Friday, May 2, 2008

Mattel making headlines for all the wrong reasons

By Maria Gabriela Marin

There is nothing worse for a company than having a stained public image and/or experiencing a situation where the customer’s perception is that its products are substandard.

The reason is quite simple, public image is quite important because it can potentially affect your prospective customers. Those types of customers may prefer to do business with a reputable company with the highest levels of corporate, social, environmental & quality control standards. Furthermore, if existing or prospecting customers consider a company’s products as substandard, they will simply take their business someplace else.

Mattel, the biggest toymaker in the world, is a great example of the above strategic blunders. Mattel made headlines in 2007 for all the wrong reasons as it announced three toy recalls of Chinese-made toys, which not only raised questions about inadequate quality control standards but made parents consider its toys as substandard products.

Mattel's public image was battered last year when in early August, the company recalled 1.5 million Chinese-made toys (i.e. Big Bird, Elmo, Dora the Explorer and Diego) because of excessive levels of lead paint, which can cause brain damage if young children ingested it.

Later in the same month, Mattel recalled millions of more toys because of dangerous levels of lead paint or small magnets that could be swallowed by children. At the time, Robert Eckert, Mattel’s Chief Executive Officer, said that the “safety of children is our primary concern, and we are deeply apologetic to everyone affected." He added "we don't want to have recalls, but we don't hesitate to take quick and effective action to correct issues as soon as we've identified them to ensure the safety of our products and the safety of children." (link to youtube video of Mattel's CEO announcing one of the company's three toy recalls http://www.youtube.com/watch?v=xH9O8JlvOe4)

Making good on his word regarding safety of his company’s products, Eckert announced in September another recall of 848,000 Chinese-made toys (i.e. Barbie’s pet figurines and furniture sets) that contained excessive amounts of lead paint.

Damage was done. Mattel’s third quarter results were below analyst’s expectations and its stock price spiraled down to hit rock bottom in November. Since then, Mattel bounced back as parents regained confidence in the toymaker and forgot about these series of nightmarish recalls.