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Mattel, Inc.

Mattel, Inc.

333 Continental Boulevard
El Segundo, California 90245-5012
U.S.A.
Telephone: (310) 252-2000
Fax: (310) 252-2180
Web site: http://www.mattel.com

Public Company
Incorporated: 1948
Employees: 25,000
Sales: $4.89 billion (2002)
Stock Exchanges: New York Pacific
Ticker Symbol: MAT
NAIC: 339931 Doll and Stuffed Toy Manufacturing; 339932 Game, Toy, and Children's Vehicle Manufacturing

The world's largest toy company, Mattel, Inc. designs, manufactures, markets, and distributes a wide variety of toy products in 150 countries. The company's products include a number of core toy lines, including Barbie dolls, clothing, and accessories; Hot Wheels toy die-cast vehicles; Warner Bros. merchandise, including Harry Potter, Batman, Superman, and Looney Tunes products; the American Girls Collection of books, dolls, clothing, and accessories; Fisher-Price infant and preschool toys, including Little People figures and playsets and toys based on various licensed characters from sources such as Disney and Sesame Street; and games such as Scrabble and UNO. The company's toys are produced in company-owned manufacturing facilities in China, Indonesia, Malaysia, Mexico, and Thailand, as well as through independent contractors located in the United States, Europe, Mexico, the Far East, and Australia. Approximately 36 percent of 2002 revenues was generated outside the United States, with 60 percent of international sales originating in Europe. During 2002, about half of Mattel's revenues was derived through three main retail customers: Wal-Mart Stores, Inc., Toys 'R' Us, Inc., and Target Corporation. Mattel's toys have delighted generations of children throughout the world.

From Picture Frames to Toys: 194549

Mattel was founded in 1945 by Elliot and Ruth Handler. The youngest of ten children of Polish immigrants, Ruth was a secretary for Paramount Pictures in Los Angeles when she married Elliot Handler, an industrial engineer. Handler started out designing light fixtures but soon began making furniture to sell out of his garage. The business attracted four partners and quickly rose to become a $2 million enterprise making giftware and costume jewelry. By 1945 Elliot Handler grew restless and wanted a new business approach to remain competitive in the fast-changing postwar world. Handler's plans led to a dispute with his partners and he sold his interest in the company at a loss. Meanwhile, also in 1945, Ruth hooked up with an old friend, Harold "Matt" Matson, and they started Mattel Creations, with Elliot designing products. The name Mattel was formed by combining Matson's last name with Handler's first name. Ill health soon forced Matson to sell out.

Mattel first entered the picture frame business using scrap plastic and wood. With the leftover wood slats and plastic, Elliot Handler designed dollhouse furniture. Ruth Handler formed a simple sales organization, and the company was off to a winning start. In its first year the company pulled in $100,000, netting $30,000.

The Handlers had little business experience and even less capital, but the demographics of a baby boom plus a virtual toyless marketplace immediately after World War II gave them a unique opportunity to make their mark. Even so, it took a couple of years to see profits. In 1946 another low-cost line of molded furniture with meticulous detail put the Handlers out of the doll furniture business. Because of their introduction of a "birdy bank" and a "make-believe makeup set," however, they managed to break even, and in the following year the Handlers introduced the first in a long string of hits in the toy industry. The "Uke-A-Doodle," a miniature plastic ukelele, was an immediate success and drew large orders. In 1948 the Handlers introduced another hita new all-plastic piano with raised black keys. Although a winner, the company lost ten cents for each piano it sold because of quality problems relating to the die-cast sound mechanism breaking loose from the plastic.

These early business experiences taught the Handlers some poignant lessons in avoiding obsolescent products, ruinous price competition, poor cost control, and product quality problems. They realized that a successful business had to produce unique and original products of superior quality and strength that could not be copied easily by competitors.

The company incorporated in the state of California in 1948. At the same time the Handlers and an outside inventor began developing a music box employing a unique mechanism. A shortage of capital and the refusal of banks to gamble on the struggling young firm put the project on hold. With a $20,000 loan from Ruth Handler's brother-in-law, however, Mattel completed the project and produced another winner. As Elliot Handler later recalled, "Our music box had a patented mechanism which had continuous play value because it operated only when the child turned the crank. It was different, it was well-made, and because we were able to mass-produce it, the price was lower than the imports." By taking an Old World idea and adapting it to modern production techniques, the Handlers beat out their Swiss competition, which up to then had dominated the domestic market for music boxes.

The success of the music box taught the Handlers a few other lessons. First, they discovered that child participation was essential for any quality toy; children should be able to interact with a toy and want to play with it often and for extended periods of time. Second, the Handlers recognized that a toy with lasting appeal is preferable to short-lived faddish products and can serve as a basis for other toys to follow.

Innovation, Diversification, and Success: 195069

Mattel reached several important firsts in 1955. Sales climbed to $5 million; the company introduced another hit, Burp Guns; and the Handlers decided to take a gamble that would change the toy business forever. In what seemed a risky venture, the Handlers agreed to sponsor a 15-minute segment of Walt Disney's Mickey Mouse Club on the ABC television network. The Handlers signed for 52 weeks at a cost of $500,000, equal to Mattel's net worth at the time. Up until this time, toy manufacturers relied primarily on retailers to show and sell their products and advertising occurred only during the holiday season; never before had a toy company spent money on advertising year-round. With television, however, toys could be marketed directly to children throughout the country. Thus with the slogan, "You can tell it's Mattel, it's swell," the Handlers began a marketing revolution in the toy industry that produced an immediate payoff. The company sold many toy Burp Guns and made the Mattel brand name well known among the viewing audience.

In 1957 the company, exploiting the popularity of television westerns, introduced toy replicas of classic western guns and holsters. From the basic Burp Gun mechanism, Mattel developed the "Fanner 50" western pistol and a toy version of the Winchester rifle, complete with ejecting bullets. Mattel's sales reached $9 million and the following year hit $14 million. Then in 1959 Mattel made toy industry history with the introduction of the Barbie doll, the best-selling toy of all time. The idea for the doll originated with Ruth Handler, who had observed that their daughter favored adult-looking paper dolls over baby dolls. So the Handlers set to work designing a teenage fashion model doll and, despite a cool reception at the 1959 New York Toy Fair, the result was a smash hit, propelling Mattel into the national spotlight. Barbie, the famed doll named after the nickname of the Handlers' own daughter Barbara, soon prompted the founding of official fan clubs across the United States, which by 1968 had a total membership of about 1.5 million. Mattel marketed Barbie as an insatiable consumer of clothes and accessories, which were sold separately. In 1961 the company provided her with a boyfriend, the Ken doll.

After the phenomenal success of Barbie, Mattel entered the competitive large doll market in 1960 with another winner, Chatty Cathy, the first talking doll. That year Mattel made its first public stock offering, and by 1963 its common stock was listed on the New York Stock Exchange (NYSE). Mattel's sales skyrocketed from $26 million in 1963 to more than $100 million in 1965, due in part to the expansion of the Barbie line with Ken (named after the Handlers' son), Midge, and Skipper; Christie, an African American doll, debuted in 1968.

Throughout the 1960s the company continued to introduce popular toys: Baby First Step (the first doll to walk by itself), live-action dolls with moving eyes and mouths, See 'N Say talking educational toys, the Vac-U-Form machine, and an entire line of Thingmaker activity toys, including Creepy Crawlers, Fun Flowers, Fright Factory, and Incredible Edibles. Another spectacular hit, Hot Wheels miniature model cars, was introduced in 1968, which proved to be a pivotal year for Mattel as a host of its products dominated the market, including its original toy music boxes, which had sold more than 50 million. The company reincorporated in Delaware, and by the end of the decade it was the world's number one toy maker.

During the 1960s the company began aggressively diversifying its operations into a worldwide enterprise with a host of acquisitions: Dee & Cee Toy Co. Ltd. (1962); Standard Plastic Products, Inc., Hong Kong Industrial Co., Ltd., and Precision Moulds, Ltd. (1966); Rosebud Dolls Ltd. (1967); Monogram Models, Inc. and A&A Die Casting Company (1968); Ratti Vallensasca, Mebetoys, Ebiex S.A., H&H Plastics Co., Inc., and Metaframe Corp. (1969).

Company Perspectives:

Mattel's management has articulated its overall company vision: The World's Premier Toy BrandsToday and Tomorrow. Management set five key company strategies: (i) improve execution of the existing toy business; (ii) globalize the brands; (iii) extend the brands; (iv) catch new trends; and (v) develop people.

Stretched Too Thin: 1970s Through Mid-1980s

At the dawn of the 1970s, Mattel still was gobbling up other companies, such as Ringling Bros., Barnum & Bailey Circus and others. But the good times soon soured. In 1970 Mattel's plant in Mexico was destroyed by fire, and the following year a shipyard strike in the Far East cut off its toy supplies. To maintain the appearance of corporate growth, Seymour Rosenberg, executive vice-president and chief financial officer, fixed the books by reporting orders as sales, although many of the orders had been canceled and shipments had not been made. For two years Mattel issued false and misleading financial reports, until 1973, when the company reported a $32 million loss just three weeks after stockholders had been assured that the company was in sound financial condition. Mattel's stock plummeted and the Security and Exchange Commission (SEC) stepped in to investigate. Before Judge Robert Takasugi of the federal district court in Los Angeles, Ruth Handler and Rosenberg pleaded no contest to the SEC charges.

In 1974 Rosenberg was fired, the banks pressured the Handlers to resign, and the court ordered Mattel to restructure its board so that its majority would be company outsiders. In addition, the court fined Ruth Handler and Rosenberg each $57,000 and gave them 41-year sentences, which were suspended on the condition that they both performed 500 hours of charitable work annually for five years. Finally, in 1980 the Handlers cashed in most of their Mattel stock, ending their involvement in the company they had founded. Comprising approximately 12 percent of the company, the stock was worth about $18.5 million. Ruth Handler then went on to start Nearly Me, a company producing prosthetic breasts for mastectomy patients.

A new management team under Arthur S. Spear, a Mattel vice-president, replaced the Handlers in 1975 and by 1977 the company had returned to profitability. By 1980 Mattel was running a slew of other businesses, including the Ringling Bros., Barnum & Bailey Circus; Shipstad & Johnson's Ice Follies; Western Publishing, the largest publisher of children's books; and an entire line of electronic toys, most notably Intellivision video games.

Yet, unfortunately, Mattel stumbled badly for much of the 1980s. Many of the company's business acquisitions turned out to be unprofitable and had to be sold. Further, a big slump in video game sales in the early 1980s drove Mattel out of the video game business with a $394 million loss for 1983, putting the company on the edge of bankruptcy. Mattel might have gone under if the New York venture capital firms E.M. Warburg, Pincus & Co., and Drexel Burnham Lambert had not stepped in with $231 million in 1984 to save the company from the video game debacle. Still, in 1985 the company fell behind Hasbro, Inc. as the world's largest toymaker.

A New Direction: 198792

By 1987 Mattel suffered a $113 million loss when the market for its Masters of the Universe toy line for boys evaporated. As a result of Mattel's troubles, its stock plummeted from 1982's peak of $30 per share to just $10 per share in 1987. But the company's fortunes took a dramatic upswing when John W. Amerman, who had joined the company in 1980 as head of the international division, was named chairman. Under his direction the division's sales had quadrupled, far outpacing the profitability of Mattel's domestic operations. In his new role, Amerman moved quickly to cut Mattel's overhead by closing 40 percent of the company's manufacturing capacity, including plants in California, Taiwan, and the Philippines. He slashed the payroll by 150 at Mattel's corporate headquarters in California, saving an estimated $30 million annually. Mattel also refinanced highcost debt and curbed advertising costs.

Amerman turned the company around by focusing on core brand names with staying power, such as Barbie and Hot Wheels, and by making selective investments in the development of new toys. One such selection was the re-emergence of Disney toys, due to a chance meeting in Tokyo, which, starting in 1988, gave Mattel licensing rights for a new line of infant and preschool plush toys. Renewing its collaboration with Disney proved more than serendipitous for Mattel, as their union in the 1990s would prove far more advantageous than Amerman ever imagined.

