Mattel Business Development Plan

Mattel: Business Development Plan

Pepperish Tedder

QSO-690

11/05/17

I. Aligning Resources to Market Opportunities

Mattel designs, produces, and sells a broad variety of toy products worldwide. The brand objectives focus on growing its share in the market, continuing to improve its operating perimeters, and creating long-term stockholder value (United Stated Securities and Exchange Commission, 2016). To achieve these objectives, Mattel embraces brand building, creativity, and innovation. Speed and personal accountability are also important to its operations (United Stated Securities and Exchange Commission, 2016). Management has strived to put Mattel back on track for growth and improved profitability. Franchise strength of its primary brands, and re-establishing toy leadership is the main goal of its organization (United Stated Securities and Exchange Commission, 2016). The brand is also strengthening its global supply chain, achieving distinctiveness and excellence in its commercial organization, rapidly expanding into emerging markets, and continuously driving cost improvement.

The company manufactures toy products in both company-owned facilities, and through third-party manufacturers, to provide greater flexibility in the manufacture and delivery of its products, and as part of a continuing effort to reduce manufacturing costs (United Stated Securities and Exchange Commission, 2016). Mattel’s principal manufacturing facilities are located in Canada, China, Indonesia, Malaysia, Mexico, and Thailand (United Stated Securities and Exchange Commission, 2016). Mattel produces its products in multiple facilities across multiple countries to help avoid issues in production in the event of political instability, civil dissatisfaction, economic instability, any changes in government policies or regulations, and other anticipated risks (United Stated Securities and Exchange Commission, 2016). The company believes that the existing production capacity company- owned facilities and its third-party facilities is sufficient to handle expected forecast volume, which is basis for production schedules as well (United Stated Securities and Exchange Commission, 2016). Forecasts are gathered by comparison of historical trends, results of market research, and current market information. Supply and demand are affected by consumer acceptance of product lines, strength of competing products, marketing strategies of retailers, changes in buying patterns of both retailers and consumers, and overall economic conditions (United Stated Securities and Exchange Commission, 2016). Any unexpected changes in these factors can result in shortage of product or excess inventory.

Competition in the toy industry is based primarily on quality, play value, and price. Mattel offers a diverse range of products from electronics, hand-held and other games, puzzles, educational toys, and media-driven products, to fashion-related toys. The international operations and the North America segment competes with several large toy companies, including Bandai, Hasbro, Jakks Pacific, Leap Frog, Lego, MGA Entertainment, Spin Master, Tomy, and VTech, many smaller toy companies, and manufacturers of video games and consumer electronics (United Stated Securities and Exchange Commission, 2016). Competition is strengthening due to trends towards shorter life cycles for individual toy products, and an increasing use of high technology. Mattel competes with companies that sell products outside the toy aisle, such as electronic consumer products and video games the phenomenon of “children getting older younger” resulting from children outgrowing toys at younger ages (United Stated Securities and Exchange Commission, 2016).  Competition is heavily influenced by the fact that a small number of retailers account for a large portion of all toy sales, distribute the shelf space from which toys are viewed, and have direct contact with parents and children through in-store purchases, coupons, and print advertisements (United Stated Securities and Exchange Commission, 2016). Such retailers also promote their own private-label toys, facilitate the sale of competitors’ toys, and allocate shelf -space for the products (United Stated Securities and Exchange Commission, 2016). Competition is also escalating due to the availability of online-only distributors, including Amazon.com, which can promote a wide variety of toys and represent a wide variety of toy manufacturers, and do this at lower costs (United Stated Securities and Exchange Commission, 2016).

Mattel regularly refreshes, redesigns, and extends existing toy product lines and develops forward new toy product lines, for all divisions, through its product design and development group (United Stated Securities and Exchange Commission, 2016). Independent toy designers and developers bring ideas and products to Mattel, and are generally paid a commission on the net selling price of products licensed to Mattel (United Stated Securities and Exchange Commission, 2016). These independent toy designers may also create different products for other toy companies.

