Mattel Recalls

Presented by: Josh Kern

Presented to: Mr. Rico Horca

Abstract

Mattel Inc. is currently the market leader in the toy industry (UK Essays). They have

had many innovative toy creations in their history including Barbie and Hot Wheels. Mattel

currently has manufacturing facilities located in China, Indonesia, Malaysia, Thailand and

Mexico. Recently, Mattel has had a few issues with toys which were released from some of

these manufacturers. This report will give three possible solutions and a recommendation

in order to solve their issue. Four criteria will be used to explore each option:

Cost Ease of Implementation Time to complete Effectiveness

Table of Content

Contents Abstract ......................................................................................................................................................... 2

Table of Content ........................................................................................................................................... 3

Executive Summary ....................................................................................................................................... 4

Introduction .................................................................................................................................................. 5

Key Players .................................................................................................................................................... 6

Current Issue ................................................................................................................................................. 7

Evaluating Criteria ......................................................................................................................................... 8

Option 1 ........................................................................................................................................................ 8

Option 2 ........................................................................................................................................................ 9

Option 3 ...................................................................................................................................................... 10

Option Matrix .............................................................................................................................................. 12

Recommendation ........................................................................................................................................ 12

Conclusion ................................................................................................................................................... 13

References .................................................................................................................................................. 14

Annotated Bibliography .............................................................................................................................. 14

Executive Summary

In 2007, Mattel Inc. experience five critical recalls, which amounted in over twenty

million products being recalled. Mattel needs to make a change in order to prevent these

issues from continuing to occur. The option with the highest evaluation of each criteria will

be the option that is recommended. Mattel is looking to grow their customers in addition to

improving their profits each year. The option which prevents the greatest number of recalls

and limits the number of bad publicity will be the most important option.

The three options are:

Hire Superintendent (employee) Hire new supply chain manufacturing company Improve existing supply chain

They will be evaluated by these criteria:

Cost- Cost refers to the amount of money needed to implement each option. The

options will all cost money to accomplish and each option will cost Mattel a different amount.

The cost criteria analyze the long-term and short-term expenses of each option. Cost will

include costs such as: salary of additional employees, travel fees and any additional costs. The

most desirable option will be the one which is the cheapest.

Ease of Implementation- Ease of Implementation refers to how difficult each option

is to begin operations. Ease will also refers to how difficult each option will be to continue the

implementation for many years. Ease of Implementation will also include the number of

employees needed in order to complete each option. The option which is easiest to complete

and require the least participants will be the more desirable option.

Time to complete- Time to Complete refers to the amount of time each option will

require to accomplish. It refers to all time from the start to the finish of each option. Time to

complete will include; total time, strategy time, employee time, implementation time and the

time needed to keep the option going for many years. The option which takes the shortest

amount of time will be the more desirable option.

Effectiveness- Effectiveness refers to the long-term and short-term benefits of each

option. The criteria refers to the new safety prevention and prevention of hazardous toys from

being released into the general public. The more productive options will create greater long-

term safety. Effectiveness will prevent law-suits and recalls of our product. Effectiveness also

suggests the more productive option will positively affect the greatest number of individuals.

The most effective option will provide Mattel with a better organization image and greater

customer satisfaction.

Introduction

Mattel was created in 1945 out of a garage. The company was founded by Ruth and

Elliot Handler and Harold “Matt” Matson. The company began selling picture frames when it

was first established. The picture frames scraps lead Elliot Handler to begin manufacturing doll

houses as a side business. In 1959, Mattel had their greatest breakthrough; Ruth Handler was

inspired by her daughter’s fascination with cutout paper dolls. She suggested manufacturing a

three dimensional doll named, Barbie, for little girls to play with. In 1961, Mattel introduced

Barbie’s boyfriend, Ken, named after Ruth Handler’s son. They later introduced a friend named

Midge and a sister named Skipper. In 1968, Mattel introduced the first African-American doll,

her name is Christie, and she is a friend of Barbie. Much later, Mattel introduced a Latina friend

named Theresa and an Asian friend named Kira. In 1975, Ruth and Elliot Handler, the founders

of the company, decided to leave the company. After the founders of Mattel left, they began

concentrated on manufacturing products for preschool kids and young boys; they also began

acquiring established toy manufacturing companies and licensing agreement to manufacture

these products.

