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Analysis of Mattel vs Hasbro

Analysis of Mattel vs Hasbro

Mattel vs Hasbro Mattel: History: Mattel was founded in 1945 by Matt Matson and Elliot and Ruth Handler as a picture frame manufacturing company. The name Mattel was derived from a combination of the two names, Matt and Elliot. They operated out of a garage in Southern California. Handler then recognized an opportunity and began to manufacture dollhouse furniture with scrap material from the picture frame business. Matson quickly sold out to the Handlers who then changed the focus of the business to toys. In 1955 Mattel changed the way toy companies advertise.

Up until this point, toy manufacturers relied on retailers to showcase and sell their products. The only advertising was done for the holiday season. Mattel decided to take a chance, and became a year round sponsor of a fifteen minute segment of the Mickey Mouse Club television program. The deal cost Mattel $500,000 for 52 weeks, which was approximately what the company was worth at that time. It was the first time that a toy manufacturer advertised on television year-round marketing directly to children. They acquired the rights to produce Mickey Mouse Club merchandise, and capitalized on products such as the “Mouse Guitar” in the 50’s.

In 1959 Mattel again revolutionized the industry. Ruth Handler developed the Barbie Doll named after her daughter Barbara. The Barbie line of products has proven to be remarkably successful and today is responsible for 80% of Mattel’s profits. The 1960’s and 1970’s were a time of expansion for the company. They developed products such as Chatty Cathy and the See N Say product line. This was also when Hot Wheels was introduced. Since its introduction in 1967, there have been approximately 10,000 different models of Hot Wheels die cast cars. The 1970’s also saw Mattel’s entrance into the world of electronic games.

In 1982, Mattel launched the “Masters of the Universe” product line. It became a “media franchise” and inspired several animated television series, many comic book series, and a major motion film in 1987. In 1985 alone, the Masters of the Universe product line made over $400 million for Mattel. They acquired Fisher-Price in 1993 expanding their product lines even further. By 1997 they had bought out TYCO. At the time, TYCO was the third largest US toymaker. Continuing their drive for expansion, in 1998 they acquired the Pleasant Company and with it their highly successful American Girl brand.

In 2005 they partnered with Oasys Mobile, a mobile game developer. They produce the mobile games based on the Mattel franchise brands. These include UNO, Ker Plunk! , Toss Across, Barbie, and even Rock ‘em Sock ‘em Robots Mobile. In contrast, 2007 was a very difficult time for Mattel. In August, Fisher Price recalled approximately 1 million chinese made toys – including the popular Dora the Explorer and Sesame Street toys – for using lead based paint that exceeded the US federal limit for lead content.

Later that same month, Mattel recalled over 18 million products because of small magnets that could possibly detach and be swallowed by children. The magnets were small, but very strong, and if more than one were swallowed could cause intestinal perforation. While no US or European safety legislation standards addressed this problem specifically, Mattel rewrote its own policy on the use of these magnets, and issued the recall. Mattel was issued a fine in 2009 by the Consumer Products Safety Commission for their violation of the Federal ban on lead based paint.

They agreed to the fine, but did not admit to any wrong doing. Today, Mattel is the world’s largest toy distributor. Their products are sold in over 150 countries. They closed their last American factory in 2002 and is now primarily manufacturing their products in China. As of December 2010, Mattel employs 31,000 and is based in El Segundo, California. Product Line: The Mattel family of products includes the Fisher Price brand, Hot Wheels brand, Matchbox cars, American Girl brand, WWE action figures, games such as Pictionary, Scene It? , and Othello.

They also currently have the licensing rights to Warner Brothers – including Harry Potter, Batman, Superman, and Looney Tunes – as well as the Disney Princesses and Sesame Street. Mattel divides their operating segments on a geographic basis between Domestic and International. The Domestic segment is then divided into 3 categories: 1. Mattel Girls and Boys Brands, US. This includes the Barbie line, Polly Pocket, Hot Wheels, WWE, etc. 2. Fisher Price Brands, US. This includes the Fisher Price brand, Dora the Explorer, Power Wheels, etc. 3. American Girl Brands.

