Over the years, Mattel (NYSE: MAT) has built a portfolio of valuable toy brands -- Barbi, Barney, Dora and so on. In the highly competitive global economy, strong brands are extremely valuable. They act as a barrier to entry and allow for premium pricing.
Yet, brands are also vulnerable.
In the case of Mattel, the company has ordered a massive recall of 967,000 Fisher-Price toys manufactured in China because of high levels of lead in paint. There will be refunds as well.
It's a tough lesson for Mattel. And, I'm sure management will try to implement systems to prevent this from happening again.
But are there lessons for small businesses? Or are such issues (I think this case falls under a larger umbrella of environmental issues faced by businesses) mostly concerns for big companies?
Well, I think small business owners should pay attention. After all, Mattel has the resources to deal with a crisis. But, for a small business, the result of such a catastrophe is likely to be bankruptcy or a severe decline.
Some Lessons
First of all, it's a good idea to start understanding the environmental laws. Keep in mind that you may be liable even if you did not cause the problem. Basically, Congress has some strict regulatory requirements and may demand remediation – which can be costly and time consuming.
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