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How do demand and cost trends affect profitability and competitive advantage?

Do the following trends weaken or strengthen the competitive advantage of Shomei and to the other competitors in the greeting card industry? Why?

The 2 Trends affecting profitability to review are:
1. Increases in paper prices and payroll costs
2. The change in demand from seasonal to everyday cards.

See attached for industry and company backgrounds.


Solution Preview

The factors which have affected the greeting card industry are as follows:
1. Availability and price of raw material (Example paper) and pay roll costs
2. Government policy like taxes and duties on industry
3. Change in preferences of the customer
4. State of competition, both domestic and global
5. Production capacity and actual production
6. Economic situation and the inflation rate.
7. Growth in the industry
8. Political and governance situation
9. Change in socio cultural factors
10. Global competition
11. Availability of substitutes
12. Change in Technology like using egreeting

Impact of Trends
The greeting card industry is facing slowdown in the growth rate. It is around 3.8 percent compound annual growth rate and in future it is predicted lesser at 2.7 percent each year for the next five years. Average profitability margin of greeting card industry is at 12 percent. But the slow down in the growth rate ...

Solution Summary

This solution provides descriptions of the trends that weaken or strengthen competitive advantage of a company and its competitors.