During 2015, Mattel’s three largest customers (Wal-Mart at $1.0 billion, Toys “R” Us at $0.6 billion, and Target at $0.5 billion) accounted for 37% of worldwide consolidated net toy sales (United Stated Securities and Exchange Commission, 2016). Within international division countries, there is also a concentration of sales to certain customers that do not operate in the US, none of which exceed 10% of net sales (United Stated Securities and Exchange Commission, 2016). The customers, and the degree of concentration, vary depending upon the region or nation.

As the leading innovator in the toy industry, the brand approaches business with a forward-looking commitment to the environment (Bird, 2013). The brand views sustainability as an investment in the current and future generations. Their strategic approach to sustainability inspires the company to make continuous improvement through their three related platforms (Bird, 2013):

• Design it with the end in mind
• Make it with eco-efficiencies
• Live it with personal commitment

Mattel is committed to promoting the use of sustainably-sourced paper and wood fiber in their packaging and products (Mattel, 2009). They maintain packaging and product integrity and compliance with applicable laws and regulations, and avoids fiber from controversial sources, by ensuring that the fiber source origin is known and traceable, and that the fiber source is harvested in compliance with applicable laws and regulations, domestic and international (Mattel, 2009). Also, they assure that the fiber source is not harvested in violation of international guidelines and treaties, to protect the human rights of indigenous peoples, and is not originating from locations identified as containing “High Conservation Value Forest” (Mattel, 2009). The fiber source is not collected from recently converted natural forests, for the purposes of timber production plantations, or for other non-forest uses (Mattel, 2009). Mattel increased the use of wood/fiber that has been verified by a third-party forest certification, with preference for those with the highest standards, and strict audit processes (Mattel, 2009). They have adopted, and refined procedures designed to ensure that their sourcing practices are developed and implemented in accordance with these principles (Mattel, 2009). The brand has also established specific goals to measure their progress. Mattel supports multi-stakeholder efforts to protect global forest resources (Mattel, 2009). On- going progress is reported publicly by the company.

Cost increases, whether resulting from rising costs of materials, transportation, services, labor, or compliance with existing or future regulatory requirements, could impact the profit margins, created by Mattel, on the sale of its products (United Stated Securities and Exchange Commission, 2016). There can be no assurance that Mattel will be able to counteract any of these increased costs by adjusting the prices of its products, because of market conditions, timing of pricing decisions, and other factors (United Stated Securities and Exchange Commission, 2016). Increases in prices of products may not be sustainable and could result in lower sales. Mattel’s ability to meet customer demand depends partially on its ability to obtain timely and adequate delivery of materials, parts and component, from its suppliers, and internal manufacturing volume (United Stated Securities and Exchange Commission, 2016). Mattel has experienced shortages in the past, including shortages of raw materials and components (United Stated Securities and Exchange Commission, 2016). Major suppliers may stop manufacturing components at any time with little or no notice. Due to this concern, Mattel cannot guarantee the stability of its major suppliers. If Mattel is required to use alternative sources, it may be required to redesign some aspects of the affected products, which may involve delays and additional expense (United Stated Securities and Exchange Commission, 2016). Although Mattel works closely with suppliers to avoid these types of shortages, there can be no assurance that Mattel will not encounter these problems in the future. Mattel’s financial outcome resides in a few factors resulting in reduction or cessation in supplies, or in the delivery of finished products (Mattel, 2009). Decreased global economic conditions and failure to successfully implement new initiatives or meet product introduction schedules could also adversely affect business and financial results, and net of operations (United Stated Securities and Exchange Commission, 2016). Mattel has taken initiative to reduce its costs and increase its efficiency. The brand also strives to improve the execution of its core business, expand internationally, and extend the brand, all in effort to improve its supply chain (Mattel, 2009). These initiatives involve the investment of capital and contribution of complex decision-making (Mattel, 2009). Failure to successfully implement any of these initiatives, or launches, could have a significant adverse effect on Mattel’s business, financial condition, and result of operations.

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