Barbie, Bratz, and SWOT

Managers develop strategies at multiple levels (corporate, business, and functional) that direct the organization towards accomplishing its mission and achieving its goals. Strategy formulation begins with managers systematically analyzing the factors or forces both inside and outside the organization, focusing on those that can affect the organization's ability to succeed.

One method of performing a strategy-developing environmental analysis is the SWOT analysis. SWOT analysis is a planning exercise in which managers identify internal organizational strengths (S) and weaknesses (W) and external environmental opportunities (O) and threats (T). Based on a SWOT analysis, managers at the different levels of the organization select the corporate, business, and functional strategies to best position the organization to achieve its mission and goals.

To define their business, managers must ask three related questions about a company's products and services: (1) Who are our customers? (2) What customer needs are being satisfied? (3) How are we satisfying customer needs? Answering these questions helps managers identify not only the customer needs they are satisfying now but also the needs they should try to satisfy in the future. It also helps the organization determine who their true competitors are. All this information helps managers create plans and strategies for achieving organizational goals. The following case of Mattel shows the important role that defining the business can play in the planning process.

Read the case below and answer the questions that follow.

Vicious combat rages in the doll business, worth over $2.3 billion a year in the U.S. alone. The largest global toy company, Mattel, has earned tens of billions of dollars from the world's best-selling doll, Barbie, since it introduced her over 50 years ago. However, Barbie's advantage as a best-selling global doll led Mattel's managers to make major strategic errors in the 2000s.

Barbie and all Barbie accessories have accounted for about 50 percent of Mattel's toy sales since the 1990s, so protecting this star product was crucial. The Barbie doll was created in the 1960s when most women were homemakers; her voluptuous shape was a response to a dated view of what the "ideal" woman should look like. Barbie's continuing success, however, led Mattel CEO Bob Eckert and his top managers to underestimate how much the world had changed. Changing cultural views about the role of girls and women in the home and the workplace shifted the tastes of doll buyers. However, Mattel's managers continued to bet on Barbie's eternal appeal and collectively bought into an "If it's not broken, don't fix it" approach. In fact, given that Barbie was the best-selling doll, they thought it might be dangerous to change her appearance; customers might not like the product-development changes and stop buying the doll. Mattel's top managers decided not to rock the boat. They left the brand and business model unchanged and focused their efforts on developing new digital toys.

As a result, Mattel was unprepared when a challenge came along in the form of a new kind of doll, the Bratz doll, introduced by MGA Entertainment. Many competitors to Barbie had emerged over the years because the doll business is so profitable, but no other doll had matched Barbie's appeal to young girls. The marketers and designers behind the Bratz line of dolls spent a lot of time to learn what the new generation of girls, especially those aged 7–11, wanted from a doll, and then designed Bratz dolls to meet these desires. Bratz dolls have larger heads and oversized eyes, wear lots of makeup and short dresses, and are multicultural to give each doll "personality and attitude." The dolls were designed to appeal to a new generation of girls brought up in fast-changing fashion, music, and television markets. The Bratz dolls met the untapped needs of "tween" girls, and the new line took off. MGA quickly licensed the rights to make and sell the dolls to toy companies overseas, and Bratz became a serious competitor to Barbie.

Mattel was in trouble. Its strategic managers had to change its business model and strategies, bringing Barbie up to date. Mattel's designers decided to change Barbie's extreme shape.They killed off her long-time boyfriend Ken and replaced him with Blaine, an Aussie surfer. They also recognized they had waited much too long to introduce new lines of dolls to meet the changed needs of tweens and older girls in the 2000s. They rushed out the "My Scene" and "Flava" lines of dolls, obvious imitations of Bratz dolls, and both lines flopped. The decisions they made to change Barbie—her figure, looks, clothing, and boyfriends—came too late, and sales of Barbie dolls continued to fall.

By 2006 sales of the Barbie collection had dropped by 30 percent. Given that Mattel’s profits and stock price hinged on Barbie's success, they both plunged. In a sign of its mounting problems, Mattel's lawyers sued MGA Entertainment, arguing that the Bratz dolls' copyright rightfully belonged to Mattel. Mattel complained that the head designer of Bratz was a Mattel employee when he made the initial drawings for the dolls, and that Mattel had applied for copyright protection on a number of early Bratz drawings. Mattel claimed that MGA hired key Mattel employees away from the firm, and these employees stole sensitive sales information and transferred it to MGA.

Mattel and MGA have been suing and counter suing each other ever since, accusing each other of industrial espionage and copyright violations. Both sides have won and lost over the years.

Barbie’s sales dropped 16% during the first half of 2015. Towards the end of that year, MGA put Bratz dolls back on the shelves for the first time in two years. Both firms continue to try to update their doll lines to meet the changing tastes of young girls.

1. A new generation of girls who were interested in rapidly-changing tastes in music and fashion, and the increasing multicultural aspect of the toy market as producers sold more dolls overseas, was viewed as a(n) ______ by the makers of the Bratz dolls.

weakness

trend

opportunity

strength

waste

2. Mattel’s original _______ strategy for the doll division was to keep Barbie as she was.

managerial-level

corporate-level

global-level

business-level

functional-level

3. What was Mattel’s strategy to counter the threat posed by MGA with the introduction of the Bratz dolls?

sue MGA and claim they had stolen confidential information

promote Barbie as the "traditional" doll

remove Barbie products from the shelves

purchase the rights to Bratz dolls

4. If you were performing a SWOT analysis for Mattel, which of the following would you classify as a strength?

narrow product lines and growth without direction

increase in domestic competition and changes in demographic factors

brand name reputation and manufacturing competence

rising manufacturing costs and appropriate organizational structure

ability to manage strategic change and decline in "R&D" innovation

5. If you were performing a SWOT analysis after reading this case, which of the following would you classify as Mattel’s greatest weaknesses?

changes in demographic factors and falling barriers to entry

obsolete narrow product lines and poorly developed strategy

good marketing skills and ability to manage strategic change

rising labor costs and slower market growth

ability to apply "R&D" skills in new areas and diversification into new growth businesses