E-mail from Chris Harolds on Shomei's Strategy Statement



E-mail from Chris Harolds on Shomei's Strategy Statement

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|To: |

|You, Analyst |

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|From: |

|Chris Harolds |

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|Subject: |

|Shomei strategy statement |

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|Nice work! Your assessment of Shomei's competitive advantages was quite good. |

|Your next assignment is to come up with a strategy statement for Shomei. We are looking for a succinct, but powerful statement—a |

|paragraph or two that really captures what we are trying to accomplish at Shomei Cards. |

|In addition to the material I've already sent you, I think you'll be interested in watching a newscast on the greeting card market |

|earnings that features Shomei. |

|Also, to help you prepare the Strategy Statement, I asked our human resources and marketing managers to gather some information from|

|company employees as well as some of Shomei's customers and suppliers. I hope you find this information useful. |

|Why don't you e-mail me your proposed strategy statement? Also, I've asked several people to draft strategy statements so that we |

|can get a variety of input. I'd like you to give me your comments on some of the other statements. |

|I look forward to seeing your work! |

|Chris |

|Shomei Cards Overview |

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|Shomei Cards History |

|In 1980, Chris and Bob Harolds, a young married couple, started Shomei Cards from their home in Wareham, Massachusetts. The couple |

|designed their greeting cards using objects found in nature, such as wildflowers, leaves, feathers, and moss. After collecting the |

|materials, they dried and glued them onto washi, a thick, cottony paper imported from Japan. Once the materials were dried, the |

|couple wrote short sayings and poems inside with a black calligraphic pen. These cards made up the Shomei Impressions line of |

|greeting cards. |

|Soon, the Harolds moved their growing operation to a warehouse on the outskirts of Wareham and hired a group of 10 artists. There |

|they began to produce new styles of Shomei Impressions cards decorated with nonnatural objects, including wire, wicker, and plastic.|

|By 1986, they decided to manufacture washi themselves, instead of importing it from Japan, so they built a factory in Portland, |

|Oregon, and began making paper. This is the only washi-making plant in the United States. The Harolds financed this project by |

|taking their company public in February 1986. |

|The increased production capacity allowed the Harolds to distribute their cards at more outlets, including coffee shops, museum gift|

|shops, large bookstores, specialty boutiques, and gourmet grocery stores throughout the country. The increased volume also allowed |

|them to significantly reduce the cost of producing cards. Though it costs Shomei more than its competitors to produce a card, it |

|earns greater margins per card and provides higher profits to its retailers and more differentiation to its customers. |

|As time passed, the Harolds developed new lines of cards. In addition to the Shomei Impressions line, the couple created a new |

|collection called the Shomei Fine Artist line. This collection of cards featured the artwork of up-and-coming artists in the United |

|States. The Harolds solicited artists to work for them through an innovative program called the Shomei Artists Program (SAP). The |

|enormous response to the program and the subsequent culture that emerged around Shomei Cards resulted in explosive growth for the |

|company. |

|As the demand for Shomei cards increased steadily, the Harolds decided to create a new line of cards printed on high-quality |

|non-washi style paper, which they purchased from commodity suppliers. The cards in this line—Simply Shomei—sold for $3.50 apiece. |

|The company then planned to scale distribution to increase volume. Thanks to the success of the SAP program, the Harolds were able |

|to establish small offices in communities with high concentrations of artists. |

|Other card companies have had difficulty replicating Shomei's designs and processes. Shomei has the sole proprietary right to mass |

|produce washi in the United States, and it owns patents on a special nano-piezo ink-jet printer and a unique surface-adhesion |

|process. These technologies have revolutionized the company and helped it achieve the most creative, elegant, and professional |

|images for its greeting cards. |

|Current Situation |

|Shomei's growth is flat, and its stock price is falling. Though the company remains profitable, its volume of new orders has |

|dropped, and this year, for the first time in the company's history, its first-quarter earnings were down. The greeting card |

|industry as a whole is struggling, and analysts think Shomei may have no more room to grow unless it makes dramatic changes. |

|Chris Harolds thinks the Internet is responsible for the slowdown in sales. She recently attended a Greeting Card Industry Executive|

|Council meeting in New York, where she learned about new trends in the industry and how they are affecting the traditional greeting |

|card market. In particular, Chris heard that consumers today are interested in making their own cards on computers at home or |

|sending e-greetings, which they can personalize to their own tastes. She is worried that Shomei will fail if the company doesn't |

|respond to these changes by developing a web presence. |

|To complicate matters, competitors are threatening to take away some of Shomei's market share. Hercules Cards plans to release a |

|line of high-end cards, which could compete with Shomei for consumer attention. Though Atlas Cards has not expressed interest in |

