Strategic Risk Management in Mattel

Risk can be defined as exposure or a probability of a loss occurring in an organization. However, not all risks have an adverse effect. Threats tend to affect the success or failure of any business immensely. It is important to note that risks can never be avoided, but they can be controlled. The management process is done by applying effort in their eradication or reduction. Risk management requires a lot of time and effort, but its effect can be massive. Without any risk management strategies, a company’s chance of failing is high (SANTEN, 2015). Effective strategic risk management helps in reducing the weaknesses within an organization which may cause damages. However, the implementation of risk management tools becomes difficult as the organization continues to grow and operate in several locations. Risk management is known to focus on both the positive and negative aspects of risk. Risks provide opportunities for either benefits or threats to the success of a business.

The entertainment industry is a field that has existed since time immemorial. Most people however forget the young generation especially the children who are not entertained by certain objects and worldly pleasures such as television and radio. Toys have been in existence for a long time and the industry keeps growing as more advances are made. Companies that have perfected the art of making children toys keep coming up with new models that offer almost as equal interaction as that offered by other living beings. Ventures all start as ideas that later are realized to viable projects that can generate profit for the owners.

Mattel is an international toy-based company that began as a picture frames venture before the founders discovered the profitability of toys. Despite the success of the decades, Mattel has had a fair share of losses due to decline in sales and bad business acquisitions. This paper describes several virtues that have been applied for tackling ethical issues faced by the Mattel Company.  Being a multinational company, Mattel has to meet some level of standards to cover issues such as wages, work hours, freedom of association and working conditions for their employees. With the company’s vision to be the World’s Premier Toy Brand company, there are many strategies that the company has developed to maintain a fair share in the market as well as the competitive advantage. they include; improvement of the existing business in toy manufacturing, grow globally in relation to their brand, keep up with the trends and develop the people.

Mattel Inc. has established itself in the global economy as the World’s largest toy company. With coverage in over 150 countries in the distribution of toys, Mattel Inc is widely known for the manufacture of toys such as the Barbie dolls and Hot-Wheels die cast vehicles. These two are most common among children and have gained popularity all around the world. With such popularity, the company can only ensure that all needs of its consumers are met to the latter. Even with the massive profits that the company records every year, there are risks that have been associated with the manufacturing of toys. They also include eth challenges the company have faced since its inception in early 1990s. The company has advanced from motion pictures to toys and video games even though the introduction of video games did not succeed as intended.

Risk Management Plan

            In 2007, the growth and popularity of the Mattel Inc was interrupted due to the recall of 19million toys from their manufacturing unit in China (Story & Barboza, 2007). Recalls is a type of risk that messed up with production and distribution of the products from the company. Consumer trust was violated when the toys were found to contain lead paint that is highly toxic to humans.  During the recall, the company also announced recalling other toys that had some magnetic compounds that were harmful to children if accidentally swallowed. All these toys were manufactured in China and this prompted the assessment of all the toys that were already in circulation. During the wave of recalls in the Mattel Company, the company has resolved to settle its mistakes by shoring up its ethical defenses to defend its standards and those of its consumers. Mattel’s growth has been slow due to the technological advances and the children abandoning traditional toys. Despite this, one of its products the Barbie doll remains the leading toy in America as well as globally. To maintain its ethical standards, Mattel ensures all its facilities provide full access onsite inspection and access to records that determine compliance to its principles (Casey & Zamiska, 2007).

A tarnished reputation and loss in sales were the main types of risks in the Mattel case. In the risk management strategies, there was need for the company to prioritize the problems as it addressed the stakeholders.

Stakeholder Analysis

The company’s stakeholders include children, parents, media, financial institutions and the retailers and suppliers of the company.  With 80% of the production made in China, the company also has regulators and quality control individuals to issue inspection for the safety of the children. The problems that were associated with the product recalls was in the production. To maintain its reputation in the world, there was need for a detailed risk management plan to retain its consumers and protect its market share in the industry.

