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Kimberly Tucker, Chris Salt, Ashley Solomon

Case 7: Mattel: Overcoming Marketing and Manufacturing Challenges
11/01/2010
Marketing Management 6800 Section 004

The Problem:
The problem surrounding Mattel Inc., one of the worlds largest toy companies, is
their mismanagement of international subcontractors and vendors and the production of
certain toys (the manufacturing process), as well as their inability to adapt their marketing
strategy or product to the constantly changing demographic and socioeconomic trends
(Ferrell, et. all 466). This is supported by Mattels legal battle with Carter Bryant and
MGA, their forced recall of certain toys that were manufactured overseas, and the
increasing rate at which traditional toys are becoming less appealing to todays young
audience. Essentially, Mattels mismanagement and oversight lead to violations in terms
of ethical and social responsibilities and safety standards.
Issues Relevant to the Problem:
Mattels problem of mismanagement can be divided into several issues that need
to be considered: legal issues, international supply chain issues, and an increase in
technology-based toys. In regards to legal issues, Mattel has been involved in prolonged
litigation with Carter Bryant and MGA over a breach of an employment contract and
copyright infringement. Due to Mattels poor management of its overseas manufacturers,
in which unauthorized subcontractors and third-party suppliers were hired and unsafe
materials used, several toy products were recalled. Advances in technology and changes
in socioeconomic and demographic trends have created marketing, privacy, and product
development issues for Mattel.
Analysis of Issues:
Legal Issues:
It is evident that Mattel has used poor management practices, in which their HR
and Operations Departments have failed to ensure that employees adhere to
confidentiality clauses in their employment contracts. The creation of MGAs line of
Bratz dolls and the legal battle that ensued are a direct reflection of this practice. Since
2004, Mattel, their former employee Carter Bryant, and MGA Entertainment, Inc. have
been embroiled in a bitter intellectual property battleover rights to MGAs popular
Bratz dolls (Ferrell, et. all 459). Although Barbie remains one of Mattels core products,
Barbies popularity has suffered over the last several years due to new and innovative
competition. Unlike Mattel, this new competition, like MGAs Bratz dolls, has been able
to successfully keep up with the changing lifestyles of todays youth by creating dolls that
feature contemporary, ethnic designs and skimpy clothes (Ferrell, et. all 459).
According to Mattel, Carter Bryant designed the Bratz dolls while he was employed with
Mattel. He then left Mattel to work at MGA, which began producing Bratz in 2001
(Ferrell, et. all 459). Mattel then decided to sue Carter Bryant and MGA for engaging in
fraudulent activities. Mattel and a federal jury agreed that Carter Bryant was in breach of

his employment contract when he developed the Bratz concept while working for Mattel.
The jury also found MGA guilty of copyright infringement, intentional interference with
contractual relations, aiding and abetting breach of fiduciary duty, and aiding and abetting
breach of the duty of loyalty (http://www.msnbc.msn.com/id/26410627/). They deemed
MGA and its CEO liable for what it termed intentional interference regarding Bryants
contract with Mattel (Ferrell, et. all 459). In terms of copyright infringement, MGA built
the popular Bratz brand to include more than 40 characters and expanded it with spinoffs such as Bratz Babyz, Bratz Petz, Bratz Boyz and items such as helmets, backpacks
and bedsheets (http://www.msnbc.msn.com/id/26410627/). Due to the popularity of
these highly stylized dolls among Mattels target audience of tweens, domestic sales of
Barbie went down 15 percent in 2007 and 12 percent in the first quarter of 2008, while
international sales increased 6 percent in 2008 as opposed to 12 percent the previous
year (http://www.msnbc.msn.com/id/26410627/). Essentially, this lawsuit and the
findings of this lawsuit demonstrate Mattels oversight in the management of its
employees and its failure to notice the changing psychographic characteristics of its target
market.
International Supply Chain Issues:
Because Mattel has a powerful presence on the international scene, they must be
aware that the international environment often complicates business transactions
(Ferrell, et. all 463). However, it is clear that Mattel did not properly manage its global
manufacturing process. In 2007, Mattel was forced to recall 1.5 million Chinese-made
toys containing lead paint and powerful magnets that posed a choking hazard for
children (http://www.nytimes.com/2007/08/28/business/worldbusiness/28ihtmattel.4.7289869.html). These unsafe products are the result of overseas manufacturers
not adhering to Mattels high ethical and safety standards, as well as Mattels negligence
in investigating its international contractors and auditing the entire supply chain,
including subcontractors (Ferrell, et. all 463). In fact, Mattel became overconfident
about its ability to operate in China without major problems and failed to recognize that
the toy recalls were more of systemic problem
(http://www.nytimes.com/2007/08/28/business/worldbusiness/28ihtmattel.4.7289869.html). These oversights left room for certain violations to occur. The
violations and problems began when subcontractors used unauthorized third-party
suppliers. Early Light Industrial Co., a subcontractor for Mattel,subcontracted the
painting of parts of Cars toys to another China-based vendor (Ferrell, et. all 462). This
vendor, Hong Li Da, then decided to source paint from a nonauthorized third-party
supplier: a violation of Mattels requirement to use paint supplied directly by Early
Light (Ferrell, et. all 462). In order to save money and cut corners, this unauthorized
supplier used paint that contained impermissible levels of lead. As outsourcing and
subcontracting increased, Mattels ability to monitor the manufacturing process and the

