The Mattel Toy Story

The Context

Founded in 1945, Mattel is an American multinational toy manufacturer based in California. With $1.4 billion annual revenue and 27,000 employees, it is one of the worlds largest toymakers. Mattels power brands are Barbie, Hot Wheels, American Girl, Fisher-Price, and Thomas & Friends. These were introduced between 1930 and 1986, and Mattel had not created another hit product for some time. Barbie dates from 1959. Smaller brands were incorporated in what Mattel called toy box, an everything else category that included Polly Pocket dolls, Uno (a card game), and toys linked to the video game Minecraft. Mattels traditional competitive advantage was based on making incremental product improvements and on manufacturing cost advantage.

Mattels most important brand is Barbie, who still generates 20 percent of the companys sales despite being 60 years old. Half of Barbie sales are nonoriginal body or non-Caucasian, and Barbie dolls in the image of K-pop band BTS have been successful. The company also now sells gender-neutral dolls with the brand name Creatable World.

The Problem

Revenues at Mattel have been falling, from over $6 billion in 2007 to $4.5 billion in 2018. Mattels stock price fell from $50 in 2014 to $10 at the end of 2018. Revenue growth was expected to be flat in 2019. Barbie and Hot Wheels continue to sell well, but American Girl dolls, once famous, are in decline. The companys falling sales are accompanied by rising debt. Earlier in the decade, American Girl was selling well, linked to Disneys Frozen franchise. But this success took sales away from Barbie. Sales of Monster High merchandise generated hundreds of millions of dollars, but suddenly collapsed when the brand became unfashionable. Sales of Hot Wheels have also stalled.

Manufacturing and supply chain management at Mattel had not changed. Along with other toymakers (apart from Lego), Hasbro closed factories and started outsourcing, but Mattel made its own products. HasbroMattels main competitorhas similar sales and employs 6,000 people; Mattel has 40,000 employees at peak factory output. Hasbros gross margins are 51 percent; Mattels are 39 percent.

The Changes

Ynon Kreiz, the companys fourth chief executive since 2012, joined Mattel in 2018. Colleagues describe him as sure and steady, disciplined, and unflappable (Lashinsky, 2019,Page 167 p. 101). His vision is to transform Mattel from toy maker to high-margin media company, basing movies on its familiar brands. Toy manufacturers earn only a small percentage of movie revenues, most of which go to studios and distributors. But movies can revive old brands and increase sales of merchandise.

One of Kreizs first actions as chief executive was to reduce the workforce by 22 percent. To reduce costs further, he also planned to sell 12 of Mattels 13 factories. He also reduced a three-inch-thick strategy document to one page, identifying three priorities: cut costs, fix broken brands, and capture the value of the companys intellectual property. Following practice in the rest of the sector, Kreiz abandoned the toy box concept and grouped Mattels brands into two categories: toy-industry leaders (dolls, vehicles, infant/preschool) and challengers (games, construction, action figures).

The idea of making movies based on Mattel brands was not new. But movies that were to be based on Hot Wheels and on the Rock Em Sock Em Robot were never made. In 2016, Sony started to develop a live-action Barbie comedy, but the star, Amy Schumer, dropped out. Mattel was not the only toy company to adopt this strategy. Hasbro, for example, has based movies on Transformers and G.I. Joe and planned to buy the Canadian media production company Entertainment One.

Kreiz hired an experienced movie producer, Robbie Brenner, who identified Barbie, Hot Wheels, and American Girl as initial projects, along with Magic 8 Ballan old toy box product that gives advice and had been almost forgotten. In 2019, Mattel announced eight film projects with four studios, including Warner Bros and MGM. Paramount will make a live-action movie starring Tom Hanks based on the astronaut Major Matt Mason, who was created by Mattel in 1966. In 2019, Mattel announced that Margot Robbie would star in its Barbie movie, with a script written by the prestige team of Greta Gerwig (Little Women, 2019) and Noah Baumbach (Marriage Story, 2019).

In October 2019, Mattel posted its first positive cash flow in three years. Revenues appeared to be increasing again. Performance would have been better, but Fisher-Price had to recall five million Rock and Play Sleepers at a cost of $34 million, when the product was alleged to have caused 30 infant deaths. Rising sales, cost cutting, and improved financial forecasts lifted the companys share price. Will Kreiz be successful in rewriting Mattels toy story?

Criteria

Introduction – The introduction provides sufficient background on the topic and previews major points.

Question #1 Response – Explain in a comprehensive manner, in no less than one paragraph, whether the changes at Mattel are emergent, planned, or both.

Question #2 Response – Explain in a comprehensive manner, in no less than one paragraph, your assessment of Ynon Kreizs changes, given the challenges facing Mattel.

Question #3 Response – Explain in a comprehensive manner, in no less than one paragraph, the image or images of change management that Ynon Kreiz exerts at Mattel.

Conclusion  – The conclusion is logical, flows from one question to the next question, and reviews the major points.

Assignment Questions

Which of the changes at Mattel are emergent, and which are planned?

What is your assessment of Ynon Kreizs changes, given the challenges facing the company?

What image or images of change management does Ynon Kreiz illustrate?

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