Mattel inc. world’s largest toy manufacturer

Introduction

Mattel Inc. (Mattel) is the world’s largest toy manufacturer based on revenue. It has operations in 155 countries worldwide. Mattel was founded in 1945 in South California by Ruth and Elliot Handler, and Harold Mattson. The name Mattel was formed by combining Mattson’s last name with Handler’s first name. The company incorporated in the state of California in 1948 (Mattel, 2010).

In 2007, Mattel was involved in a product quality and safety dispute. Since August 1st, 2007, Mattel has recalled in 30 million toys it manufactured in China due to quality and safety defects, such as problems with lead paint and concerns about loose magnets that children could swallow. Mattel’s recall involved 83 products and was discovered by a European retailer in early June 2007. Due to the recall incident, Mattel not only reported loss in profits, but the public also lost trust and faith in Mattel. The image of the company was severely affected.

The product safety problem may seem especially pronounced in the toy industry because it relies so heavily on Chinese production. According to the Toy Industry Assoc., China makes about 80 percent of all toys sold in the U.S. One may ask how can companies such as Mattel, who have years of manufacturing experience along with an extensive quality assurance program in China prior to the incident fail to detect such a incident? What and who is to be blamed for this toy recall incident? In this essay we are going to focus and discuss on the conflicts Mattel faced with Consumers and Manufacturers from the Mattel Toy Recall incident.

Literature Review

Conflict is a process which begins when one party perceives another has or is about to frustrate a concern of theirs. There are three conceptual models of conflict as identified by Pondy (1967): bargaining model; bureaucratic model and systems model. The bargaining model focuses on the conflict caused by competition of scarce resources which is most commonly found in employee relations and budgeting processes. The bureaucratic model is primarily focused on institutional attempts to control behaviour and the reaction by the organisation to such controls. The third, systems model, is directed at conflict among parties to a functional relationship or the interactions for task accomplishment. Similarly, Jehn (1997) identifies these three models of conflict but classifies them under the titles of task, relationship and process. She emphasises that there are predominately two types of conflict within organisations – those that are task related and those that are not. Social-emotional or affective conflict is the interpersonal relations that interfere with task efforts as they focus on reducing threats and increasing personal power or are attempting to build cohesion between parties. On the other hand, cognitive or substantive conflict is associated with group tasks which can improve efficiency through collaborative decision making, productivity and constructive criticism via discussions and minor group conflicts.

As noted by Pondy (1967), conflict is a dynamic process where conflict relationships can be analysed at different stages. Conflict potentials, though usually not identified from the beginning by the parties involved, mark the beginning of a series of stages. These conditions are developed by emotions, perceptions and behaviours and lead to an aftermath which will then determine the direction of the conflict endured. The management of any conflict is therefore a key for leaders. They must analyse and be able to manage the process in order to gain the most beneficial outcome.

Thomas and Kilmann (1974) presents the management of conflict in a two-dimensional taxonomy, where assertiveness represents the degree to which one attempts to satisfy their own concerns, while the degree of cooperativeness is the degree to which one tries to satisfy the needs of the other party. The taxonomy of five approaches to conflict is outlined below.

When analysing conflict, this model is used to outline both the cause and characteristics of conflict thus becomes a useful tool for leaders to manage the process for the optimal outcome. Furthermore, it has been noted that conflict management requires the synthesis between two time horizons (Thomas, 1992). The short term focus is based on contingency and requires the management and being reactive to current conditions. The second horizon, the long term concerns the need to achieve collaboration. This involves the establishment of trust and respect between the parties to generate an environment of open information exchange and optimal decision making.

The Incident

Background

During the early stages of the incident, CEO, Mr Robert Eckert suggested that outside contractors were behind the recent product recalls. “We were let down, and so we let you down,” is what he said to senators in a meeting referring to the product recalls during August 2007. The company denied responsibility and blamed it as a manufacture problem. However on September 21st, Mattel’s Executive Vice-President for worldwide operations, Mr Thomas Debrowski stated “Mattel takes full responsibility for these recalls” and said that, “vast majority of those products that were recalled were the result of a design flaw in Mattel’s design, not through a manufacturing flaw in China’s manufacturers.” We are going to discuss below what caused Mattel to take a completely different attitude towards the incident in two months time.

Mattel vs Consumers

The recall of Mattel Toys may create a major conflict between the company and their consumers. In the first place, the hazardous amount of lead in Mattel toys has the potential to impact children negatively. According to Woo (2007), Mattel lead toys have caused children health problems, such as neurological damage, hearing problems and learning disabilities. This is likely to cause conflict between consumers and Mattel toys, in particular among parents of affected children. Moreover, multiple customers have a negative experience of Mattel’s product recall crisis thereby dramatically harming the reputation of the firm. Choi and Lin (2009) cite evidence that the product recall has elicited a negative response from customers where nearly half of consumers feel anger, while significant minorities have chosen to change their product choice, surprise and worry. As a consequence, there has been a significant increase in Mattel’s conflict with its consumers (Choi & Lin 2009). Furthermore, the recall of Mattel’s products has led to many customers to seek alternative products due to the loss of trust with their products (Pirson & Malhotra 2008). In addition, this incident is likely to wreak considerable damage on Chinese economy as a result of the loss of confidence in local brands among consumers, especially American consumers (Lee et al. 2008). In fact, Lee et al (2008) illustrate that more than half of American buyers lack confidence in Chinese products and this has been compounded by the product recall. Hence, Mattel’s consumer conflicts affect the sales and profitability of company while harming the Chinese economy. Choi and Lin (2009) comment that significant numbers of parents have avoided all Chinese toy products due to their perceived negative effect on children. Additionally, this customer conflict has created an opportunity for competitors to attract Mattel consumers thereby affecting their market share. Consequently, customers’ conflict could negatively affect economy, manufactories and the reputation of the organisation.

