| Mattel, Incorporated
Barbie dolls, Hot-Wheels, Fisher-Price toys are all products of the number one toy maker in the world. Mattel Creations (named for then-partner Harold Matson and Elliot Handler). Mattel expanded by 1946 into a toy firm making miniature wood and plastic tables and chairs. Elliot's toy ukulele and later his toy piano brought the firm into the mainstream of national manufactures. Elliot soon patented an inexpensive music box mechanism, the first American-made competition to costly Swiss imports. Mattel also became the first toy company to use television advertising on the brand-new Mickey Mouse Club program. But it was only in 1959 that the Mattel company reached international fame and quadrupled its sales, with an invention by Ruth Handler.
Mattel, Inc. began in 1945 when founders Ruth and Elliott Handler and Harold "Matt" Matson began building picture frames out of their garage. Elliott wanted to expand their product line so he began constructing and selling dollhouses. The success of these dollhouses was so great that Harold Matson sold out his portion of the business so the Handlers could create new and improved ideas for the toy-end of the company (Mattel, 2008).
In May 1999, at the height of the Dot.com bubble Mattel acquired The Learning Company for $3.5 billion in stock or 4.5 times annual sales. The Learning Company was considered at the time one of the leading entertainment and educational software companies. Owner of such titles as Reader Rabbit, Carmen San-Diego, Myst, Riven and National Geographic but had in 1997 accumulated losses of $475 million. Mattel thought that this acquisition would help business diversification by giving the company a leading position in the market of consumer software. Mattel CEO Jill Barad expected to have direct internet sales for all. Mattel's toys and predicted that Mattel sales over the Internet would reach $1 billion in a few years. By 2000, Mattel was losing $1.5 million a day with The Learning Company and Mattel's stock price (which reached a high of $45 in March 1998) traded at $11 in February 2000. The employees were unmotivated and there was no strategic plan in place. Under pressure on February 3rd Mattel's CEO Jill Barad resigned but received a $50 million severance package. (Ruiz, 2006).
After Jill Barad's departure, Eckert was called to the rescue, and he brought a plan of action to create a workforce plan that focused on performance tracking, succession planning and leadership development. As of May 2008, Mattel employs more than 31,000 employees around the world and has more than 4 billion dollars in sales (MoneyCentral, 2008). The success of the company can be attributed to the strong leadership they have had throughout the last few years they have spent in restructuring, and working together as a team. Based on that restructure, they have accomplished an excellent toy maker.
To understand Mattel's success, one must also know about the life and career of its leader, Chairman and Chief Executive Officer (CEO) Robert Eckert. Eckert was born August 14, 1954 in Elmhurst, Illinois. He was a modest child, which largely shaped his leadership style in the years to come. He grew up as the son of a dentist and did little to stand out in his early years. Eckert's personality during his high school years was described as "low wattage," according to an article in Forbes. Eckert agreed and said, "You never would have predicted that I would be a CEO someday" (Forbes, 2000).
Eckert left his home state of Illinois to attend the University of Arizona. He graduated with a bachelor's degree in business administration in 1976 and returned to Illinois, where he enrolled in the Kellogg Graduate School of Management at Northwestern University. He received his MBA in marketing and finance in 1977 (Mattel, 2008).
Prior to joining Mattel Corporation, Eckert worked for Kraft Foods from 1977 to 1987, where he held several marketing positions. From 1987 to 1989, Eckert was the vice president for strategy and development, grocery products division. In 1989 to 1990, he was the vice president for marketing refrigerated products Then in 1990 to 1993, he became the vice president and general manager, of the cheese division of Oscar Mayer Foods Corporation. Finally, in 1993 to 1996, Eckert became the president of Kraft Foods (Forbes, 2000).
Eckert was credited with turning around Kraft's cheese division by reducing product prices. His success with the division led to a new appointment as president of Oscar Mayer Foods, another company owned by Philip Morris. At Oscar Mayer, Eckert introduced ambitious plans for pricing and successfully introduced new product lines. During his tenure as president of the unit, Oscar Mayer introduced a line of fat-free meals as well as the popular Lunchables® pre-packaged food combinations. These items combined to bring in an estimated $400 million in sales during Eckert's time as president (Forbes 2000).
Eckert's achievements in the cheese division and at Oscar Mayer propelled him to the second-highest executive position at Kraft in 1996. He retained responsibility for Oscar Mayer as group vice president, but also took charge of the company's food service group, as well as five operational staff groups. After Eckert's successful career in the food industry, he made a move to Mattel Corporation. He started his career there in 1996 to 1997, as group vice president; and from 1997–2000, as president and chief executive officer. Today, Eckert is the chairperson and chief executive officer of Mattel, Inc.
