Party City Final Report

By Ester Berrocal, Brianne Burgess, Noah Canto, Christian Flanagan, Gillian

Inglis
Strategic Management
11/12/22
Ester (Chapter 1 and 4.2, 4.5)
Gillian (Chapter 2 and 4.6)
Brianne (Chapter 3 and 4.1)
Christian (Chapter 5 and 4.4)
Noah (Chapter 6 and 4.3)
Chapter 1

1.1 Firm Overview and current situation

Party City was founded in 1986 by Steve Mandell in East Hanover, New Jersey. Mandell

had the vision to create a dominant player in the party goods market to compete against smaller

retailers with limited party supplies. Party City became a public company in 1996, ten years after

its development (4). Currently, Party City manages 759 corporate stores, 72 franchise stores,

approximately 6,400 full-time employees, and 10,000 part-time members (2). Party City’s vision

now goes beyond retail operations, and they have now become “one of the largest global

designers, manufacturers, and distributors of decorated party products” (2). Although Party City

had great initial success, the company has been facing some difficulties which have led to a drop

in its stock price and a cumulation of debt of $1.7 billion, as of September 30, 2022 (3).

In its 2021 annual report, Party City listed some of the risks that are damaging the

company and the brand (2). COVID-19 took a toll on the company’s businesses, operations, and

financial conditions. Since COVID-19 began we have witnessed supply chain inflation, labor

shortages, and increased transportation costs.

Inside Party City’s operations, the balloon business is one of the biggest sources of sales.

Recent regulatory restrictions and prohibitions regarding “the sale of balloons filled with gas

lighter than air” have jeopardized one of the company’s most profitable services (3). On top of

the restrictions, a helium shortage has become a major hurdle for Party City and its balloon

business. This helium shortage triggered an 8% loss in balloon sales in just one quarter which
translated to 1.4% of lost sales at Party City stores (5). This loss of income has pushed Party City

to close 45 of its stores (5).

The party supply retail market is a highly competitive market that has seen the rise of

different companies these past years. Party City has fallen behind on overall innovations in the

business, including technological updates, which has led to a loss of market share against some

of its competitors. The three main competitors we have identified for the company are Amazon,

Target, and Oriental Trade, but other companies like Walmart have also made a dent. The

company’s e-commerce software is outdated, and its management is weak. Online sales have

been a source of growth for businesses worldwide, but for Party City it is currently a wasted

resource.

The retail business is sensitive to consumer spending, which is affected by the country's

general economic conditions. The current inflation in the market is driving away consumer

spending on party supplies and therefore decreasing sales for Party City. This is an issue Party

City has no control over, but they do have the capability to respond to economic changes and

readjust spending and pricing to certain levels.

1.2 Competitive advantage

 Party City creates value for its customers by concentrating all party supplies they might

need in one store. This creates a feeling of convenience and fulfillment for the customer. The

appeal of Party City relies on the fact that it is a specialized store for party supplies that invites

customers to take part in a shopping experience with no distractions and with a team of workers

fully equipped to assist them with any questions or requests they might have. The low prices of

the store’s products are also a great resource that provides value for the customers. Customers

usually work around a budget for parties and thanks to the lower prices offered by Party City

they can purchase the supplies necessary to bring to life their party visions.

Party City has a great competitive advantage in capturing value due to its supplier power.

Because Party City is its own supplier, it gives them an extra layer of security regarding its

supply chain that other companies do not have. The fact that they do not have to work through a

third party for their supply chain operations saves Party City money and time.

Party City lacks an official mission statement and an official vision for the company. We

see this lack of guidance and focus as an indicator of Party City’s failure. Looking at Party City’s

website we can find a loose explanation of the company’s goals that says, “at Party City, we’re

committed to helping you create unforgettable memories with your family and friends, and to

inspire fun, fresh, and exciting ways to make any moment even more fun” (1). This statement

seems coherent but is too informal to run a company the size of Party City. We want to create an

official mission statement for the company that reads, “At Part City, we strive to inspire

everyone to create and celebrate joyful moments. We are committed to being the industry leader

for any, and all-party needs.” Implementing this statement, we are looking to give the company

more of a structure, concrete goals, and ideals to work towards and give us a bigger competitive

advantage in the market.

 Party City’s finite game focuses on the development of physical stores and growth in the

online retailing market. They provide a wide variety of party supplies and keep an affordable

price on their products. The biggest players in the market along Party City are Target, Amazon,

and Oriental Trade. Party City needs to maintain its competitive advantage over these other

players to maintain popularity and sales levels up. Its current finite game is focused on a cost

leadership strategy. On the other hand, Party City’s infinite game is focused on becoming the

industry’s leader in party planning. They look to inspire and enable their customers to host

unforgettable parties.

1.3 Customer Journey

The graph below guides us through the current customer journey for Party City.