Mattel vs Manufacturers

Mattel has years of manufacturing experience there before this lead paint incident. The company runs its own factories in China and has successfully managed dozens of vendors there over the years. Mattel already has an extensive quality assurance program (GMP) in place long before the bad paint job. Mattel manages its vendor through the Global Manufacturing Principles (GMP) program which applies to all parties that is responsible for manufacturing, assembling, or distributing any products with the Mattel logos. That program involved mandatory quality tests by Mattel’s vendors as well as testing of in-process and finished goods by Mattel itself. GMP provides guidance and minimum standards for all manufacturing plants, assembly operations and distribution centers that manufacture or distribute Mattel products. Mattel is prepared to end partnerships with those who do not meet or comply with the requirements. (Mattel, 2010)

The Toys delivered were clearly not the ones ordered and specified by Mattel and somehow toxic materials had found their way into the production process. To try and increase profits suppliers will often switch raw materials for something similar and cheaper and have got good at passing audits and appearing compliant without actually being compliant. In many cases, it is the supplier’s sub-contractors and the sub-sub-contractors where the switch occurs and the deeper down the supply chain the problem exists, the more difficult it is to spot.

Mattel stated in a statement to The Associated Press explained that, its primary vendor, Early Light Industrial Co, responsible of the production of Sarge toys hired a subcontractor hired to decorate parts of the Sarge toy ran out of the paint which Mattel had clearly specified in the contract. The subcontractor, Hong Li Da (HLD), then substituted a paint that contained lead.HLD acted without informing Mattel or., resulting in the recall incident.

Mattel hasn’t blamed Early Light Industrial Co. for its recall of 436,000 toys as Early Light Industrial Co. followed procedures and supplied subcontractor Hong Li Da with safe paint but Hong Li Da chose to use cheaper, unapproved paint from an unknown party. Mattel believes that “Early Light was let down just like we were,” Choi, founder of Early Lights stated to the Hong Kong media that he’d acted responsibly by reporting the problem with the paint to Mattel when he found out about it. (Mingpao Newspaper, 2007) “We discovered (Hong Li Da) didn’t turn up to fetch the paint in April and May, so we did a lab test on the toy cars. We reported to Mattel when we saw there were problems,” Choi reportedly said Mattel’s recall cost Early Light about HK$1 million (US$128,000; €95,200) and that it has terminated its contract with Hong Li Da.

Earlier, the head of another Hong Kong-based Chinese manufacturer, Zhang Shuhong, co-owner of the Lee Der Toy Company reportedly killed himself when Mattel recalled nearly 1 million lead-tainted Sesame Street toys his factory made.

Mattel even helped the contract manufacturer blamed for the recall, due to use of lead paint, to set up its own testing laboratory, which should have guarded against the paint problem. But while Mattel follows strict labour laws at its own facilities in China, it has also followed other manufacturers in relying on dozens of other contractors and sub-contractors. With a supply chain that may contain as many as 3000 factories in China, the task of quality control, audits and inspections becomes increasingly difficult. Cheating on the use of raw materials, exploiting workers, employing children and paying bribes to avoid safety inspections are all a consequence of markets that have seen the prices of some goods at all time low real prices.

The ultimate responsibility for the product quality rests with the company that owns the brand. Contracts between the corporations and the suppliers clearly stipulate the materials to be used and not to be used. The problem it seems is not with the contract but with the implementation. It is essential for Mattel to enforce stringent quality controls to catch any vendor who tries to trick them again. At the same time it is also essential for Mattel to ensure that this happens long before the products hit the market and get into the hands of consumers, especially consumers who are kids and vulnerable.

Conclusion

The ultimate responsibility for the product quality rests with the company that owns the brand9. Contracts between the corporations and the suppliers clearly stipulate the materials to be used and not to be used. For instance, lead-based paint for toys or azo-dyes for garments are forbidden. The problem it seems is not with the contract but with the implementation. It is essential for Mattel to enforce stringent quality controls to catch any vendor who tries to trick them again. At the same time it is also essential for Mattel to ensure that this happens long before the products hit the market and get into the hands of consumers, especially consumers who are kids and vulnerable.

Where the lead paint is concerned, it was negligent of Mattel not to have specified more concretely, and inspected more closely, what its Chinese suppliers were doing and where the magnets are concerned, it was negligent of Mattel not to have had a better design for its products.