Introduction to the case; On Sept 12, 2007, members of Congress, their staff, reporters, and the general public were all gathered in a U. S. Senate hearing room to discuss the issue of toy safety, how to make it better and improve it (Anne T Lawrence, 2008). What brought about the hearing was the Mattel Company, who is known as one of the “world’s premier toy companies” and was the Global leader in the design, manufacture, and marketing of toys along with other family products had ordered a series of recalls of toys and other children’s playthings.
Mattel manufactures over 800 million toys annually. They began their business in Southern California in a garage workshop manufacturing picture frames and eventually the company started selling dollhouse furniture made from their picture frame scraps and when they realized the market potential they switched their business over to manufacturing toys. In 1959 Mattel created their most famous and popular toy, the Barbie Doll. The toy was considered a doll with which little girls could play out their dreams.
Throughout the history of the company Mattel has continued to create and market popular toys such as Hot Wheels and Match Box. They have also merged with successful manufacturers (Fisher Price and Tyco), they also became partners with children’s program companies (Disney, Sesame Street, and Nickelodeon), obtained rights to manufacture popular product lines (Cabbage Patch, American Girl Dolls, Fisher Price and Harry Potter merchandise) and expanded their business by acquiring other companies like (The Pleasant Company).
Situation and Issue, Reasons for the recall; There are two separate reasons why Mattel recalled 19 million toys from August to September of 2007. The fact that both recalls occurred at the same time makes this the biggest recall in the company’s history. The first reason was some of the toys Mattel manufactured were found to be coated with lead paint which if ingested is a potent neurotoxin. The second reason toys were recalled was because of faulty magnets. The design of these toys included parts with high-energy magnets.
These types of magnets are normally used for industrial purposes not to mention they could easily come loose. These magnets pose a threat to young children and infants who 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. The strength of the magnets combined with Mattel’s poor design of the toys made these products a serious hazard for young children. On their website, Mattel listed 71 models and makes of toys that are recalled because of faulty magnets.
Toys affected by this problem included Polly Pockets, Batman action figures, and Barbie and her dog Tanner. Some Polly Pocket sets had been recalled as early as November of 2006. Once this was discovered they changed the design of the toys altogether and in the new design the magnets were locked into place. It wasn’t until August 2007 that Mattel Toy Manufacturers faced a trust issue with their stakeholders and customer base that included children, parents, consumer activists, product safety regulators, and store retailers as well as both their external and internal customers.
Beginning in June of 2007, the United States Consumer Product Safety Commission identified certain toys made in China as unsafe due to lead paint. The CPSC is a federal agency that monitors the safety of 5000 products it has standards that companies are expected to comply with. They can inspect, monitor, prosecute and fine but its budget is limited. Their key regulation is that a company must report a defect and recall it within 24 hours which Mattel did not do. A key regulation was that paint on toys must have legal lead toxicity levels and some of Mattel’s toys did not.
In the 1980’s Mattel first began shifting their production to Asia however they soon became concerned they put their intellectual property at risk by outsourcing their popular products and therefore their patents or ideas would be copied. In 1997, Mattel had developed a detailed code of conduct, called Global manufacturing principles. These principles covered a wide range of issues (wages, child labor, health and safety) to control these overseas operations. The company hired a professor from Bruch College to carry out independent audits at all the overseas facilities to assure the Chinese were in compliance.
Although Global Manufacturing focused primarily on working conditions Mattel also took steps to ensure product quality and safety. In China, Mattel tested products at both at its own facilities and in special test labs. For years Mattel had required vendors to purchase paint from a list of certified suppliers or at least test the paint that they used for compliance to U. S. standards. (Anne T Lawrence, 2008) However, it wasn’t until August 2007 that Mattel Toy Manufacturers recalled over 1. 5 million toys manufactured in China.
One of the first mistakes Mattel makes in the media was to put sole blame on the Chinese vendors they used as the cause of the defects. One of the second mistakes Mattel makes, that they are criticized for in the media, is why did the lead paint issue that was first discovered by them back in June 2007 did it take Mattel until August to react with the social responsibility they had to the public which was to recall the toys within a 24 hour period as mandated by the Consumer Product Safety Commission (CPSC). The company had begun a special investigation in July after a European retailer found lead paint on a Mattel product.
Actually it wasn’t until the New York Times ran an article on August 2, and only then, did Mattel respond by contacting Wal-Mart and Target to pull the toys from their shelves and begin the recall. Mattel’s response was that even though they became aware of the lead paint in July they needed time to investigate the issue internally to see which factories and which toys were involved with the lead. They said they needed the time to determine the extent of the problem and to come up with procedures for the recall. As they issued one recall after another, Mattel sought to reassure its customers that it was aggressively working with the CPSC.
