25-1 Case 25 Case 25 Mattel’s China Experience .docx

25-1 Case 25
Case 25
Mattel’s China Experience: A Crisis in Toyland
Mary B. Teagarden
Mattel realized very early that they were always going to be
in the crosshairs of sensi-
tivities about child labor and product safety, and they knew they
had to really play it
straight . . . Mattel was in China before China was cool, and
they learned to do business
there in a good way. They understood the importance of
protecting their brand, and they
invested. 1
M. Eric Johnson
Professor, Dartmouth
1 Bob Eckert, Mattel’s CEO, was concerned but not alarmed
when Jim Walter, senior vice
president of worldwide quality assurance, walked into his office
on Friday, July 13, 2007,
and announced, “We have an issue.” 2 The Mattel executive
had received confirmation that
one of their European customers, Auchan, had found problems
in a routine audit. The paint
on the Sarge die-cast toy cars they produced in China contained
lead levels in excess of U.S.
federal toy safety regulations. 3 Mattel, a company known as
an industry leader in corporate

responsibility, was being pulled into a recall vortex that had
seen a variety of products
produced in and exported from China, including dog food,
toothpaste, tires, and seafood,
recalled in recent weeks. The Sarge recall would be the tip of
the iceberg in which Mattel
would face a major crisis. In the next several months, Mattel
would recall 967,000 Chinese-
made toys, which featured characters such as Batman, Sarge,
Polly Pockets, and various
Barbie accessory toys, for violation of lead safety standards or
magnets detaching. Bob and
his team moved into action to implement the recall process for
Sarge cars and other toys that
might contain excess levels of lead. More importantly, they had
to identify an approach to
the recalls that would protect the valuable Mattel brand and
their sterling corporate reputa-
tion while not undermining their intent to be the “World’s
Premier Toy Brand—Today and
Tomorrow.” 4
THE TOY INDUSTRY
2 Toys are serious business. The global toy market was
estimated to be a $71 billion business
in 2007, an increase of about six percent over the previous year.
5 North America was the
largest regional market with about $24 billion in sales, or 36
percent of the global market.
1 David Barboza and Louise Story, “Toymaking in China,
Mattel’s Way,” The New York Times, July 26. 2007.
2
http:cnnmoney.printthis.clickabilty.com/pt/cpt?action+cpt?actio
n=cpt&title+Mattel+CEO+Bob+Eckert.

3 Mattel communication to the Subcommittee on Commerce,
Trade and Consumer Protection,
September 5, 2007.
4 mattel.com (http://www.mattel.com/about_us/default.asp).
5 http://www.toy-icti.org/resources/wtf_2006_files/frame.htm.
Copyright © 2008 Thunderbird School of Global Management.
All rights reserved. This case was
prepared by Professor Mary B. Teagarden for the purpose of
classroom discussion only, and not to
indicate either effective or ineffective management.
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Mattel’s China Experience 25-2
Infant and Preschool Toys 14.0%
Outdoor and Sports Toys 12.2%
Arts and Crafts 11.8%
Dolls 11.3%
Games and Puzzles 10.9%
Vehicles 10.4%
Action Figures and Accessories 6.3%
Plush Toys 5.9%
Youth Electronics 6.3%

Building Sets 3.2%
All Other Toys 9.5%
EXHIBIT 1
2007 U.S. Toy Sales
by Segment
Source: www.RetailingToday.
com, June 9, 2008.
However, annual sales in the North American market were
slower than in other global mar-
kets, about one percent per year. Europe was the next largest
regional market with about
$19 billion in sales, or 28 percent of the global market. The
European market was growing
at about five percent per year. The Asian region followed with
slightly more than $16 billion
in sales, or 25 percent of the global market. Asia was a bright
spot for the industry, and sales
were forecasted to grow at 25 percent per year, given the
economic growth and growing
middle class in both China and India. Latin America represented
about seven percent of the
global market and had sales of $4.5 billion per year. Latin
America was also forecasted to
have aggressive growth in countries like Brazil and Mexico,
given the growth of the middle
class and the large number of children.
3 The United States had about two percent of the world’s
children, yet they purchased
about half of the world’s toys. The dollars spent in the toy
industry in the United States
dipped about two percent in 2007 to $22.1 billion in sales. 6

Segments like action figures and
accessories showed strong growth with sales increasing eight
percent to $1.4 billion, while
sales of dolls, at $2.5 billion, decreased by eight percent. Other
segments and industry share
are listed in Exhibit 1.
4 In this dynamic industry, children’s preferences were
shifting from traditional toys like
dolls, games, and puzzles to movies, electronics, and video
games. The percentage of chil-
dren under 12, the primary toy industry target customer
segment, was the smallest it had
been in 20 years, and, to make matters worse, children were
playing with toys for fewer
years than their parents did. 7 Anita Frazier, a toy industry
researcher observed, “Young kids
really are the sweet spot for the toy industry, because they’re
not yet distracted by other
entertainment choices as older kids might be.” 8 The toy
industry had evolved from one with
simple, physical toys that emulated adult life (e.g., Tinker Toys,
Lincoln Logs, Barbie) to
one based on hardware and software technology platforms, and
rich, interactive content
which supported fantasy (e.g., Lego Mindstorms NXT, X-Box,
Nintendo Wii). 9
5 The industry had about 900 companies engaged in the
manufacture of toys. The top
50 companies controlled 75 percent of the market. Mattel and
Hasbro dominated with
6 www.RetailingToday.com, June 9, 2008.
7 Eric Clark, The Real Toy Story, 2007.
8 , “U.S. Consumers Buying More Toys,” SCTWeek, 13 (24),

2008, p. 2.
9 Steve Babitch, Enric Gili Fort, Andy Kim, Pam Nyberg, and
Albert Wang, “The Future of Play,” Institute
of Design, Illinois Institute of Technology, 2006.
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25-3 Case 25
control of more than one-third of the toy market in the United
States, and the majority
of the world’s largest competitors were headquartered in the
United States. Mattel’s most
direct competitors were Hasbro, JAKKS Pacific, and LeapFrog.
Exhibit 2 shows the top ten
global toy manufacturers ranked by sales.
6 Competition in the toy industry intensified as a relentless
focus on profit and brand
redefined an industry once known for creativity. Industry giants
like Mattel and Hasbro did
not have to depend on product innovation to compete. Rather,
they depended on television
shows and movies and the creation of new toys, based on brands
they had already devel-
oped or acquired, by doing such things as putting electronics in
Playmobil characters, for
example. These industry giants also exploited economies of
scale and offshore manufactur-
ing. Smaller industry competitors had to rely on innovation
more than the big competitors
with the hope of developing a successful breakthrough, like the
Trivial Pursuit board game

or Beanie Babies. 10 A big hit for the small players made the
difference between struggle and
success.
7 There was a symbiotic relationship between the toy and the
entertainment industries.
Industry expert Eric Clark contended that, “Toys and the
entertainment industry have
become two sides of the same coin—children’s television
programs and some movies exist
only because of product tie-in and are structured to maximize
sales of those products.” 11
Indeed, many of the toys recalled in 2007 were based on Sesame
and Disney charac-
ters. Increasingly, the toy industry was integrating into the
entertainment business. Clark
observed that, increasingly, toy companies viewed “their toys as
entertainment or lifestyle
properties—the books, TV series, and movies are not purely to
sell more toys, but rather to
enhance and reinforce the brand.” 12
8 Five large retailers—Wal-Mart, Target, Toys“R”Us, Kmart,
and KB Toys—sold more
than half of all toys in the United States. 13 Three retailers—
Wal-Mart, Toys “R”Us, and Tar-
get—accounted for 43 percent of Mattel’s consolidated
worldwide sales in 2007. Wal-Mart,
10 Clark, The Real Toy Story.
11 Ibid.
12 Ibid.
13 U.S. Department of Commerce Industry Outlook: Dolls,
Toys, Games, and Children’s Vehicles, NAICS
Code 33993.

