Kimberly Tucker, Chris Salt, Ashley Solomon
Case 7: Mattel: Overcoming Marketing and Manufacturing Challenges
11/01/2010
Marketing Management 6800 Section 004
The Problem:
The problem surrounding Mattel Inc., one of the world’s largest toy companies, is their
mismanagement of international subcontractors and vendors and the production of certain
toys (the manufacturing process), as well as their inability to adapt their marketing strategy
or product to the constantly changing “demographic and socioeconomic trends” (Ferrell,
et. all 466). This is supported by Mattel’s legal battle with Carter Bryant and MGA, their
forced recall of certain toys that were manufactured overseas, and the increasing rate at
which traditional toys are becoming less appealing to today’s young audience. Essentially,
Mattel’s mismanagement and oversight lead to violations in terms of ethical and social
responsibilities and safety standards.
Issues Relevant to the Problem:
Mattel’s problem of mismanagement can be divided into several issues that need to be
considered: legal issues, international supply chain issues, and an increase in
technology-based toys. In regards to legal issues, Mattel has been involved in prolonged
litigation with Carter Bryant and MGA over a breach of an employment contract and
copyright infringement. Due to Mattel’s poor management of its overseas manufacturers,
in which unauthorized subcontractors and third-party suppliers were hired and unsafe
materials used, several toy products were recalled. Advances in technology and changes in
socioeconomic and demographic trends have created marketing, privacy, and product
development issues for Mattel.
Analysis of Issues:
Legal Issues:
It is evident that Mattel has used poor management practices, in which their HR and
Operations Departments have failed to ensure that employees adhere to confidentiality
clauses in their employment contracts. The creation of MGA’s line of Bratz dolls and the
legal battle that ensued are a direct reflection of this practice. Since 2004, Mattel, their
former employee Carter Bryant, and MGA Entertainment, Inc. have been “embroiled in a
bitter intellectual property battle…over rights to MGA’s popular Bratz dolls” (Ferrell, et.
all 459). Although Barbie remains one of Mattel’s core products, Barbie’s popularity has
suffered over the last several years due to new and innovative competition. Unlike Mattel,
this new competition, like MGA’s Bratz dolls, has been able to successfully keep up with
the changing lifestyles of today’s youth by creating dolls that feature “contemporary,
ethnic designs and skimpy clothes” (Ferrell, et. all 459). According to Mattel, Carter
Bryant designed the Bratz dolls while he was employed with Mattel. He then left Mattel
“to work at MGA, which began producing Bratz in 2001″ (Ferrell, et. all 459). Mattel then
decided to sue Carter Bryant and MGA for engaging in fraudulent activities. Mattel and a
federal jury agreed that Carter Bryant was in breach of his employment contract when he
developed the Bratz concept while working for Mattel. The jury also found MGA guilty of
copyright infringement, “intentional interference with contractual relations, aiding and
abetting breach of fiduciary duty, and aiding and abetting breach of the duty of loyalty”
(http://www.msnbc.msn.com/id/26410627/). They “deemed MGA and its CEO liable for
what it termed ‘intentional interference’ regarding Bryant’s contract with Mattel” (Ferrell,
et. all 459). In terms of copyright infringement, MGA built the popular Bratz brand “to
include more than 40 characters and expanded it with spin-offs such as Bratz Babyz, Bratz
Petz, Bratz Boyz and items such as helmets, backpacks and bedsheets”
(http://www.msnbc.msn.com/id/26410627/). Due to the popularity of these highly stylized
dolls among Mattel’s target audience of “tweens,” domestic sales of Barbie went “down 15
percent in 2007 and 12 percent in the first quarter of 2008, while international sales
increased 6 percent in 2008 as opposed to 12 percent the previous year”
(http://www.msnbc.msn.com/id/26410627/). Essentially, this lawsuit and the findings of
this lawsuit demonstrate Mattel’s oversight in the management of its employees and its
failure to notice the changing psychographic characteristics of its target market.
International Supply Chain Issues:
Because Mattel has a powerful presence on the international scene, they “must be aware
that the international environment often complicates business transactions” (Ferrell, et. all
463). However, it is clear that Mattel did not properly manage its global manufacturing
process. In 2007, Mattel was forced to recall “1.5 million Chinese-made toys” containing
lead paint and powerful magnets that posed a choking hazard for children
(http://www.nytimes.com/2007/08/28/business/worldbusiness/28iht-mattel.4.7289869.html
). These unsafe products are the result of overseas manufacturers not adhering to Mattel’s
high ethical and safety standards, as well as Mattel’s negligence in investigating its
international contractors and auditing the “entire supply chain, including subcontractors”
(Ferrell, et. all 463). In fact, Mattel became “overconfident about its ability to operate in
China without major problems” and failed to recognize that the toy recalls were “more of
systemic problem”
(http://www.nytimes.com/2007/08/28/business/worldbusiness/28iht-mattel.4.7289869.html
). These oversights left room for certain violations to occur. The violations and problems
began when subcontractors used unauthorized third-party suppliers. Early Light Industrial
Co., “a subcontractor for Mattel,…subcontracted the painting of parts of Cars toys to
another China-based vendor” (Ferrell, et. all 462). This vendor, Hong Li Da, then decided
to “source paint from a nonauthorized third-party supplier: a violation of Mattel’s
requirement to use paint supplied directly by Early Light” (Ferrell, et. all 462). In order to
save money and cut corners, this unauthorized supplier used paint that contained
impermissible levels of lead. As outsourcing and subcontracting increased, Mattel’s ability
to monitor the manufacturing process and the material used to produce toys became harder.
With the mounting number of subcontractors and suppliers in the supply chain, Mattel was
found to be in use of illegal and harmful products, forced to recall some of its toys in the
