What should Rose Partyware should do.Include a Porter's 5 Forces industry analysis (threat of entry, buyer power, supplier power, threat of substitute, intensity of rivarly) for Rose Partyware, Inc. Justify the strength of each force, and the attractiveness (or lack of it) of an industry in terms of its profitability.Whenever you are working with porter's five forces it will be helpful to indicate whether the forces are operating at a 'high', 'moderate' or 'low' level. For example, If capital requirement is high, then threat of entry is low (=high barriers to entry) because large capital requirement makes industry unattractive. In contrast, If capital requirement is low, then threat of entry ishigh (=low barriers to entry) because lesscapital requirement makes industry attractive.Elaborate onthe specific recommendation andrisk mitigation strategies.

'lom Rose hated to go to a meeting with ice cream on his pants. But Rose Partyware's after- school partya monthly gesmre of goodwill to the local communityr and. not incidentally, a eld trial for produCts the company was developing-had confirmed his suspicions that one of the new ice-cream bowls was just too shallow. The ve-year-old who had demon- strated that fact had been sitting right next to him. So here he was getting ready to listen to a major presentation, with paper towels in his hands. \"Go ahead, Cassie." Tom said to his mar+ keting director. \"It'll dry or hardenor some thing. Thankfully. it's my last meeting of the day!" He could tell that Cassie Martin was excited about the presentation she was going to make tothe top management team. Tom had person- ally recruited her about a year agoto spearhead the biggest strategic initiative in Rose's history: the launch of a branded line of party ware. In fact. it wasthe first time a company in the party goods industry had contemplated a branding eort. at least in the so years Rose had been in business. Party Lines Rose manufactured a wide variety of paper goodsplates. bowls. cups. napkins. table- cloths. fayors. crepe-paper streamers. and so forthfor birthday and holiday parties and other social events. Tom's uncle, who had worked for one of the largest paper companies in the United States. had started Rose in the 19705. He had personally driven the company's growth until eight years ago, when he died sud- denly, victim of an automobile accident. A few years before the tragedy, Tom had joined the companynever expecting to stay long. He was freshly graduated from a liberal arts collage and intended to work for a year while considering options for graduate school. Because he'd minored in art. Tom chose to work in Rose's design and graphics depart- ment. Butastheyearworeonandtumedinto another year. he was drawn more and more to the management issues Rose faced His uncle soon had him spending time in the eld, going on sales calls to better understand the needs of parents and bidesargroomstobe.aswellas those ofthe shop owners who helped make their parties happen. Before long. Tom was making his mark in Rose's sales department and was clearly being groomed to take on more responsibility. when the company's patriarch and chair- man suddenly passed away. the Rose family found itself turning again and again to Tom. the only family member who winked for the company. As they slowly absorbed the shock. a consensus emerged that he should take over the top slot. Tom reluctantly agreed. He per suaded his college roommate. Jerry Davis. who was then working forone ofthe country's larg- est accounting nns on the West Coast. to join him as chief nancial ofcer but otherwise left the mnior management team unchanged. After a challenging first year learning the ropes as head of the company, Tom got Rose back onto the growth path disrupted by his uncle's tragic death. Over the next ve years. he helped it realize annual gains in revenues and prots. That was not an easy achieve- ment in the party goods industry. which was one of the last frontiers of entrepreneurship. Hundreds of small companies sold full party ware lines or a few specialty products at throwaway prices, and new competitors ap- peared and disappeared regularly. They all competed for the attention of mass retailers. drugstore chains, and big regional grocers. as well as for independent retailers that sold party products through storefronts, catalogs. homehased distributors. and Web sites. The independents ranged in size from a few super- store chains with many outlets !iocused solely on party supplies to lots of ownermanaged single stems that got by on sales of a few thousand dollars a month. Rose, with its high- end printing capabilities and great trade rela- tions. was one of a handful of big players in the industry. It employed 300 people in its single plant and distribution centers around the country. and it was a pillar of the upstate New York town where it was headquartered. Brand-New Ca pa bilities [t was during a visit to Drupa. the German print ing and papertrade fair,thatTom spotted his op- portunity to break out of the pack. A 1vendor at the show was talking