Mattel’s product history

1965- “See N’ Say” preschool toy

1968- Hot Wheels are modeled “Candy-Colored pain jobs”.

1977- Electronic games; Intellivision home video entertainment system.

1982- An action figure named He-Man.

1995- Cabbage Patch Kids

1996- Tickle me Elmo.

2003- Barbie Couture fashion line introduced Acquisitions/ Licensing agreements

1986- Purchased Arco o (Hong Kong industry)

1986- Entered joint venture with Bandai o Japan’s largest toy company

1988- Revives association with Walt Disney Company

1988- Purchased Corolle S.A. o Collector dolls in France

1989- Acquire Corgi Toys o British scale car model producers

1991- Acquires Aviva Sports o Sports toy maker

1992- Acquire International Games Inc.

1993- Merge with Fisher-Price

1994- Acquire Kransco and J.W. Spear & sons

1996- Obtains licensing agreement with Nickelodeon

1997- Merges with Tyco Toys

1998- Purchased Polly Pocket brand

1998- Fisher-Price begins dominating preschool demographic

1998- Acquires Pleasant Company

1999- Licensing and marketing deal with Ferrari toy company

2000- Licensing agreement with Harry Potter

2001- Licensing agreements with Vivendi Universal Publishing and THQ o Gaming, educational and productivity software

2001- Licensing agreement with Barney

Mattel had many great innovations at the beginning of the company history. In the mid-

80’s, Mattel began acquiring many different subsidiaries and licensing agreements to expand

their products. In 1990, Mattel moved their headquarters to El Segunda, California. Sadly in

2002, Co-founder Ruth Handler died at the age of 85 and in 2011, Elliot Handler passed away as

well.

Key Players

The current CEO of Mattel Inc. is Bryan Stockton. Mr. Stockton took over, as CEO, for

Robert Eckert, who served as the CEO from 2000-2011. Stockton began working with Mattel in

November of 2000, where he began as the executive vice president of business planning and

development. He worked his way through the company and recently became the CEO of

Mattel.

David Allmark is the currently the Executive Vice President of global brands team,

including the Fisher-Price brand. He has been working in that position since February, 2011. He

has been employed by Mattel since 1998, when he was working as director of sales and

marketing for Bluebird Toys P.L.C. and Mattel purchased Bluebird Toys P.L.C.

Peter Gibbons has recently been given the title of Executive Vice President of Mattel in

April, 2013. He was previously employed as Executive Vice President of global supply chain

operations at Starbucks Corporation.

Kevin Farr is the Chief Financial Officer and has been since February 2000. Farr began

working with Mattel in August, 1992, where he served as the Senior Tax Director. In 1996, Farr

was promoted to Senior Vice President, in addition to Corporate Controller.

Current Issue

Mattel has suffered from 36 product recalls since 1998. In 2007, Mattel suffered a

difficult year. Between a four month span, Mattel had an additional 5 recalls, which affected

over 20 million Mattel products. Product recalls can severely cripple a company; lost sales,

damaged reputation, diversion of resources, customer services expenses, and possible litigation

expenses. Every year, three billion toys are sold in the United States; of which, less than one

percent of the toys are recalled (Story & Barboza, 2007). Eighty percent of toys purchased in

the United States are produced in Chinese factories. Batch testing is a cause of harmful toys

being released to the public.

