Mattel Inc

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Mattel, Inc: Vendor Operations in Asia
Introduction Mattel is a leading company in the toy industry created in 1945, which owns a number of iconic toys and renowned brands. Mattel differentiate between core and non-core products, manufacturing its core products in-house and outsourcing non-core products. And core products include Barbie, Hot Wheels products, selective Disney and Fisher Price lines, while non-core products tended to be promotional items, or toys with short life cycles. Currently, Mattel wholly owned manufacturing facilities in China, Malaysia, Indonesia, Mexico, and Italy. It also has a subsidiary—VOA, which manages its outsourced production. In the year 1997, Mattel merged its second
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Maybe this demand may be satisfied by the OVA’ vendors in the short-term, but by 2001, the total demand of the tow series will rise 80M, merely below a medium class factory (100M capacity) .So in a long-term vision, it is sensible to build a new plant. The only problem is to select a best location. Relying on VOA’s vendors to meet the increasing demand is not sensible. The barrier to entry of VOA’s vendors is extreme high ($10M-30M), so I think it makes sense to assume that the capacity of these vendors may remain stable or grow in a stable increase rate in the near future. So the increasing demand would mainly depend on a new plant or capacity expansion of current plants.

A possible solution to this case We suggest that Mattel go ahead with the plant in Guangzhou, building a medium class factory (100M capacity) to satisfy the demand in the next 4 years. The Guangzhou location was aligned with Mattel’s overall strategy for die-cast cars, it supported Mattel's diversified portfolio of operations, and it remained a cost-competitive option even after the currency shift. There are a few reasons to support this decision:
1. In 1998, Penang is able to boost production to 144M cars(20% annually increase rate), covering most of the Hot Wheels demand(169M). The rest of Hot Wheels cars can be outsourced and then shipped to Penang to be assorted. Bangkok and Shanghai continue to meet the MB demand in 1998 since MB’s slightly demand rise.

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