MKTG/057

IBS Center for Management Research

Barbies Success Story

2003, IBS Center for Management Research. All rights reserved. To order copies, call +91-08417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: info@icmrindia.org

www.icmrindia.org

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This case was written by K. Subhadra, under the direction of Sanjib Dutta, IBS Center for Management Research. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

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MKTG/057

Barbies Success Story

Most toys are only popular for two or three years, but Barbie has been popular for decades and she shows no signs of weakening. Frank Reysen, Editor, Playthings, in 1998.1 The challenge with Barbie is that it's a 41-year-old brand, and little girls today are nothing like little girls of 41 years ago, the challenge is to continue to reflect who girls are today. Chirs Burns, Editor, Toy Report Weekly in 2000.2 We know were going to have to stay on our toes to keep up with what girls want, Barbie has always reflected what girls are interested in. Today that is fashion, hair, activities and technology. Weve got very cool products that appeal to these girls right now. - Adrienne Fontanella, President, Mattel Co. in 2000.3

BARBIE THE ICON OF AMERCIAN CULTURE

The biggest challenge for Barbie in the 2000s was to retain the interest of young girls. In the 2000s, with young girls getting access to various forms of entertainment such as video games and computers, the number of young girls playing with dolls was decreasing. In addition, Barbie faced stiff competition from Disney Princess, launched by Disney in 2001. Analysts felt that Disneys distribution strength and its brand name would make Disney Princess an instant hit with children. However, some analysts opined that it would not be easy to dethrone Barbie from the position of the worlds favorite doll.

MAKING OF BARBIE
The history of Barbie dates back to early 1950s, when Ruth Handler (Ruth), one of the founders of Mattel Co., (Refer Exhibit I) asked Mattels designers to design an adult looking doll for children. Ruth got the idea of manufacturing an adult looking doll when she saw her daughter Barbara

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Mattel Relies on Dollhouse Diva Barbies Big Business, www.abcnews.com, June 11, 1998. Mattel Giving Middle-Aged Barbie a Major Makeover, Los Angeles Business Journal, March 20, 2000 Barbie Doll Marks New Millennium with Hipper Look, Logo and Attitude, www.collectordolls. about.com, July 11, 2000. 1

Analysts attributed Barbies success to its ever-changing styles and its adaptability to changing trends in American society. Though Barbie faced of lot of criticism for allegedly sending wrong messages to young girls, it was the worlds largest selling toy and one of the most successful products of Mattel Co., its manufacturer.

By 2003, though aged 43, she set new fashion trends, expressed the dreams of young girls, and represented success for them. She was Barbie, the most popular fashion doll across the countries. Barbie was considered an icon of American culture across the world and a representation of the flamboyance and luxurious lifestyle of the Americans. She was also regarded as a role model who inspired young girls to become independent and self-reliant.

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Barbies Success Story

playing with paper dolls, imagining they were adults and imitating adult conversation. Ruth realized that a three-dimensional doll would be an instant hit if they could produce it. However, when Ruth proposed the idea to the board, it was turned down as the board felt that producing a three dimensional doll would be very expensive and that it might not click in the market. In 1955, while Ruth was vacationing in Europe with her family, she came across Lilli doll, which was based on a German comic strip character of same name (Refer Exhibit II). Ruth bought two dolls, one for her daughter and the other for herself. She showed the doll to Mattels designers and asked them to design a similar doll that would look more American, innocent and project every little girls dream of the future. The manufacturing of Barbie was handed over to a Japan-based company Kokuasai Boeki Kaisha.4 Mattel also hired Charlotte Johnson,5 a fashion designer, to design Barbies wardrobe. In 1959 winter, Barbie was first introduced in the American Toy Fair. 6 The first Barbie was dressed in a black and white striped swimsuit (Refer Figure I). Figure I

