Strategy Evaluation of Mattel Inc

STRATEGY EVALUATION OF MATTEL INC 13

StrategyEvaluation of Mattel Inc

Outline

  • Introduction: Provides a concise overview of the topic and the selected company for the discussion.

  • The Mattel Case: A concise highlight of the selected company and the internal factors that make the company a good case for the study.

  • Business Environment Analysis: A comprehensive analysis of the external market in terms of the industry, and how it influences the strategy of the firm.

  • Current Strategies and Internal Analysis: A comprehensive analysis of the factors that surround the strategy of the firm and internal environment.

  • Proposed Strategies: A comprehensive discussion of the new strategies that the firm can establish to gain competitive advantage.

  • Conclusion: A highlight of the industry and the strategic factors of the firm

Summary

MattelInc presents a company that has advanced its business objectives amida dynamic environment and a volatile industry. The main philosophy ofthe company is to provide products that satisfy the needs of thecustomers. This is the philosophy that inspires all businessstrategies. With this in mind, the company thrives on the productionof toys and dolls that focus on children as the target market. Thisdiscussion offers an analysis of the internal factors that make thecompany adopt the strategies that it implements.

Whilethe company focuses its strategies into the satisfaction of theconsumer, the competition in the industry is volatile. The businessenvironment that is described by the external factors in the marketaffects the competitors through dynamism. This is because the marketchanges in terms of consumer tastes and preferences. This changeaffects the firms in terms of the type of products to produce so thatthey can remain competitive in the industry. Therefore, this paperwill explore how the environment has influenced the strategy thatMattel Inc has adopted over time.

Throughthe understanding of the past and the current strategies, this paperwill propose new strategies that can lead the firm into competitiveadvantage. The current strategies include outsourcing, globalizationand recalling of products among others. However, the firm can adoptdiversification as the main element of local and global business. Atthe same time, the firm can use the advantages of outsourcing toexplore better and more competitive branding and marketing. Thispaper will offer a comprehensive analysis of these factors thatprovide competitiveness to the company.

Thebusiness environment in any industry has been changing over time,especially with modernization and changing consumer demands.Therefore, the success of a company in a such environments isdetermined by the plans that the company establishes to propel itsbusiness objectives. To achieve these plans, a company must come upwith strategies that result of the strategic plans to run itsoperations against the market to its favor. The strategies of acompany are determined by the internal environment of the firm, butare informed by the dynamics of the external environment. To explorethe elements of the business environment and strategies, this paperwill explore the Mattel Inc on its business strategy. Through theanalysis, this paper seeks to discuss how the firm implemented itsstrategy and the results against the developments in the industry.

TheMattel, Inc Case

Mattelis a large American firm that specializes in the manufacture. Locatedin El Segundo, California, the company is part of the fortune 500companies, with the rank of 413 during the 2008 rank for thesuccessful countries. The company produces famous brands of dollssuch as American Girl Dolls, WWE Toys, Barbie dolls, Hot Wheels andMatchbox toys among many other brands (Mattel Inc, 2014). Founded in1945, the company was formed and directed by Elliot Handler andHarold &quotMatt&quot Matson, hence the name “Mattel” from thetwo founders. Currently, the company is among the top companies inthe United States and in the world and was named among the top 100companies to work with in the country.

Thegrowth of the company is validated by its listing on the New Yorkstock exchange in 1963. The company’s stock has faced the dynamicsof the financial markets, but currently stands at $29.46(WSJ,2014). The company’s shares are also listed on the NASDAQ stockexchange which shows a successful trend in its financial structure.The philosophy of the company is to satisfy all the needs and wantsof its customers (Fraedrich&amp Ferrell, 2014).However, the company has had cases where the philosophy has been putinto test due to the delivery of products that do not reflect thegoal. The company has developed policies that are aimed at developingproducts that respond to the market.

BusinessEnvironment Analysis

Thecompany is one of the market leaders in the toy and doll industry,and has successfully grown over time. The company also faces thechallenge of competition in the dynamic industry. Among the maincompetitors of the company include companies like Hasbro Inc, LeapFrog, Jakks Pacific, VTech and MGA Entertainment.

(Statisctica,2014)

Mattelwas a market leader but faces competition from the top firms in theindustry. This competition shows the level of dynamism in theindustry since every firm strives to achieve the highest level ofmarket dominance (Warren, 2002). Hasro Inc has its competitiveposition vested in the launch of its interactive toys and games thatthreatened to shake the market. This is because the strategy wasunique and had come at a time when many children were bored with thesame type of toys and dolls. At the same time, the other competitorsalso had market edges that they tried to capitalize at the expense ofeach other.