Key Dates:

1945:
Ruth and Elliot Handler and Harold "Matt" Matson form a partnership called Mattel Creations, making and selling first picture frames and later dollhouse furniture; Matson is soon forced to sell out because of ill health.
1947:
The "Uke-A-Doodle" becomes the first of many hit Mattel toys.
1948:
The company is incorporated in California.
1955:
In a revolutionary move, Mattel becomes a yearround sponsor of the Walt Disney television program Mickey Mouse Club.
1959:
Mattel introduces the Barbie doll, which will eventually become the best-selling toy ever.
1960:
Mattel goes public.
1963:
The company gains a listing on the New York Stock Exchange.
1968:
Hot Wheels miniature model cars, another spectacular hit, are introduced.
1974:
The Handlers are ousted from the company after investigators find that the company issued false and misleading financial reports.
1983:
The company verges on bankruptcy with a $394 million loss after an ill-advised venture into video games.
1987:
John W. Amerman, who has been named chairman, revitalizes the company through an emphasis on core brands.
1988:
Mattel revives its collaboration with Disney.
1993:
Fisher-Price Inc., the world leader in infant and preschool toys, is acquired.
1997:
Mattel buys out Tyco Toys, Inc., the third largest U.S. toy maker.
1998:
Pleasant Company, maker of the American Girl brand, is acquired.
1999:
The Learning Co., a major player in computer games and educational software, is acquired for $3.5 billion.
2000:
Mattel sells off Learning Co. at a huge loss; the company reports a net loss for the year of $430.9 million.

Despite a lackluster economy and generally flat sales in the toy industry, Amerman's strategy paid off big for Mattel. The Barbie line was bolstered and expanded to include approximately 50 different dolls per year and about 250 accessory items, including everything from shoes and clothing to linens, backpacks, furniture, and a cosmetics line. A promotional campaign in honor of Barbie's 30th birthday in 1989 propelled her onto the cover of Smithsonian Magazine, confirming her status as a true American icon. In 1990 Mattel moved from the Handlers' original offices to new headquarters in El Segundo, propelled in large part by Barbie's continuing popularity. By the next year the company estimated that 95 percent of all girls in the United States aged 3 to 11 owned several Barbie dolls; in fact, Barbie was so good for Mattel that between 1987 and 1992 sales shot up from $430 million to nearly $1 billion, accounting for about half of the company's $1.85 billion in sales. As a result of this phenomenal growth, Mattel opened a new state-oftheart Barbie manufacturing plant in 1992 just outside Jakarta, Indonesia.

Mattel's emphasis on other core brands, including Hot Wheels die-cast vehicles, large dolls, Disney products, and See 'N Say educational preschool toys, provided a string of continuous hits. Mattel also pushed aggressively into other areas of the toy business, including plush toys, games, boys' action figures, and activity toys, which comprised 46 percent of the total toy market. By entering these areas, Mattel increased its participation in the total industry from 34 percent to approximately 80 percent, becoming a full-line toy company. The company made a particularly strong move into the toys for boys market, where it had been weak traditionally, with a range of new products, including the following: Bruno the Bad Dog (a monster truck that changed into a ferocious dog); action figures based on Arnold Schwarzenegger movies; and Nickelodeon's gooey Gak, a stretchy, oozing substance.

A strengthened strategic alliance with the Walt Disney Company allowed Mattel to sponsor attractions and to develop and sell toys at three Disney theme parks. The agreement gave Mattel unparalleled exposure to millions of children and adults who visited the parks each year. Mattel also negotiated the exclusive rights to sell dolls, stuffed characters, and preschool toys based on Disney movie characters, such as those from Cinderella, Beauty and the Beast, and Aladdin. The agreement was a boon for Mattel, and Amerman predicted that sales for the Disney line would top $500 million by 1995. Beyond Disney, Mattel also had reached an agreement with Hanna-Barbera to market toys based on the cartoon characters Yogi Bear, Boo-Boo, Cindy Bear, and the Flintstones; another agreement with Turner Broadcasting allowed Mattel to develop and sell Tom and Jerry products. A push into the game market led Mattel to acquire International Games, Inc. in 1992, the producer of such profitable core franchises as the UNO and Skip-Bo card games.

Mattel executives believed that the company's best growth opportunities for the mid-1990s were overseas markets, and sales for its international division exploded from $135 million in 1982 to $1.7 billion in 1992, with much of the sales through retail giants Toys 'R' Us and Wal-Mart. Overall net sales of Mattel products reached $2.6 billion, and Jill Barad, who had joined the company in 1981 as a product manager and had been most recently president of Mattel's U.S. operations, was promoted to president and COO of the company.

Bigger and Better Than Ever: 199398

In 1993 the company embarked on the landmark acquisition of venerable toy producer Fisher-Price Inc., the world's leading maker of toys for infants and preschoolers. The stock-for-stock deal, valued at $1.19 billion, bought Fisher-Price from the Quaker Oats Company and further cemented Mattel's unrivaled position in the toy industry. Year-end net sales hit $3.4 billion, and although Fisher-Price products contributed $750 million to the pie, Mattel had an extraordinary yearbusiness was up a whopping 27 percent, aided by the sturdy dollar overseas. The distribution of sales relied heavily on Mattel's old standby, Barbie, with 35 percent or $1 billion, with Hot Wheels (5 percent or $150 million) and Disney (10 percent or $330 million) bringing in healthy shares, while other popular products like the Polly Pocket line, Mighty Max toys, and UNO card games brought in the rest. Mattel also doubled the capacity of its Indonesia plant; opened offices in Austria, Scandinavia, and New Zealand; and had hopes of adding others the next year in Portugal, as well as Argentina and Venezuela, in an effort to tap into Latin America's market of 120 million children. Latin America's child population was second only to Asia's at 800 million in 1993, far beyond the United States' 40 million and Europe's 70 million.

Mattel made two strategic acquisitions in 1994those of J.W. Spear & Sons PLC, a British company that owned the international rights to the popular Scrabble games, and Kransco, whose Power Wheels and Wham-O (which included Frisbee and Hula Hoop) brands complemented its ever-growing products list. The next year Mattel became the new licensee of the Cabbage Patch Kids dolls, a top-notch addition to the company's large dolls line. Both 1994 and 1995 were record years for the company, with net sales of $4 billion and $4.4 billion, respectively, and net income of $225 million in 1994 and $338 million in 1995. The company also was looking to the future; it initiated a $72 million restructuring program in 1994 to consolidate manufacturing operations and slash unnecessary corporate expenses.

Also in 1995, Mattel approached Hasbro about a possible merger of the two largest toy companies in the world. Negotiations took place in secret over the course of several months until the Hasbro board early in 1996 unanimously turned down a $5.2 billion merger proposal that would have given Hasbro stockholders a 73 percent premium over the then current selling price. Hasbro officials expressed doubts that the merger could pass antitrust challenges and wanted a large upfront payment to help the company's performance during what would have likely been a lengthy antitrust review and to protect itself against the possibility that the merger would collapse. Mattel officials believed the merger would have had little difficulty gaining approval, but backed awayand did not initiate a hostile takeoverwhen Hasbro waged a vigorous media campaign emphasizing the possible negative ramifications of such a megamerger.

In 1996 sales grew to $4.5 billion, with income topping $372 million. The 38-year-old Barbie was once again the backbone of Mattel's net sales, hauling in $1.7 billion, up by 20 percent from the previous year. Hot Wheels sales also increased by nearly 20 percent, and Disney products were up 8 percent, surpassing the $500 million mark. International sales, however, were relatively flatcomplicated by a strengthened dollar. At the end of the year Mattel initiated the acquisition of another major player in the toy industry, Tyco Toys, Inc., the third largest toy manufacturer in the United States. The merger of Tyco into Mattel's lineup, completed in March 1997, made the latter the unparalleled leader of the industry, far beyond any of its other competitors. Tyco's successful products, such as Sesame Street brand toys and its radio-controlled and electric race cars, bolstered Mattel's infant and preschool as well as boys' toy lines.

As the decade was coming to a close, a changing of the guard was imminent. John Amerman, who had turned Mattel away from slumping sales and mismanagement, retired as Mattel's chairman of the board after 17 years, tossing the reins to Barad, who had been promoted to CEO earlier in the year. At the time of her appointment as chairman in 1997, Barad was one of only two women running a Fortune 500 company.

Never one to rest on her laurels, Barad moved forward with new Barbie innovations and aggressive expansion. International sales climbed a cautious 3 percent (in local currency), with net sales at $1.2 billion for Canada and Europe and $2.1 billion in net sales from Asia and Latin America, representing a 35 percent jump for Latin America and the emergence of a market in Japan. Stateside, sales grew by 14 percent, with Barbie bringing in $1.9 billion, especially in the burgeoning interactive market, where Barbie-brand CD-ROMs quadrupled sales to $20 million. Even the adult collector market in Barbies had reached $200 million, with new Oscar de la Renta and Vera Wang designs slated to debut. Infant and preschool toys, meanwhile, were close on Barbie's heels, bringing in $1.8 billion in net sales despite a slump in Fisher-Price. Winnie the Pooh and Sesame Street more than took up the slack, generating $175 million and $350 million, respectively. During 1998 the Fisher-Price unit was given control of Mattel's complete lines of infant and preschool toys.

In early 1998 Mattel celebrated Barbie's 39th birthday. Continuing its interactive success, a new web site was introduced (Barbie.com), as well as new dolls, including one with an official WNBA uniform. The year also marked the 30th anniversary of Hot Wheels, with booming sales, as well as the 15th anniversary of Cabbage Patch Kids dolls. Barbie remained the bigger news, however, as the centerpiece of PBS's P.O.V., which dedicated an hour-long program to her evolution, entitled "Barbie Nation: An Unauthorized Tour." Although the program provided publicity, its content was sometimes controversialdealing with the good, the bad, and the ugly, including some Barbie-inspired obsessions. Ruth Handler, extensively interviewed for the piece, vehemently supported her creation.

Still on the prowl for acquisitions, Mattel in July 1998 completed a $715 million purchase of Pleasant Company, the Wisconsin-based maker and direct marketer of the popular American Girl brand composed of books, dolls, clothing, accessories, and the American Girl magazine. Pleasant's founder and president, Pleasant Rowland, became Mattel's vice-chairman. The company also was gaining a reputation as an excellent employer, named one of the "100 Best Companies To Work For" by Forbes magazine, and similarly lauded by Working Mother for the fifth consecutive year. With a state-of-the-art in-house daycare center, health and fitness facility, half-day Fridays, and generous vacation days, which included shutting down operations the week between Christmas and New Year's, the toymaker seemed to provide employees with almost as much fun as consumers.

The Learning Company Debacle and Its Aftermath: 1999 and Beyond

Although Mattel's acquisition of Pleasant Company, which brought together the world's two largest girls' toy brandsBarbie and American Girlproved highly successful, the company's next acquisition turned into a disaster. In May 1999 Mattel took over the Learning Company in a $3.5 billion deal. Based in Cambridge, Massachusetts, the Learning Co. was a major player in computer games and educational software, producing such "edutainment" titles as "Reader Rabbit" and "Carmen Sandiego." This acquisition was intended to broaden Mattel's product line and help Mattel sell more products that appeal to boys, but the Learning Co. began reporting unexpected losses before the deal was even completed. In October, Mattel announced that its earnings would fall well below expectations, prompting the departure one month later of Learning Co.'s two founders. For the year, Mattel reported a net loss of $82.4 million on sales of $5.52 billion, which reflected a $345 million charge stemming from a restructuring that involved some 3,000 job cuts as well as a fourth quarter Learning Co. loss of $183 million. The latter loss led to the abrupt resignation of Barad in February 2000, by which time Mattel's stock had plunged below $10 per share, after trading for more than $45 in 1998.

Robert A. Eckert was named chairman and CEO in May 2000. He had been the head of Philip Morris Companies Inc.'s Kraft Foods unit. In the meantime, Mattel in July 1999 had entered into a global marketing alliance with Bandai Co., Ltd., Japan's largest toy maker and best known at the time for its line of Power Rangers action figures and the Tamagotchi electronic virtual pets. Initially, the alliance involved Bandai marketing Mattel's toys in Japan and Mattel doing likewise for Bandai in Latin America. In February 2000 Mattel reached a deal with Warner Bros., making Mattel the master toy licensee for the best-selling Harry Potter book series and for the first two Harry Potter feature films. Mattel that same year gained the multiyear licensing rights to characters owned by the popular Nickelodeon children's cable television channel.