Source: www.abcnews.com

In order to convince parents to buy Barbie, an adult looking doll, Mattel roped in motivational psychologist Ernest Dichter (Dichter). Dichter studied the responses of parents and children for six months. It was found that while parents rejected the doll, girls in the 8-12 age group liked the doll instantly. It was reported that Barbies clothes and accessories attracted children and they loved the idea of putting Barbie in imaginative situations which required constant wardrobe changes of dress. Ditcher suggested that Mattel position Barbie as a teaching tool that would encourage girls to become well groomed young ladies. Barbie was therefore projected as a role model for American girls, guiding them through puberty into adulthood. The strategy worked well and priced at $3, Barbie sold 351,000 units in the first year.
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Kokusai Boeki Kaisha was a components distributor for medium and small toy companies all over Japan. Charlotte Johnson designed Barbies wardrobe for the first 20 years. The American Toy Fair is held at New York City annually. All major toy companies participate in this fair and launch their new products. Sears one of the largest retailers in America. 2

However, she failed to impress consumers, and even Mattels largest customer, Sears,7 refused to carry Barbie in its stores. Mattel realized that it had to advertise heavily to promote Barbie. After the American Toy Fair was over, Mattel launched a highly successful ad campaign targeting children.

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The Barbie Doll in 1959

Barbies Success Story

Source: www.jcsetc.com

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As part of the bicentennial celebrations, the American government developed a time capsule containing objects representing major events and important objects of American life in 1976. The time capsule would be opened on 2076 by the US president. Holiday-themed Barbie dolls came with designer gowns to celebrate holidays. 3

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Figure II

In the 1990s, Mattel realized that Barbie needed to become techno savvy. In 1996, Mattel launched Barbie Fashion Designer, a CD-Rom. It went on to become the fourth best selling game for that year with sales of around 353,409 copies within the first three months of its launch. By 1997, Barbie had penetrated 90% of the US market and 2.5 dolls were sold every second. According to company sources, by 2002, more than 1 billion Barbie dolls (including its friends and pet animals) were sold worldwide. The bestselling Barbie in the whole Barbie series was Totally Hair Barbie launched in 1992, with hair so long that it reached the dolls toes. More than 10 million units of Totally Hair Barbie were sold generating revenues of $100 million.

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In the early 1960s, feminists in the US campaigned against Barbie. They argued that Barbie distorted the concept of femininity and was a symbol of the patriarchal system. Some even accused Barbie of encouraging girls to visualize themselves as sex objects or housekeepers. However, Barbie continued to be successful, and by 1963 around 2 million Barbies were sold. Around this time, Barbie got a boy friend, Ken and had pet animals (Figure II for Ken). In 1963, Mattel test marketed Barbie in international markets. Since the results were favorable, Mattel entered into licensing agreements in England, France, Germany, South Africa, Italy and Mexico to market Barbie in those countries. In the 1970s, Barbies looks were changed. She got a wide smile and sun-streaked hair, which was a fashion then. In 1976, Barbie was included in Americas Time Capsule during the bicentennial celebrations on the occasion of its 200th year of independence.8 In the 1980s, Barbie represented the disco culture along with Ken and her friends Donny and Marie. In the late 1980s, to counter criticism that Barbie represented only tall blonde Americans, Mattel launched Japanese, Indian and Mexican Barbies. During the same period, Barbie collectors clubs sprang up around the country. These clubs became the largest customer group for Mattel. Most Barbie collectors were in their mid-30s, and they collected Barbie dolls as a hobby. And most of these collectors were attached to Barbie because the doll was part of their childhood. Mattel launched special collector series Barbie dolls in limited editions for such collectors. In 1988 it launched the Happy Holidays Barbie Doll9 series (Refer Exhibit III).

Barbies Success Story

Barbie was reportedly the most widely sold doll across the globe. It was reported that on an average an American girl between 8-12 years owned around 10 Barbie dolls, an Italian or British girl owned seven, and a French or German girl owned five dolls. According to the Interbrand survey,10 Barbies brand value was $1,937 million and it ranked 94th in the top 100 brands for the year 2002. By the 2000s, Barbie contributed to around 40% of Mattels revenues. Barbies success was attributed to its adaptability to changing trends. A new Barbie was launched frequently to represent various cultural changes in American society, enabling young girls to connect with the doll.

BUILDING UP AN IMAGE
Made of molded polystyrene and plastic (for hair), Barbie doll was 11 inches tall with a 4-inch bust, 3-inch waist and 3 inch hips. On a human scale it measured 39-21-33, which was an improbable figure for women. Barbie faced stiff opposition from mothers who thought that the dolls make up and appearance would have a negative impact on children. However, it caught the imagination of young girls with its black eyeliner, pearl earrings, a zebra stripped bathing suit and heels. Barbie had its own wardrobe, consisting of a casual outfit for outings, a bridal gown and a tennis dress. Young girls liked Barbie instantly, thus triggering sales.

