Mattel Marketing Case Study free essay sample

Mattel, Inc. (Mattel or the company) designs, manufactures and markets toys across the globe. The company operates in the Americas, Europe and the Asia-Pacific region. Headquartered in El Segundo, California, and the company employs approximately 30, 000 people as of December 31, 2012. Mattel has some of the highly recognized brands in the toy industry, with its core brands providing strong sales and earnings. Mattels product lineup consists of some of the best-known brands in childrens toys, including Barbie, Hot Wheels, American Girl, Power Wheels, Polly Pocket and Fisher-Price. Barbie has been the most popular fashion doll brand for over 50 years. In 2012 and 2011, Barbie was named one of the 100 global brands that translated the latest consumer trends into its brands by a globally recognized brand/design studio. Monster High, an emerging key brand in the company’s portfolio, is the second largest selling fashion doll property in the US as well as five European markets including the UK, France, Germany, Italy and Spain, as of August 2012, according to the latest toy industry estimates. We will write a custom essay sample on Mattel Marketing Case Study or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Until August 2012, Mattel owned 6 of the top 10 properties in the American toy industry. The company’s strong brands will continue to help it to penetrate further into new and existing markets as they provide a competitive advantage to the company in most of the markets in which it operates. The company’s does face challenges to continue sustained growth and market share and some of these issues will be addresses throughout this analysis. Some concerns for the company include: Is Barbie past her prime? Barbie’s failure in China, products recalls, constant competition, changing technology and existing product saturation of the market. II. Problem/Issue Statement Mattel has been around for several decades and has a maintained a strong stake in the toy games industry. The industry can be stated to be a mature industry, although due to constant technological and societal changes, as well as growth in emerging markets, there is great opportunity to continue to grow profits and expand. There is an every revolving need for need for learning games for children and teens, and also for games with higher levels of interactivity, i. e. virtual, computer, etc. Rather than view these changes as a threat, if analyzed appropriately, they can lead to strong growth opportunities, and a chance for the company to grow with its base and extend its product life cycle per user. Societal changes will always affect the consumer products markets, including changing birth rates, cultural changes, women/men’s roles, poor economy, etc. Mattel has to deal with the fact that the toy industry is very saturated with their products, although they do have extensive product lines, the duration the products have been on the market can lead to boredom with products if the products don’t change with the times even if the user changes and matures and they get new users. A significant opportunity still remains to further penetrate emerging markets, however the company has to be able to properly addressing other cultures both without offense, and to properly understand the difference in markets. Even domestically, the company has to address changing women’s issues as it relates to its major products lines. Are their products targeting girls changing with the times? Should girls still play with dolls Kids grow up: how to extend product life line per user; another opportunity is to capture more mature market through high tech toys. Even the adult toy market has opportunities, but have to be concerned not to lose identity with customer base. The counter-fit toy market poses a serious threat to the company’s bottom line. I attempt to look at several of these challenges to Mattel throughout this case analysis. III. Situational Analysis Mattel SWOT Analysis StrengthsWeaknesses †¢Strong Brand Recognition †¢Mostly Positive, Trustworthy Image †¢Extremely Large Portfolio of Brands †¢Strong Licensing Agreements Partnerships †¢Worldwide Distribution Network†¢Frequent, Major Product Recalls †¢High Customer Concentration in the US Market †¢High Concentration of Sales, amongst a few Retailers, approx. 40% †¢Weak Penetration of Large, Emerging Chinese Market Opportunities Threats Extension of Product Life Cycle per User, As Kids Mature †¢Changing Technology, Need for Learning Games, Games with Interactivity, Societal Changes affecting children’s toys †¢Reaching Into More Global Markets/Cultures†¢Dangerous Market for Counterfeit Goods †¢Ever Revolving/Maturing Customer Base †¢Oversaturation of Products †¢Currency Fluctuations Environmental Analysis: PEST Analysis Political Economic Social Technological †¢Political Instability per Country †¢Differing Global Safety Regulations †¢Loose Employment Environmental Laws in Some Countries †¢Loose Copyright Infringement Enforcement in Some Countries †¢Trade Restrictions Tariffs Tax Laws†¢Currency/Exchange Fluctuations †¢Economic Instability per Country †¢Need to Adapt to Different Global Markets †¢Changing Gender Roles †¢Differing Cultural Views Issues†¢Movement Toward Smart Devices, Electronic Toys Games †¢Ever Changing Technology Creates High Competition and RD Costs Market Analysis: The international toy games market has experienced moderate growth in the recent years. In the 2012-2017 period, this is predicted to continue, abut at an even higher rate. The market is forecast to accelerate with an anticipated CAGR of 4. 5% for the five-year period 2012 2017, which is  expected to drive the market to a value of $105,821. 2 million by the end of 2017. Porter’s 5 Forces Model Buyer Bargaining Power High Consumer buying power as a whole is strong due availability of low cost, acceptable quality substitutes, making the tendency to switch, and therefore modest brand loyalty to a particular retailer/manufacture. Threat of New Entrants – Low The high level of product differentiation and lowered disposable income amongst consumers due to the economy pose strong challenges to new entrants, in addition to the high fixed costs associated with operations. Supplier Bargaining Power Moderate Although supplier power is diminished numerous substitutes and the low switching costs for retailers and the importance of the retailers to supplier revenues, most retailers will not backwards integrate into manufacturing toys/games. Retailers are highly dependent on providing the popular high quality products. In addition, a high level of product differentiation is needed in the market and government regulation is fairly strict regarding toy safety. Threats of Substitutes – High Computer video games are strong substitutes to the toys and games market. Children are now playing computer games at a younger age in this growing digital environment. Game consoles, PCs and mobile phones are playing an ever growing part in childrens lives by providing games, education and entertainment. Although they are not cheaper substitutes, these electronics are becoming increasingly popular to the detriment of traditional toys and games, where consumer loyalty is low with no switching costs. The counter-fit toy market is also a major concern, encroaching on profits, particularly stemming out of Asia. Intensity of Rivalry High There is a high tendency for consumers to change between toys and games, partnered with low switching costs, which serves to increase competition. The popularity of many games and toys is short-lived and/or seasonal, meaning the market is subject to rapid change, further increasing rivalry. IV. Alternatives Some alternatives to promote continued growth for Mattel include. Seeking New Partnerships with Other Industries: There is a particular opportunity with its rival substitute products in the digital arena. Possible Partnerships include PC, Software and Phone manufacturers, i. e. : Apple, Microsoft, etc. and Social Networking, i. e. Facebook, Myspace (Teens) 2. Additional Product Segmentation: Moving into older age Group of toys: tweens, teenagers and/or even adults. 