Mattel Recalls 2007: Communication implications for quality
control, outsourcing and consumer relations
TEACHING NOTE:
1. Introduction....................................................................................1
2. Purpose of the Case Study.............................................................2
3. Overall Synopsis of the Case.........................................................2
4. Teaching Components....................................................................3
4.1 Assignments and Activities.....................................................3
4.2 Relevant Theories....................................................................3
Situational Crisis Communication Theory (SCCT).........3
Issues Management Principles.........................................4
4.3 Mattel Teaching Points: SCCT...............................................5
Application of Theory.....................................................5
Discussion Question........................................................5
4.4 Mattel Teaching Points: Issues Management.........................6
Application of Theory.....................................................6
Discussion Questions.......................................................6
5. Solutions through Application of the Page Principles....................7
6. Closing Discussion Questions........................................................9
1. INTRODUCTION:
Quality control and product safety are key challenges for companies that
manufacture in third-world countries. In the event of a safety or quality control crisis,
corporations must respond quickly and efficiently using clear crisis communication and
image repair strategies. By studying the Mattel recall case, we see how a multinational
corporation restored its reputation amongst multiple stakeholders; it also implemented
policies and processes to divert or lessen future crises. The lessons learned from Mattel
demonstrate the importance of transparent communication practices and may guide
companies facing similar communication challenges.
The teaching notes will firstly introduce the purpose of the Mattel case study,
followed by a brief synopsis. Students will next learn relevant theories and principles
from which to understand Mattel's corporate communication response, particularly
strategic crisis communication theory (SCCT) and issues management principles.
Students will then compare Mattel's communication response to the industry best practice
principles as outlined by Page and suggest a revised, more suitable and effective course
of action.
1
2. PURPOSE OF CASE STUDY:
Upon completion of this case study, students should demonstrate that:
1. Issues develop over time, not overnight.
2. Through environmental scanning, crisis anticipation and strategic
communications planning, corporations can minimize the damage done by
emerging and sustained crises.
3. Prompt corrective action can remedy the current crisis and avert future crises and
criticism--in the event that a crisis recurs.
4. Companies can turn a crisis into a long-term competitive advantage if it is
handled properly from the outset.
5. Outside influences may affect a corporation's image. Communicators must
demonstrate preparedness to deal with external effects.
6. In the event of a crisis, a corporation must address (and prioritize) a number of
audiences with tailored messages, for example investors, customers, the media,
government and the industry.
7. Initial responses to a crisis will remain present throughout a communications
campaign, for better or worse, and must be planned carefully. For example,
Mattel's shifted blame to Chinese manufacturers. This backfired and has remained
a controversial point since.
8. Successful cross-cultural communication is essential for corporations operating in
foreign countries.
3. SYNOPSIS:
Beginning in August 2007, America's largest toy manufacturer, Mattel,
announced the first of what would become a series of five recalls involving 21 million
toys. The majority of the recalls were caused by poorly designed magnets fashioned in
the United States, while a smaller number were due to toxic lead paint applied by
slipshod Chinese suppliers. On the one hand, Mattel's various publics, such as parents,
investors and the government, have harshly criticized the toymaker; on the other hand,
analysts and industry experts have praised it for its quick response and stringent safety
inspection systems, which are purportedly the industry's tightest. Regardless, the case
draws attention to the quality control challenges facing companies that outsource
manufacturing to developing countries.
Students, through discussion of the case study and the attached study materials,
will analyze the positive and negative approaches of Mattel's corporate communications
response. They will critique the response's suitability to the level of crisis, and suggest
possible alternatives. They will consider the unique communications challenges facing a
corporation that operates in an international, cross-cultural arena.
2
4. TEACHING COMPONENTS:
4.1 Assignments, Activities and Study Materials:
Students will read the case before class. They will browse Mattel's website,
paying particular attention to the recall page (http://service.mattel.com/us/recall.asp) and
the Investors and Media pages (http://www.shareholder.com/mattel/default.cfm). They
should review Mattel's history, financial information, corporate governance documents
and social responsibility pages. For additional information, students should visit toy
industry websites such as Toy Industry Association (www.toy-tia.org) or consumer action
group sites like Healthy Toys (www.healthtoys.org). Students should carefully read the
news releases in the case appendix.
