Mattel Case PDF

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Mattel case study...

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GBA 490 016

Johnny Thompson

Appendix A – Dominant Economic Characteristics A. Industry: U.S. TOY AND CRAFT SUPPLIES WHOLESALING INDUSTRY B. Market Size: $28.3 billion in 2018 C. Scope of Competitive Rivalry: Fierce competition. Mainly Mattel vs. Hasbro. Mattel and Hasbro share 25% of market share. Remaining 75% are smaller competitors.

D. Market Growth Rate: According to IBIS World revenues for the industry were forecasted to continue a downward trend from 2018 to 2023. Industry revenue was forecasted to decrease at a rate of 1.0 percent per year to $26.9 billion in 2023

E. Stage in Product Life Cycle: Most of their money makers are in the decline stage. F. Number of Companies in Industry: Notable competitors in U.S. are Hasbro, Jakks Pacific, Just Play Products, Lego, Mega Entertainment, Moose Toys, Spin Master and Vtech. International competitors include Hasbro, Famosa, Giochi Preziosi, Lego, MGA Entertainment, Playmobil, Ravensburger, Simba, Spin Master and Vtech.

G. Type of Customers: Thrifty parents shopping for their children. Age has shifted to younger children. Example: Barbie target from 3- 9 to 3-6 years of age. Kids outgrowing toys at a faster rate, particularly as they entered the 8 to 12 age range, so main audience is from babies (with their purchased fisher price section) to kids up to 12. H. Distinctive Features: Mattel is one of the largest and recognizable children’s toy manufactures. Named one of the world’s most ethical companies by Ethnisphere Magazine in 2013 Number 2 on Corporate Responsibility Magazine’s “100 Best Corporate Citizens” list Deep history High innovation

O: Adoption of online format Sales in the Asia Pacific region Social media influence

T: Bankruptcy of retailers Parents wanting to spend less on toys Strong competition Seasonality of sales

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Appendix B – PESTEL Analysis POLITICAL – Strong Moderate Weak • Political stability • Corruption Levels • Intellectual property protection • Taxation • Wage Regulation • Industrial safety regulations • Pricing regulations ECONOMIC – Strong Moderate Weak • Interest Rates • Inflation Rates • Economic Growth Rate • Labor Costs • Work force skill • Efficiency of financial markets • Infrastructure strength • Exchange rates • Unemployment Rate SOCIO-CULTURAL – Strong Moderate Weak • Demographics • Culture • Leisure spending habits • Education level TECHNOLOGICAL – Strong Moderate Weak • Adaptation of new technology • Technology in market • Impacts on the cost structure • Impacts of supply chain ENVIRONMENTAL – Strong Moderate Weak • Weather • Attitudes toward “Green” products or substitutes • Waste management • Pollution regulations LEGAL – Strong Moderate Weak • Employment Law • Health and safety laws and regulations • Intellectual property law • Consumer protection law • Discrimination law

O: Adopt cultural changes

Johnny Thompson

GBA 490 016

Johnny Thompson

Direct sales Green toy movement Licensing, toy rights of characters from hit TV shows and films

T: Digital Gaming – Especially free to play games Seasonality of sales

Appendix C – Driving Forces •

Precaptia disposable income o

•

Family size o

•

Households with higher income will spend more on luxury goods like toys and games

More kids = more demand for toys

Competition/Rivalry o

Mainly Rivaling Hasbro

o

Loss of Disney Princess line

o

Hasbro greater revenues

o

Mattel acquired Mega Bloks – competition with Lego ▪

•

Supply Chain Management o

Mattel has deep history with suppliers

o

Owns many own factories

o

Price cut by outsourcing production

o

Is diverse in countries to avoid political instability ▪

o

Mainly positive

Direct purchasing without wholesalers ▪

•

Seems negative, losing to Hasbro?

Problematic and negative

Bargaining Power of Buyers o

Easy changing of consumer tastes

o

Children getting older younger

o

Bankruptcy of retailers

o

Must compete for self-space with private retailers

GBA 490 016 o

Johnny Thompson Walmart, Toys R Us, and Target, are responsible for 35% of worldwide sales ▪

•

Threat of New Entrants ▪

•

Have considerable buying power and can put price pressures on Mattel

Very Low Threat

o

Mattel is the second largest toy manufacture

o

New entrants are likely unable to compete with Mattel’s size and international establishment

o

New entrants would likely cut into other small and privately owned businesses market share

o

Threat from other large retailers introducing private-label toys

Threat of Substitutes ▪

Large threat

o

The introduction of digital gaming is sweeping the market

o

Must adapt to slower growthier and fiercer rivalry

o

Must adapt to digital formatting

O: Online social media growth in advertising Direct sales through company website Sales through Amazon Digital sales from retailers help T: Substitutes are more common Most revenue is currently generated through traditional sales Must put money towards development of technology while already in decline

