INSIDE MATTEL: Revamping Corporate Strategy

Business Policy Final Project

December 02, 2015

Lily Mullins, 0819301Michael Legosz, 0819148

Tomson Varghese, 0718293Zachary Ferreira, 0801416

MATTEL[NASDAQ: MAT $24.48 (Nov 27,2015)]Industry: Recreational ProductsFounded: 1945CEO: Christopher Sinclair (Age 64)Employees: 31,000 (May 2015)Sales: USD $6.02 billion (May 2015)HQ: El Segundo, CaliforniaKey Products: Barbie, Hot Wheels, American Girl, Fisher-Price, ELLO and many more!!!

COMPANY OVERVIEW

1945 – Founded after several years of work (70 years old)1959 – Barbie makes a debut1960 – Mattel becomes a public company1968 – “Hot Wheels”1972 – Mattel restructures to create Mattel Inc with 1 division & 7 subsidiaries 1975 – Matt and El leave the company1993 – Fisher-Price joins Mattel (merger)

COMPANY HISTORY

GROWTH PATTERNS & MILESTONES

0

1

2

3

4

5

6

7

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mattel’s Historical Revenue 1994-2015 (in billions USD)

PRODUCT RECALL: LEAD

POISONING

REVENUE

5.80USD BILLION

SALES BY PRODUCT CATEGORY

1,148

737

300

182

0

200

400

600

800

1,000

1,200

1,400

Mattel Boys+Girls Fisher Price American Girl Construction/Arts &Crafts/Other

YTD Sales Per Product Category (in millions USD)

Source: FACTSET – May 2015

FOREIGN OPERATIONS

2,367

928

466

337

YTD Sales Per Region (in millions USD)

North America

Europe

Latin America

Asia

U.S. MARKET COMPRISES

58 MATTEL’S REVENUE

%

Source: Statista.com – May 2015

The toys industry consists of the total revenues generated through the sale of activity toys, dolls, games and puzzles, educational toys, plush, outdoor & sports toys and other toys. This also includes action figures, youth electronics and boy character toys, which includes small racing cars etc.). It doesn't include games consoles and video games.

The toy industry is highly fragmented and extremely competitive.

Source: MarketLine –2015

TOY INDUSTRY

84BILLION

TOTAL REVENUE BY GLOBAL TOY MARKET

STAGNANT GROWTH IN THE U.S. [0%]

$

MATTEL’S INDUSTRY POSITION

6.032

4.665

4.277

0.499

0.996

0.416

Mattel

LEGO

Hasbro

Revenue vs. Net Income of Major Toy Companies in 2014 (in billions USD)

Net Income Revenue

Source: Statista.com – May 2015

MATTEL’S STOCK PRICE

Source: EDGAR – May 2015

MATTEL HASBRO

Current Price: $24.48Market Cap: $8.3 billion

Current Price: $73.09Market Cap: $9.4 billion

CHANGING CONSUMER DEMAND Shift to digital platforms

INDUSTRY WIDE ISSUES

1INCREASING COMPETITIONNew, non-traditional competitors2

One thing that hasn’t changed about the child consumer is their desire to use their imagination. [which is key to learning and development]

POOR CORPORATE GOVERNANCEIneffective, tall corporate structure

ORGANIZATIONAL ISSUES

1LACK OF PRODUCT INNOVATIONLack of responsiveness to markets2POOR M&A STRATEGYNeed for diversification3

A BROKEN CORPORATE STRATEGY

Lack of separation of ownership & managerial controlCurrently, Christopher Sinclair serves as the CEO and the Chair of the BoD; leading to reduced strategic decision-making

Not enough insider buy-in

POOR CORPORATE GOVERNANCE

Board of Directors

Senior Mgmt.

CEOSinclair

Lack of responsiveness to changes in the market Corporate structure is too tall and large to pivot quickly in the newly technological, fast-paced environment – ‘Global’ Corporate-Level Strategy

Senseless use of internal resource based modelIncreasing emphasis on the strength of core brands that are slowly becoming obsolete

Lack of fresh, innovative mindsStagnant decision makers strikes needfor increased diversity in seniormanagement

LACK OF PRODUCT INNOVATION

Christopher Sinclair Kevin Farr Richard Dixon

M&A activity at a standstillIn recent years, M&A activity has significantly declined; Mattel hasn’t pursued innovative opportunities but rather has focused on their core business units

Inability to exploit ‘synergies’ & learn/develop new capabilitiesNeed for integrating current acquisitions into organization’s ecosystem while adopting new technological capabilities [increasing agility]

POOR M&A STRATEGY

12

23

2

1996-2000 2001-2005 2006-2010 2011-2015

Failure isn’t failure if you learn from it.[turning point for Mattel’s strategy]

ALTER CORPORATE GOVERNANCEIndependent Chairman; Insider buy-in

OUR RECOMMENDATION

1INVEST IN PRODUCT INNOVATIONTransnational strategy; Heterogeneous teams2ADOPT ACTIVE M&A STRATEGYLearn/develop new capabilities; Speed to market3

REVAMPED CORPORATE STRATEGY

It’s not about staying alive, it’s about staying ahead.[thank you, charlie]