In October 2000, soon after Eckert came onboard, the Learning Co. was sold to Gores Technology Group, a corporate turnaround firm, for no cash and an unspecified share of future Learning Co. earnings. Mattel agreed to pay off $500 million in Learning Co. debt, and losses from the sale led to a net loss for 2000 of $430.9 million. The consequences of this disastrous acquisitionwidely regarded as one of the biggest corporate blunders everwere not over yet. Numerous lawsuits were filed by shareholders in 1999 and 2000 alleging mismanagement and breach of fiduciary duty by company executives and the board of directors. In November 2002 Mattel agreed to pay $122 million to settle these actions.

Eckert took a conservative approach to running Mattel, concentrating more on returning the firm to profitability than on seeking huge new blockbuster toys that would greatly increase revenues. As a result, revenues were relatively flat during his first two years at the helm (2001 and 2002), but net income figures were decent: $298.9 million and $230.1 million, respectively. Among the successes during this period were the Harry Potter products, a line of products derived from the Nickelodeon hit Sponge Bob Square Pants, and a line of big-eyed talking dolls called Diva Starz. As part of Eckert's strategy of expanding Mattel's core brands into additional product categories, the company in October 2001 released the first Barbie video, Barbie in the Nutcracker, which sold quite well. Overall, however, sales of the Barbie line were on the decline under pressure from new competitive dolls, particularly MGA Entertainment's hip Bratz dolls, which debuted in 2001. In the computer games sector, Mattel took a new partnership-oriented approach, entering into license agreements with computer games makers Vivendi Universal and T-HQ Inc. in 2001 for the development of interactive software games based on such Mattel brands as Barbie, American Girl, Hot Wheels, and Fisher-Price. On the licensing side, Mattel gave up licenses for toys based on new Disney movies, which tended to be hit-or-miss propositions, but kept the rights to established Disney characters such as Mickey and Minnie Mouse. Other early Eckert initiatives included cutting costs, speeding up toy production turnaround time, overhauling the supply chain, and placing additional emphasis on international sales.

In early 2003 Mattel streamlined its operations, consolidating its Boys/Entertainment and Girls divisions into a new business unit known as Mattel Brands. The Pleasant Company was separated from the Girls division and placed into a new unit called American Girl Brands. The firm's third unit, Fisher-Price Brands, remained unchanged. Meantime, while Mattel's doll lines were contending with the upstart Bratz dolls, Fisher-Price was under pressure from another upstart, LeapFrog Enterprises, Inc., which quickly became a leader in electronic learning toys after its founding in the mid-1990s. Fisher-Price responded in August 2003 with the launch of the PowerTouch system, through which youngsters could playand learnon interactivelearning books. PowerTouch competed directly with Leap-Frog's popular LeapPad system, and LeapFrog was troubled enough by similarities between the two products to file a patentinfringement lawsuit against Fisher-Price in October.

Although some analysts were disappointed with the lack of revenue growth at Mattel, particularly the flat to declining sales in the United States, Eckert remained committed to improving bottom-line profits rather than the top line. International sales were growing at a double-digit percentage pace, enabling Mattel to expand its overall sales in the mid-single-digit range, which was actually a little better than the industry norm. Perhaps in the first decade of the 21st century the more measured approach of Eckert would serve Mattel better than the approaches of the leaders of the three previous decadesparticularly because each of these decades included a major crisis that called into question the company's future.

Principal Subsidiaries

Fisher-Price Inc.; Mattel Factoring, Inc.; Mattel International Holdings B.V. (Netherlands); Mattel Investment, Inc.; Mattel Overseas, Inc.; Mattel Sales Corporation; Pleasant Company.

Principal Operating Units

Mattel Brands; Fisher-Price Brands; American Girl Brands.

Principal Competitors

Hasbro, Inc.; JAKKS Pacific, Inc.; LEGO Company; LeapFrog Enterprises, Inc.; Bandai Co., Ltd.; MGA Entertainment; TOMY Company, Ltd.

Further Reading

Bannon, Lisa, "New Playbook: Taking Cues from GE, Mattel's CEO Wants Toy Maker to Grow Up," Wall Street Journal, November 14, 2001, pp. A1+.

Bannon, Lisa, and Joann S. Lublin, "Jill Barad Abruptly Quits the Top Job at Mattel," Wall Street Journal, February 4, 2000, p. B1.

Beauchamp, Marc, "Barbie at 30," Forbes, November 14, 1988, pp. 248+.

Deutsch, Stefanie, Barbie, The First 30 Years, 1959 Through 1989 and Beyond: Identification and Value Guide, 2nd ed., Paducah, Ky.: Collector, 2003.

Donahue, Ann, and Nola Sarkisian-Miller, "How Mattel's Brass Ring Turned to Lead," Los Angeles Business Journal, February 14, 2000, p. 1.

Donlon, J.P., "A Doll's House," Chief Executive (U.S.), September 1997, pp. 32+.

Grant, Linda, "Mattel Gets All Dolled Up: Buying Fisher-Price Will Make the Toy Giant Less Reliant on Barbie," U.S. News and World Report, December 13, 1993, pp. 74+.

Handler, Elliot, The Impossible Is Really Possible: The Story of Mattel, New York: Newcomen Society in North America, 1968.

Handler, Ruth, with Jacqueline Shannon, Dream Doll: The Ruth Handler Story, Stamford, Conn.: Longmeadow Press, 1994.

Kim, Queena Sook, "Mattel's Babes in Toyland Struggle to Gain Market Share," Wall Street Journal, November 21, 2003, pp. C1, C3.

"Looking for a Few Good Boy Toys," Business Week, February 17, 1992.

Lublin, Joann S., and Lisa Bannon, "Mattel Taps Kraft Chief Robert Eckert to Succeed Jill Barad As CEO," Wall Street Journal, May 17, 2000, p. B1.

"Mattel Has to Play Harder Than Ever," Business Week, May 25, 1987.

Morgenson, Gretchen, "Barbie Does Budapest," Forbes, January 7, 1991, pp. 66+.

Morris, Kathleen, "The Rise of Jill Barad," Business Week, May 25, 1998, pp. 112+.

, "Searching for Turnaround Barbie," Business Week, September 6, 1999, pp. 80, 8283.

Palmeri, Christopher, "Mattel: Up the Hill Minus Jill," Business Week, April 9, 2001, pp. 5354.

, "Mattel's New Toy Story," Business Week, November 18, 2002, pp. 72, 74.

"Playing Favorites," Marketing and Media Decisions, March 1990.

Quirt, John, "Putting Barbie Back Together Again," Fortune, September 8, 1980, pp. 84+.

Stevens, Tim, "Playing to Win," Industry Week, November 3, 1997, pp. 18+.

"The Story of Mattel, Inc.: Fifty Years of Innovation," Newcomen Address, 1995.

Bruce P. Montgomery

updates: Taryn Benbow-Pfalzgraf,

David E. Salamie

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Mattel, Inc.

Mattel, Inc.

333 Continental Boulevard
El Segundo, California 90245-5012
U.S.A.
(310) 252-3070
Fax: (310) 524-4443
Web sites: http://www.hotwheels.com
http://www.barbie.com
http://www.mattelmedia.com

Public Company
Incorporated:
1948
Employees: 25,000
Sales: $4.8 billion
Stock Exchanges: New York
Ticker Symbol: MAT
SICs: 3944 Games, Toys & Childrens Vehicles; 3942 Dolls & Stuffed Toys; 3940 Toys & Sporting Goods; 2361 Girls Dresses & Blouses

The worlds largest toy company, Mattel, Inc. designs, manufactures, markets, and distributes a wide variety of toy products in 150 countries. The companys products comprise a number of core toy lines, including Barbie dolls, clothing, and accessories; Hot Wheels toy die-cast vehicles; Disney merchandise; the American Girl Collection of books, dolls, clothing, and accessories; Fisher-Price toys; See N Say talking toys; a line of large dolls, including the Cabbage Patch Kids; and games like Scrabble and UNO. Mattels toys are produced in manufacturing facilities in the United States, the United Kingdom, China, Malaysia, Mexico, Italy, and Indonesia and have delighted generations of children throughout the world.

From Picture Frames to Toys: 194449

Mattel was founded in 1944 by Elliot and Ruth Handler. The youngest of ten children of Polish immigrants, Ruth was a secretary for Paramount Pictures in Los Angeles when she married Elliot Handler, an industrial engineer. Handler started out designing light fixtures but soon began making furniture to sell out of his garage. The business attracted four partners and quickly rose to become a $2 million enterprise making giftware and costume jewelry. By 1945 Elliot Handler grew restless and wanted a new business approach to remain competitive in the fast-changing postwar world. Handlers plans led to a dispute with his partners and he sold his interest in the company at a loss. Meanwhile, in 1944 Ruth hooked up with an old friend, Harold Matson, and they started Mattel Creations, with Elliott designing products. The name Mattel was formed by combining Matsons last name with Handlers first name. Ill health soon forced Matson to sell out.

Mattel first entered the picture frame business using scrap plastic and wood. With the leftover wood slats and plastic, Handler designed doll house furniture. Matson manufactured and Ruth Handler formed a simple sales organization, and the company was off to a winning start. In its first year the company pulled in $100,000, netting $30,000.

The Handlers had little business experience and even less capital, but the demographics of a baby boom plus a virtual toyless marketplace immediately after World War II gave them a unique opportunity to make their mark. Even so, it took a couple of years to see profits. In 1946 another low-cost line of molded furniture with meticulous detail put the Handlers out of the doll furniture business. Because of their introduction of a birdy bank and a make-believe makeup set, however, they managed to break even, and in the following year the Handlers introduced the first in a long string of hits in the toy industry. The Uke-a-Doodle, a miniature plastic ukelele, was an immediate success and drew large orders. In 1948 the Handlers introduced another hita new all-plastic piano with raised black keys. Although a winner, the company lost ten cents for each piano it sold because of quality problems relating to the die-cast sound mechanism breaking loose from the plastic.

These early business experiences taught the Handlers some poignant lessons in avoiding obsolescent products, ruinous price competition, poor cost control, and product quality problems. They realized that a successful business had to produce unique and original products of superior quality and strength that could not be copied easily by competitors.

The company incorporated in the state of California in 1948. At the same time the Handlers and an outside inventor began developing a music box employing a unique mechanism. A shortage of capital and the refusal of banks to gamble on the struggling young firm put the project on hold. With a $20,000 loan from Ruth Handlers brother-in-law, however, Mattel completed the project and produced another winner. As Elliot Handler later recalled, our music box had a patented mechanism which had continuous play value because it operated only when the child turned the crank. It was different, it was well-made, and because we were able to mass-produce it, the price was lower than the imports. By taking an Old World idea and adapting it to modern production techniques, the Handlers beat out their Swiss competition, which up to then had dominated the domestic market for music boxes.

The success of the music box taught the Handlers a few other lessons. First, they discovered that child participation was essential for any quality toy; children should be able to interact with a toy and want to play with it often and for extended periods of time. Second, the Handlers recognized that a toy with lasting appeal is preferable to short-lived faddish products and can serve as a basis for other toys to follow.

Innovation, Diversification, and Success: 195069

Mattel reached several important firsts in 1955. Sales climbed to $5 million; the company introduced another hit, Burp Guns; and the Handlers decided to take a gamble that would change the toy business forever. In what seemed a risky venture, the Handlers agreed to sponsor a 15-minute segment of Walt Disneys Mickey Mouse Club on the ABC television network. The Handlers signed for 52 weeks at a cost of $500,000, equal to Mattels net worth at the time. Up until this time, toy manufacturers relied primarily on retailers to show and sell their products and advertising occurred only during the holiday season; never before had a toy company spent money on advertising year-round. With television, however, toys could be marketed directly to children throughout the country. Thus with the slogan, You can tell its Mattel, its swell, the Handlers began a marketing revolution in the toy industry that produced an immediate payoff. The company sold many toy Burp Guns and made the Mattel brand name well known among the viewing audience.

