Harvard Case - Turnaround at Mattel, 2017
"Turnaround at Mattel, 2017" Harvard business case study is written by Ted Berk. It deals with the challenges in the field of Finance. The case study is 22 page(s) long and it was first published on : Apr 15, 2019
At Fern Fort University, we recommend a multi-pronged strategy for Mattel's turnaround, focusing on: 1) Restructuring operations and streamlining costs, 2) Rejuvenating the core toy brands, 3) Expanding into new markets and product categories, and 4) Leveraging technology and data analytics for growth. This strategy aims to enhance profitability, improve cash flow, and ultimately increase shareholder value.
2. Background
Mattel, a leading toy manufacturer, faced a decline in sales and profitability in the mid-2010s. The company struggled with intense competition, changing consumer preferences, and the rise of digital entertainment. The case study focuses on Ynon Kreiz, the new CEO, who took over in 2017 and implemented a turnaround strategy.
3. Analysis of the Case Study
The case study highlights several key issues facing Mattel:
- Declining Sales and Profitability: Mattel's core brands like Barbie and Hot Wheels faced declining sales due to competition and changing consumer preferences.
- High Operating Costs: The company had high operating costs, including manufacturing, marketing, and distribution, which impacted profitability.
- Lack of Innovation: Mattel struggled to keep up with evolving trends and introduce innovative products that resonated with children and parents.
- Financial Performance: Mattel's financial performance reflected the declining sales and profitability, with a significant drop in revenue and net income.
To analyze the situation, we can use the Porter's Five Forces framework:
- Threat of New Entrants: The toy industry is relatively easy to enter with low barriers, leading to increased competition.
- Bargaining Power of Buyers: Buyers (retailers and consumers) have considerable power due to readily available alternatives and price sensitivity.
- Bargaining Power of Suppliers: Suppliers have moderate power, but Mattel can leverage its scale for better pricing.
- Threat of Substitutes: Digital entertainment and other forms of play pose a significant threat to traditional toys.
- Competitive Rivalry: The toy industry is highly competitive, with major players like Hasbro, Lego, and Disney vying for market share.
4. Recommendations
1. Restructuring Operations and Streamlining Costs:
- Cost Reduction: Implement activity-based costing to identify and eliminate unnecessary costs.
- Outsourcing: Explore outsourcing non-core functions like manufacturing and distribution to reduce overhead.
- Supply Chain Optimization: Streamline the supply chain to improve efficiency and reduce inventory costs.
- Organizational Restructuring: Reorganize departments and streamline processes to improve operational efficiency.
2. Rejuvenating Core Toy Brands:
- Product Innovation: Invest in R&D to develop innovative and engaging toys that appeal to modern children.
- Marketing and Branding: Rebrand core brands like Barbie and Hot Wheels to resonate with a new generation of consumers.
- Licensing and Partnerships: Explore licensing agreements and partnerships with popular entertainment brands to boost brand appeal.
3. Expanding into New Markets and Product Categories:
- Emerging Markets: Target emerging markets with high growth potential for toys.
- New Product Categories: Expand into new product categories like educational toys, STEM toys, and interactive play.
- Digital Products: Develop digital products like mobile games and apps to complement physical toys.
4. Leveraging Technology and Data Analytics for Growth:
- E-commerce: Enhance online presence and expand e-commerce capabilities to reach a wider audience.
- Data Analytics: Utilize data analytics to understand consumer preferences and optimize product development and marketing.
- Technology Integration: Integrate technology into toys to enhance the play experience and create new product opportunities.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: Mattel's core competencies lie in toy design, manufacturing, and branding. The recommendations leverage these strengths while addressing weaknesses.
- External Customers and Internal Clients: The recommendations focus on meeting the needs of both external customers (children and parents) and internal clients (employees).
- Competitors: The recommendations aim to differentiate Mattel from competitors by focusing on innovation, digitalization, and expanding into new markets.
- Attractiveness: The recommendations are expected to improve profitability and enhance shareholder value.
6. Conclusion
By implementing these recommendations, Mattel can address its challenges and achieve a successful turnaround. The company can regain its position as a leading toy manufacturer by focusing on innovation, cost optimization, and expanding into new markets.
7. Discussion
Alternatives:
- Mergers and Acquisitions: Mattel could consider acquiring smaller toy companies to expand its product portfolio and market share.
- Divesting Non-Core Assets: Mattel could divest non-core assets to streamline operations and focus on its core strengths.
Risks and Key Assumptions:
- Execution Risk: Implementing the recommendations requires effective execution and commitment from all stakeholders.
- Competition: The toy industry is highly competitive, and new competitors could emerge.
- Consumer Preferences: Consumer preferences are constantly evolving, and Mattel needs to adapt to these changes.
8. Next Steps
- Develop a detailed implementation plan: Outline the specific actions, timelines, and resources required for each recommendation.
- Communicate the strategy to stakeholders: Ensure that all stakeholders understand the rationale behind the turnaround strategy.
- Monitor progress and make adjustments: Regularly monitor the progress of the turnaround and make adjustments as needed.
By taking these steps, Mattel can successfully navigate the challenges of the toy industry and achieve a sustainable turnaround.
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