Identification and Treatment of risks

            The risks associated with production of Mattel toys were those of use of lead paint in the toys, misuse of toys and dislodging parts of toys with magnetic components. The design problems were labeled as having the toys manufactured were small in nature making it easier for children to dislodge the pats and swallow them. These small toys had magnets resulting from deficient designs such that when dislodge and swallowed, they perforated the intestines causing injury or death. During this period, the fist death associated with the problem was recorded in 2005. Connected pats that were small in size such as nose, ears and eyes in stuffed animals, or wheels in cares were now made in a way that they could not be detached from the main body. This was to prevent choking hazards to infants.

            Manufacturing recalls related to use of lead paint on toys was the most recurrent problem in the company. At the time, there was a ban on the use of lead in 1978 for any lead levels exceeding 0.06%. following the research on the recalled toys, it turned out that the toys with lead paint were 30-60% cheaper than those with no lead paint. The Chinese contractors could have used this as a strategy to increase the sales. Further probing into the matter indicated that majority of the suppliers were unlicensed or used false certification to deliver toys without any form of inspection being conducted.

Another risk associated with the Mattel toy recalls was the use of toys by children for their unintended purposes. Cases of children using chords to tie them around their necks indicating possible suicidal cases were reported. Others could get stuck resulting in strangulation. There was therefore the need to evaluate the toys produced in order to protect the children and manage the risk of losing their sales. Mattel’s ethical safety standards states that they could damage their consumer’s trust id they sell products do not meet the standards and that they will meet or exceed legal requirements and industry standards for product quality and safety. Some of the customer ethics that have improved were due to the recalls made and the damaged reputation. The lost sales gave the company a rain check to consider increased support for their consumers.(Bertland, 2009)

Monitoring details

 The risk management plan in manufacturing that has been deemed effective by the company includes the following; prototype testing for design failures and proper supply chain management to ensure that all the toys meet the required standards. Prototype testing entails ensuring that all the toys released in the market are safe for use by children. Prototype testing is aimed at looking for harmful chemicals, detachable parts that pose as choking hazards to children, toys that could be used for other intentions will also be eliminated from entering the market, those with small parts as well as the chances of the toys breaking. Prototype testing also involved evaluating the possible ways in which the toys could be used by children and the reason behind the manufacture and delivery of certain designs.

Supply chain management is the department in a company that manages risks associated with manufacturing, supply and quality control. In the Mattel case, the company has a Multi-tier supply system with retailers all around the world. The risk of overlooking the mistakes could result in distribution of unsafe toys in the market. With high levels of supply chain, the company has the possibility of overlooking and failing to inspect the lower tiers. Working on thin margins and lacking resources for quality improvement could result in more failure due to the small sizes of these companies. In relation to the company’s expectations, there is need to adhere to safety and integrity aspects in every tier of the supply chain. Being a global company, Mattel should invest on quality improvement to maintain its market share as the leading toy manufacturing company.

SWOT Analysis

            An analysis on the mentioned company looks at its strengths, weakness, opportunities and threats in attempt to maintain a competitive advantage in the industry. Mattel Inc strengths include a large business share in the toy industry. Since its inception in 1945, the company tops the industry taking up $85billion in toys. With the brand extending across many countries, the company can only get stronger. In addition to this, the dividend yield share of the company has always been on the rise with a 5.5% increasing rate as compared to others in the market. Some of the weaknesses associated with the company are lack of complementary products to go with the existing toys. The tech world has evolved but the company has been reluctant in embracing technology. This can boost its sales if more attention is paid to existing products. Management in Flux is another weakness faced by the company. Since 2015, the company has had three CEOs in attempt to improve the business. This however has not resulted in positive changes (Misra, & Gupta, 2015).

            Opportunities relating to the company are as a result of global recognition of the company. Emerging markets in China and Asian regions increase the dominance o the company as compared to the already mature economies of the euro and American zones. However, even with the possibility of growth in the global economy, the main threats facing the company is video gaming. Today, more children have abandoned the traditional toys and are now being consumed into video games. Even though the toy sales are still almost three times higher than those of video gaming, there is fear that in the next decade, the traditional toy industry will be overtaken by the video gaming that is on the rise.

