Mattel Toys Case Study

Policy and Strategy of Mattel

Mattel is the biggest toymaker, which has its products being sold in more than 150 countries and is committed to philanthropy for children around the world. Mattel has more than 100 various registered brands, including such market leaders as Barbie, Fisher-Price, and American girls. Its success is facilitated by the well-developed guidelines for corporate governance and clear work conduct. However, the company has faced numerous obstacles on its way to fame and acknowledgment, which induced the team management to be more attentive and improve quality control.

Mattel is one of the 100 most trustworthy US companies, which has found its customers in numerous courtiers. Mattel manufactures its core products, which are wholly owned and non-core products, which are made under the movie-licensing deals. The difference between the two kinds of products is that core products, which are manufactured in such countries as China, Indonesia, Thailand, and Mexico, are under the constant and rigid control of the personal work team, while non-core products are outsourced to the third-party suppliers.

By 2007, Mattel had developed massive manufacturing and subcontracting operations in China. The company obtained five wholly-owned factories, which produced such branded toys as Barbie dolls and Hot Wheels cars. However, a great part of the toys was manufactured by the vendors, and the company’s management team were afraid that they may neglect the rules and perform the work not qualitatively enough.

Mattel, to avoid threats to their core products, rigidly controls the quality and safety of the output during the manufacturing process and uses an extensive program with multiple quality control guidelines. For instance, raw materials arriving at the Chinese factories are thoroughly tested. Mattel also set high demands to the vendors which manufacture non-core products and obliges them to undergo a review of their equipment. Mattel also audits their vendors under its GMP.

Approximately 65% of Mattel toys have been made in China and half of them were manufactured in Mattel’s plants. By 2006, Mattel had 10,000 toy factories which operated in China, and their exports exceeded $17, 7 billion. According to the China Toy Association, consumption of Mattel toys in the world accounted for 80%. However, Mattel does not produce all the core and non-core toys in their plants, because manufacture at vendors’ plants results in lower costs. Besides, rigid control, high safety standards, and thorough testing are the same on both wholly owned and vendors’ plants. The main purpose of such intensive control is children’s protection from harm, as the poorly constructed toys may cause injuries, which can negatively influence the excellent reputation of Mattel.

The analysis of the strategy applied by the Mattel Company shows that the management team has thoroughly thought over all the possible risks and elaborated an efficient and gradual program of monitoring the manufacture to receive a qualitative final product. Strategies applied by the Mattel Company require a high safety level, which is based on the constant testing of the raw material and quality of work performed by the employees. It is also important to notice that Mattel Company rigorously audit their vendors under GMP and check their production facilities, which helps to support their perfect reputation and attract the clients.

Mattel’s Efforts in Managing their Chinese Supply Chain

According to the International Council of Toy Industries (ICTI), China exported approximately 22 billion toys in 2006. The main markets have been situated in North America and comprised 36%, in Europe the quantity reached 29%. Completely all toy industries of China are focused on Guangdong’s outsourcing factories, which’s the scale of manufacturing and price could be hardly matched by competitors.

Lee Der has been founded in Foshan City by Hong Kong businessmen Mr. Cheung Shu-hung and Mr. Xie Yuguang. Their first order from Mattel was a small party of educational toys. However, because of the Mattel’s orders growth, Lee Der decided to stack its future with the company. Xie ensured that Lee Der met all the Mattel’s standards of toys’ quality since 1993. In 2007, Lee Der had nearly 2,500 employees in three plants, which annually brought an income of about $ 26 million. The investigation showed that Lee Der was one of the best companies for employees in China, as their wages were well above the local minimum level, and payments were always timely. Cheung even gave money to the needy workers, who did not have enough money to pay for the education of their children.

Besides Lee Der, Mattel had 36 principle contract manufacturers that produced toys at a lower cost. However, the main requirement of the contract was a constant audition under the Mattel’s GMP and a thorough technical inspection of their production facilities. Therefore, the possibility of such a phenomenon as quality fade is fully eliminated in the company. Quality Fade is a deliberately concealed profit margin through the economy on the materials used for the product manufacturer. Usually, the initial sample of production is fine, but further its quality significantly decreases. The company shortens its expenses, which may negatively influence the safety and health of the customers. Mattel pays great attention to the quality of its products and rigorously checks them. For example, when the raw materials come to the factories, they are thoroughly checked at the manufacturing sites and then pass additional testing at the sophisticated and extensive “Product Integrity” test facilities in Shenzhen. Checking is based on pulling the limbs of the plastic dolls and breaking the model cars. Besides, lead paint is also under the most rigorous safety control. All abovementioned facts prove that control is sufficient for the final product to have high quality and be safe for children.