In 1957, the company, exploiting the popularity of television westerns, introduced toy replicas of classic western guns and holsters. From the basic Burp Gun mechanism, Mattel developed the Fanner 50 western pistol and a toy version of the Winchester rifle, complete with ejecting bullets. Mattels sales reached $9 million and the following year hit $14 million. Then in 1959 Mattel made toy industry history with the introduction of the Barbie Doll, the best-selling toy of all time. The idea for the doll originated with Ruth Handler, who had observed that their daughter favored adult-looking paper dolls over baby dolls. So the Handlers set to work designing a teenage fashion model doll and, despite a cool reception at the 1959 New York Toy Fair, the result was a smash hit, propelling Mattel into the national spotlight. Barbie, the famed doll named after the Handlers own daughter, soon prompted the founding of official fan clubs across the United States, which by 1968 had a total membership of about 1.5 million. Mattel marketed Barbie as an insatiable consumer of clothes and accessories, which were sold separately. Soon the company provided her with a boyfriend, the Ken doll.

After the phenomenal success of Barbie, Mattel entered the competitive large doll market in 1960 with another winner, Chatty Cathy, the first talking doll. That year Mattel made its first public stock offering, and by 1963 its common stock was listed on the New York Stock Exchange (NYSE). Mattels sales skyrocketed from $26 million in 1963 to more than $100 million in 1965, due in part to the expansion of the Barbie line with Ken (named after the Handlers son), Midge, Skipper, and Christie (an African-American doll).

Throughout the 1960s the company continued to introduce popular toys: Baby First Step (the first doll to walk by itself), live action dolls with moving eyes and mouths, See N Say educational toys, the Vac-U-Form machine, and an entire line of Thingmaker activity toys, including Creepy Crawlers, Fun Flowers, Fright Factory, and Incredible Edibles. Another spectacular hit, Hot Wheels miniature model cars, was introduced in 1968, which proved to be a pivotal year for Mattel as a host of its products dominated the market, including its original toy music boxes, which had sold more than 50 million. The company reincorporated in Delaware, and by the end of the decade it was the worlds number one toy maker.

During the 1960s the company began aggressively diversifying its operations into a worldwide enterprise with a host of acquisitions: Dee and Cee Toy Co. (1962); Standard Plastics (1963); Hong Kong Industrial Co., Ltd. and Precision Moulds, Ltd. (1966); Rosebud Dolls Ltd. (1967); Monogram Models and A & A Die Casting Company (1968); Ratti Vallensasca, Mebetoys, Ebiex S.A., H & H Plastics Co., and Metaframe Corp. (1969).

Company Perspectives:

Mattel is a consumer products company in the business of building brand equity. The companys core franchises of Barbie, Fisher-Price, Disney, Sesame Street, and Hot Wheels rank among the most powerful brands in the world.

Stretched Too Thin: 1970 Through the Mid-1980s

At the dawn of the 1970s, Mattel still was gobbling up other companies, such as Ringling Bros., Barnum & Bailey Circus and others. But the good times soon soured. In 1970 Mattels plant in Mexico was destroyed by fire, and the following year a shipyard strike in the Far East cut off their toy supplies. To maintain the appearance of corporate growth, Seymour Rosenberg, executive vice-president and chief financial officer, fixed the books by reporting orders as sales, although many of the orders had been canceled and shipments had not been made. For two years Mattel issued false and misleading financial reports, until 1973, when the company reported a $32 million loss just three weeks after stockholders had been assured that the company was in sound financial condition. Mattels stock plummeted and the Security and Exchange Commission (SEC) stepped in to investigate. Before Judge Robert Takasugi of the federal district court in Los Angeles, Ruth Handler and Rosenberg pleaded no contest to the SEC charges.

Rosenberg was fired, the banks pressured the Handlers to resign, and the court ordered Mattel to restructure its board so that its majority would be company outsiders. In addition, the court fined Ruth Handler and Rosenberg each $57,000 and gave them 41-year sentences, which were suspended on the condition that they both performed 500 hours of charitable work annually for five years. Finally, in 1980 the Handlers cashed in most of their Mattel stock, ending their involvement in the company they had founded. Comprising approximately 12 percent of the company, the stock was worth about $18.5 million. Ruth Handler then went on to start Nearly Me, a company producing prosthetic breasts for mastectomy patients.

A new management team under Arthur S. Spear, a Mattel vice-president, replaced the Handlers in 1975 and by 1977 the company had returned to profitability. By 1980 Mattel was running a slew of other businesses, including the Ringling Bros., Barnum & Bailey Circus; Shipstad & Johnsons Ice Follies; Western Publishing, the largest publisher of childrens books; and an entire line of electronic toys, most notably Intellivision video games. Yet, unfortunately, Mattel stumbled badly for much of the 1980s. Many of the companys business acquisitions turned out to be unprofitable and had to be sold. Further, a big slump in video game sales in the early 1980s drove Mattel out of the video game business with a $394 million loss, putting the company on the edge of bankruptcy. The company might have gone under if the New York venture capital firms E. M. Warburg, Pincus & Co. and Drexel Burnham Lambert had not stepped in with $231 million in 1984 to save the company from the video game debacle. Still, in 1985 the company fell behind Hasbro as the worlds largest toymaker.

A New Direction: 198792

By 1987 Mattel suffered a $113 million loss when the market for its Masters of the Universe toy line for boys evaporated. As a result of Mattels troubles, its stock plummeted from 1982s peak of $30 per share to just $10 per share in 1987. But the companys fortunes took a dramatic upswing when John W. Amerman, who had joined the company in 1980 as head of the international division, was named chairman. Under his direction the divisions sales had quadrupled, far outpacing the profitability of Mattels domestic operations. In his new role, Amerman moved quickly to cut Mattels overhead by closing 40 percent of the companys manufacturing capacity, including plants in California, Taiwan, and the Philippines. He slashed the payroll by 150 at Mattels corporate headquarters in California, saving an estimated $30 million annually. Mattel also refinanced high-cost debt and curbed advertising costs.

Amerman turned the company around by focusing on core brand names with staying power, such as Barbie and Hot Wheels, and by making selective investments in the development of new toys. One such selection was the re-emergence of Disney toys, due to a chance meeting in Tokyo, which gave Mattel licensing rights for a new line of infant and preschool plush toys. Renewing its collaboration with Disney proved more than serendipitous for Mattel, as their union in the 1990s would prove far more advantageous than Amerman ever imagined.

Despite a lackluster economy and generally flat sales in the toy industry, Amermans strategy paid off big for Mattel. The Barbie line was bolstered and expanded to include approximately 50 different dolls per year and about 250 accessory items, including everything from shoes and clothing to linens, backpacks, furniture, and a cosmetics line. A promotional campaign in honor of Barbies 30th birthday in 1989 propelled her onto the cover of Smithsonian Magazine, confirming her status as a true American icon. In 1990 Mattel moved from the Handlers original offices to new headquarters in El Segundo, propelled in large part by Barbies continuing popularity. By the next year the company estimated that 95 percent of all girls in the United States aged three to 11 owned several Barbie dolls; in fact, Barbie was so good for Mattel that between 1987 and 1992 sales shot up from $430 million to nearly $1 billion, accounting for about half of the companys $1.85 billion in sales. As a result of this phenomenal growth, Mattel opened a new state-of-the-art Barbie manufacturing plant in 1992 just outside Jakarta, Indonesia.

Mattels emphasis on other core brands, including Hot Wheels die-cast vehicles, large dolls, Disney products, and See N Say educational preschool toys, provided a string of continuous hits. Mattel also pushed aggressively into other areas of the toy business, including plush toys, games, boys action figures, and activity toys, which comprised 46 percent of the total toy market. By entering these areas, Mattel increased its participation in the total industry business from 34 percent to approximately 80 percent, becoming a full-line toy company. The company made a particularly strong move into the toys for boys market, where it had been weak traditionally, with a range of new products, including the following: Bruno the Bad Dog (a monster truck that changed into a ferocious dog); action figures based on Arnold Schwarzenegger movies; and Nickelodeons gooey Gak, a stretchy, oozing substance.

A strengthened strategic alliance with the Walt Disney Company allowed Mattel to sponsor attractions and to develop and sell toys at three Disney theme parks. The agreement gave Mattel unparalleled exposure to millions of children and adults who visited the parks each year. Mattel also negotiated the exclusive rights to sell dolls, stuffed characters, and preschool toys based on Disney movie characters, such as those from Cinderella, Beauty and the Beast, and Aladdin. The agreement was a boon for Mattel, and Amerman predicted that sales for the Disney line would top $500 million by 1995. Beyond Disney, Mattel also had reached an agreement with Hanna-Barbera to market toys based on the cartoon characters Yogi Bear, Boo-Boo, Cindy Bear, and the Flintstones; another agreement with Turner Broadcasting allowed Mattel to develop and sell Tom and Jerry products. A push into the game market led Mattel to acquire International Games, Inc. in 1992, the producer of such profitable core franchises as the UNO and Skip-Bo card games.

Mattel executives believed that the companys best growth opportunities for the mid-1990s were overseas markets, and sales for its international division exploded from $135 million in 1982 to $1.7 billion in 1992, with much of the sales through retail giants Toys R Us and Wal-Mart. Overall net sales of Mattel products reached $2.6 billion, and Jill Barad, who had joined the company in 1981 as a product manager and had been most recently president of Mattels U.S. operations, was promoted to president and COO of the company.

Bigger and Better Than Ever: 199397

In 1993 the company embarked on the landmark acquisition of venerable toy producer Fisher-Price. The stock-for-stock deal, valued at $1.19 billion, bought Fisher-Price from the Quaker Oats Company and further cemented Mattels unrivaled position in the toy industry. Year-end net sales hit $3.4 billion, and although Fisher-Price products contributed $750 million to the pie, Mattel had an extraordinary yearbusiness was up a whopping 27 percent, aided by the sturdy dollar overseas. The distribution of sales relied heavily on Mattels old standby, Barbie, with 35 percent or $1 billion, with Hot Wheels (five percent or $150 million) and Disney (ten percent or $330 million) bringing in healthy shares, while other popular products like the Polly Pocket line, Mighty Max toys, and UNO card games brought in the rest. Mattel also doubled the capacity of its Indonesia plant; opened offices in Austria, Scandinavia, and New Zealand; and had hopes of adding others the next year in Portugal, as well as Argentina and Venezuela, in an effort to tap into Latin Americas market of 120 million children. Latin Americas child population was second only to Asias at 800 million in 1993, far beyond the United Statess 40 million and Europes 70 million.

Mattel made two strategic acquisitions in 1994: those of J.W. Spear, a British company that owned the popular Scrabble games, and Kransco, whose Power Wheels and Wham-O (which included Frisbee and Hula Hoop) brands complemented its ever-growing products list. The next year Mattel became the new licensee of the Cabbage Patch Kids dolls, a top-notch addition to the companys large dolls line. Both 1994 and 1995 were record years for the company, with net sales of $4.0 billion and $4.4 billion, respectively, and net income of $225 million in 1994 and $338 million in 1995. The company also was looking to the future; it initiated a $72 million restructuring program in 1994 to consolidate manufacturing operations and slash unnecessary corporate expenses.

In 1996 sales grew to $4.5 billion, with income topping $372 million. The 38-year-old Barbie was once again the backbone of Mattels net sales, hauling in $1.7 billion, up by 20 percent from the previous year. Hot Wheels sales also increased by nearly 20 percent, and Disney products were up eight percent, surpassing the $500 million mark. International sales, however, were relatively flatcomplicated by a strengthened dollar. At the end of the year Mattel initiated the acquisition of another major player in the toy industry, Tyco, the third largest toy manufacturer in the United States. The merger of Tyco into Mattels lineup made the latter the unparalleled leader of the industry, far beyond any of its other competitors. Tycos successful products, such as Sesame Street brand toys and its radio-controlled and electric race cars, bolstered Mattels infant and preschool as well as boys toy lines.