They also issued a press release saying that “Mattel has rigorous procedures and they will continue to be vigilant and unforgiving in enforcing quality and safety”. They set up phone lines and websites that had the recall procedures in place for the public to view. Products recalled were Big Bird, Elmo, Diego, Thomas the Tank, Pet Food, toothpaste and other Mattel toys. The recalls had created concern over toy and product safety, as well as quality control and toy safety inspection processes when outsourcing their work to China.
There were five recalls in 2007 with over 21 million toys involved that were mostly made in China due to a lead paint issue and also poorly designed magnets on the toys that when put inside a child’s mouth they can come loose and if ingested could cause major intestinal blockage and or failure. The recall is particularly alarming to the public since Mattel is known for its strict quality controls as they are considered a role model in the toy industry for how they have their set up their global operations in Asia.
Mattel was also considered socially responsible because in 1997 they created Global manufacturing principles which were considered ethical standards and they were posted in their factories worldwide. In 2007 they achieved status in the top 100 best corporate citizens category. Mattel’s safety standards on their website are socially responsible in that they state “Children’s health, safety, and wellbeing are their primary concern and that “we could damage our consumer’s trust if we sell products that do not meet our standards and we will meet or exceed legal requirements and industry standards for product safety”.
Most of the problem they said had been attributed to the outsourcing of operations to China because 80 percent of the U. S. toys were being manufactured in China and 6. 5 billion toys are exported from China to the US annually. Concerning Mattel’s toys 65 percent of them were also being made in China and that was where the problem was identified in their management operations. Quality Control in China was not being controlled as well as Mattel thought because over there it is so new and unique to them to have standard to comply to.
The supply chain over there can be considered or compared to “intellectual property” for Mattel’s business. You see, the way the Chinese think in their manufacturing processes they are happy enough with having just average quality workmanship with their products. As proof and in fact, there were 177 recalls since 2006 with products manufactured in China. This all came to a surprise to Mattel because when outsourcing to China was done there were in fact Quality Inspections still being incorporated into the outsourcing procedure so it wasn’t like Mattel was lacking quality systems because after all they are a first rate company.
What options could they have considered? Mattel often outsourced what they called “batch testing” to the Chinese factories themselves and they also helped the contractors build their own inspection facilities at those factories but the reality was they couldn’t check everything 100% so it was up to the company’s they chose to do business with to check their work. As you can see there were definitely holes in the system so it was Mattel who needed to take the blame. In its investigation, Mattel learned that some of the external vendors were cutting corners to save money and time.
When you look at it like this, that out of 3 billion toys being sold per year in the U. S. , less than 1% of those are recalled so that measurement appeared to be pretty good. The Effects of the Recall; The trickledown effect of the recalls was lost sales and revenue, definitely damaged their reputation, diversion of resources therefore an enormous amount of revenue wasted, increased customer support provided, threat and the huge expense of hiring lawyers and court fees.
Mattel’s reputation damaged because they had 36 recalls since 1998 (not good). For instance the Power Wheels recall alone involved 10 million ride-on toy vehicles with fires and electrical malfunctions (also not good). Anther damaging and embarrassing thing that happened was the CPSC was the one who mandated the recall after conducting inspections from 1995 to 1998 and even though Mattel was investigating they didn’t comply within the 24 hour mandate of the CPSC regulation.
In response to that issue, Mattel stated in the news, that the CPSC timeline mandate was unreasonable and they needed time to conduct an internal investigation first and maybe so but it still appeared Mattel did not comply so (not good). Even worse Mattel was fined by the CPSC in 2001 the sum of 1. 1 million dollars. To sum up The 2007 Mattel recall timeline on June 8th Mattel was first alerted to possible lead paint contamination. The CPSC deadline to report the problem was supposed to be no later than June 9th but by June 10th the deadline passes and Mattel fails to act.
It wasn’t until June 26th that Mattel files full recall report with the CPSC and on Aug 14th Mattel voluntarily recalls 17. 4 million products with loose magnets and not until Sept 4th did Mattel recall 850,000 toys with a lead paint issue. Then on Oct 25th Mattel recalls Go Diego Go (rescue boats) coated with hazardous levels of lead paint. By Nov 6th Mattel had recalled 155,000 toys manufactured in Mexico because of choking hazards with magnets so it wasn’t just outsourcing to China that there was an issue. Conclusion;
There were positive results in the outcome of Mattel’s recall tactics in dealing with these issues because of the fact that it worked with the CPSC to launch an external media program, the CEO Robert Eckert apologized to parents in a video posted on their website, they (the company) formed a new Corporate Social Responsibility organization within the company, and they also instituted a new three-point safety check system moving forward to prevent any more problems in the future. The bad results were however that they delayed reporting the issues to the CPSC by taking over 1. months to do it and Mattel prematurely shifted the blame on the Chinese companies that did the work for them when they should have taken the blame from the beginning for having a better system in place for monitoring the Quality of the vendors in China. Mattel instituted an SCCT system which is that each crisis is unique and requires a unique response. The ways to apply SCCT is to assess the threat of a particular crisis and put it in a category under the system then have an appropriate response strategy ready before it even happens.