Source: http://premium.hoovers.com.ezproxy.t-
bird.edu/subscribe/ind/overview.xhtml?HICID=1207.
Manufacturer 2007 Revenue Headquarter Location
Mattel $5,970.1 m United States
Hasbro $3,837.6 m United States
Namco Bandai $3,833.8 m Japan
LEGO $1,383.9 m Denmark
Sammy Corporation N/A Japan
Sanrio $940 m Japan
JAKKS Pacific $857.1 m United States
LeapFrog $442.3 m United States
RC2 $489 m United States
Ty N/A United States
EXHIBIT 2 Global Toy Manufacturers Ranked by Sales
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the world’s largest retailer and largest toy retailer, sold about
20 percent of Mattel’s toys,
Toys “R”Us sold about 14 percent, and Target sold about nine

percent. These large retailers
also sold competitors’ toys and their own private-brand toys
that they sourced directly, often
from China.
TOY PRODUCTION IN CHINA
9 Companies seeking ever-lower prices have benefited from
what BusinessWeek called the
“China price,” a price that was 30 to 50 percent cheaper than
what it would cost a company
to make the equivalent product in the U.S. 14 Companies
manufacturing in China were able
to produce at the “China price” for a variety of reasons,
including lower business costs:
labor, facilities, plant and equipment, and raw materials were
all cheaper in part because of
differences in absolute costs of labor, for example, and
differences in regulatory oversight
between China and many other countries, including the U.S. For
example, the U.S banned
lead in toys in 1978, whereas China only signed an agreement to
do so in September of
2007. 15 Nevertheless, Chinese officials estimated that 50
percent of their exported products
did not comply with Chinese law. 16 At the same time that the
Chinese government agreed to
ban lead, it also agreed to increase inspections and meet more
regularly on export-related
issues. 17 Skeptics believed that this was a public relations
ploy to protect the reputation of
“China, Inc.” Analysts, while noting the incredible economic
growth in China, identified
the parallel pressure on the physical, technical, and human
resource infrastructure that this
growth had brought. 18

10 Manufacturing in China is not going away. In 2007,
China’s manufacturing sector ranked
fourth in the world after the U.S., Japan, and Germany. China’s
exports to the United States
had grown by approximately 1,600 percent over the previous 15
years. According to the
U.S.–China Business Council, the dollar value of imports from
China was US$287.8 bil-
lion in total, and toys, games, and apparel as industrial
segments represented 40.8 percent
of this volume. 19 The North American toy industry was a
US$24 billion dollar industry,
and 80 percent of these toys were manufactured in China
through company-owned plants
and an extensive network of contractor and supplier
relationships. 20 China toy imports to
the United States accounted for 86 percent of total toy imports
in 2006. This was up from
41 percent 14 years earlier. The rise in toy imports from China
came at the expense of other
toy-exporting countries like Mexico, Japan, Taiwan, and Hong
Kong.
11 Toys were one of the first consumer products to be
produced in China in significant vol-
ume, and Mattel was a pioneer in taking the manufacture of toys
offshore. The importance
of China in this industry could not be underestimated. Most of
the toys produced in the
world were produced in China, and most of these were produced
in second- and third-tier
and smaller cities surrounding Guangzhou and outside of
Shanghai or Hong Kong. The
supply networks for toys and their components were extensive,
increasingly complex, and

sometimes underscrutinized by the companies who branded and
imported the toys. Mattel’s
14 Pete Engardio and Dexter Roberts, “The China Price,”
BusinessWeek, December 6, 2004.
15 www.msnbc.msn.com/id/20726149/.
16 http://energycommerce.house.gov/cmte_mtgs/110-ctcp-
hrg.092007.Teagarden-testimony.pdf.
17 Ibid.
18 Paul Beamish, “The High Cost of Cheap Chinese Labor,”
Harvard Business Review, 2006.
19 www.uschina.org/statistics/tradetable.html.
20 Renae Merle, “Recalls of Toys Pressure Agency: CPSC
Resources Called Inadequate,” WashingtonPost.
com, August 3, 2007.
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25-5 Case 25
network exemplified this complexity with more than 3,000
partners in China alone. 21 By
moving their manufacturing overseas, toy companies shifted
their focus to research and
development, product design, marketing, and other core
business activities of strategic
importance.
12 Companies knew how to take advantage of the benefits of
manufacturing in China
while maintaining product quality and obeying U.S. laws for the
products they imported.
Many companies produced world-class quality products that

were high-tech and difficult
and complex to manufacture in Chinese plants. Companies also
knew how to produce safe,
quality products in China, whether in their own plants or
through contracting relationships
with Chinese suppliers. Indeed, Mattel, one of the high-profile
companies involved in the
toy recalls, had been manufacturing toys in China for 20 years.
If we look at the recall
statistics, Mattel had done a fairly good job of manufacturing
safe toys in China. But the
large number of highly visible product recalls in 2007 was
eroding customer confidence in
products made in China. This was a big problem for China,
where the focus was to move
away from simple toy assembly to high value-added
manufacturing and knowledge work.
The 2007 China product recall timeline is shown in Exhibit 3.
13 Given the global shift of toy manufacture to China, it was
not surprising that the number
of China toy recalls rose from one product category, or three
percent of the total annual
recall in 1988, to three product categories, or 79 percent of the
total annual recall in 2006. 22
Of the 550 toy recalls by the Consumer Products Safety
Commission (CPSC) since 1988,
“. . . only about ten percent (or 54) of recalls were historically
attributable to manufacturing
defects such as poor craftsmanship, overheating of batteries,
toxic paint, and inappropriate
raw materials.” 23 A history of the CPSC appears in Exhibit
4.
14 Lead paint on toys is a recognized danger to young
children who tend to chew on toys,

and thus its use in toy manufacture raises serious alarms.
Exposure to this heavy metal poses
a risk because even low levels of lead are dangerous for young
children, as it can lead to
lower IQ scores according to the Centers for Disease Control
and Prevention. 24 Higher lev-
els of lead can damage children’s brains and nervous systems,
slow growth, create hearing
or behavior and learning problems because their growing bodies
absorb more lead. Chil-
dren’s brains and nervous systems are more sensitive to the
damaging effects of lead than
are adults’ brains. 25 As a result, lead use is banned or
restricted in most developed countries,
but the same is not true for developing countries. 26
15 Environmental and occupational health experts found that
India, China, and Malaysia
still produced and sold paints with levels of lead that exceeded
U.S. safety levels, even
for products intended for use by children. 27 About 50
percent of the paint sold in these
three countries had lead levels 30 times higher than U.S.
regulations. 28 This heavy metal
is used to improve the durability and color luster of paint. One
of these experts, Scott
Clark, commented, “There is a clear discrepancy in product
safety outside the United
States and in today’s global economy; it would be irresponsible
for us to ignore the public
21
www.timesonline.co.uk/tol/news/world/article2259492.ece?print
+yes&random=119.
22 Hari Bapuji and Paul Beamish, “Toy Recalls: Is China Really
the Problem?” Asia Pacific Foundation of