Date Quantity

Recalled

Description Reason

08/02/07 1,500,000 Fisher-Price toy trains High levels of lead-paint

08/14/07 17,400,000 Mattel play set

Barbie doll & Tanner

Loose magnets

09/04/07 850,000 Barbie Accessory Set

GeoTrax

High Levels of lead-

paint

10/25/07 55,000 Go Diego Go! Rescue Boats High levels of lead-paint

11/06/07 155,000 Laugh & Learn

Learning Kitchen

Choking hazard

The Hansheng Wooden Products Factory and Lida Toy Company were the two

companies involved in the controversial issues. They were directed to temporarily stop their

operations because the products did not comply with safety standards. They had their

exporting licenses revoked, by Chinese authorities. Reports claim, four days later, the boss of

the Lida Toy Company hung himself inside the factory (UK Essay’s). Mattel is in need of changes,

in order to improve Mattel’s supply chain.

Evaluating Criteria

Option 1

Option one will require Mattel to hire an additional employee, who specializes in safety

prevention. The inspector will require additional training in safety prevention. The employee

will need to accurately predict harmful hazards which may result in recalls, and damaging

publicity. The employee will need to know the safety laws of every country in which they are

doing business.

A foreign supplier is concerned in optimizing profits. Doing so requires buying the most

inexpensive materials and selling for a price above break-even. A foreign supplier may purchase

the cheapest paint, possibly unknowingly containing higher than legal levels of lead-paint. It is

Mattel’s new employee’s job to investigate the quality of our products.

The employee would travel between manufacturing plants, in order to inspect the

products before they are released to the general public. He would travel between

manufacturing plants before the conclusion of the finished product. Mattel currently does the

majority of their manufacturing in China. They have additional manufacturing facilities in

Indonesia, Thailand, Malaysia and Mexico, which the employee will need to travel between.

The job will require additional testing of products by breaking them and testing the content

materials in each product. Toys containing small breakable pieces or other hazard for children

will not be allowed into the marketplace. Broken toys can be into weapons and will also not be

allowed into the marketplace.

Advantages:

An advantage of hiring a superintendent to inspect products before products are

released would be the time to complete criteria. The only time needed to complete this option

would be the time needed to hire and train a capable superintendent.

Another advantage of hiring a superintendent would be the Ease of Implementation

criteria. Hiring an additional employee for the company would be simple, but it will be a little

more difficult to find an employee with intuition skills.

Disadvantages:

Cost may be considered a disadvantage of this option. The cost needed to hire a

superintendent will not be cheap. This option may be the most expensive option, but it

guarantees an extra set of eyes inspecting the products before they are shipped.

The effectiveness criteria would also be considered a disadvantage of this option. The

option will create an additional staff member, but the superintendent may not be entirely

necessary. The products need to be inspected, but the company should train the manufacturers

to inspect the products themselves, during assembly.

Option 2

A decision Mattel will need to consider is to hire a new manufacturing company to

produce their product. The multiple manufacturing companies located in China, which

Mattel has hired to produce their products, cannot do it effectively. The purpose of a

manufacturing supply chain is to optimize profits of the company. Mattel outsources the

manufacturing of their products, in order to maximize their revenue.

Mattel’s main manufacturers are located in China. Mattel’s Chinese manufacturers

produce over 65% of Mattel’s products (Story & Barboza, 2007). Mattel will need to find

another reputable manufacturer, possibly still located in China. Chinese manufacturing

companies produce nearly 80% all of toy purchased in the United States (Story & Barboza,

2007).

Advantages:

An advantage of the hiring a new supply chain manufacturer is the cost criteria. This

option will have a reasonable price, similar to the previous supply chain. The price of each

supply chain will be very similar with companies looking for the cheapest alternatives.

Disadvantages:

A disadvantage of hiring a new manufacturing company to produce the product would

be a lack in effectiveness. All manufacturing companies are just as capable of producing quality

goods. Changing companies will delay future product releases. New staff would require

training.

The time to complete this option is unnecessary. The time needed to switch between

manufacturing facilities is not productive. Mattel needs to be more focused on improve current

problems in the organization.