Even though Party City’s customer journey has contributed to its success throughout the

years, there are many opportunities for improvement in different areas. We see a fantastic

opportunity for the capture of awareness throughout the growth of our social media presence by
improving our platforms. We are also looking to improve our odds in the consideration step by

providing customers with extra value creating an experience rather than just providing them with

the products. In the converting step, where customers make their purchases, we can make it even

more convenient for them by offering house delivery for purchased products. Currently, shipping

to personal residences is not available for all products and is limited to certain areas. We also

want to work on a rewards program to keep our customers engaged with the store and increase

the loyalty percentage. This idea can be worked into the online accounts customers are already

able to create.

1.4 Firm comparison with competitors

The issues linked to Party City’s unsuccessful business have been discussed in the firm

overview and current situation section so we will now compare our firm with its competitors and

their success. Just a disclosure before starting to analyze Party City’s and its competitor’s stock

prices, even though we have been talking about Amazon, Target, and Oriental Trading as their

main competitors, Oriental Trading is a privately-owned company which leaves its stock prices

not available. Therefore, we have chosen a different competitor, Walmart, to analyze its stock

prices.

As of December 12, 2022, Part City’s stock price is down to 0.5226 (8) meanwhile

Amazon’s is up to 84.14 (9), Target’s is up to 150.16 (10), and Walmart’s is up to 147.76 (11).

For the past five years, Party City has seen a constant decline in its stock prices, while the rest of

the companies have witnessed growth and a rise in their stock prices. It is very notable on Party

City’s stock price graph the significant dip that took place during the year 2020. This dip was

caused by COVID-19 and the restrictions that came with it, including no big get-togethers and

the recommendations to avoid public places unless completely necessary. It is interesting to see
how Party City’s competitors’ stock prices have risen since 2020, which is due to their capability

of adaptation and development of online sales. Party City fell back on the game and has not been

able to catch up since then.

It seems like Walmart has been the most successful of the competitors in creating value

and managing its spending over the last 5 years. Looking at their stock price graph we can

appreciate constant growth and fewer dips than with any of the other graphs.

(8,
9,10,11)
Chapter 2

2.1 Competitive Landscape and Five Forces

Party City primarily operates and competes in consumer goods for parties. Most of their

revenue comes from retail sales, but a portion comes from wholesale revenue as well. The

industry for party products was negatively impacted by the COVID-19 crisis in 2020. During

much of 2020, Party City, along with many other retailers, had to shut down their in-person retail

business, resulting in a major setback for the company.

Government regulations for Party City from 2021 to now have not affected Party City

any more than they affected their direct competitors, as government regulations are similar

across the country, and Party City does most of its business in the United States (2021

Environmental, Social and Governance Report: Inspiring the Future of Celebration, 2022).

The threat of new entrants is low. To manufacture and sell party supplies at a similar

price to Party City requires massive economies of scale. A company would need a lot of capital

to start their own brand, and this would take years to decades to become a major player in the

party supply market. Any new entrants to the party supplies industry would have to first operate

on a small scale. Therefore, new entrants are actually a potential wholesale customer for Party

City.

The threat of substitute products and services is a medium threat to Party City. Balloons

are unique and are still a popular item used at many different kinds of parties. Party City uses a

lot of disposable products, which means reusable products like ceramic plates, metal cutlery,

tablecloths, etc. are substitutes consumers can use when hosting parties. There are also party

places, like Chuck e’ Cheese or event halls, where the place provides the party supplies that the
consumer needs for the party. For Halloween costumes, another major part of Party City’s

business, people can create their own costumes either by using fabric and making their costumes,

or by purchasing clothing from traditional clothing apparel shops.

The bargaining power of suppliers is low for most products but is very high for their

balloons. Helium is a natural resource and there are not many suppliers that can provide the large

amount of helium that Party City needs to sell balloons. There is currently a helium shortage,

and this shortage is an ongoing concern for Party City, as they are beholden to their suppliers for

helium and do not have much bargaining power on their side to negotiate prices (Party City

Reports Third Quarter 2022 Results and Updates 2022 Business Outlook, 2022).

The bargaining power of buyers is fairly low for wholesale, but high for business-to-

consumer end users. Party City offers some of the most competitive prices for their wholesale

items, but because there are many other big-box stores that have party supplies that are not

associated with Party City, buyers have much more choice when looking for party supplies. This

ties into the fact that there is intense rivalry in the party supply industry and Party City has to

regularly compete with other party goods suppliers. Additionally, their competitors offer more

than party supplies, making them a more desirable shopping place for many consumers. This

demonstrates how the intensity of rivalry is most prominent, and therefore affects Party City the

most out of the five forces (Party City Holdco Inc., 2022).

2.2.1 SWAT Analysis

A SWAT analysis creates an overview of Party City’s position as a company.

Party City has many strengths. They are unique in that it is the largest physical retail

establishment that offers party products exclusively. They are the number one vertically
integrated supplier of party goods by revenue. They have more than 25,000 individual products

at every store at any given time, and over 40,000 individual products online. Many of those

products are manufactured by Party City, giving them control over the quality and pricing of

their products. This allows them to keep their costs for the products low. Party City frequently

updates their Instagram page showing imaginative and visually appealing uses of their products.

