Case Study: Mattel

If the company we outsource with has some sort of issue with its equipment or is running behind schedule it will delay our orders and reflect poorly upon our company. If we choose not to do anything we will continue running at inefficient levels costing us more and more money as time goes on.

In 2007, Mattel a California based toy company shockingly recalled 19 million toys that had been manufactured in China. Mattel was founded in 1944, and has produced iconic toys such as Barbie and Hot Wheels. The company had a long established trust with their consumers that had been forged from decades of reliability. However, when the company recalled 19 million toys due to health and safety violations, consumer confusion and outrage soared. The public wanted to know how such an established company’s safety regulations could fail, how Mattel was addressing the issue, and whether consumers could trust Mattel to produce reliable toys in the future.

recalls related to product quality problems. Observers felt the company would have lost even more

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.

Outsourcing is a method used by many corporations in which their products are manufactured in foreign countries often for cheaper labor.This method method of productions has it’s pros and cons.

Many times these products needs to be recalled as they do not meet the safety standards and tend to hurt the image of a well-known organization like Mattel. Therefore, Mattel’s strategy was to focus on making most of its core products at their own manufacturing facilities, and outsource the products that are less popular and non-core.

1. The decision facing Mattel is whether to continue to produce their products internationally where cost are low, or produce them in the United States where costs are significantly higher but quality is better. Mattel might want to even reconsider going global if there sales are decreasing more internationally than in the United States. Mattel needs to determine how many of the products produced internationally were recalled versus the amount of products produced in the United States that were recalled. Mattel also needs to decide how they are going to advertise their products in a way that will convince consumers in the external environment to buy their products, without having any

Outsourcing is when a company purchases products or services from an outside supplier rather than performing the same work within its own facilities, in order to cut costs. In other words, outsourcing is an organization's contractual relationship with a specialized outside service provider for work traditionally done internally by that organization. The decision to outsource is a major strategic one for most companies because it involves weighing the potential cost saving against the consequences of a loss in control over the product or service. Some common examples of outsourcing include manufacturing of components, computer programming services, tax compliance and other accounting functions, as well as payroll and other

As we can see Mattel does a pretty good job of of managing risk within its own business. However, it is some of these large multi national companies that often overlook managing corporate integrity risk in there supply networks. Companies have inserted clauses into their standard contracts with suppliers requiring them to comply with the rules and regulations applicable and materials used must exactly that which has been stated in the contract.

In the past four years, Mattel has had to recall nearly 30 million of toys due to safety concerns such as lead level in paint, magnets and dangerous toy parts or design.

Others felt that they should consider Indonesia as a way to take advantage of low labor costs and very attractive exchange rates. Mattel currently operated a plant in Indonesia that produced Barbie® dolls. Montalto had to decide whether Mattel should go forward with the new China plant, build a plant in Malaysia or Indonesia, expand one of the existing facilities, or outsource the surplus die-cast volume through VOA. Company Background Based in California, Mattel, Inc designed, manufactured, and marketed a broad variety of toy products. The company’s core product lines included Barbie fashion dolls, Hot Wheels die- cast toy vehicles, Cabbage Patch Kids, Fisher-Price preschool toys, and Disney toys. Most of these toys were made overseas, primarily in southeast Asia. Mattel had wholly owned manufacturing facilities in China, Malaysia, Indonesia, Mexico, and Italy. Mattel was founded in 1944 by Elliot and Ruth Handler. Neither Elliot nor Ruth had much business experience or capital, but they both had dreams. The post World War II demographics of a huge baby boom plus a virtually toyless marketplace provided a unique opportunity to gain a place in a growing toy market. Mattel’s first products, simple picture frames and doll house furniture, met with mixed success. The first really big hit was a music box. By partnering with another toy inventor, they developed a music box that could be

In 2111, Prof. Sethi and colleagues disclosed that Mattel Inc. had played a part in, what many would consider, unacceptable business practices (p. 483). Although Mattel took actions to investigate the level to which practices were truly occurring, they had also promised to remediate all noted unacceptable practices. One of the unacceptable business practices that was uncovered was the mandating of certain employee groups required to live in company dormitories and were not permitted to utilize any other options for housing. Was this practice a form of discrimination? In order to decide if the business practice and any alternatives are fair and ethical for all, resulting in the greatest amount of good for the greatest number of people, the scenario will be run through the EthicsOps.com’s Utility Test.

As the makers of children’s toys, Mattel has the ultimate responsibility to ensure that every toy is made within the tightest of safety standards. With the case of the Mattel toy recall, the company acted within the spectrum of their code of conduct that was titled Global Manufacturing Principles. Once the problem was identified, Mattel quickly addressed the issue, by automatically issuing the product recall and conducted a special investigation. The findings from the investigation led to other issues being found in Mattel toys. Once again, Mattel quickly responded with more product recalls, and a deeper investigation into the reasoning behind the faults. Through these actions Mattel did act in a socially responsible and ethical manner.

Mattel, Inc. is the world's largest toy company based on revenue. The company produces Barbie dolls, Hot Wheels and Matchbox cars, Masters of the Universe, American Girl dolls, and board games. The company's name is derived from Harold "Matt" Matson and Elliot Handler, who founded the company in 1945. Handler's wife, Ruth Handler, later became president, and is credited with establishing the Barbie product line for the company in 1959. Mattel closed its last American factory, originally part of the Fisher-Price division, in 2002, outsourcing production to China, the beginning of a chain of events that led to a scandal involving lead contamination. On Friday, September 3, 2010 a mini "Flash Crash" appears to have occurred in Mattel shares which plunged 22% in pre-market trade for no apparent reason, only to recover shortly thereafter.

Clearly  Mattel  did  not  have  sufficiently  tight  quality  control   procedures  in  its  supply  chain  to  compensate  for  the  extra   risks  of  outsourcing  to  relatively  new  Chinese   subcontractors.  Clearly  there  were  design  flaws  in  the  toys   with  the  magnets  that  could  come  loose.   But  Mattel  deserves  praise  for  now  stepping  up  to  its   responsibilities  as  the  leading  brand  in  the  toy  industry.   -­‐What  has  Mattel  done!  :