As the decade was coming to a close, a changing of the guard was imminent. John Amerman, who had turned Mattel away from slumping sales and mismanagement, retired as Mattels chairman of the board after 17 years, tossing the reins to Barad, who had been promoted to CEO earlier in the year. At the time of her appointment as chairman in 1997, Barad was one of only two women running a Fortune 500 company. Never one to rest on her laurels, Barad moved forward with new Barbie innovations and aggressive expansion. International sales climbed a cautious three percent (in local currency), with net sales at $1.2 billion for Canada and Europe and $2.1 billion in net sales from Asia and Latin America, representing a 35 percent jump for Latin America and the emergence of a market in Japan. Stateside, sales grew by 14 percent, with Barbie bringing in $1.9 billion, especially in the burgeoning interactive market, where Barbie-brand CD-ROMs quadrupled sales to $20 million. Even the adult-collector market in Barbies had reached $200 million, with new Oscar de la Renta and Vera Wang designs slated to debut. Infant and preschool toys, meanwhile, were close on Barbies heels, bringing in $1.8 billion in net sales despite a slump in Fisher-Price. Winnie the Pooh and Sesame Street more than took up the slack, generating $175 million and $350 million, respectively.

Mattel in the Next Century: 1998 Onward

In early 1998 Mattel celebrated Barbies 39th birthday. Continuing its interactive success, a new web site was introduced (Barbie.com), as well as new dolls, including one with an official WNBA uniform. The year also marked the 30th anniversary of Hot Wheels, with booming sales, as well as the 15th anniversary of Cabbage Patch Kids dolls. Barbie remained the bigger news, however, as the centerpiece of PBSs P.O.V., which dedicated an hour-long program to her evolution, entitled Barbie Nation: An Unauthorized Tour. Although the program provided publicity, its content was sometimes controversialdealing with the good, the bad, and the ugly, including some Barbie-inspired obsessions. Ruth Handler, extensively interviewed for the piece, vehemently supported her creation.

Still on the prowl for acquisitions, mid-year Mattel announced the $700 million acquisition of Pleasant Company, the Wisconsin-based maker of the popular American Girl brand comprised of books, dolls, clothing, accessories, and the American Girl magazine. Pleasants founder and president, Pleasant Rowland, became Mattels vice-chairman. The company also was gaining a reputation as an excellent employer, named one of the 100 Best Companies To Work For by Forbes magazine, and similarly lauded by Working Mother for the fifth consecutive year. With a state-of-the-art in-house daycare center, health and fitness facility, half-day Fridays, and generous vacation days, which included shutting down operations the week between Christmas and New Years, the toymaker seemed to provide employees with almost as much fun as consumers.

With Barbie a force to be reckoned with, earning an additional $100 million annually since 1987, and its other brands picking up speed as well, Mattel was poised not only to maintain its status as the top toy producer in the world, but to stake an even greater claim in the United States and internationally. Its brand recognition was second to none and, with the 1998 acquisition of the Pleasant Company, the sky was the limit for Mattel.

Principal Subsidiaries

Arco Toys, Limited (Hong Kong); ARCOTOYS, Inc. (U.S.); Far West Insurance Company, Ltd. (Bermuda); Fisher-Price, Inc. (U.S.); Mabamex, S.A. de C.V. (Mexico); Matchbox Collectibles (Europe) Ltd.; Matchbox Toys (USA), Inc.; Mattel Argentina S.A.; Mattel Chile S.A.; Mattel Colombia S.A.; Mattel East Asia Ltd.; Mattel Espana, S.A.; Mattel Factoring, Inc.; Mattel (HK) Limited; Mattel Holding, Inc.; Mattel Holdings Limited (Canada); Mattel I., Inc.; Mattel N.V. (Netherlands Antilles); Mattel Japan Limited; Mattel (K.L.) Sdn.Bhd. (Malaysia); Mattel (Malaysia) Sdn.Bdn.; Mattel Media, Inc.; Mattel de Mexico, S.A. de C.V.; Mattel (NZ) Limited; Mattel Operations, Inc.; Mattel Overseas, Inc.; Mattel Polska Sp. Z.O.O.; Mattel Pty., Ltd. (Australia); Mattel Realty Corporation; Mattel Servicios, S.A. de C.V.; Mattel Sales Corp.; Mattel Southeast Asia Pte. Ltd.; Mattel Specialty, Inc.; Mattel Tools Sdn.Bhd.; Mattel Taiwan Corporation; Mattel de Venezuela, C.A.; Montoi S.A. de C.V. (Mexico); Precision Moulds Ltd. (Hong Kong); Tyco Hong Kong Ltd.; Tyco Preschool Toys, Inc.; Tyco Toys (Europe) N.V.; Tyco Toys (Switzerland) AG; Tyco Toys (UK) Ltd.; Universal International Holdings Ltd. (Hong Kong).

Further Reading

Barbie at 30, Forbes, November 1988.

Barbie Does Budapest, Forbes, January 7, 1991.

Deutsch, Stefanie, Barbie, The First 30 Years, 1959 Through 1989: Identification and Value Guide Collector, Collector, 1995.

Everybodys Business (1st ed.), 1980.

Fennick, Janine, The Collectible Barbie Doll: An Illustrated Guide to Her Dreamy World, Running Press, 1996.

Guide to Company Profiles, New York: Doubleday, 1990.

The Impossible Is Really Possible: The Story of Mattel, Newcomen Address, 1968.

Jill Elikann Barad Named Chairman of the Board of Mattel, PRNewswire, October 8, 1997.

Looking for a Few Good Boy Toys, Business Week, February 17, 1992.

Mattel Agrees To Acquire Pleasant Company; Names Pleasant Rowland Vice Chairman of Mattel, Inc., PRNewswire, June 15, 1998.

Mattel Celebrates the Birthday of Barbie Doll with the Launch of barbie.com for Girls, PRNewswire, March 9, 1998.

Mattel Has To Play Harder Than Ever, Business Week, May 25, 1987.

Playing Favorites, Marketing & Media Decisions, March 1990.

The Story of Mattel, Inc.: Fifty Years of Innovation, Newcomen Address, 1995.

Bruce P. Montgomery
updated by Taryn Benbow-Pfalzgraf

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Mattel, Inc.

Mattel, Inc.

333 Continental Boulevard
El Segundo, California 90245-5012
U.S.A.
(310) 524-2000
Fax: (310) 524-4443

Public Company
Incorporated:
1948
Employees: 15,000
Sales: $1.85 billion
Stock Exchanges: New York
SICs: 3944 Games, Toys & Childrens Vehicles; 3942 Dolls & Stuffed Toys

Mattel, Inc. designs, develops, manufactures, markets, and distributes a wide variety of toy products worldwide. The companys products comprise a number of core toy lines, including Barbie fashion dolls, doll clothing, and accessories, Hot Wheels toy die cast vehicles, Disney toys, See N Say talking toys, a line of large dolls including Lil Miss, Magic Nursery, P. J. Sparkles, and various new product introductions. Most of Mattels toys are made overseas in manufacturing facilities in China, Malaysia, Italy, Indonesia, and Mexico. Today, Mattel represents the worlds second largest toy company.

Mattel was founded in 1944 by Elliot and Ruth Handler. The youngest of ten children of Polish immigrants, Ruth Handler was a secretary for Paramount Pictures in Los Angeles when she married Elliot Handler, an industrial engineer. Handler started out designing light fixtures but soon began making furniture for sale out of his garage. The business attracted four partners and quickly rose to become a $2 million enterprise making giftware and costume jewelry. By 1945 Elliot Handler grew restless and wanted a new business approach to remain competitive in the fast-changing postwar world. Handlers plans led to a dispute with his partners and he sold his interest in the company at a loss. Meanwhile, in 1944 Ruth hooked up with an old friend, Harold Matson. They started Mattel Creations with Elliott designing products. The name Mattel was formed by combining Matsons last name with Handlers first name. Ill health soon forced Matson to sell out.

Mattel first entered the picture frame business using scrap plastic and wood. With the leftover wood slats and plastic, Handler designed doll house furniture. Matson manufactured and Ruth Handler then formed a simple sales organization, and the company was off to a winning start. In its first year, the company pulled in $100,000 and netted $30,000.

The Handlers had little business experience and even less capital, but the demographics of a huge baby boom plus a virtual toyless market place immediately after World War II gave them a unique opportunity to make their mark. Even so, it took them a couple of years to begin to see profits. In 1946, another low cost line of molded furniture with meticulous detail put the Handlers out of the doll furniture business. Because of their introduction of a birdy bank and a make believe makeup set, however, they managed to break even, and in the following year the Handlers introduced the first in a long string of hits in the toy industry. The Uke-a-Doodle, a miniature plastic ukelele, was an immediate success and drew large orders. In 1948, the Handlers introduced another hita new all-plastic piano with raised black keys. Although a winner, the company lost ten cents for each piano it sold because of quality problems relating to the die-cast. sound mechanism breaking loose from the plastic.

These early business experiences taught the Handlers some poignant lessons in the necessities of avoiding obsolescent products, ruinous price competition, poor cost control, and product quality problems. They realized that a successful business had to produce unique and original products of superior quality and strength that could not be easily copied by competitors.

In 1948, the company incorporated in the state of California. At the same time, the Handlers and an outside inventor began developing a music box employing a unique mechanism. A shortage of capital and the refusal of banks to gamble on the struggling young firm put the project on hold. However, with a $20,000 loan from Ruth Handlers brother-in-law, Mattel completed the project and produced another winner. As Elliot Handler later recalled, our music box had a patented mechanism which had continuous play value because it operated only when the child turned the crank. It was different, it was well made, and because we were able to mass-produce it, the price was lower than the imports. By taking an old world idea and adapting it to modern production techniques, the Handlers beat out their Swiss competition, which up to then had dominated the domestic market for music boxes. By 1968, Mattel had sold more than 50 million of the toy music boxes.

The success of the music box taught the Handlers a few other lessons. First, they discovered that child participation was essential for any quality toy, and that children should be able to interact with a toy and want to play with it often and for extended periods of time. Second, the Handlers recognized that a toy with lasting appeal is preferable to short-lived faddish products and can serve as a basis for other toys to follow.

The year 1955 brought other important firsts for Mattel. Sales reached $5 million a year, the company introduced another hitBurp Gunsand the Handlers decided to make a gamble that would forever change the toy business. In what seemed a risky venture, the Handlers agreed to sponsor a 15 minute segment of Walt Disneys Mickey Mouse Club on the ABC Television Network. The Handlers signed for 52 weeks at a cost of $500,000, equal to Mattels net worth at the time. Up until this time, toy manufacturers relied primarily on retailers to show and sell their products, and advertising occurred only during the holiday season; never before had a toy company spent money on advertising year-round. With television, however, toys could be marketed directly to children throughout the country. Thus with the slogan you can tell its Mattel, its swell, the Handlers began a marketing revolution in the toy industry that produced an immediate payoff. The company sold many toy Burp Guns and made their brand name well known among their viewing audience.

In 1957, the company, exploiting the popularity of television Westerns, introduced toy replicas of classic Western guns and holsters. From the basic Burp Gun mechanism, Mattel developed the Fanner 50 Western pistol and a toy version of the Winchester rifle, complete with ejecting bullets. Mattels sales reached $9 million and the following year hit $14 million.

Then in 1959, Mattel made toy industry history with the introduction of the Barbie Doll, the best-selling toy of all time. The idea for the doll originated with Ruth Handler, who had observed that their daughter favored adult-looking paper dolls to baby dolls. So the Handlers set to work designing a teenage fashion model doll and, despite a cool reception at the 1959 New York Toy Fair, the result was a smash hit that propelled Mattel into the national spotlight. Barbie, the famed doll named after the Handlers own daughter, soon prompted official fan clubs across the United States, which by 1968 had a total membership of about 1.5 million. Mattel marketed Barbie as an insatiable consumer of clothes and accessories, which were sold separately, and soon they provided her a boyfriend, the Ken doll.

After the phenomenal success of Barbie, Mattel entered the competitive large doll market in 1960 with another winnerChatty Cathy, the first talking doll. That year, Mattel made its first public stock offering, and, by 1963, its common stock was listed on the New York Stock Exchange. Mattels sales skyrocketed from $26 million in 1963 to more than $100 million in 1965.