This emphasizes Party City’s mission to create joyful experiences (2021 Annual Report, 2022).

Party City is the first non-sponsored website to appear when someone searches for party

supplies. Their balloon business, one of their biggest products continues to be profitable. They

distribute products such as Disney Princesses, Sesame Street, Baby Shark, and more which helps

them stand out from generic party products.

Their weaknesses include an over-reliance on balloons, limited access to helium and low

bargaining power for helium. In order to keep costs low, many of Party City’s products are low-

quality and can only be used once or twice. Employee morale is extremely low and many

employees report low job satisfaction (Party City, 2022). Although, Party City is the first non-

sponsored website to appear when someone searches for party supplies, it is lower down on the

first page when you search for specific party supplies like balloons, paper plates, or streamers.

The in-store shopping experience for customers is very low. Every store has a lot of

products, but those products are not shown in-store in an attractive way. Many stores are

unorganized with many different products on the same hook or displayed vertically in a way that

makes it hard for customers to reach or look through certain products that are hung high. This

means customers have to spend a lot of time trying to find the product they are looking for. It

also creates a liability for the company if customers hurt themselves trying to access products

that are placed high up on the displays. Even stores that are well organized still have a lot of
products laid out in a way that can be overwhelming for customers during the shopping

experience. By having a bad in-store experience, customers are less likely to return to Party

City.

Party City stores are almost exclusively in North America and most of Party City’s

revenue comes from the United States. While they do distribute products that they manufacture

to customers in other countries, it is on a much smaller scale. Because they focus on creating and

distributing party supplies, when consumers are unable to throw parties due to global events,

government regulations, economic instability, etc. Party City doesn’t have other non-party

products to sell and create revenue. Lastly, Party City has low brand recognition. Party City as a

retail establishment is known to the public but is a less prominent place to buy party supplies

compared to larger corporations such as Walmart or Amazon.

There are many opportunities for Party City. Firstly, only 18.5% of their business is from

their wholesale, and there are major big-box stores and online retailers that could sell Party City

supplies. Party City could try and extract their own helium to have more control over the cost of

helium. Additionally, there are other natural resources that are lighter than air that make balloons

float, such as hydrogen. Party City could use these resources to fill balloons.

Party City has the opportunity to improve the functionality of their main website. They

can also work with technical experts to increase search engine visibility. There is opportunity to

create a better in-store experience for their brick-and-mortar stores. Party City could expand their

reach to more international customers by establishing brick-and-mortar stores outside of North

America. They could increase the number of products that they sell to buyers outside the United

States, or they could expand their business into areas other than party supplies. By increasing

employee satisfaction, Party City could establish a strong employment force who work
 Threats include consumer shopping habits. Many consumers are moving away from in-

store purchasing and gravitate towards online shopping. Helium is a nonrenewable natural

resource. This means there is a finite amount of helium in the world. Therefore, there are rising

costs associated with using helium, and it is not sustainable for Party City to continue to rely on

this as a main source of their business. There are other competing companies that manufacture

and supply party goods that are on-par with (or slightly worse than) Party City when it comes to

product quality and price but are much more successful in distributing their products widely.

The threat of another strain of Covid-19 causing another shut down could also lead to Party

City’s demise. Public health can also minimize consumers desires to throw parties or purchase

party items.

2.2.2 PESTEL Analysis

The PESTEL analysis is a tool to identify the macro forces affecting an organization.

These include political, environmental, social, technological, environmental, and legal factors.

Political factors that have affected Party City include the mandatory shut down of all its

stores in 2020. Although most of their revenue comes from the United Stated, they also need to

be mindful of international law. This mostly consists of the legal factors for the countries where

they manufacture their goods and all the related laws and regulations that they have to comply

with. In its annual report, Party City disclosed its manufacturing facilities and their employment

practices to ensure that they were not using slave labor to create their products.

Economic Growth was severely impacted by the Covid-19 pandemic, leading to

economic decline in 2020. While 2021 saw an increase in revenue, Party City has been
unsuccessful in maintaining that success in 2022 (Party City Reports Third Quarter 2022 Results

and Updates 2022 Business Outlook, 2022).

Economic factors such as increasing inflation and interest rates also lead to people not

prioritizing parties as something to spend their money on. While the cost of Party City’s

supplies remains competitive, if people cannot afford to throw parties, they will not be buying

party supplies.

Social factors can play a big part in how successful Party City can be as time goes on. As

the population ages, less and less young people prefer to do their shopping in-person. As most of

Party City’s revenue comes from its in-store business, it’s important that Party City learns to

adapt to this change and create a more prominent online presence for younger consumers. Even

when consumers could purchase products online from [Link], the global pandemic caused

many people to keep group gatherings to a minimum. When people aren’t throwing many

parties, they are unlikely to buy party goods. Additionally, the desire for sustainable products

and disdain for waste is something that could negatively affect Party City if they do not continue

to evolve.

