Harvard Case - Mattel's China Experience: A Crisis in Toyland
"Mattel's China Experience: A Crisis in Toyland" Harvard business case study is written by Mary B. Teagarden. It deals with the challenges in the field of Operations Management. The case study is 17 page(s) long and it was first published on : Feb 2, 2009
At Fern Fort University, we recommend that Mattel implement a comprehensive strategic plan to address the challenges it faces in China, focusing on a multi-pronged approach that prioritizes supply chain resilience, product innovation, customer engagement, and operational efficiency. This plan should involve a combination of organizational change, process improvement, technology adoption, and strategic partnerships.
2. Background
Mattel, a global leader in the toy industry, faced significant challenges in China due to a combination of factors:
- Rapidly growing market: The Chinese toy market was expanding rapidly, attracting both domestic and international players.
- Competition: Mattel faced fierce competition from local Chinese toy companies, who were often more agile and cost-effective.
- Supply chain disruptions: The 2008 global financial crisis and subsequent natural disasters disrupted Mattel's supply chain, leading to production delays and increased costs.
- Quality control issues: Mattel faced criticism for quality control issues in its Chinese manufacturing facilities, damaging its reputation and eroding consumer trust.
- Changing consumer preferences: Chinese consumers were increasingly demanding higher quality, innovative, and educational toys, challenging Mattel's traditional product offerings.
The case study focuses on Mattel's struggle to navigate these challenges and regain its market share in China.
3. Analysis of the Case Study
Strategic Framework: The case study can be analyzed using Porter's Five Forces framework:
- Threat of new entrants: High, due to the rapid growth of the Chinese toy market and the ease of entry for local companies.
- Bargaining power of buyers: Moderate, as consumers have a wide range of choices and are increasingly price-sensitive.
- Threat of substitutes: High, as alternative forms of entertainment, such as video games and online activities, are gaining popularity.
- Bargaining power of suppliers: Moderate, as Mattel relies on a network of suppliers in China, but it also has some leverage due to its size and global reach.
- Competitive rivalry: High, as Mattel faces intense competition from both domestic and international players.
Operational Challenges:
- Supply chain management: Mattel's reliance on a single supplier in China created a vulnerability to disruptions.
- Inventory control: Mattel struggled to manage inventory levels effectively, leading to stockouts and excess inventory.
- Production processes: Mattel's manufacturing processes were not as efficient as those of its competitors, resulting in higher costs and longer lead times.
- Quality control: Mattel faced challenges in maintaining consistent quality standards across its Chinese manufacturing facilities.
- Information systems: Mattel lacked a robust information system to track and manage its operations in China.
4. Recommendations
1. Supply Chain Resilience:
- Diversify sourcing: Mattel should diversify its sourcing base by establishing partnerships with multiple suppliers in China and other countries.
- Implement a robust risk management system: This should include identifying potential risks, developing contingency plans, and monitoring supply chain performance.
- Invest in technology: Implement advanced supply chain management software to improve visibility, forecasting, and inventory control.
- Develop strong supplier relationships: Build trust and collaboration with suppliers through long-term contracts, performance-based incentives, and regular communication.
2. Product Innovation and Customer Engagement:
- Develop products tailored to Chinese consumers: Conduct thorough market research to understand the preferences and needs of Chinese consumers.
- Invest in R&D: Develop innovative and educational toys that meet the evolving demands of the Chinese market.
- Leverage digital platforms: Utilize e-commerce, social media, and mobile apps to engage with Chinese consumers and build brand loyalty.
- Focus on customer experience: Provide excellent customer service, offer personalized recommendations, and create engaging brand experiences.
3. Operational Efficiency:
- Optimize production processes: Implement lean manufacturing principles, Six Sigma methodologies, and other process improvement techniques to reduce waste, improve efficiency, and enhance quality.
- Adopt advanced manufacturing technologies: Explore the use of automation, robotics, and other technologies to improve productivity and reduce labor costs.
- Invest in IT infrastructure: Implement an enterprise resource planning (ERP) system to integrate all aspects of the business, improve data visibility, and facilitate decision-making.
