Mattel and Toy Safety, Case Study Example

In the case study “Mattel and Toy Safety” the case goes into detail about a recall of toys in 2007 Mattel executed due to uncovering substantial amounts of led paint. This led to a Congressional hearing on the prevalence of these types of recalls in the media and the need for better regulatory policy. The following will assess case study in regards to market capitalism framework of business-government-society relationship and explain why I think it is useful for analyzing the situation described in Mattel and toy safety case study.

There is a common misconception in regards to U.S. Capitalism that government interferes with business, more than it supplements the ability of business to thrive. In truth, in many ways U.S. Businesses are allowed to thrive because of government.  The market capitalism framework of the business-government-society relationship is one that makes free market capitalism possible through strict regulations that create an atmosphere for trade and commerce. For example, before Limited Liability laws were passed, if an investor invested in a company they would have been held legally responsible for the debt of that company, and could potentially have their property seized. This was a major deterrent people investing in corporations and ultimately the companies, economy, consumer, and investors all lost out. The government passing Limited Liability legislation enabled companies to get the money they needed from investors to prosper and it protected investors from the potential risk of the failure of those companies beyond the loss of their initial investment.

In the case of Mattell Inc., the government can be seen in playing a pivotal role. Mattel failed to ensure that their products were safe for distribution, in regards to U.S. Standards, but not necessarily in regards to global standards. By this, I mean it must be assumed the recall was motivated by the fear of greater loss of revenue and potential sanctions that would reign down from the U.S. Government. As much as one does not want to be pessimistic about the morality of Mattell Inc. executives, or any corporate executives for that matter, capitalism is the competitive pursuit of profits by all legal means and it is the regulation that sets the tone for what is legal. In this sense, the government plays a valuable role in why Mattell Inc. saw fit to hire S. Prakash Sethi as an outsideinspector, and why they drafted their Global Manufacturing Principles. The real motivating factor behind these steps is to avoid the loss of revenue or the loss of business through sanctions suspension and bad public reputation that would arise if the U.S. Government were to take note of Mattel and deem it unethical.

In the end, the 2007 hearing congress had, was two weeks after Mattel’s recall and it was in reaction to the recall. Mattell was self policing their product line from the very start of their expansion into China. As stated in the 2007 hearing by the Toys R Us executive, the real problem most toy manufactures were facing is that, despite the energy and resources put into inspections the actual inspection process was not executed on a frequent enough basis. This resulted in outside vendors switching up compliant toy products that passed inspection for non-compliant products, in between inspections to cut on costs.

In respect to where Mattell went wrong, the Toys R Us executive hit the nail on the head. The case stated that every three years, S. Prakash Sethi would uncover violations and Mattell would do massive layoffs and then continue business as usual. On the surface, this looks like an effective strategy but the demands of Capitalism are more diligent and urgent than this style of regulation. The congressional hearing stated the same thing that regulations needed to be more diligent and that and frequent and acknowledgment about the lax regulatory process within China was mentioned, noting that the laws were in place to keep lead paint out of toys but the regulations were not reinforced. It was also mentioned that the U.S. Government agency in charge of monitoring Chinese imports safety had their staff cut in half due to budget limitations. All of this points to a major gap between policy language and the reality of how policy is actually dealt with in the real world. This is true of both corporations like Mattel and the government itself.

In the case, when Congress held the 2007 hearing on the prevalence of Toy recalls and the need for new policy, it was not to police Mattel’s behavior it was to police it’s own methods of dealing with companies like Mattel and the government’s failure to catch the issue. The case reveals that while the market framework of the business-government-society relationship is one that creates the free market environment for businesses to compete, many regulations designed to ensure they compete fairly and ethically, even those implemented by the businesses themselves, don’t take into account real market limitations. The case notes that Mattel Inc. paid their inspector an excessive salary to inspect once every three years and most and it would probably been too expensive for the company to schedule the inspections more frequently. Likewise, the case notes that the U.S. Government had to cut their import inspection agency in half due to budget cuts, despite the fact that the demand for product did not decline. The case demonstrates that in bother government and industry there is a major difference between policy and practice.