Mattel Magnet and the Lee Der Lead Paint Recall

Product recalls can be caused by defects related to the design or defects in the manufacturing process. Professors Hari Bapuji and Paul W. Beamish published a report which explicitly described their examination the phenomenon of products recall. The professors studied such problems as sharp edges on a toy, small detachable parts and glue eyes on the stuffed toys. However, the investigation showed that many defects occurred during the manufacturing process because of not qualitative materials being used. Such instances can negatively influence the health of the customers because children can choke with the small parts which are badly reinforced, or get poisoned because of the harmful paint consumption.

The recall is a highly problematic aspect, which may affect the reputation of the company. Thus, the company should react immediately and pay some sort of compensation to the customers for not qualitative toys, because the situation may attract media attention and provoke a reduction in customer purchases. Naturally, the rest of not qualitative toys have to be utilized. The company has to investigate the problem and increase control over the problematic issue.

Recall also may involve additional costs, which include expenses for the lawsuits because of the serious injuries caused by the defected toys; the most severe cases may involve massive compensation. Compensation because of the product recalls also may be initiated by the importer or marketing company as a response to the customers’ claims. Besides, the situation may bring the company under the rigid control of the related authorities and induce further problems with licensing.

In 2007, several prominent product safety scandals took place because of fake milk powder, pet food tainting with prohibited chemicals, the disintegration of car tires at high speed, and toys’ coating with lead paint. Recalls included Rc2 and US-based Company, which had problems with its popular Thomas and Friends toy railway set, which was coated with toxic lead-based paint. The toys have been made in China by a contract manufacturer, which provoked many industry analyses. US politicians accused Chinese manufacturers in using cheap raw materials to cut their costs. The event had a negative influence on the reputation of Chinese plants’ manufacturing quality. Consequently, in the minds of the US public, the output manufactured in China began to associate with risky and dangerous products.

In 2007, an independent laboratory performed the pre-shipment tests for lead paint on Fisher-Price branded products manufactured in China by Lee Der, and it was established that toys did not comply with Mattel standards. The further investigation concerned the yellow pigment in the paint supplied to Lee Der from unauthorized sources. It was identified that Lee Der had been buying paints from Dongxing New energy Co. for four years. In April 2007, the company ran short of yellow pigment powder, and Lee Der bought the product from another company, which represented fake documents, including the certificate of quality. In July, Mattel identified the problem and stopped to accept any shipments. Thus, Lee Der was left with $16 million worth of toys produced for Mattel. On August, 9th, the website of China’s Administration of Quality Supervision and Inspection and Quarantine announced that Lee Der was banned from exporting. The next day Cheung asked employees to leave the factory because of the equipment selling. A great problem was that Mattel Company did not catch Lee Der sooner, which testifies the excessive trust to the partner who neglected the rules. Mattel Company considered Lee Der a reliable partner and did not identify the problem before the products’ shipping to Europe and the U.S.

Mattel’s vendors could purchase materials from one paint supplier, who was approved by the Mattel Asia Pacific Sourcing. The qualified suppliers had to test pigments before the delivery. The vendor was also obligated to check every incoming shipment. Every month, the compliance with this procedure was checked by the MAPS auditors. If the vendor wanted to buy the product from another supplier, the procedure would automatically become more complicated to eliminate the low quality of the supplied products. It is obvious that the procedure applied by Mattel is thoroughly elaborated, but the company should not be complacent because new technologies constantly develop, and it is important to investigate the market to search new equipment and ways of checking the product’s quality.

Conclusion

Mattel Inc. is a world leader in designing, marketing, and manufacturing toys. The company launched its toys manufacture in 1945 and is still one of the best toy companies, which’s new trendy toys are eagerly anticipated by the children. However, the global acknowledgment of the company only makes the management team work harder and monitor the quality of the raw materials and a final product more rigorously through quality testing equipment. The company should understand its responsibility, keep abreast with time and new technologies, and take all measures for possible recall prevention. Otherwise, the reputation, which has been developing for many years, can be destroyed in a few moments.