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Case 6 Lecture Notes
Mattel Confronts Its Marketing Challenges
Case 6 Mattel Confronts Its Marketing Challenges*
Synopsis: As a global leader in toy manufacturing and marketing, Mattel faces a number of
potential threats to its ongoing operations. Like most firms that market products
for children, Mattel is ever mindful of its social and ethical obligations and the
target on its corporate back. This case summarizes many of the challenges that
Mattel has faced over the past decade, including tough competition, changing
consumer preferences and lifestyles, lawsuits, product liability issues, global
sourcing, and declining sales. Mattel’s social responsibility imperative is
discussed along with the company’s reactions to its challenges and its prospects
for the future.
Themes: Environmental threats, competition, social responsibility, marketing ethics,
product/branding strategy, intellectual property, global marketing, product
liability, global manufacturing/sourcing, marketing control
Case Summary
Over the past fifty years, Mattel has grown to be the world’s largest designer, manufacturer, and
marketer of toys. Well-known for brands such as Barbie, Fisher-Price, Disney, Hot Wheels,
Matchbox, Tyco, Cabbage Patch Kids, and board games, the company boasts nearly $5.9 billion
in annual revenue. Headquartered in El Segundo, California, with offices across the world,
Mattel markets its products in over 150 nations. However, despite its many successes, Mattel has
had its share of losses over its history. During the mid to late 1990s, Mattel lost millions to
declining sales and bad business acquisitions. In January 1997, Jill Barad took over as Mattel’s
CEO. Barad’s management-style was characterized as strict and her tenure at the helm proved
challenging for many employees. While Barad had been successful in building the Barbie brand
to $2 billion by the end of the 20th century, growth slowed in the early 2000s. Declining sales at
outlets such as Toys “R” Us marked the start of some difficulties for the retailer, responsibilities
for which Barad accepted and resigned in 2000. Robert Eckert replaced Barad as CEO. Aiming
to turn things around, Eckert sold unprofitable units and cut hundreds of jobs. In 2000, under
Eckert, Mattel was granted the highly sought-after licensing agreement for products related to the
Harry Potter series of books and movies. The company continued to flourish and build its
reputation, even earning the Corporate Responsibility Award from UNICEF in 2003. Mattel
released its first Annual Corporate Responsibility Report the following year. In 2011, Mattel was
recognized as one of Fortune magazine’s "100 Best Companies to Work For" for the fourth
consecutive year.
Today, Mattel faces many opportunities and threats, including the rate at which children are
growing up and leaving toys, the role of technology in consumer products, and purchasing power
and consumer needs in global markets. The continuing lifestyle shift of American youth is of
* Michael D. Hartline, Florida State University, prepared this teaching note for classroom
discussion rather than to illustrate effective or ineffective handling of an administrative situation.
Case 6 Lecture Notes
Mattel Confronts Its Marketing Challenges
particular concern. Today, many children, tweens, and teens prefer to spend time with music,
movies, or the Internet. Children and teens are also more active in extracurricular activities
(sports, music, volunteerism) than ever before. Consequently, these young consumers have less
time to spend with traditional toys. These shifts have been challenging for Mattel, as the sales
growth in its key brands has been relatively flat for some time. Barbie’s worldwide sales, in
particular, have been declining over the past several years due to changes in the youth market
and intense competition from the Bratz line. Mattel also faces continued issues with respect to
potentially unsafe products manufactured in other countries (particularly China). Several high-
profile product recalls have somewhat tarnished Mattel’s reputation for product safety.
Despite these concerns, Mattel has a lot to offer both children and investors. Barbie remains the
number one doll in the United States and worldwide. And Barbie.com, the number one website
for girls, routinely gets over 50 million visits per month. Furthermore, all of Mattel’s core brands
are instantly recognizable around the world. Hence, the ability to leverage one or all of these
brands is high. A few remaining issues include Mattel’s reliance on major retailers, such as
Walmart, Target, Toys “R” Us, and Amazon (which lessens Mattel’s pricing power), volatile oil
prices (oil is used to make plastics), and increasing competition on a global scale. However,
analysts believe Mattel has a great growth potential with technology-based toys, especially in
international markets, in spite of changing demographic and socioeconomic trends.
Teaching Overview
This case focuses on a company that has traditionally enjoyed success with its marketing efforts
rather than one that is struggling to gain market share. Mattel must develop a strategy to maintain
its position and enhance its already well-known and trusted brands. Most students will be
familiar with Mattel’s products. This case will interest students as it allows them to relate
personal experience and memories from childhood with the company that likely was behind
many of them. Information is provided about a variety of marketing topics, which allows you to
focus on the issues you deem most important. How has the numerous changes in marketing
strategy impacted Mattel’s bottom line, effectiveness, or culture? How do you determine whether
(and to what degree) to alter products before entering foreign markets? What are the benefits and
drawbacks of relying heavily on one customer or product line? How do ethics and social
responsibility affect marketing strategy? How should a company handle widely publicized
product recalls? How does legal activity affect marketing strategy? The following SWOT
analysis and questions will explore some of these possibilities.
SWOT Analysis
Internal Strengths
• World’s leader in the design, manufacturing, and marketing of toys
• Unrivaled brand recognition
Case 6 Lecture Notes
Mattel Confronts Its Marketing Challenges
Internal Weaknesses
• Managerial turnover and financial difficulties in most recent history
• Flat sales growth in key brands
External Opportunities
• Societal changes dictate changes in toy products
• More consumers are interested in doing business with socially responsible companies
• Brand awareness and loyalty is often developed at young age, which helps firms to
External Threats
• Fluctuation in consumer preferences—traditional toys are not as popular
• The tween market is especially challenging to reach
Problem/Decision Statement
How should Mattel conduct strategic planning to synchronize its corporate and marketing
strategy to changing target markets? What are the environmental factors that will influence these
decisions?
Strategy Alternatives
1. Focus on international markets, especially Europe and Japan. Significant investments in
product development and promotion would be needed to expand brand awareness in these
markets. Additionally, distribution decisions will be needed to ensure proper exposure of
the products to these markets.
Case 6 Lecture Notes
Mattel Confronts Its Marketing Challenges
need to invest in marketing research, product research, and development in order to serve
this expanding market.
Strategy Recommendations
From the SWOT analysis, it appears that the third strategic alternative to develop interactive toys
is not appropriate at this time. Mattel has a history of difficulty with technology related products.
Implementation Issues
Students should bring in responsibility at Mattel as a key component of implementation. The fact
that Mattel is an international toy manufacturer committed to ethics and social responsibility,
especially in the areas of international awareness and marketing to children, should give parents
Teaching Questions
1. Do manufacturers of products for children have special obligations to consumers and
society? If so, what are these responsibilities?
It is obvious that Mattel has a differential advantage in the area of responsibility to
consumers and society. Mattel is meeting these responsibilities and it is a source of
2. How effective has Mattel been at encouraging ethical and legal conduct by its
manufacturers? What changes and additions would you make to the company’s global
manufacturing principles?
Case 6 Lecture Notes
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3. To what extent is Mattel responsible for issues related to its production of toys in China?
How might Mattel have avoided these issues?