One big environmental factor affecting Party City is the aforementioned sustainability

issue. Many people are moving away from single-use plastics. Party City remains committed to

limiting their use of plastics and creating recyclable paper goods (2021 Environmental, Social

and Governance Report: Inspiring the Future of Celebration, 2022). However, they do

manufacture and distribute many single-use products which could lead to problems in the future.

Party City has an interesting relationship with technology. Like many companies, it uses

an internal system tracker to monitor what products are popular in which locations. They
consistently design and create thousands of products each year, remaining innovative. However,

many of these products are recreations of similar past products, not completely new products

(2021 Environmental, Social and Governance Report: Inspiring the Future of Celebration, 2022).

Their lack of technological innovation could severely hurt their e-commerce side of their

business (Investor Relations - Stock Info, 2022).

2.3 Generic Strategy

Currently, Party City uses an overall cost leadership strategy. However, Party City

should be employing a differentiation strategy. It is unlikely that Party City can lower their costs

even more, and they are currently on par or better than their competition when it comes to price.

This can be seen in the following competitive landscape matrix.

Factor Party City Target Oriental Amazon

Trading

Low Price 5 4 5 3

High Party 4 3 4 5
Product
Variety

Product 3 3 3 4
Quality

Rapid 2 4 4 5
Delivery

In-Store 1 3 N/A N/A

Experience

Online 2 3 4 5
Accessibility
 While they remain competitive when it comes to price, this strategy is not sustainable as

the company is not currently making a profit (Party City Reports Third Quarter 2022 Results and

Updates 2022 Business Outlook, 2022). When looking at the SWAT and PESTEL analysis, it’s

clear to see that low prices is not what is going to keep the company afloat in the long term.

Helium prices are likely to increase their overall costs, and Party City’s mission is to help

consumers cultivate memorable experiences. A differentiation strategy is more in line with the

company’s core values than an overall cost leadership strategy (Golman Sachs Retail

Conference, 2017).

Party City doesn’t have control over external factors such as the global economy,

changing trends, or the availability of nonrenewable resources. What they do have control over

is the products and store experience that they create, the online experience when purchasing

products, and the way they present themselves to the general public. Party City has a capable

creative team. They’ve demonstrated that they know how to innovate and create. It is time to

utilize that talent and take the company in a new direction by creating a better user experience.

2.4 Opportunity Analysis

Opportunities that Party City can take advantage of include emphasizing the creative

ways their products can be used, optimizing the ecommerce experience for consumers, and

expanding their wholesale business.

There are many opportunities that Party City is missing out on because major strengths

that they have are not being utilized properly. For example, they have the ability to create table

sets and displays that showcase what can be made with their products. However, this is only

demonstrated on their Instagram page. It is not incorporated into their retail stores, nor their
main website in any way. By integrating creativity into the company in both its physical and

online presence, while using resources they already have, they can create value for their

company and make shopping an enjoyable experience for customers. This also ties back to their

mission statement to create joyful experiences for their customers.

In addition to showcasing creativity on their website, they can streamline their website to

create a better user experience. Party City creates many of its products in groups. For example,

someone can have a Pokémon party or a New Year’s party using exclusively Party City products.

However, these party packages are few and far between on their ecommerce website. Supplies

are not organized in a way that makes it easy for users to create individual packages. Sifting

through products is not an enjoyable experience for customers and if Party City leaves the

website the way that it currently is, they will turn off customers who prefer to do their shopping

online.

Using a few prompting questions, and a guided process, party city can help consumers

make party packages for users in a customized and easy way. This would give them a

competitive advantage over other traditional websites where consumers have to search for

everything individually when getting supplies for a party.

Finally, Party City should expand their wholesale business and try to get competitors like

Walmart, Target, and Amazon to become business-to-business customers instead of their

competition. Because Party City manufactures its own supplies, they have good control over the

products that they sell. They can offer good variety and competitive pricing to these companies.

Party City has a lot of inventory, and by making deals with these companies, Party City can

greatly expand their reach to end users.

Chapter 3

3.1 Value Chain

The most important value-chain activity for Party City is its operations activity. Since

Party City manufacturers/ supplies many of their own products it’s important for them to keep

their operations running smoothly. If they failed to do so they would have to buy from supplies at

a higher price and run the risk of shipping delays. Party City could focus on all areas of their

value chain for improvement; but regarding our specific redesigns, they should focus mainly on

marketing and sales and their service. To implement an online interactive platform Party City

will need to devote more energy and money to its marketing and sales activities. They barely

advertise themselves and the products and services they offer. In order to have a successful store

redesign they will need to improve their service activities. They can have more frequent

employee training and overall better store etiquette. Employees should keep the store

presentable, clean and easy to navigate for customers. Employees should also be a resource for

customers when they need help.

3.2 Core competencies

Party City’s core competencies are that they have an in-store presence related to only

party supplies and that they are a vertically integrated firm. Party City is strictly dedicated to

selling party supplies which differs from their competition. There are no other party supply

stores that have a nationwide in-store presence like Party City. They also have an advantage in

their manufacturing and distributing process since they are a vertically integrated company.

