Mattel Toys Recall Case

Because many businesses in the US have more often began outsourcing different business products instead of doing them in-house, it is important to understand why outsourcing may be the best option. Although many tie outsourcing to foreign markets, outsourcing can include both foreign and domestic markets. By entering into a contractual agreement, outsourcing allows organizations to pay for services they need. This gives the option for a business to get professionals to perform services for them that the business may not have the staff for. Outsourcing provides a cost saving-strategy that is usually more affordable. Ultimately,

In general, the outsourcing is hiring the foreign workers/company to do a particular task, as opposed to hiring domestic workers/company. Besides the outsourcing, the international purchase is an essential activity of companies. In the trend of a booming global economy, a company only focuses on its core value and hire suppliers to supply the necessary product and service. The relationship between companies are complicated and interdependent.

As early as the 1970s Mattel was manufacturing products in China in order to take advantage of lower costs and enable corporate resources to focus on establishing the brand. By 2007, nearly 65% of Mattel products were produced in China. Mattel used a combination of company-run plants and a network of contract manufacturers. Exhibit C displays a simplified example of Mattel’s supply chain after moving production to China. Global production obviously had major benefits for Mattel, the country factors of China gave it a comparative cost advantage over producing in the U.S., and outsourcing enabled Mattel to remain profitable in an increasingly competitive toy industry. However, outsourcing does have disadvantages, a global supply chain increases the challenges to regulate and enforce quality.

This will also make it easy for a competitive company to come in and take over the market share that Mattel currently holds. Over the long-term, if Mattel stays on this course of action, then they can be sure that they will eventually lose all or most of their market share. There are too many ambitious companies that want to make money. If Mattel remains on the plateau where they currently stand, they will be overtaken. The end result would inevitably be that Mattel either goes out of business or gets bought out.

Many businesses in United States manufacture their product overseas. This involves manufacturing products outside United States where the labor cost is cheaper. Because of cheap labor, it is often more economical for a U.S. company to manufacture overseas and pay the shipping costs than to manufacture in the United States. For a company, the savings may be substantial. However, there are negative impacts on U.S. employment, as many jobs in the United States are being outsourced and replaced by overseas positions. The manufacturers outsource production projects to save time, money or resources. The manufacturing is outsourced so as to remain competitive and maintain a steady work flow. Without outsourcing, manufacturing costs could escalate to the point at which no product would sell and all employees would have no work. Outsourcing comes

The main goal of a business is to break even, spending about the amount as profits gained, or gain a net profit and expand. While expanding is expensive, companies will attempt to outsource jobs to different countries for a cheaper cost . Outsourcing is an issue for multiple unemployed and employed Americans, where the businesses could be supporting families by creating jobs for those who need them. Flatworld solutions, a company made to help businesses outsource jobs, would argue, “You can get your job done at a lower cost and at better quality as well” (Flatworld). It does lower the cost,

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.

Mattel is the world’s #1 toy maker with more than 30,000 employees and more than $4 billion in sales. A well-established core product portfolio has set Mattel’s established position in the toy market much higher than their competitors. Its products include Barbie, Fisher-Price toys, Hot Wheels and Matchbox Cars, American Girl dolls books, and licensed Disney and Sesame Street products are just a few that have helped them reach such great profits throughout the world. Although Mattel leads the industry, it recognizes the complexity of staying on top in a highly competitive and shifting business. While keeping their sales outlets current, toy companies must constantly seek to achieve the next big hit. In

Mattel, Inc. is the largest toy company in the world. This largest toy company in the world was founded by Harold Matson and Elliot Handler in 1945, as they started to produce picture frames. However it was Elliott Handler who had a visionary of a side business in dollhouse furniture out of the converted garage (Mattel). As a top company, the primary activities of Mattel are to design, manufacture, and market the toys. As the company’s sales growing slowly, Mattel started to produce varieties of high quality products and became one of the of the best toy companies around the nation at the time. The major move by Mattel was when it sponsored Walt Disney’s Mickey Mouse Club television show that put the company in spotlight and company’s

Mattel has been criticized heavily for having to recall not once but thrice in 5 weeks 20 million toys manufactured in China with lead paint and/or loose, potentially dangerous magnets. Clearly Mattel does not have sufficiently tight quality control procedures in its supply chain to compensate for the extra risks of outsourcing to Chinese subcontractors and clearly there are design flaws in the toys with the magnets that could come loose. Although many observers give the company credit for responding to the crisis quickly with an apology from the CEO and pledges to institute more rigorous product safety checks, Mattel still faces a number of problems, including significant costs associated with the recalls and new

Companies that decide to outsource do so for a number of reasons. The primary reason is to achieve cost savings or better cost control over the outsourced function. Companies usually outsource to a vendor that specializes in a given function more efficiently than

Toys were pulled from the shelves of retailers, and a media frenzy ensued as public pressure was mounting. By the time the dust had settled from the recall, Mattel had recalled over 2.2 million toys that were manufactured in China because of unacceptable levels of lead paint. Their stock prices suffered drastically as they were responsible for a $40 million charge relating to the recalls of their products. Customers were threatening to boycott Mattel and all toys that were made in China. It was eminent that Mattel had to determine what next steps they would take to recover from such a crisis and move quickly in order to protect their brand.

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. Do you believe that Mattel acted in a socially responsible and ethical manner with regard to the safety of its toys? Why or Why not? What should or could Mattel have done differently, if anything?

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