Barbie still profit babe 50 years on January 30, 2010-02-03 In light of the recent global economic downturn, countless corporations were forced to reconsider their strategic plan so that they could survive the economic conditions and mitigate their risks of failure. With over half a century of experience Mattel Inc. , the biggest name in the toy industry, is one name that is synonymous with longevity. Barbie, Mattel’s flagship product has survived decade after decade; through extreme social change and relentless economic conditions, the Barbie product has survived.
The global toy industry is fiercely competitive. Competition comes from the whole spectrum, low cost an highly differented. The success that Mattel has experience is due largely in part to the fact that Mattel Inc. has an effective strategic plan. In hopes of revitalizing its profit making potential for its key products Mattel in 2009 cut jobs, improved global supply chain, reduced number of items it developed and slashed capital spending of offset weak sales, which was likely driven by the economic downturn and the extremely elastic nature of the demand for toys.
Mattel made the decision to engage in further product differentiation to the Barbie product by creating new Fashionista line, smaller more bendable dolls with fashionable accessories, “I Can Be “ Barbies that depict Barbie in career outfits and Barbie accessories including camper and townhouse. In the 4th quarter ending December 31st, Mattels profits were US$328. 4M (89 cents per share). Excluding tax benefits, per share earnings were 81 cents, beating forecast of 68 cents by 20 percent. In 2009, Mattel earned US$528. 7M, up 39 percent, versus US$379. 6M in 2008.
Sales of Barbie rose 12 percent in the last quarter. Cost cutting helped the number one us toy maker report profit jump of 86 percent on a 1 percent sales increase in the fourth quarter. As the text states “The best empirical indicators (of effective strategy) is whether the company is achieving its stated financial and strategic objectives. ” (Thompson, Stickland III, & Gamble, 2010) I believe that Mattel has an effective competitive strategy because their core product lines are showing signs of healthy improvement. There are countless alternatives to their products and low switching costs for consumers.
In order for Mattel to stay competitive they must continue efforts to differentiate their products which means innovating the traditional Barbie design. This aligns with Mattel’s core competency of product innovation. Furthermore, they should also focus resources on innovating and improving their core product lines instead of creating new lines especially in times of rough economic conditions. Mattel has recognized the market need and made commendable efforts to reach customers and deliver to them a more sophisticated product experience.
Other resource stregenths that Mattel should leverage to improve the effectiveness of their strategy is the firms image with customers, and how well it innovates products and how quickly it can get newly developed products to markety quickly relative to competitors and also the fact that it has unbeleively strong brand equity which is a valuable intangible asset. It is clear that Mattel takes strategic planning seriously. Bibliography Thompson, A. A. , Stickland III, A. J. , & Gamble, J. E. (2010). Crafting and executing Strategy: Concepts and Cases (Seventeenth Edition ed. ). New York: McGraw-Hill Companies.