Problems faced by Ms. Georgiadis’ as the CEO of Mattel
Ms. Georgiadis’ faced various problems during her tenure as the CEO of Mattel between February 2017 and April 2018. The first problem at the Company during the time resulted from the bankruptcy of key client, retailer Toys “R” Us that occurred in 2017, the same year she was appointed as the CEO. Losing the customer had caused the Company a steady drop in revenues, earnings, and stock prices. Besides, Mattel had already received several merge offers from competitors who were taking advantage of Mattel’s struggles financially. The industry was experiencing significant changes, including increased online content resulting from faster growth among children who were changing tastes and preferences. Movies, smartphones, and video games were increasingly becoming popular, thus affecting the popularity of toy games. There was also increased competition for store space, market share, and sales in the market resulting from technological influence and entry of more firms into the industry. Moreover, in physical retail stores, Mattel’s traditional sales methods were no longer effective and were being replaced with online sales channels like Amazon.com.
Ms. Georgiadis’ might have been a good leader but who was appointed during tough times and was never given enough time to improve the situation. She joined the Company at a time when its sales for most products were slumping. She was also faced with a takeover offer from Hasbro that the board declined. In addition, she only spent fourteen years as the CEO before she left. The time was not enough to handle problems that were facing the country since 2012.
Five Forces Analysis of the Toy Industry
Competitive rivalry
Increased rivalry among competitors in the industry makes players use desperate measures to outdo each other. One of the techniques involves price wars, which might lose among some players and even force other participants out of the market. The Toy industry comprises Companies with fierce rivalry. The intense competition seems to affect Mattel, Inc, as one of the players causing the Company reduced profitability in general.
Mattel, Inc. can overcome the deep rivalry among the players in the Toy and Games industry in various ways. One technique involves building a sustainable differentiation. By distinguishing its products from those of the competitors, Mattel, Inc. could attract consumers who are looking for different products other than the existing ones. Another measure may entail collaborations with competitors to expand the market rather than compete over the existing market. The Company may consult and share ideas on how to reach abroad markets or how to venture into the online content line of products that include video games that seem to attract children of the 21st century. Moreover, Mattel, Inc. can build its scale in order in order to compete favorably in the market.
Threat of new entry
New entrants in the Toys and Games industry are using technology to produce products that entice children of today’s generation. Besides innovation, the Companies are using techniques that lower their costs of production, provide new value to customers, and use lower pricing techniques to attract buyers. The strategies seem to be affecting Companies like Mattel, who use traditional methods of production and distribution, which are more expensive and inconvenient.
Mattel, Inc. can safeguard its business interests in several ways, including adopting new technology and introduce new products and services into the market. New products are effective in motivating the existing customers to buy from Mattel, Inc and also attract new buyers. The Company can also build its economy of scales, which will help to reduce its cost of production, leading to more profits. Low costs of production also promote sales at lower prices that will enable the Mattel, Inc. to compete favorably in price competitions. The organization can also invest in research to understand the market and produce goods that align with the customers’ tastes. Besides, it will help the organization to define standards at will, thus scaring new entrants.
Buyer power
Buyers may be intimidating and insist on buying high-quality products at lower prices. Companies in the industry who entertain such actions are likely to have experienced lower profitability or losses.
Mattel, Inc. can handle the issue of demanding buyers by increasing its promotional activities with the aim of creating a large customer base, thus reducing their bargaining power. The Company can also limit the bargaining power of buyers by innovating new products rapidly. New products also have the advantage of maintaining the existing clients by preventing them from shifting to competitors.
Supplier power
The Toy and Games industry depends on different suppliers who supply the players in the market. Powerful suppliers can negotiate terms that limit the profitability of companies such as Mattel, Inc. An industry dominated by suppliers with higher bargaining power is likely to experience low profitability. To manage the bargaining power of suppliers, Mattel, Inc. can use strategies such as diversifying the supply chain so that they can switch to a different supplier when one presents unfavorable terms. The Company can also work with multiple suppliers to ensure an efficient supply chain. The Company can also develop loyalty with one supplier by working with suppliers whose operations depend on Mattel, Inc.
Threat of substitution
Companies operating in a competitive industry risk the introduction of substitute products that may divert consumer’s attention. Mattel, Inc. can combat the threat of substitutes by increasing the cost of switching to other products, aiming to satisfy the needs of the customers, and by being service-oriented and not product-oriented.
Mattel, Inc. SWOT Analysis
Strengths
- Availability of skilled workforce through training programs.
- Successful history of mergers and acquisitions
- Establishment of a strong brand portfolio.
- Reliable suppliers.
- Huge capital base.
- A strong supplier chain web.
Weaknesses
- High attrition rate increases its spending on the training of new employees.
- Inability to challenge innovations brought by competitors.
- Existence of a gap in the types of products between Mattel and competitors.
- Low profitability as compared to the industry rates.
- Limited expansion due to an organizational structure that is only compatible with the current line of production.
Opportunities
- Availability of capital to invest.
- Availability of huge potential market from the online channels.
- Mattel’s core competencies can be viable in other business areas.
- Ability to invest in technology and innovation.
Threats
- Intense rivalry between Mattel and competitors can promote unfavorable competition leading to low profits or losses.
- Increased innovation and new technologies by competitors can help competitors produce at lower costs and sell at lower prices, thus affecting Mattel’s pricing.
- Changing tastes and preferences among consumers.
Mattel’s Competitive Advantage
Mattel’s competitive advantage in the Toy and Games industry is that it operates manufacturing plants that produce approximately half of the products they sell. As a result, they have a low cost of production and are able to manipulate prices in the market as compared its competitors who depend entirely on products from other manufacturers.
The best cost- provider is the generic strategy that best fits the competitive approach of Mattel. Mattel owns manufacturing facilities and is, therefore, able to control both the quality and prices of products presented to consumers. The strategy entails giving customers high-quality goods at a lower cost as compared to competitors.
Offensive strategy
The best offensive strategy for Mattel would be a flank attack. The strategy would be considered less risky, especially for a business like Mattel, who owns manufacturing facilities. It entails attacking competitor’s weak points or blind spots. In the strategy, firms follow the path of least resistance where the competitor is unable to defend. Most new entrants into the industry do not have manufacturing facilities and thus may find it challenging to compete should Mattel focus on maximizing the advantage.
Defensive strategy
The best defensive strategy for Mattel would be the mobile defense. The strategy requires that the business is flexible in order to adjust to a new environment. It entails making constant changes in the business or making changes in the existing product. The Toy and Games industry seems to be shifting to technological products. It is, therefore, important that Mattel uses a strategy that involves innovation. The Company should venture into the field of video games and smartphones to compete favorably with new entrants who introduce the products in the industry.