A TERM PAPER ON ARCHIES LTD

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 Archies Limited earlier called Archies 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. Archies 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. Archies 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 Archies 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,
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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 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. Tieups with global players enabled Archies to present a range of specialoccasion 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
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STORE STRUCTURE A typical Archies store is 1000 to 3000 sq ft. in area. GROWTH STRATEGY 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 Archies 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. Archies 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: "Archies is all set to satisfy untapped potential. With brand launches and new products, the thrust is on reaching every individual, satisfying
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various emotions and being within varying budgets. Basing its operations on this vision, Archies 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 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
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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 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 lan 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 pathbreaking 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 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 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." 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
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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 companys leadership status in the Indian greeting card 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.

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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 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
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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. 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

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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. 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.
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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. 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
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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 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

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MARKET SHARE Archies enjoys 50% share of the organized greeting cards market. SHAREHOLDING PATTERN NO.OFSH ARES PROMOTERS Institution PUBLIC TOTAL 4212500 15500 2528000 6756000 62.35% 0.23% 37.42% 100% %

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CHANGE IN OPERATING PROFIT: CAGR IN OPERATING PROFIT IS 12.6%. FINANCIAL: TOTAL INCOME EXPENDITURE OPERATING INCOME DEPRECI ATION -1.62 INTEREST TAX PBT PAT -0.43 -3.62 9.66 6.04 -2 -0.47 -3.7 10.42 6.72 -2.41 -0.83 -4.05 11.87 7.82 -2.73 -1.28 -4.52 12.71 8.19 31/03/05 74.75 -63.04 11.71 31/03/06 85.58 -72.69 12.89 31/03/07 106.03 -90.92 15.11 31/03/08 119.39 -102.67 16.72

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CHANGE IN NET PROFIT: CAGR IN NET PROFIT IS 10.7%. RATIO EPS OPM NPM IC 31/03/05 8.940201 15.66555 8.080268 23.46512 31/03/06 9.946714 15.06193 7.852302 23.17021 31/03/07 11.5749 14.25068 7.375271 15.3012 31/03/08 12.12256 14.00452 6.859871 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 terms 1. 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 Profitability 1.Return on capital employed(ROCE): Mar 05 Return on 17.22 capital employed(%) Return on -6.09 capital employed(%) Mar 06 17.19 -36.97 Mar 07 15.99 -Mar 08 13.74 -44.3 Mar 09 10.19 -80.06

archies vintage

2.Return on investment (ROI) Return on investment Return on -5.77 investment Mar 05 6.96 Mar 06 6.63 -19.66 Mar 07 6.79 -48.61 Mar 08 6.14 -29.38 Mar 09 --34.6 archies vintage

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Trading position Operating profit margin(%) Operating -27.35 profit margin(%) Liquidity position Current ratio: Mar 05 1.81 0.91 Mar 06 2.05 1.05 Mar 07 1.77 2.67 Mar 08 1.78 1.95 Mar 09 2.47 1.35 Mar 05 15.77 Mar 06 15.29 -86.13 Mar 07 13.95 -Mar 08 13.64 -59.02 Mar 09 8.61 -123.68 archies vintage

Current ratio Current ratio

archies vintage

Quick ratio: Mar 05 1.15 1.48 Mar 06 1.92 1.58 Mar 07 1.03 1.25 Mar 08 1.05 -0.84 Mar 09 1.12 0.54

quick ratio Quick ratio

archies vintage

Shareholders ratios Earnings per share: Mar 05 9.28 -2.34 Mar 06 10.32 -6.03 Mar 07 12.03 -10.67 Mar 08 12.14 -6.64 Mar 09 -1.61 -9.79

Earnings per share Earnings per share

archies vintage

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BCG MATRIX

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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 industry BARRIERSTO 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. Explicit collusion 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.

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The intensity of rivalry is influenced by the following industry characteristics: A larger number of firms increases 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 growth Causes 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 costs result 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 products cause 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 costs Increases 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 differentiation is associated with higher levels of rivalry. Brand identification, on the other hand, tends to constrainrivalry.7. Strategic stakes are high when a firm is losing market position or has potential for great gains. This intensifies rivalry. . High exit barriers place 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 rivals with 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,
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for example, is populated by hospitals that historically are community or charitable institutions, by hospitals that are associated with religious 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 Position Tie-ups with global greeting card majors for designs and artwork While 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 their respective 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 market Archies 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 advantage Archies has a strong distribution network of about 2000 outlets and franchisees across the country out of

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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 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 segments All 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 Valentines 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 realisations
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Conclusion and recommendations: Ups and downs ,road ahead 1. Focus on gifts segment 2. One stop gift shop. 3. Heart warmers. 4. Products available all over the world 5. Tie-up with hallmark Company going through a rough patch is facing a financial crunch Reconsider 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 classifying The 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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