PEST Analysis

            The above analysis will look at the political, environmental, social, technological, environmental and legal factors affecting the company. In a competitive macro environment, the PESTEL analysis will look at the challenges facing the company. Being a global company, the main political problems that face the company that have to be analyzed before investing in a given region include trade tariffs involving the export and import of toys, military invasion, regulation of consumer goods which is interfered by corruption, government interference of certain toy brands and employee benefits. As discussed earlier,, the company’s multi-tier system fails to incorporate extra expenses such as high wages and benefits especially in low tier suppliers. These political factors need to be considered before Mattel sets up a venture in a given state or country.

            Economic factors look at the prevailing state of the economy in relation to inflation rates, exchange rates, interest and aggregate demand of the economy. Consumer spending can greatly attract the introduction of more toys and games in an industry. Mattel PESTEL analysis will mainly be dependent on the cost of labor and productivity; whereby lower costs yield higher profits, the stability of the economic system, and probability of government intervention in the market economy as well as business cycle evident in the economy (boom, recession, depression and recovery). In relation to social factors, Mattel is a manufacturing industry where skills and labor are high determinants. A market with higher leisure interests will be more viable for the industry. Skills in manufacturing also increase the chances of Mattel setting up a venture. In China for instance, the high population growth, skilled labor and class structures explain the reason why most of the production is done there.

            Technology has been impacting most industrial activities. These advances call for change from the traditional ways of production to those that involve more technology use. High technological growth fails to give time for companies to adjust. As for Mattel, looking at the competition’s technological applications is a major factor to analyze. There are certain environmental factors that should be considered before entering a market. Certain environmental standards and regulations such as those relating to pollution impact industries. Mattel mainly considers climatic changes, attitude towards renewable energy and waste management. Legal factors that are factored in by the company are those that entail discrimination, copyrights, and health and safety laws.

 Risk management Template

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Reason/Management strategy

Task 2: Risk Assessment (Welding)

            Vocational training refers to preparation and mastery of a given trade or craft. Over the years, people are taking pride in vocational training unlike back in the day when the craft was for those who didn’t perform well in school (Li, 2014). Today, the art has been advanced to incorporate activities from hair dressing, welding, auto mechanics and tourism management. Vocational training takes a shorter time to train as compared to other diploma or degree courses.

Welding is a form of vocational training that entails joining metallic part by use of heat. The trade has been in existence since the evolutionary times where people used heat to manipulate iron into various shapes. The craft is deemed dangerous due to the excessive amount of heat needed to shape a metallic object. Various metals have different levels of brittleness. This is where welding comes in by layering tough metals with soft layers under high carbon material and later hammering into shape. The skill has improved in our modern world and we see the various effects in the daily activities. The most common form in which welding takes place is cast iron formations and riveting in railways and bridges. Depending on the kind of work required, welding has taken up certain forms. Some of the welding training that are offered include; forge welding that entails joining small pieces of metal into a large one, arc welding that the largest form of welding today. This kind entails striking an electric arc between an electrode and the work piece. Resistance welding, cold and friction welding are other forms that are present today.

There are risks associated with the mentioned craft. Gases and particles emitted during the welding process can be harmful to the welder. The risk associated with inhalation of these gases could result to irritation or damage to the respiratory system. Another main danger in welding is the emission of rays which can cause burns. Welding uses high temperatures to shape metals. Temperatures of above 6000 degrees can cause severe burns on the skin. In addition to the temperatures, the infrared rays, flakes and sparks can also injuries to the body. In relation to arc welding, the electric arc that is passed through damages the eyes. This is after long periods of glaring at the arc which later irritates the eyes when either closed or open. Another major risk associated with welding is noise. When two materials are placed together, the vibrations result to noise. Hammering and other polishing activities in welding are also associated to noise produced. Electrical shock is another danger that a welder is exposed to. The main activities that lead to shock during welding include leaving the equipment on, not wearing protective gloves when working or standing on water.  Handling metallic objects results to friction and later bruises and bumps that are painful for the welder (Vendan et al, 2019).

A welding station set up in a free market area is one of my assessment areas. Being a constant passer-by, the idea o experiencing an episode of risk never crossed my mind. The station is next to the path that people use when doing shopping. The facts that it is an open area, many individuals are exposed to the dangers associated with welding. The most common risk that I assessed was sparks and flakes that are emitted during arc welding. To those who work nearby, glaring at the flames can be blinding since they are never wearing any protective equipment. The sparks always reach the passer-by posing great risk to their bodies.