Canada: Vancouver, Canada.
http://www.asiapacific.ca/analysis/pubs/pdfs/2007/toyrecalls.pd
f, November
2007.
23 Ibid, p. 4.
24
http://toys.about.com/od/healthandsafety/f/leadpoisoning.htm.
25 http://www.epa.gov/lead/pubs/leadinfo.htm.
26 http://www.ens-newswire.com/ens/aug2006/2006-08-24-
02.asp.
27 Ibid.
28 Ibid.
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EXHIBIT 3 2007 Timeline of China Export Recalls
March 15: After consumer complaints prompted lab testing,
Canada-based Menu Foods Inc. informed the FDA
that it was recalling cat and dog food made with tainted wheat
gluten. The recall included food sold
under the Iams and Eukanuba labels.
April 30: USDA and FDA officials said chickens on at least 30
Indiana poultry farms in February were fed
remnants of pet food that was contaminated by poisoned wheat
gluten imported from China. The
officials said the farms had since processed the chickens, but
added that the risk to humans is “very
low.” Officials earlier had revealed that the contaminated pet
food was fed to hogs in at least six

states. At least 6,000 hogs were quarantined and euthanized.
May 7: An invoice offered evidence that two Chinese
corporations, Xuzhou Anying Biologic Technology
Development Co. and Binzhou Futian Biology Technology Co.,
were linked to tainted wheat gluten
found in the recalled pet food.
May 10: The Chinese cabinet vowed to crack down on the food
industry, saying it will promote organic
agriculture, beef up inspections of farms and butchers, and
blacklist companies that make tainted
products.
May 24: Responding to reports that diethylene glycol was
found in toothpaste made in China, the FDA announced
it will block Chinese imports of toothpaste until they can be
tested. The action followed reports that
authorities have found the chemical in toothpaste in Panama,
the Dominican Republic, and Australia.
May 30: Beijing announced it will set up a food-recall system.
June 14: Colgate-Palmolive Co. said counterfeit toothpaste
falsely packaged as “Colgate” and possibly
containing diethylene glycol was found in several discount
stores in New York, New Jersey,
Pennsylvania, and Maryland.
June 25: About 450,000 Chinese-made tires sold in the U.S.
were recalled after federal regulators and the
U.S. tire distributor said the tires may lack an important safety
feature designed to make them more
durable.
June 27: The Chinese government said it closed 180 food

manufacturers found to have used industrial
chemicals and additives in food products.
June 28: The FDA announced it would detain all Chinese
shipments of shrimp, catfish, basa, dace, and eel unless
it is proven free of residues of illegal antibiotics and chemicals.
An agency test of 89 samples from
October 2006 to May 2007 showed 25 percent of the farm-raised
seafood contained such residues.
June 29: The European Union said it will follow the lead of the
U.S. Food and Drug Administration, which is
stepping up scrutiny of Chinese farm-raised seafood.
July 2–5: American consumer-protection authorities recalled
Chinese-made children’s necklaces and earrings
that were found to contain dangerously high levels of lead.
July 4: China’s quality-control watchdog said that nearly one-
fifth of the products sold in China that it
studied failed to meet the country’s quality standards.
July 10: Zheng Xiaoyu, the former head of China’s State Food
and Drug Administration, was executed for
dereliction of duty and taking bribes from drug companies.
July 19: The U.S. House Agriculture Committee agreed to
require country-of-origin labels on meats beginning
next year, but it softened penalties and record-keeping
requirements that had concerned many food
retailers and meatpackers who opposed the law.
July 20: China said it had shut down several firms at the heart
of food and drug safety scares. The country’s
quality supervision agency pulled the business license of
Taixing Glycerin Factory, which has been

accused of exporting diethylene glycol—a thickening agent used
in antifreeze—and fraudulently
passing it off as 99.5 percent pure glycerin. The mix of 15
percent diethylene glycol and other
substances ended up in Panamanian medicines that killed at
least 51 people. Also, two companies
linked to melamine-tainted wheat gluten blamed for the deaths
of 16 dogs and cats in North
America had their licenses revoked.
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25-7 Case 25
health threat for the citizens [children or workers] in the
offending countries, as well as
the countries they do business with.” 29 This health hazard
has led to calls for global lead
safety standards.
16 Merle A. Heinrichs, Chairman and CEO of Global Sources,
an Asia-based corporation
that serves as a platform for international trade connecting
buyers and suppliers online,
29 Ibid.
July 23: The European Union’s top product safety cop, on her
first official trip to China, said she has an
“ambitious” agenda and is prepared to send a tough message to
the Chinese government that it
needs to crack down on producers of defective goods sold in the
27-nation bloc.

July 31: The U.S. Department of Health and Human Services
sent a senior official to China to try to reach
agreements aimed at improving the country’s food and drug
safety by the end of the year.
Aug. 2: The U.S. Consumer Product Safety Commission said
Mattel Inc.’s Fisher-Price unit will recall 967,000
toys that may contain hazardous levels of lead paint, including
items featuring popular characters
such as Elmo and Big Bird. The company said it would adjust
second-quarter results by about $30
million to reflect the impact of the recall.
Aug. 7: Mattel Inc. identified the Chinese factory involved in
the company’s recall of 1.5 million Chinese-
made toys believed to contain lead paint. Mattel said the plant
is Lee Der Industrial Co., located in
Guangdong province.
Aug. 13: A Chinese public security official said an owner of
Lee Der Industrial Co., the toy factory at the center
of a major recall by Mattel Inc. earlier this month, killed
himself at his factory’s warehouse in China’s
southern Guangdong province.
Aug. 14: Mattel Inc. issued recalls for millions of Chinese-
made toys that contain magnets that can be
swallowed by children or could have lead paint. The recall
involves 7.3 million play sets, including
Polly Pocket dolls and Batman action figures, and 253,000 die-
cast cars that contain lead paint. Also
recalled were 345,000 Batman and “One Piece” action figures,
683,000 Barbie and Tanner play sets,
and one million Doggie Day Care play sets.