4.2 Relevant Theories:
Students must understand the key theories informing Mattel's crisis and response
strategies.
Situational Crisis Communication Theory (SCCT):
SCCT posits that each unique crisis requires a unique response tailored to the events
and characteristics at hand. It is based on convergent research from Coombs, Benoit,
Benson and Hearit that aims to minimize or deflect all possible negative outcomes such
as lost sales or low stock prices.1
In order to determine the best strategy, corporate communicators must assess the
reputational threat of the crisis. This is a two-step process. The first step is to determine
the nature of the crisis. There are three types:
Type 1. Victim Cluster (mild reputational threat, the company is an innocent victim)
a. Natural disasters
b. Rumors
c. Workplace violence
d. Product tampering
Type 2: Accidental Cluster (moderate reputational threat, the company is responsible
for the crisis, but the actions leading up to it were unintentional)
a. Challenges from stakeholders
b. Mega-environmental-damage from an accident
c. Technical breakdown accidents
d. Technical breakdown recalls
Type 3. Preventable Cluster (severe reputational threat, company knew it was placing
stakeholders at risk and violated laws)
a. Human breakdown accidents
b. Human breakdown recalls
c. Organizational misdeed with no injuries
3
d. Organizational misdeed with injuries
e. Organizational misdeed management misconduct
The types vary in the amount of responsibility the stakeholders, audiences and publics
think the company holds in the crisis.
The second step considers whether the company has a history of such crises.
Looking at both the type of crisis and history of crisis, corporate communicators can
determine the reputational threat. For example, if a crisis is an accident but has occurred
frequently, this may be a high reputational threat. If a crisis is an accident and this is the
first time it has occurred, this would be a lower reputational threat.
After ascertaining the reputational threat of the crisis, communicators must
choose an appropriate response strategy. SCCT offers three choices: deny (say there is
no crisis, or that you are not responsible), diminish (try to minimize the organization's
responsibility or the severity of the crisis), or rebuild (apologize and offer compensation).
A fourth choice, "reinforce" (reiterate past positive actions and praise stakeholders),
cannot stand alone as a response strategy but can supplement the other three. For a more
detailed look at each of these strategies, please see Appendix IV.
Issues Management:
An issue is a phenomenon or trend that gains a public's attention and directly
involves an organization, such as human rights or environmental sustainability.
Hainsworth and Meng categorize issues as political, social, regulatory or legislative.
Meng further categorizes issues as potential, emerging, current, crisis and dormant.
Current and crisis issues place the most strain on corporations. At these stages, an issue
has become institutionalized in public opinion and its proponents pressure the
government to take regulatory action.2
Issues managers constantly scan the environment to anticipate potential issuesdriven crises before they break. Often, corporate communicators will intervene in an
issue during the potential or emerging stage.3 Once an issue is identified, corporate
communicators should actively manage the issue's development. For example, they can
influence issue policy in favor of the company.
To prevent a circulating issue from becoming a crisis, Cutlip and Center
recommend that corporate communications practitioners constantly:
1. Asses the worst that could go wrong and become the most visible
2. Assess which issues would make the corporation most vulnerable and which
are most urgent
3. Write questions, answers and resolutions for every possible crisis scenario
4. Plan what to do and what to say during the first critical hours following the
start of a crisis
5. Have a strategy to contain and counteract -- don't react and respond. That
could backfire4
4
4.3 Mattel Teaching Points: Situational Crisis Communication Theory
Application of Theory: Students should apply Situational Crisis Communication Theory
to the Mattel case.
1. Assess type of threat: First, assess the type of threat facing Mattel. Choosing from
SCCT's types, there are two that could explain Mattel's recalls. The first is the
"Victim Cluster," which encompasses product tampering and malevolence--when
an external party causes damage to an organization. Here, the external party is the
Chinese supplier who used toxic lead paint. This is a low reputational threat to
Mattel. The second type of threat that could apply here is the "Preventable
Cluster," which is a high reputational threat. Here, publics may accuse Mattel of
both human breakdown recalls and organizational management misconduct-when management violates its own regulations.5
2. Assess crisis history: Mattel has experienced 36 recalls since 1998 and was fined
twice by the CPSC for failing to divulge defects and threats within the 24-hour
time frame.