Despitebeing a market leader, the company has faced a dynamic industry thatconsistently presents challenges for the company to cope with. Thetoy and doll business environment, especially the market environmentare dominated by regularly changing market preferences (Fraedrich&amp Ferrell, 2014).This is because children have continuously changed their fashion andtrends due to changes in age and tastes. Since children form a bulkof the company’s consumer base, the firm has faced marketenvironment challenges over time.

Dueto the changes in the market needs, Mattel failed to match up to thechanging demands of children. These are because children wereincreasingly becoming technology savvy, thereby having a taste oftechnically advanced toys and dolls. They were interested withinteractive and electronic toys that would spark their interest inthe computer-dominated world (Fraedrich&amp Ferrell, 2014).As a result, the competition was determined by the ability of thecompetitors to understand the market and adapt to the newenvironment. Therefore, the success of the firm in the market washighly dependent on the responsiveness of its products to the newdemands.

Anothermarket environment, strategic challenge that faced the industry thatMattel operates in is the cultural and social preferences of thepeople. As a global producer of toys and dolls, the company faces,the effect of social and cultural orientation that propels itsobjectives. Therefore, different regions, continents and countriesresponded differently to its products. For instance, the Malaysiancustomers rejected its dolls because they found them insensitive totheir social dynamics (Fraedrich&amp Ferrell, 2014).This was happening when the Malaysian Consumer Association tried toprohibit the company’s dolls of the Barbie Brand because of theappearance, according to the Malaysians, the product, which is one ofthe Mattel’s main products did not appear Asian and had differentintellectual stimulation. As a result other countries followed,leading to an drop in the company’s sales.

Thecurrent trends in this industry are based on the responsiveness ofproducts to the market demands. From the analysis of the past trendsand the current market preferences, the future of the industry isoptimistic but dynamic. The future trends of the market will bedominated by companies that will continually develop new productsthat respond to the market demands (Fraedrich&amp Ferrell, 2014).With the advancement in computing several computer applications willbe embedded in the products that will be produced in the future. Withthe development in the technical application of computer software, itis expected that the companies in the doll and toy industries willadvance their products to match the demands of the consumers. This isthe main philosophy of Mattel, the company should work towards usingtechnology to achieve the goal.

CurrentStrategies and Internal Analysis

Torespond to the above external market dynamics, the company hasemployed a number of strategies from its internal operations. Some ofthese strategies have earned its business value and image, but somehave landed the company into criticism and negative review. One ofthe challenges is that the company failed to produce products thatappeal to the consumers and due to defects (Fraedrich&amp Ferrell, 2014).To respond to this challenge, one of the main strategies anddecisions that have haunted the company towards a negative review ofits philosophy was recalling of toys (Merle, 2007).

(Merle,2007).

In2007, the company recalled millions of toys that it had sold due tovarious defects. Of the millions that were recalled, 17.4 million ofthem were because of defective design, but 2.2 million was because ofdefective lead paint on the toys (Merle, 2007).

Theproblem that the firm faced was the cost of managing the crisis ofrecalling toys and the negative image the recall attracted for thefirm. In the regard to the focus of this paper on business strategyand business environment, the company faced a test time in terms ofthe strategy to employ in handling the effects of the recall. One ofthe strategies was a strict administrative policy that required morestringent evaluation of the products that the company produced. Thiswas because most of the defects were as a result of poor managementcontrol over the manufacturing process (Merle, 2007). Despite theblame being laid on the Chinese outsourcing strategy, it was evidentthat the firm was not on the toes when it came to the issue ofquality checks in the manufacturing.

Outsourcinghas been an internal strategy that the company as employed over timeas a way of increasing production at low cost. This strategy wasemployed by the firm to respond to the increased need for strategicposition. Therefore, the company adopted the strategy as a means ofutilizing its resources efficiently and gain competitive advantage.According to Robbins (2011), outsourcing only helps the company if itlowers cost of production and leaves the company with the resourcesto apply in the administrative or marketing functions. To exploit thecompetitive advantage, the firm used the resources saved from theoutsourcing to promote its products through branding and marketing.However, due to the use of outsourcing, the company had a limitedoversight role over the quality standards of the products, especiallythose that were produced in China.