To counter criticism of Barbie being a sex symbol, Mattel introduced Midge, a friend of Barbie, in 1963. Midges face was freckled and not at all sensual. During the same period, there was increasing demand for Barbie to have kids. Instead of getting Barbie married, Mattel introduced Skipper, Barbies little sister in 1964, enabling Barbie to baby sit. Consequently, Mattel was criticized for not getting Barbie married to retain her youthful and perfect figure. In the late 1960s Mattel added new features to Barbie to sustain the interest of young girls in the doll. In 1966, Barbie accessories included a magic solution that would change the colour of Barbies hair and clothes. (In the mid 1960s, colored hair was fashionable among American teenagers). In 1967, Mattel revolutionized the toy industry when it introduced Twist and Turn Barbie. This Barbie fascinated children since it was able to move its waist. Realizing that dolls that could move caught the imagination of young girls, Mattel soon introduced a Barbie that was able to move, bend, grasp, and tilt her head. These improvements in Barbie enabled Mattel to sustain
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Interbrand is a leading brand consultant established in 1974. Interbrand lists the top 100 brands of the world in association with BusinessWeek. 4

Mattels introduction of Ken, Barbies boyfriend, met with widespread criticism from feminist groups. However, analysts pointed out that Kens introduction only represented American society in the early 1960s. They pointed out that in the 60s, womens roles were defined by men and that most women spent their lives raising families. As American women were not career oriented, Barbie was not introduced in any career mode. Instead she represented the average American womans life before marriage.

After its launch in 1959, Mattel received suggestions for remolding Barbie. However Ruth felt that the original mold should be retained because it was familiar to customers. In 1961, Barbie got new bright blue irises and shaped eyebrows replacing the heavy black eyeliner and pointed eyebrows. It had a soft skin tone and a bubble cut, which was popular in the early 1960s.

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From its inception, Barbie fashions were based on the philosophy that the doll sells the clothes and the clothes sell the doll. Charlotte designed a bridal gown, a tennis dress, and a ballerina outfit as basics accessories for Barbie. She also added a sleepwear for slumber parties, which were popular in those days. In the early days, Ruth wanted to create an extensive wardrobe for the doll to enable young girls to choose their Barbies personalities. Barbies wardrobe was designed according to the latest fashions, so that young girls could connect with the doll and its accessories.

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Barbies Success Story

the interest of young girls in the doll. To popularize Barbies new features, Mattel advertised heavily. It launched Total Go, a campaign with a $12 million budget, focusing on the new features of Barbie. Mattel advertised heavily in both the print and electronic media (press, television, and radio). Before launching any advertisements, Mattel tested them on children. Only ads that the children liked were aired. In 1967, when racial equality was dominating Americas political and social agenda, Mattel introduced a black Barbie called Francie. This doll did not perform well in the market. Caucasian parents were not ready to buy a black Barbie for their children, and black parents were not ready to accept Francie, as they could not relate to it. As a result, the doll had low sales and was discontinued within a few months of its launch. In 1968, Mattel introduced Christie, a black friend for Barbie. Christie was successful compared to Francie. Christie represented the changing social scenario in the US during the late 60s, a time when African Americans demanded rights and Martin Luther King and Malcolm X asserted the equality of blacks. Mattel continued innovating and in 1969 it introduced Talking Barbie, which spoke about its new clothes, hairstyles and Ken. Along with these innovations, Mattel introduced innovative programs to increase the sales of Barbie. In 1967 it launched a trade-in program, which enabled young girls to exchange their old Barbie for a new Barbie. Analysts pointed out that this venture, not only helped Mattel sell new Barbie dolls, it also allowed the company to erase the old image of Barbie from the minds of young girls. Analysts also observed that the trade-in program taught young children about increasing temporary relationships that was becoming popular in American society.