3. Choose a response strategy based on history and type: Mattel's 2007 recall crisis
is likely a high reputational threat of the "Preventable Cluster." Mattel has a
history of recalls and was ordered by the CPSC to implement tighter reporting and
quality control measures in its overseas factories. Some parties might rank it low
risk, but for the purposes of these teaching notes we will assume it is high.
Therefore, Mattel should adopt "Rebuilding Strategies."6 It should apologize and
offer compensation to consumers and retailers.
Discussion Question:
Assume that Mattel's crisis is high level and requires "rebuilding" strategy. Did Mattel
appropriately apply this strategy? If not, what should it have done differently?
Mattel's response was a mix of denial, diminishing and rebuilding strategies.
For denial, whether done in good faith or maliciously, Mattel initially led consumers to
believe its Chinese suppliers were responsible for the magnet recall. Influenced by recent
pet food and toothpaste recalls, the American media accepted the claim.
Mattel then attempted to diminish the recalls' severity by highlighting its
stringent safety inspection process and minimizing the quantity of toys recalled. It
asserted that the 2.2 million toys recalled because of lead paint constitute only 0.3 percent
of annual production. The 17.4 million recalled because of design flaws make up only 0.5
percent of production between 2003 and 2006.7 In a media statement to concerned
shareholders, Mattel shifted blame and diminished the issue by claiming that American
media and government interest in lead paint over the decades had unduly magnified
Mattel's own lead paint problem.
Mattel did not neglect rebuilding strategies. To rebuild its reputation amongst
parents and consumers, Mattel implemented mortification and compensation tactics. It
apologized through its website and the news media; it offered coupons to affected
5
customers. In the future, Mattel can improve by allocating more resources to the
implementation of creative rebuilding tactics.
4.4 Mattel Teaching Points: Issues Management:
Application of Theory: For Mattel, maintaining tight quality control in its overseas
factories remains a crucial issue that, if not properly addressed, could damage the bottom
line, its reputation, and children's health and safety. Environmental scanning would
clearly identify this as a current issue for two reasons: recalls have existed as a toy
company shortcoming for decades; as companies move manufacturing abroad, the media,
lobbyists and consumer groups have focused increasing attention on quality control. In
fact, 60 percent of the recalls in 2007 were of products manufactured in China.8
Discussion Questions:
Has this issue been building over a long period of time?
Product safety and quality control is not a new issue. Mattel has had 36 recalls
since 1998; one was the high profile Power Wheels recall. Lead paint contamination has
attracted much attention over the years, with some watchdogs dedicated almost entirely
to it.i In addition, the U.S. government, private corporations, consumer groups and
consumer themselves have for years been concerned about low quality, cheap goods
coming out of China. The melamine pet food and toothpaste contamination crises in
spring 2007 heightened concern over food and drugs manufactured in China,9 while back
in 2004 dozens of Chinese babies died from consuming fake baby formula manufactured
by Chinese companies.10
To avoid repeat recalls, how should Mattel handle outsourcing issues? How should it
manage Chinese suppliers and contractors?
Experts claim it is practically impossible to monitor every supplier or test every
layer of paint that goes onto a toy. But Mattel must still ensure that it is doing everything
within its power. For example, Mattel can allocate more monetary and human resources
to the safety inspection process: it can build more testing sites, hire more staff to conduct
more frequent tests, and hire more third-party organizations to conduct tests. Secondly, in
order to improve communication between suppliers, manufacturers and home base,
Mattel should assign teams of American communications representatives to its Chinese
factories. Their main responsibilities should include meeting regularly with supplier
heads, conducting surprise audits, and ensuring that American directives are carried out.
These representatives should speak the local language and have prior work experience in
China. Third, Mattel should lobby for federal legislation that would subject importers to
tighter standards and inspections conducted by a third-party organization like the CPSC.
i
www.esainc.com, www.madeinusaforchristmas.com
6
5. SOLUTIONS THROUGH APPLICATION OF PAGE PRINCIPLES
1. Tell the Truth
Mattel arguably adapts its definition of truthfulness to match its interests at a given
moment. By waiting over a month to make a potential toy hazard public, Mattel evaded
the truth. Even though the company launched an informational campaign after filing its
first recall with the CPSC, for many the honesty came too late. Some investors suspect
the reporting delay was meant to falsely bolster stock shares and sell as many faulty toys
as possible, reducing the financial consequences. The CPSC will likely take Mattel to
court. And framing communication to make China appear culpable for the magnet recalls
is another example of evading the truth to minimize reputational damage. On the other
hand, posting news releases and video interviews on its website kept publics informed
and created a degree of transparency and honesty.
