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Mattel, Inc. in China MBA 752 Business in Asia Final Project Group 5 David Gallo, Christina Maly, James Servi, & Brooke Walczak

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About Mattel, Inc. Founded in 1945 in Southern California Worlds largest toy company by revenue Most well known toy brands include Hot Wheels, Fisher Price, American Girl, and Barbie Creating the Future of Play

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Manufacturing at Mattel Started moving its manufacturing abroad over 50 years ago Wholly owned manufacturing facilities for core product lines Outsource the production of non-core lines Manufacturing facilities in China, Indonesia, Italy, Malaysia, Mexico, and Thailand

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Approach to Quality Toy test lab Test supplies and raw materials Independent auditor for factories and vendor facilities

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The Lead Paint Scandal Traced back to Lee Der Industrial Co. Strained relations with Chinese partners and officials Prevention

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Fair Play Global Scholarship Program 2007 Special Olympics in Shanghai 2008 Earthquake Relief in China

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Play Local General Administration of Quality, Supervision, Inspection, and Quarantine 65% of Mattels Employees in Asia/Pacific Improved labor policies for local workers Factory Audits

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Joint Ventures Creates Goodwill Provides an Inside Track Mutually Beneficial Li & Fung Partnership Opportunities for Growth

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Recommendations 1. Only contract with manufacturing plants that receive quality control audits 2. Hire a third-party auditing team responsible for inspections 3. Conduct QA/QC on every batch of toys worldwide 4. Rebuild partnership with the new Chinese government 5. Develop a plan to resolve similar crisis situations in the future

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1. Manufacturer Quality Control Audits Set standards high from the beginning Recognize that different countries have different standards of quality Show you mean business by only contracting with plants that have clean annual audits

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2. Outside Auditing Team Expand footprint of Mr. Sethi by creating an entire team to perform inspections Findings should go to executives first and then be made available to the public

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3. QA/QC All Toys Test every batch of toys not only in China, but at all Mattel factories Revised QA/QC model with accountable manager Additional costs but nothing compared to the cost of the lead paint crisis $40 million in response $71 million in lost revenues

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4. Partner with New Government Commendable with their efforts to repair relationships Need to continue with the newly formed Chinese government Present newly formed crisis response plan and build trust

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5. Crisis Response Plan Good can result from this negative situation Form a high profile team to write a crisis response plan Analyze the lead paint crisis What was done correctly and what needs to be improved Cultural aspects of the response Reaction to future catastrophes

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Implementation Plan Going Back to Basics PreventionDetectionCorrection

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Implementation #1: Manufacturer Quality Control Audits Adopting a policy requiring a clean annual quality control external audit Newly contracted manufacturing plants Existing manufacturing plants Lessons from the past Quality differences in China vs. USA Hedging lower costs for higher risks

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Implementation #2: Outside Auditing Team Hire third-party auditor to inspect Mattel and manufacturing plants Audits would be independent of Mattel and external auditor, PWC Adopting a policy for corporation with existing manufacturing plants Would report directly to the Board of Directors

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Implementation #3: QA/QC All Toys Review recent quality control issues at all plants Revise QA/QC protocols New manager policies

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Implementation #4: Partner with New Government Continued open communication channels with Chinese officials Present Crisis Response Plan to re-gain trust

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Implementation #5: Crisis Response Plan Creating the response plan team Completing a response plan for each country Mattel operates in Engaging with country officials prior to implementation

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Going Forward Issues identified Recommendations provided Implementation strategies

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References Barboza, David and Louise Story. 26 Jul 2007. Toymaking in China, Mattels Way. The New York Times. Web. 25 Nov 2012. http://www.nytimes.com/2007/07/26/business/26toy.html?pagewanted=all&_r=2& http://www.nytimes.com/2007/07/26/business/26toy.html?pagewanted=all&_r=2& Fackler, Martin. 11 Oct 2007. Safe Food for Japan. The New York Times. Web. 25 Nov 2012. http://www.nytimes.com/2007/10/11/business/worldbusiness/11safety.html http://www.nytimes.com/2007/10/11/business/worldbusiness/11safety.html Global Citizenship Report. Mattel, Inc. Web. 27 Oct 2009. Retrieved from http://corporate.mattel.com/about-us/cr-csreport.aspx http://corporate.mattel.com/about-us/cr-csreport.aspx Johnson, M. Eric and Tom Clock. 2002. Mattel, Inc: Vendor Operations in Asia. Trustees of Dartmouth College. Web. 25 Nov 2012. http://mba.tuck.dartmouth.edu/pdf/2002-1-0013.pdfhttp://mba.tuck.dartmouth.edu/pdf/2002-1-0013.pdf Leung, Annie and, Wai, Madison. 22 Jun 2011. Li and Fung Limited- Press Release. ]Retrieved from http://202.66.146.82/listco/hk/lifung/press/p110622.pdf http://202.66.146.82/listco/hk/lifung/press/p110622.pdf Mattel History. Mattel, Inc. Web. 25 Nov 2012. http://corporate.mattel.com/about- us/history/default.aspxhttp://corporate.mattel.com/about- us/history/default.aspx Murphy, Maxwell. 19 Jul 2011. Foreign-Sales Kick for Toys. The Wall Street Journal. Web. 25 Nov 2012. http://online.wsj.com/article/SB10001424052702304567604576454231132358052.htmlhttp://online.wsj.com/article/SB10001424052702304567604576454231132358052.html Thottam, Jyoti. 21 Sept 2007. Why Mattel Apologized to China. Time. Web. 25 Nov 2012. http://www.time.com/time/business/article/0,8599,1664428,00.html http://www.time.com/time/business/article/0,8599,1664428,00.html Wisner, Joel D. 2009. The Chinese-Made Toy Recalls at Mattel, Inc. University of Nevada, College of Business. http://faculty.unlv.edu/wisnerj/mba720_files/Mattel_case2.pdfhttp://faculty.unlv.edu/wisnerj/mba720_files/Mattel_case2.pdf Wong, Andy. 29 Nov 2012. Overview: Chinas 18 th National Congress NY Times. Retrieved from http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html http://topics.nytimes.com/top/news/international/countriesandterritories/china/index.html Zamiska, Nicholas and, N. C. 14 Aug 2007. Another big recall may hit mattel; latest incident from China involves cars, magnet toys; more pressure on factories. Wall Street Journal. Retrieved from http://search.proquest.com/docview/399045121?accountid=9355 http://search.proquest.com/docview/399045121?accountid=9355 Louise Story. 2 Aug 2007. Lead Paint Prompts Mattel to Recall 967,000 Toys. The New York Times. Web. http://www.nytimes.com/2007/08/02/business/02toy.htmlhttp://www.nytimes.com/2007/08/02/business/02toy.html General Administration of Quality Supervision, Inspection and Quarantine of P.R.C. Retrieved from http://english.aqsiq.gov.cn/ http://english.aqsiq.gov.cn/