Aug. 22: China claims quality issues associated with imports of
U.S. soybeans, and calls for the U.S. to inves-
tigate the situation. Analysts say the soybean complaint is
simply a retaliatory gesture following the
recent criticism of Chinese products.
Sept. 12: U.S. and Chinese regulators move to ban the use of
lead paint in toys, and promised changes to the
way Chinese imports to the U.S. are scrutinized for safety
compliance after public uproar surrounding
product recalls.
Sept. 14: Under immense international pressure, China’s chief
inspector of exported food said he is working
to strengthen oversight of Chinese products. He also suggested
that China’s food exports had been
unfairly targeted by the public furor over U.S. recalls of
Chinese-made toys and animal feed.
Sept. 18: China restricts the exportation of garlic and ginger to
the U.S., ordering numerous facilities in
Shandong province, a hub for the nation’s agricultural exports,
to stop shipping the foods until they
can abide by tougher safety standards.
Sept. 21: Mattel issued an apology to China over the recall of
Chinese-made toys, saying most of the items
were defective because of Mattel’s design flaws rather than
faulty manufacturing. The company also
said it had recalled more lead-tainted Chinese toys than was
justified.
Sept. 21: U.S. regulators recalled about one million Chinese-
made baby cribs, branded Simplicity and Graco,
after the cribs were linked to at least two infant deaths. In both
deaths, the cribs were assembled

incorrectly by consumers.
Source: Adopted from Wall Street Journal, October 21, 2007.
EXHIBIT 3 2007 Timeline of China Export Recalls (Continued)
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EXHIBIT 4 History of the Consumer Product Safety
Commission
Toy Safety and the Consumer Product Safety Commission
Toy safety is regulated by the Consumer Product Safety
Commission (CPSC) in the United States. The CPSC was
authorized by Congress through the Consumer Product Safety
Act of 1972. The CPSC, an independent govern-
mental agency, was charged with “protecting the public from
unreasonable risks of serious injury or death from
more than 15,000 types of consumer products. . .” Deaths,
injuries, and damage to property from consumer
product injuries cost the United States more than $800 billion
annually. The efforts of the CPSC had contributed
significantly to the 30 percent decline in the rate of deaths and
injuries associated with consumer products over
some 30 years following its authorization, according to
government reports. The CPSC reported 22 toy-related
deaths and an estimated 220,500 toy-related injuries in 2006.
Some potential toy hazards scrutinized by the CPSC
included lead-tainted paint on toys, and other major hazards like
small parts or small magnets that came loose

from the toy and were swallowed.
The CPSC has many responsibilities, including the development
of voluntary standards in collaboration with
industry. They inform and educate consumers through media,
state and local governments, private organizations,
and by responding to consumer inquiries. In addition, they
conduct research on potential product hazards, and
obtain the recall of products or arrange for their repair. The
CPSC does not certify or test products for safety prior
to sale nor do they recommend the safest products or brands.
The agency, with a budget of $66 million in 2006,
employed 420 people who were responsible for monitoring the
safety of more than 15,000 kinds of consumer
products. Janell Mayo Duncan of the Consumers Union
observed that the Consumer Product Safety Commis-
sion had only about 100 field investigators and compliance
personnel nationwide to conduct inspections at ports,
warehouses, and stores of US$24 billion worth of toys and other
consumer products sold in the U.S. each day. She
concluded that they needed more money and resources to
perform more checks.
The CPSC relies on the voluntary compliance of companies who
are required by law to report product safety
hazards for products they have sold as soon as the manufacturer
or importer becomes aware of the problem. The
CPSC collects information from a variety of sources, including
hospitals, physicians, consumer complaints, industry
reports, investigations by the CPSC staff, and company self-
reports. Once the CPSC is notified of a hazard, they
work with the company to initiate and manage a recall.
Sources: http://www.cpsc.gov/about/about.html; Eric Lipton and
David Barbosa, “As More Toys Are Recalled, Trail Ends in
China,” The New York Times, June 19, 2007.

face-to-face, and in print, observed that offshore manufacturers
produce for a variety of
markets, and that, “These markets, whether they are developed
markets similar to Germany
or the U.S., or developing markets such as India and Nigeria,
will all have a variety of prod-
uct standards and specifications. The importer of record is
ultimately responsible to ensure
that the offshore manufacturer he/she has selected, regardless of
country, must understand
the appropriate importing country’s standards, and that the
importer must take responsibil-
ity for the inspection prior to distribution.” 30
MATTEL OVERVIEW
17 California-based toy giant Mattel was founded in 1944
with a vision of capturing the
post–World War II baby boom toy market. And capture they
did. Founders Elliot and Ruth
Handler began building Mattel’s brand image in the mid-1950s
by advertising on the very
popular daily Mickey Mouse Club television program, a bold
move because, at the time, toy
advertising was seasonal. Mattel’s iconic core product, Barbie,
now pushing 50, was intro-
duced in 1959. The company rolled out the equally iconic
product, Hot Wheels, a decade
later. Mattel, a true toy industry offshoring pioneer, began
manufacturing toys in offshore
30 Merle Heinrichs, Commentary, Thunderbird International
Business Review, forthcoming, 2009.

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25-9 Case 25
locations to take advantage of lower manufacturing costs and to
focus corporate resources
and attention on building brand.
18 Mattel’s Fisher-Price division was instrumental in
developing the first toy safety stan-
dards in the industry as an extension of their focus on brand.
Beginning in 1971, Fisher-
Price worked with a team of experts from the American
Academy of Pediatrics, the U.S.
Consumer Product Safety Commission (CPSC), as well as toy
industry designers and engi-
neers, consumers, consultants, and retailers, to develop the very
first voluntary toy safety
standards. Eventually, these were adopted by the industry, as
were Mattel’s international
testing standards developed to ensure compliance with safety
standards. Almost 40 years
later, many of the tests established by this group were still
being used. 31
19 Mattel endeavored to maintain supply network integrity as
they executed an offshore
manufacturing strategy in China and other locations. Roger
Rambeau, a long-time Mattel
employee who worked his way up from the production line to
vice president of manufac-
turing, believed that the company was the leader in protecting
the integrity of their supply
network and a toy safety champion at the forefront of their

industry. Rambeau cited Mat-
tel’s early voluntary collaboration with the U.S. Consumer
Product Safety Commission
and contributions to the development of the American Society
for Testing and Materials
(ASTM), an international product standards organization, as
strong evidence of significant
early efforts by Mattel to maintain supply network and product
integrity. 32
TROUBLE IN TOYLAND
20 In 1973, Mattel had a major change in leadership. After
thirty years at the helm, Elliot and Ruth
Handler left the company as Mattel’s growth stalled due to
operational problems in Mexico and
Asia, and the SEC charged that Mattel had issued misleading
financial reports. Arthur Spear,
a former Revlon executive with extensive manufacturing
experience, inherited a company in
financial distress, characterized as “. . . the most incredible
mess you have ever seen.” 33
21 In an endeavor to improve profitability and maintain
consistent revenue streams, Mat-
tel’s new management team implemented a focus strategy for
maximizing the value of
core brands like Barbie and Hot Wheels. Mattel continued
offshore manufacturing to take
advantage of cost savings from labor arbitrage. By 1979, Spear
had cut Mattel’s debt to
$20 million from $118 million, and diversified its product
offering to include Intellivision,
an electronic game system that was ahead of its time. 34
Spear grew Mattel’s annual sales
from $281 million in 1973 to $1 billion when he retired in 1986.

