Mattel Responds to Ethical Challenges Essay

Mattel, Inc. is a spheric leader in designing and manufacturing romances and family reapings. known for differentiates such as Barbie, Fisher-Price, Disney, lively Wheels, Matchbox, Tyco, Cabbage slice Kids, and board games, the partnership boasts nearly $5.9 one jillion million in annual revenue. Headquartered in El Segundo, atomic play 20, with offices crossways the world, Mattel markets its intersection points in over 150 nations.It entirely scratch offed in a California garage forgeshop when Ruth and Elliot Handler and Matt Matson founded Mattel in 1945. The bon ton started out making picture frames, but the founders soon accepted the lucrativeness of the run industry and switched their emphasis to short-changes. Mattel became a publicly owned go with in 1960, with sales exceeding $ atomic number 6 million by 1965. everyplace the next forty old age, Mattel went on to become the worlds largest toy club in terms of revenue.In spite of its overall success , Mattel has had its voice of losses over its history. During the mid to late 1990s, Mattel lost millions to declining sales and braggart(a) note organization acquisitions. In January 1997, JillBarad took over as Mattels CEO. Barads management-style was characterized as strict and her tenure at the helm proved gainsay for galore(postnominal) employees. While Barad had been successful in building the Barbie brand to $2 gazillion by the end of the 20th century, growth slowed in the early 21st. Declining sales at outlets such as Toys R Us marked the start of some difficulties for the retailer, responsibilities for which Barad accepted and resigned in 2000.Robert Eckert replaced Barad as CEO. Aiming to turn things around, Eckert sold unsuccessful units and put off hundreds of jobs. In 2000, under Eckert, Mattel was granted the laid-back uply sought-after licensing covenant for products related to the Harry Potter series of books and movies. The attach to continued to infla te and build its reputation, even earning the Corporate Responsibility Award from UNICEF in 2003. Mattel released its start Annual Corporate Responsibility topic the following year. In 2011 Mattel was recognized as one of Fortune cartridge holders 100 beat out Companies to Work For for the fourth consecutive year.MATTELS CORE PRODUCTSBARBIE AND AMERICAN filleAmong its many lines of popular toy products, Mattel is famous for owning top girls brands. In 1959, Mattel introduced a product that would change its approaching forever the Barbie doll. mavin of the founders, Ruth Handler, had observe how her daughter loved playing with paper cutout dolls. She decided to create a doll based on an adult sooner than on a baby. Barbie took off to become one of Mattels critical product lines and the number one girls brand in the world. Since her introduction,Mattel has sold more than 1 billion Barbie dolls in over 150 countries. The Barbie line todayThis material was substantial by Debbie Thorne, John Fraedrich, O.C. Ferrell, and Jennifer Jackson, with the editorial assistance of Jennifer Sawayda under the direction of O.C. Ferrell and Linda Ferrell. It is provided for the Daniels breed Ethics Initiative at the University of New Mexico and is intended for class manner tidings rather than to illustrate effective or ineffective handling of administrative, measureable, or legal decisions by management. Users of this material ar prohibited from claiming this material as their own, emailing it to others, or placing it on the Internet. Please call O.C. Ferrell at 505-277-3468 for more avowation. (2011) Includes dolls, ragories, Barbie softw atomic number 18, and a broad assortment of license products such as books, appargonl, food, hearthstone furnishings, home electronics, and movies.To supplement the Barbie line, in 1998 Mattel acquired a popular younger type of doll. Mattel inform it would pay $700 million to Pleasant Co. for its high-end American young wo man collection. American Girl dolls are sold with books about their lives, which attain place during important periods of US history. The American Girls brand includes several book series, entrywayories, clothing for dolls and girls, and a magazine that ranks in the top ten American barbarianrens magazines.HOT WHEELS lively Wheels roared into the toy world in 1968. More than thirty days later, the brand is hotter than ever and includes high-end collectibles, NASCAR (National Association for run Car Auto Racing) and Formula One models for adults, high-performance cars, track adapts, and play sets for children of all ages. The brand is connected with travel circuits world considerable. More than 15 million boys aged five to 15 are avid collectors, for each one owning forty-one cars on average. Two alive(p) Wheels cars are sold every second of every day. The brand began with cars designed to dally on a track and has evolved into a lifestyle brand with licensed Hot Wheels shir ts, caps, lunch boxes, backpacks, and more. Together, Hot Wheels and Barbie generate 45 percent of Mattels revenue and 65 percent of its profits.CABBAGE PATCH KIDSSince the