RUNNING HEAD: Mattel’s China Experience: A Crisis in Toyland
Unit Three Mattel Case Study Analysis
School of Business and Management
MT460 Management Policy and Strategy
Author: Teresa Binder
Professor: Dr. DiMatteo-Gibson
Date: January 28, 2011
In 1945, the Mattel brand was born. Ruth and Elliot Handler and Harold “Matt” Matson launched Mattel out of a garage workshop in Southern California. The first Mattel products were actually picture frames, but Elliot soon started using those picture frames to create dollhouse furniture. Harold Matson eventually sold out to his partner, Ruth and Elliot Handler. The Handler’s, encouraged by the success of the doll furniture and turned the emphasis of the company to toys. By 1955 Mattel was advertising toys through the popular show “Mickey Mouse Club”; this revolutionized the way toys were marketed. By 1959 Mattel had introduced Barbie, named after their daughter Barbara’s nickname. Barbie would soon lead Mattel to the forefront of the toy industry and fascinate girls all over the world for decades. In 1960, Mattel became a publicly owned company, stock was listed was listed on the New York and Pacific Coast Stock Exchanges in 1963. By 1965, sales topped $100 million and the company joined the Fortune 500. In the years to come Mattel would enter the ever growing electronics industry, they would also enter several joint ventures and licensing agreements that would earn them more profit (Mattel History, www.Mattel.com). In 2010, Mattel posted profit of $24.8 million, or 7 cents a share, compared with a loss of $51 million, or 14 cents a share in the previous period. Sales totaled $880.1 million, an increase of 12% compared with $785.6 million a year earlier (Chang, 2010).
A host of external factors can influence a firm’s decision of direction and action. Influencing Mattel’s decisions are economic factors, social factors, political factors, technological factors and ecological factors. Mattel must also understand the globalization strategy as it will allow them to pursue opportunities anywhere in the world and enable them to optimize business functions in the countries in which it operates (Pearce & Robinson, 2011). Companies such as Mattel, seeking lower prices have benefited from the “China price” which was 30 to 50 percent cheaper than the cost to make the equivalent product in the U.S. Companies choose China for a variety of reasons including lower business costs, cheaper labor, facilities, plant and equipment and raw materials. There were also differences in regulatory oversight between China and many other countries, including the U.S. The U.S. banned lead toys in 1978; China only signed an agreement to do so in September of 2007 (Pearce & Robinson, 2011).
Being a global company, Mattel faces multiple political, economic, legal, social and cultural environments as well as various changes within each of them. Other issues arise in geographic separation, cultural and national differences and variations of business practices which all tend to make control and communication efforts between headquarters and the overseas affiliates difficult. Global companies like Mattel also face intense competition due to the differences in industry structures within countries. External factors such as technological change force Mattel to promote innovation to remain competitive. Mattel must be aware of technological changes that might influence its industry. Political factors are also considered external and are designed to benefit and protect firms like Mattel. Political constraints are placed on firms through actions like fair trade decisions, antitrust laws, tax programs, minimum wage legislation, pricing and polluting, many of these aimed at protecting employee’s (Pearce & Robinson, 2011). Outsourcing to China also creates concerns in quality control as in the case of the 2007 recall for Mattel. In July of 2007, Mattel announced it would be voluntarily...
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