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Mattel´s China Experience: A crisis in toyland

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andy salinas

on 28 November 2013

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Transcript of Mattel´s China Experience: A crisis in toyland

Create a Code of Conduct
"A written set of guidelines issued by an organization to its workers and management to help them conduct their actions in accordance with its primary values and ethical standards"
How could this industry giant, a company so highly regarded as a toy industry model of corporate citizenship, find itself mired in such a controversy?

Strategic Recommendations
2. Analysis

Innovation through investment in R&D

"Fundamental basis for creating a firm specific advantages enabling the firm to: Achieve sustainable competitive advantage and improve corporate performance”
(Howard, 1993)

Increase control
Revise contracts
Who are we dealing with?
Restore reputation
More communication and transparency

Stakeholder compensation

Engaging in CSR activities
Mattel´s China Experience: A crisis in Toyland
1. Lack of control
Manufacturing contracts
Liability of foreignness ( institution based view)

3. Violation of Trust
Previous voluntary recalls maintained reputable standing
Public perception still Mattel as responsible
Response on Illinois recall caused public uproar

4. Conclusion: Food for thought
Was this crisis a major roadblock to being the world's premier toy brand "tomorrow"?

“With great power comes great responsibility”

What next steps should they take to recover from the crisis?

What must they do to protect their brand and restore their reputation?

1. Brief summary and context of the case
2. Analysis
Main Issues
3. Strategic Recommendations
Short/Long term actions
4. Conclusion

Stakeholder Theory
Main issues
3. Strategic Recommendations
Chinese Suppliers
Mattel didn’t respect the safety standards that they implemented

They didn’t seem to make a close analysis of the country where they decided to off-shore which led them to not detect Opportunism fast enough

They didn’t take a close look at the proper application of the Chinese laws to make sure the country where they were outsourcing was really reliable.

The law was implemented in China in 2007 only. What did Mattel do to make sure these regulations were put into action in the production of their toys?

2. CSR
(Corporate social responsibility)

Who is Mattel?
1. Brief summary and context
Leaving one’s home country to work in another country.
Home country rules in a foreign country
Mattel´s China Experience: A crisis in Toyland
Katariina Väisänen
Ann Sophie
Andrea Gonzalez Salinas
Tareq Faris
Margarita Liuzzi

Long term
Decreased institutional costs due to more stabilized and controlled operation
Short term
Revise and end relationships if necessary

With this ‘mistake’ Mattel put many children in danger. The excess of lead in the toys represent a risk for young children who have a tendency to put their toys in their mouth. Even small amount of lead consumption can have negative effects like the reduction of IQ scores 2

Did Mattel do a good job in thinking about general safety before their own profit?
This question leads us to think about CSR

2007 - Public scandal: Paint on the Sarge toy containing lead levels in excess of US regulations.

Contracted manufacturers didn't follow and violated Mattel's quality standards

19 million toys were recalled by Mattel. Only 2.2 million were because of lead paints, the other 17 million were because of faulty design and use of small magnets.

Bear in Mind...
Short term
Choose communication channels to keep the stakeholders informed
> Reinforces transparency

Implement customer compensation strategies/systems
> loyalty and satisfaction
Long term
Engage in CSR activities that are of great importance to society

> Donations
> Campaigns
Long term
Focus on conforming to the guidelines!
Short term
Implement a REALISTIC code of conduct

> make known internally and externally

> Important for high levels to abide by it, the rest of the company will follow

Long term
Why not try to expand the target market?
Short term
Invest in the newest technology

Renew the brand by creating something new.

> Costly and time consuming

Could play many important roles....


2.Daily Manager



Short term
Increase the frequency of check-ups

Hire a parent-country national (PCN) to work in China.

Third Party Monitoring Team (TPMT)

"...Designed to monitor, review and asses the implementation of all signed agreements "
Open an extra subsidiary in China which main job is to supervise that contracts are followed.

Check-ups on a regular basis
Long term
Even revised contacts require monitoring!

See the probability of different kind of contracts.
Ownership advantages
Mattel disposes of several company-run plants in China, which ensure a higher management control of the core product production and maintain the industrial secrets and know-how.
Part of their productive activity is made by contract manufacturers (around 3000 partners), this reduces costs but increases risk in the productive process.
Location advantages
Produce at the "China Price" - 30 - 50% lower than in the United States.
Lower business costs: labor, facilities, raw materials, and plant and equipment.
Interesting spot for the industry - Sales grow 25% per year. (2008)
Asian market: 25% of global toy market.
By moving their production to China, Mattel could focus on research and development, product design, marketing, and other core business activities of strategic importance.
Internalization advantages
Cheaper to produce and import to USA than producing directly there, keeping the quality standards and obeying US laws.
Access to asian market.
"The World´s Premier Toy Brand - Today and Tomorrow"
The Toy Market
Very dynamic - 900 companies

Top 50 companies control 75% of the market.

Close and growing relationship between toy & entertainment industry. (Technology driven)

China toy imports accounted for 86% of total toy imports in USA.

Mattel and Hasbro 1/3 of Global Market
Worldwide leader in the design, manufacture and marketing of toys and family products.
Founded California, 1944
Main competitors: Hasbro, Namco, JAKKS Pacific, Leap Frog, Lego.
Core Products:

Mattel´s stock price declined and costs increased.
Customers threatened to boycott all toys made in China.
Mattel and China's reputation was badly affected.

Main issues
• They didn’t take a close look at the proper application of the Chinese laws to make sure the country where they were outsourcing was really reliable.

• The law was implemented in China in 2007 only. What did Mattel do to make sure this regulations were put into action in the production of their toys?

The voluntary activities undertaken by a company to operate in an economic, social and environmentally sustainable manner
"A business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms"
Bracey, Leon (2013).
Business in focus: The importance of business reputation
. Retrieved 20th November 2013 from http://www.businessinfocusmagazine.com/2012/10/the-importance-of-business-reputation/

Business dictionary (2013). Retrieved 22nd November 2013 from http://www.businessdictionary.com/definition/code-of-ethics.html#ixzz2l22KVm56

Government of Canada (2013).
Foreign affairs, Trade and Development Canada.
Retrieved 20th November 2013 from http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-rse.aspx?lang=eng

Hd Center (2011)
The Third Party Monitoring Team
. Retrieved november 22nd 2013 from http://www.hdcentre.org/fileadmin/user_upload/Our_work/Peacemaking/Philippines_Mindanao/Supporting_documents/The-Third-Party-Monitoring-Team-_TPMT_-and-its-Terms-of-Reference.pdf
Lamontagne, Élaine (2013).
Lectures 1-10: International Management
. Retrieved 14th November 2013 from HEC Montréal’s website: https://zonecours2.hec.ca/portal/site/3-006-04A.A2013.A01/page/ed915b0d-12e7-475c-8970-a78e1227f789

Martineau, J; Pauchant, T. (2013)
Corporate Social Responsibility by Archie B. Carroll.
Chapter 10 Retrieved from the book in process Good Business: Integrating Ethics and Performance.

Peng, M. (2013).
(With Printed Access Card) 2e, Cengage Leaning.
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