The ease of Implementation is fairly simple. It requires replacing the existing

manufacturing company with a new one. This option is more difficult than another option. The

option would be relatively simple if the company needed a replacement in the current

manufacturing supply chain.

Option 3

The third option Mattel has to consider is to keep the existing supply chain

manufacturer and improve it in a variety of different ways. Communication is a key variable in

order to improve Mattel’s supply chain. The company will need to re-train and re-communicate

the laws of each country. Mattel will need to test every product they are intending to sell; batch

testing could allow harmful toys to be release to children. Mattel could improve customer

relations of these incidents by posting a blog page for unhappy customers and parents to bring

their objectives about the company.

Mattel needs a better supply chain to create reliable merchandise. In order to

accomplish this, Mattel will need to communicate better with their foreign manufacturers,

located in five different countries. Communication is important in the business industry. Each

employee needs to communicate with others. Mattel needs to communicate the product

requirements, in the toy industry with their manufacturers. The company needs to confirm the

requirements of their product with the regulations of each countries law. Researching possible

complications can prevent future harmful obligations of the company.

Mattel will need to begin testing their entire product. Once the product is assembled, it

will need to be inspected and tested. The only products that will be released will be safe toys,

free of any apparent danger. Preventing as many product recalls as possible is the major factor.

Doing so will prevent harmful publicity and law-suits from injured customers. If any additional

products are deemed hazardous, rapidly establish a recall before any further damage may be

dealt to the company. A blog page for upset customers and parents will bring angry customers

to a single location. It will establish an opportunity to re-establish a relationship with a

customer which has been harmed. It also prevents negative publicity to reach a greater number

of profitable customers.

Advantages:

An advantage of keeping the existing manufacturing company and focus on improve it is

the cost criteria. The reason this company was chosen to manufacture our products was

because they were the best option at the time. They are capable of accomplishing their tasks in

addition to doing their job at the most affordable rate.

The time to complete criteria would also be an advantage because it would only require

the additional time needed to train the manufacturing company. The company may only need

to be told the US regulations for toys. Staff may need additional training to spot substandard

products.

The ease of implementation criteria is another advantage of this option. The company is

currently under contract and has already been employed. All time can be concentrated on

preventing additional recalls. The company should be aware of their mistakes and fix them

accordingly.

Disadvantages:

A disadvantage of this option would be the effectiveness. This option may be effective if

the improvements were to be implemented, it would create an effective supply chain. Mattel

needs a manufacturing company which will produce their products, without creating any need

for a recall.

Option Matrix

Cost Effectiveness Time to

Complete

Ease of

Implementation

Option 1 XX XX XXX XXX

Option 2 XXX X XX XX

Option 3 XXXX XX XXXX XXXX

Cost- More X’s refer to a lower cost option

Effectiveness- More X’s refer to more effective option

Time to complete- More X’s refer to less time needed to complete each option

Ease of Implementation- More X’s refer to easier options to implement

Recommendation

Mattel is already an established company. The recommendation will need to help

Mattel fix the negative publicity, prevent lost revenue and prevent injuries of customers.

Option 3 is the most efficient option for Mattel to consider. Mattel already has the cheapest

alternative they can find. They need to improve their current manufacturing supply chain.

After five incidents occurred, consecutively, Mattel needs to focus on the final product

they are releasing. Children toys should not contain objects will small pieces or pieces which

can be broken easily. Children may be harmed by any malfunction of a product. Every angle of a

product must be inspected and tested before release of product. In addition, the exterior of

products may harm children as well. Children don’t know any better; they have the urge to

place everything they can into their mouths. The paint of our products will be a major priority

to discuss with our supply chain manufacturers. Each incident which occurs, severely damages

Mattel’s reputation and their profits.

The main priority of this option is to prevent recalls. Mattel will need to eliminate their

batch testing system by testing their entire finished products. Hazardous products may slip past

the production line and reach the final customer. Increased production tests will prevent any

harmful toys from being released. In order to guarantee assurance of the product, they would

need to be inspected before the delivery.