material used to produce toys became harder. With the mounting number of
subcontractors and suppliers in the supply chain, Mattel was found to be in use of illegal
and harmful products, forced to recall some of its toys in the international market, and
faced with a damaged reputation. Even though this incident occurred in China, and it was
the Chinese governments failure to properly protect the public, Mattel was still held
liable for all the products produced under its name (Ferrell, et. all 463). Essentially,
ineffective enforcement and market surveillance on the part of Mattel led to the huge
toy recalls. Through the mismanagement of overseas manufacturers, contractors, and the
international supply chain, harmful raw materials were used in the production of Mattel
toys. Codes, safety standards, and business ethics were ignored to begin with, and Mattel
ended up neglecting its social and ethical responsibility to produce toys that are safe and
fun for young children.
Technological and Socioeconomic Issues:
Over the past decade, advances in technology and changes in socioeconomic
trends have created special marketing, privacy, and product development issues for
Mattel. Because this companys core products are designed for children, they must be
sensitive to social concerns and privacy issues regarding childrens rights (Ferrell, et.
all 463). They must also effectively communicate with parents regarding its corporate
marketing strategy (Ferrell, et. all 463). In order to strengthen its commitment to
business ethics and inform both children and adults about its philosophy regarding
Internet-based marketing tools, Mattel provides an extensive online privacy policy on its
website (Ferrell, et. all 463-464). In this policy, Mattel and its family of companies
("Mattel") are committed to protecting your online privacy when visiting a website
operated by us (http://corporate.mattel.com/privacy-policy.aspx). They also claim that
they do not collect and keep any personal information onlineunless you volunteer it,
are 13 or older, [or have the] consent of a parent or legal guardian, except in limited
circumstances authorized by law and described in this policy
(http://corporate.mattel.com/privacy-policy.aspx). Essentially, in order to keep up with
social concerns, Mattel has had to prove their social and ethical responsibility by
assuring parents that their childrens privacy will be respected (Ferrell, et. all 464).
As technology advances and the lifestyles of children change, Mattel is forced to
contend with the phenomenal success of gaming systems, portable music players, text
messaging, and social networking sites among todays youth (Ferrell, et. all 466). In
addition to the popularity of these technology-based toys, movies, music, and internet,
children and teens are also more active in extracurricular activities (for example, sports,
music, and volunteerism) than ever before (Ferrell, et. all 466). Thus, traditional toys,
like those produced by Mattel, are becoming less appealing to young consumers. In order
to keep up with these changing technological and socioeconomic trends, Mattel
introduced the new line of My Scene dolls aimed at tweens (Ferrell, et. all 459). They
developed this product to be trendier, look younger,be more hip for this age group
who is on the cusp of outgrowing playing with dolls (Ferrell, et. all 459). Mattel even
created a website (http://www.myscene.com) [to engage] girls in a variety of fun,
engaging, and promotional activities (Ferrell, et. all 459). Still, technology, changing