Appendix D – 5 Forces Rivals – Score: • • • •

Strong/Moderate/Weak

Differentiated Products (Significant = 0, Weak = 1) Demand (Fast Growing = 0, Otherwise = 1) Switching Costs (Yes = 0, No = 1) Excess Production Capacity (No = 0, Yes = 1)

0 1 0 1

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TOTAL

Substitutes – Score: • • • •

•

1 1 0 2

Strong/Moderate/Weak

Strong/Moderate/Weak

Differentiated Products (Significant = 0, Weak = 1) Demand (Strong = 0, Otherwise = 1) Switching Costs (Yes = 0, No = 1) Buyers Large and Few in Number (No = 0, Yes = 1) Buyers Well Informed (No = 0, Yes = 1) Buyers Able to Postpone Purchase (No = 0, Yes = 1) TOTAL

Suppliers – Score: • • • • •

Strong/Moderate/Weak

Demand (Not Fast Growing = 0, Fast Growing = 1) 0 Margins (Not Healthy= 0, Healthy = 1) 0 Entry Barriers (Yes = 0, No = 1) 0 o Barrier: Economies of scale of larger companies o Barrier: Long history in other companies o Unable to license since larger companies fight for these rights TOTAL 0

Buyers – Score: • • • • • • •

2

Good Substitutes Available (No = 0, Yes = 1) Comparable or Better Value (No = 0, Yes = 1) Switching Costs (Yes = 0, No = 1) TOTAL

New Entrants – Score: • • •

Johnny Thompson

0 0 1 1 1 1 4

Strong/Moderate/Weak

Differentiated Products (Weak = 0, Significant = 1) Demand > Supply (No = 0, Yes = 1) Switching Costs to Change Supplier (No = 0, Yes = 1) Substitutes for Suppliers Goods (Yes = 0, No = 1) TOTAL

1 0 0 0 1

Competitive Environment: Friendly or Hostile Hostile O: Adopt electronics and online format T: Direct competition and many substitutes

Appendix E – Key Success Factors •

Reputation o Mattel has a reputation that is relatively good ▪ Very old company with lots of history ▪ Toy recall because of led o Ability to Licenses

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o o o

Johnny Thompson ▪ Major factor for the big players Ability to innovate ▪ Must engage customers Ability to control stock ▪ Lag time and seasonality Effective cost controls ▪ Outsourcing and supply chain management

O: Promote diversity with their products Brand recognition Reinvigorate old product lines Under cut costs if necessary since they have an effective supply chain T: Housholds less willing to spend money on toys Disposable income at whim to the health of the economy Seasonality can be unpredictable, especially if you’re in decline

Appendix F – Competitive Analysis

Mattel

Hasbro

Lego

Jakk’s Pacifi c

Annual Revenue

4.5 B

5.21 B

3.5 B

613 M

Market Share

18.94%

Market Focus

Traditional Toys

Traditional toys

Crafts

Toys

Major Products

Barbie

Transformers

Legos

Basis of Value

Low Cost and Differentiation

Licensing popular brands

Competitive Advantage

Established brand

Licensing

Distribution

Nostalgi a

GBA 490 016 Growth Rate Other Factors

O: To license more T: Negative growth

Johnny Thompson Negative

Small

Small

Small

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Johnny Thompson

Appendix G – Weighted Competitive Analysis Mattel

Hasbro

Jakk’s Pacific

Key Success Factors

Wgt

Rating

WGT Score

Rating

WGT Score

Rating

WGT Score

Ability to License

0.3

1

0.3

2

0.6

1

0.3

Ability to Innovate and expand globally

0.3

2

0.6

3

0.9

2

0.6

Asia Pacific’s Market

0.2

2

0.4

1

0.2

1

0.2

Effective Cost Controls

0.1

3

0.3

3

0.3

2

0.2

Effective Demand Forecasting

0.1

1

0.1

2

0.2

2

0.2

Ability to Penetrate

Total

1.0

S: Has a higher score than other competitors W: Is getting beat our by Hasbro

1.7

2.2

1.5

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Johnny Thompson

Appendix H – Financial Analysis INCOME STATEMENT

2017

2016

2015

2014

2013

Net Revenue

$4,881,951

$5,454,650

$5,702,613

$6,023,819

$6,484,892

Cost of Goods Sold

(3,061,122)

(2,902,259)

(2,896,255)

(3,022,797)

(3,006,009)

1,820,829

2,554,391

2,806,358

3,001,022

3,478,883

(2,163,652)

(2,035,158)

(2,265,436)

(2,347,308)