BARBIEs CHANGING IMAGE

During this period Mattel went through some turbulent times. An enquiry was ordered by federal agencies into Mattels finances and Mattels founders Ruth and Elliot were expelled from the company in 1974. In 1974, Mattel introduced Sweet Sixteen Barbie. However, the sweet sixteen Barbie was not glamorous as teenagers during that period opted for less make up and long hair. In 1975, Mattel associated Barbie with the Winter Olympics and a new athlete Barbie was launched. The athlete Barbie had the clothes and accessories of a swimmer, a skater and a skier. Along with the new versions, Barbies face saw a few changes. In 1975, she got a warm grin and by 1977 she had a permanent smile. In the 1980s, Barbie came with wide smile and winged hair, riding on the disco wave of the early 1980s. By the mid-1980s, with American women exploring different careers, Mattel realized the need to change Barbies image to boost its sales. Mattel realized that young girls were becoming more techno savvy and career oriented. Thus, Barbie was launched as an astronaut (Astronaut Barbie 1986) and as a doctor (Doctor Barbie in 1988) (Refer Exhibit IV). In 1985, Mattel introduced Day to Night Barbie, representing the busy lifestyle of working women. Mattel also revived the
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In the 1970s, Americans experienced turbulent times, both socially and politically. The womens liberation movement and the sexual revolution overthrew the values and traditions of the 1950s. In addition society became more materialistic. Mattel realized that to suit the changing times, Barbie needed to look more assertive. In 1971, Mattel introduced Live Action Barbie to portray the liberated woman. Live Action Barbie had a trimmer figure than earlier Barbies and wore tie-dyed outfits. The Vietnam War and the increasing usage of drugs by teenagers put new challenges before Barbie. So far, Barbie had represented changes in society, but Mattel was against making Barbie a representative of the drugs and free sex culture.

One of the main reasons for Barbies success was its adaptability to changing trends. It was reported that Barbie had more than 80 careers within a period of 40 years. The doll had played the role of college graduate, doctor, teacher, astronaut, Presidential candidate, surgeon and business executive, among others.

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image of Barbie as a fashion doll by introducing Crystal Barbie, Puerto Rican Barbie and Great Shape Barbie. Analysts felt that these new Barbies enabled girls to not only fantasize about the adult life of women but also think and dream of the careers they wanted to pursue. To support Barbies new image, Mattel launched a new ad campaign We girls can do anything in 1980s. The ad showed a series of scenes. The first scene showed a young girl running to greet her mom coming from office and carry her briefcase. This scene was followed by another young girl playing baseball11 and then playing with her doll. The third scene showed a young girl looking through a microscope. The whole ad conveyed the idea that young girls could do anything they wanted. In 1992, Mattel launched Presidential Candidate Barbie, inspiring young girls to opt for a career in politics. By 1993 Barbie crossed the $1 billion sales mark. The Internet revolution of the mid-1990s changed peoples lifestyles and also affected Barbie. In 1998, to keep up with the technology revolution, Mattel launched Barbies website www.barbie.com. The site provided various interactive items. Along with interactive games, the site provided a letter from Olympic Gold Medalist, Tara Lipinski,12 to inspire girls to pursue their dreams and ambitions. The site also included a parents section, through which Mattel conducted an online survey of parents regarding features that should be added to the site. Digital Planet 13 collaborated with Mattel on the design and development of Barbie.com. Commenting on the site, David Haddad, general manager, Mattel Media, said, Were very excited about building our website to include a destination where girls can have a meaningful experience with Barbie on-line. In addition, we truly hope that parents will be our partners in this effort to bring girls to the Internet in a way that's fun and comfortable for everyone.14 In the mid-1990s, Barbie experienced a drop in sales due to the increased in alternative means of entertainment for, kids such as videos games, computer games and the Internet. Also kids could not relate to Barbie due to changing priorities. Analysts observed that in the 1990s, young girls became more career minded and techno savvy and they failed to relate to Barbie. In 1997, Jill Barad (Barad) took over as CEO of Mattel. She announced that she planned to make Barbies image more consistent with the image of women in the 1990s.

In 1998, Mattel redesigned Barbie. Barbie was launched with slimmer hips, a wider waist and smaller breasts. According to Mattel sources, the new Barbie reflected society in the late 1990s. It was reported that the earlier Barbies measurements were improbable for humans. According to Mattel, the slimmer Barbie would fit into the fashion outfits of the 1990s, which did not suit the earlier Barbie.
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Inspite of this launch, Barbies sales started declining after 1997. Analysts pointed out that while Barbies target market consisted of young girls between 3-12 years till the 1980s, the target group was reduced to girls between 3-8 years by the late 1990s. They observed that in the late 1990s, girls were not keen on playing with traditional playthings such as dolls. Analysts also said that since young girls in the late 1990s had lots of exposure due to the Internet, they felt that playing with dolls was childish.