Thecurrent strategy of globalization of the company is important but hasnot been successfully exploited by the company. The main problem withthe globalization is that it should be customized to fit into theneeds of the specific global market (Christopher et al, 2009).Currently, the company makes products for the global market without aprior understanding of the uniqueness of the target foreign market interms of religion and culture. Therefore, the global design of itsproducts did not respond to these dynamic markets and failed toimpact on the consumers. As a result, the globalization market waschallenging due to the assumption that what is good for the UnitedStates is good for every child globally.

ProposedStrategies for Mattel, Inc

Themain strategy that the company can use is the use of celebrities inbranding and promoting its products. This will solve two of the mainchallenges that the firm faces currently. One of the challenges isnegative publicity that emanates from the recalling of the toys inthe recent times. The company can gain positive review from consumersif it uses celebrities that identify with children. Therefore,branding through celebrities will paint a picture of a company thatrelates to the likes of the children.

Tofinance the strategy of increased cost of branding and marketing,outsourcing would be the best internal production strategy. It is oneof the strategies that the company should continue to pursue is theoutsourcing strategy (Mattel Inc, 2007). This is because outsourcingwill always focus on reducing the cost of production to leave thecompany with a higher mark up. At the same time, the strategy willleave the management with the time and labor force to concentrate onthe marketing and the branding.

Strategicdiversification is another strategy that Mattel Inc can adopt toremain competitive and successful in the market. For instance, thefirm should diversify in the education sector by producingeducational toys. This will make the firm a player in the educationindustry through the use of its existing market potential, customerbase and global distribution networks. The entry in the educationindustry is a major strategy because the competition in thetraditional dolls and toy market may leave some firms out ofbusiness. As the industry currently dependent on the use of dolls andtoys for playing, innovation should be their new philosophy.

Therefore,Mattel should explore ways through which venturing into otherindustries can be achieved competitively. To achieve this strategy,the firm should carry comprehensive research that will lead to theidentification of the needs in the education sector that can besolved by its products (Robbins &amp Judge, 2011). Secondly, thefirm should hire, new and professional designers to come up with theeducational toys and dolls that solve the identified needs. This willbe a result of innovation that should be the basis of the company’sinternal and external strategies that determines its competitivenessin the industry.

Thefirm should redesign the globalization strategy to align with itsphilosophy of customer satisfaction. The firm should therefore designits dolls and toys to fit in different countries and differentcultures. With the philosophy of the company to satisfy the customerin mind, Mattel should prepare different products for differentregions. Different countries have different legal, social andcultural demands that impact on the production of the products (Hittet al, 2013). Therefore, the design of the dolls and toys made byMattel should be primarily be informed by a comprehensiveunderstanding of the dynamics of the global market. Consequently, thecompany should research on every market it targets and partner withbusinesses in these markets so as to design competitive products.

Finally,the Mattel should start a strategy of consistently engaging in smartand strategic partnerships and mergers for market dominance. Insteadof acquiring companies for the sake of business expansion, the firmshould focus on establishing business partnerships for marketdominance. According to Hitt et al (2013), the firm can engage withpartners in the countries that it focuses on the global market thatwill help it to gather market intelligence and distribute itsproducts. Through these partners, Mattel will understand howdifferent global markets should be treated and the type of productsto be distributed. As a result, the company will be competing in boththe local and global market by fulfilling its primary philosophy ofmeeting the needs of the consumers.

Conclusion

Thebest strategies of Mattel Inc have been faced with the challengesthat encounter the toy and doll industry. The competition in theindustry is dominated by local competitors as well as foreign brandsthat also compete in the global market. The success of the firm inthe industry will be based on how innovative it will be in designingproducts that will respond to the changing needs of the consumers.The new strategies that the company can adapt are globalizationthrough market understanding and strategic diversification in theeducation industry. Moreover, the company should continue withoutsourcing strategy that should be used to finance, branding of itsproducts through celebrities. This way, the company will remaincompetitive and gain strategic advantages in the industry.

References

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Robbins,S. P., &amp Judge, T. A. (2011). OrganizationalBehavior, 13th ed.Upper Saddle River, NJ: Prentice Hall

Statistica,2014. Worldwiderevenue of major toy companies in 2012 (in million U.S. dollars).RetrievedFrom,&lthttp://www.statista.com/statistics/241241/revenue-of-major-toy-companies-worldwide&gtOctober 21, 2014

Warren,J.K. (2002). Globalmarketing management.Upper Saddle River, NJ. Prentice Hall

WSJ,R. (2014). MattelInc. 2014,Retrieved From, &lthttp://quotes.wsj.com/MAT&gt October 21, 2014