Mattel Porter Five Forces Analysis
Five Forces analysis of Mattel covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
Mattel is an American toy manufacturing company that started in 1945 in El Segundo, California. Being a new entrant in toys and games requires high capital and resources. It is extremely important to innovate bring in new ideas and creations in this industry. The product differentiation is somewhat moderate, and the customer experience is more important. The new entrants would also have to take into consideration the regulatory frameworks and policies that govern this industry. Since the toys are going to be used by children who have a tendency of putting things in their mouths, it becomes very vital for the company to make them toxic-free. The new entrant would have to get new patents and licenses before they start their company. Achieving economies of scale is comparatively difficult. The distribution system is not very complex, but resources would be needed to set up shops and displays. Owing to high quality of production, the investments are higher and hence threat of new entrants are low.
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This concludes the threat of new entrants in the Mattel Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Mattel:
The main threat to toy industries in this era is the introduction of video games & mobile games. Kids these days have started using mobile phones at a very tender age, and with the entry of the internet, most of the games are online; therefore, they do not feel the need to play with toys.
As a result, it has posed a major threat to the toys industry. Mattel even tried to enter the video games industry in the year 1979 with Intellivision. The company also tried to get into a partnership with Nintendo but failed. Another big substitute for toys is sports. Kids could play sports, which is a better option than toys. Replacing toys would be a tough job as it helps in a kid’s overall development. Many parents prefer this alternative to simple toys. The cost of switching in this industry is pretty low. There is also a threat from poor cheap toys which could replicate the toys. Hence, for Mattel, substitutes like video games, mobile games or other entertainment sources are high.
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Bargaining Power of Customers:
In the Mattel Porter Five Forces Analysis the bargaining power of the customers can be explained as:
Mattel produces toys and games for children of all age groups. In North America, the brand sells toys under the brands- Fisher-Price brands, Mattel girls and boys brands, Arts and Crafts and construction brands. It also sells the same in Europe, Asia Pacific and Latin America. If the customer base of Mattel is increased then the bargaining power of the customers decreases. It is extremely important for the company to innovate new products, make new products based on the movies being released. Making merchandises and toys after children’s movies so that kid’s get attracted to them. Making the toys visually attractive and colorful draws a kid’s attention to it. Providing discounts and various offers helps the company rope in more customers. The main customers are Walmart, Toys ‘R’ Us and Target, which accounts for 35% of the sales in the entire world.
Mattel has to be up to date with the demands of the customers which changes seasonally and also with different fads.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Mattel:
Mattel sells toys & games across USA, Europe, Asia Pacific, and Latin America. Suppose the customer base of Mattel is increased, then the bargaining power of the customers decreases. It is extremely important for the company to innovate new products based on the movies being released. It is important to make merchandise and toys after children’s movies so that kids get attracted to them. Making the toys visually attractive and colorful draws a kid’s attention to it. Providing discounts and various offers helps the company rope in more customers. The main customers are Walmart, Toys ‘R’ Us, and Target, which account for 35% of the sales in the entire world. Mattel has to be up to date with the demands of the customers, which changes seasonally and also with different fads.
Competitive Rivalry:
The impact of key competitors in the Mattel Porter Five Forces Analysis is as follows:
Mattel has many competitors like Hasbro, LEGO, Bandai Namco, and Jakks Pacific. Mattel mainly split its market into boys and girls. For girls, Barbie and American Gir were the primary toys. Hasbro, on the other hand, has toys like teenage mutant ninja turtles and NERF guns. By branching out into various segments of the toy industry, the company can increase its relevance. Mattel acquired MEGA brands to get into the construction toy market. The company has high brand equity, which makes it easier for the company to get shelf space in toy stores. Creating higher differentiation products in this industry is extremely important and creating great service for the customers is extremely important for the company. Many handmade toys also pose as competitors for the company. It is a leading toy manufacturer and should definitely concentrate on high-quality manufacturing products which are safe for kids to use.
Owing to high competition, the competitive rivalry is higher for Mattel.
To conclude, the above Mattel Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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