exit barriers asset specificity. When the plant and equipment required for manufacturing a product is highly specialized, these assets cannot easily be sold to other buyers in another industry. Litton Industries ‘acquisition of Ingalls Shipbuilding facilities illustrates this concept. Litton was successful in the 1960's with its contracts to build Navy ships. But when the Vietnam war ended, defence spending declined and Litton saw a sudden decline in its earnings. As the firm restructured, divesting from the shipbuilding plant was not feasible since such a large and highly specialized investment could not be sold easily, and Litton was forced to stay in a declining shipbuilding market.9.A diversity of rivalswith different cultures, histories, and philosophies make an industry unstable. There is greater possibility for mavericks and for misjudging rival's moves. Rivalry is volatile and can be intense. The hospital industry, for example, is populated by hospitals that historically are community or charitable institutions, by hospitals that are associated with religious

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organizations or universities, and by hospitals that are for-profit enterprises. This mix of philosophies about mission has lead occasionally to fierce local struggles by hospitals over who will get expensive diagnostic and therapeutic services. At other times, local hospitals are highly cooperative with one another on issues such as community disaster planning

value chain analysis Business and Competitive PositionTie-ups with global greeting card majors for designs and artworkWhile Archies has in-house design facilities for greeting cards and other paper products, it also has tie-ups with reputed international players like American Greetings Corp., Gibson Greetings Inc., Portal Publications Ltd., Paramount Cards Inc., and Carte Blanche Greetings Ltd. for sourcing designs and artwork. Archies localises these designs and artwork in its greeting cards to suit the requirements of Indian customers. Archies also has tie-ups with institutions like Help Age India and Child Relief and You (CRY) to sell theirrespective brands of cards to corporate as well as retail customers. These tie-ups offer Archies the ability to not only offer a wide range of designs, but also keep pace with the latest trends, and are a source of competitive strength.Leading player in the organised greeting cards marketArchies continues to dominate the organised segment of the Indian greeting cards market with about 50% market share. The other leading players in the organised segment are the Vintage Cards and Creations Limited, Wilson, Ambassador and ITC Limited. Most of the smaller players in the unorganised sector serve mainly to the regional markets. However, despite the entry of newer players and the inroads being made by alternative communication channels, Archies has been able to maintain its share of the organised market on the strength of its established brand image, strong distribution network, and large variety of product offerings. Nevertheless, the highly competitive market and low growth of the greeting cards industry, is a key concern for the business.Established distribution network a major source of competitive advantageArchies has a strong distribution network of about 2000 outlets and franchisees across the country out of which around 120 are company owned/managed. Over the years Archies has developed a strong brand image through advertising and promotion as well as association with the world leading brands. This has

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enabled it to expand its business and protect its market share despite the entry of newer players. Moreover with the establishment of concept stores, Archies has now established itself as a one-stop shop for greeting cards and gift items. Going forward, Archies’ strategy is to expand its network of owned stores by opening 25 new outlets in major malls in big cities. This is expected to ensure greater visibility and help increase consumer reach.Continuing threat from alternative communication media such as electronic mails (emails) and short message service (SMS)While the greeting cards industry would continue to be threatened by competing channels like SMS and e-greetings, Archies’ current initiatives to streamline its greeting cards operations and focus on the fast growing gifts segment are likely to serve it well. Moreover, Archies’ strategy of expanding its network of owned stores by opening new stand-alone exclusive outlets or taking up prominent space in major malls in big cities is expected to ensure greater visibility for the company. While Archies plans to incur capital expenditure on acquiring new premises, the investment is expected to be phased over a period of three years.Positive growth in turnover across the business segmentsAll the three segments of Archies, Gift segment, Greeting card segment and stationary items, witnessed growth during the FY2008-09. The greeting cards industry had witnessed high growth during the late 1980s and 1990s on the strength of higher visibility, increased income levels, and greater popularity of concepts like Friendship Day, Forgiveness Day, and Valentine’s Day in India. In the early 2000s, however, the industry reported significant negative growth with the penetration of competing communicating media, especially Internet and SMS, increasing. Nevertheless, the company has been able to report a positive growth in the greeting card business due to improvement in realizations. While the number of greeting cards sold by the company declined from 47 million in FY2007-08 to 39.3 million in FY2008-09, the value of the sales increased from Rs. 386.6 million in FY2007-08 to Rs. 443.0 million in FY2008-09 on the back of higher realisationsConclusion and recommendations:Ups and downs ,road ahead

1. Focus on gifts segment2. One stop gift shop.3. Heart warmers.4. Products available all over the world

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5. Tie-up with hallmarkCompany going through a rough patch is facing a financial crunchReconsider moving into new business avenues (Theme and Amusement park, Cakes and confectionaries, Play schools and crech for Children)

This paper attempts to explain organization structure based on optimal coordination of Interactions among activities. The main idea is that each manager is capable of detecting and coordinating interactions only within his limited area of expertise. Only the CEO can coordinate companywide interactions. The optimal design of the organization trades off the costs and benefits of various configurations of managers. Our results consist of classifyingThe characteristics of activities and managerial costs that lead to the matrix organization, the functional hierarchy, the divisional hierarchy, or a flat hierarchy. They also investigate the effect of changing the costs of various managers on the nature of the optimal organization,Including the extent of centralization.

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