22 John Amerman followed Arthur Spear as chairman and
CEO, and promised to slash
costs and reinvigorate product design and development.
Amerman, who came from Warner-
Lambert Company’s American Chicle division before joining
Mattel in 1980, took the helm
of a company that was losing money and had very little
diversity in its product line, despite
strong brand names like Barbie and equally strong marketing
skills. He continued the prac-
tice of manufacturing the majority of Mattel’s products in
company-owned facilities around
the world, a practice that was contrary to the industry norm of
contracting manufacturing,
usually to the lowest cost source. 35 In the 1990s, on
Amerman’s watch, Mattel came under
31
http://www.mattel.com/about_us/Corp_Responsibility/CSR_FIN
AL.pdf.
32 http://productglobal.typepad.com/gss/2007/07/mattel-a-
model-.html.
33 David Cay Johnson, “Arthur Spear, Who Led Mattel through
Fiscal Crises, Dies at 75,” The New York
Times, January 4, 1996.
34 Ibid.
35 Richard W. Stevenson, “More Trouble in Toyland,” The New
York Times, December 20, 1987.
017.indd 9 11/20/09 6:51:57 PM11/20/09 6:51:57 PM

fire from critics charging that the company was running
sweatshops in Asia and employing
underaged workers in Indonesia.
23 As a response to this public relations threat, Mattel’s
Global Manufacturing Principles
(GMPs) were developed and introduced around the world.
Highlights of the GMP standards
are shown in Exhibit 5. These comprehensive GMPs provided a
framework within which
all manufacturing for Mattel must be conducted, regardless of
whether it was done in their
company-owned plants or in contractors’ plants. These
principles were supported and rein-
forced by an independent monitoring system, Mattel’s
Independent Monitoring Council
(MIMCO), created to ensure that GMP standards were
consistently met. MIMCO was
headed by Dr. Prakash Sethi, a distinguished professor at
Baruch College’s Zicklin School
of Business.
EXHIBIT 5 Mattel’s Global Manufacturing Principles
Mattel’s Global Manufacturing Principles (GMP) apply to all
parties that manufacture, assemble, license, or
distribute any product or package bearing any of the Mattel
logos. GMP provides guidance and minimum
standards for all manufacturing plants, assembly operations, and
distribution centers that manufacture or
distribute Mattel products. GMP requires safe and fair treatment
of employees and that facilities protect the
environment while respecting the cultural, ethnic, and
philosophical differences of the countries where Mattel
operates. GMP also requires internal and periodic independent

monitoring of our performance and our partners’
performance to the standards.
Mattel is committed to executing GMP in all areas of its
business, and will only engage business partners who
share our commitment to GMP. Mattel expects all its business
partners to adhere to GMP, and will assist them
in meeting GMP requirements. However, Mattel is prepared to
end partnerships with those who do not comply.
Mattel and its partners will operate their facilities in
compliance with applicable laws and regulations. Mattel has
defined the following overarching principles to which all
facilities and partners are required to comply. These prin-
ciples are dynamic and evolving to continually improve our
efforts to ensure ongoing protection of employees and
the environment. In addition, Mattel has developed a
comprehensive and detailed set of underlying procedures
and standards that enable us to apply and administer our GMP
in the countries where we operate. The procedures
and standards are updated and refined on an ongoing basis.
1. Management Systems
a. Facilities must have systems in place to address labor,
social, environmental, health, and safety issues.
2. Wages and Working Hours
a. Employees must be paid for all hours worked. Wages for
regular and overtime work must be compensated
at the legally mandated rates.
b. Wages must be paid in legal tender and at least monthly.
c. Working hours must be in compliance with country and
Mattel requirements.
d. Regular and overtime working hours must be documented,
verifiable, and accurately reflect all hours

worked by employees.
e. Overtime work must be voluntary.
f . Employees must be provided with rest days in compliance
with country and Mattel requirements.
g. Payroll deductions must comply with applicable country and
Mattel requirements.
3. Age Requirements
a. All employees must meet the minimum age for employment
as specified by country and Mattel
requirements.
4. Forced Labor
a. Employees must be employed of their own free will.
b. Forced or prison labor must not be used to manufacture,
assemble, or distribute any
Mattel products.
017.indd 10 11/20/09 6:51:57 PM11/20/09 6:51:57 PM
25-11 Case 25
EXHIBIT 5 Mattel’s Global Manufacturing Principles
(Continued)
5. Discrimination
a. The facility must have policies on hiring, promotion,
employee rights, and disciplinary practices that
address discrimination.

6. Freedom of Expression and Association
a. The facility must recognize all employees’ rights to choose
to engage in, or refrain from, lawful union
activity and lawful collective bargaining through
representatives selected according to applicable law.
b. Management must create formal channels to encourage
communications among all levels of manage-
ment and employees on issues that impact their working and
living conditions.
7. Living Conditions
a. Dormitories must be separated from production and
warehouse buildings.
b. Dormitories and canteens must be safe, sanitary, and meet
the basic needs of employees.
8. Workplace Safety
a. The facility must have programs in place to address health
and safety issues that exist in the workplace.
9. Health
a. First aid and medical treatment must be available to all
employees.
b. Monitoring programs must be in place to ensure employees
are not exposed to harmful working conditions.
10. Emergency Planning
a. The facility must have programs and systems in place for
dealing with emergencies such as fires, spills,
and natural disasters.
b. Emergency exit doors must be kept unlocked at all times
when the building is occupied. Emergency exits

must be clearly marked and free of obstructions.
11. Environmental Protection
a. Facilities must have environmental programs in place to
minimize their impact on the environment.
Source: Mattel.
24 This approach was effective and formed the basis of
Mattel’s sterling reputation in the
industry. Mattel was the first global consumer products
company to apply such a system
to its facilities and core contractors on a worldwide basis. “. . .
[The] fact is that Mattel—
largely under Sethi’s direction—has gone further than any other
company to be a good
corporate citizen with regard to its Chinese operations.” 36
Given the legacy of pioneering
collaboration with the Consumer Product Safety Commission
and the ASTM to develop
industry safety and testing standards, plus adherence to Mattel’s
GMPs and oversight by
MIMCO, Mattel had earned its position as a role model in the
toy industry for its worker
health and safety and product safety practices.
25 Amerman was followed by Jill Barad, who was credited
with building the Barbie
brand from a dated doll generating $250 million in the mid-
1980s to a collectible earning
$1.9 billion in 1998 during her 18-year “storybook” career at
Mattel. As CEO, Barad aban-
doned Amerman’s focus on quarterly profits and shed
unprofitable assets at a time when
growth in Barbie sales was declining and Mattel continued to
have a very limited new prod-

uct pipeline. When Barad took over in 1997, Mattel had a $206
million profit; the following
year they had a loss of $82.3 million. 37 She led the
acquisition of the Learning Company, a
company that controlled the market for educational software, in
a $3.6 billion deal to secure
Mattel’s online, interactive, high-tech presence and to grow the
top line. 38
36 Jonathan Dee, “A Toy Maker’s Conscience,” The New York
Times, December 23, 2007.
37 Ibid., p. 56.
38 Barbara Kellerman, Bad Leadership, Boston: Harvard
Business School Press, 2004, p. 55.
017.indd 11 11/20/09 6:51:57 PM11/20/09 6:51:57 PM
26 Analysts criticized Barad and Mattel for a lack of due
diligence in the Learning Company
acquisition, for overly aggressive estimates of growth revenue
synergies from the deal, and
for failure to take responsibility for the financial disaster the
deal created. 39 Between 1999
and 2000, Mattel experienced a steady stream of executive
departures. Roger Brunswick,
managing partner of Hayes, Brunswick, and Partners
commented, “In the end, she alienated
the very individuals charged with helping her grow the company
and deliver shareholder
value.” 40 Jill Barad was forced out in 2000.

