Mattel Corporation specializes in creating lasting memories for every child the corporation is able to touch through the purchase of their toys. Therefore, the Mattel does not sell toys rather a child's imagination and memories are forged and created respectively, via the purchase of their merchandise. (Corporate.Mattel.com/annual-report) Operations have been successful in U.S. markets from the 1950's through 2000. Since however, the lion's share of profits have been generated by overseas markets in Europe. (Corporate.Mattel.com/annual-report)
The risk factors for Mattel are generally macroeconomic in nature. Generally speaking if the global economy continue to realize marginal GDP growth outside of the ultra-hot Brazil, Russia, India, China (BRIC) region, Mattel's business and financial results are likely to be adversely affected. (Corporate.Mattel.com/annual-report) Globalization will force additional forces on multinational corporations such as Mattel thus creating "governance risks inherent in value chains and networks." (Abonyi, Van Slyke, 2010)
Global economic factors hurt financial performance in 2009. Although gross profit had increased from 2008 to 2009, Net Sales decreased by just under $500,000. (Corporate.Mattel.com/annual-report) Discretionary consumer spending is a major determinant of sales for Mattel and when global economic activity slows down, sales and subsequently profits are expected to fall below forecast.
The global economic slowdown is a function of increased inflation that is reflected in the consumer price index (CPI) rather the producer price index (PPI). The consumer, whom is already burdened with a poor job market and a reduced amount of available discretionary consumer spending levels, must now bear the burden of the rising manufacturing and raw material costs. Although the cost of oil, needed to manufacture oil-based products such as plastic, has risen and will continue to rise, Mattel will pass the increase in cost onto the consumer via higher pricing. Since toy's face an elastic demand curve, the consumer is more responsive to price increases and will decide to leave the market rather pay the higher cost.
"Our performance is impacted by the level of discretionary consumer spending, which has deteriorated sharply in the United States and in many countries around the world in which Mattel does business. Consumers' discretionary purchases of toy products may be impacted by job losses, foreclosures, bankruptcies, reduced access to credit, significantly falling home prices, lower consumer confidence and other macroeconomic factors that affect consumer spending behaviour." (Abonyi, Van Slyke, 2010)
Such economic conditions will generally cause a decrease in the value of the equity traded on the stock exchange. Given the depreciation of the stock price relative to market conditions, it is best to remain with a low debt ratio. The advantages of equity financing for Mattel is the dilution of the equity price enables a stock buyback, which is seen as a positive sign by shareholders and stakeholders.
To finance the liabilities, a high debt ratio would leave Mattel exposed to interest rate risk, which is expected to eventually increase as core and secondary inflation increase globally forcing the U.S. federal reserve to raise interest rates. Such exposure would cripple Mattel and cause undesirable financial loss in an environment that would otherwise be conducive to growth. A low debt ratio enables more equity financing, thus rendering a favourable financial position when the interest rates increase and stock prices rise with Mattel holding a large number of class A and B. shares.
Clorox
The Clorox Corporation provides consumer products such as bleach and other cleaning and maintenance products. Suppliers and other vendors to hospital systems throughout the U.S. have contracts with Clorox for proprietary products used under a different label for use in these clinical and sterile environments. Additionally, hundreds of millions of consumers a quarter rely on the consumer goods produced by Clorox to clean and sterilize bathrooms and kitchens throughout the modern home.
The risks faced by Clorox are similar to those faced by manufacturing and consumer companies globally. A slowing global economy with increasing competition from competitor products and a higher cost of market penetration...
Mattel Toy Recall In 2007, Mattel was dealing with a number of challenges surrounding the quality of toys that were manufactured at their plants China. This is because lead paint was found in a number of toys which were produced in the country. These problems raised concerns about if enough was being done to test merchandise and the kinds of procedures that were place. However, after an extensive investigation, is when
Mattel understands that for its customers and retailers, there is nothing worse, ethically, than putting profit over the health of children. It would appear that Lee Der did not share these values. Thus, part of the problem lies with communication of values between Mattel and its suppliers. The suppliers need to understand that they need to work to the same ethical standards as Mattel, since it is Mattel's name
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Mattel faces an uncertain operating environment. An old-established company with a great family of brands, Mattel has a lot of strengths with which to improve its business. However, the company is facing increased competition both from other toy companies and from electronic entertainment alternatives. This paper highlights some of the challenges that Mattel faces and some of the alternatives for dealing with its problems. There are four major alternatives presented
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