Question One: Do manufacturers of products for children have special responsibilities

to consumers and society? What are these responsibilities and how well has Mattel met

them? Provide evidence of Mattel’s strengths and weaknesses in this area.

Yes. As Mattel’s products are designed primarily for children, it must be sensitive to societal

concerns about children’s rights.

Strengths

Responsibility towards the community

Mattel recognizes international environment, different legal systems and cultural

expectations, and the use of technology especially with regard to consumer privacy

and has taken steps to strengthen its commitment to business ethics and social

responsibility.

Mattel recently published its first “Corporate Social Responsibility” report, including

a strong statement about its commitment to economic, legal, ethical and philanthropic

responsibilities which includes commitment to product safety, volunteering in a

community, developing a best practice or even treating colleagues with respect and

dignity.

Another way they have done this is through philanthropic events by the Mattel

Foundation

o The Mattel foundation promotes philanthropy and community involvement

among Mattel’s employees and makes charitable investments to help children

in need. It is funded through mainly pre-tax corporate profits and helps a

variety of children’s issues. One of the main goals is to open a Children’s

Hospital at UCLA The Foundation also supports annual fundraising events

such as Children affected by AIDS Foundation (established by an HIV-

positive Mattel executive, the Mattel family learning program, the annual

giving campaign targeted at Mattel employees.

o Within the philanthropy is a Mattel Employee Volunteer Program. Employees

are encouraged to volunteer and give back to their communities and to

continue its commitment to help children.

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o Makers of American Girl collection provided $449,500 in grants to support

children’s projects as environmental education for elementary school children,

various cultural programs and a performing arts series for children.

o The Barbie brand debuted a worldwide cause related-program called “Barbie

Cares: Supporting children in the Arts” dedicated to supporting Arts education

for children funded by a $2 million donation to the Entertainment Industry

Foundation.

Responsibility towards children

Mattel communicates with parents about its corporate marketing strategy. It has taken

legal special steps to inform both children and adults about its philosophy regarding

its Internet-based marketing tools. On Barbie.com website, parents are encourages to

read and follow suggestions on Internet safety by providing full explanation on how it

collects information, precautions it takes to protect information, and other issues

relevant to parents and children.

Mattel does not collect and keep any information online from visitors or consumers

unless they are 13 and older and volunteer it. Mattel does not collect and keep

personal information online from children under the age of 13 without consent of a

parent or legal guardian, except in limited circumstances authorized by law and

described in the policy.

Mattel adheres to Children’s Online Privacy Protection Act of 1998 and the guidelines

of the Children’s Advertising Review Unit (CARU) of the Council of Better Business

Bureaus, Inc.

In the late 1997, Mattel’s first full ethics audit indicated that the company was not

using any child labour and those contractors who were found in violation of Mattel’s

standards were forced to change their operations of lose Mattel’s significant business.

Mattel instituted a code of conduct called Global Manufacturing Principles (GMP) as

audited by Mattel Independent Monitoring Council (MIMCO) require all Mattel-

owned and contracted manufacturing facilities to favour business partners who are

committed to ethical standards that are compatible with Mattel’s.

Weaknesses

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Children’s privacy

Mattel’s attempts to follow their market into the technological realm have included the

development of a number of children-friendly websites to accompany their toys. Targeting

children with internet sites, however, brings about extra concerns. Mattel must be very

careful to protect their legal and moral reputations by respecting the privacy of the children

and their families, which is put in jeopardy every time the website asks a minor to provide

information.

Lack of total control over business partners

Though Mattel has embarked on the Global manufacturing Principles (GMP) and regular

social audits, Mattel cannot intensively monitor the business processes and activities of its

partners. There is no guarantee that its business partners will completely comply with

Mattel’s corporate social responsibility (CSR), ethical business conducts and product safety

requirements. Mattel somehow could be facing legal actions and criticisms from various

stakeholders around the world.

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Question Two: Comment on the strengths and weaknesses of Mattel’s core brands

(Barbie and American Girl). In looking at Barbie specifically, has Mattel’s success with

the American Girl collection cannibalized sales from Barbie? Explain.

Strength

Brand Recognition

Barbie is Mattel’s flagship brand and its number one seller-routinely accounting for

more than 50 percent of Mattel’s sales revenue.

Barbie was the only Mattel brand that made the list of the 2002 “The 100 Best Global

Brand”.

American Girl is targeted for girls in from 7 – 12 years old. This is due to different

taste in different target market.

American girl is a well-known line of a historical dolls, books and accessories.

Intense Demand

Barbie- Captured the attention of girls under 7 years old that resulted in high demand.

The intense demand seen at the retail stores was insufficiently met for several years.

Barbie- The best selling fashion dolls in most global market with $2 billion in

worldwide sales annually and more than 1 billion dolls sold in four decades.

Customer orientation

Mattel redesigned Barbie to more naturally reflect a normal athletic woman in an

attempt to meet the demands for a more realistic doll.

Opening of American Girl Place shops New York, Chicago and Los Angeles. The

New York store features three floors of dolls, accessories, and books in the heart of

the 5th Avenue shopping district. The store offers a cafe where girls can dine with their

dolls and a stage production where young actresses bring American Girl stories to life.