introduction of fabricate Cabbage tinkers dam Kids in 1982, more than 90 million dolls ask been sold worldwide. In 1994, Mattel took over marketing these beloved dolls after buy product rights from Hasbro. In 1996, Mattel created a new line of Cabbage Patch doll, called Snack cadence Kids, which was expected to contact with immense success. The Snacktime Kids had moving mouths that enabled children to feed them plastic snacks. However, the product backfired. The toy had no on/off switch and reports of childrengetting their fingers or hair caught in the dolls mouths surfaced during the 1996 holiday season. Mattel voluntarily pulled the dolls from store shelves by January 1997, and offered consumers a cash refund of $40 on returned dolls. The U.S. Consumer Product sentry go delegation applauded Mattels hand ling of the Snacktime Kids locating. Mattel effectively managed a situation that could easily seduce created bad publicity or a crisis situation. Mattel stopped producing Cabbage Patch Kids in 2000.MATTELS COMMITMENT TO ETHICS AND SOCIAL RESPONSIBILITYMattels core products and business environment create many ethical issues. Because the troupes products are designed primarily for children, it moldiness be cranky to cordial aids about childrens rights. It must also be cognisant that the inter subject environment often complicates business transactions. Different legal systems and heathen expectations about business can create ethical conflicts. Finally, the use of engineering may present ethical dilemmas, especially regarding consumer privacy. Mattel has recognized these potential issues and interpreted steps to strengthen its commitment to business ethics. The familiarity also purports to take a stand on social responsibility, encouraging its employees and consumers to do th e same.privateness AND MARKETING TECHNOLOGYOne issue Mattel has tried to address repeatedly is that of privacy and online engine room. Advances in technology realise created special marketing issues for Mattel. The partnership recognizes that, because it markets to children, it must communicate with parents regarding its corporate marketing strategy. Mattel has taken steps to inform twain children and adults about its philosophy regarding Internet-based marketing tools, such as the Hot Wheels website. This website discontinues a lengthy online privacy policy, part of which is excerpted belowMattel, Inc. and its family of companies (Mattel) are affiliated toprotecting your online privacy when visiting a website operated by us. We do not collect and give any personal information online from you unless you volunteer it and you are 13 or older. We also do not collect and keep personal information online from children under the age of 13 without consent of a parent or legal guardi an, except in limited fortune authorized by law and described in this policy.By guarantee parents that their childrens privacy will be respected, Mattel demonstrates that it takes its responsibility of marketing to children seriously.EXPECTATIONS OF MATTELS BUSINESS PARTNERSMattel, Inc. is also making a serious commitment to business ethics in its dealings with other industries. In late 1997, the come with completed its first full ethics audit of each of its manufacturing sites as well as the facilities of its primary funkors. The audit revealed that the company was not using any child grasp or forced labor, a paradox plaguing other overseas manufacturers. However, several contractors were found to be in infringement of Mattels safety and human rights standards and were asked to change their operations or venture losing Mattels business. The company now dribbles an independent monitoring council audit in manufacturing facilities every three years.In an effort to continue i ts strong say on human rights and related ethical standards, Mattel instituted a code of divvy up entitled globular Manufacturing Principles in 1997. One of these principles requires all Mattel-owned and contracted manufacturing facilities to advance business partners commit to ethical standards comparable with those of Mattel. Other principles relate to safety, wages, and bond certificate to local anaesthetic laws. Mattels audits and subsequent code of conduct were designed as preventative, not punitive measures. The company is dedicated to creating and encouraging obligated business practices throughout the world.1 Mattel, Inc., Online Privacy Policy,http//www.hotwheels.com/privacy-policy (accessed wonderful 23, 2011).Mattel also claims to be committed to its sketchforce. As one company consultant noted, Mattel is committed to improving the aptitude level of builders so that they will experience increased opportunities and productivity. This teaching reflects Mattels concern for relationships between and with employees and business partners. The companys code is a signaling to potential partners, customers, and other stakeholders that Mattel has made a commitment to fostering and upholding ethical values.LEGAL AND ETHICAL BUSINESS PRACTICESMattel prefers to partner with businesses similarly committed to high ethical standards. At