Eckert is a member of several company boards and civic organizations. He serves on the board of McDonald's Corporation, the Advisory Board of the Kellogg Graduate School of Management, and the Board of Visitors of the Anderson School of Management at the University of California at Los Angeles. In addition, he also serves on the Trilateral Commission, is Chairman of the Board of Directors of the Business Council in Washington, D.C., and is a member of the Asia Society, the Business Council, the Young Presidents' Organization in Los Angeles, and Town Hall Los Angeles (Window to the World Communications, Inc., 2003).
For over 60 years, the Mattel Company has been putting smiles on children's faces. Like many other companies, pleasing their customers has not been an easy task. Early management was faced with losing market share, profitability were declining, overhead expenses were rising, and the morale was at an all-time low, after many trials and errors, Mattel turned in a new direction. They acquired new leadership with a vision of building brands, cutting costs, and developing people and turned the company into a profitable business once again. Their new vision has taken the company to a completely new level, making them the global leader in the toy industry (Mattel, 2008).
The leadership changes that Mattel experienced have changed directions several times. The challenges that Mattel has faced-such as recent product recalls-has made the company's leadership skills stronger because they have had to take significant losses and make quick, tough decisions in order to do the right thing. Mattel's controls within the organization have also become stronger, because they have had to be stricter about various areas of their business such as production. Tough competition has also led them in different directions, but strong leadership skills have brought the Mattel Company through the worst of times, they could not have done what they have done without the expertise that Robert Eckert has brought to the company.
The National Environmental Trust (NET) recently welcomed Mattel's announcement they will begin introducing organically derived material that does not contain phthalates- chemicals added to soften plastic vinyl-for use in every Mattel product line. According to NET, Mattel's announcement represents a significant commitment to the health and well-being of the children who play with their toys. Mattel Inc. said it hoped to begin making products from renewable materials as early as 2001, initially in toys aimed at children less than three years old (In-motion Magazine, 2007).
In Mattel's announcement, the company recognized the ongoing scientific debate over the safety of phthalates, indicating that the company has already eliminated phthalates from tethers and other toys intended for the mouth. "We understand that Mattel's commitment represents a substantial investment of resources in identifying new substances and retooling production lines," said Jeff Wise, policy director for the National Environmental Trust. Mattel provided no timetable for the introduction of the new, non-phthalate containing material. Wise added, "We hope the company will respond to the requests of physicians, consumer advocates, religious leaders, and environmentalists to label toys with phthalates that continue to be sold, so parents can make informed decisions about the toys they are buying for their children" (In-motion Magazine, 1997).
If substitutes are found, they could be used in all Mattel brands and product lines and replace polyvinyl chloride and a controversial group of chemical additives called phthalates that are used in soft plastic toys, the company said. Some phthalate compounds have been linked to cancer, kidney, and liver damage in animals, and their threat to humans is being studied (In-motion Magazine, 1997).
Greenpeace, the international environmental group, which has led an aggressive fight against toys made with phthalates, immediately hailed the announcement as a revolutionary step. "With Mattel as an industry leader, this is a sea change for the toy industry and perhaps for the use of plastics in general," said Rick Hind, legislative director for the Greenpeace campaign. Hind added, "As for Barbie, she will become even healthier and a truly natural beauty." Wise said the importance of labeling during the transition could not be overstated in light of new test results his organization will announce that found high levels of phthalates in several bath and squeeze toys manufactured by Mattel. The NET encourages other toy companies to follow Mattel's leadership on this issue (In-motion Magazine, 1997).
For over 60 years, the Mattel Company has been putting smiles on children's faces. Like many other companies, pleasing their customers has not been an easy task. However, after many trials and errors, with product recalls, big losses, and tough competition, Mattel turned in a new direction.
The leadership changes that Mattel experienced have changed directions several times. The challenges that Mattel has faced-such as recent product recalls-has made the company's leadership skills stronger because they have had to take significant losses and make quick, tough decisions in order to do the right thing. Mattel's controls within the organization have also become stronger, because they have had to be stricter about various areas of their business such as production. Tough competition has also led them in different directions, but strong leadership skills have brought the Mattel Company through the worst of times, and now they are working toward making a better company where they focus on their vision of building brands, cutting costs, and developing people. They could not have done what they have done without the expertise that Robert Eckert has brought to the company.
Mattel, Inc., like any other business, has had its difficulties. In 1998, Mattel made a decision to purchase The Learning Company, which resulted in a $3.5 billion dollar acquisition. The disastrous decision pushed the prior CEO Jill Barad to resign in hopes that Mattel could pull through the rough time. The employees were unmotivated and there was no strategic plan in place. Eckert was called to the rescue, and he brought a plan of action to create a workforce plan that focused on performance tracking, succession planning and leadership development (Ruiz, 2006).
