Case Scenario: Warfare in Toyland

The rapid pace at which the world is changing is forcing strategic managers at all kinds of companies to speed up their decision making; otherwise they get left behind by agile competitors who respond faster to changing customer fads and fashions. Nowhere is this truer than in the global toy industry, in which the doll business, worth more than $10 billion a year in sales, vicious combat is raging. 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 almost 50 years ago.24 Mothers who played with the original dolls bought them for their daughters and granddaughters and Barbie became an American icon. However, Barbie's advantage as bestselling global doll led Mattel's managers to make major strategic errors in the 2000s. Barbie and all Barbie accessories accounted for almost 50% of Mattel's toy sales in the 1990s, so protecting its 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 Bob Eckert, Mattel's CEO, and his top managers to underestimate how much the world had altered. Changing cultural views about the role of girls, women, sex, marriage, and women working in the last decades shifted the tastes of doll buyers. But Mattel's managers continued to bet on Barbie's eternal appeal and collectively bought into an "If it's not broken, don't fi x it" approach. In fact, given that Barbie was the best-selling doll, they thought it might be very dangerous to make major changes to her appearance; customers might not like the product development changes and stop buying her. 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 kinds of 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, and the doll business is highly profitable, but no other doll had matched Barbie's appeal to young girls (or their mothers).

The marketers and designers behind the Bratz line of dolls had spent a lot of time to discover what the new generation of girls, especially those aged 7-11, wanted from a doll, however. It turned out that the Bratz dolls they designed met the desires of these girls. Bratz dolls have larger heads, oversized eyes, wear lots of makeup, short dresses, and are multicultural to give each doll "personality and attitude."25 The dolls were designed to appeal to a new generation of girls brought up in a fast-changing fashion, music, and television market/ age. 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 doll to toy companies overseas, and Bratz quickly became a serious competitor to Barbie. Mattel was in trouble. Its strategic managers had to change its business model and strategies and bring Barbie up to date; Mattel's designers must have been wishing they had been adventurous and made more radical changes earlier when they did not need to change. However, they decided to change Barbie's "extreme" vital statistics; they killed off her oldtime boyfriend Ken and replaced him with Blaine, an Aussie surfer.26 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" line of dolls in 2002, which were obvious imitations of Bratz dolls. This new line has not matched the popularity of Bratz dolls. Mattel also introduced a new line called Flava in 2003 to appeal to even younger girls, but this line flopped completely.

At the same time, the decisions that they made to change Barbie and 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%. This was serious because Mattel's profits and stock price hinged on Barbie's success and they both plunged. Analysts argue that Mattel had not paid enough attention to its customers' changing needs or moved quickly to introduce the new and improved products necessary to keep a company on top of its market. Mattel brought Ken back in 2006, but in recognition of its mounting problems in November 2006, Mattel's lawyers fi led suit against MGA Entertainment. They argued that the Bratz dolls' copyright rightfully belonged to them. Mattel complained that the head designer of Bratz was a Mattel employee when he made the initial drawings for the dolls and that they had applied for copyright protection on a number of early Bratz drawings. In addition, they claim that MGA hired key Mattel employees away from the firm, and these employees "stole" sensitive sales information and transferred it to MGA. In 2008, a judge ruled in Mattel's favor and ordered MGA to stop using the Bratz name; the case was still under appeal in 2009.

Case Discussion Questions

1. What business model and strategies made Mattel the industry leader?

2. What strategies have its rival, MGA, pursued that have threatened its competitive position?

3. What new strategies does Mattel need to pursue to regain its competitive advantage?