2. Prove it with Action
Mattel pledged three key actions following the recalls: to launch a corporate
responsibility department, to implement a revamped safety audit system run by third
party inspectors, and to maintain a three-point safety check system. But in order to
succeed on this principle, Mattel must execute each action and ensure the news is taken
public. Stakeholders will likely remember and be waiting to see if the company follows
through with its word. For example, Mattel should create an evaluation scheme for its
three-point safety check system. Several times a year, it should conduct audits of this
three-point system and report the results, unbiased, to the media. Mattel should also allow
reporters and even consumers to enter its China factories to see first-hand the new
systems in place.
3. Listen to the Customer
Mattel should improve two-way, interpersonal communication with two key
customers: parents and shopkeepers/retailers. Firstly with parents, Mattel traditionally
favored a one-way, asymmetrical model of communication. This is still apparent today.
For example, the toymaker currently communicates safety info to parents through oneway Q&A links on its homepage.ii Aside from its recall hotline, Mattel has few
communication channels open to facilitate two-way communication. Solutions could
include, for example, an e-mail messaging component. This would signal additional
commitment to customer relations.
Fortunately the communications team recognizes the need to evolve. Mattel vice
president of brand PR, Sarah Rosales, said that fourth quarter marketing campaigns
would address toy safety and how to buy age-appropriate toys. The website will undergo
a redesign in 2008, as the team increases interaction with consumers online. Mattel has
already begun to utilize social media to monitor consumer reactions. For example,
through social media sites they discovered that moms were particularly concerned about
ii
e.g. "Tips for Safe Toys This Holiday"
7
the Polly Pocket magnet recalls. To counter this, the communications teams will focus on
Polly Pocket promotions during the holiday season.11
Secondly, Mattel should not neglect its shopkeepers and retailers. These publics can
stem the spread of misinformation during a recall. For example, parents have direct faceto-face contact with shopkeepers and are likely to ask them about toy safety. Shopkeepers
and retailers should be equipped to provide comprehensive, accurate answers. Mattel
should better communicate with these key publics and address any needs or
troubleshooting difficulties they encounter during a recall.
4. Manage for Tomorrow
There are many ways for Mattel to actively plan for tomorrow. For one, Mattel should
anticipate future crises by scanning domestic and international consumer watch groups
and industry websites. Mattel should understand both its domestic and international
markets and be ready to circumvent any product-safety related issues that are brewing.
Mattel should ensure that each country receives products held to the same safety
standards; sub-standard products should not be dumped on developing markets. It should
generate goodwill with its international customers, but understand the cultural nuances
necessary to do this properly. For example, Mattel's apology to Chinese consumers
backfired because it failed to anticipate that the Chinese government, in order to save
face internationally, would exaggerate and frame the apology in its own favor.
Additionally, Mattel should ensure that every single one of its factories worldwide
implements the new three-step safety check process. A recent Canadian study found that,
compared to China, toy factories in other developing countries actually have higher recall
rates in proportion to production capacity.12 Thirdly, another finding states that design
flaws are more common, and therefore more dangerous, than lead paint. Paul Beamish, a
professor at Richard Ivey School of Business who worked on the study, noted that,
"design quality improvement requires the investment of additional resources... design
quality is usually compromised when a new fad item is rushed to the market." Mattel
could capitalize early by investing more resources into its design department.
5. Conduct Public Relations as if the Whole Company Depends on It
Mattel's public relations functions are headed up by a vice president of
communications and further divided into corporate communications, investor relations,
consumer relations and brand public relations. An in-house communications team
consisting of 10 people oversaw all communication during the recalls. To maximize
productivity and brainpower, the team consulted experts from WS (web services), AOR
and smaller, localized public relations agencies operating in international markets. Upper
management played an important, visible role, with CEO Robert Eckert appearing on
television, on the website, and giving media interviews.