The new change did not happen quickly. Mattel began by re-evaluating the toys and the brands. Some toys were taken out of production and other toys were added to improve the company's sales. Next, the leadership team focused on the employees, the key to the organization's success. The employees were given support, training and an opportunity to advance within the company. The morale was boosted to a higher level, which in turn increased productivity. Eckert made a point to open the communication gap by going to the cafeteria to have lunch every day. Each day, employees would approach him and discuss their ideas about the company. He felt that if employees knew what was going on they would be able to take ownership of their positions in the company (Eckert, 2001).
Robert Eckert's plan was a success and showed in Mattel's financial statements. In 2000, the company had no money in cash or cash equivalents. According to the company's annual report, that number had swelled to $997 million dollars. This is an important shift, because Mattel is a company with widely varying seasonal expenses. As such, the company had always borrowed a significant amount of its seasonal operating requirement; now it is able to self fund those seasonal costs to a much larger degree. In addition to saving the shareholders interest expense, the company has managed to lower its long-term and short-term debt since 2000 from $2.75 billion dollars down to $1.98 billion dollars. Therefore, in a six-year period, Mattel was able to reduce the debt by $756 million dollars while increasing cash by another one billion dollars. That is an addition of almost $1.8 billion dollars to the balance sheet, book value, and ultimately the stakeholders' pockets. Another offshoot of this balance sheet strengthening is the reduction of interest expense carried by the company. In 2000, this company paid $172 million dollars in net interest expense. In 2005, that number was down to $12 million dollars (in large part due to an offset of interest expense by the interest income earned on the cash reserves). That is a significant amount of savings for the company's stockholders (Answers.com).
Mattel, Inc. is not worry-free, but they have developed a plan to keep the business from making poor decisions and overcome tragedies such as income loss and recalls. However, many are curious as to what the future holds for the toy market. Given Mattel's recent recalls (one was related to lead from Chinese manufacturers, and the other one was about magnets that were being dislodged from toys), the company maintains "its global manufacturing principles are of the most strict, detailed and comprehensive within the consumer products industry" (Bynum, 2007).
Mattel's principles are intended to create and encourage responsible manufacturing business practices around the world. Moreover, Mattel expects all of its business partners to meet these principles on an ongoing basis. If the company determines that anyone of its manufacturing facilities or any vendor has violated these principles, they can either terminate their business relationship or require the facility to implement a corrective action plan (Paradoa & Thorne LeClaire, 2007). Thus, a key challenge for Mattel is the certification of business partners and potential partners with respect to the manufacturing principles.
Another issue for Mattel's products and marketing activities relates to its online marketing efforts. Since the company relies heavily on communication with children to market it products, any legislation in this area must be carefully monitored. One example of Mattel's compliance plan is the adoption of the United States Federal Trade Commission's new rules on the Children's Online Privacy Protection Act of 1998 (Paradoa & Thorne LeClaire, 2007). These rules require Web-based marketers to get parental permission before collecting any personally identifiable information (e.g., name, address, email address) from children. Further, since its Web sites are accessible to children around the world, Mattel must be cognizant of regulation in other parts of the world.
Children are exposed to technology at a very young age, and as a result, they are becoming increasingly more interested in technology-based entertainment, including electronic, video, and online games. Currently, Mattel has a very limited presence in electronic entertainment. This shift in children's entertainment preferences is accompanied by a trend toward "childhood compression," meaning that children's tastes are maturing more quickly than in the past. As such, Mattel's target market is shrinking. Particularly worrisome to Mattel is the steady sales decline of Barbie® products over the past several years (Barbie® is Mattel's largest, most profitable brand). Even though things might seem especially dire for Mattel, there is hope. By leveraging their existing competencies while acquiring new capabilities through internal development and partnerships, Mattel can develop relevant products and services that positively reposition them in the lives of children (Illinois Institute of Technology, 2006).
Mattel is of interest to managers because they are one of the first consumer products companies to employ independent monitoring of its manufacturing facilities and make findings available to the public, and it continues to be the only toy company to have such a program in place (Mattel, 2008). This year, the toy giant ranked #70 out of Fortune's 100 Best Companies to Work For (CNNMoney.com, 2008). Mattel is the only toy company to make the 2008 list. In 2007, Mattel ranked among the 100 Best Corporate Citizens by Business Ethics magazine for embracing higher standards-combining strong financial performance with responsible practices on environmental and social issues (CRO Corp., 2006-2008).
Like other industry-leading companies, Mattel operates in a highly competitive, dynamic marketplace and global society where circumstances are forever changing. Therefore, Mattel must stay the course of ethical practices; adhere to stricter testing of its toys and products; continually strive to exceed the expectations of their stakeholders; and lead the way in making a difference in children's lives through their safe and reliable products and their philanthropic programs; "Leaders at Mattel align themselves with Mattel's core values, exhibit leadership competencies with an unwavering drive for success in their business strategies" (Mattel, Inc., 2008). With over 25,000 employees, Mattel has a vision to be "The World's Premier Toy Brands - Today and Tomorrow," and they will achieve this vision because their people are creative and energetic, continually thriving on innovation and passion for the business.
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