Including the American Girl Doll brand and Bitty Baby. The International segment sells products from all categories except for American Girl Doll brands. They are not available overseas. Internationalization: Mattel prides itself on their ability to bring play to children around the world. International business represents more than 50% of gross revenues for many of their key brands. To grow these markets, they concentrate on investing in infrastructure, building brand awareness, and establishing their brands as the “aspirational” brands in the market.

Currently they market 80% of their products globally. Only 20% are geared to individual country markets. When they launch a new global product, it is done simultaneously in many countries. For example, when Mattel introduced Rapunzel Barbie, it was launched the same day in 59 different countires with television advertising in 35 different languages. The widening reach of retail giants such as Wal-Mart and Target allows them to co-ordinate their merchandising globally. Distribution: Mattel products are available everywhere, from small retailers to the retail giants.

Mattel’s top three customers are Wal-Mart, Toys R Us, and Target. These three retailers account for almost half of all revenues. Their products are also available on line through various online stores as well as through the Company’s own website www. Mattel. com at the “Mattel Shop”. Competitors: Their main competitors in the toy industry are Hasbro, JAKKS Pacific, LEGO, LeapFrog Enterprises, TOMY, and MGA Entertainment. In 1995, Mattel approached Hasbro about a possible merger. After several months of secret negotiations, the Hasbro board voted unanimously to turn down the $5. Billion proposal. SWOT Analysis: Strengths: * They are a global market leader with well-established lines of distribution and a trusted manufacturing base. * Recognizable portfolio of products – Strong brand recognition. * Innovation. Weaknesses: * Concentrated buyers – sales are made on credit with no collateral required. If one or more of their large customers were to be unable to pay, it would adversely affect Mattel’s financial position. If one or more of their large customers were to reduce purchases, it would have an impact on net operating results. Reliance on few products – Barbie accounts for 80% of Mattel’s profits. * Recent (2007) product liability issues. Opportunities: * Adding to existing portfolio by expanding already successful product lines – Barbie video games, DVD’s, etc. * Acquisitions. Threats: * Highly discretionary products. These products are affected by economic slowdowns. Less expensive private label products may result in lower sales of Mattel branded products. * Product Liability – possible negative outcomes of pending litigation. * Seasonality of the industry. The majority of sales are from September – December.

Any disruption in business during these months would have a disproportionate effect on revenues. * Increased competition for access to entertainment properties could inhibit Mattel’s ability to establish, retain, and/or renew licensing agreements. * Changes in regulations or laws pertaining to the import or manufacturing of their products. * Significant changes in currency value. Hasbro: History: The Company was started in 1923 in Hasbrouck Heights, New Jersey, by brothers Henry and Helal Hassenfeld. It was originally called Hassenfeld Brothers, and was a textile remnant company.

It wasn’t until the 1940’s that they began to make their first toys – a Doctor’s kit and a Nurse’s kit. In 1952, they purchased Mr. Potato Head – their first great success. Then, in 1964, in an effort to market to boys who didn’t want to play with dolls, they introduced the “action figure” G. I. Joe. By 1968, they had shortened their name to Hasbro. They purchased Romper Room in 1969. Much of their expansion took place during the 1980’s. In 1982 they introduced the My Little Pony product line. This line was the inspiration for several animated specials and feature length films.

It has is still available and is now tied to a television show that airs on Hasbro’s television channel the HUB. In 1984, Hasbro acquired Milton Bradley expanding its reach into the board game market with such popular titles as the Game of Life, Candy land, and Twister. 1984 also saw the launch of the Transformers product line. The transformers product franchise has led to comic books, animated television series, and several live-action feature films. Playskool was acquired by Hasbro in 1986 moving into the preschool and infant toy market.

They solidified their presence in the board game market in 1991 with the purchase of Parker Brothers which includes Monopoly, the most successful commercial board game of all time. In 2009 Hasbro acquired a 50% stake in the television channel DiscoveryKids. This joint venture channel with Discovery was renamed the HUB. Discovery oversees the ad sales and distribution while Hasbro is responsible for programming. Of course the programming is based primarily on Hasbro branded product lines with shows such as My Little Pony: Friendship is Magic, and Transformers: Prime, as well as G. I. Joe: Renegades.

