Reference no: EM131285174

In 1945 Mattel's founders, Ruth and Elliott Handler, were manufacturing picture frames out of a garage workshop. The couple also ran a side business making dollhouse furniture from the frame scraps; this became so successful that they turned to making toys. In 1955, Mattel began advertising its toys through the Mickey Mouse Club TV show and thus revolutionized the way toys are sold. In 1959, Ruth Handler, noting her own daughter Barbara's love for cut-out paper dolls, created the idea of a three-dimensional paper doll. Barbie was born and very quickly propelled Mattel to the forefront of the toy industry.

The 1960s saw Mattel grow with such new products as Barbie's boyfriend Ken, See-and-Say toys, and Hot Wheels toy cars. In the 1980s Mattel became a global company with the purchase of Hong Kong-based ARCO industries, Correlle, SA, a maker of collector-quality dolls based in France, a British company, Corgi Toys Ltd., and a joint venture with Japan's largest toy company, Bandai. Mattel stresses social responsibility.

Its Sustainability Mission states "We regard the thoughtful management of the environment and the health and safety of our employees, customers, and neighbors as among our highest priorities and as key elements of our responsibility to be a sustainable company." In 2006, Mattel's Children's Foundation donated approximately $4.8 million in cash grants and approximately $10 million in toys to organizations serving children around the world. Over 2,500 Mattel employees volunteered for charitable activities and Special Olympics programs in 13 countries.

In 2007 trouble arrived in Toyland. Like many other toy makers, in recent years Mattel commissioned Chinese companies to produce its products. In August, Mattel was forced to recall 1.5 million of its Fisher-Price toys, including such favorites as Elmo and Big Bird, because they were suspected of containing hazardous levels of lead paint. Later in August, Mattel recalled over 19 million more Chinese-made toys because they contained magnets that could be swallowed by children or because they were made with dangerous lead paint.

Following the second recall the company purchased full-page ads in the New York Times and the Wall Street Journal to assure parents that it understands how they feel. CEO Robert Eckert, a father of four, appeared on an online video to state, "I can't change what has happened in the past, but I can change how we work in the future." Mattel pledged to test the paint in every batch of paint delivered to all of its toy producers and to take other safety measures. Consumers, however, were not all convinced. Video clips appeared on YouTube mocking the company's efforts. One video referred to the recall of "Tickle Me Lead-Mo." The recall dramatically cut into Mattel's revenues.

Sales of Dora the Explorer toys fell 34 percent in the United States and 21 percent internationally. Barbie sales fell 19 percent in the United States, and Brazil banned imports of all Mattel products while it evaluated whether or not the company was complying with its safety regulations. Again in 2010, Mattel recalled over 10 million of its Fisher-Price products including about seven million FisherPrice Trikes and Tough Trikes. The tricycles have a plastic ignition key near the seat that kids can sit on or fall, potentially leading to injuries. Fisher-Price offered customers free repair or replacements. Mattel must continue to work hard to recover from these disasters.

Are apologies and claims for new safety regulations enough? Because some but not all of the recalls were because of production in other countries, should the company stop producing its toys in China and other developing countries where costs are low? Or should Mattel return to its roots and produce the millions of Polly Pockets, "Sarge" toy cars, and Barbie playsets in the United States, where costs are substantially higher but standards are tougher? You Make the Call

1. What is the decision facing Mattel?

2. What factors are important in understanding this decision situation?

3. What are the alternatives?

4. What decision(s) do you recommend?

5. What are some ways to implement your recommendation?