MATTEL’S NEW MILLENNIUM
27 In May 2000, Robert Eckert took over as Mattel’s CEO,
and BusinessWeek called him
the “anti-Barad.” 41 He assumed the CEO role with no toy
industry experience: Bob came
from Kraft Foods, the only company he had ever worked for. He
inherited a very troubled
company, and many of the top management team had just left.
42 One of his first actions
was to clean up the Learning Company fiasco. Eckert introduced
a new vision for Mattel
that focused on building brands of tried-and-true products—like
Barbie, Hot Wheels, and
Fisher-Price—cutting costs, and developing people.
28 When he took Mattel’s helm, Eckert encountered low
morale, an equally low stock price,
and lack of accountability among his followers, the legacy of
his predecessor. To remedy
this, Eckert worked with a team of line managers to craft a set
of new values for the com-
pany that conveyed collaboration. This well-respected CEO
engaged the organization with
a vision of greater collaboration, a vision that would eventually
become known as One Mat-
tel . 43 These values all built on the word play: Play Fair,
Play Together, Play with Passion,
and Play to Grow . Guided by these values, Mattel believed they
would have to improve
execution across all business segments, globalize into new
markets, extend technologies
and licenses, catch new trends with existing and future
businesses, and develop people to
carry out these missions. The spirit behind the strategies was to
improve shareholder value

by increasing revenues, operating profit margin, and ultimately
cash flow. 44 Mattel’s annual
income statements for December 2003 through December 2007
are shown in Exhibit 6.
29 In line with Eckert’s vision for cutting costs, in 2006
Mattel identified supply net-
work initiatives to reduce manufacturing costs in response to
the rising cost of material.
These included ramping up lean manufacturing practices and
optimizing distribution net-
works among other cost-saving initiatives. 45 Mattel also
identified efforts to streamline the
procure-to-pay process, including reducing cycle time for
ordering and receiving goods.
The interaction of these initiatives resulted in increased
performance pressure on Mattel’s
Chinese contractors, including the Lee-Der Industrial Company
plant, where the supply
network was compromised by the use of lead paint on Sarge
cars.
30 Mattel made about 65 percent of its toys in China, using a
combination of company-
run plants that focused on their most popular core products, and
a network of contract
manufacturers for the remainder of their production needs.
They used this hybrid approach
39 John W. Torget, “Learning from Mattel,” Tuck School of
Business, Dartmouth (No. 1-0072), 2002.
40 Byrne and Grover, “Mattel’s Lack-of-Action Figures,”
BusinessWeek, February 21, 2000.
41 Christopher Palmeri, “Mattel: Up the Hill Minus Jill,”
BusinessWeek, April 9, 2001.
42 Robert Eckert, “Where Leadership Starts,” Harvard Business

Review, November 2001.
43 Douglas A. Ready and Jay A. Conger, “Enabling Bold
Visions,” Sloan Management Review, Winter,
Vol. 49, No. 2, 2008, pp. 70–76.
44
http://www.financialexecutives.org/eweb/upload/chapter/austin/
The%20Worlds%20Premier%20
Toy%20Brands.htm.
45
http://www.shareholder.com/mattel/downloads/Mattel_AnalystH
andout_6-14-07.pdf.
017.indd 12 11/20/09 6:51:57 PM11/20/09 6:51:57 PM
25-13 Case 25
to protect the brand of their core products. Mattel used a higher
proportion of company-
owned plants than the industry standard, which was, in effect, a
higher cost method than
using low-bid local manufacturers for all of their production.
46 About half of Mattel’s toy
revenue was derived from core products made in these
company-run plants. When subas-
semblies and raw materials arrived at company-run plants, they
were analyzed and tested for
safety, either on site or in Mattel’s test laboratories. As part of
the independent monitoring
process, Mattel’s factories were inspected by independent
auditors who posed result reports
on the Internet for public viewing. Contract manufacturers had
to comply with Mattel’s strict
quality and safety operating procedures and the GMPs, just like

a company-run facility. 47
31 Mattel competed on brand. In Mattel’s public statements
about quality, they promised:
Mattel’s reputation for product quality and safety is among its
most valuable assets, and our
commitment to product quality and safety is essential.
Children’s health, safety, and well-
being are our primary concern. We could damage our
consumers’ trust if we sell products
that do not meet our standards.
Our commitment to product quality and safety is an integral
part of the design,
manufacturing, testing, and distribution processes. We will meet
or exceed legal requirements
and industry standards for product quality and safety. We strive
to meet or exceed the
expectations of our customers and consumers.
46 Barboza and Storey, “Toymaking in China.”
47 Ibid.
December
2007
December
2006
December
2005
December
2004

December
2003
Revenue 5,970.1 5,650.2 5,179.0 5,102.8 4,960.1
Cost of Goods Sold 3,192.8 3,038.4 2,806.1 2,692.1 2,530.8
Gross Profit 2,777.3 2,611.8 2,372.9 2,410.7 2,429.5
Gross Profit Margin 46.50% 46.20% 45.8% 47.20% 49.0%
SG&A 1,875.1 1,710.7 1,533.3 1,497.4 1,459.9
Depreciation & Amortization 172.1 172.3 175.0 182.5 183.8
Operating Income 730.1 728.8 664.5 730.8 785.7
Operating Margin 12.20% 12.90% 12.80% 14.30% 15.80%
Nonoperating Income 44.3 34.8 64.0 43.2 35.7
Nonoperating Expenses 71.0 79.8 76.5 77.8 80.6
Income Before Taxes 703.4 683.8 652.0 696.3 740.8
Income Taxes 103.4 90.8 235.0 123.5 203.2
Net Income After Taxes 600.0 592.9 417.0 572.7 537.5
Continuing Operations 600.0 592.9 417.0 572.7 537.5
Discontinued Operations — — — — —
Total Operations 600.0 592.9 417.0 572.7 537.5
Total Net Income 600.0 592.9 417.0 572.7 537.5
Net Profit Margin 10.00% 10.50% 8.10% 11.20% 10.8%
Diluted EPS from Total Net
Income ($)
1.5 1.5 1.0 1.4 1.2
EXHIBIT 6 Mattel’s Annual Income Statements, December
2003–December 2007
(All dollar amounts in millions except per share amounts.
Financial Year End: December)
Source: Mattel’s Annual Reports.