a minimum, partners must comply with the local and national laws of the countries in which they operate. In addition, all partners must respect the intellectual post of the company, and support Mattel in the protection of assets such as patents, trademarks, or copyrights. They are also responsible for product safety and theatrical role, protecting the environment, customs, evaluation and monitoring, and compliance.Mattels business partners must mother high standards for product safety and quality, adhering to practices that meet Mattels safety and quality standards. In recent years, however, safety standards have be en seriously violated, which will be discussed in more detail later. Also, because of the global nature of Mattels business and its history of leadership in this area, the company insists that business partners strictly adhere to local and international customs laws. Partners must also comply with all import and export regulations. To assist in compliance with standards, Mattel insists that all manufacturing facilities provide the following1 Full access for on-site inspections by Mattel or parties designated by Mattel2 Full access to those records that will enable Mattel to determine compliance with its principles3 An annual statement of compliance with Mattels Global Manufacturing Principles, signed by an officer of the manufacturer or manufacturing facility2With the creation of the Mattel Independent Monitoring Council (MIMCO), Mattel became the first global consumer products company to apply such a system to facilities and core contractors worldwide. The company seeks to hold up an independent monitoring system that provides checks and balances to help ensure that standards are met.If sure aspects of Mattels manufacturing Principles are not being met, Mattel will try to work with them to help them fix their problems. New partners will not be employ unless they meet Mattels standards. If corrective action is advised but not taken, Mattel will terminate its relationship with the partner in question. Overall, Mattel is committed to both business success and ethical standards, and it recognizes that it is part of a continuous onward motion process.2 Mattels Commitment to Ethics, e melodic phrase Ethics, http//www.e-businessethics.com/mattel9.htm (accessed terrific 23, 2011).MATTEL CHILDRENS FOUNDATIONMattel takes its social responsibilities very seriously. Through the Mattel Childrens Foundation, established in 1978, the company promotes philanthropic grant and community involvement among its employees and makes charitable investments to better the lives of children in need. Funding priorities have included building a new Mattel Childrens Hospital at the University of California,Los Angeles (UCLA), sustaining the Mattel Family Learning Program, and promoting giving among Mattel employees.In November 1998, Mattel donated a multiyear, $25 million gift to the UCLAChildrens Hospital.The gift was meant to support the existing hospital and provide for a new state-of-the-art facility. In honor of Mattels donation, the hospital was renamed Mattel Childrens Hospital at UCLA.The Mattel Family Learning Program utilizes computer learning labs as a way to advance childrens basic skills. Now numbering more than eighty throughout the United republics, Hong Kong, Canada, and Mexico, the labs offer software and technology designed to help children with special needs or limited position proficiency.Mattel employees are also encouraged to participate in a wide range of volunteer activities as part of Mattel Volunteers Happy to Help. Employees servi ng on boards of local nonprofit organizations or helping with ongoing nonprofit programs are eligible to apply for volunteer grants supporting their organizations. Mattel employees contributing to higher didactics or to nonprofit organizations serving children in need are eligible to have their personal donations matched dollar for dollar up to $5,000 annually.INTERNATIONAL MANUFACTURING PRINCIPLESAs a U.S.-based multinational company owning and operating facilities and contracting worldwide,Mattels Global Manufacturing Principles reflect not only its need to conduct manufacturing responsibly, but to respect the cultural, ethical, and philosophical differences of the countries in which it operates. These Principles set uniform standards across Mattel manufacturers and attempt to take in both employees and consumers.Mattels Principles cover issues such as wages, work hours, child labor, forced labor, discrimination, freedom of association, and working conditions. Workers must be pa id at least minimum wage or a wage that meetslocal industry standards (whichever is greater). No one under the age of 16 or the local age limit (whichever is higher) may be allowed to work for Mattel facilities. Mattel refuses to work with facilities that use forced or prison labor, or to use these types of labor itself. Additionally, Mattel does not tolerate discrimination. The company states that an various(prenominal) should be hired and employ based on his or her abilitynot on individual characteristics or beliefs. Mattel