This post is part of a feature on companies and products that our bloggers think are in need of a makeover. See all 26.
Founded in 1945 in a garage workshop in southern California, Mattel Inc. (NYSE: MAT) is now the world's biggest toy maker, with a market cap of about $5.2 billion. Number two Hasbro Inc. (NYSE: HAS) has a market cap of about $4.2 billion. Mattel produces from everything Barbie and American Girl, to Hot Wheels, Fisher Price toys, Scrabble, and the Magic 8 Ball, as well as tie-ins with Pixar, the Dark Knight, Harry Potter, and Nickelodeon. However, in 2002 Mattel shut its last factory in the United States, and since then most of its products have been produced in China.
That decision came back to bite Mattel when, beginning in the summer of 2007, it was forced to issue a series of recalls of Chinese-made toys that contained lead paint. The company is still reeling from that PR disaster, which for some reason included an apology from Mattel to the Chinese people. The situation prompted BloggingStocks contributor Tom Barlow a year ago to suggest (tongue in cheek) that Mattel merge with Waste Management Inc. (NYSE: WMI) so that toxic toys could go directly where they belonged, bypassing the middleman (i.e., the children). That would be one way to make over the company, I guess.
As Christmas of 2007 approached, it looked like the worst might be behind Mattel. The year-end numbers were respectable, and some investors were beginning to eye Mattel again. But first quarter 2008 results were disappointing, and by mid year, expectations were very low. The share price has continued to slide since the recalls, reaching a multi-year low recently. While there was a copyright infringement lawsuit settled in Mattel's favor (though they didn't get as much out of it as they wanted), and they are no doubt hoping for the Dark Knight and other tie-in merchandise to help boost what otherwise looks like it could be dismal holiday season for retailers, the newest thing Mattel has to contend with is claims by some parents that one of its dolls secretly promotes Islam, which Mattel denies.
So how can Mattel be made over so it can put this tale of outsourcing gone wrong behind it? I have one idea, and it's going to sound rather outlandish, but bear with me.
Think Star Trek: The Next Generation type replicators.
Now, the idea may not be as ridiculous as it may seem at first. The concept of reconstructing objects on a molecular level from base materials is known as digital fabrication, or desktop manufacturing, and scientists at MIT have been working on it for a while now. The goal, they say, to take what what now requires a whole factory to produce and make it cheaper and more quickly in a machine that can fit on a tabletop. One can imagine that this would take away any of the advantages to outsourcing overseas. For Mattel that could mean small shops located very near distributors or customers, perhaps even within toy stores themselves. Heck, one day kids might even have their own personal Mattel toy shops at home -- a quantum leap over the Easy-Bake Oven (a Hasbro product).
Yes, this technology is still in its infancy, and therefore not much help to Mattel right now, as it faces a questionable holiday season. But a good CEO has to have vision, right? And developing a reputation as a forward-looking company certainly couldn't hurt Mattel. It's better than continuing to be associated with recalls, lawsuits, and hysterical customers, right?
Does Mattel need a makeover? What would you suggest? Be sure to check out the other makeover posts.
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Reader Comments (Page 1 of 1)
10-23-2008 @ 9:10AM
Lisa said...
Just wanted to make a clarification that Mattel does not make Scrabble, Hasbro does.
10-23-2008 @ 11:29AM
Lorene said...
Mattel needs to move it's factories back to America so we can have the lovely sign on their products that say "Made in America" again. We knew then that the toys were safe and we didn't have to worry about the toys being safe for our children. Now I don't buy anything from Mattel for my grandchildren because I'm afraid to any more. I have two of my grandchildren who are just babies and I won't want anything to harm them in any way, let alone a toy meant to educate them or entertain them. I'm just as concerned about my older grandchildren when it comes to buying toys for them. Mattel needs to have people testing their products every time a new toy comes out and not just once every couple of hundred but every 25 or more items. It probably should be someone that isn't even paid by Mattel but someone that oversees all toys made by all manufacturers. Now every time I wish to buy toys I look for that "Made in America" sign. We have to take back our factories and move them back to America and give our citizens a chance to work in them again. We need the jobs not other world workers. It's time to keep us safe and our children safe and keep us working again.