socioeconomic trends, and privacy issues will remain pressing concerns for Mattel until
they can better adapt their marketing strategy and product development to these market
threats.
Viable Alternatives:
In order to correct their management problems, improve their marketing strategy
and product development, rectify their mistakes andprevent future mistakes as well,
Mattel has worked to shore up their ethical defenses to protect both itself and its
customers (Ferrell, et. all 466). They have moved to enforce a rule that subcontractors
cannot hire suppliers two or three tiers down the supply chain, and have even spent
more than 50,000 hours investigating its vendors and testing its toys (Ferrell, et. all 463).
Mattel has also taken a strong stand on social responsibility, human rights, product safety,
and ethical standards by auditing each of its manufacturing sites as well as the facilities
of its primary contractors and establishing the Mattel Independent Monitoring Council
(Ferrell, et. all 464). However, there are several other courses of actions Mattel can take
in order to remedy their management and socioeconomic issues. Mattels problems have
resulted from ineffective management in the legal realm and with the international
manufacturing process, as well as from their inability to adapt to the changing
technological and socioeconomic trends. Thus, some potential solutions might include
hosting training seminars on production and safety standards, employing internal
auditors, and developing technology-based toys.
Analysis of Alternatives:
Training:
One solution to Mattels problem of ineffective management is for Mattel to
require all of their executives and employees to attend training sessions on production
and safety standards. Because some of Mattels contractors were found to be in violation
of Mattels safety & human rights standards, they currently conduct an independent
monitoring audit in manufacturing facilities every three years. If Mattel required their
contractors to attend training seminars based on upholding safety standards, adopting a
safe production process, and complying with state and federal regulations for their toys,
they could reduce the number of violations during the manufacturing process. These
training sessions would also increase Mattels employees awareness of the importance of
upholding safety and human rights standards. During these sessions and workshops,
employees will be tested on legal regulations regarding safety and production standards.
These training seminars should be held regularly and should not be discontinued for any
reason. Although contractors may remain in compliance with regulations, they should
still be reminded of their importance regularly. In the short run, this solution could be
somewhat expensive for Mattel because they would have to hire educated and licensed

trainers and make arrangements for both the educators and employees. Also, if Mattel fell
into financial difficulties, these training sessions would be the first to go. However, the
long-term effect of imparting knowledge that will stay with the employees outweighs the
short-term effects.
Internal Auditors:
By adopting internal auditing practices, Mattel management will be able to learn
new techniques for detecting problems, as well as increase their awareness of potential
problems. With this, the company would be able to avoid its negligence in the inspection
of the international manufacturing process, prevent losses due to fines and litigation, and
remain in compliance with toy regulations and standards. In order to keep track of the
intricacy of Mattels operations, the internal auditors can implement monitoring
techniques. The auditors will be responsible for monitoring managements decision
making process, operating choices, subcontractors, and the entire supply chain. They will
also be accountable for keeping track of the complexity of these operations and
processes. By employing internal auditors, Mattel will be able to measure the
accountability of each manager, as opposed to blaming subcontractors for things such as
the recall of toys. While potential short term affects could be the cost involved in
employing auditors and the resentment of Mattel executives and employees; in the long
run, knowing that their work would be inspected on a regular basis could motivate
employees to stay focused on upholding the companys high standards and
responsibilities.
Technology-based Products:
A third solution to the problem surrounding Mattel is for the company to focus on
the development of technology based toys. By expanding their My Scene and Barbie
brands in order to contend with the ever increasing role of technology in consumer
products, Mattel would be able to keep up with new competition, advancements in
technology, and the shifting lifestyle trends of their target audience (Ferrell, et. all 466). A
My Scene movie would center on the My Scene girls living the average life of high
school girls. Barbie has appealed to younger girls because her movies have focused on
imaginary incarnations of Barbie, like Barbie mermaid. With My Scene movies, the story
would focus on certain aspects of an average girls life, which involves fashion, concerts,
shopping, and pop culture references.
So much of our world is online these days. This move to the online world has
resulted in the decrease of Barbie doll sales because much of Barbie's target market has
developed a taste for online interaction instead of playing traditional toys like dolls. To
counter this recent market trend, the Barbie and My Scene dolls should build a unique
and fun online experience for its target audience. For the My Scene brand, a whole online
social world should be created. In this world, girls can log on and make their own My

Scene girl that they can then use in the My Scene world to interact with other girls. There
would be places to play games, go shopping for clothes for your My Scene character,
design the interior of you own apartment, and invite other My Scene players to parties at
your place. Expanding the My Scene and Barbie brands will increase Mattel's
technological offerings to satisfy the ever growing technology-based toy trend. This
solution could be costly in terms of research, development, and testing. However, in the
long run, Mattel would be able to better compete with new and innovative competition in
this technologically advanced and changing socioeconomic world.