- Develop a strong talent pool: Recruit and retain skilled employees with expertise in manufacturing, supply chain management, and technology.
4. Organizational Change:
- Empower local teams: Give Chinese employees more autonomy and decision-making authority to respond quickly to local market needs.
- Foster a culture of innovation: Encourage creativity and experimentation among employees to develop new products and solutions.
- Promote collaboration and communication: Break down silos between departments and foster cross-functional collaboration to improve efficiency and effectiveness.
- Develop a strong leadership team: Identify and develop leaders who are passionate about the Chinese market and have the skills and experience to drive change.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Mattel's situation in China, taking into account:
- Core competencies: Mattel's strengths in product design, brand recognition, and global reach can be leveraged to succeed in China.
- External customers: Understanding the needs and preferences of Chinese consumers is crucial for product development and marketing strategies.
- Competitors: Mattel needs to differentiate itself from local competitors by offering superior quality, innovation, and customer service.
- Attractiveness: The Chinese toy market offers significant growth potential, making it an attractive market for Mattel.
6. Conclusion
By implementing these recommendations, Mattel can overcome its challenges in China and regain its market share. A focus on supply chain resilience, product innovation, customer engagement, and operational efficiency will be key to success.
7. Discussion
Alternatives:
- Exit the Chinese market: This would be a drastic measure and would result in significant losses for Mattel.
- Continue with the current strategy: This would likely lead to continued decline in market share and profitability.
Risks:
- Political instability: China's political landscape can be unpredictable, which could pose risks to Mattel's operations.
- Economic slowdown: A slowdown in the Chinese economy could impact consumer spending on toys.
- Competition: Mattel faces intense competition from both local and international players, which could make it difficult to gain market share.
Key Assumptions:
- Mattel is committed to the Chinese market and is willing to invest in the necessary resources to succeed.
- Chinese consumers are willing to pay a premium for high-quality, innovative toys.
- Mattel can successfully implement its recommended strategies and overcome the challenges it faces.
8. Next Steps
Timeline:
- Year 1: Implement supply chain diversification and risk management strategies.
- Year 2: Invest in product innovation and customer engagement initiatives.
- Year 3: Optimize production processes and adopt advanced manufacturing technologies.
- Year 4: Implement an ERP system and build a strong talent pool.
Key Milestones:
- Establish partnerships with new suppliers in China and other countries.
- Launch new products tailored to Chinese consumers.
- Develop a comprehensive digital marketing strategy.
- Implement lean manufacturing and Six Sigma methodologies.
- Recruit and train skilled employees in China.
By taking these steps, Mattel can transform its China experience from a crisis to a success story, positioning itself for long-term growth and profitability in this dynamic and lucrative market.
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Case Description
Mattel, an industry leader with a sterling reputation in corporate responsibility, was being pulled into a recall vortex that had seen affected a variety of products produced in and exported from China in 2007, including dog food, toothpaste, tires, and seafood. Mattel CEO Robert Eckert was faced with a crisis. By the time the dust settled, Mattel had recalled 19 million toys made in China. Mattel's stock price declined as they took a $40 million charge for recalls, and their costs increased because of added regulation in China and the United States. Customers threatened to boycott Mattel and all toys made in China. Bob Eckert had been called to testify before both U.S. House and Senate hearings on toy safety. Chinese government officials saw Mattel's recall public relations approach as blaming China's manufacturers for what was primarily a Mattel design problem. This unfavorable publicity drew attention from Chinese regulators, and resulted in Mattel making a highly publicized public apology to China and China's quality watchdog chief, Li Changjiang. When it looked like nothing could get worse for Mattel, Congress sent a letter to Mattel stating that Robert Eckert was not honoring the public commitment he had made to consumers during the initial recall incident. This tsunami of negative events left Mattel executives perplexed and reeling: How could a company so highly regarded as a toy industry model of corporate citizenship find itself mired in such a controversy? What next steps should they take to recover from the crisis? How should they protect their brand? What should they do to restore their reputation? Was this crisis a roadblock to achieving their vision of being the world's premier toy brand "tomorrow"?
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