Lastly, a blog for unhappy customer would be a great strategy, in order to contain the

bad publicity of these disgruntled purchasers. The blog page for their complaint will be located

in a harmless environment. It will allow Mattel an opportunity to make amends for the issue

they may be responsible for. The location would be an opportunity to retain these customers.

The customers may be extremely loyal; losing the lifetime customer value may deplete profits.

Conclusion

Mattel has been operating for nearly 70 years. Recently, the company has begun

producing products of poorer quality. The company needs to focus on producing quality

products, like they originally did. The owner began manufacturing the original products.

Now the company ships its manufacturing labor elsewhere.

In conclusion, Mattel Inc. needs to implement option three. If successfully

implemented, Mattel will reduce and prevent future recalls from occurring within the

public. Recall prevention is the issue at hand. Mattel needs to become better aware with

products which may become hazardous. Preventing future incidents will reduce the

number of recalls and also the number of law suits against them. Preventing future

incidents will increase profits and increase the reputation of the company. The reputation

of a company takes time to build.

References

Lynn Yang, J. (2008, January 22). Mattel's ceo recalls a rough summer. Retrieved from http://money.cnn.com/2008/01/21/news/companies/mattel.fortune/

Mattel. Mattel history. Retrieved from Mattel.com

Mattel Inc. (2008, January 01). 2007 mattel annual report.

Mattel recalls 2007. (n.d.). Retrieved from http://www.awpagesociety.com/wp-content/uploads/2011/09/Mattel_CaseStudy.pdf

Story, L., & Barboza, D. (2007, August 15). Mattel recalls 19 million toys sent from china. Retrieved from http://www.nytimes.com/2007/08/15/business/worldbusiness/15imports.html?pagewanted=all&_r=1&

UK Essay’s. Mattel inc global leader in manufacturing toys and family products read more: http://www.ukessays.com/essays/marketing/mattel-inc-global-leader-in-manufacturing-toys-and-family-products-marketing-essay.php

Annotated Bibliography

Lynn Yang, J. (2008, January 22). Mattel's ceo recalls a rough summer. Retrieved from http://money.cnn.com/2008/01/21/news/companies/mattel.fortune/

Mattel had a few articles regarding their poor manufacturing procedures. The articles analyzes the CEO during the time of the recalls. Bob Eckert was the CEO and had to keep employee moral high during a rough period. The articles also analyzes some questions that needed to be answered at the conclusion of the recalls.

Mattel. Mattel history. Retrieved from Mattel.com

Mattel’s website assisted in providing information. It helped provide the product history of the company. It provided an in depth analysis of the current key players of the company. The website informed visitors of the history of the founders in the Mattel company.

Mattel Inc. (2008, January 01). 2007 mattel annual report.

Mattel’s 2007 annual reports helped with retrieving information of the project. Mattel had a difficult year in 2007 with the disasters of the product releases. It was interesting to learn the impact of these recalls. The lost revenue was not a key topic of the annual report but the sure needed to place information about it, into the report.

Story, L., & Barboza, D. (2007, August 15). Mattel recalls 19 million toys sent from china. Retrieved from http://www.nytimes.com/2007/08/15/business/worldbusiness/15imports.html?pagewanted=all&_r=1&

This newspaper article describes the second and third recalls which resulted in over 19 million toys recalled. The toys that were recalled were manufactured in Chinese factories. The article analyzes all the products affected by the harmful content.

UK Essay’s. Mattel inc global leader in manufacturing toys and family products read more: http://www.ukessays.com/essays/marketing/mattel-inc-global-leader-in-manufacturing-toys-and-family-products-marketing-essay.php

The essay this person wrote was a great analysis of the results of the recalls. It describes the incidents in the perspective of the supply chain manufacturer. The Chinese facilities were never guilty of any crime. The results occurred by accident and if anybody was to blame; it should be Mattel. Mattel took full responsibility for the recalls because it was their design, the manufacturing company was assembling