SWOT Analysis:
Internal

External

Strengths
Mattels core brands are instantly recognizable
Barbie is the #1 doll in the U.S.A.
Brand leveraging is high
Dominance in the international market

Opportunities
Growth potential with technology-based toys,
especially in international markets
Development of an online social network
Expand Barbie and My Scene brands to
include sports gear, fashion lines, music, and
movies

Weaknesses
Inefficient management
Reliance on Wal-Mart and Target
Reliance on traditional toys

Threats
Increasing global competition
Increasing domestic competition
Volatile oil prices
International laws and ethics
Lifestyle changes of target audience
Rate of children growing up
Role of technology in products
Purchasing power and consumer needs in
global markets

An internal analysis of Mattel Inc. brings to light the companys strengths and
weaknesses. Their strengths center on their core brands being instantly recognizable.
Since 1960, Mattel has become the worlds largest toy company in terms of revenue
(Ferrell, et. all 457). Today, Mattel Inc. is a world leader in the design, manufacture, and
marketing of family products (Ferrell, et. all 457). This family toy companys core
brands are Barbie, Fisher-Price, American Girl, and Hotwheels. These brands are
instantly recognizable, and Barbie is even acknowledged as the number one doll in the
United States. Since its inception in 1959, the Barbie doll has become one of Mattels
core products. Today, Barbie still remains the flagship brand and number one seller
of Mattel (Ferrell, et. all 458). With the acquisition of Pleasant Company, maker of the

American Girl collection, Mattel was able to realize its long-term strategy of reducing
reliance on traditional products and[taking] away the stigma surrounding the perfect
image of Barbie (Ferrell, et. all 460). Since its acquisition in 1993, Fisher-Price has
become the umbrella brand for all of Mattels infant and preschool lines (Ferrell, et. all
461). This brand has even built a trust with parents by creating products that are
educational, safe, and useful (Ferrell, et. all 461). Due to these brands being instantly
recognizable, Mattel has the power to leverage their brands. Known as brand leveraging,
this strategy allows Mattel to use an existing brand to support the companys entrance
into a new product category. Mattel was able to do this in their creation of the My Scene
dolls. Besides these brands, Mattels strength also lies in their international presence.
They are an international power with offices in 36 countries[and] products in more
than 150 nations (Ferrell, et. all 457). In terms of weaknesses, Mattel has to contend
with inefficient management. They also rely too heavily on the production of traditional
toys and have not yet delved into the development of technology-based toys.
An external analysis of the company reveals Mattels opportunities and threats.
There are many threats that Mattel has to face. They are confronted with increasing
global and domestic competition, financial problems that include volatile oil prices,
international laws and ethics, the lifestyle changes of their target audience, the role of
technology in todays products, and the purchasing power and consumer needs in global
markets. However, Mattel does have a valuable opportunity in terms of developing
technology-based products.
Decision:
After considering the benefits, strengths, and weaknesses of each viable solution,
we think the best option for Mattel is to employ internal auditors. This solution, while
potentially expensive to implement, will be cost-efficient in the long run due to the fact
that Mattel will no longer be involved in legal battles because the auditors will monitor
the companys employees to ensure that they adhere to correct safety standards,
discontinues the unauthorized use of subcontractors, and develop safe products. This
solution will also allow Mattel to improve its product design and supervision over
product quality, which has been identified as part of Mattels problem in the first place
(Ferrell, et. all 462).
Implementation of Plan:
In order for the internal auditors to be a success and produce the desired outcomes
for Mattel, there are several aspects to consider in implementing this plan. First, the
manufacturing process, as well as the manufacturers themselves, must be audited on a
regular basis. Employees must be required to comply with the auditors. In order for the
auditing to occur on a monthly or quarterly basis, an adequate budget will be established.
Auditors taken from the Human Resources Department and Operations Management
Department will be put in charge of monitoring the domestic and international supply
chain, the manufacturing process, the quality of the products, and the compliance of

employees with the companys high safety and ethical standards. At the end of the
auditing process, an audit report must also be produced and presented to Mattels
management. This report should also be published on their website so their customers
will have access to Mattels conclusions about the safety of their toys, the production
process, and the integrity of their employees and subcontractors.

Works Cited

Ferrell, O. C., and Michael D. Hartline. Marketing Strategy. 5th ed. Mason, OH: Thomson
South-Western Cengage Learning, 2008. Print.
Mattel awarded $100 million in Bratz lawsuit. msnbc.com. Associated Press U.S.
Business, Web. Fri. 29 Oct. 2010. <http://www.msnbc.msn.com/id/26410627/>.
Story, Louise. Mattel Shifts into Crisis Mode after Quality Problems. Nytimes.com. The
New York Times, 28 Aug. 2007. Web. 29 Oct. 2010.
<http://www.nytimes.com/2007/08/28/business/worldbusiness/28ihtmattel.4.7289869.html>.
Mattel Privacy Policy. Mattel Inc. Web. 29 Oct. 2010. <http://corporate.mattel.com/privacypolicy.aspx>.