017.indd 13 11/20/09 6:51:57 PM11/20/09 6:51:57 PM
Any compromise to product safety or quality must be
immediately reported to Worldwide
Quality Assurance. 48
32 The United States, where Mattel designed and developed
their toys, generated about
51 percent of their global sales revenue. The international
segment made up the balance.
The products marketed through the international segment were
generally the same as those
developed and marketed by the domestic segment with limited
product localization. In
China, for example, the Barbie sold in the United States was
seen as too mature for little
girls. As a consequence, Barbie in China was given a more
juvenile appearance. Barbie was
Mattel’s largest and most profitable brand, but was experiencing
declining sales. Unlike
Barbie, Hot Wheels did not require local adaptation in China or
most other international
markets. Mattel was successful in extending existing brands; for
example, Barbie movies
on DVD, Barbie Lives in Fairytopia, a live touring stage show,
or the Hot Wheels Hall of
Fame exhibit at the Peterson Automotive Museum.
33 Mattel was the leading toy manufacturer for all children
under eight years of age, pri-
marily due to the strength of their Fisher-Price offerings. With
children age 10 or older,

however, Mattel lost considerable share to other competitors
and non-toy activities. 49 All
of Mattel’s early innovations were developed internally. But
they had relied on acquisi-
tions and licensing over the past 40 years. In addition, all non-
toy-related acquisitions and
internal development ventures had failed. 50 By 2007, Mattel
had a very limited presence in
electronic entertainment, which their business intelligence told
them was a very important
growth segment.
TROUBLE IN TOYLAND REDUX
34 Jim Walter, a senior vice-president for worldwide quality
assurance at Mattel, gave an
interview to the New York Times on July 26, 2007. It was
noted by media insiders that
Mattel rarely gave media interviews. Walter claimed, “We are
not perfect; we have holes
. . . But we’re doing more than anyone else.” 51 Other toy
manufacturers agreed. One week
later, Mattel issued a press release announcing a voluntary
recall of “some products made
by a contract manufacturer in China that were produced using a
non-approved paint pig-
ment containing lead . . .” 52 In this release, they stated that
this procedure was in violation of
Mattel’s standards. Walter commented, “We require our
manufacturing partners to use paint
from approved and certified suppliers and have procedures in
place to test and verify, but
in this particular case our procedures were not followed . . . We
are investigating the cause
to ensure such events do not reoccur.” 53

35 Mattel announced that they were conducting a thorough
investigation of this problem,
and would take appropriate action if they concluded that their
safety procedures were
knowingly ignored. Under CPSC rules, manufacturers were
supposed to report all claims
of potentially hazardous product defects within 24 hours. Mattel
reportedly took months
to gather information and privately investigate problems after
becoming aware of them.
48
http://www.mattel.com/about_us/Corp_Governance/ethics.asp#o
r_consumers.
49 Babitch et al., “The Future of Play.”
50 Ibid.
51 Ibid.
52 http://www.shareholder.com/mattel/news/20070801-
258085.cfm.
53 Ibid.
017.indd 14 11/20/09 6:51:58 PM11/20/09 6:51:58 PM
25-15 Case 25
Between August 14 and September 4, 2007, there were six
separate CPSC recalls of Mattel
products announced. 54 These included:
• Mattel Recalls Batman TM and One Piece TM Magnetic
Action Figure Sets Due to Magnets
Coming Loose (August 14, 2007)

• Mattel Recalls “Sarge” Die-Cast Toy Cars Due to Violation
of Lead Safety Standard
(August 14, 2007)
• Mattel Recalls Barbie and Tanner TM Magnetic Toys Due to
Magnets Coming Loose
(August 14, 2007)
• Mattel Recalls Doggie Day Care TM Magnetic Toys Due to
Magnets Coming Loose
(August 14, 2007)
• Additional Reports of Magnets Detaching from Polly Pocket
Play Sets Prompts
Expanded Recall by Mattel (August 14, 2007). This extends a
November 21, 2006,
original recall of Mattel’s Polly Pocket Magnetic Play Sets.
• Mattel Recalls Various Barbie ® Accessory Toys Due to
Violation of Lead Paint Standard
(September 4, 2007)
36 Mattel began working with “retailers worldwide to
identify affected products, have them
removed from retail shelves, and intercept incoming shipments
and stop them from being
sold.” 55 In this same press release, Robert Eckert
apologized, “We realize that parents trust
us with what is most precious to them—their children. And we
also recognize that trust is
earned. Our goal is to correct this problem, improve our
systems, and maintain the trust of
the families that have allowed us to be part of their lives by
acting responsibly and quickly
to address their concerns.” 56

37 On September 4, 2007, Robert Eckert issued a statement,
“As a result of our ongoing
investigation, we discovered additional affected products.
Consequently, several subcon-
tractors are no longer manufacturing Mattel toys. We apologize
again to everyone affected
and promise that we will continue to focus on ensuring the
safety and quality of our toys.” 57
He added that Mattel had completed its testing program and
spent more than 50,000 hours
investigating its vendors and testing its toys in the preceding
four-week period. 58 Of the
19 million-plus Mattel toys recalled, only 2.2 million of the
recalls were because of lead
paint. The rest of the recalls were the result of faulty design, the
use of small magnets that
could cause choking and internal injuries. 59
38 Toys were pulled from retailers’ shelves. A media frenzy
ensued, and public pressure
mounted. This resulted in Congressional hearings on toy safety,
with a focus on protect-
ing children from lead-tainted imports. Eckert testified to the
House Subcommittee on
Commerce, Trade and Consumer Protection of the Committee on
Energy and Commerce,
stating:
Mattel has been manufacturing products and using contract
vendors in China successfully
and without significant manufacturing-related safety issues for
more than 20 years…
When Mattel does contract with vendors to manufacture toys,
our contracts require that
54 U.S. Consumer Product Safety Commission

(http://www.cpsc.gov).
55 Ibid.
56 Ibid.
57 http://www.truthout.org.issues_06/090507HB.html.
58 Ibid.
59
www.businessweek.com;bwdaily/dnflash/content;Sept2007/db20
070921_569200.
htm?cha=top+news_top+news+index_businessweek+exclusives.
017.indd 15 11/20/09 6:51:58 PM11/20/09 6:51:58 PM
the vendors comply with Mattel’s quality and safety operating
procedures and Global
Manufacturing Principles (“GMP”), which reflect the company’s
commitment to responsible
practices in areas such as employee health and safety,
environmental management, and
respect for the cultural, ethnic, and philosophical differences of
the countries where Mattel
operates. 60
THE PERFECT STORM?
39 By the time the dust settled, Mattel had recalled 19 million
toys made in China. 61 Mattel’s
stock price declined as they took a $40 million charge for
recalls, and their costs increased. 62
Customers threatened to boycott Mattel and all toys made in
China. 63 Bob Eckert had been
called to testify before both U.S. House and Senate hearings on