Product variety or differentiation

Barbie has taken on an extension of different characters, family and friends, and

profession.

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For Barbie, there are Barbie clothing for children, computers and digital cameras with

Barbie theme. This is done to recapture more customers and expand their market to

attract girls after the age of 7.

For American girl, they have books, accessories and even a Store that offers a café for

girls. This has resulted in an increase the product variety for both brands that

generates more revenues.

Product development

Mattel introduced the new line of My Scene dolls aimed at “tweens” with a more

trendier, young looking and are considered to be more hip for girls of age group above

7.

Other efforts targeted at “tweens” include the Mystery Squad, a crime-solving crew,

and the Barbie Doll as Elle Woods, which is a tribute to the blond character in the

MGM Pictures film Legally Blond 2.

Effective marketing campaign

Barbie’s 40th anniversary marketing campaign has a tagline of ‘Be Anything’ which

allows girls to buy any Barbie to represent their future profession. The ads focus on

building a dream for girls that evoke emotions instead of product focus.

American girl focus on selling America’s history that appears to be educational to

teens that even the store has a stage production where young actresses bring the

stories to life

Weaknesses

Ineffective Foreign Market Customization

Traditional Barbie has triggered the possibility of banned in Malaysia by the

Malaysian Consumers’ Association of Penang, due to her non-Asian appearance and

the lack of creativity but it was not success.

In Iran, the non-Islamic characteristics of Barbie and western influences resulted in

the confiscation of Barbie doll from toy stores.

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In Russia, it is interpreted as harmful to young minds that awaken sexual impulses

and consumerism among infants. This will create negative brand images that bring

losses to Mattel.

Not only are children leaving tangible toys at earlier ages, but the impact of the global

market is affecting the success of Mattel. Mattel’s Barbie is well recognized

throughout the global market, but is not considered appropriate in all cultures.

Limited distribution networks of American girl

American girl is sold exclusively through catalogs and 3 stores in New York, Chicago

and Los Angeles but no mention of it selling worldwide.

Even though there is product innovation in Barbie, but its popularity slipped and the

brand failed to make the top-five-selling dolls due to competition.

Brand Recognition of American Girl

American Girl has yet to be Mattel’s major brand due to its distribution network.

Mattel fails to recognize that this Brand would have the potential of online markets so

that American youth could have access to buy it wherever they are around the world.

Cannibalization sales of American girl from Barbie

In my opinion, American Girl has managed to out-performed the sales of Barbie due to

the following reasons:

Because Barbie can only successfully cater to those young girls of 7 years old and

below

American Girl has a better image. American Girl dolls have a wholesome and

educational image- the antithesis to Barbie. The retrofied versions of Barbie dolls,

feature Hooker Barbie, Trailer Trash Barbie and Drag Queen Barbie are seen less

decent than the American Image

American Girl provides a well-known line of historical dolls, books and accessories.

This has captured the attention of girls of the age of 7 and above and definitely gives

the sentimental value of the American History

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The demographic changes in children where they prefer to have more interactive toys

have made American Girl more in demand because of its educational features. This

can be seen with the opening of American Girl Place shops New York, Chicago and

Los Angeles. The New York store features three floors of dolls, accessories, and

books in the heart of the 5th Avenue shopping district. The store offers a cafe where

girls can dine with their dolls and a stage production where young actresses bring

American Girl stories to life.

Question Three: What are the opportunities and threats that Mattel faces as it looks

ahead?

Opportunities

Venturing into more interactive, educational and technology savvy product line

Today, many children, tweens and teens prefer to spend time with music, movies or

on the Internet. The American toy market is becoming increasingly saturated and

competitive, along with a downward shift in age of when children abandon tangible

toys such Hot Wheels and Barbie for more interactive and technological products.

This makes for little opportunity domestically for Mattel if they continue with the

same product line.

Leveraging its brand recognition of the number one doll in the United States and

worldwide

All of Mattel’s core brands are instantly recognizable around the world. Therefore,

Mattel has the ability to highly leverage one or all of these brands.

Expand distribution network internationally

Mattel can expand more to international distribution networks apart its reliance on

Wal-Mart and Target. Hypermarkets like Giant (Malaysia), Carrefour, Cold Storage

and local toy distribution network could make Mattel’s products highly visible.

Strategic alliance with foreign toy makers

An alliance with an Asian company, Bandai, should also prove very beneficial as

numerous eastern countries open their markets to western goods. This market has

been left largely untapped, and offers a huge increase in customer base.

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Customizing to Foreign Markets

The final issue Mattel must address is that of selling in foreign markets. An important

aspect of going global is being able to adapt to different cultures and to break down

cultural barriers. Mattel has done a little bit of this with the changing of the product

packaging, and some of their Barbie lines. However, there are still some countries

that are boycotting Mattel because they are offended by some of their products that

are being sold. While Mattel is expanding their product lines, they need to take into

consideration the message each of their products is conveying. By conducting market

research, Mattel can find out what values are important in foreign markets. If Mattel

neglects to customize to all of their markets, their new products can fail overseas, and

therefore the company as a whole will not be able to expand.

