Management Strategy and Decision Making
According to the model, countries engage in international activities because of the advantages that arise from the relationships. Unlike firms, countries are not in competition with each other but rather engage in mutually benefiting relationships . The US provides a market for the toys while China provides manufacturing countries with cheap labor for the production of these toys. This is referred to as comparative advantage. The cost of manufacturing in the United States is relatively higher compared to the cost of manufacturing in China, a factor that has led many companies such as Mattel to outsource their manufacturing to vendors in China. Country-specific resources such as the availability of labor and raw materials often influence which resources companies and firms can leverage to gain an international competitive advantage . China, on the other hand, exports its services to toy businesses in the United States because the toy industry is more important in the United States as compared to China. The diamond emphasizes the importance of both external and internal factors . As a leading toy manufacturing company globally, Mattel possesses a comparative advantage through its strong position in the toy industry market. Another of its diamonds is its innovativeness which has enabled the company to come up with a variety of toys for children. Although the Chinese vendors previously had this comparative advantage, the recalls are evidence that the numerous contracts have compromised the product safety of goods manufactured by the Chinese vendors. The common assumption that the Chinese vendors provide Mattel with an absolute advantage should be reconsidered due to the product safety concerns.
VRIO Framework
The VRIO framework aims at finding out whether a resource is imitable, rare, and valuable and whether the company is taking advantage of the resource . The Chinese vendors used by Mattel enabled the company to gain a cost advantage due to their low manufacturing costs. The quality concerns of these vendors such as Der Lee are proving invaluable following the compromise on quality. The Chinese vendors are causing Mattel a huge trouble due to the numerous recalls that the company was experiencing due to quality issues. As a result, Mattel stopped accepting toys from Der Lee. The services offered by the Chinese vendors were rare as the manufacturing process was considered cost effective as compared to the production process in other countries. Der Lee had been manufacturing toys for Mattel for close to 20 years and was making toys for Mattel exclusively. Mattel had invested heavily in patents which meant that most of its innovations were not imitable. Mattel has also made a name for itself through philanthropic activities to over 37 organizations across the world. The company has handled previous recalls efficiently. Mattel, however, needs a strategic plan to deal with the recall situation so as to restore the company's reputation. The company also needs to ensure that all the toys are audited before they are released into the market to avoid similar incidences in the future.
Leonard's Core Technical Dynamic Capability
Dynamic capability is used to enable companies to gain and retain competitive advantage. Product innovation is one of the many ways to obtain a competitive advantage. Another major contributor is time responsiveness and the ability to coordinate both internal and external competencies. Dynamic capabilities are influenced by external factors and a firm’s strategic management. A company’s business process, history and high performance practices are key to acquire a competitive advantage . Mattel has been a leading toy manufacturer in the United States whose ability to come up with the core, and non-core products have maintained the company's position at the top. The rolling strategy also ensures that the retailers have access to new toys or models every two weeks since the toy industry is largely based on variety. Mattel, however, needs to come up with more strict measures which will enable her to ensure product safety. Through the many recalls, Mattel has derived maximum experience and is in a position to handle the recall effectively. This will further be enhanced by the reputation that the business has built for itself over the years. Mattel has managed to achieve a monopoly in the toy industry by investing heavily in patents. Mattel spends over 261 million USD, which ensures that most of its designs are illegal to imitate. Mattel has placed itself in an advantageous position by entering into partnerships with producers of movies such as Disneyland, which allows them to make toys based on their characters, and as a result, Mattel is not likely to run out of new ideas. Business processes are one of the ways through which firms can acquire dynamic capabilities . Mattel has been relying on International Center for Corporate Accountability which failed to take notice of the excessive lead on the toys. The frequency of the audits is evidently inadequate to ensure product safety. The company should come up with more efficient ways to ensure quality control. Der Lee also failed to request for supplies from the expected suppliers and also failed to test the batch that was used to paint the toys. Mattel should come up with more fool proof methods to ensure the safety of its products.
References
Chapman, R. J. (2012). Simple Tools for Techniques and Enterprise Risk Management. John Wiley and Sons.
Smit, A. (2010). The competitive advantage of nations: is Porter’s Diamond Framework a new theory that explains the international competitiveness of countries? South African Business Review, 105-130.
Teece, D., & Gary, P. (2010). The Dynamic Capabilities of Firms. Oxford Journals, 537-556.