up its nestgeneration digi tal imaging technology. which took color les from the pro-press network and put them directly onto the printing press. thereby eliminating the expensive lmmaking process. That approach was still in prototype. hot it held out the promise of speeding up production. making shorter print runs viable, and bringing down costs. Best of all. Tom thought. it might ac tually enhance the printed product's quality. He decided to go with his hunch. and with the help of some expert consulting engineers. his production team modied the new ma chines to work with some of the trickierand more eye-poppinginks and nishes. The re- sults provedto be better than Tom had hoped: Abstract designs on the party ware seemed to glow. and popular characters. like Harry Potter and Frodo Baggins. acquired a near three-di- mensional effect. When Rose test-marketed the new partyJware designs. consumers loved them. and all participating retailers said they \"mild give the new line a lot of display and merchandising support. That emboldened Tom, who had become increasingly concerned about the fact that Rose sold its party ware under generic labels like Your Birthday. Your Wedding, and Your Anniversary. The company's namehis nameappeared only on a small sticker on the back of the plastic packaging. almost as an informational afterthought. Tom felt that the new line presented a great opportunityto undertake a major branding ehrt. Having a strung brand. rooted in a quality advantage. mold allowRosetostayaheadofitstivalseven when, sooner or later. they caught up with its printing capabilities. When Tom asked around at conferences and trade shows about a person to lead his branding initiative, Cassie's name kept cropping up. Peo- ple praised not just her creativity but also her business grounding: She had left a fasttrack ca reer in a market research rm to get her MBA. After B school. she joined a high-end toy-store chain. Toy Pile. and was credited with turning it into one of the top ve in the industry. Everything's Coming Up Roses Tom was now seeing the evidence that his in stincts had been right; Cassie's slides told a great story. She'd spent the better part of a year putting together Rose's edgling market- ing department and preparing for the launch of the branded line. She had researched cus tomers. trade partners. and retail chains and established relationships with advertising and market research agencies. promotion houses, and memhandising mts. Customers loved the brand concept. Cassie was able to report with authority. They saw it as bringing a trust factor to party wareas Crayola had done to crayons and Elmer's to glue. \"Virtually all our retailers. too. responded positively.\" crowed Cassie. as she moved on to the next slide. \"The party Stores and rerail chains saw branding as bringing order and Eli- citernent to what is pretty much a hodgepodge today The independents loved the idea of ad- vertising behind a brand they could feature." \"The only bad news." Cassie continued. "is that establishing our brand is going to be more expensive than I had budgeted for. After con- ducting the advertising and promotion tests. Ivre've found that we need to deliver the mes- sage moo: often in the firsr neo years. in the my business. I wuld concentrate communion- tions around the holiday season. To make a party goods brand elicit in people's minds. we have to appear in a variety of magazinesfor parents. brides. teens. and morethroughout the year. We have to grab people whenever they're thinking about throwing a party." Cassie penned the ad agency's creative presen- tation around the table to all the meeting members. Most of the group had seen one or two ofthe ads. but the reality of the full cam- paign created an instant butt. I"My recommendation Would be tofunzl this additional expenditure with a small price increase on all the branded items." She put up a new slide. \"As you can see. my gures show that we should be able to accomplish our objectives with a price hike in the range of\": to 7%. in your presentation books. after the cost estimates. I have included studies of half-a- dozen brands that sell at premituns to nonadvert'tsed competitors and still lead their markets. Our price differential would be less than all those cases.\" \"I don't know about that. Cassie.\" [t was Jerry Davis. the CFO. \"Party ware has always been a commodity businem. and pricing above the market scares me. when people are hur- riediy comparing paper items For a party. they will always opt lior the cheaper product.\" \"Customers say that isn't true." Cassie coun- tered. She switched toa slide that underscored the point. \"In our studies. they consistently in dicated that they were willing to pay even more or our branded products than I'm sucsestina" I"What they say can be di'erent from what they do.\" ferry replied. I'Sure. they'll take a stand on quality when speaking to a re searcher. but when they're buying disposable stuff for so little kids. it's easy to say. 