Mattel Case Analysis

Meredith Boyd

MGMT 400

Mattel Case

Summary

Mattel was the world's largest toy manufacturer with revenue of $5.65 billion. Along with being the largest toy manufacturer, Mattel was also featured in the New York Times as a role model for manufacturing in China. Mattel had been doing business in China for 25 years, which is where 65% of Mattel's toys were manufactured. However, in August 2007, Mattel was faced with some rough challenges when lead paint was found on toys from some of the vendors. Also, in the process of additional testing for lead paint, Mattel found that many of the toys contained strong magnets that prove hazardous if swallowed. The lead paint, along with the magnets, caused Mattel to announce the largest toy recall, in units, in its history. Mattel issued recalls of 9.5 million toys in the United States and 11 million in foreign countries.

The recall drew negative media coverage as well as public attention to the global toys' inspection system and the products' quality of 'Made in China,' resulting in a trust crisis of Mattel itself and Chinese manufacturers. This proved devastating for both Mattel and its vendors, considering the CEO of a long-time vendor responsible for the first Mattel toy recall committed suicide in the factory. Also, in October 2007, Mattel announced a sales decline of $30 to $50 million and a charge of $40 million due to product scares, delayed shipments, and revoked import licenses. Despite the tragic events that had occurred over the past few months, Mattel sought to undo the hazard in an open and respectful manner; through taking action hastily, they publicly presented their concern for consumers and the welfare of their children.

Potential Causes/Problems

The massive recall of toys can be attributed to multiple factors. First, many Western companies operating in China did not test their raw materials although suppliers were known to use cheaper materials to increase profit. Dane Chamorro, regional director of Control Risks, stated, "The samples you get are always fantastic, but once they rope you in, they can cut costs. A lot of Chinese companies will do anything to cut costs." Firms had somewhat forced Chinese toy makers to reduce costs. Retailers attempt to force prices down, which forces companies to manufacture as inexpensively as possible, which can be the cause of an incident such as Mattel's toy recall. Second, in recent years, the Consumer Product Safety Commission had received diminishing budgets. The number of personnel involved in the Children's and Other Hazards Division dropped from 228 in 2003 to 168 in 2006. Also, its budget dropped from $27.7 million to $25.6 million. This reduction in the CPSC's staff and budget