Reference no: EM133034979

The Mattel Toy Company is a $5 Billion American multinational toy manufacturing company. Toys 'r Us is one of its largest customers. It has already begun preparing contingency plans by retaining your firm to build a 'post Toys 'r Us' strategy.  

You plan to use the:

• Porter's Five Forces to identify trends early on so they can identify and exploit the emerging opportunity to build a sustainable competitive advantage in Toys & Games industry; 
• A SWOT Analysis comparison between The Toy Industry and Mattel Toys
• Rumelt's Strategy Kernel to prioritize coherent actions going forward. 

All Prompts are related to Mattel Toy Company, (not Toy's 'R' Us) analysis to formulate new strategy for Mattel Toy Company to moving forward without Toy R us.

Prompt #2

Mattel Toys Porter's Five Forces Analysis

Formulate a recommendation for each of these with examples:

Threats of New Entrants
New entrants in Toys & Games bring innovation, new ways of doing things and put pressure on Mattel through lower pricing strategy, reducing costs, and providing new value propositions to the customers. What is your recommendation on how Mattel can manage all these challenges and build effective barriers to safeguard its competitive edge?

Bargaining Power of Suppliers
Almost all the companies in the Toys & Games industry buy their raw material from numerous suppliers. Suppliers in dominant positions can decrease the margins Mattel can earn in the market. Powerful suppliers in the Consumer Goods sector use their negotiating power to extract higher prices from the firms in the Toys & Games field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Toys & Games.  What is your recommendation on how Mattel can improve its bargaining power with suppliers?

Bargaining Power of Buyers
Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price possible. This puts pressure on Mattel's profitability in the long run. The smaller and more powerful the customer base is of Mattel, the higher the bargaining power of the customers and the higher their ability to seek increasing discounts and offers.  How can Mattel tackle the Bargaining Power of Buyers?

Threats of Substitute Products or Services
When a new product or service meets similar customer needs in different ways, industry profitability suffers. For example, services like Dropbox and Google Drive are substitutes for storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from the present offerings of the industry.  How can Mattel tackle the Threat of Substitute Products / Services?

Rivalry among the Existing Competitors
If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Mattel operates in a very competitive market. This competition can take a toll on the overall long-term profitability of the organization.  How should Mattel deal with the Intense Rivalry among the Existing Competitors in the Toys & Games industry?

Prompt #3

Below are 2 SWOT Analyses:  The Toy Industry and for Mattel Toys. 

Compare the two for similarities and differences in Strengths and Weaknesses. 

• Identify a specific Industry Opportunity that aligns with a Company Strength.
• What would be your Diagnosis, Guiding Policy, and Coherent Action recommendations?
• Identify a specific Industry Threat that aligns with a Company's Weakness.
• What would be your Diagnosis, Guiding Policy, and Coherent Action recommendations?

Support your recommendations with material from the two SWOT analyses.

Toy Industry SWOT Analysis

Strengths

According to the Toy Industry Journal, the global toy industry has proven itself "remarkably resilient" in recent years. The sector rapidly recovered from the 2008-2009 recession and has grown to an almost $100 billion industry worldwide. In the plus column are these notable industry strengths:

• A diverse base of toy producers and brands from major companies to small and vibrant startups ensures broad choices for consumers.
• Diverse points of sale include brick-and-mortar stores as well as online retailers.
• A large capacity for the development of new products and innovations includes engineering and design firms, prototyping operations, and full-scale manufacturing facilities.
• Toy manufacturers and retailers have access to robust and cost-effective marketing channels at local, regional and global levels. Children's entertainment, in particular, offers a plethora of marketing opportunities. 

Weaknesses 

Despite its strengths, the toy industry suffers from some significant weaknesses; 

• New products have difficulty breaking through in terms of awareness and sales in a market dominated by well-known, popular existing products.
• Slow development times and unexpected consumer responses make for a challenging forecasting environment.
• Both overstocking of toys and lack of availability for popular toys is a common industry occurrence.
• As the BBC Links to an external site reported, the hit movie Frozen took toy manufacturers by surprise, resulting in shortages of toys linked to the popular film.
• The industry has a concentrated selling opportunity around the winter holidays, which creates an unusual and complex demand for more storage capacity and a larger workforce than at other times of the year.

Opportunities 

A growing population and expanding middle class around the world make for a solid demand for toys. In particular, China, which has long been a source for toy manufacturing, has become a major toy market. Some specific opportunities in the toy market are:

• Parents are increasingly relying on toys to provide alternatives to "device obsession" - the tendency of children to spend inordinate amounts of time on their phones and tablets.
• The rapid miniaturization and reduced costs of electronics allow manufacturers to introduce many new features into toys.
• New production capacities in countries such as Vietnam are emerging as more cost-effective manufacturing centers than China, where costs have been on the rise.

Threats 

Two major threats to the industry are noted:

• The first threat stems from environmental concerns. Consumers are increasingly aware of the environmental costs of excess plastic consumption and waste. If this backlash solidifies further, toy manufacturers will be faced with tough choices, as more than 90 percent of toys are currently made, in whole or in part, from plastics. Environmental concerns will also affect toy packaging.
• Secondly, the toy industry is still heavily reliant on manufacturers in China and has only slowly located production in other areas of the world. However, the Chinese capacity has been disrupted by strained relations between the United States and China, resulting in tariffs and other trade restrictions that can complicate business. On top of increasing production costs in China, over-reliance on this one country is challenging to the overall industry.

Mattel Toys SWOT Analysis

Strengths:

• One of the leading toy manufacturing companies in the world
• Produces in over 150 countries.
• Strong brand equity
• Scale of opportunities
• A global leader and presence
• Strong supply chain 

Weaknesses:

• Weak management team
• Recent product safety
• Weak online presence
• Utilization of cheap labor in third world countries 

Opportunities:

• The innovation of new toys and products with changing technology
• Create a strong online presence to connect with customers.
• The U.S. dollar is getting weak which will allow emerging markets and expansion abroad.
• Product and services expansion 

Threats:

• Cheaper technology
• Economic slow-down
• Exchange rate fluctuations
• Imitations that are cheaper 

Prompt #4: 

Rumelt's Strategy Kernel

Summarize your observations/recommendations using  Rumelt's Strategy Kernel, to provide Mattel Toys with a strategy to going forward based on your analyses [using the guideline chart below].