Situation Analysis
Started in California as a garage workshop in 1945, producing photo frames, Mattel transformed itself into a leader in the toy and marketing industry, recognized for many major innovative and unique products. This transformation was a result of a strategic vision and better understanding of the opportunities and external forces by its founders, Ruth and Elliot Handler and Matt Matson. By 1965, the company became a USD$ 100 million businesses with continuous and sustainable growth over the past decades. In spite of the success of the operations, the company went through a number of challenges over the years.The launch of the Barbie brand under the leadership of Jill Barad illustrates the situation in which the company benefitted from a great innovative product, but at the same time went through administrative challenges, distrustful for the culture and long-term sustainability. The arrival of large market players and over 60% decrease in sales, accompanied by the poor performance of such outlets as Toys'R'Us and the costly acquisition of The Learning Company. The first decade of the XXI century outlines streaming and realigning process in the company, when the new CEO, Eckert sold unprofitable units and focused on profitability and shareholder return. With an additional focus on Corporate Social Responsibility (CSR), Mattel managed to revive the brand and strengthen its position as a CSR-driven company.
Assumptions and Missing Information
The Case is built around a period of time, which does not allow an in-depth period-by-period analysis of the situation. While it provides a good insight into the company's vision and operation, it does not address specific financial issues and challenges. With that in mind, several major assumptions have to be made: company's problems and financial issues come from both, reduction in sales and the lack of working capital and internal financing available for marketing and innovation strategies. It is assumed that the company’s Merger and Acquisition (M&A) strategy contributed to the financial challenges that the organization went through.
Another important consideration is the contribution of the CSR-driven strategy and The Mattel Children's Foundation specifically into the recovery of the brand and its current strong marketing position. Furthermore, strong focus on privacy policy and advertisement demonstrates not only the company's ability to recognize and segment their clients, but also outlines its focus on emergency and change management, critical to remain flexible and responsive to the rapidly changing market and client needs. That said, the company focused on direct and transparent communication with the parents to address potential issues related to the ethical advertisement, targeting children (Seiter, 1995). While there is a missing data to confirm the statement, it is believed that such ethical approach and transparency in organizational policy and targets allowed Mattel to build its brand loyalty, based on confidence and bond with the products as well as vision (Sadler, 2003).
Additionally, the case lacks specific data for the analysis of the target market and specific customer segmentation strategy. This limitation is significant in the analysis of the case and the information was obtained from other sources.
Root Problem
The company’s success and marketing strategy to a great extent are based on its major products, Barbie and the American Girl, Fisher-Price and Hot Wheels. The major challenges came along with the financial benefits of global supply chain. In spite of the efforts to ensure CSR compliance on the upstream, many suppliers failed to achieve the required level of quality and effectiveness in the production process, resulting in major product recalls. The major failures in bringing forward CSR strategy and quality drop, along with the reduction of Barbie popularity and the copyright issues, build on the competitive weakness of Mattel in an early XXI century.
The second issue that should be discussed with regards to the situation is related to the ability of the organization to recognize the root problem and address it internally and effectively before it causes the significant negative impact on the entire brand. In the "blaming game" with its Chinese manufacturers, Mattel lost the opportunity to minimize the effect of negative media on its core products, gaining the "Bad Product Award" by Consumers International in 2007.
Finally, the above issues operational downfalls within the company's supply chain build on the growing frustration of parents with the quality and potential risks associated with the use of the Mattel products. The company dealt with a number of lawsuits, filed by parents, which further harmed the brand.
Target Market and Segmentation Strategy
Mattel strength is can be summarized in the following categories: trusted the brand, constantly expanding product variety and line, product development under the challenge of an extremely short lifecycle, increased brand awareness through marketing and CSR strategies and the power of scale and scope,which allows constantly leading competitive position. With that in mind, the organization is able to segment and specifically target its clients with long-term planning. To ensure personalized and customized strategy, the company has adopted the two-fold high-level segmentation: domestic and international segment. In the domestic market, the company works with three customer groups through The American Girl, Fisher-Price, and The Boys&Girls brands. This customer segment is an average American family, with a strong focus on innovation and focus on the variety of recognizable products, which give continuity to the "game". The customer is extremely aware of the quality and demanding with regards to the ethical conduct of the business on all the levels of a supply chain. With that in mind, this customer segment has the following characteristics (McAlister, 2012):
Looking for the balance between quality and price;
Demanding to innovation and new launchings;
Is ready to pay premium price for quality and exclusivity;
Looking for convenience shopping;
Demanding to information provision and transparency.
