Central Issue:
The question to be answered is how Mattel should respond from a strategic standpoint in light of a product recall that involved unsafe toys that were made in China. While the use of offshoring of labor is pervasive in the industry that Mattel works in, there are indeed other options and having “tainted” toys and other products that are used primarily, if not solely, by children is a huge problem for Mattel from a reputation and liability standpoint.
Recommended Course of Action:
Mattel is in a precarious position in that having the toys made in the United States or in other fully developed countries would entirely too expensive and would drive up the costs of operations significantly. At the same time, Mattel cannot continue to rely on vendors and manufacturers of their toys that deliver unsafe products that are intended for and/or that end up in the hands of children. As noted by the case study, Mattel has other options when it comes to having their toys manufactured. They must find a vendor to make their toys that is cost-efficient and keeps Mattel competitive. At the same time, their vendors must not be delivering toys to American and other markets that harm or even kill the children that are exposed to them. Overall, Mattel must deliver a product that is both safe yet cost-effective so that Mattel does not lose business for either price-related or safety-related reasons. Mattel encountered the issues above despite the fact that they exerted command, control and ownership over its factors in Asia. One would expect this to stem and prevent the problem but this did not happen. Mattel needs to use its command and control to demand and require quality and safety standards that are fully compliant with product safety laws and that meet the concerns of the buying public and regulatory bodies in the United States and other markets that Mattel sells products within.
Basis for Recommendation:
The basis for the recommendation above is quite simple. Mattel must deliver a product that is accepted by the buying public in terms of price point and they are in a unique position to do all of this given the amount of control that they have over the manufacturing plants that exist in China. At the same time, this has not been happening but they cannot deliver a product that is unsafe for the children and/or parents that will be using and handling the product. There is a chance that nationalism and off-shoring of jobs will become a sticking point for Mattel. However, having the toys and other products that Mattel makes manufactured and distributed solely in the United States is basically a non-starter from a labor cost and competitiveness standpoint. Even so, Mattel has options at their disposal to accomplish the price and safety measures that they need to focus on given the totality of the circumstances.
Reasonable Alternatives:
1. One option that Mattel has at their disposal is to relocated manufacturing to the United States or another country that is more developed and established when it comes to product safety and manufacturing in general. Between agencies like the Occupational Safety and Hazard Administration (OSHA) and other standards that must be met, it would be more of a sure bet that the goods made in American factories would be safe. However, this is rejected because it is not necessary to do this since Mattel controls the factories in Asia and thus has the ability to fix the problem without moving the operations to other countries. Beyond that, relocation of manufacturing locations would be cost prohibitive in many ways no matter where the alternative countries in question.
2. Another reasonable alternative is to use factories and so forth that are
within the Asian sphere. This would get them out of China and would
perhaps remove some of the stigma and other public relations issues
about the goods. However, this alternative is rejected since the real issue
at hand is not addressed and dealt with. Beyond that, Mattel’s control over
the factors in China makes it entirely possible to fix the issue without
relocation of any factories.
3. Another possibility is to use factories in China (or anywhere else) that are not completely commanded and controlled by Mattel. While this would displace and distance Mattel from a liability standpoint, it would lessen the command control that Mattel has. While one might assume that this would save Mattel in the arena of public opinion, this is simply not the case, and for a couple of reasons. First, the primary users of the product in question are kids. If children are in danger due to the lack of safety of the products, the customers will view Mattel’s liability/legal distance as a non-issue because, ultimately, Mattel is the one that is contracting with the third party and thus are allowing inferior and unsafe products to reach the hands of kids. While it related more to working conditions and less about safety of consumers/kids, Apple Corporation learned this lesson the hard way when the amount of workplace injuries and even worker suicides at a non-Apple plant that Apple contracted with came to light (Cooper, 2012). Incidentally, that plant was in China. In short, the option of using third parties in China is not an option that could or should be used as it lessens Mattel’s ability to control and fix the situation and the fact that a third party would be the ones making any mistakes would not lessen Mattel’s exposure to condemnation and legal action in the court of public opinion, not to mention the real courts. Mattel has the ability to exert control over the factories and fix the problems that exist and they need to do so immediately.
Significant Factors:
Costs
Safety
Corporate Social Responsibility
Cost of Labor/Importation
Corporate Reputation
Quality control in foreign countries
Discussion:
Costs: Over the years, Mattel has shifted their operations here and there. As factories have been opened and closed, it is clear that the primary factor when it comes to the movement and operations of this factor has been cost. While this is certainly something that Mattel must focus on to remain competitive within their industry, they have clearly been focusing too much on cost as compared to keeping the products safe for the children, in the United States or not, that would be handling and using them. Even so, the use of Asian factories (in China and other countries) is basically a must as doing business operations in the United States is cost-prohibitive due to the wage and benefit laws that exist there as compared to other countries.