If the threat is defined as Victim, a low reputational threat a denial strategy is used if Accidental, a moderate reputational threat a diminishing strategy is used if preventable, or a high reputational threat a rebuilding strategy is then used. Since in Mattel’s case the recalls were defined under a preventable crisis and it required a rebuilding strategy to repair the company’s damaged image with the public specifically when the CEO publicly apologized on television.
As compensation Mattel offered coupons and they introduced a new stringent inspection process to improve their quality systems moving forward. The negative image Mattel left on the public was the denial tactic it used by trying to shift and pin the blame on China and the diminishing tactic was when they said the media and government blew the issue out of proportion and made it seem worse than it really was. It really was bad so that was not true either.
As the Senate hearings commenced many of the key groups in toy safety offered their perspectives on how to improve both safety and quality systems to members of the Senate. Those that gave their input were the CPSC, the Consumer Product Safety Commission, the consumer advocacy organization of Consumers Union, the American National Standards Institute, the Toy Industry Association, the retailer Toys “R” Us, and Mattel. The Consumers Union proposed eight steps that should be taken to help safeguard the health and safety of American Consumers from unsafe Chinese produced product and foods.
The Toy Industry Association instituted a new mandatory testing program for toys sold in the U. S. Mattel’s CEO, Robert Eckert, told the Senate Committee at the closing, that like many in the room we are parents and care deeply about the safety of their children and that he was deeply disturbed and disappointed by the recent events surrounding Mattel. Concerning the lead paint Mattel’s systems were circumvented, and their standards were violated. Not only were they let down but Mattel let the people down. He then apologized to everyone and romised to change the way they do things moving forward to prevent this from happening again and he stated in fact that he already has begun by implementing a three point safety check system to enforce compliance with all safety regulations. He ended by saying that there is nothing more important to Mattel than the safety of children. Problem: Search the Internet for Mattel. com home page. Review the website and find its Corporate Social Responsibility information with respect to Product Safety. Review the site to learn about its viewpoints on product safety.
Research Mattel’s experience with respect to the product recalls from China. Review the various discussions/issues that you find and answer the following questions: What are some of the challenges Mattel has had with regard to Business Ethics? Did Mattel follow its values of Corporate Social Responsibility? If yes, why? If not, why not? What would you do to improve the corporate image if you were a leader at Mattel? Your work MUST include a reference list. All research should be cited in the body of the paper. Your report should contain a short introduction and conclusion in addition to the body of the paper.
Please note that if you have a source in your reference section, you need to cite it in the body of the paper and vice-versa per APA guidelines. During the past year, Mattel like Intersect Investments faced a trust issue with their customers and internal audiences. Beginning in June 2007, the United States Consumer Products Safety Commission identified certain toys made in China as unsafe due to lead paint. By August 2007 Mattel Toy Manufacturers faced a trust issue with their customers. On August 2, 2007, Mattel recalled over 1. 5 million toys made in China.
News sources questioned why if lead paint was discovered in June, why did it take Mattel until August 2 to recall the toys. The toys were recalled the same day that the “New York Times ran an article about Mattel’s toy safety procedures” (Story, New York Times, August 2, 2007). Mattel responded that although they became aware of the lead in July, they had to investigate which factories and which toys were involved in the lead. That same day Mattel contacted their chief suppliers Wal-Mart and Target and asked them to pull the recalled products from the shelf.
The remainder of the time was spent determining the exact extent of the problem and the procedures for recall. At the time of recall they had phone lines, web sites and procedures in place for recall procedures (Story, New York Times, August 2, 2007). Although after a recall of 1. 5 million toys, Mattel stock did not drop in 2007. In fact, although the United States had a slow Holiday Season, Mattel’s 2007 Annual Report showed a profit for the Fourth Quarter. For the Fourth Quarter, the time of the recall, Mattel reported a net income of $328. 5 million, or $. 89 per share. This compared to the 2006 Fourth Quarter of $286. million, or $. 75 per share. The profit and sales were from international rather than United States domestic (Business Week, Mattel, 2007). Like Intersect Investme … Mattel, “the world’s premiere toy company,” began in Southern California in a garage workshop that manufactured picture frames. When the company started selling dollhouse furniture made from picture frame scraps, they realized the market potential and decided switch to toy manufacturing. In 1959, Mattel created their most popular toy, the Barbie doll. Inspired by paper dolls, Barbie was a three dimensional doll with which “little girls could play out their dreams. Throughout the decades Mattel has continued to create and market popular toys, (Hot Wheels and He-man) merge with successful manufacturers, (Fisher Price and Tyco) partner with children’s program companies, (Disney, Sesame Street, and Nickelodeon) obtain licenses and rights to manufacture popular lines (Cabbage Patch Dolls and Harry Potter merchandise) and acquire other companies (Pleasant Company). Since its conception, the Mattel Company has done a lot to make sure it is considered a trustworthy company for children and the community. The corporation established a children’s charity, called the Mattel Children’s Foundation.