Threats

Change in the American youth lifestyle

The most notable threat in the domestic market is the systematic movement away

from tangible toys, which account for a majority of Mattel’s core products, at an

earlier age. Children are adopting more interactive and electronic toys earlier in age

today, eroding Mattel’s primary market of children under the age of 10. This has

already forced Mattel to enter, and may force Mattel to further their involvement in

the technological realm, a product category in which the firm has performed very

poorly. Young customers have less time spending on traditional toys.

Intense competition on a global scale

Intense competition from other toy-makers like Bratz has slowed Barbie’s sales

worldwide.

Limited Distribution networks

Mattel is relying on its product distribution mainly to Wal-Mart and Target which

lessens Mattel’s pricing power.

Volatile oil prices

Volatile oil prices (oil is used to make plastics) affect Mattel’s cost of production and

this could decrease its profit margin and be less competitive against its competitors.

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Cultural barriers in International markets

Mattel has also experienced problems breaking into foreign markets due to cultural

barriers. The Chinese found it offensive that the Barbie doll did not represent people

of their cultures, the Russians believe that the doll promotes adolescents to think in a

promiscuous fashion at a young age, and the Islamic countries find that the doll goes

against their religion with regards to the role and image of women. The foreign

market will be very prosperous for Mattel if they can structure their entry into the

market appropriately.

Decline in its stock price

Mattel’s stock specifically has lacked stability for years, dropping and rising upwards

of $30 per share in a matter of years. Such instability can lead to wary investors, and

the firm could find itself having trouble generating funds.

Question Four: If you could make only one recommendation to Mattel, what would it

be?

Expand into the technology market /Add-on and Re-innovate Their Product Lines

Mattel, Inc. is known to many as the leading manufacturer, designer and marketer for

children’s toys. They have accomplished brand recognition throughout the world, and

have established offices in over 36 countries. However, Mattel still is faced with the

threat of new entrants. Competition in the toy industry is primarily based on price,

quality and play value. In order to reside as an industry leader, Mattel must use their

leadership skills to take advantage of current market opportunities within their

corporation.

Within our fast paced world, come children moving further and further away from

toys at an early age than ever before. Although toys such as Barbie have shown

previous success, new toys must be established to keep the attention of the older

children. Toys have been replaced by more technological products like video and

computer games. The age gap has narrowed, and the window of time to sell certain

toys is shrinking. With this in mind, Mattel has the opportunity to re-innovate their

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current toys and add-on to particular product lines in order to maintain the attention of

their target market.

The creation of a more technological segment with the objective of catching the

attention of the older market will be one of Mattel’s strategies into capturing more

market segments. Hasbro, a large competitor of Mattel, has already aggressively

pursued the teen market. Unless Mattel does the same, they may see further

decreasing revenues in the future.

Question Five: How can Mattel reverse the decline in Barbie’s sales? Should Mattel give

up on Barbie and accept the fact that the brand will never regain its former sales

status? Explain.

Due to demographic, technological and social changes that Mattel is experiencing in the

modern era, Mattel, in my opinion cannot reverse the decline in Barbie’s sales.

Although there are still improvements to be made, Mattel’s weaknesses appear to be far

fewer than they were just a few years ago. New leadership appears to have righted the ship,

but Mattel has had a history of management struggles and uncertainty since the original co-

founders, the Handlers, left the company in the 1970’s. Many of the decisions that have led to

trouble can be attributed to this fact.

Specifically, Mattel has a handful of very recognizable brands. The largest, of course, is

Barbie, which put Mattel on the map at the beginning, and currently accounts for over half of

the firm’s revenue.

The most concerning piece of news for Mattel, however, must be the slipping popularity of

their core product, Barbie. As of 2002, Barbie dropped out of the top five selling dolls. Mattel

has been scrambling to recapture market share by expanding the Barbie line to items such as

computer software and girl’s clothing.

Mattel faces many cultural barriers which need to be overcome before market penetration

will be successful. By ignoring the proper research and adaptation of products, Mattel will be

losing out on a large market that could prove to be extremely prosperous. Without the proper

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research and understanding of different cultures, Mattel will not have the opportunity to make

a great impact on certain areas of the world.

The simplest strategy for Mattel is to maintain the course of action that it is currently taking.

Mattel is a strong company that has strong brand recognition due to Barbie. This might just

be a channel that the company is in, and they will pull out on top in the end. Mattel can

somehow do some research in local customs and cultures of its foreign markets and develop

Barbie as to confirm those customs and cultures. Having the right marketing message and

innovating Barbie product lines into becoming more interactive and educational, Barbie can

still create demand for its by-products. These products include interactive board and card

games, architecture of Barbie houses and gadgets, educational videos and games and

collectible items of Barbie dolls. With new applications on computers, iPod, and social

networks like facebook and twitter, Barbie will be able to manage its declining sales.

The only advantage for this strategy, both short and long term is that they will incur no

additional costs. It is very expensive to alter your production and to produce advertisements.

This way, they can use the resources they have now, take advantage of the learning curve of

the socio-technological environment, and try to compete on price.

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