3. Extending Global Market Reach: Moving into More Cultural Markets More including previously unsuccessful markets such as China, but also, not yet widely dominated markets such as Africa. Evaluation of Alternatives 1. Seeking New Partnerships with Other Industries: Given Mattel’s strong brand recognition, high product success and the current success of its partnerships, I believe it should be able to easily get into talks with new partners to cross transfer popularity from Mattel products on to with maturing kids to more electronic platforms. The kids are already familiar with Mattel products and it could help transfer the kid’s interests to these electronic products while allowing Mattel a gateway to stay in the kid’s lives for longer. This can be down through exploring the opportunity to have Mattel game applications on different devices or online games through social applications. Mattel has already started to have online games for certain brands through its website, however, its website is not as popular as other electronic device platforms such smart phones, games consoles, social networking platforms, etc. Due to shared costs between partners, and/or just paying more moderate costs to add on to be a compliment to these existing platforms, I feel that this option is probably the least costly and least risky of the alternative. Additional Product Segmentation: Moving into an older age group of teenagers requires significant market research (RD) expenditures, however, it is a natural transition from their core customer base and would allow them to stay in their consumer’s life for a longer duration. Alternatively, upon a closer look, moving into the older adult toy and games market might deviate the company too far from its natural base and confuse parents who wouldn’t to play with the same toy maker as their kids. 3. Extending Global Market Reach: There is certainly a lot of untapped market share for Mattel to reach into in the global arena. Extending into further into global markets is the most costliest and riskiest of opportunities. With the huge $30 million dollar failure of its Shanghai, China project, the company has learned the obvious lesson that they have to thoroughly research the particular cultural market they plan to move into and enter into the market slowly. VI. Recommendations I think it would be lucrative for Mattel to explore each one of the alternatives recommended. Some of which they are currently exploring. The website shows that they are expanding into the online game market with their brands, but need to gain a stronger foothold into this market with more popular partnerships in this area. Seeking New Partnerships with other Industries can be down relatively easily, less costly with shared costs. Trying to penetrate into more global markets is the most costly and riskiest opportunity, but due to the growth in emerging markets, offers a high level of growth potential. VII. Financial Implications The company can still be characterized as financially sound, with strong revenues and operation margins. The company had 8% sales growth in 2011 and 7% in 2012 and nearly $1Billion in operating income in each of the years of 2012, 2011, 2010. However, as slow-down has been occurring in Barbie sales and stagnation in Hot Wheels growth over the last three years. Although, Barbie sales continue to decrease, the company’s other girls products increased 47% in 2012, driven primarily by higher sales of its Monster High products. Additionally, costly product recalls in 2006, 2007 and again in 2010 and 2011 have cost the company both financial and damaged their product image. Due to product recalls, the company was subjected to numerous lawsuits and regulatory actions, and suffered sales and profit losses along with significant damage to its reputation. Two main issues were involved: excessive levels of lead in numerous toy surface paints because Chinese subcontractors used unapproved paint; and small unsecured magnets, which could be swallowed, in toys caused by faulty Mattel toy designs. Because of the two problems, many Chinese toy manufacturers and their suppliers were either put out of business entirely or had lost significant business; toy distributors, retailers and logistics companies had potentially incurred additional costs to manage the millions of recalled toys; parents had become more concerned about toy safety and buying Mattel toys; and children had been harmed. Additional product segmentation through products target to older teen-agers as well as expanding into even more global markets are a huge expenditure, however, with possible large rewards if successful. Adapting to another global market would not have as much overhead costs given the company’s current manufacturing facilities. A significant amount of RD and innovation would be required, however, a large investment into the proper market research to truly capture what the foreign market wants, would be highly lucrative. The products must be designed to fit the cultural, social as well as economical dynamics of each country. The failure of its efforts in China can be overcome. Due the size of emerging and developing markets, there is enormous profit potential. VIII. Action Plan †¢Seek Partnerships with Complimentary Product Providers oIdentify Brands Products that its core base is transitioning to after maturing from Mattel Toys oPinpoint Lucrative Partnerships within the PC, Software, Console arena †¢Additional Product Segmentation oDevelop New Market Research (RD) Budget oThoroughly Analyze Older Teenage Market Tastes oTest Pilot Products †¢Extending Global Market Reach. Pinpoint possible markets with expansion opportunity. oSetting up a presence of in these regions oPerform extensive market research regarding tastes and preferences and product adaptability with extensive research on the social, cultural and economic dimensions of the group. oEnsure strength in distribution channels in the new market oEnsure quality control and all pertinent legal compliance in regional market. oTest pilot products on a smaller level before making huge investments into a niche cultural market.