'Who'll notice the difference?" Tom interoeded. \"Jerry. you've put your n- ger on a key decision point. But I want to give eteryom a chance to digest what Cassie's pre- sented. As you know. we're reconvening next week to wrestle this to the ground." He thanked Cassie for her excellent presentation and adjounted the meeting. A Thorny Issue M'i'orn made his way back to his ofce, his na- tional accounts manager, Hank Lewis. caught up with him. \"Got a minute?\" he asked. "This may complicate things a hit.\" Hank said, as be shut 'l'om's office door behind him. \"Remember I was out calling on Party! yester- day?\" He was referring to one of Rose's largest cusromers. "I got back ion in time for Cassie's presentation. The thing is. Party! has decided to get into private labeling in this category. It's planning to oizrcustomers a complete line of party goods under its own name.\" Seeing Tom wince. Hank hastened to con- tinue. \"Yeah, that's the bad news. But the good news is. they want us to do the production. They'd just be doing the designing and setting the specs." \"But that's not our business. Hank." Torn re- plied. a little sharply. \"We've always been mar- keters and designers. not just pressmen.\" \"Better listen to the full story.\" advised Hank. \"Party! is going to do this with or with out us. The company plans to give its store line lots of space and merchandising support and sharply reduoe the number of other partyware lines it carries. If we're the supplier. we're guar anteed one of the remaining positions. If we're not. there are no guarantees] don't need to re- mind you that's about 20% of our sales.\" Having Tom's Full attention now. Hank lled in more details. The retailer. he reported. .'|"It would initially test the line in too of its stores. If it did well. the company would roll it out to all 30o outlets. \"Party! will price the products on a par with the other lines, including ours. btrtit'sproposingtopayusrs'lslessdtanit does now. Still. we wouldn't have to spend any promotional dollars on those sales, and the ml umes could be huge. The price difference and the promotional spending about balance out. and. netnet. Egure it 1wrouldbe a good-sized win at us." \"Okay." countered Torn. \"but you're not thinkingofourmtupcoststodoiLAndit sounds to me like you're counting on sales of our own lines holding steady. Won't Party! be cannibalizing a lot of them?\" Hank pressed the case again. \"No question. Party! will be a gorilla of a rival. but like I said. the stores will carry fewer other lines. I think we could hold our own,\" he said, getting upto go. \"Maybe even do a little better.\" Behind Every Successful Brand As Tom drove home that night. it struck him that he faced an eitheror proposition; Rose didn't have the capacity, he was sure. to under take Cassie's branding initiative and respond to the Party! opportunity at the same time. lost in tlnught. be nearly forgot the prom ise he'd made to his daughter to pick up sup plies for her school project. He ended up backtracking a mile to OfceMart rather than going home without the requisite three colors of poster board and markers. On his way to the mgister. Torn stopped short in front of a section devoted to writing tablets. Six brands were on display. but the top shelf and the two bottom rows all bore the same name.- OfceMart. Torn also saw a neat display ofO'iceMart scratch pads when he got to the end ofthe notebook aisle and a stack of smaller OfficeMart notepads near the register. He thought back to something Hank had said as he left Tom's ofce: \"You're always saying we should look for the opportunity in every setback. Maybe there's a bigger business for us in this privatelabel stuff than just this one account." it was hard to argue with Hank's assertion. if the Party! store brand caught on. all the other mass and party chains might want to launch private-label brands. too. and quickly. In that case, Rose could be the supplier of choicethe one that had already gured out how to do it and represented the lowestrisk partner. The next morning. Tom decided his rst conversation should be with Marge Dinson. Rose's sales director for the independent stores. In truth. his heart had always been with this group. the small retailers who focused on providing their customers with a little more personalized service along with their party ware purchases. They were an idiosyncratic bunch: mothers looking for a career after the kids had left home. caterers and liquor distrib- utors who sold party goods as an important adjunct to their businesses. some lnternetonly sellersall were great sources of ideas and en- couragement Tom ahvays looked forward to meeting these folks at the shows and in their shops; he felt he owed them a debt of gratitude for Rose's success over the years. Tom and Marge met over a cup of coffee in his office. where he proceeded to explain the Party! opportunity to her. It didn't take long to tell where Marge stood on it. \"Madness!