1. Situational Analysis
Mattel Inc., headquartered in El Segundo, California was the global leader in design, manufacture and marketing of toys and family products. Mattel toy lines included such best selling brands as Barbie, Hot Wheels, Matchbox, American Girl, Radica and Tyco as well as Fisher-Price brands including Little People, Power Wheels and a wide range of entertainment-inspired toys. In 2007, Mattel manufactured about 65 percent of its toys in China. Initially they used outside contractors but out of concern over protection of intellectual property at risk, Mattel operated its own factories in China. Mattel contracted production to between 30 and 50 Chinese firms many of which had relationships with other subcontractors.
On August 1, 2007, Mattel issued a voluntary recall of 1.5 million Chinese-made, Fisher-Price products, including the popular Big Bird, Elmo, Diego and Dora the Explorer after the company learned that they contained too much lead. Mattel also recalled the Sarge toy from the cars die cast vehicle line because of high levels of lead. The second recall included 18.2 million toys, such as Barbie, Batman, Polly Pocket and Doggie Daycare play sets that contained small but powerful magnets that could fall out of the toys and be swallowed by young children.
In its investigation, Mattel found that some of its external vendors and their subcontractors used lead paint which was at least 30% cheaper than unleaded paint and some thought that it produced a richer colour and was easier to apply. In the investigation of its problem with the small magnets, Mattel learned that the problem lay in the toys’ design. It did not anticipate that if two or more highly powered magnets were ingested at once they could close off the intestines if they became attached inside a young child.
2. Analysis of the Case
The analysis of the case is done using the Stakeholder Theory Approach.
Stakeholder refers to persons and groups that affect or are affected by, the organisation’s decisions, policies and procedures. Stakeholder Theory Approach argues that corporations serve a broad public purpose, to create value for society. Success of a business venture depends on maintaining the trust of all essential stakeholders.
Market Stakeholders or primary stakeholders engage in economic transactions with the organisation as it carries out the primary purpose of providing the society with goods and services.1 Market Stakeholders are the Employees, Stockholders, Creditors, Suppliers, Customers and Distributors and Retailers.
Mattel had long enjoyed a reputation as a responsible company. With the recall of its toys that posed serious threats to children, the reputation of company was at stake. It would result in stock value dropping. They also face lawsuits and allegations of failure to disclose timely recall of defected products. The recall also affects the overall confidence of investors. Shareholders are the ones who sustain the company and they hold high power.
Customers of Mattel are parents of young children. Reports say that in the wake of recall and risks involved with buying Mattel toys produce in China, 33% will not buy toys during the holiday. 45% will totally avoid toys made in China. Parents had raised their concerns on safety of their young children at age when they swallow everything they get. Parents may switch to other toy manufacturers.
Major retailers like Toys “R” Us were frustrated by some of the large recalls of Mattel especially by what appeared to be an unacceptably long time frame between discovery of a problem and the actual consumer recall. Retailers also have alternative manufacturers to choose from and they can boycott Mattel products.
Non-Market Stakeholders or secondary stakeholders are people or...