Throughout the 1960s, the company continued to introduce popular toys: Baby First Step (the first doll to walk by itself), live action dolls with moving eyes and mouths, See N Say educational toys, the Vac-U-Form machine, and an entire line of Thingmaker activity toys including Creepy Crawlers, Fun Flowers, Fright Factory, and Incredible Edibles. Another spectacular hit was introduced in 1968Hot Wheels miniature model cars.

During this time, the company began aggressively diversifying its operations into a worldwide enterprise with a host of acquisitions: Dee and Cee Toy Co., Toronto (1962); Standard Plastics, New Jersey, a producer of vinyl cases (1963); Hong Kong Industrial Co., Ltd. and Precision Moulds, Ltd., Hong Kong (1966); Rosebud Dolls Ltd., a British doll manufacturing firm (1967); Monogram Models (1968); A & A Die Casting Company (1968); Ratti Vallensasca and Mebetoys, Milan, Italy (1969); Ebiex S.A. Brussels, Belgium (1969); H & H Plastics Co., Gardena, California (1969); Metaframe Corp., May wood, New Jersey (1969); Ringling Bros, and Barnum and Bailey (1970); and others. In 1968, Mattel reincorporated in Delaware and by the end of the decade it was the worlds number one toy maker.

But the good times soon soured. In 1970, Mattels plant in Mexico was destroyed by fire, and the following year a shipyard strike in the Far East cut off their toy supplies. To maintain the appearance of corporate growth Seymour Rosenberg, executive vice president and chief financial officer, fixed the books by reporting orders as sales, although many of the orders had been canceled and shipments had not been made. For two years Mattel issued false and misleading financial reports until 1973, when the company reported a $32 million loss just three weeks after stockholders had been assured that the company was in sound financial condition. Mattels stock plummeted and the Security and Exchange Commission (SEC) stepped in to investigate. Before Judge Robert Takasugi of the federal district court in Los Angeles, Ruth Handler and Rosenberg pleaded no contest to the SEC charges.

Rosenberg was fired, the banks pressured the Handlers to resign, and the court ordered Mattel to restructure its board so that the majority would be company outsiders. Furthermore, the court fined Ruth Handler and Rosenberg each $57,000 and gave them 41-year sentences, which were suspended on the condition that they both perform 500 hours of charitable work annually for five years. Finally, in 1980 the Handlers cashed in most of their Mattel stock, ending their involvement in the company they had founded. Comprising approximately 12 percent of the company, the stock was worth about $18.5 million. Ruth Handler then went on to start Nearly Me, a company producing prosthetic breasts for mastectomy patients.

A new management team under Arthur S. Spear, a Mattel vice president, replaced the Handlers in 1975 and by 1977 the company had returned to profitability. By 1980, Mattel was running a slew of other businesses, including the Ringling Bros., Barnum & Baily Circus, Shipstad & Johnsons Ice Follies, Western Publishingthe largest publisher of childrens booksand an entire line of electronic toys, most notably Intellivision video games.

But Mattel stumbled badly for much of the 1980s. Many of their business acquisitions turned out to be unprofitable and had to be sold. Also, a big slump in video game sales in the early 1980s drove Mattel out of the video game business with a $394 million loss, putting the company on the edge of bankruptcy. The company might have gone under if the New York venture capital firms E. M. Warburg, Pincus & Co. and Drexel Burnham Lambert had not stepped in with $231 million in 1984 to save the company from the video game debacle. Still, in 1985 the company fell behind Hasbro as the worlds largest toymaker. Two years later it took another $113 million loss when the market for its Master of the Universe toy line for boys evaporated. As a result of Mattels troubles, its stock plummeted from a peak of 30 in 1982 to 10¼ in 1987.

That year, however, Mattels fortunes took a dramatic upswing when John W. Amerman was appointed as the new chairperson. Amerman had joined the company in 1980 as head of Mattels international division. Under his direction the divisions sales had quadrupled, far outpacing the profitability of Mattels domestic operations. In his new role, Amerman moved quickly to cut Mattels overhead by closing 40 percent of the companys manufacturing capacity, including plants in California, Taiwan, and the Philippines. He slashed the payroll by 150 at Mattels corporate headquarters in California, saving an estimated $30 million annually. Mattel also refinanced high-cost debt and curbed advertising costs. (Mattel had been the first to pioneer in the early 1980s the development of television programming based on a toy linea 30 minute promotional show disguised as entertainment.) Most important, Amerman turned the company around by focusing on core brand names with staying power such as Barbie and Hot Wheels, and by making selective investments in the development of new toys.

Despite a lackluster economy and generally flat sales in the toy industry, Amermans strategy has paid big dividends for Mattel. The Barbie line was bolstered and expanded to include approximately 50 different dolls per year and about 250 accessory items, including everything from shoes and clothing to linens, backpacks, furniture, and a cosmetics line. A promotional campaign in honor of Barbies 30th birthday in 1989 propelled her onto the cover of Smithsonian Magazine, confirming her status as a true American icon. By 1991, Mattel estimated that 95 percent of all girls in the United States aged three to 11 owned Barbie dolls. In fact, Barbie has been so good for Mattel that between 1987 and 1992, sales shot up from $430 million to nearly $1 billion, accounting for about half of the companys $1.85 billion in sales. As a result of this phenomenal growth, Mattel opened a new state-of-the-art Barbie manufacturing plant in 1992 just outside Jakarta, Indonesia. Mattels emphasis on other core brands including Hot Wheels die cast vehicles, large dolls, Disney products, and See N Say educational preschool toys have also provided a string of continuous hits. The company captured a majority share of the large doll market with winning lines in Lil Miss and Magic Nursery. A popular new line of Disney infant and preschool toys featuring such animated stars as Mickey Mouse and Donald Duck was introduced in 1988.

Mattel has also pushed aggressively into other areas of the toy business, including the plush toys, games, boys action toys, and activity toys categories, which comprise 46 percent of the total toy market. By entering these areas, Mattel has increased its participation in the total industry business from 34 to approximately 80 percent to become a full-line toy company. The company has made a particularly strong move into the toys for boys market, where it has been traditionally weak. Since 1991 Mattel has introduced a host of new products including Bruno the Bad Dog, a monster truck that changes into a ferocious dog, action figures based on the upcoming Arnold Schwarzenegger movie, Last Action Hero, and Gak, a gooey substance that stretches and oozes.

A strengthened strategic alliance with The Walt Disney Company in 1991 allows Mattel to sponsor attractions and to develop and sell toys at three Disney theme parks. The agreement is anticipated to give Mattel unparalleled exposure as more than 50 million children, parents, and grandparents visit the parks each year. Mattel also negotiated the exclusive rights to sell dolls, stuffed characters, and preschool toys based upon such movie favorites as Cinderella, Beauty and the Beast, and Aladdin. The agreement produced approximately $200 million in revenue for Mattel during 1991. Moreover, Mattel has the exclusive rights, once held by Hasbro, to sell stuffed Mickeys and other top Disney characters starting in 1993. Amerman predicts that by the year 1995, sales for the Disney line will produce volume of $500 million.

Beyond Disney, Mattel reached an agreement with Hanna-Barbera in November 1991 to market toys based on the cartoon characters Yogi Bear, Boo-Boo, Cindy Bear, and the Flint-stones. Another agreement with Turner Broadcasting allows Mattel to develop and sell Tom and Jerry products. The company also entered the activity toy area with the acquisition in 1991 of Aviva Sports, Inc., a developer of sport toys, and through an agreement with the childrens cable network, Nickelodeon, to sell a new line of activity toys, including its Gak and the Color Writer. A push into the game market led Mattel in 1992 to acquire International Games, Inc., the producer of such profitable core franchises as the UNO and Skip-Bo card games.

Mattel sees its best growth opportunities overseas. Currently, the company has 30 affiliate organizations around the world, more than any other toy company. Fifty percent of Mattels sales volume is achieved in international markets. Since 1982, sales for its international division have exploded from $135 to $825 million in 1992. The company believes that there are sound reasons to be optimistic for dramatic sales growth in the international markets in the future. Almost twice the number of children live in Europe as in the United States, and sales growth is anticipated to be bolstered in Europe by the arrival of Toys R Us and other toy superstores. Mattel expects that by 1995 sales volume in Europe will outpace sales in the U. S. market.

Mattel is also counting on its superstar toy linesBarbie, Hot Wheels, and other core productsto capture a large share of the worlds second largest toy market, Japan. Mattel is the only U. S. toy company with a wholly owned marketing organization in Japan, giving it an advantage over other U. S. toy companies among the Japanese. Thus, with its expanding product line in both the domestic and international markets, Mattel appears well positioned to take advantage of new growth opportunities in the future.

Principal Subsidiaries

Arco Toys, Ltd; Aviva Sports, Inc.; International Games, Inc., Mattel Pty., Ltd. (Australia); Mattel Belgium; Mattel Canada, Inc.; Mattel Chile S.A.; Mattel Scandinavia A/S; Corolle Anselme (France); Mattel France S.A.; Mattel GmbH (Germany); Mattel Greece S.A.; Mattel B.V. Holland; Mattel (HK) Ltd. (Hong Kong); Precision Moulds Ltd. (Hong Kong); Mattel Toys KFT (Hungary); PT Mattel Indonesia; Mattel Toys (India); Mattel Italy SRL; Mattel K.K. (Japan); Mattel (K.L.) SDN BHD (Kuala Lumpur, Malaysia); Mattel Malaysia SDN BHD (Penang, Malaysia); Mabamex, S.A. de C.V.; Montoi, S.A. de C.V.; Matco (Puerto Rico); Mattel Toys PTE Ltd. (Singapore); Mattel España S.A.; Mattel A.G. (Switzerland); Mattel Asia Ltd. (Taiwan); Mattel U.K. Ltd.; Mattel Corgi (U.K.).

Further Reading

Everybodys Business, 1st ed. (1980); Guide to Company Profiles, (New York: Doubleday, 1990); The Impossible Is Really Possible: The Story of Mattel, Newcomen Address, 1968; Mattel Has to Play Harder Than Ever, Business Week, May 25, 1987; Barbie at 30, Forbes, November 1988; Playing Favorites, Marketing & Media Decisions, March 1990; Barbie Does Budapest, Forbes, January 7, 1991; Looking For A Few Good Boy Toys, Business Week, February 17, 1992.

Bruce P. Montgomery

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Mattel, Inc.

Mattel, Inc.

founded: 1945



Contact Information:

headquarters: 333 continental blvd.
el segundo, ca 90245-5012 phone: (310)252-2000 fax: (310)252-4423 url: http://www.mattelmedia.com

OVERVIEW

Mattel is the number-one manufacturer of toys in the United States, placing it ahead of the country's other toy titan, Hasbro. One of Mattel's leading products is the world famous Barbie doll. The "plastic princess" shares the stage with several other Mattel products such as Fisher-Price toys for preschoolers and Hot Wheels cars. Mattel also make toys based on characters licensed from the Walt Disney Company. These four product lines together account for more than 80 percent of Mattel's overall sales.

This massive toy company also manufactures the Cabbage Patch Kids, Frisbees, See 'N Say educational toys, and many others. The company continually expands its horizons with the development of new toys and even ventured into the realm of computers with various interactive products that include CD-ROMs featuring the Barbie doll. Mattel also expanded its foreign market with a focus in China, India, Japan, and South America.

In 1996, Mattel made an unsuccessful attempt to purchase Hasbro. That same year, Mattel acquired Tyco Toys, the maker of Matchbox cars, for $755 million.




COMPANY FINANCES

With $3.7 billion in revenues, Mattel is the top-ranking toy company in the United States' $19-billion toy industry. In 1998, Mattel reported that its first-quarter net income of $12.7 million or $.04 per share had more than doubled over 1997's first-quarter income of $5.1 million or $.01 per share. In May 1998, Mattel increased the quarterly dividend paid on common stock from $.07 to $.08 per share. The company attributed the increase to confidence in the company's projected growth of 15 percent for the year. Net sales for the first quarter of 1998 were $705.0 million, a 2-percent increase over 1997's first-quarter sales of $694.0 million. Sales of the ever-popular Barbie doll accounted for 44 percent of the total, while Fisher-Price products represented one-third of total sales. In 1997 sales of Mattel toys totaled $4.8 billion and net income was $285.0 million, a 24-percent decrease over 1996's net income of $378 million.

