BA 358 Toy Industry and Recalls
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  • Matt
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BA 358 Toy Industry and Recalls BA 358 Toy Industry and Recalls Presentation Transcript

  • The Toy Industryand Recalls
    BA 358:
    Lacey Bowman
    Allie Bricek
    Frank Castronovo
    Lorelay Corona
    Matthew Vital
  • The Toy Industry
    Term used to describe industries that produce small number of goods in any material
    Hinges, buttons, belts, hooks, etc.
    “Playthings”
    1st based on small-cottage manufactories
    (London) Rise of the middle class, a demand that led to rapid expansion of the industry
    Mid-18th century
    Later, a number of very large manufactories were built.
  • Background (Cont’d)
    The US toy manufacturing industry includes:
    About 700 companies and
    Has annual revenue of $20 billion
    Most manufacturing is conducted in overseas factories
    Primarily in China.
    Highly concentrated industry
    Top 50 companies generate about 75%of revenue
  • Differences betweenSmall vs. Large Companies
    Small Companies:
    • Competitive
    • Specialize in product segment
    • Respond faster to market trends
    Large Companies:
    • Wide selection of toys
    • Have scale advantages in:
    • Purchasing
    • Manufacturing
    • Distributing
    • Selling
    • Marketing
  • US vs. InternationalCompanies (List)
    United States
    Tiger Electronics, Massachusetts
    Fisher Price, New York
    Leapfrog, California
    Playskool, Rhode Island
    International
    Hasbro, global
    Mattel, global
    Bandai, Japan
  • Differences between US & International Companies
    US Traditional Toy Markets
  • Differences between US & International Companies
    International Traditional Toy Markets
  • Major Players
    Mattel
    Hasbro
    Bandai
    Lego
    Tiger Electronics
  • Matel
    "Leadership" at Mattel is the ability to develop and communicate a compelling picture of the future that inspires and motivates others to take action.
    Leaders at Mattel align themselves with Mattel's core values, exhibit leadership competencies and drive for success in our business strategies.
    In this way, we will work to achieve our vision, "Creating the Future of Play.”
    Every day as Mattel's 30,000 employees worldwide strive to realize that vision, our leadership team is guiding the way
  • #1. Mattel
    World’s largest toy company
    Barbie
    Generates 80% of revenue sales
    Hot Wheels
    American Girl
    Polly Pocket
    Matchbox
  • Problems for Mattel
    August 2,2007: toxic toy scandal:
    Recalled almost all Chinese made toys, potential hazard of being colored with lead based paint
    Was up to 11% lead in some U.S. allows for .06%
    August 14,2007: recalled over 18 million products
    Small magnets in toys can detach allowing kids to swallow these items
    September 4,2007: recalled 530,000 affected toys in U.S. and 318,000 outside of U.S. because of levels of lead
    June 5, 2009: Consumer Product Safety Commission fined Fisher-Price division $2.3 million for violation of Code 16 of Federal Regulations for lead paint
  • Mattel: Effects and Response
    Effect on Mattel: Fortune Magazine rated the recall of Mattel’s products The “dumbest moments” in business of 2007
    Increased audits and testing of all products
    Took full responsibility of magnet recall 
    Closed its last American factory in 2002
    2007 primarily manufactured by subcontractors in Asia
  • #2. Hasbro
    Board Games
    Monopoly
    Candy Land
    Scrabble
    Trivial Pursuit
    Pictionary
    Recently, Cranium Inc. for $77.5 million
    2nd largest global toy maker
    Long-lasting toy franchises since the 1920s
    Mr. Potato Head
    G.I. Joe
    Transformers
    My Little Pony
  • Hasbro Manufacturing
    Out sourced the manufacturing of their products, mostly to China
    Hasbro doesn’t directly own the factories
    2007: factories investigated by a workers right group
    Found 1000 junior high students working there, they now send independent auditors since they do not have control over this
    Outside China- Hasbro owns and operates two manufacturing facilities one in Waterford, Ireland, other in East Longmeadow, MA
  • Hasbro Recalls
    2007: Recalled 985,000 easy bake ovens, children would get their hands caught in them
    2008: Recalled 330,000 Nerf Guns, they could cause bruising, abrasions, pinching, blood blisters and welts
  • #3. Bandai
     Business Philosophy:
    to provide timeless entertainment through endless creativity
    3rdlargest toy manufacturer
    Based in Japan
    Popular video games for
    Nintendo
    Sega
    PlayStation
    Game Boy
    Wii
    Xbox
  • Bandai Recalls
    February 2010: Tales of Graces: a Wii game due to glitches
    January 2007: 173,816 video game consoles as a result of or faulty cords that can cause burns and smoke
  • Bandai International
    European Region:
    Works closely with U.S.
    Goal of expanding their sales channels intoEastern Europe.
