MATTEL INCORPORATED

MATTEL INCORPORATED

Mattel Incorporated in 2018:  Can Ynon Kriez Save the Toys?

Assignment Questions

1. What is your opinion of Ms. Georgiadis’s job performance as CEO of Mattel? What problems was she facing during her short tenure?

The performance of Ms. Georgiadis is slightly above average. She was allocated a tough task in correcting various challenges that were done by the previous CEO (Randall, 2018). In 2017, the majority of these challenges came about by Toys R US going bankrupt. Toys R US was a major client for the goods of Mattel. It contributed to a large portion of revenues for Mattel. She tried her best to ensure that the company succeed but lacked support. Ms. Georgiadis faced the challenge of over encouragement and supervision. This is a case of leadership development as Ms. Georgiadis was very inspired and motivated to become a leader of the firm. Leadership development demands a high level of motivation and self-discipline. Because the company carries out many international businesses, she took it upon herself to learn to handle challenging scenarios. Ms. Georgiadi focused majorly on the performance of the company rather than paying too much attention to his career ambitions. Ms. Georgiadi took in the advice she received from her mentor and supervisor to focus on performance and accomplishing the objectives of the organization. She embraced failures and used them as a learning experience to improve in the future (Randall, 2018). Failures are inevitable, and she was ready and prepared for it.

2. Conduct a Five Forces Analysis of the Toy Industry. What is your overall conclusion regarding the collective strength of the five competitive forces?

Porter’s Five Forces Model is a vital instrument for comprehending the forces which shape competitions within industries (Randall, 2018).  Also, it is using for assisting managers in adjusting their strategies in improving their potential profits and in suiting the competitive environments. The major Porter Five Forces Analysis is to comprehend the various forces which shape competitions within a sector. Companies gain a competitive advantage by understanding their effects in the industry. The technique can be utilized in helping the firms find a position in industry from where they can best compete favorably or overcome the rival companies and competitive forces. The framework of five-force offers an organized manner of thinking about the way powers of competition work at the industry and the way such effects identify the profitability of various industry segments and different sectors (Randall, 2018). The structure of the competitive forces also contains various fundamental assumptions about the competition sources as well as the strategy process nature.

The local toy sectors are a stable but low-growth industry that is mature and depends on fragmented distribution retail channels (Randall, 2018). With low barriers to entry, the toy industry is highly competitive. The traditional toy producers are facing increasing competition from the digital products and media as well as the digital gaming products which integrate the digital play with the traditional analog products. The competitors include marketers as well as small and large manufacturers with robust capabilities to recognize the change in the customers’ interests and availing new toys to the market to meet such interests. Due to the nature of the selected market segmentation, the rise of video games, and the introduction of electronics in toys, the industry may not follow precisely the industry cycle typical pattern.

The threat of new entries- due to the very high startup cost, there are weak threats of new entries. There is an industry where a company can gain a competitive edge from the economy if scale. Purchasing in bulks shall reduce costs, and the company can sell for lesser prices compared to its rivals. However, establishing a new firm shall take a long time, and the business will have a more extended period to earn a return on investment.

Competition from substitutes- Competition from substitutes is high. This is because there is a high level of innovation in the toy industry. There are regularly new games and toys that are being developed to meet the interests of the customers (Randall, 2018). This implies that a company can innovatively design modern toys and games and then establish a trend for these products. This gives the business a competitive edge. This is how the firm fights against close substitutes.

Buyer power: in this scenario, the purchasing power is high as firms in this industry are purchasing through economies of scale. Therefore, purchasing in bulks shall give the company competitive advantages since it shall reduce costs. This will also minimize the selling price for the customers.

Supplier bargaining power- There is a weak supplier power since there is multiple suppliers than buyers in this industry (Randall, 2018). This establishes weak purchasing power for the vendors.

Rivalry- there is intense and robust rivalry within this market. The competition stiff, and therefore the company must differentiate itself to remain competitive in such markets. Even though the competitors are few, they are big in size (Randall, 2018). They use their resources to outdo each other. This establishes the presence of stiff competition because they are all competing to be the best. The companies in the industry are all attempting to get new approaches to have competitive advantages.