HISTORY

Mattel was started in 1945 by Harold Matson and Elliot Handler. The name of the company was derived by using letters from each individual's name. Initially, the company manufactured toy furniture out of a converted garage. Soon after Mattel was off the ground, Matson sold his portion of the company to Handler and his wife, Ruth, who incorporated Mattel in 1948. The business eventually moved into the realm of burp guns and musical toys and, by 1952 sales exceeded $5 million. Mattel went on to sponsor the "Mickey Mouse Club," which marked the birth of toy advertising. The decision proved to be an enormous step in the right direction, because televised sponsorship gave the company year-round exposure to millions of eager toy consumers.

Eventually, Mattel decided to move into doll manufacturing. In 1959 the first Barbie doll was introduced. Barbie received her name from the Handlers' daughter, Barbara. Later, when Mattel provided a male counterpart for Barbie, they called him Ken, the name of their son. With the help of an expansive wardrobe and countless accessories, the Barbie doll "was an instant hit and eventually became the most successful brand-name toy ever sold," according to Hoovers Online.

In 1960 the Handlers decided to go public, and within two years sales tripled from $25 to $75 million. This incredible feat provided the means to purchase smaller toy companies that included The Dee & Cee Toy Company in 1962, The A & A Die Casting Company in 1968, and Western Printing in 1979. Also in 1979, Mattel bought the Ringling Brothers-Barnum & Bailey Combined Shows circus.

A 1974 investigation showing discrepancies in the company's profit reports eventually led to the Handlers' removal from management positions. Mattel was ordered to restructure its board and the Handlers were no longer allowed to participate in Mattel's activities. Even with this dramatic change in the company's operations, Mattel continued to grow and flourish.

The 1980s brought the sale of the company's nontoy holdings, a $93-million loss in 1987 and a major restructuring effort that resulted in the shutting down of 40 percent of the company's manufacturing capacity and lay offs of 22 percent of the staff. By the end of the decade, Mattel was back on track with $80 million in profits.

Mattel expanded into the game market in 1992 with the purchase of International Games, manufacturer of the UNO and Skip-Bo card games. And after years of competing for the rights to license Disney toys, Mattel and Disney signed an exclusive three-year licensing agreement in 1996. At this time, Mattel attempted to buy arch-rival Hasbro for $5.2 billion, but then decided that the acquisition would be too costly and could have antitrust implications.

After backing down from the attempted acquisition of Hasbro, Mattel successfully purchased Tyco Toys in 1996. This gave Mattel a 25-percent market share of the toy industry, far outstripping Hasbro's 15 percent. This enabled the company to target boys, a market segment that had been Mattel's least developed.



STRATEGY

Mattel's success is due in part to the introduction of many new products, as well as the ability to count on generational loyalty. Many individuals who owned Barbie dolls as children will likely provide these toys to their children. High quality toys and marketing expertise also account for Mattel's continued success. Mattel possesses a knack for anticipating consumer trends and then following those trends.



INFLUENCES

As interactive computer games became increasingly popular in the mid- to late 1990s, Mattel introduced products to appeal to a new generation of children. One such product was a CD-ROM that enabled users to design clothes for Barbie dolls onscreen. The company also launched a web site (http://www.Barbie.com) for young girls. The site, designed to encourage girls to play on the computer and explore the Internet, included such features as a "Barbie Shoppe," a "Barbie Collectors Club," an e-mail box, a pen pal section, and "My Room," an area on the site that a user could personalize with wallpaper, curtain, and carpet decorating options.



CURRENT TRENDS

Mattel's method of combining an aggressive marketing approach with the development of new products has proven successful. The latest example of this method is Mattel Media, Inc., a wholly owned subsidiary created in 1995. Mattel Media released its first software product in the fourth quarter of 1996. The subsidiary created interactive multimedia products that featured some of Mattel's most successful toys, such as Barbie, Cabbage Patch Kids, and Polly Pocket. The first products to appear on store shelves were Barbie Fashion Designer (a CD-ROM) Barbie Storymaker, and Barbie Print 'N Play.

Although Barbie dolls have enjoyed phenomenal popularity since their creation 40 years ago, many critics regarded the curvaceous blonde doll as a negative influence on young girls. In response to such criticism Mattel has, over the years, issued doctor, firefighter, and even Presidential candidate Barbie dolls. The company also produces African-American, Hispanic, and Asian versions of the doll to appeal to a more diverse market.

Mattel sought to broaden the appeal of Barbie by connecting the doll with sports such as soccer. In 1998, the company became a licensee of the world championship for women's soccer and announced the introduction of a Women's World Cup Barbie. The new doll was the third sport-themed Barbie to be introduced, following on the tiny heels of WNBA Barbie and Olympic Skater Barbie.



PRODUCTS

Mattel has provided some of the most famous toys in the world. The most prominent products were the Barbie doll and Hot Wheels cars. Together, these two product categories account for over 50 percent of total sales. Cabbage Patch Kids are another important element in Mattel's line.

FAST FACTS: About Mattel, Inc.


Ownership: Mattel is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: MAT

Officers: Jill E. Barad, Chmn. & CEO, 46, $1,545,511; Bruce L. Stein, Pres. Mattell Worldwide & COO, 43, $912,819; Harry J. Pearce, CFO, 53; Francesca Luzuriaga, Exec. VP Worldwide Business Planning & Resources, 43

Employees: 25,000 (1997)

Principal Subsidiary Companies: Mattel's principal subsidiaries include Tyco, J.W. Spear and Sons, and Mattel Media, Inc.

Chief Competitors: As the number-one U.S. manufacturer of dolls, toys, games, and interactive products, Mattel competes with a wide range of companies, including: Acclaim Entertainment; Action Performance; Hasbro; Huffy; Lego; Galoob Toys; Little Tykes; Nintendo; Rubbermaid; SEGA; SLM International; Spalding; Evenflo; and Toy Biz.




Since the 1996 agreement with Disney, Mattel has produced dolls in the likeness of such popular Disney characters as Cinderella , Belle, Cruella De Vil, and Snow White. In 1997 Mattel announced plans to introduce a line of toys based on the animated film "Hercules," which is also owned by Disney.

In the late 1990s, Mattel issued several new Collector Edition Barbie dolls, including Soda Fountain Sweetheart Barbie, and After the Walk Barbie. Both dolls were part of the "Coca-Cola Fashion Classic Series" and were dressed in period costumes that had been featured in Coke ads during the early 1900s.




GLOBAL PRESENCE

Mattel's continued growth allowed it to venture into several different areas of business outside of the United States. In the early 1990s Mattel purchased a Japanese subsidiary of Aviva Sport and also acquired Auritel, a Mexican toy manufacturer. In the late 1990s, Mattel strengthened its presence in India, Japan, and South America, and launched the sale of Barbie dolls in China. Mattel has offices and facilities in 36 countries and sells its toys and other products in more than 150 countries. Sales in Asia and Latin America represent 29 percent of the company's profit, with sales in Canada and Europe accounting for 20 percent. The United States remains the most lucrative market for Mattel with total sales making up 48 percent of profits.

CHRONOLOGY: Key Dates for Mattel, Inc.


1945:

Harold Matson and Elliot Handler start Mattel by selling tow furniture out of their garage

1948:

Matson sells his stake to Elliot and Ruth Handler; Mattel incorporates

1959:

The Barbie doll is introduced, named after the Handler's daughter, Barbara

1960:

Mattel goes public

1974:

The Handlers are removed from management when discrepancies are found in the profit report

1979:

Mattel buys Ringling Brothers, Barnum & Bailey Combined Shows

1985:

Hasbro replaces Mattel as the world's biggest toy maker

1991:

Mattel estimates that 95 percent of all girls age 3-11 own a Barbie Doll

1996:

Buys Tyco Toys giving Mattel a 25 percent share of the toy industry




WHERE DO I GET MY FOXHOLE BARBIE?

Once upon a time, there were talking Barbie dolls, but they disappeared from the market in the 1970s when a fire gutted the Mexican plant in which they were produced. However, with much fanfare, "Teen Talk" Barbie was introduced in 1992, and immediately attracted cries of protest from outraged feminists. It seems that, among other phrases, "Teen Talk" Barbie said such "politically incorrect" things as, "Math class is tough." Subsequently, the Barbie Liberation Organization (BLO) went on the attack by switching the talking mechanisms in "Teen Talk" Barbie and Hasbro's GI Joe dolls. So it was that many a young girl opened up her brand new "Teen Talk" Barbie and was surprised to hear a masculine voice scream, "Vengeance is mine!"




There has been speculation that Mattel is operating "sweatshops" in countries outside the United States. However, Mattel has denied such accusations and promised an investigation of the charges.




SOURCES OF INFORMATION

Bibliography

"continuing its commitment to enhancing girls' experience on the computer, mattel announces creative new features to its barbie.com web site." cbsmarketwatch, 6 may 1998. available at http://www.marketwatch.newsalert.com/.

"information on barbie dolls and related products," april 1997. available at http://www.barbie.com/.

"mattel color spin case study." berkley, ca: university of california, 1997. available at http://www1.needsorg/develop/mattel2/111hist.html.

"mattel, inc." hoover's online, 28 may 1998. available at http://www.hoovers.com.

"mattel increases quarterly dividend by 14 percent." cbsmarketwatch, 6 may 1998. available at http://www.marketwatch.newsalert.com/.

"mattel reports strong earnings increase, remains on track to achieve full-year profit target." pr newswire, 16 april 1998. available at http://www.prnewswire.com/.

"mattel signs on as licensee of 1999 fifa women's world cup." cbsmarketwatch, 28 april 1998. available at http://www.marketwatch.newsalert.com/.

"a new generation of interactive play." mattel media, 1997. available at http://berklymm.com/mattel/barbie0.htm.

riddick, kristin. "barbie: the image of us all." april 1997. available at http://xroads.virginia.edu/class/barbie/barb.html.

schaffler, rhonda. "barbie finds a new home: mattel purchases tyco toys in a $755 million stock deal." cnnfn web site, 18 november 1996. available at http://www.cnnfn.com/hotstories/deals/.

"tale of the toy makers." cnnfn web site, 10 february 1997. available at http://www.cnnfn.com/hotstories/companies/.

"toys 'r' tough business." cnnfn web site, 16 april 1998. available at http://www.cnnfn.com/hotstories/companies/.


For an annual report:

telephone: (310)252-2000 or write: mattel inc., 333 continental blvd., el segundo, ca, 90245-5012


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. mattel, inc.'s primary sics are:

3942 dolls and stuffed toys

3944 games, toys and children's vehicles

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Mattel, Inc.

Mattel, Inc.

333 Continental Boulevard
El Segundo, California 90245-5012
USA
Telephone: (310) 252-2000
Fax: (310) 252-2180
Web site: www.mattel.com

PLAY. LAUGH. GROW. CAMPAIGN

OVERVIEW

With the popularity of video games infringing upon the children's-toy industry, the largest toy manufacturers reported that the maximum age of children playing with toys dropped from 12 years old in 1981 to 8 years old by 2001. Even for children under 8, traditional toys were losing ground to electronic learning toys, a category that increased by 60 percent in four years. The rise was attributed to the developing population of Generation X mothers, who valued toys that combined playing with learning. Mattel, Inc., led the toy industry with brands such as Hot Wheels, Barbie, and Fisher-Price, but LeapFrog Enterprises, Inc., was one of the industry's fastest-growing competitors with its smash hit, the LeapPad, an electronic book that attempted to make learning fun. To rebrand itself as a toy maker that also fused playing with learning, Fisher-Price released its "Play. Laugh. Grow." campaign.

Created by ad agency Young & Rubicam Brands, "Play. Laugh. Grow." was estimated to cost $25 million, making it the most expensive campaign in Fisher-Price's history. It started in September 2003 and used print ads and television spots. Ten commercials appeared across network and cable channels to tout the brand's latest products, which included the PowerTouch, an electronic book-holder that taught preschoolers reading as well as subjects such as science, geography, and mathematics. One television spot showed preschoolers giggling and learning to read with PowerTouch. By 2004 the campaign had refocused on the burgeoning demographic of Latina mothers, and commercials began airing in Spanish across television and radio.