recognizes all employees rights to choose to associate with organizations or associations without baulk. Regarding working conditions, all Mattel facilities and its business partners must provide safe working environments for their employees.ISSUES WITH OVERSEAS MANUFACTURINGpatronage Mattels best efforts, not all overseas manufacturers have faithfully adhered to its high standards. Mattel has come under scrutiny over its sale of unsafe products. In Septem ber 2007, Mattel announced recalls of toys containing lead winder. The problem surfaced when a European retailer discovered lead paint on a toy. An estimated 10 million individual toys produced in china were affected. Mattel quickly stopped production at lee(prenominal) Der, the company officially producing the recalled toys, after it was discovered that lee(prenominal) Der had purchased lead-tainted paint to be utilize on the toys. Mattel damn the fiasco on the manufacturers desire to save money in the face of increasing prices. In the last three or five years, youve seen labor prices more than double, crude(a) material prices double or triple, CEO Eckert said in an interview, and I think that theres a lot of pressure on guys that are working at the margin to try to save money.The situation began when Early wakeful Industrial Co., a subcontractor for Mattel owned by Hong Kong toy tycoon Choi Chee Ming, subcontracted the painting of parts of CARS toys to some other China-ba sed vendor. The vendor, named Hong Li Da, decided to line of descent paint from a non-authorized third-party suppliera violation of Mattels exigency to use paint supplied directly by Early Light. The products were found to contain impermissible levels of lead.On August 2, 2007, it was announced that another of Early Lights subcontractors, Lee Der Industrial Co., used the same lead paint found on Cars products. China immediately suspended the companys export license. Afterward, Mattel pinpointed three paint suppliers working for Lee DerDongxin, Zhongxin, and Mingdai. This paint was used by Lee Der to produce Mattels line of Fisher-Price products. It is said that Lee Der purchased the paint from Mingdai due to an intimate friendship between the twain companys owners. On August 11, 2007, Zhang Shuhong, operator of Lee Der, hung himself after pay his 5,000 staff members.Later that month, Mattel was forced to recall several more toys because of stiff magnets in the toys that could c ome loose and pose a choking circumstances for young children. If more than one magnet is swallowed, the magnets can attract each other inside the childs stomach, causing potentially deadly complications. Over 21 million Mattel toys were recalled in all, and parents filed several law law obliges claiming that these Mattel products harmed their children.At first, Mattel blamed Chinese subcontractors for the huge toys recalls, but the company later accepted a portion of the blame for its troubles, while maintaining that Chinese manufacturers were largely at fault. The Chinese view the situation quite differently. As reported by the state-run Xinhua countersignworthiness agency, the spokesman for Chinas General Administration of Quality Supervision and superintendence and Quarantine said, Mattel should improve its product design and supervision over product quality. Chinese original equipment manufacturers were doing the job just as importers requested, and the toys conformed to t he U.S. regulations and standards at the time of the production. Mattel also faced criticism from many of its consumers, who believed Mattel was denying culpability by placing more than of the blame on China. Mattel was later awarded the 2007 Bad Product Award by Consumers International.How did this crisis occur under the watch of a company praised for its ethics and high safety standards? Although Mattel had investigated its contractors, it did not audit the entire supply chain, including subcontractors. Theseoversights left room for these violations to occur. Mattel has also moved to enforce a rule that subcontractors cannot hire suppliers two or three tiers down. In a statement, Mattel says it has spent more than 50,000 hours analyse its vendors and testing its toys. Mattel also announced a three-point plan. This plan aims to tighten Mattels control of production, discover and prevent the unauthorized use of subcontractors, and test the products itself rather than depending on contractors.THE CHINESE GOVERNMENTS REACTIONChinese officials lastly did admit the governments failure to properly protect the public. The Chinese government promised to tighten supervision of exported products, but effective supervision is challenging in such a large country that is so loaded down(p) with corruption. In January 2008, the Chinese government launched a four-month-long nationwide product quality campaign, offering intensive training courses to domestic toy manufacturers to help them brush up on their knowledge of international product standards and safety awareness. As a result of the crackdown, the State Administration for Quality Supervision and critique and Quarantine (AQSIQ) announced that it had revoked the licenses of more than 600 Chinese toy makers. As of 2008, the State Administration for Commerce and Industry (SACI) released a report claiming that 87.5 percent of Chinas newly manufactured toys met quality requirements. While this represents an improvement , the temptation to cut corners remains strong in a country that uses price, not quality, as its main competitive advantage. Where there is demand, there will be nation trying to turn a quick profit.MATTEL VERSUS FORMER EMPLOYEE AND MGAIn 2004, Mattel became tangle in a bitter intellectual property rights battle with occasion employee Carter Bryant and MGA Entertainment Inc. over rights to MGAs popular Bratz dolls.Carter Bryant, an on-again/off-again Mattel employee, designed the Bratz dolls and pitched them to MGA. A few months after the pitch, Bryant leftMattel to work at MGA, which began producing Bratz in 2001. In 2002, Mattel launched an investigation into whether Bryant had designed the Bratz dolls while employed with Mattel. After two years of investigation, Mattel sued Bryant. A year later MGA fired off a suit of its own, claiming that Mattel was creating Barbies with looks similar to those of Bratz in an effort to eliminate the competition. Mattel answered by expanding i ts own suit to include MGA and its CEO, Isaac Larian.For decades, Barbie has reigned supreme on the doll market. However, Bratz dolls have givenBarbie a run for her money. In 2005, four years after the brands debut, Bratz sales were at $2 billion. At the same time, Barbie was suffering from declining sales. In 2008 Barbies gross sales fell by 6 percent. galore(postnominal) analysts believe that Barbie has reached the maturity stage of its product life cycle.Four years after the initial suit was filed, Bryant settled with Mattel under an undisclosed set of terms. In July 2008, a jury deemed MGA and its CEO liable for what it termed intentional interference regarding Bryants contract with Mattel. In August 2008, Mattel received damages in the range of $100 million. Although Mattel first requested damages of $1.8 billion, the company is felicitous with the principle behind the mastery.In December 2008, Mattel appeared to win another victory when a California judge banned MGA from is suing or selling any more Bratz dolls. However, the tide soon turned on Mattels victory. In July 2010, the Ninth U.S. Circuit Court of Appeals threw out the ruling. Eventually, the case came down to whether Mattel owned Bryants ideas under the contract he had with the comapny. In April 2011, a California federal jury rejected Mattels claims to ownership. In another blow to Mattel, the jury also ruled that the company had stolen trade secrets from MGA. check to the allegations, Mattel employees used fake business cards to get into MGA showrooms during toy fairs. Mattel was enjoin to pay $85 million in liabilities, plus an additional $225 million in damages and legal fees. MGA CEO Isaac Larian hasalso announced that he will file an antitrust case against Mattel. Mattel continues to claim that Bryant violated his contract when he was working for the company.MATTEL LOOKS TOWARD THE FUTURELike all major companies, Mattel has brave out its share of storms. The company has faced a serie s of difficult and potentially crippling challenges, including the recent verdict against the company in the Bratz lawsuit. During the wave of toy recalls, some analysts suggested that the companys reputation was battered beyond repair. Mattel, however, has refused to go quietly. Although the company admits to poorly handling recent affairs, it is attempting to rectify its mistakes and to prevent future mistakes as well. With the economic future of the United States uncertain, Mattel may be in for slow growth for some time to come. Mattel is hard at work restoring goodwill and faith in its brands, even as it continues to be plagued with counterweight distrust over the lead paint scandal and its alleged thieving of trade secrets. Reputations are hard won and easily lost, but Mattel appears to be steadfast in its commitment to restoring its reputation.QUESTIONS1. Do manufacturers of products for children have special obligations to consumers and confederacy? If so, what are these r esponsibilities?2. How effective has Mattel been at encouraging ethical and legal conduct by its manufacturers? What changes and additions would you make to the companys GlobalManufacturing Principles?3. To what extent is Mattel responsible for issues related to its production of toys in China? How might Mattel have avoided these issues? 9SourcesLisa Bannon and Carlta Vitzhum, One-Toy-Fits-All How Industry Learned to Love the Global Kid, Wall pathway Journal, Apr. 30, 2003, http//online.wsj.com. hug drug Bryant, Mattel CEO Jill Barad and a Toyshop That Doesnt Forget to Play, New York Times, Oct. 11, 1998. Bill Duryea, Barbie-holics Theyre Devoted to the Doll, St. Petersburg Times, Aug. 7, 1998.Rachel Engers, Mattel Board Members Buy $30 Million in Stock Insider Focus, Bloomberg.com, Dec. 22, 2000. 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