Ruth and Elliot Handler and Matt Matson
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I. Background
Mattel has been a fixture in the toy industry since 1945. It began when Ruth and Elliot Handler and Matt Matson founded the company based on picture framing. The company soon became publicly traded in 1960 and by 1965, Mattel has a gross revenues 0f $100 million. Mattel has such brands as Barbie, Fisher-Price, Disney, Hot Wheels, Matchbox, Tyco and Cabbage patch Kids to their credit. Since, the company has expanded operations to have local representation in 36 countries globally. Mattel is known for having a vast market share of the toy industry across the globe. However, things have not always run smoothly as with various hurdles over the past 14 years.
In 1997, Jill Barad took over as CEO and soon after, mismanagement ensued. She was a strict leader and many employees did not agree with the direction of the company. Under the three-year tenure, stock prices dropped by nearly 60 percent. Upon the resignation of Barad in 2000, David Eckert took over and stock prices began to rise again. By 2008, Mattel had a value of over $20 per share and was named to Fortune “100 Best Companies to Work For” and Forbes “100 Mot Trustworthy Companies”.
What are the hurdles Mattel has had to overcome? The legal battle between Mattel and MGA over the Bratz doll line since 2004 has caused much disturbance within the company. The companies have settled over the lawsuit, but Mattel has seen a sharp decline in sales of the Barbie line of products recently.
The most well-known and prominent issue Mattel has faced is the rash of recalls in both 2007 and 2008. These global incidences took a toll on Mattel and have since caused much political and consumer uproar. The inclusion of inferior and illegal subcontracted lead paint through an unapproved Chinese vendor caused Mattel to pull nearly 10 million toys. Also, the inclusion of harmful magnets in many toys took a heavy toll on Mattel. Many of these magnets were small enough to swallow and within the stomach of a child, could come together to cause potentially harmful effects. Finally, the ever-changing environment of our world has caused toy sales to drop. The growing presence of portable music devices, social media, and the Internet has caused adolescents to abandon common methods of entertainment for contemporary medium. The problem of how to expand toy sales while maintaining customer satisfaction and keeping quality at a high is the issue Mattel has faced in recent years.
II. Problem Definition
There are several issues at hand as touched on previously. The most pressing issues Mattel currently faces are the decreasing demand/interest in traditional toys by kids and restoring their image from the subcontracted lead paint fiasco from 2007. The influx of technology in schools, the home, and social situations has caused children to seek other means of entertainment outside of the traditional toy. The other issue Mattel faces spawns from the aftermath of the toy recall in late 2007/early 2008. After products were found to contain excessively high levels of lead in the paint, consumers were turned off to Mattel and began to take their business elsewhere. Here, I am going to focus on the issue of the evolving market and target market. The youth of today do not accept traditional toys as enough. They simply need more exciting and interactive methods of play on a daily basis.
III. SWOT Analysis
Strengths
– Brand Longevity – Mattel has been a key cog in the toy industry since 1945. There is something to be said about a company that has been not only in business, but expanding for over 60 years across the globe.
– Significant Toy Lines – Mattel has some of the most popular and significant toy lines in the world that appeal to both males and females. Current product lines include: Barbie, American Girl, Hot Wheels, Fisher-Price, Disney, Tyco, Cabbage Patch Kids, and many more.
– Global Market Share – As an American based company based in California; Mattel has a corporate representation in 36 countries and market products in over 150 countries across the globe. This shows that Mattel is a globally recognized and respected brand with sales extending past their local headquarters.
– Commitment to Ethical Business Practices – There has made a conscious effort to meet and exceed standards for quality inspection within manufacturing facilities. Mattel has also made the commitment that new business partners will not be considered or included until passing the quality standards already set in place.
– Mattel Childrens Foundation – An event or cause outside of the realm of the product/service a company offers can prove valuable for a company. The most notable effort has been the donation of $25m to the UCLA Childrens Hospital. There is also a matching program for employees contributing to higher education or nonprofit organizations serving special needs children. This has significantly aided in the advancement of the external image of Mattel from both a consumer and investor view.
– MGA Settlement – After the lawsuit filed against both Carter Bryant and MGA Entertainment, Mattel gained significant control over the number one competition to Barbies largest competitor. Despite the dollar value being less than intended, the result that MGA could no longer produce or sell Bratz dolls.
Weaknesses
– Technological Advancement – Not just Mattel, but the toy industry as a whole has been greatly altered due to technology. With the introduction of portable music devices, laptops and other various devices to children, the conventional toy has become obsolete is some households. In this case, there is not much that can be done; it is simply the way that society is moving in 2011.
– Product Recalls – The aforementioned and most notable case was the 2007 incident causing the recall of an estimated 10 million units due to the inclusion of lead in the paint used in manufacturing. Later in 2007, over 21 million units were recalled due to inclusion of powerful magnets that could come loose and pose a choking hazard for children.
– Significant Number of Subcontractors – Being such a large company has both pros and cons. With such a large number of vendors and suppliers involved, it is incredibly difficult to keep a close eye on all manufacturing endeavors to keep quality where it needs to be.
– Pricing – As mentioned, Mattel relies heavily on third party retailers such as target and Wal-Mart for sales revenues. By doing this, they are including another party that demands to see a cut of the revenues stream, decreasing the final profit.
Opportunities