\" she cut in. as soon as she got the gist of it. \"This industry is like a small town. and the day any retail chain launches its own line. by 5 pm everyone will know who's making it. That's a loyalty check. Every party store. every supermarket. every dmgstore is trying to eat the independents' lunch. You're either with 'em or against 'em. They realize we can't stop selling to the chairs. but they sure don't expect us to make the wave that could wash them away. You'd lose 80% of their business in the rst six months. That's almost 35% of our sales. You'll be better off telling the indepen- dents what Party! is planning and asking them to ratchet up their support for our products titan turning the screw on them yourself. And you really think they'll get behind our branded line if we also manufacture products for Partyl? Forget it.\" What's in a Name? The next day. the management team once again tethered in the party room; Tom had asked Hank to present Partyl's proposal to all the group members, after which they would hear Marge's point of view. Both Hank and Marge got caught up in their emotions and went further than either had earlier. \"Whether we like it or not, chains are the future,\" Hank declared. \"We had better learn how to play their game. or we're going to be on the sidelines with a handful of indepen- dents. making a futile last stand This business ischanging.andwehayetochangewid1it.\" \"Hank. you've been living with those chains for so long. you've bought their story crun pletely.' Marge shot back. I'The fact is. you simply can't trust them. Today. you'll be their Favorite. Tomorrow. they'll want to pay you a dime less on their line. then a dollar less. You're not at the foot of a ladder. instead. you're at the top ofa slippery slope." The rest of the group didn't hold back. ei- ther. lack Kuczinski. Rose's production man- ager for almost two decades reminded Tom that they were in possession of a printing breakthroUgh. \"Anyone can be a commodity producer.\" lack stated atly. 'If your uncle had wanted to be in that business. he'd have stayed at United Paper. But the fact is we manufac- ture products bener than anyone else does. There's no way any retailer is going to toss us out of their stores This branding thing is the way to go. if you ask me. It's about pride in who and what we arcnot skulking around like the man behind the curtain. I bet that every person on the shop floor feels exactly the same way.\" Clutrlottc Hann. the design director and an- other company vetcran. seconded those thoughts. 'Wc can do exciting things with borh designs and the brand. but we umn't have any impactand I expect no one in the company will feel yery proudif we use someone else's brand." nSorry to be the party pooper here,\" said Jerry, jumping in. "But we're trying to choose between two bad ideas. on the branding issue. you simply have to scale it back to a point whereour products can be competitively priced. a disaster awaits any premium-priced product in this market. whatever the reason for the higher price. As for Partyl's other. i think we should pass. If it succeeds and we're part of it. it has a relationship dtn'mside in every other segment ofour market. If it fails and we're part of it. the damage is even worse. Hank's numbers look good today. but once we get pressured to cut prices and have lost a chunk of the independentsI business. we will be in :1 nun u, l'lll' uni-L- III-III' - nun man. _ll|.l|.dl trouble. I think this is a time to be carerl.'J The last speaker was Cassie. who summa- rized the key points from her earlier meeting. emphasizing her condence that a branded line would be a major success. She was clearly disappointed that the team members doubted it would work. \"Every test we carried out says that a brand can succeed.'I she repeated. \"The rewards lbr being the rst to brand will be tre- mendous or Rosenot just in terms of sales but also in the consolidation of our position with both customers and the trade. In the toy industry. companies with powerful brands call the shots. Commodity producers come and all! She had plenty more to say as she walked back to her ofce with Tom. "I don't think that the branding opportunity will last orever. 'lbm.' Cassie explained. \"People are going to be talking about the fact that Rose has been doing research in this area. and someone is going to do it sooner or later. If it's not us,l'n1 sad. and it'll mean that there won't be much of a role For me here. Your sales guys can handle the maimcnance ad and promotion spending and that's pretty much all it will bewithout me and my salary.\" Rose on the Fence Four weeks later. \"him was on a plane to Partyl's headquarters. On his laptop were two PowerPoint presentations. one explained why he was excited about Partyl's plans to launch a store brand and how Rose's lines could growin tandem with it. The other argued that Rose's new branded line was important enough for Party! to hold off on its test launch and evalu- ate the impact of Rose's branded line on its sales before making a nal decision. As the plane taxied down the runway. Tom was still not sure how he'd lead off. What's the best marketing strategy for Rose Partyware? Reprint R0303! To order. call 30049330336 or Ely-7337500 or go to www.hbr.org