Introduction:
Principal Agents:
Mattel manufacture and commercializes toys since 1945; now a day owns top brands such as Barbie, American Girl, Fisher Price, Hot-Wheels and Matchbox among others. In their financial for the years 2006 and 2007 they reported net sales of USD 5.6Bn and USD 5.8Bn and a net income of 592Millons and 599 respectively. Since 1959 the company had has experience manufacturing abroad; there are two types of manufacturing strategies the first are the core products (long run toys, such as Barbie) are manufacture in company owned factories, the second non-core products( seasonal toys, such as licensed characters of movies) are manufacture with vendors. This vendors have specific policies and standards that regulates its manufacturing process and materials used in order to comply with Mattel´s quality standards; the vendors receive from the company the specific detail of the design of the toys that are committed.
The Chinese Toy Manufactures are companies that use economy of scale in order to provide its clients with low cost products; they can achieve this due to inexpensive material, work labor and taxes. These companies operate with low margins of profit, so any pressure among any of their variables affects the business model. It is a common practice for these companies to subcontract to other companies in order to meet productions deadlines and to constantly look for better prices in the input materials in order to maximize their profits; this practice open the door for quality issues not only in the toys industry but in pet food, tires and tooth paste they all suffer from recalls between 2006 and 2007.
Situation:
In august 1st of 2007 Mattel issue and statement informing that it will recall 83 toys models due to quality concerns regarding non-approved paint pigment containing lead. 13 days later a new announcement with a total of 152 toys model had to be recall, 85 models due to the lead and the rest of the models due to small magnets

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