10-23-2008 @ 1:07PM
leighlee227 said...
I agree with Lorene, but I don't think that people understnad what moving the factories back to the US would mean in terms of price. This is a double edged sword. We move the factories back to the US and inturn we have more jobs, but the price of the toy, in some cases, will come close to doubling. So if everyone is willing to pay more for everything (i mean more than a buck or two) then do it. But untill we as consumers can pay and are willing to pay then the factories will remain in china.
10-23-2008 @ 1:46PM
Missy said...
I am a long time fan of Barbie (32years) and I don't like the new look of the Barbies'. They have feet way to big for the doll. Their face is no longer the beauty that I fell in love with. Come on bring back to America the jobs we so desperately need. I mean simply put the Barbie's now look ugly with the new "Fashion Fever" Barbie. Even my 5 year old don't like the looks of them. My 11 year old thinks they are even uglier now than when she was 5. Seriously put the orginal looks back. The black, asian, and all the old Barbie's need to come back, they looked a hell of a lot better than what they look like now. Also the poseables aren't that great either.
10-23-2008 @ 1:49PM
Angie said...
I wish we had toys that said made in the USA too. Ok we have to pay more for a toy, as long as our kids were safe thats what matters right?
10-23-2008 @ 2:04PM
Jean said...
I agree with Lorene. My grandkids are worth more than a few bucks. They have so many toys now they can't play with them all. I'd be happy to give them fewer toys and have the peace of mind that my gifts weren't going to harm them.
10-25-2008 @ 9:25AM
Ashwin said...
"the newest thing Mattel has to contend with is claims by some parents that one of its dolls secretly promotes Islam, which Mattel denies."
I'm not muslim, but I really don't like the way that's phrased.
I think the best way Mattel could recover is to produce more innovative products and to have no problems this year. The problems in China are similar to those we faced in the United States in the early 1900's, so I think that it is worth the massive cost savings to manufacture these goods in China. The salaries these jobs are likely to pay in the United States are really not enough to survive, unless you are under 18.
10-27-2008 @ 2:21PM
R.J. said...
first of all i agree with Lorene, Mattel does need to move it's Factories back to the USA, Mattel needs to show case the Cars from the 70's and 80's in a Diecast 1:18 Scale and they Havent But i am sure there is a large amounts of reasons why they havent, i am not talking about the Hotrods either, I am talking about the Luxary and Family cars that Ford, Plymouth, Chevy, Dodge and the other companys had made those years that were Popular Cars, they would make twice then they are now because that stuff is Popular and hard to find,
i cant even count the amount of requests i have seen online for other companys for that kind of Stuff, but Mattel has a Brand Name and could get access were others cant,
11-21-2008 @ 2:24PM
Pam said...
I wholeheartedly agree with Missy. Barbie is no longer recognizable as a Barbie doll. I had to read the box twice before believing the doll I was looking at was actually a "Barbie" doll! I refuse to buy not only such an "ugly" doll but one so poorly made for my granddaughters. It is a sad day for those of us who loved Barbie so much as children of the 60's and 70's. How about more quality in the clothing made for Barbie as well. Starting in the 80's it was difficult to dress a Barbie doll now it is simply impossible. Come on, Mattel, I think people would be willing to spend the extra dollars for a well-made doll and accessories if you would provide it.
11-23-2008 @ 4:54PM
Deanna said...
Unfortunately, Mattel decided to make Barbie look more like a Bratz doll and gave her a giant freak head. I have to agree with Missy and say they are not the same doll I loved or my grown daughter enjoyed. Please Mattel...change her back so my granddaughters can enjoy the look of the original Barbie.
11-24-2008 @ 2:45PM
mildred said...
i am not buying any toys that's not made in the u.s. i am also hoping i will soon be able to stop buying any products from companies who ship jobs overseas and mexico. we talk about the prices will go up, we brought the products before. take barbie ,when the dolls were made in the USA the demand was greater than supply, the collector editions would fly off the shelves. i think if we are ever going to get some of our jobs back we MUST purchased products made in the USA. we have to reward the companies that stay here and stick with the american people during the good times and the bad, and punish the companies that wants us to buy their products, but don't want to invest anything in the american people.