Case Summary:
Mattel, Inc has the vision of being the world’s premier toy brand, for the present and the future. It currently sells products in over 150 nations. The company was founded in 1945 by Harold Matson and Elliot Handler. It has gone to be 30,000 employees strong working in 43 countries. Mattel, Inc includes a number of toy brands such as Barbie, Fisher Price, Hot Wheels, American Girl, Tyco, and others. In 2008, the company was recognized by FORTUNE magazine as one of the “100 Best Companies to Work For”.
Key Marketing Issues:
International marketing: International marketing is the application of marketing principles across the borders of countries. Since Mattel, Inc. sells products in over 150 nations, the company
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3. What environmental forces have created challenges for Mattel as it continues expansion into global markets? Which markets have created opportunities?
The biggest environment force affected Mattel recently has been legal and regulatory with the high levels of lead paint found in their die-cast toys in 2007. This issue created a voluntary recall from Mattel for over 2 million toys and created doubt in customers to the quality of their Mattel toys. Mattel responded by immediately implementing a check system to accept paint only from certified suppliers, tightened controls throughout the production process and testing every production run to ensure compliance. Mattel said that it is working in cooperation with the U.S. Consumer Product Safety Commission and other regulatory agencies worldwide. Mattel is also working with retailers worldwide to identify and remove affected products from retail shelves.
In addition to legal factors, economic forces also affect Mattel, especially the global economy because of its international operations and markets. The fluctuations in currency and the rising energy costs have Mattel concerned. Mattel has made energy saving changes in its production to offset the costs.
Although Mattel has its challenges, Mattel’s market in Asia has created opportunities for outsourcing as a
1.3. In order to estimate the peso discount rate, assume that the International Fisher Effect (IFE) holds. Groupe Ariel's Euro hurdle rate for a project of this type was 8%. Assume that inflation rates are expected to be 7% in Mexico and 3% in France.
Sales in Asia could help combat Mattel’s plateauing market in the United States. The company seemed like it was in a strong position.
The problem surrounding Mattel Inc. is their mismanagement of international subcontractors and vendors and the production of certain toys (the manufacturing process), as well as their inability to adapt their marketing strategy or product to the constantly changing “demographic and socioeconomic trends.” This is supported by Mattel’s legal battle with Carter Bryant and MGA, their forced recall of certain toys that were manufactured overseas, and the increasing rate at which traditional toys are becoming less appealing to today’s young audience. Essentially, Mattel’s mismanagement and oversight lead to violations in terms of ethical and social responsibilities and safety standards.
Outsourced almost 87% of production activities involving spare parts while maintaining core competencies like R&D, design, quality control and key trademark
Mattel is starting to take a step in the right direction, according to Renae Merle from The Washington Post, “Mattel said it was strengthening its process for preventing the use of lead based paint, it will only permit paint from certified suppliers and require every batch to be tested, company officials said” (Merle 1). 80% of toys in the United States are imported from China, according to Renae Merle, and 65% of those toys are created by Mattel. Although that is a step in the right direction, that still leaves 15% of the toys in the United States at a higher risk of having high traces of lead on them, going undetected. Stores like Toys ‘R’ Us that sell toys sold by companies other than Mattel, should be required to post the percentage of how much lead is in each toy directly next to or near the toy so that parents can be aware of this problem. If parents are not made aware of this problem, it is going to cause more concerns health wise. Michelle Albert, a stay at home mom of two children states that “I feel our country should be more careful about the things we import” (Albert 1). She fears that her children may have been exposed to these toys and has no way of knowing until it may be too late.
In 2004, Mattel Inc. first filed a lawsuit in Los Angeles County Superior Court claiming that its former employee, Carter Bryant, violated copyright infringement and breach of contract. Mattel is widely known for their popular Barbie dolls and MGA Entertainment have their Bratz dolls, which were the popular modernized Barbie in the 2000’s. In 2008, a federal jury ruled in favor of Mattel because they believed Mr. Bryant developed the concept of the Bratz doll while working at Mattel, then leaving and pitching his idea to MGA (“Barbie”). Mattel was awarded $100 million, however, the verdict was appealed resulting in a retrial.
Products are manufactured and utilized by the general public without thinking about the ramifications that it might have on the environment. In 2007, Mattel was under intense scrutiny for the production of toys that contained lead paint (Tacbobo, 2012). Furthermore, it was estimated that 10 million individual toys in China were affected. In addition, this lead to the recalling of millions of toys produced by Mattel (Tacbobo, 2012). Mattel suffered enormous amount of losses from the recall of these issues and their reputation was damaged.
In the past, the booming economy had allowed for year to year increase in their sales because people had larger discretionary incomes. But due to the recession, smaller independent retailers had to markdown their items in order to stay in business because designer outlet stores are getting more traffic; so will Harry Rosen follow in suit? Or in order to maintain the integrity of the quality products they offer, will they continue their higher pricing and settle for a lower market share?
The lead paint laced toys came from one of Mattel’s contracted factories in China called Lee Der. This company manufactures toys using products from subcontractors; one of these contractors was Hun Li Da, responsible for violating Mattel’s lead paint standards by using an uncertified paint supply. With Mattel recalling an ominous amount of toys shed light on the fact that many U.S. name brands that have manufacturing facilities overseas use contractors that provide materials that sometimes are not what they are supposed to be. While Mattel took the blame and relieved the contractors of any blame, Zhang Shuhong, the owner of Lee Der committed suicide just days after the Mattel recalls took place. Lee Der Industrial was in fact responsible for the toys that were coated in toxic lead
In 2007, the international toy manufacturer, Mattel, Inc. issued several recalls for millions of their products. These recalls were for safety reasons in that testing at the manufacturing sites and special test laboratories showed that millions of their toys were coated with dangerous amounts of lead in the paint. This lead based paint contains a potent neurotoxin that if ingested can cause serious harm to children. Mattel assured the public that the problem would be solved, the recalled products would be collected and replaced, and that the company would never let this type of incident happen again.
Mattel’s three largest customers are responsible for more than one third of the company’s revenue. With such a large portion of the company’s sales dependent on the these three customers any changes such as purchase reduction, favoring competitors or private label expansion, will have a significant impact on Mattel’s revenue. Also, with this limited customer base Mattel is hindered in with its ability to change prices.
1. no. 1-0013 Mattel, Inc: Vendor Operations in Asia Only 3% of the world’s children are here in the U.S. Our biggest opportunities are in growth outside the U.S. – Jill Barad President & CEO Mattel, Inc. The sun was just breaking over Kowloon Harbor. From his corner office, Ron Montalto gazed across the water and watched the early morning light reflect off Hong Kong’s famous downtown skyline. Only 24 hours ago Ron had been riding around the Carolina Speedway in Kyle Petty’s blue Pontiac, emblazoned with the Hot Wheels logo. The event was part of the kickoff for a new series of Hot Wheels® replicas of NASCAR racers. Now, back in Hong Kong questions still swirled around the sourcing
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MATTEL TOYS RECALL CASE STUDY Product recall: On August 14, 2007, the U.S. Consumer Product Safety Commission (CPSC) in cooperation with Mattel announced five different recalls of Mattel's toys. On September 4, Mattel announced three more recalls. Some were due to the use of lead paint, while others were due to small magnets coming loose. On August 2, 2007, Mattel's Fisher-‐Price subsidiary recalled almost one million Chinese-‐made toys, including the
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