The second customer segment is the international customer is very similar to the domestic segment with several exceptions. First of, The American Girl brand is not present internationally. Secondly, the company adopts some of its products to gain a better response from some of its major international markets, such as Latin America and Asia.
The above allows arguing that the company market segmentation is built around "global strategy and local thinking" approach, where Mattel attempts to sell the brand through offering iconic toys while continuously challenging the competition with new products. The target market is still the domestic segment, further segmented into the customer groups, based on their age and social status. It is critical for a definition of the Mattel customer segment that the company targets both,the child and the parent, as it recognizes that while the child builds on the "desire", the parent indicates the "need and limitation" of purchasing behavior.
New Product Alternatives
Based on the current analysis of the external environment and the latest trends in the toy industry, it is possible to argue that customers have become more demanding with regards to the continuity that toys can provide to the game. That said, traditional toy lines, such as Barbie and Hot Wheels are still on the top of the toy market pyramid. The interest in these products, however, has changed in a new way. W.B. (2013) argue that the toy market and the market leaders, such as Mattel experience the reorientation process, where children tend to experience their toys online, before actually growing the sufficient interest to the actual traditional toy. Sales of Hot Wheels, Barbie and Fisher-Price experienced stable growth over the past years, which indicate that the organization should continue developing these lines of product, strengthening their competitiveness, as it did with Bratz dolls. Given the growing interest in environmental issues and increased attention of parents to quality and "green" aspect of the toys, it is essential that Mattel, being a market leader, uses the opportunity to factor into this market. With the above in mind, it is recommended that the company looks at the viability of the following product alternatives: higher investment into virtual and online toy experience, related to traditional Barbie and Hot Wheels lines; develops a special line of wooden educational toys, addressing "green product" and intellectual toys thinking (W.B., 2013). This will not only make the company respond to the current trends, but will help to strengthen its CSR market position and brand recognition.
Recommendation on Course of Action and New Product Development
An important trend, identifying the changing profile of the customer in the contemporary business environment is the demographic shift and the change in the lifestyle of families individuals. Under the influence of growing mobility and changing the approach of women to work, modern women tend to have fewer children and at the older age. This means that at the time when these customers are interested in purchasing toys, they are more financially stable and can allocate the higher share of their earnings to a purchase of toys. Along with the growing virtualization of the toy industry, the companies should focus on the link between the film industry, online gaming, and traditional toy proposition. Mattel, therefore, should continue developing its online and virtual department, where it focuses on finalization of the clients through offering an embracing experience of gaming, information websites, contests and blog related to the products that they produce. Additionally, the market indicates some interest in more traditional educational toys, which could open up opportunities for market expansion through offering "green products", attractive to parents and interesting for children. Given the growing consumption power of parents, it is expected that parents are able and willing to pay the premium price for "green product" line.
References
Sadler Ph (2003). Strategic Management. 2nd Edition. London: Kogan Page Limited
Schwartz M.S. (2011). Corporate Social Responsibility: An Ethical Approach. Journal f Economic Studies. 283(3), 202-215.
W.B. (2013). The Toy Story. Child´s Play. The Economist [Online]. Retrieved 23 May 2016, http://www.economist.com/blogs/schumpeter/2013/09/toy-industry
Seiter E. (1995). Sold Separately. Children and Parents in Consumer Culture. New Brunswick: Rutgers University Press.
McAlister A. (2012). Collectible Toys as Marketing Tools. Understanding Preschool Children’s Responses to Foods Paired with Premiums. Journal of Public Policy & Marketing: Fall 2012, Vol. 31, No. 2, pp. 195-205