Below is Party City’s VRIO analysis:

 Resource or V R I O Implications
Capability? Valuable Rare Inimitable Organized for
Competitive-
ness?
Online Yes No Yes No Competitive
presence disadvantage
Specialty Yes Yes Yes No Competitive
party supplies parity
In-store Yes Yes Yes No Sustainable
presence competitive
advantage

3.3 Product analysis

Below is a BCG matrix to assess Party City and its products. The items in the star section

represent Party City’s best-selling items that also have a high market value elsewhere. The dogs

section are items that Party City should discontinue since they have large markets elsewhere and

they’re not big revenue streams for the company.

Stars ⭐ Question Marks ❓

 Pinatas
 Balloons  Candy
 Tableware (plates, cups, napkins,
utensils)
 Party favors & decorations

Cash Cows 🐄 Dogs 🐕

 Invitations and stationary items

 Halloween decorations  Cake decorating supplies
 Halloween costumes
 Season decorations
3.4 Resource management

At the corporate level, Party City has many individuals who possess sufficient intellectual

capital to run the company. Their corporate employees all have a diverse background and bring

different aspects to running Party City. At the store front level is where they run into efficiency

problems regarding intellectual capital. The employees who have worked previously at Party

City didn't seem to enjoy their time spent there since they received a low rating for an eNPS

score. Employees who don't have a passion for their job or don't care won't keep the business as

prosperous as it should be. Party City is not managing their strategic resources to the best of their

ability which is why we have proposed redesigns to help. They are the only company of all their

competitors to have an in-store shopping experience solely dedicated to party supplies, but their

stores are typically messy, unorganized and overcrowded with items. Another resource they need

to take advantage of is their online and social media presence. Online and social media presences

are essential for businesses to succeed in today’s market and Party City hasn’t invested in taking

their online and social media presence to the next level.

Chapter 4

4.1 Life Cycles

A majority of the at items at Party City have a short life cycle. The products at Party City

follow the introduction, growth, maturity & decline life cycle. Their best-selling products have

the longest life cycle like their balloons, tableware & party favors/ decorations. Some things
Party City can do to increase their products life cycle is focus on marketing. Increased focus on

marketing will boost sales so their products don’t decline in sales so quickly.

4.2 Value Proposition

We have two different projects to help Party City regain strength in the party supply

industry. First, we are planning to create a new interactive online platform for customers to

research and buy party supplies. Secondly, we are planning on an interior store redesign to make

the customers’ experience in-store better and more successful.

Our online platform is going to be a new service inspired by the mix of our current online

website and social media platforms. We are looking to update the software to create a space

where customers can interact with each other and give their reviews on party packs and party

setups, and where they can buy the products as well. We want to add a feature that shows 3D

models of displays of our different party packs to help the customer visualize what their party

might look like. We also want customers to use our platform as a source of inspiration for their

party planning. This platform will also be a tool for Party City by collecting data and monitoring

customer satisfaction. It will allow the company to identify the best-sellers, and products that

should be discontinued, help track inventory, and more.

Our new in-store experience includes showroom sections within our stores, a cohesive

and organized space, and better-organized inventory on the walls. We are hoping to create a

party feeling inside the store while also making the trips to the store less time-consuming for our

customers.

We have created two value proposition canvases to represent each one of our projects.
4.3 Competitive Landscape

The competitive landscape that Party City will find itself in after implementing our

recommended solutions is slightly different from before. The improved emphasis on idea

generation and a less stressful party-planning experience begins to move Party City towards

competition in the party services industry. This means increased competition from party planning

businesses who specialize in aiding customers in planning and throwing the perfect party.

Customers who are looking for an easy party planning experience could choose to hire these

businesses instead of doing the shopping themselves. Professional party planners have much
more experience with party planning than the average consumer and thus are less likely to be

swayed by our new model’s emphasis on providing our own expertise. Additionally, Party City

will be competing over a similar target market as a rentable party venue. Businesses such as

Chuck E. Cheese and Cowabungas focus on consumers who wish to make party planning

incredibly easy by relying on a third party to be the host.

Party City still has its core business model based on selling party supplies, which means

they will still be facing the same retail competitors as before our solutions. The difference is that

Party City will now be shifting its position in the market to be in-between standard party retailers

and party service providers. Party planners and rentable venues can be expensive, which makes

Party City a cheaper alternative. At the same time, standard retailers can be too stressful and

frustrating when it comes to planning. Party City will cover the slightly more niche market

between these two options in order to win back the market share it has lost over the years.

4.4 Business Model

With the new online platform service redesign and its added features, there would need to

be considered more products ready to ship and deliver to the customer directly. With the new in-

store redesign, customers get to experience the party package setups in front of them as well as

be able to test out products in-store before buying.

