Mattel Inc

1
Mattel Inc

• Michael Birmingham
• October 21 2004

2
General Information

• Founded in 1945 in Southern California
• Originally made picture frames
• Harold Matt Matson started making doll houses
  out of picture frame scraps.
• Dollhouse line encouraged him to pursue toys
  instead of picture frames
• Mattel is born! (incorporated 1948)
• 1959 Barbie debuts
• 1960 first time publicly traded
• 1965 first educational toy introduced

3
Business

• Mattel designs, manufactures and markets a broad
  range of toy products worldwide.
• Their goal is to be the worlds premier toy brand
  both today and tomorrow.

4
Product Segments

• Mattel Brands
• -Barbie, Nickelodeon, How wheels, Matchbox,
  Polly Pocket, Ello, Tyco, YuGiOh, Justice League
• Fisher Price Brands
• -Power Wheels, Sesame Street, Little People,
  Winnie the Pooh, Barney, Dora the Explorer,
  Disney Pre School, Power Touch, View Master
• American Girl Brands
• -American Girl Today, American Girl Collection,
  Bitty Baby

5
Consumers

• Mattels products are made for infants, pre
  school toddlers and young girls and boys.
• Those individuals however cannot buy the items
  because they are too young to earn, save and
  spend money. So,
• Their target consumers are the PARENTS of young
  children.
• Cost per Barbie ranges from 19.99 36.88
• Cost per American Girl doll package 98

6
Marketplaces

• Mattel is a global company with manufacturing
  done in China, Thailand, Indonesia, Malaysia and
  Mexico.
• Sales concentration are highest in USA, Canada,
  Europe, Latin America, Asia Pacific.
• 60 of all revenues were from the domestic
  segment and 40 of revenues originated in the
  international segment.
• Europe contributed the most to foreign revenues,
  accounting for 62 of all international sales.

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Competitor (mkt cap)

• Hasbro (3.3 B)
• Marvel Enterprises (1.6 B)
• RC2 Corp (649 M)
• Leap Frog Enterprises (646 M)
• Jakks Pacific (523 M)
• Mega Bloks (523 M)
• Mattel has a market cap of 7 B

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Corporate Growth Strategies

• Management focuses on five key areas
• -improve existing products
• -globalize their brands
• -extend brand products
• -catch trends
• -develop and keep people

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Strengths

• Mattels three largest customers account for 47
  of net sales.
• Wal- mart accounts for 1 Billion in sales.
• Toys R Us accounts for 0.8 Billion in sales.
• Target accounts for 0.4 in sales
• Many product lines
• Strong brand recognition

10
Weaknesses

• Competition is tight in the toy business.
• With 40 of revenues coming from international
  units foreign exchange rates increase risk to the
  company.
• Leisure Products industry is very heavily
  dependant on the national economy and in Mattels
  case, the economies of each nation it conducts
  business in.

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Opportunities

• Globalizing the brands.
• American Girl Brands
• Canada and Pacific Asian markets account for only
  8 and 9 of international revenue, respectively.
• Redefining the educational toy market via
  increased investment in their interactive
  learning products segment.
• Licensing

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Threats

• Geo-political turmoil
• Strength of the global economy

13
Performance
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Keep in mind

• Over a 5-10 year period, Mattel is an excellent
  company to own. But for the coming year, from my
  research, their results will not be congruent
  with what we want.
• Returns for the company will suffer due to
  spending on new products and re invigorating
  traditional brands for the next coming year.
• Be prepared to hear complaints from prior classes
  for selling such a good, long term investment at
  a loss. (discussion board)

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Recommendation

• In any other circumstance, other than our IMP
  class and its objectives, strategies and
  benchmark, I would recommend buying more shares.
  No other toy company has the reputation and
  strategy for long term growth that Mattel
  possesses.
• However, with our strategy the consumer
  discretionary portfolio weight has to be lowered
  and our results are based on a one year period.
• Mattel also underperforms in many of criteria.

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Recommendation (finally)

• Sell