|moving into this card segment, analysts do not dismiss the possibility. After all, Atlas and Hercules have been vying for control of|

|the supermarkets and drug store chains for years. Shomei needs to stay aware of its surroundings and keep on top of consumer tastes |

|and preferences if it wants to remain in its position as the No. 3 greeting card company in the nation. |

|On a positive note, the industry executive council noted the shift in demand from holiday cards to everyday cards. These everyday |

|cards are used to express sentiments—the core of Shomei's business. There is also a shift in the traditional card buyer from older |

|women to men and young professional men and women. This new market is one that Shomei has successfully targeted. |

|When she returned home from the meeting, Chris discussed what she learned with her husband, Bob. Bob isn't worried about the |

|Internet's effect on their company. After all, he believes electronic cards can't replicate the intricate designs featured on Shomei|

|cards. And people want the sensory experience that touching a greeting card produces. Unlike his wife, Bob believes Shomei should |

|keep on doing what it's doing to stay successful, instead of roaming into territory they know little about. |

|Still, Chris remains uncomfortable. As a result, the Harolds have retained Kegan Strategy to help them evaluate Shomei's competitive|

|positioning and their strategic options for moving forward. |

|Marketing and Branding of Shomei Cards |

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|Welcome! We are very excited to have you on the Shomei Cards sales team. As you know, we pride ourselves on the extraordinary |

|service levels we offer our customers and consumers. |

|I have been a Shomei representative for more than 15 years. I am proud of what I do because I stand for a quality product. |

|—Charles Claude, senior sales representative at Shomei Cards |

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|We at Shomei Cards believe people deserve a high-quality personalized product. We are fortunate to display both the original |

|creations of up-and-coming young artists and renditions of classic art pieces on our cards. As an employee of Shomei, you represent |

|this brand image. When you are in the field serving retailers, you personify Shomei. |

|About Our Company |

|Shomei Cards, the nation's third-largest greeting card company, is in a class of its own. We distinguish ourselves from other |

|companies through the use of first-class materials and a high-tech production system. But that is only part of what we have to |

|offer. We are the only card company that provides original designs by tomorrow's art stars. |

|We are finding that our consumers buy cards and add their own art. Shomei cards have pulled through the sale of additional items. |

|They are a retailer's dream to work with. |

|—Andrea Ellis, assistant manager, Virelli's Card Shop |

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|Since our company was founded in 1980, it has risen faster and become stronger than any of its competitors in the industry. We have |

|consistently enjoyed a 14 percent growth rate. Even without the luxury of selling to the large retail outlets, we have been able to |

|increase our market share to 7 percent. |

|We used to carry Hercules cards. Unfortunately, they took up too much space and were unrelated to our target market. As a result, |

|our sales were slow. But our patrons love Shomei cards. They browse and buy two or three extra cups of coffee while composing their |

|own sentiments onto these unique cards. |

|—Aaron Rumberg, regional manager, Cappy Chino's coffee shop, Ann Arbor, Michigan |

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|Your Customers |

|Shomei caters to two types of people: consumers and customers. Customers are the store owners who are selected to become licensed |

|Shomei retailers. Your job is to make these retailers happy. Consumers are the people who actually buy the cards from the |

|customers/retailers. |

|Shomei is my easiest vendor. John (my representative) has become a good friend. I find myself hoping to sell more Shomei cards so |

|John can come by for a visit. |

|—Bridget Cole, owner of Artist Spot, New York |

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|We at Shomei Cards have chosen not to distribute our cards to mass-market outlets and grocery stores. Instead, we have decided to |

|focus on smaller, more intimate settings. Because consumers can't get Shomei cards at other locations, our retailers are not |

|threatened by competition from outside sources. |

|Shomei cards augment our mission of bringing fine art to all people. And the company's vendors are the best at replenishing our |

|stock quickly. We never seem to run out of the favorites. We place these cards with our art items rather than with the sundries and |

|postcards because of their high quality and brilliant designs. |

|—Guy Bernard, manager, Pasadena Museum of Contemporary Art, California |

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|Our keen understanding of our target market has helped us successfully distribute our cards. Some of our most popular retailers |

|include the following companies: |

|Cappy Chino's, the nation's largest coffee shop chain |

|Museum gift shops, including those in world-famous museums in New York, Los Angeles, Philadelphia, and Chicago |

|Sunny Side Boutique, one of the country's top specialty gift stores |

|Gourmet food stores, including Gordon Gourmand's, Gabriella's Kitchen, and Les Repas, which can be found in all major metropolitan |

|areas |

|Art stores such as Denious Art, which has more than 300 franchise stores throughout the country |

|Our Consumers |

|Shomei consumers do not resemble card buyers of the past. We have tapped into a new generation of card consumers—a younger, |