Even though the toy industry had been waning for years and Mattel posted a sales decrease in 2004, "Play. Laugh. Grow." helped Fisher-Price's sales increase 7 percent, making it one of Mattel's most successful brands. The campaign also won a Silver EFFIE Award in 2005. John Taylor, a toy analyst at Arcadia Investment, an institutional research group in Portland Oregon, explained in the Wall Street Journal, "This is Mattel's first salvo in a market LeapFrog dominates and is likely to dominate for a long time. But Fisher-Price isn't going away, and the final outcome of this battle won't be determined for some time."

HISTORICAL CONTEXT

When Mattel purchased Fisher-Price, a toy manufacturer for preschoolers, in the early 1990s, Mattel already owned such brands as Barbie and Match Box. The acquisition soon paid off for the industry leader. Top-selling Fisher-Price items, such as the brand's trademark lines Activity Table, Little People, Rescue Heroes, and See 'N Say, helped Fisher-Price increase sales by 26 percent in 2001. Fisher-Price formed strategic alliances with companies such as Procter & Gamble, which solicited new products to mothers in prenatal education classes. That same year ad agency Young & Rubicam formulated a campaign titled "Oh, the Possibilities!" which utilized print, including a direct mailer for expectant mothers entitled "The First Year." Fisher-Price began reducing its dependency on colossal retailers like Wal-Mart and Target by selling merchandise online and through direct-mail catalogues. By 2002, even though Fisher-Price was still increasing its sales, LeapFrog had gained significant market share by developing electronic learning toys, such as the LeapPad. From the mid-1990s to 2002 more than nine million LeapPads were sold, an achievement connected to the growing population of Generation X mothers, who preferred toys that combined playing with learning. A generation earlier baby-boomer mothers had treated learning and playing as two separate activities.

In 2003 toy brands were also rethinking their entire marketing strategies. Big sales on one-hit items such as Beanie Babies and Razor Scooters had become less frequent. "We're all transitioning from a phenomena-based, hit-driven business to a brand growth business as our center ground," Brian Goldner, president of the U.S. toys unit of toy company Hasbro, told Brandweek. "We're rediscovering the power of brands. The basics still ring true."

Young & Rubicam wanted to create a campaign that proved Fisher-Price was just as viable as LeapPad when it came to designing educational toys. "We want to remind today's mom that Fisher-Price is relevant and it's still important to their child," Chuck Scothon, senior vice president of marketing at Fisher-Price, told the Wall Street Journal.

TARGET MARKET

"Play. Laugh. Grow." initially targeted mothers who were part of Generation X, a classification of Americans and Canadians born between 1965 and 1976. By 2003 mothers in this age range were purchasing 65 percent more toys than baby-boomer (born in the 1940s through early 1960s) mothers. When it came to toy selection Generation X mothers preferred electronic learning toys that combined the process of learning with playing. Baby-boomer mothers tended to separate their learning toy purchases from play toys. Fathers from Generation X were also more involved with toy purchasing than baby-boomer fathers. To specifically target Generation X mothers, however, Fisher-Price created commercials that showed preschool children having fun while learning with Fisher-Price products.

In 2004 the campaign refocused on another target market. Influenced by research conducted by the U.S. Census Bureau, which stated one out of every five U.S.-born child was Hispanic, "Play. Laugh. Grow." began targeting the Latino communities of Los Angeles, Houston, and Chicago. It was predicted that by 2010 the number of Hispanic children under nine years old would increase by 22 percent, while the same age of non-Hispanic children would decrease by 1 percent. Fisher-Price contracted Market Vision, an Hispanic advertising agency, to create Spanish television and radio spots for the campaign. Bonnie Garcia, president of Market Vision, told the PR Newswire, "The Latina mom is young. Her child is at the center of her universe and she's very much involved in her family and in her community. As a brand of toys and juvenile products, Fisher-Price is uniquely positioned to offer her everything she needs to give her family the best possible start in life."

SCIENCE OF PLAY

Fisher-Price, the maker of toys for preschool-aged children, was one of the few toy makers in the United States with laboratories to study what toys children liked. "The company has long realized and championed the importance of play in a child's development," the brand's United Kingdom marketing manager, Ruth Clement, told New Media Age, a magazine that covered the business of interactive media. "In the laboratories, children are observed by our researchers so we can get a better idea of the stages a child goes through and what toys can aid them in that."

COMPETITION

Founded in 1995, LeapFrog developed electronic learning toys that used interactive games to teach children subjects such as phonics, reading, math, writing, music, geography, and spelling. Generation X mothers, looking for toys that made learning fun, quickly became fans of the brand's LeapPad, an electronic toy into which a book was placed; it taught preschoolers different subjects depending on what cartridge was inserted. LeapPad's popularity catapulted the brand's earnings. Net sales rose from $160.1 million in 2000 to $313.7 million in 2001. LeapFrog's success prompted Fisher-Price to strategize its own advertisement for the electronic-learning toys category. "People get the impression that Fisher-Price will buy their way into the category," Mike Wood, LeapFrog's founder and chief executive, told the Wall Street Journal. "But we've got nine million parents telling other parents about how their children learned to read on the LeapPad."

As LeapFrog's popularity grew, so did its product line. The company continued developing products for newborn children all the way up to children 16 years of age. In 2003 the ad agency Ackerman McQueen, Inc. released a wildly successful campaign titled "Learn Something New Every Day!" The campaign earned a Grand EFFIE Award in 2004 and cost LeapFrog more than $20 million. While other brands ran ads on Nickelodeon networks and during Saturday-morning cartoon shows, commercials for "Learn Something New Every Day!" targeted 25- to 49-year-old-mothers by appearing during such shows as Oprah and The View and on the Oxygen Network. Television spots showed parents, grandparents, and neighbors eager to give LeapFrog products as gifts to children.

MARKETING STRATEGY

In September 2003 the $25 million "Play. Laugh. Grow." campaign appeared in print and on television. The TV spots aired across network and cable stations. It was the largest campaign in Fisher-Price's history and positioned the brand to attract 20- to 30-year-old mothers. Ten initial television spots were created by Young & Rubicam, each depicting preschoolers playing and learning with Fisher-Price products. One commercial featured children playing with Fisher-Price's Little People, plastic figurines that taught children about farming, transportation, and even historical subjects such as the Middle Ages.

Another 30-second spot featured Fisher-Price's new PowerTouch toy, a product similar to the LeapPad. When a PowerTouch book with embedded software, such as Dora's Alphabet Adventure Game, was placed into the PowerTouch cradle, the cradle would talk children through the book's storyline. Children could then interact with the book by pressing down on certain words, objects, or colors. The spot promoting the PowerTouch began with the copy: "Learning to read is easier …" with an off-screen woman also reading the words. Next, a preschool-aged girl exclaimed to a preschool-aged boy, "Look, my finger is magic!" She then placed her finger upon the word "cat," and PowerTouch pronounced the word through its small speaker. After the girl effortlessly taught the boy how to use PowerTouch, the spot ended with the Fisher-Price logo above the word "Learning." The words "Play. Laugh. Grow." appeared on the lower half of the white screen.

After the U.S. Census Bureau released information showing the Hispanic population to be the fastest-growing ethnic group in America, Fisher-Price altered its marketing strategy. On October 15, 2004, television and radio spots created by Market Vision and Young & Rubicam began appearing across Spanish channels. The Hispanic portion of the campaign was initially launched in Los Angeles, Chicago, and Houston. Outdoor ads appeared with the following tagline in Spanish: "Play with Them. Laugh with Them. Grow with Them."

At the beginning of the campaign Fisher-Price attempted to convince Generation X mothers that Fisher-Price could integrate playing and learning. Once the campaign shifted toward Latina mothers, Fisher-Price also had to overcome two common beliefs held by their new target market. One was that Fisher-Price was too expensive; the other was that Fisher-Price toys were for elementary school-aged children. "Our recommendation to Fisher-Price was to focus on these three top markets and make a deep connection with Hispanic families. Through traditional and non-traditional marketing vehicles, we can reach the Latina mom in her home, her neighborhood and even in her pediatrician's office," Bonnie Garcia stated in the PR Newswire. To increase brand loyalty with Latina mothers, Fisher-Price released heartfelt ads that emphasized the mother-child bond.

By 2005 "Play. Laugh. Grow." had been extended to Hispanic festivals across the United States, where children could sample Fisher-Price toys inside two 60-by-60-feet "play pens." Actors dressed as life-sized Fisher-Price toys interacted with children at the festivals as well. The 2005 portion of the campaign coincided with the brand's 75th-anniversary celebration.

POPULAR BRANDS

Wunderman, a unit of advertising agency Young & Rubicam Brands, conducted a survey in 2002 to discover what brands were most popular with women. Fisher-Price was selected as one of the most popular, along with Starbucks, Tylenol, Google, and Discover. Among the least popular were Hertz, adidas, RadioShack, Avis, and PlayStation.

OUTCOME

Even while Mattel's other brands reported losses in 2004—Barbie, for instance, was down 13 percent—Fisher-Price reported a 7 percent increase in sales. Much of the toy industry was suffering from a phenomenon that analysts called "age-compression," in which children stopped playing with toys at a younger age. Brandweek reported that in 1981 the average age at which kids stopped playing with toys was 12 but that by 2003 the age had dropped to 8. Despite the change, the new age ceiling of 8 was still above Fisher-Price's preschool age. Mattel brands such as Pictionary, Tyco Electric Racing, and Barbie were more affected by age-compression, which explained why Fisher-Price performed better. Matt Bousquette, president of Mattel's boys division, told Brandweek that to overcome age-compression, "You've got to reinvent 80 percent of your base volume on an annual basis. You've got to continue to reinvent and keep the brand fresh every year."

In 2005 the campaign garnered a Silver EFFIE Award (Children's Products category) from the New York American Marketing Association. Overall the campaign helped Fisher-Price transition its brand from baby-boomer mothers to the developing Generation X market, and eventually, the even faster growing market of Latina mothers. "Play. Laugh. Grow." also branded Fisher-Price as a toy maker that melded playing with learning.

FURTHER READING

Bain, Helen. "Brand Gestures." Dominion (Wellington, New Zealand), April 26, 2001, p. 17.

Bellantonio, Jennifer. "Big Y&R Gets Bigger with Mattel Boys' Account Win." Irvine (CA) Orange County Business Journal, August 26, 2002, p. 45.

―――――――. "Crossover Eyeing Second, Third Generation Hispanics." Orange County Business Journal, June 17, 2002, p. 12.

Coleman-Lochner, Lauren. "Despite Discounters, Game Isn't Over for Toymakers." New York Times, December 30, 2003, p. 13.

―――――――. "Hunting for Value inside the Toy Box." New York Times, December 28, 2003, p. 7.

Finnigan, David. "A Knock-Down Drag-Out Fight." Brandweek, February 12, 2001, p. 21.

Flass, Rebecca. "Y&R Wins Big in Mattel's 3-Way Toy Review." Adweek (Southwest ed.), August 19, 2002, p. 5.

Goetzl, David, "Media Edge Media Agency of Year." Advertising Age, February 28, 2000, p. S2.

Hays, Constance. "Toy Retailers Find Prices at Wal-Mart Tough to Beat," New York Times, December 23, 2003, p. 1.

Kim, Queena Sook. "Advertising: Fisher-Price Courts Gen-X Mothers." Wall Street Journal, September 19, 2003, p. B3.

Lomartire, Paul. "Toronto Firm's Toys Are Hot." Milwaukee (WI) Journal Sentinel, December 28, 2003, p. 10B.

Pearlman, Jonathan, and Gerard Ryle. "Revealed: Deadly Bath Cradles in Thousands of Homes." Sydney Morning Herald, May 24, 2004, p. 1.

Sampey, Kathleen. "FCB Taps Y&R Exec: Corrigan to Steer J.P. Morgan Chase Account." Adweek (eastern ed.), May 27, 2002, p. 4.

Seckler, Valerie. "Study Reveals Women's Top 10 Favorite Brands." Women's Wear Daily, November 11, 2002, p.15.

                                              Kevin Teague

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