The following discussion describes changes in the greeting card industry.

American Greetings Corp., which originated in the early 1900s, has been struggling in the face of a multiyear decline in industry-wide greeting-card sales. Although the company is the second-largest greeting-card maker by sales, it achieved positive growth in the last two quarters of 2011, something it rarely accomplished in the previous two- and one-half years. The company increased revenue through the use of discounts to increase card sales and market share. However, it lowered its annual revenue growth projection from 5% to 3%.

The greeting card industry is facing increased competition from the use of e-cards and the rise of mobile phones to send messages. Many consumers are also replacing traditional holiday cards with photos uploaded to the Internet. Industry analysts have noted that greeting-card sales have declined steadily since 2005 with the trend expected to continue through 2015. However, managers in the greeting-card industry have argued that a portion of the population will continue to express their feelings with physical rather than virtual cards.

In 2009 American Greetings left the retail business and acquired Papyrus and Recycled Paper

Greetings. This move helped the company focus on its core business of making cards. It also acquired Watermark Publishing Ltd to increase its presence in the United Kingdom. American Greetings does have a small part of its business devoted to selling e-cards and other digital offerings.

a.Discuss how the case of American Greetings Corp. relates to the market power issues described in the chapter.

b.How might American Greetings increase its market power in the future?