3. Evaluate Mattel’s internal strengths and competitive deficiencies (SWOT Analysis). What are Mattel’s strengths, weaknesses, opportunities, and threats?

Type	Resource
Tangible	-Large installed facilities of production
Intangible	-Brand name and positive reputation of the company. -High level of innovations -Focus on high standards of quality -The creativity of product design and development -Knowledge of the raw materials or factors of production (resins)
Organizational	-Efficient chain of supply -Operational teams’ involvement in the turnaround -Management organization and leadership

Opportunities-Threats Putting and Consideration of Five Porter’s Analysis

Context	Trends	Positive impact	Negative impact
Political	-Promotion of safer toys for children by the national regulations. -Imposing high importation taxes in developing economies.	-Ban taxes on toy imports from other regions.	-Need for local production. -Cost increase
Economic	-Middle-class high growth in emerging countries. -The slowdown in the global economy.	– New customers with the wallet share for toys	– The decrement of the market in developed countries.
Socio-Cultural	-Digitally educated children -The pressure to use educational toys. -The pressure to use environment-friendly toys.	-Opportunity to sell Mattel games -Leverage on the culture of the company -Perfect for Mattel toys	-Competition from games -Costs increase
Technological	-New 3D printing technology -Availability of the Internet. -Usage of smartphone devices.	-The opportunity of creating a new space in the market. -Being closer to the customers	-Difficulty in protecting the intellectual property

SWOT Analysis

Strengths

Mattel has a very robust industry position due to the reliabilities of its vendors (Randall, 2018).  This dependence establishes fewer bottlenecks and fewer problems within the profitable and distribution processes. Also, Mattel has skilled employees and automated processes that have both enhanced processes and operations of the manufacturing.  Mattel has a wide range of business opportunities, such as technologies. This enables the company to collect revenue from various customers; therefore, it does not have to depend on a single source of revenue. This diversity in income sources enables Mattel to switch to a different revenue source when facing challenges with other companies. Labour is also an available factor in the industry since the area of operation has a considerable population. The area of the process also has a very outstanding modern infrastructure that promotes the growth of the economy. This infrastructure includes good sources of energy which are utilized by the manufacturing sector.

Weaknesses

In the core of their operations, lack of managerial supports is one of the weaknesses of the company. This has pulled each element of the corporation downward. In four years, the company has had four CEOs (Randall, 2018). The company also has challenges ranging from a poor cost structure that slows down business growth.

Opportunities

For Mattel, there are various opportunities. New leadership by their new CEO is one of the opportunities. The company can also introduce innovation in their research and development department. This is a major driver for the business. Innovations can assist the business to expand and establish more opportunities (Randall, 2018). Mattel Company is an example since there are new strategies in the firm that is likely to improve the growth of the business. The development of new technology enables financial stability in the market. The availability of land where the company can expand and develop its activities improves company growth.

Threats

There is high competition among companies in the toy and game sector. Lack of managerial direction and cooperation are some of the threats the company is facing. Recently, things have been going downwards after Toys R US was declared bankrupt. The leading buyer of Mattel is no longer in the industry.

4. What is Mattel’s competitive strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fit with the competitive approach that Mattel is taking?

The competitive plan of Mattel is that it is a low-cost provider in the industry (Randall, 2018). The company uses the marketing plan of economies of scale that gives the business a competitive edge. These economies of scale allow the company to purchase in bulks. Therefore, it can have fewer expenses. The company can sell at lower prices to its clients. The company places more focus on applying leading-edge technologies in the manners which supported the values of Mattel brand like the extension of the “intelligent brick” concept. The “intelligent brick” concepts opened up new ways to play and learn and initiatives like Mattel Studios that placed the moviemaking power in the children’s hands. The company uses product differentiation to produce new and unique products such as development in the essential and technical brands as well as the “power product” Programme. The company launches other new products, offering children an opportunity to expand creativity and imagination (Randall, 2018). Mattel uses product strategies to establish open-ended situations of play with fantasy or popular characters with elements of Mattel.