(2,310,780)

Operating Income

(342,823)

519,233

540,922

653,714

1,168,103

Interest Expense

(162,164)

(109,491)

(77,007)

(66,804)

(68,975)

Tax

(548,849)

(91,720)

(94,499)

(88,036)

(68,975)

$(1,053,836)

$318,022

$369,416

$498,874

$903,944

2017

2016

$1,079,221

$869,531

600,704

613,798

Other Current Assets

1,431,663

1,456,732

Total Current Assets

3,111,588

2,940,064

$6,238,503

$6,493,794

Total Current Liabilities

1,623,803

1,505,573

Total Liabilities

4,981,048

4,086,012

Total Equity

1,257,455

2,407,782

$6,238,503

$6,493,794

Gross Income Operating Expense

Net Income BALANCE SHEET Cash Finished Inventory

Total Assets

Total Liab + Equity

GBA 490 016

Johnny Thompson

FINANCIAL RATIOS GROWTH RATIOS CAGR (2013-2017) Growth Rate - previous year(2016-2017)

PROFITABILITY RATIOS Gross Profit Margin Operating Profit Margin Net Profit Margin ROA ROE

-6.85% -10.53% 2016 53.19% 9.52% 5.83% 4.90% 13.21%

SUSTAINABILITY RATIOS LIQUIDITY RATIOS Current Ratio Quick Ratio Inventory Turnover Rate Days in Inventory

1.95 1.43 4.73 77.16days

DEBT RATIOS Debt to Asset Debt to Equity Times Interest Earned

30.06 81.06 5.46x

S: Relatively high profit margins and quick inventory turnover rate W: Awful CAGR and bad growth rate

GBA 490 016

Johnny Thompson

Appendix I – Product Life Cycle Develop a PLC chart by graphing Sales Revenue over 10 years

Revenue $7,000,000,000 $6,000,000,000 $5,000,000,000 $4,000,000,000 $3,000,000,000 $2,000,000,000

$1,000,000,000 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

S: Had such a high growth phase W: In the decline phase

Appendix J – Go-to-Market Strategy

Narrow

Differentiated

Low Cost

Narrow Narrow Low Differentiated Cost Strategy Strategy Mid-Cost Provider

Market Segment • Sell in retailers, big box stores, and specialty stores

Broad

GBA 490 016

Johnny Thompson

Broad Overall Low Differentiated Cost Strategy Strategy Uniqueness Drivers • Licensing well known brands

S: Low cost since outsourcing W: Licensing is competitive

Cost Drivers • Expensive and cheap toys

Market Segment: • Outsource to countries where it is cheaper to produce to ys

GBA 490 016

Johnny Thompson

Appendix K – VRINE Drivers & Key Attributes

Valuable

Rare Inimitable Non-Substitutable

Effective Cost Controls Reputation

X X

X X

X

Ability to License

X

X

X

Creator of Most Famous Brand Names Current Market Position Workplace attraction

X

X

X

X

X

X X

X X

X X

X X

X X

Sustainable Competitive Advantage(s): Reliability and nostalgia Brand names that multiple generations grew up with Power to start trends Great workplace reputation that draws talent

S: Strong Market Position Broad franchise management consisting of several brands Talented workforce

W: Seasonality of demand Declining state sales Competitive ability to license Strong competition

Exploitable

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Appendix L – SWOT Analysis • • •

• • • • • • • • •

Opportunities Adoption of online format Sales in the Asia Pacific region Social media influence

Adopt cultural changes Direct sales Green toy movement Licensing, toy rights of characters from hit TV shows and films

Online social media growth in advertising Direct sales through company website Sales through Amazon Digital sales from retailers help

•

Threats

• • • • •

Bankruptcy of retailers Parents wanting to spend less on toys Strong competition Seasonality of sales Digital Gaming – Especially free to play games

• • • • • • • • • • •

Strengths Has a strong current market share Has long history Recognizable brands Has innovation opportunity to adapt to technology Weaknesses Currently losing to Hasbro Most products are in decline phase Has been losing money Considerable debt New executive staff

Strategic SWOT Factors •

•

Sustainable Strengths o Old brands that can be invigorated o Economies of scale o Strong supply chain Irresistible Opportunities o Online adaptations

Johnny Thompson

GBA 490 016 o •

•

Johnny Thompson Mergers with other brands to sustain revenues

Existential Threats o Competition o Fast technological growth o Kids growing up younger Debilitating Weaknesses o Declining products

The Big Strategic Question: How can (the organization) leverage its (Sustainable Strengths) to grow revenues and take advantage of (Irresistible Opportunities) given that the industry is facing (Existential Threats) and (the organization) has (Debilitating Weaknesses)?

They should start a bid war....