Safety: Of course, the focal point of this case study has been product recalls that are related to products that are unsafe for kids and the associated condemnation and hits to the corporate reputation that Mattel has endured. Of course, Mattel really has no one to blame but themselves and the optics of this entire situation is fairly bad. The entire situation reeks of a company that has put cost above all else. Even though they presumably had the command and control capabilities to put out toys that are safe for children to use and handle and even though they directly control the factories that are pumping out these toys, the toys are still unsafe. Due to that, it is imperative that Mattel crack down on the safety and other issues that exist at the factors. They have every ability to do so and if they do not, they stand to lose their dominant status as a toy maker and marketer in the United States and other parts of the world.
Corporate Social Responsibility: There has been a paradigm shift in the United States over the last generate or two. Traditionally, there has been a lot of focus on keeping costs down and maximizing profit. However, there has also been a rise of the idea that what is lawful and what is ethical are not always the same thing and that complying with the standards relating to both is a must in today’s marketplace. While many still actively dismiss the idea of jumping through public relations hoops just for the sake of pacifying certain parts of the public, this would not apply to Mattel for two reasons. First, they control the factories in question, even if they are not domestic, and thus it cannot be ignored or passed over that they are pumping out these toys. Second, even if that were not true, Mattel would have to have some sort of structure and organization that prevents these tainted toys from reaching the hands of children. As cited with the Apple example earlier, the fact that Mattel could use third parties to distance themselves from a liability standpoint, the company would still be made a pariah because they allowed it to happen nonetheless and they would be viewed (rightfully) as having the means to avoid such a happenstance. The point is that corporate social responsibility as it exists in the United States demands that Mattel do whatever it takes to ensure that the toys that make it to United States and other markets are safe irrespective of the corporate structure and culture that leads to the same and the latter of those two will be roundly condemned if the products are unsafe. Mattel must represent themselves as a company that absolutely cares about the safety of the children using their products and their ensuing deeds much match the words and values that they portray to the buying public and the media. If there is discord when it comes to those, the buying public and media will pounce on that and this could be extremely damaging to Mattel from a revenue and competitive standpoint (Carmela, 2016).
Cost of Labor/Importation: As noted throughout this case study, the cost of doing the labor and manufacturing in the United States or any other fully developed country would be cost prohibitive. On the other hand, the continued cost savings by having manufacturing done in other countries will not mean much if the quality of the product is deficient and/or customers abandon the product due to safety concerns.
Corporate Reputation: Dovetailing with the last point made, the fact that Mattel is importing unsafe toys, by itself, could be extremely damaging to the companies fortune and future. Beyond that, the factories are in the control of Mattel but are not on American soil. This creates a backlash that is both nationalistic and angry in nature. Indeed, Mattel should worry about cost but they also need to worry about quality and safety. It cannot be an all or nothing proposition. Cost cannot be ignored but safety cannot be disregarded either.
Quality control in foreign countries: The “way of doing things” and culture that exists in the foreign factories needs to go through a paradigm shift. Costs should remain as low as possible but everything needs to be looked at so as to make sure that quality and safety are also held in high regard. Raw supplies, the parts that make up the toys, the processes and machines used to make the toys and the people working all of the above all need to be inspected from a process, quality and output standpoint. Once the new standards and ways of doing things are set, those methods and policies need to be enforced.
References
Carmela, S. (2016). Corporate Social Responsibility: Definition and Examples. Businessnewsdaily.com. Retrieved 25 August 2016, from http://www.businessnewsdaily.com/4679-corporate-social-responsibility.html
Cooper, R. (2012). Inside Apple's Chinese 'sweatshop' factory where workers are paid just £1.12 per hour to produce iPhones and iPads for the West. Mail Online. Retrieved 25 August 2016, from http://www.dailymail.co.uk/news/article-2103798/Revealed-Inside-Apples-Chinese-sweatshop-factory-workers-paid-just-1-12-hour.html
HBR. (2016). Mattel's Strategy after its Recall of Products Made in China. Hbr.org. Retrieved 25 August 2016, from https://hbr.org/product/mattel-s-strategy-after-its-recall-of-products-made-in-china/HKU810-PDF-ENG