5. What is Mattel’s global strategy? Which of the international strategy discussed in Chapter 7 most closely align with the global approach that Mattel is taking?

Mattel has an international strategy because of its functioning in more than one hundred nations all over the world (Randall, 2018). This global strategy is interested in making the whole world interested in the products of Mattel as it expands to the foreign markets. Mattel enjoys wide-ranging international coverage because of its diverse portfolio. The company aims at accomplishing economies of scale while selecting new marketplaces.  Comprehensive marketplace research is carried out, and the markets are chosen in which the firm may acquire less expensive production factors and offer majorly standardized goods with restricted localization. While operating globally, Mattel favors cost-leadership over differentiation strategies. The organization has been broadly criticized for its plan to imitate the competitors. The firm majorly uses a joint venture approach out of the four conventional global market entry approaches. The corporation believes in establishing strategic relationships that have helped Mattel to emerge as a top-notch leading technological business (Randall, 2018). At many times, the diversified portfolio of Mattel assists when their hostile scenarios in any of the partnering countries.

6. Analyze Mattel’s financial statements. What is your assessment of the overall condition and strength of Mattel’s finances?

The financial ratios illustrate that Mattel has bright futures to expand and grow into the global marketplace. The firm needs to monitor its expenses to ensure it maximizes profits and minimizes costs.

Period Ending	2016	2017	2018	2019
Liquidity Ratio
Current Ratios = Current Assets/current liabilities	$ 1,000,000/$ 455,000 = 2.20	$1,200,000/$ 500,000= 2.40	$ 1, 300,000/$ 600,000=2.20	$1,500,000/$ 730,000= 2.05
Quick Ratios (cash + account receivable)/ (current liabilities)	($ 200,000 +$ 100,000)/ 455,000 = 0.6593	($ 225,000 +$ 230,000)/ 500,000 = 0.91	($ 250, 000 + $ 290,000)/ 600,000=0.90	($ 275,000 + 425,000)/730,000 = 0.9589
Cash Ratios (cash +cash equivalent)/ (current liabilities)	200,000/455,000 =0.4397	$ 225,000/$ 500,0000 =0.45	259,000/600,000 = 0.432	275,000/730,000 = 0.3767
Profitability Ratio
Gross Margins (Revenue- the cost of goods sold)/ revenue	50.00%	52.38%	53.48%	54.55%
Inventory turnover	3.33	3.23	2.87	2.93

Financially, Mattel is strong in all aspects as compared to other companies in the same industry (Randall, 2018). However, the company has adverse trends in net income and profits. In 2013, the net income and earnings of the company remained stagnant. The net sales of the business reduced by more than two billion in 2017. This is closely associated with the bankruptcy of Toys R Us. After the introduction of the product differentiation strategy, Mattel Company returned to profits in the next financial year. Therefore, the approach is described as “fitting.” The result of 2018 appeared to be clear improvements from the unsatisfactory performances of the previous years. The positive results were attributed to extensive internal changes and a marked increase in sales in areas such as the range of unique and quality products, on-time production, and control. The management of the company confirmed implementing the strategies, and those strategies are yielding positive results. There are also increasing in internet sales and mail orders through Mattel Direct as for the multi-channel retailing. Mattel Company has almost finished the fundamental change processes where it has been involved in the past few years. The significant modifications have assisted in generating a more market-oriented and efficient company. The financial success of the organization is primarily because of the determined efforts made in many areas. This has included more targeted marketing, more efficient production procedures, product mix, as well as a more focused product range and market-responsive (Randall, 2018). The company has succeeded in developing product programs that have demonstrated more eye-catching to the customers. It has become better at reacting faster to the demands of the clients.