|trendier, professional crowd that includes more male consumers than in the past and a more diverse audience in general. Tired of the|

|traditional sentiment market, these people are eager to be the vanguard in the new "art for the masses" movement that is sweeping |

|the country. |

|The man in me loves the quality; the consumer in me loves the price; the artist in me appreciates the designs. Shomei satisfies me. |

|—Dalton Smedley, art collector, Lake Forest, Illinois |

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|Shomei card buyers are looking for high-quality missives that impart a sentiment to the recipient. The sentiment is conveyed not |

|only through words but also through illustrations and the choice of card design. Our consumers have demonstrated through their |

|buying power that they are turning away from traditional cards with their focus on soft sentiments and toward more powerful and |

|artistic greeting cards narrated with meaningful words or simply left blank inside. |

|Shomei cards are so great. Who else sells cards I can frame and hang in my apartment? Give me a Shomei over a Hercules card any day.|

|I don't want to send the same kind of card my mom sends. Nobody says that corny stuff anymore. |

|—Hiroshi Ishikawa, student, Philadelphia, Pennsylvania |

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|Your Role |

|Your job is to make sure that your existing customers are pleased with the level of service they are receiving and that they remain |

|active members of the Shomei community. You will learn that most retailers are enjoyable to work with. They are clear and reasonable|

|about their expectations of you. Once you establish a relationship with a retailer, it should be easily maintainable. |

|The Shomei line has increased my retail traffic significantly. My profit per square foot of space for Shomei is twice that of other |

|cards—and 20 percent above my store average. |

|—Gertrude Corell, owner of 31 Corell Gift Shops around the country |

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|Distribution |

|Your sales team will include a strong network of upbeat service representatives—art school and college students who tend to |

|patronize the stores they are stocking. These representatives are responsible for closely monitoring the inventory levels at retail |

|outlets; shop owners should never have to ask for new inventory. |

|Another strong point of Shomei Cards is our ability to replenish our shelves more quickly than any of our competitors. We never run |

|short on stock, because we can print small quantities on short notice. Because we can perform small card runs at the touch of a |

|button, we do not need to keep large stocks of inventory on hand. This lessens our risk of being left with large oversupplies of |

|cards. |

|Frequently Asked Questions by Retailers |

|Q: Why should I carry Shomei cards? |

|A: |

|Shomei cards enable retailers to record the highest profit margin in the industry. Shomei offers nearly 50 percent profit, whereas |

|our competition tops out at 26 percent. |

|Q: How is Shomei able to afford giving away such generous profit margins? |

|A: |

|Because of our strong brand identity and our loyal following, we are able to spend less on marketing than our competitors. This |

|aspect of our business is heavily reliant on you, the retailer, so we want to make sure you are appropriately rewarded. |

|Q: As a smaller card store, how do I know that I will have appropriate inventory? |

|A: |

|As a licensed Shomei retailer, you will have a personal relationship with your service representative. Together, you will develop |

|the optimal inventory system for your location. All of Shomei's retailers are small and have personal needs. Our representatives are|

|trained to meet those needs. If you have to call us, we guarantee that we will replenish your inventory within 24 hours. |

|Q: What does it take to become a licensed Shomei retailer? |

|A: |

|Commitment, at least a one-year contract, and 3 percent retail space in the store. More important, we ask that our retailers |

|recognize the importance of the art community. Before becoming a licensed Shomei retailer, you and your representative will explore |

|whether your beliefs align with the company's. Being a licensed Shomei retailer means that the community will look to you as an |

|artisan-friendly shop. They will interpret your license as a message that you support the art community. |

|Q: If sales of Shomei cards are dependent on other stores, how do I know they won't let me down? |

|A: |

|Licensed Shomei retailers have a say in the way Shomei does business. Retailers are voting members of the Shomei Artists Program |

|(SAP). Every year we ask retailers to evaluate the stores in their area. This information is then exchanged at a regional meeting. |

|Although the focus of the annual meeting is on Shomei Cards, it has evolved into a fun networking opportunity for retailers. Being a|

|licensed Shomei retailer admits you into a resource-rich community. |

|Our Card Lines |

|We speak to people's needs by offering three distinct collections of high-quality greeting cards. Each card line maintains its own |

|flavor and style, while supporting our ideal of high artistry and sensitivity to sentiment. |

|Shomei Impressions line |

|This is our original line of cards. These cards are well known for their handcrafted look and feel. Our consumers consider the |

|Shomei Impressions line of cards as gifts in and of themselves. We have two categories of cards: |

|Nature: Cards are decorated with objects found in nature. Cards are produced on washi paper with a simple, elegant, peaceful |