The risk assessment process was conducted by the safety department of the county, led by the chairman, the manger of the welding station and welfare committee in the area. The main areas of concern were the safety measures taken to protect the workers in the station and the rest of the community. Besides posing a health hazard to the lives of the workers, there were other complains that were issued such as lack of proper working equipment and inadequate working space for the load of tasks performed there. Identification of the hazards was conducted swiftly since every aspect was visible. The working space was small and the welders had casual dress code instead of protective wear. Since the identification of the hazards was done by simple viewing, the rest of the assessment entailed workers expressing their views on the ways in which work ethics were exploited.

The main issues that we came along included; poor working conditions of the welders. Form the state of affairs; it was clear that the individuals were not given employee benefits even if they were casual laborers. One of the main issues was lack of health benefits or leave days in case of injury. As established earlier, the art of welding exposes the individuals to high risks of getting burnt, long term respiratory diseases and electric shock. In relation to respiratory diseases, there was need for constant check-ups but the employers did not offer any health benefits. The passers-by and workers in the neighboring areas also complained of poor disposal and storage of metals. This mainly affected children playing nearby who constantly would hurt themselves. Electrical cables used in welding were left unattended to in most cases increases the dangers of shock to everyone in the area. Noise from the welding metals that were always in contact with each other caused noise pollution. All the above risks were posing a threat to lives of the involved individuals.

The risk assessment above was intended to come up with ways of improving the society and lives of those working and surrounding the welding areas. Form the assessment, we came up with the following findings; most workers in the informal working sector are still oppressed of their employee benefits. The lack of health insurance and other benefits aimed at ensuring work environment is conducive are missing in most of these areas. The employers claimed that the returns from the work could not yield enough revenue to account for such benefits. This called for the government to subsidize the rates of receiving healthcare in public hospitals. In addition to this, health insurance to allow for provision of regular checkups for such individuals was also a suggestion that came up during the assessment.

Provision of protective wear to welders is the first step to improving the working conditions. Gloves, tinted glasses and asbestos laced outfits are some of the ways that the workers would be protected from burns and bruises. Ear muffs and insulated shoes could also be provided to protect against noise pollution and electric shock respectively. With the government aimed at transforming lives of people, provision of more space by liaising with the employers could make work easier and prevent dangers to the outsiders. Based on the location of our study vocation, the station would be better at a secluded area with few passers-by especially children. This will prevent third party injuries.

Task 3: Written Assessment

3. When communicating risks, it is vital to understand the needs and preferences of stakeholders. It is difficult to manage the expectations without identifying the individuals or groups that might affect the implementation of the project. It is vital to ensure that you analyse the risks and fully understand them before passing the information to the shareholders (Larson, 2015). The communication should be simple and straightforward. Ensure that both the top risks and steps are taken to manage the risks are highlighted. Adequate information should be provided at the right time to the right audience.

4. Structured interviewees can be used to gather information about risk. The interviewees may be asked several questions where they are given a chance to provide their own opinion and hence identify risks. Such interviews are conducted during consultations with stakeholders when coming up with risk management strategies. The researcher can also rainstorm with their colleagues to come up with potential risks, their causes, methods for making decisions, and possible solutions. Checklists are a good way of collecting information on lists of hazards or control fails that have developed due to a previous risk assessment.

5. Communication is a strategy aimed at creation of awareness. The employees can be made aware of the risk management processes in the company by being provided with the information when they are being recruited. Risk management can be made a key selection criterion (Theaker, 2017). Another way is to create a safety committee that goes through the complaints, injuries, accidents, and other incidences experienced by the employees at the workplace. The company can conduct risk audits that involve almost every staff member.. A training video can be used to pass the information to the employees. Posters that advocate for safety and risk management can be displayed on the company’s premises.

6. company activities that include members of the public promote participatory actions that in turn create harmony among the employees and other individuals. The employees need to witness a visible address of the risk. As soon as the employees are sure that their issues have been addressed they will be more willing to engage and participate with their representative. The information can be made available to the employees through the use of posters and internal memos.