In 1997 the company created the Global Manufacturing Principles, making them the first company to create a framework to ensure manufacturing would be conducted through consistent standards on a global level. In 1998 they started a $25 million multi-year donation to the UCLA children’s hospital, which is now called the Mattel Children’s Hospital at UCLA. However, Mattel has not always been able to maintain their image of child-like innocence. The corporation has had numerous complaints that they’ve stolen ideas for their toy-lines from children who have entered their competitions.
In the mid 1970’s, it was uncovered that company officials had lied in press releases and financial information to make it look like the company was continuing to grow corporately. The company has also had its share of recalls. Depending on who you ask, the number ranges from 17 to 28. And from August to September of this year Mattel has faced the biggest recall in the company’s history. Reasons for Recall There are two separate reasons why Mattel recalled 19 million toys from August to September of 2007. The fact that both recalls occurred at the same time makes this the biggest recall in the company’s history.
The first reason toys were recalled was because of faulty magnets. The design of these toys included parts with high-energy magnets – magnets normally used for industrial purposes – that can easily come loose. These magnets pose a threat to young children and infants who 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. The strength of the magnets combined with Mattel’s poor design of the toys made these products a serious hazard for young children.
On their website, Mattel listed 71 models and makes of toys that are recalled because of faulty magnets. Toys affected by this problem included Polly Pockets, Batman action figures, and Barbie and her dog Tanner. Some Polly Pocket sets had been recalled as early as November of 2006. The other reason Mattel toys were recalled was because high levels of lead-based paint were found on the surface of many toys. 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. Lead-based paint is dangerous for children because 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. There are 91 models and makes of toys that Mattel placed on recall because of harmful levels of paint. Many of the toys coated with lead-based paint were from Mattel’s Fisher Price line. China Recently, China has had numerous problems with the quality and standards of the products manufactured within the country.
Pet food, toothpaste, seafood, tires, and toys are some of the products that had to be recalled from homes in the United States because of serious – and possibly deadly – manufacturing errors. The business relationship between Mattel and China seemed to be a text-book partnership that started over 25 years ago. Mattel currently does 65 percent of their manufacturing in China, and before this recall was a company others wanted to model in terms of their global manufacturing. Mattel has been criticized for placing too much confidence in their relationship with China and slacking on quality checks at the manufacturing sites.
At this point, it seems that Mattel will continue to work with the same manufacturers in China because their options are limited. Recall Timeline In November of 2006, Mattel recalled several Polly Pocket sets sold with magnets that could pose a threat to children. In early July of 2007 a retailer in Europe discovered a high lead content on some Mattel toys. Upon notification, Mattel began an investigation and halted operations at the factory that produced the toys. During this investigation it was discovered that there were millions of products that didn’t conform to safety standards, many that had been available since 2003.
Fisher-Price started the recalled with 1. 5 million toys on August 1, 2007 due to high levels of lead-based paint. The products containing lead paint were mostly from this division of Mattel and were all manufactured in China. On August 9, 2007, China cancelled the export license of two of the factories linked to the recalls – Hansheng Wooden Products Factory and Lida Toy company. Four days later, the body of Zhang Shuhong, the boss of the Lida Toy Company, was found in the factory workshop. Reports said that he committed suicide by hanging himself in the factory.
After further investigation, Mattel recalled 18 million more products on August 14, 2007 because of the possible hazards they could pose to children swallowing faulty magnets. And on September 4, 2007, Mattel recalled 848,000 more toys globally because of high levels of lead-based paint. The U. S. Senate Committee began scrutinizing American safety standards for children’s toys and clothing on August 28. The committee said it would consider the possibility of creating new legislation to keep hazardous toys from children.
Despite the fact that a larger number of toys were recalled because of faulty magnets rather than lead-based paint, recall blame was heavily placed on China by global media. During this time, Chinese media claimed that Mattel should be accountable for the mistakes they made rather than use China as a scapegoat. Mattel eventually listened. On September 21, Mattel issued a prepared apology to China about the recall, taking full blame for the incident. They took ownership of the magnetic design flaw, claiming that it was a Mattel design flaw and not a Chinese manufacturing flaw. Nothing was said about the paint.