    North American Region:
    Products for boys is their focus
    Power Rangers
  • #4. Lego
    1934, Danish toymaker
    Ole Kirk Christiansen
    1st line of wooden toys, then produced plastic bricks (legos)
    Popular culture phenomena
    Star Wars
    Harry Potter
  • Lego’s Philosophy
    “Good Play” enriches a child’s life – and its subsequent adulthood.
    Developed and marketed a wide range of products, all founded on the same basic philosophy of learning and developing–through play.
  • About Lego
    Products sold all over the world
    One of the world’s largest toy manufacturers, and largest in construction toys
    Began in 1932
    Took the first two letters of the Danish words LEG GODT, meaning “play well”, and put them together
    There are about 2,350 different elements, plus 52 different LEGO colors
    Total number of active combinations is more than 7,000
    LEGO brick was acclaimed “Toy of the Century” –by Fortune Magazine and by the British Association of Toy Retailers
  • International
    Relocation began in 2006
    LEGO Group has production facilities in Denmark, Eastern Europe and Mexico.
    The new production facilities in Mexico and Eastern Europe have been chosen for their proximity to the
    Group’s main markets in Europe and the USA.
    The most specialized and skills related LEGO products will still be manufactured at the Group’s Danish plant in Billund
    in order to preserve important skills in molding, processing and packing within the group’s own organization.
  • Fun Facts
    Laid end to end, the number of LEGO bricks sold in a year would reach more than five
    Times round the world
    The world’s children spend 5 billion hours a year playing with LEGO bricks
    On average there are 62 LEGO bricks for every person on earth
  • Recalls
    2002-2003: Lego Explore Super truck
    Wheels can separate from truck (potential puncture hazard to children)
    April 8, 2009 and May 6, 2009 :Power Functions IR Speed Remote Control
    Remote controls heating up
     
  • #5. Tiger Electronics
    American electronic-toy manufacturer
    Subsidiary of Hasbro
    Handheld games
    Furby
    Giga Pets
    Leading electronic toys for:
    Star Trek
    Neopets
    Barney
    Jeopardy
    Who Wants to Be a Millionare?
    Winnie the Pooh
  • Tiger Electronic Recalls
    -August 2009: Pooh Poppin' Piano: top of the microphone breaking off
  • Common Trends AmongMajor Players
    Organic & Green Toys
    Eco-friendly raw materials from reused & recycled materials
    Interactive and Digital Toys
    Computerized-virtual world
    Budget Toys
    Basic, nostalgia
    i.e. remote controlled cars
    Movie Toys
    Movie-licensed toys
    Iron Man, Superman, Batmam
  • Minor Players
    Fisher-Price
    Leap Frog
    Playskool
  • Minor Players International
    All 3 of these minor players are traded internationally
    Fisher-Price
    Sold in North America and most European, Latin American, and Asian countries and also in Australia, Canada and New Zealand
    LeapFrog
    Products are available in 4 languages in more than 44 countries and in more than 100,000 classrooms in the U.S.
    Playskool
    U.S., Canada, Europe, Asia, and South America; in 2009 expanded operations in Brazil, China, Russia and Korea by pushing main brands such as Playskool
  • Fisher-Price
    Headquarters: East Aurora, NY
    Infant toys
    Subsidiary of Mattel, Inc. (1933)
    Products
    Little People toys
    Power Wheels
    Others: Disney, Sesame Street, Barney, Dora the Explorer, & See ‘n Say
  • Leap Frog
    Most engaging & effective learning experience for all ages
    Tag, Tag Jr., Zippity, Scout, Leapster
    Based in Emeryville, CA
    Leading designer, developer, & marketer of innovative, technology-based educational products world-wide
  • Playskool
    American company; headquarters in Pawtucket, RI
    Subsidiary of Hasbro
    Educational toys & games for children
    Mr. Potato
    Play-Doh
    Tonka
    Tinker Toys
    Lincoln Logs
    Weebles
    Gloworms
  • Minor Players—Sales Revenue
  • Fisher-Price 2009
    Fisher-Price business unit sales
    Worldwide gross sales- 2.17 billion, down 8 percent
    Fisher-Price brands made up 36.7% of Mattel’s 2009 sales
  • LeapFrog Enterprises 2009 Sales
    Total Sales- 379.8 million, down 17.3% from 459.1 million
    Web Sales- 19.2 million, up 20% from 16.0 million in 2008
    Total International Sales- 73.4 million, down 23.3% from 95.7% million
    Net loss was 2.7 million, versus a net loss of 68.4 million in 2008
  • Playskool 2009 Sales
    Hasbro- global net sales- 4.07 billion
    Net earnings- 375 million
    Playskool made up 11.1% of the revenue made in 2009
  • Innovations
    Webkinz
    Ganz Company
    Stuffed animal with unique “Secret Code”
    Webkinz World website
    Concept: Giga pets
    • Green Toys Inc.