The new business model has a few strategic pivots, one being our ability to ship party packages,

costumes, individual items, and accessories more directly to the customer via online order. This

will accumulate a much larger percentage of our direct sales and revenue. With Party City being

a specialty retailer of party goods and Halloween supplies, they will still operate B2B and

provide other businesses goods at wholesale, being their supplier. They already develop and
manufacture a lot of their own supplies and accessories, which gives them the advantage of being

the supplier to other partners and having a steady consistent stream of revenue. With that said,

Party City will open to many more types of distribution partners, such as bars, sports bars, event

management companies, special holiday venue events and more, also establishing partnerships

with much bigger retail outlets such as Target or Walmart. This gives the opportunity to add a

small retail location for Party City inside of these outlets for a more strategic way to gain

exposure and awareness.

With the new online platform service redesign and its added features, there would need to

be considered more products ready to ship and deliver to the customer directly. With the new in-

store redesign, customers get to experience the party package setups in front of them as well as

be able to test out products in-store before buying.

4.5 Innovation type

We classify our online platform project as a new service in an existing market which

would classify it as a product development strategy in the Ansoff Matrix. To manage the

software redesign and development we would have to allocate a budget of between $40,000 and

$75,000 (7).

On the other hand, we consider our in-store redesign as a market penetration strategy in

the Ansoff Matrix. Our innovation with this project relays on an existing product in an existing

market. The cost and allocation of resources for this project are unique to each one of our stores.

Party City would have to research to decide if a store expansion is needed or just a re-

organization of the space. There would have to be some extra training implemented for our

employees to prepare them to successfully construct our party packs displays in the stores. We
want cohesiveness throughout our stores so there will be new guidelines added as to what the

stores must look like.

(6)

4.6 Managing innovations and costs

Section 4.6 Managing Innovation and Costs

Three aspects that are under Party City’s control include a new website, new store

layouts, and the amount of employee labor at each store.

The impact of new product strategies is going to increase the firm’s costs. The cost to

create a website typically runs $40,000 to $75,000. We estimate that it will cost closer to

$100,000 given the size and scope of our business (Vettorino, 2022). Store redesigns with

expansion can be anywhere from $75,000 to $500,000 per store. In order to shift and display

product at each location, we think the cost will be on the higher end for this aspect as well. Extra

staff for a better customer experience can range from $100,000 to $200,000 per store. Much of

this cost will come from labor, both for the research and development team and for the labor to
implement the changes at each location (Soloman, 2019). While this is a significant cost, in the

long run, we believe it will lead to an increase in Party City’s revenue.

It is hard for the firm to decrease costs without it negatively impacting the business.

There isn’t much that the company can do to currently decrease product costs as we don’t want

too slim of profit margins, and we are already very competitive when it comes to pricing. The

distribution channels are already fairly streamlined, and to increase revenue, we can likely

increase prices slightly to increase gross profit, as long as we do it as a slow and steady rate.

Therefore, we may continue to operate at a loss for a short while, but since most of our debt is

not due for a few years, operating at a loss should be sustainable for at least two years, if not

longer.

Ch. 5 – Strategic implementation part 2: Corporate-level changes

5.1 Corporate level changes

Our new product and services will be integrated into our business in a few separate ways.

We would need to consider more products that are ready to ship and deliver to the consumer

straight with our new web platform service redesign and its extra capabilities. Customers can

now test out products in-store before making a purchase thanks to our updated in-store design,

which also allows them to experience the party package configurations in front of them, as

mentioned before with our business model. This requires an extension of customer service

training and staff to manage the custom order party packages and a more simple and detailed

online presence. Customers will be able to get more attention in the store when looking for

specific items or packages. All the inventory, packages, and products that were in the store prior

are all available to be shipped out via ordering through the online platform. The AR/VR
technology used on the new platform will allow people in stores to get a better look at what it is

like setup when purchasing in person. This technology is integrated into the platform from

complete package setups and can also show past customers’ custom packages they created and

how they ended up looking for new users. The new platform would be more user-friendly and

have a better user interface. This would be a higher cost at first and then smaller continuous costs

for development and technical issues. (15)

The role with our strategic partners and agreements mostly has to do with quality

customer experience and quality management. We partnered with augmented reality companies

to showcase the party package options in action both on the website and in-store. We will have

their software integrated into our physical tablets in-store and coded onto our website so the

customer can have a full 360 view of what their potential setup could look like. Other partners

include other different company stores or retail locations to cross promote with our online

platform and present our in-person tablets to new customers, spreading brand awareness.

5.2 Managing Operations

Some of the operations that are being added to the business that need additional attention

would be the online platform and the active live customer service feature. Not only will

customers be able to chat or request to get on a call, but they can also see and visualize how

certain packages are accustomed to their living space or where they want to have it set up. This

will all take additional development resources and staff with training to make sure everyone is

happy, and we gain a positive presence online. With this efficient new website platform for

customers to use and order from, delivery services will need to be ramped up and carefully

managed. This will be for any of our products being directly shipped to customers' houses, or

wholesale being shipped to a distribution partner. The delivery time for all products will be fast
and efficient, within 2-5 business days, which means the service completion time is also a crucial

factor that will be paid attention to. The overall goal is to make sure the customers find the

website easily accessible, user-friendly, simple, and has everything the customer may be looking

for.

