Mattel Toy Recall

Analyzed by:

Marti Bryant

Richard Davis

Don Petterson

Terry Ward

Introduction

What began in 1944 when Harold Matson and Elliot Handler began making toys out of a garage is now the world leader in design, manufacture, and marketing of children's toys. They named the business Mattel using letters from their names. The company's first products were picture frames and dollhouse furniture. Mattel was incorporated in 1948 and later introduced Barbie in 1959. Since then Barbie has become a major product line for Mattel accounting for over 50% of total sales. Mattel went public in 1960 and by 1964 Mattel opened its first international sales office. The product line Hot Wheels was introduced in 1968, and became the second biggest hit since Barbie, further establishing Mattel's position in the toy industry.

The company's history is what has made it a recognized brand with best-selling toys such as Barbie, Hot Wheels, and Match Box. Today, Mattel operates in 43 countries and territories, was named one of the "World's Most Ethical Companies" in 2010, and is also one of Fortune's "100 Best Companies to Work For". However, the company's strengths do not come without weakness. The multinational company has faced the many problems associated with global business; particularly the issues of coordination and control, slippages in global supply chains and ineffective management.

Problem and Issue Identification

In August of 2007, Mattel, the largest toy-maker in the world, made a decision to recall millions of toys manufactured in China. The recall included 1.5 million Fisher-Price infant toys and 253,000 Mattel die-cast cars model after "Sarge" for Disney's movie "Cars" that contained lead based paint. Mattel also recalled 9.3 million play sets that contained small powerful magnets. The toys that fell into this category were; Polly Pocket dolls, Barbie, Tanner play sets, Batman action figures and Doggie Day Care. These recalls occurred at the same time making it the biggest recall in the toy-makers history.

The reason for each recall was the potential risk of injury to the user of these products. Due to poor regulatory systems and safety standards, the Chinese manufactures were making sub-standard toys that contained possible lead base paint and faulty small magnets that created certain health risks to children who played with them. If high concentration levels of lead-based paint is ingested by children, it has been shown to cause learning and behavioral problems, slow muscle and bone growth, hearing loss, anemia, brain damage, seizures, coma and in extreme cases death. The faulty magnets, which were originally designed for industrial purposes, could easily come loose from the toys they were used for. If one or more of these magnets were ingested, they could attach to each other and cause intestinal perforation, infection or blockage, which could be fatal.

The Toy Industry

The toy industry is a multi-billion dollar global industry that has become highly competitive. In today's economy, the toy industry is taking a hit with unstable and unpredictable demand patterns. The sellers in this industry encounter high risk and volatility. The toy industry concentrates heavily on seasonal times of the year and as a result, toys are sold in "short -selling windows". The main season for the toy industry is Christmas, which is during the fourth quarter for all toy sellers. Studies show that manufactures need to produce five to ten times more capacity during this high demand time of year.

Another characteristic for the toy industry is short product life cycle. Toys are created by special characters, fashion, movies, stories, popular shows, and crazes. Therefore, the toys life cycle lasts about as long as all these driving factors. Sometimes this can range from 2 months to 2 years. Most new toys fail in the market; as a result the toys that are going to be successful must be highly innovative. This leads to intense competition on innovation, creativity, and pricing in the toy industry.

The toy industry also has a high supply and demand uncertainty. This is due to the fact that this industry is seasonal, and that consumer preferences are constantly changing. Variable characteristics that exist within other industries apply to the toy industry as well, but these particular characteristics of the toy industry separate them from other industries.

Off shoring Production

The majority of actual toy production occurs overseas in Asia, specifically China. As the toy manufacturing industry realized that they could buy and build their products cheaper in China, secondary to the inexpensive business environments there, China almost developed a monopoly that left other countries that had been producing toys behind. In fact, employment in domestic toy manufacturing has dramatically decreased and is limited to design and development. As the reliance of the toy companies on products from China increased, the impact of the recalls for unsafe products caused increased challenges. The toy companies, being domestically based, have limited to no control over the quality of their products. Many U.S. consumers have begun to lose confidence in Chinese-made goods and this has lead to a decrease in sales for many toy companies.

The increased pressure and rapid growth in manufacturing toys in China also led to challenges in human and environmental resources. Growth of the business before growth of the infrastructure leads to a decrease in quality control, and the toy companies ultimately responsible for the project, cannot suitably impact the quality of the product they are putting their "name" on. Toy companies can not necessarily anticipate what safety issues may arise in their off shoring. For example, lead has been banned in developed countries, but not in developing countries. The availability of magnets at cheap prices overseas has also prompted recall action.

Stakeholders

The stakeholders include the distributors, customers, investors and more. The challenges for the distributors of Mattel toys are the loss of sales, and the irreparable damages to public trust Consumers lost trust in these stores due to the recalled products they sold. The customers, mainly parents, will avoid toys manufactured in China and are concerned for their child's safety. These concerns will deter them from purchasing Mattel toys