|presentation. |

|Non-natural objects: Cards are decorated with non-natural objects, such as wire, wicker, straw, and wax. Cards are produced on washi|

|paper. Card presentation is bold and colorful, yet elegant. |

|Shomei Impressions cards come in two forms: |

|Blank cards |

|Cards with Shomei-composed sayings inside, all for non-holiday occasions |

|Retail card price: $7.50 per card |

|Retail box price: $35 per 10-card box and $20 per five-card box |

|Shomei Fine Artist line |

|A series of cards illustrated with fine art produced by artists from around the country. Card designs are printed on washi paper |

|with the artist's signature and personal art philosophy on the back. Cards in the Shomei Fine Artist line have broad appeal among |

|our customers while retaining their individual uniqueness—one of Shomei's trademarks. |

|Renowned artists: Cards are produced by a select number of nationally recognized artists. |

|Up-and-coming artists: Cards are produced by a large number of highly talented, aspiring artists. |

|Cards in the Shomei Fine Artist line come in two forms: |

|Blank cards |

|Cards with Shomei-composed sayings inside, all for non-holiday occasions |

|Renowned artist retail price: $7.50 per card |

|Up-and-coming artist retail price: $5 (6"x 4") |

|Simply Shomei line |

|This line features non-washi paper cards that are decorated with simple yet beautiful ink designs. The cards are blank inside. Our |

|Simply Shomei cards follow the Shomei brand image of quality art that meets the current mood and imagination of the masses at a |

|lower price. |

|Retail card price: $3.50 per card |

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|Shomei Cards Interviews |

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|Interviews with Shomei Employees |

|Chris Harolds, CEO: |

|Why do you think people choose Shomei cards? |

|People want the sensory experience they get with Shomei cards. They like the high quality and natural designs of our cards. Plus, |

|they can add their own sentiments, which makes our cards more personal than the typical greeting card. |

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|Mike Marconi, vice president of marketing |

|What is Shomei's brand image with consumers? |

|People identify Shomei as the leader in high-quality, artistic cards. In particular, we are known for the fine materials we use. |

|How is this accomplished? |

|Shomei uses only the best materials. In addition, we manufacture our own washi paper. This helps us ensure that our cards meet our |

|high standards. Shomei has a commitment to quality and is always looking for process improvements that will make our product better.|

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|Charles Claude, senior sales representative at Shomei Cards |

|How do you feel about working for Shomei Cards? |

|I have been a Shomei representative for more than 15 years. I am proud of what I do because I stand for a quality product. |

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|Jane Farmer, vice president of finance |

|How do you feel about working for Shomei Cards? |

|What I love about Shomei is that we continually focus on the customer. Sure, we want to make a profit and are always looking for |

|opportunities to reduce costs, but we never do this at the expense of the customers. Shomei's commitment to quality is number one. |

|Hercules might sell more cards than we do, but when people receive a Shomei card they know that the person who sent it really cares.|

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|Interviews with Suppliers |

|Andrea Ellis, assistant manager, Virelli's Card Shop |

|Why do you carry Shomei Cards? |

|Shomei cards offer me the best margins in the business! Plus, Shomei Cards have a great artistic feel. They are definitely high |

|quality! That's what I want in my shop. People won't come into Virelli's if the cards we carry are the same ones they can get at the|

|big discount chain down the street. |

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|Aaron Rumberg, regional manager, Cappy Chino's coffee shop, Ann Arbor, Michigan |

|Why do you carry Shomei Cards? |

|We switched to Shomei because its product is a better fit with our image. Cappy's is a place where people can come and relax. When |

|we had Hercules cards, the place was cluttered with rack after rack of cards. It took away from our relaxed feeling. Shomei cards |

|are beautiful and unique. And because Shomei concentrates on quality over quantity, we make the same profits on Shomei cards as we |

|did on Hercules — with half the volume! |

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|Guy Bernard, manager, Pasadena Museum of Contemporary Art, California |

|Why do you carry Shomei Cards? |

|Shomei cards augment our mission of bringing fine art to all people. And the company's vendors are the best at replenishing our |

|stock quickly. We never seem to run out of the favorites. That's what is great about Shomei — their people. They have the same |

|commitment to quality that we do. |

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|Interviews with Consumers |

|Leslie Eve, personal trainer, New Canaan, Connecticut |

|Why do you buy Shomei Cards? |

|I love the personal feel of Shomei cards. The designs are so original. Plus, I love being able to write my own message rather than |

|just sending a card with some corny message someone else wrote. |

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|Jeongjin Lee, art student, Chicago, Illinois |

|Why do you buy Shomei Cards? |

|Shomei has found a way to combine art and value. When I buy a Shomei card, I always think it is money well spent! |

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