This goes back to Party City’s original problem of having everything unorganized in the

store and being able to locate the item the customer wants. With the store redesign, everything

must be in alphabetical order in each of its own sections of categories. Further attention will also

be paid to the training of the employees in the store to where everything is, and we have a system

in place to allow every item to be tracked and able to see if it is available or not. The

organization is the major change for both in and on the online platform.

5.3 Funding (14)

Party City will plan to fund these new developments with an initial private equity round

of $400 million. Starting with the 850 locations, $255 million will be given to redesign or expand

the current stores, which ranges from $75,000 to $500,000 per store location. This includes the

reorganization of the store inside and the setup of the rooms for the different displays of party

packages. If needed, we will expand the store size depending on the busiest and most popular

locations. The second most biggest expense will be on the added staff and customer service and

training, this applies to online and in-person locations.

The remaining budget will be used for the online presence and marketing. As mentioned

before, we plan to have a budget for our website of $40,000 to $75,000, which is solely for the

interface and structure. $120,000 will be spent on the design and development of the website

along with the technical issues and edits from customer reviews. A little over $15 million will be
spent on digital marketing including paid social ads, paid influencers and partnerships, and

content creation. In-person marketing includes pop-up venues at certain events and public events

promoting brand awareness of the company with its new values and offers.

5.4 Internationalization

PartyCity’s plan to internationalize is currently manufacturing their key products in

different countries and will continue to sell its foil balloons and party products to other

distributors in North America. They previously sold some of its operations to international

companies such as Endless LLP, a U.K. based private equity investor. From this, expansion to

European companies to establish more physical locations and acquire distribution partners.

PartyCity will be responsible for party supplies and costumes for major holidays in different

countries, a brand awareness campaign and establishing the right partnerships with retailers can

help the company expand and set up in new countries. (13)

Some of the transaction costs for these expansion plans will be licensing in new

countries, fees from partnering with local manufacturers, and tax policies and ramifications

depending on the country. The transportation costs will account for shipment to distributors in

different countries too but establishing a presence in different areas can help us save money

when working with other international partners. (12) Market penetration and diversification will

be the most crucial factors PartyCity focuses on when expanding internationally. There are not

too many competitors taking over the countries and areas involved, giving them an opportunity

to jump in with a unique strategy to gain exposure to a new type of audience.

Chapter 6

6.1 Organizational Structure

 Party City’s current organizational structure follows the path of a very traditional

functional structure. The head of the organization is CEO Brad Weston who is reported to by

four managers who each head a major function of the organization. These four managers are the

Chief Financial Officer, Chief Commercial Officer, Chief Human Resources Officer, and Chief

Legal Officer. This functional structure is not surprising to see within Party City when

considering the types of companies that usually employ it. Party City’s current strategy of

furthering vertical integration and sustaining high production volumes fits the description of a

company that would want to stay centralized and maintain tight control over its primary

activities.

We believe this overall organizational structure will work effectively for the

implementation of our solution to Party City’s declining performance. However, there is a slight

change to the structure that could help improve firm performance. The major change that needs

to be made is the introduction of additional executive managerial positions that allow Party City

to keep a degree of separation between their manufacturing processes and their retail processes.

Currently, Party City has all aspects of its operations grouped under the same four executives,

but this spreads the talent and focus of some of these executives thin. Party City should introduce

a Chief Manufacturing Officer whose job is to oversee efficiency and production further up the

value chain. This new position would work closely with the Chief Commercial Officer to

produce the products selling best in Party City’s retail locations. The Chief Commercial Officer

would then shift their focus to Party City’s retail performance, especially concerning the

implementation of our store and web redesign solutions.

As of November 2022, Party City has announced the hiring of a new executive, Peter

Smith, who will take the position of Chief Operating Officer (Wassel, 2022). Mr. Smith’s role
seems to have similar responsibilities to the Chief Manufacturing officer we previously

proposed, but it is still too early to fully understand the implications of his role on Party City’s

performance. We believe this could be an acceptable solution to the key issues that we observed

in Party City’s structure and would thus recommend waiting before implementing further

organizational changes.

6.2 Leadership

The leadership and board of Party City boasts impressive experience and qualifications in

retail and business. The board of directors has several directors who have had experience in the

children’s toy and entertainment industry. This includes the former president of Hasbro, John

Frascotti, who joined Party City’s board in 2019. Having board members with experience in this

field should help to keep Party City focused on its most basic goal of generating fun, especially

for children. The management team itself lacks this exposure to children’s entertainment outside
of their positions at Party City but does have extensive high-level experience in retail-based

companies. Notably, Chief Commercial Officer Sean Thompson has experience working with

Target, which is a large competitor of Party City. This insight into the competition should make

Mr. Thompson particularly effective at his job. Overall, we believe the qualifications of Party

City’s leadership are acceptable position.