They also air a game show Family Game Night – which is adapted from Hasbro’s board game properties. In 2010 the NERF branded products were responsible for 10. 3% of net revenues. Today, Hasbro is one of the largest toy makers in the world. They are headquartered in Pawtucket, Rhode Island. Of their approximately 5,800 employees, 3,100 of them are working in the US. They currently have 8 “Mega Brands” and actively market over 150 brands. They boast they have over 1,500 different brands available to them in their “vault”. Their long term strategy involves expanding current brands into the digital world.

They have an agreement with Electronic Arts (EA) to create digital versions of Hasbro branded properties for all available platforms – video games, mobile phones, pc’s etc. Product Lines: The Hasbro family consists of many diverse product lines including Playskool, Tonka, Milton Bradley – Yahtzee, Twister, Transformers, Parker Brothers – Clue, Sorry, Risk, NERF, Play-Doh, Big Ben Puzzles, Strawberry Shortcake, My Little Pony, Atari, TSR – Dungeons and Dragons, Magic: The Gathering. Hasbro is divided into three operating segments. 1. The US and Canada 2. International 3. Entertainment and Licensing

The US and Canada and International segments are involved in the marketing and sales of toys and products in the following categories: * Boys Toys – Transformers, NERF, Star Wars * Preschool Toys – Playskool brands, Tonka, Play-Doh * Girls Toys – My Little Pony, Strawberry Shortcake * Puzzles and Games – Milton Bradley and Parker Brothers – board games, Big Ben – puzzles, cards/ role playing games – Dungeons & Dragons. The International segment sells and markets to wholesalers in Europe, Asia Pacific, Latin and South America. They are expanding into Eastern Europe and into emerging markets in Asia and Latin and South America.

The US and Canada segment markets and sells its products in the US and Canada directly to retailers. Their strategy is based on promoting their brands as innovative and by leveraging off of entertainment experiences to increase customer awareness. The Entertainment and Licensing segment has three main priorities: * Lifestyle Licensing – out-licensing of Hasbro brands for items such as apparel, home goods, and publishing. * Digital Licensing – out-licensing of intellectual properties – such as their alliance with EA to create applications based on Hasbro properties on all digital platforms. Movie, Television, and Online Entertainment – the HUB, Hasbro television studios, and a long-term strategic relationship with Universal Studios. Hasbro uses a Global Development Group to develop products for their toy and game product lines. This group establishes the brand direction and assists the segments to establish local marketing programs. Internationalization: Hasbro is focusing on developing more global brands to capitalize on economies of scale. Since 2007, they have opened offices in the emerging markets of Brazil, Russia, Czech Republic, Romania and China.

They also have a presence in Chile, Turkey, Poland and India through established joint ventures. In 2010 they saw revenue gains of 68% in Russia, 58% in Brazil, and 27% in China. Distribution: Consolidated net revenues from their top three customers – Wal-Mart, Toys R Us and Target – are 46% of total. The top five customers account for 50%. In the US and Canada segment, these top three accounted for 71% of net revenues. Hasbro products are available everywhere. They sell directly to retailers where they have a presence. Where they do not maintain a presence, they distribute through wholesalers.

Competitors: Hasbro’s main competitors are Mattel, JAKKS Pacific, LEGO, Nickelodeon, and the Cartoon Network. SWOT Analysis: Strengths: * Strong Brand presence. * Second in the global toy market * Large product base. * Diverse product offerings. Weaknesses: * Concentrated Buyers – if one or more of their large customers were to reduce purchases or become unable to pay, it would greatly impact the financial position of the company. Opportunities: * Expansion of established product lines to digital media. * Acquisitions Threats: * Highly discretionary products.

Sales of these products are very susceptible to economic slowdowns. * Seasonality of the industry. The majority of their revenues occur in the 3rd and 4th quarter of the year. If there were to be a disruption to their business during this time, there would be an adverse effect on revenues. Although when a product line has a tie in with a mid-year release of a motion picture (i. e. , Transformers), the seasonality of the business is not as pronounced. * The use of 3rd party manufacturers – primarily in China – may result in non-compliance with Hasbro’s standards and requirements.