6. A Company's True Character is Expressed by Its People
Mattel's "people" includes its management, employees, retailers and suppliers; their
actions in good times and bad should express the company's character and corporate
culture. Eckert expressed Mattel's emphasis on family when he spoke to parents from his
perspective as a father. Toy retailers like Target and Wal-mart actually have the most
direct contact with customers and can help convey Mattel's character during a crisis--they
should be a part of any communication strategy. Suppliers, when they cut corners and use
8
contaminated materials, expose a company's failure to uphold the same character
standards and commitments in its third-world factories. Mattel should extend its
corporate culture to its suppliers, demanding the same standards both at home and
overseas.
7. Remain Calm, Patient and Good-Humored
By prematurely placing disproportionate blame on Chinese manufactures, Mattel
appeared defensive and paranoid. In reality, by exposing its flaws and coming clean early
on, Mattel may fare better than its competitors. When the panic shifts to the industry as a
whole, and to other toymakers, Mattel's own public scrutiny will be alleviated.
6. Closing Discussion Questions:
1. Did Mattel learn from past mistakes, for example how it handled the Power
Wheels recall? Considering its history, was Mattel's 2007 communications plan
for a quality control/product safety crisis adequate?
2. Toy manufacturers must balance the needs of investors with the needs of
consumers. How should Mattel negotiate these sometimes conflicting demands?
What role does corporate communication play in the balancing process?
3. How can Mattel redirect negative media attention to ensure the recall crisis turns
into a competitive advantage?
4. Two-way symmetrical communication strategies can improve a company's
contact with consumers. How can similar strategies facilitate better cross-cultural
communication in an international arena? Or better internal communication?
What tactics might be most effective?
5. Proposed federal product safety legislation will have a direct affect on Mattel in
the future. Considering issues management principles, reputational rebuilding
strategies and the needs of multiple stakeholders, what role should toymakers play
in shaping legislation?
6. Did Mattel's communication program during the recall reflect a company-wide
commitment to the importance of corporate communications as a management
function?
7. Suppose that in 2008 a Mattel manufacturer operating in China is found to be
using lead paint. How should Mattel respond from a corporate crisis
communication standpoint?
9
Heath, R. L., & Coombs, W. T. (2006). Today’s public relations: An introduction. Thousand
Oaks, CA: Sage, Chapter 8
1
2
Matera, F., and Artigue, R. (2000), Public Relations Campaigns and Techniques. Needham
Heights, MA: Allyn & Bacon, pg 165-168
3
Matera, F., and Artigue, R. (2000), Public Relations Campaigns and Techniques. Needham
Heights, MA: Allyn & Bacon, pg 169-170
4
Cutlip, S. M., Center, A. H., & Broom, G. M. (2006). Effective Public Relations (9th ed.). Upper
Saddle River, NJ: Prentice-Hall, pg 328
Heath, R. L., & Coombs, W. T. (2006). Today’s public relations: An introduction. Thousand
Oaks, CA: Sage, Chapter 8
5
6
Ibid.
7
Media Statement, September 21, 2007, http://www.shareholder.com/mattel/downloads/09-2107%20China%20Meeting%20Media%20Statement.pdf, accessed November 29, 2007
8
"The Stories Behind the Mattel Recall," CSR Asia Weekly, Vol.3 Week 32, August 8, 2007,
http://www.csr-asia.com/upload/csrasiaweeklyvol3week32.pdf
9
Barboza, David, "Fake Goods and Unsafe Foods Threaten Chinese Exports," International
Herald Tribune, May 18, 2007, http://www.iht.com/articles/2007/05/18/business/trade.php
10
"China 'Fake Milk' Scandal Deepens," BBC.com, April 22, 2004,
http://news.bbc.co.uk/2/hi/asia-pacific/3648583.stm
11
"Mattel Tackles Crisis with Solid Comm," http://www.mmm-online.com/Mattel-tackles-crisiswith-solid-comms/article/96308/
12
"New Survey Lets China Off the Hook for Recalls: Most Other Countries Manufacturing Toys
Have Far Worse Problems, Study Finds," Bulldog Reporter, November 16, 2007,
http://www.bulldogreporter.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publicati
ons%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=D5EDB899D
B55459F90748BD212E76E0A
10