Mattel Case Study
2. Discuss the competitive forces that influence profitability potential in the toy industry. Potential entrants
Threat of entry in toy industry is moderate. To develop, produce, and market a new toy takes large capital investment in research, development and marketing a product. Within the toy industry, there are large economies of scale, specifically in the marketing segment. Mattel has many well known brands in the marketplace such as Fisher-Price, Hot Wheels, and Barbie. To have the buyers informed, the company has to invest large capital in advertising and marketing. Without having this done to each product, these toys wouldn’t be successful as successful as they are exactly because of the popularity of these products, it is extremely difficult for new companies to compete in this industry. This advantage decreases the threat that new entrants for Mattel.
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New entrants may have problems setting up distribution channels because large, established companies already dominate them.. For instance, Mattel has set up numerous relationships with big companies such as Wal- Mart, Target and Toys R Us.
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A barrier that new entrants must surpass is the legal barrier. In the toy industrymany products are being patented. Many potential products like ones related to the movie industry, have patents that only certain companies have the rights to. For example, Mattel holds the exclusive right to produce the Barbie doll. This means that new entrants must design new products, or secure the rights to existing products to get into the industry.
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Another barrier for new entrants is government policies. They ensure companies are in accordance with various international, federal, and state regulations and aim to enforce safety standards in attempt to remove products that can create injury to children. In 2007 Mattel recalled
Threat of entry in toy industry is moderate. To develop, produce, and market a new toy takes large capital investment in research, development and marketing a product. Within the toy industry, there are large economies of scale, specifically in the marketing segment. Mattel has many well known brands in the marketplace such as Fisher-Price, Hot Wheels, and Barbie. To have the buyers informed, the company has to invest large capital in advertising and marketing. Without having this done to each product, these toys wouldn’t be successful as successful as they are exactly because of the popularity of these products, it is extremely difficult for new companies to compete in this industry. This advantage decreases the threat that new entrants for Mattel.
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New entrants may have problems setting up distribution channels because large, established companies already dominate them.. For instance, Mattel has set up numerous relationships with big companies such as Wal- Mart, Target and Toys R Us.
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A barrier that new entrants must surpass is the legal barrier. In the toy industrymany products are being patented. Many potential products like ones related to the movie industry, have patents that only certain companies have the rights to. For example, Mattel holds the exclusive right to produce the Barbie doll. This means that new entrants must design new products, or secure the rights to existing products to get into the industry.
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Another barrier for new entrants is government policies. They ensure companies are in accordance with various international, federal, and state regulations and aim to enforce safety standards in attempt to remove products that can create injury to children. In 2007 Mattel recalled
References: ------------------------------------------------- R. Duane Ireland, Robert E. Hoskisson, Michael A. Hitt; Understanding Business Strategy: Concepts and Cases, Second Edition (Pages C-152- 154) ------------------------------------------------- http://www.mightystudents.com/essay/Develop.external.factor.34600 Recommendations The following two options can help Mattel to improve further. The long-term benefits are expected to exceed the costs of implementing the following ideas: The impact of 20 million products being recalled is very expensive and have hurt Mattel in 2007. Having experts to supervise manufacturing plants in China will reduce the likelihood of future recalls and will help the company to reestablish trust from consumers Secondly, as the market leader in the toy industry Mattel should to be innovative and expand its most profitable products. A joint venture with a company to produce educational software could help Mattel gaining future achievements and to regain public trust. Creating educational software that is interactive will be helpful to children in learning foreign languages for example, and can involve some of the characters that Mattel has trademarked These two options will increase market capitalization and achieve higher performance level for Mattel.