In terms of implementing our solutions, the management team seems very qualified to

handle the changes we have proposed for the retail locations. Their experience in retail should

allow for a smooth transition into the new layout. The second part of our solution, which is the

reorganization of Party City’s website, may prove more difficult for the current management.

None of Party City’s current management team has experience operating in the online retailing

market. This lack of expertise could make the website overhaul difficult to enact effectively. This

lack of experience can be mitigated through a third-party contractor with more experience with

designing online retail sites.

The top management team and the board of directors are operating in synch, as there have

been no discernible disagreements between them. Both parties also seem to have aligned their

focus towards leaning heavily into the cost leadership strategy, which shows they can come to a

consensus on how the business should be run. This shared preference of keeping to tradition in

terms of how the company is run is the current leadership's biggest blunder. A refusal to take

risks in how Party City operates has led to the slow decline of the company in the first place. To

take full advantage of our solutions and change the position of Party City, management and the

board must open their minds to strategies outside of their comfort zone.

6.3 Culture
 For a business devoted to helping their customers develop a fun environment, it is

important to be able to foster an enjoyable environment internally. Culture is an aspect of

business that Party City struggles with due to its hiring practices. The company tends to hire

many employees during the Halloween season, only to remove 85-90 percent of them by the end

of the year (Kavilanz, 2022). This yearly influx of temporary workers can make a culture

difficult to develop and sustain, but not entirely impossible. If Party City intends to develop a

culture that fits its brand, they need to be careful about the criteria they require for these seasonal

workers. Party City should ensure that they are hiring employees who show strong social skills

and creativity. These are the workers who will best be able to assist future party goers and

generate innovative ideas for party designs.

Training for all employees also provides an important opportunity for directing the

corporate culture of a firm. In Party City’s situation, new training procedures need to be

developed with a stronger focus on encouraging employees to learn about the decisions and

design planning that a good party requires. Exposing employees to various popular party set-ups,

allowing them to design themes, and educating them on what is currently trending are all crucial

ways to get employees in the mindset of providing customers with a good party. Additionally,

focus needs to be placed on being proactive in working with customers to get their needs

fulfilled. Currently there is little interaction between customers and employees besides ringing

them up at the register. Planning a party is stressful, thus Party City needs to train its staff to try

and take as much of that stress away as possible.

6.4 Summary of Competitive Advantages

The graph below depicts the elements of Party City’s competitive advantage after the

implementation of our solutions.

The biggest area of improvement over Party City’s previous model is the expanded portfolio in

terms of customer value creation. Our solutions shift the company towards making the

experience of party shopping an enjoyable one. This creates a secondary value to the customer

beyond the simple acquisition of party supplies and encourages customers to choose Party City

over competitors. This is combined with an increase in customer service, armed with knowledge

from spending years in the party business, that should help to make the experience less

overwhelming. Due to the reorganization of the website, Party City will now be able to make

shopping from home a convenient alternative for those who can’t have, or simply don’t want to

have an in-person experience. While these new values will be taking the spotlight, we still

believe Party City can hold on to one of their original focuses by keeping products on the

affordable end of the market.

When it comes to Competitive tactics, not much has changed due to our solutions. Party

City already has engaged in heavy vertical integration which allows them to out-price

competitors in their retail endeavors. By handling their own manufacturing, they avoid the step-
up in price that occurs when relying on paying outside sources to stock their stores. There is no

need to make changes that would undo this advantage because the investment has already been

made.

This vertical integration also plays a part in Party City’s element of risk mitigation.

Having a strong manufacturing side to the company allows Party City to hit both a business-to-

business market and a business-to-consumer market. This diversification tactic keeps Party City

safe if our solutions fail to provide the boost in their retail markets we expect to see. Party City

also practices patenting their designs on manufactured products as well, this provides protection

from other manufacturers and retailers who purchase from these manufacturers.

Finally, Party City is in a good place in terms of value capture. As before our changes,

their vertical integration allows for tighter pricing control and more profit per sale due to reduced

costs. However, the new model that Party City will now operate from will encourage consumers

to purchase supplies in large packages all from Party City locations. This will allow for

maximized value per customer, at the cost of discouraging some customers who may wish to

shop around at multiple locations.

Conclusion

With the inventory that Party City has, we plan on not changing the products which we

sell but the different ways we can distribute them. We plan to make our online platform a user-

friendly platform to sell more products worldwide and increase our 18.5% B2B sales and better

internationalize ourselves with further partners. Party City's never-ending game focuses on

becoming the industry leader in party planning. They want to inspire their customers so they can

have an unforgettable party. The cost leadership strategy should be replaced with a
differentiation strategy to eventually make a profit because of the competitiveness and

unlikeliness of being able to lower product prices. The redesign of our physical store and online

platform will allow for better user experience and efficiency to distribute more products. We will

continue to keep our strong manufacturing process and further expand internationally to acquire

additional strategic partners. Overall, the focus of how to maximize our private equity funds

given to us would be to turn around our employee training and give the same attention to the

online platform and perfecting brand awareness.

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