7. The representatives should provide a report of how they handled specific issues raised by employees. To back up this information, there should be a statement for the affected individuals stating that they have been assisted. The management should task a specific individual with the duty of keeping track of all the issues that have been raised by the employees. The officer will be in charge representatives and have to oversee their activities. He or she will be expected to update the management on whether the issues have been resolved.

8. Expert risk management is necessary in a company especially when dealing with ambiguous issues. Managerial decisions such implementation of new methods of governance require expert advice. To identify the point of intervention, one has to look at the main issues that could impact the company negatively. The advisors often have better solutions which may work. Such advice can be acquired from professional advisors.

16. One of the political factors affecting Starbucks I son sourcing the raw materials. It has received a lot of attention from politicians in the West. As a result, the company is making an effort to follow the social and environmental norms. Another impact is the need for Starbucks to adhere to the laws and regulations of the nations from which it gets its raw materials. The economic factor affecting Starbucks is the global economic recession (Decò, 2011). The factor above dented Starbuck’s profits. Most of the company’s customers decided to shift to cheaper options. Also, there are increasing costs of labour and operation. The taxation levels and currency exchange rates affect the operations of the firm. The socio-cultural factor affecting Starbucks is the need to try and reduce the cost of its products. If Starbucks is to provide cheap products, it will be forced to sacrifice the quality. The technical factor affecting Starbucks is the emerging mobile wave.

17. Exiting policies and procedures has its own implications to a company. For instance, in our research vocational area, policies dictate safety at the work place. Exiting such will result to injury or death in extreme cases. However, exiting certain procedures could also result in positive change. Starbucks’ strength includes having a superior financial performance due to its strong growth and efficient operations. The company is growing in China. Also, it has a premium menu and a variety of coffees, and quality customer service which ensures that it provides its customers with the best experience. Some of the weaknesses faced by Starbucks include high price points, limitability of goods, and the fact that the standards for many products are generalised. The high price points have increased the profits margins but made the products less affordable.

18. Risks may lead to financial losses from consumer sales and strict credit requirements. Business owners may be forced to sell inventories to consumers at low prices as a way of making money to cater for other business operations. Difficult business situations may be created through sales on account (Larson, 2015). Risks may lead to deterioration of the production process. When there is insufficient equipment or broken tools, the business operations will be negatively affected.  Appropriate methods for treatment of risks can be identified through assessing the chances of the risk associated with the hazard resulting in an injury or illness. The level of harm should be investigated. The relevant staff should be questioned on their knowledge about the risk and ways of eradicating it.

19. Critical success factors in a company that can be applied in the risk management process revolve around the prevailing aspects in businesses. Investing in technology automates the various processes involved in management. This reduces the cases of human error. Board and executive support in the implementation of the various automation risk management process also ensure that the company is on toes with the current events.

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Credit risk

Creating greater relationships with customers

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Introducing policies and procedures.

References

Bertland, Alexander. “Virtue ethics in business and the capabilities approach.” Journal of Business Ethics 84 (2009): 25-32.

Casey, N., & Zamiska, N. (2007). Mattel does damage control after new recall. Wall Street Journal, B1.

Decò, A., &Frangopol, D. M. (2011).Risk assessment of highway bridges under multiple hazards. Journal of Risk Research, 14(9), 1057-1089.

Larson, E. W., & Gray, C. F. (2015). A Guide to the Project Management Body of Knowledge: PMBOK (®) Guide. Project Management Institute.

Li, W. (2014). Risk assessment of power systems: models, methods, and applications. John Wiley & Sons.

Misra, S., & Gupta, P. (2015). Toys and Safety Regulations. Consumer Education Monograph Series No, 18.

SANTEN, C., & OY, S. (2015). Risk Management Plan.

Story, L., & Barboza, D. (2007). Mattel recalls 19 million toys sent from China. The New York Times, 15(8).

Theaker, A. (2017). What is public relations?.In The Public Relations Strategic Toolkit (pp. 17-27).Routledge.

Vendan, S. A., Gao, L., Garg, A., Kavitha, P., Dhivyasri, G., & Rahul, S. G. (2019). Codes and Safety Standards During Welding. In Interdisciplinary Treatment to Arc Welding Power Sources (pp. 209-229). Springer, Singapore.