Mattel, Inc.: The Lead Paint Recall I.

STATEMENT OF THE PROBLEM: Mattels CEO seeks to appease for the firms failure to provide a quality product. The acquisition of Tyco had driven the need for more capacity to produce die-cast cars. The production equipment and steel molds used in the manufacturing plants were becoming obsolete. There was no room for further building on the site and no available land adjacent to the plant in Penang, Malaysia. OBJECTIVES: To improve the quality of the products being produce by Mattel. To be able to redirect the major activities and sub-activities with its corresponding budget as planned. To upgrade the necessary equipment needed in manufacturing certain products. To accommodate the increasing needs of the company in producing more products. To expand and build another site for solving the capacity problems. BACKGROUND: Mattel was founded in 1944 by Elliot and Ruth Handler. Mattels first products, simple picture frames and doll house furniture, met with mixed success. By partnering with another toy inventor, they developed a music box that could be massproduced, dramatically reducing its cost. Handlers signed a 52 week contract with ABC Television to sponsor a 15-minute segment of Walt Disneys Mickey Mouse Club at a cost of $500,000. Mattel made toy industry history again in 1959 with the introduction of Barbie. Mattel made its first public stock offering and by 1963 was listed on the New York Stock Exchange. The introduction of Hot Wheels miniature model cars in 1968 was another spectacular success making Mattel the worlds largest toy company by the end of the decade. In 1973, Mattel was caught issuing misleading financial reports forcing the Handlers out. Mattel regained profitability and started diversifying into other childrens products including publishing and entertainment under a new management team. The companys core product lines included Barbie fashion dolls, Hot Wheels die-cast vehicles, Fisher-Price preschool toys along with Disney toys and games like Scrabble.

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ALTERNATIVE COURSES OF ACTION (ACA): ACA1: Have rigorous control checks because once a bad product hits the market the damage is done reputation is everything. By providing the best, you put yourself a cut above the rest people expect to pay more for quality, and they tend to regard higher priced items as being of a higher standard. ACA2: Expansion investment in larger or additional factories, new machinery, further shops or offices. This will involve recruitment and training of new employees. Although there is considerable expense involved, this may be an appropriate strategy if demand is growing steadily and is expected to be sustained. ACA3: Outsourcing or subcontracting this means passing one or more aspect of the production process to another firm. For example an engineering firm could send components to another specialist firm for plating and concentrate itself on the other aspects of production. RECOMMENDATION:

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Since the Guangzhou location was aligned with Mattels overall strategy for die-cast cars, I would recommend the ACA2: Expansion strategy because it supported Mattel's diversified portfolio of operations, and it remained a cost-competitive option among the alternative courses of action. Matchbox production was centralized in the new plant and Hot Wheels and other die-cast products were transitioned in Bangkok and Shanghai. In addition, other outside vendors in the region grew up around the factory and were used as component suppliers and relief capacity when needed.