7. What are the main strategic issues faced by Mattel and CEO Kreiz as of April 2018?

Mattel has a challenge of not increasing net returns and growth (Randall, 2018). Throughout his internal management, this is an activity for the new CEO must give optimal commands. This mater is associated with their major buyer going bankrupt and bad management culture. Mattel suffered because it lacked identity. Comprehending who they are, having a mission that fits its goals, discovering its core values, and developing the brand vision are sometimes regarded as being critical for the success of the business. The last ten years have been a time of re-identification and soul-searching for Mattel, even though it has built a large market share since its humble establishment. Mattel’s brand should be as strong as ever. Mattel Company should establish a vision that “we need to raise the children within each one of us.” This a timeless vision, and the company should remain valid and built future success upon it. For the entire toy industry, 2017 had been a tough year. Mattel Company was impacted despite the high points and much strength it had because many that included management and customers believed to have lost vision. The company should plan to abandon or reduce some initiatives outside the core business that included lifestyle products, wristwatches, and publishing. It should also minimize Mattel parks and losses in software. The strategy is to refocus on the Mattel brand through innovation, creativity, and learning as well as stimulation of the imagination. That is what the children and parents expected from them (Randall, 2018). The company should continue to expand within the area as they apply a growth strategy with lower risk and huge potential.

8. Review the offensive strategies discussed in Chapter 6. Of these offensive strategies, which, if any, would you recommend for Mattel? 9

In efforts to outdo other firms, Mattel should invest more in research and development by being first to sell next-generation products to the customers to regain its industry strength and gain a competitive edge against competitors (Randall, 2018). In Mattel, the whole manufacturing systems and operational controls should be vertically incorporated to helps the firm to excel in its chain of supply. Compromising of quality should be highly forbidden, and the company should ensure that its processes are more cost-effective. Along with being customer-centric, the operations should rotate around systems of low-cost manufacturing. Therefore, the organization should take revolutionary decisions to change its organizational structure to a more innovation-oriented company from being an efficiency-focused corporation. The philosophy of once risk aversion should be substituted by an organizational structure that fosters continual experimentations and innovation (Randall, 2018). Mattel should instill a corporate culture of creating internal proficiency.

9. Review the defensive strategies discussed in Chapter 6. Which, if any, would you recommend for Mattel?

Signaling the strong retaliation probability is the defensive strategy. The company should use a new line of products (Randall, 2018). Mattel should fulfill its social responsibilities, create environmental, economic, and social values, and deliver innovative goods and services as an international corporate citizen. Management of sustainability at Mattel should aim to establish integrated values. The company should create economic benefits by maximization of shareholder values and profits. The company should also take more robust responsibilities as an international citizen to establish social values.  Along the value chain that based on the core values, Mattel should pursue and generate benefits in the areas of environment, economy, and society as it delivers innovative products and services(Randall, 2018). The company should monitor the non-financial and financial effects, which it exerts on the community throughout such processes to maximize its positive impact while reducing any adverse consequences.

10. What recommendations would you make to Mattel’s new CEO, Ynon Kreiz?

The new CEO should bring various changes soon, like the establishment of Mattel sustainable materials center to find a viable material to substitute plastics in the products of the Mattel Company (Randall, 2018).  The management should continuously explore the opportunities offered by the new technologies to create creative experiences and fun for the children. The company should establish a department of Creative Play Lab that focuses on the inventing the future play. The department should achieve its roles by viewing the various ways and trends in which families, children, and parents interact and play with play materials to establish the tomorrow’s play experiences and unleash their potentials in creativity. At the Human Media Lab, the management should believe that technology can take experiential learning to an entirely new level. Soon, the company should create a technique that works to integrate and blend the physical world and the digital world right before the eyes of the children. Mattel should not be just an organization. The products and services scope Mattel should offer its customers mind-boggling experience. R & D team and engineers of the company should always develop the next Mattel product generation (Randall, 2018). Pushing to be the market leader in product technology and sales, innovations should always be at the core of Mattel.

 

 

 

 

 

 

 

 

 

 

 

 

 

Reference

Randall D. Harris Mattel (2018): Incorporated in 2018: Can Ynon Kreiz Save the Toys? Texas A&M University-Corpus Christi