    • Line of classic children’s toys constructed from recycled plastic & other environmentally friendly materials.
    • Helps reduce fossil fuel use and greenhouse gas emissions
    • Improving the overall health and happiness of the planet
  • Production & Operation:Push System
    (def) Produce goods in advance of customer demand using a forecast of sales […]
    Replenish shelves as needed
  • The Toy Industry Productions and Operations: US & International:Value Chain Model
    Management
  • Outsourcing
    70% + toys are manufactured in China
    Reasons for Outsourcing:
    Experience-specialization
    Fast-track response  quick opportunities emerge
    Save money & time
    Market Intelligence3rd party research on market trends
  • Ethical Concerns
    Labor Standards:
    • Increased focus on standards
    • Req. by USA brands
    • Relocation of factories to cheap, remote area
    • Hiding bad practices
    Recall of 45 million toys imported from China
    Consumer Product Safety Improvement Act
    Passed: August 2008
    In-Effect: February 2010
  • Social Responsibility
    AKA Corporate Social Responsibility
    Complexities in international business:
    Balancing the idea of a global stance on social responsibility against the local conditions that may compel differential approaches in the various countries where a firm does business
  • 2006 RECALL TIMELINE for MATTEL
  • MAGNETS
    71 Makes/Models were recalled
    normally used for industrial purposes
    that can easily come loose
    could easily ingest the parts and have them bond together along their digestive tract
    if several magnets were swallowed they would pull together in the stomach and rip through stomach tissue
    Recalled toys:
    Polly Pockets, Batman action figures, and Barbie and her dog Tanner
  • LEAD PAINT
    91 Makes/Models were recalled
    Elevated levels have been shown to create learning and behavioral problems, slow muscle and bone growth, hearing loss, anemia, brain damage, seizures, coma, and in extreme cases, death
    Mattel had previously given manufacturers in China a list of eight paint suppliers that they could use, but in order to cut costs, subcontractors used unapproved suppliers. In some cases the lead content was over 180 times the legal limit
    Recalled toys:
    Many of the toys coated with lead-based paint were from Mattel’s Fisher Price line
  • Hasbro Recalls
    Playskool Team Talkin' Tool Bench 9/22/06
    -Suffocation hazard- toy nails may become forcefully lodged in the back of children's throats.
    Easy-Bake Oven 7/19/07
    -Entrapment and burn hazard.
    Cranium Cadoo Board Game 1/17/08
    -Surface paint on die contains excessive levels of lead.
  • Mattel’s Product Safety
    At Mattel, the safety of our toys is our number one priority. We create and produce some of the world's most beloved toys and brands for children, and we know that with this comes the responsibility to ensure quality and safety. We strive to sustain the trust of consumers by employing strict standards that extend from product design to manufacturing and through distribution.
    Mattel applies internal operating procedures designed to meet or exceed compliance with regulations and laws enforced by the U.S. Consumer Product Safety Commission (CPSC), and their regulatory counterparts around the world.
    If questions ever arise about a product, consumers can contact Mattel directly at our Consumer Relations Call Center. In addition, consumers can make contact 24 hours a day via the company's Consumer Relations Answer Center website.
    Learn more about our approach to product safety: Go to the 2009 Global Citizenship Report
  • China’s Temptation
    Lead paint is cheap & China is under extreme cost pressure
    Lead added to paint speeds up the drying process and enhances moisture resistance, thus reducing corrosion and mold.
  • The Producer Using Lead
    Lee Der Industrial Company
    Mattel allowed them to hold their own inspection tests
    Mattel Trusted Lee Der through a 15 year relationship they had with them
    Mattel also conducted random audits of Lee Der’s testing records as well as some of the products themselves
    In fact the Lee Der had inadequate controls over their supply chain.
    Turns out they had received a shipment of yellow paint, not knowing it contained toxic lead compounds
    Chinese regulators believe that the paint supplier provided Lee Der with false quality of inspection documents.
    As well as Lee Der’s lead detecting equipment failed to detect the presence of lead
    Mattel doesn’t know which of 3 supplier passed the paint
  • Fixing the problem
    Objective 1: Get all information about the recall to the public accurately, quickly, and efficiently.Objective 2: Reassure consumers – especially parents – that Mattel is committed to making safe toys, fixing the problem, and being open and honest.Objective 3: Take responsibility for the recall. Solve the problem while maintaining a stable relationship with China.
  • How Mattel Handles RecalledProducts Involving Magnets
  • How Mattel Handles RecalledProducts Involving Lead Paint
  • Summary and Conclusion
    Background of the toy industry
    Small vs. large and US vs. International companies
    Major Players
    Common Trends Among Major Players
    Minor Players
    Innovations
    Productions and Operations
    Outsourcing
    Ethics and Social Responsibility
    Product Recalls
    Recommendations
  • Any Questions???