toy safety. In response to the
hearing surrounding the recalls, Senator Sam Brownback
commented, “Made in China has
now become a warning label.” 64 Despite industry pleas for
voluntary compliance, the U.S.
Senate voted by a large margin to enhance toy safety by passing
a bill that would make the
ASTM 65 International toy safety standard, F963, a
mandatory requirement for all toys sold
in the U.S. 66
40 Chinese government officials saw Mattel’s recall public
relations approach as blaming
China’s manufacturers for what was primarily a Mattel design
problem. This unfavor-
able publicity drew attention from Chinese regulators, and
resulted in Mattel making
a highly publicized public apology to China and China’s quality
watchdog chief, Li
Changjiang. 67
41 When it looked like nothing could get worse for Mattel,
Congress sent a letter in January
2008 charging that Robert Eckert was not honoring the public
commitment he had made to
consumers during the initial recall incident. The text of this
letter is presented in Exhibit 7.
This tsunami of negative events left Mattel executives
perplexed and reeling: How could
this industry giant, a company so highly regarded as a toy
industry model of corporate
citizenship, find itself mired in such a controversy? What next
steps should they take to
recover from the crisis? What must they do to protect their
brand? What should they do to
restore their reputation? Was this crisis a major roadblock to

being the world’s premier toy
brand “tomorrow”?
60 Testimony to Subcommittee on Commerce, Trade and
Consumer Protection of the Committee on
Energy and Commerce, September 19, 2007.
61 Steven G. Brant, “China’s Quality Problem: A Long-Term
vs. Short-Term Thinking Teachable Moment,”
The Huffington Post, 2007; Louise Story and David Barbosa,
“Mattel Recalls 19 Million Toys Sent from
China,” The New York Times, 2007.
62 http://caps.fool.com/Ticker/MAT.aspx.
63
http://www.abc.net.au/news/stories/2007/10/23/2066950.htm;
Bill Mah, “Recall Has Parents Mulling
Toy Boycott,” edmontonjournal.com,
64 http://www.msnbc.msn.com/id/20738314/.
65 ASTM International is one of the largest voluntary standards
development organizations in the world,
and is considered a trusted source for technical standards for
materials, products, systems, and services.
ASTM is known for high technical quality and market
relevancy. ASTM International standards have an
important role in the information infrastructure that guides
design, manufacturing, and trade in the
global economy.
66 http://69.7.224.88/viewnews.aspx?newsID=1300.
67 Andrew Clark, “Mattel: China Toy Scares Our Fault,” The
Guardian, 2007.
017.indd 16 11/20/09 6:51:58 PM11/20/09 6:51:58 PM
25-17 Case 25

EXHIBIT 7 Letter from Congress to Mattel, January 30, 2008
Source:
http://www.house.gov/list/press/md07_cummings/20080130matt
el2.shtml.
Mr. Eckert:
We write you today not only as federal legislators, but as
parents, grandparents, aunts, uncles, neighbors, and
representatives of the children who find joy in the toys
produced by Mattel. We are gravely concerned about the
dangers posed to children by the use of lead in your company’s
products, and urge you, as a father yourself, to
completely eliminate the use of lead in the toys produced by
your company and all of its subsidiaries.
Specifically, we are disturbed by your lack of action upon the
discovery that a red toy blood pressure cuff
manufactured by Fisher Price, Mattel’s subsidiary, contains
high levels of lead; two such cuffs tested at 4,500 and
5,900 ppm of lead, respectively. It was not until Illinois State
Attorney General Lisa Madigan notified you that the
toys were in violation of Illinois state regulations that you took
any action at all to protect our children, and said
action was limited to removing the toy from the shelves of
Illinois stores. We find this response to be deficient, and
encourage you to immediately stop selling the red blood
pressure cuff in all states. If this product is too dangerous
for the children of Illinois, it is too dangerous for children in
the rest of this country.
The effects of lead poisoning are irreversible and tragic, and
every precaution should be taken in the manufac-
ture of products intended for use by children—our most
vulnerable population. The federal lead paint standard
established nearly thirty years ago is 600 ppm. If 600 ppm is too
high for lead paint, then surely lead levels in toys

that are 800% to 900% of this standard are unacceptable.
The State of Illinois has taken a bold step in passing protective
legislation on this issue, and other states and
the federal government are examining legislation at least as
strict as Illinois’ extension of the 600 ppm limit to all
toys, regardless of material. It is unfortunate, however, that toy
manufacturers have not voluntarily enacted these
standards on their own.
In an opinion statement published in the September 11, 2007,
issue of the Wall Street Journal responding to
criticism over recent recalls of numerous toys due to high levels
of lead paint, you wrote:
It is my sincere pledge that we will face this challenge with
integrity and reaffirm that we will do the right
thing. We will embrace this test of our company and the
opportunity to become better . . . [M]y father
encouraged me to earn his trust through my actions rather than
just talk about what I was going to do…
And it is on this principle that Mattel will move forward. We
will earn back your trust with our deeds, not
just with our words.
We encourage you to review your pledge and act accordingly by
recalling the red blood pressure cuff. Furthermore,
we challenge you to live up to your words and set a standard for
the entire industry by completely eliminating the
use of lead in all of the children’s products manufactured by
Mattel. When parents purchase a product from your
company, they are not just purchasing a toy—they are putting
their trust in an established brand that has histori-
cally been believed to provide merchandise that is safe for their
children. We urge you to live up to this reputation.
Sincerely,

Neil Abercrombie
Thomas H. Allen
Sanford D. Bishop, Jr.
Corrine Brown
G.K. Butterfield
Kathy Castor
Donna M. Christensen
Yvette D. Clarke
Wm. Lacy Clay
Emanuel Cleaver
Steve Cohen
Elijah E. Cummings
Artur Davis
Diana DeGette
Rosa L. DeLauro
Keith Ellison
Anna G. Eshoo
Sam Farr
Chaka Fattah
Bob Filner
Barney Frank
Al Green
Raul M. Grijalva
Luis V. Gutierrez
Phil Hare
Baron P. Hill
Maurice D. Hinchey
Sheila Jackson-Lee
Carolyn C. Kilpatrick
Dennis J. Kucinich
John B. Larson
Barbara Lee
John Lewis
Nita M. Lowey

Edward J. Markey
Doris O. Matsui
James P. McGovern
Kendrick B. Meek
Dennnis Moor
James P. Moran
Eleanor Holmes Norton
Bill Pascrell, Jr.
David E. Price
Silvestre Reyes
Steven R. Rothman
Bobby L. Rush
Linda T. Sanchez
Janice D. Schakowsky
Vic Snyder
Betty Sutton
Bennie G. Thompson
Debbie Wasserman
Schultz
Melvin L. Watt
Henry A. Waxman
Robert Wexler
Albert R. Wynn
017.indd 17 11/20/09 6:51:58 PM11/20/09 6:51:58 PM

Unit <Number> <insert name of case> Case Study Analysis
Kaplan University
School of Business
MT460: Management Policy and Strategy
Author: <insert your name>
Professor: Dr. <professor’s name>
Date: <month> <date>, <year>
Name of Case Study
Introduction
<Sstart here and indent 5–-7 spaces; then one inch margins all
around (the right-hand RH margin will be variable but close to
one inch); enter content; double-space between sentences and
paragraphs>
Synopsis of the Situation
<startStart here and indent 5-–7 spaces; then one inch margins
all around; enter content>
Key Issues
<startStart here and indent 5–-7 spaces; then one inch margins
Define the Problem

Alternative
Solution
s
Selected

25-1 Case 25 Case 25 Mattel’s China Experience .docx

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25-1 Case 25 Case 25 Mattel’s China Experience .docx