Base Ball is the American national game. Tara Lipinski was the Olympic Gold Medalist in Skating. She won a gold medal in 1998 Olympics. Founded in October 1994, Digital Planet was based in Beverly Hills. Digital Planet had produced over 120 Websites, created over 100 DVD interface designs and won more than 100 awards. Mattel Celebrates the Birthday of the Barbie(R) Doll with the Launch of Barbie.Com For Girls, PR Newswire, March 9, 1998. 6

In 1997, Barbies domestic sales were reported to be $320 million while global sales were reportedly $2 billion. That year Barbies first classical ballet series, Sugar Plum Fairy was launched. In this series Barbie was launched under seven world famous ballet series (Refer Exhibit V).

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Barbies Success Story

To support the image overhaul of Barbie, Mattel launched the Be Anything campaign in 1999. The advertisement showed a girl staring into the camera with untamed hair and a confident look, holding a hockey stick behind her head. In the same year, Mattel celebrated Barbies 40th birthday. During its birthday celebrations, Mattel introduced successful women (Ambassadors of Dreams) who like Barbie doll taught little girls that they could do anything. Commenting on the companys decision to honour women achievers, Anne Parducci, senior vice-president, Barbie marketing, said, This was an exciting opportunity to begin the year of celebration of the Barbie doll. The accomplishments and wisdom of these outstanding trail-blazing women will provide little girls with tools to imagine their futures and to reach their goals. The gala was one way to acknowledge the positive impact of the Barbie brand and honor people that share the same visions and goals.15

OVERHAULING THE IMAGE

In March 1999, Adrienne Fontanella took over as Mattels girls division president and announced a total overhaul of Barbies image. To improve Barbies sales, Mattel adopted two strategies. The first strategy involved introducing more brand extensions for Barbie and segmenting the market according to age. The second strategy involved targeting older girls by stretching the Barbie doll to other products such as perfumes cosmetics and music. Analysts were skeptical of this approach as Barbie would face stiff competition from established brands in cosmetics, music, fashion and electronic games. Mattel also announced that to increase profits from Barbie it would create two distinct personalities of Barbie, one career oriented and the other, cyber Barbie that would specialize in the traditional gender role game.

In 2000, Mattel also launched Jewel Girl Barbie, which was able to move in a more realistic way. According to company sources, Jewel Girl Barbies waist was more soft and fleshy and would twist and bend to give a more realistic feel. Jewel Girl Barbie also had a soft smile and an ovalshaped face. The doll was launched with around 20 outfits including slim pants, long spilt skirt, colored vinyl jacket and stick on fashion jewels. Due to all these initiatives, by 2000 Barbies sales reportedly increased by 9%. However, in 2001, Mattel announced that Barbies sales declined by 12% in domestic markets due to decrease in demand for the collector series and the Holiday Celebration series. In order to increase Barbies sales, in 2002, Mattel launched Barbie as Rapunzel, a computer animated video. Extending its computer-animated videos, Mattel launched Barbie as Swan Lake16 in early 2003.

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Barbie Doll Gala Kicks off Year-Long Celebration; An All-Star Salute to the Barbie Doll's 40th Anniversary, BusinessWire, February 8, 1999. Popular character in a ballet series 7

Along with the change in image, Mattel changed the packaging of Barbie dolls. Till late 1999, Barbie was packaged in a bright pink box, which did not have the usual rectangular shape. The name of the doll was prominently displayed on the package, along with graphics and the Barbie logo. In 1999, Barbie boxes were redesigned, featuring the new logo. Barbie was written in big letters while the name of the doll was written in small letters after the logo. The earlier bright pink colour was replaced by a new light pink colour. In addition, the box was shaped like a rectangle, with well-defined angles. The packaging was done in such a way that Barbies accessories and toy line were visible.

As part of the brand extensions of Barbie, Mattel introduced hi-tech products like the Barbie scrapbook, which came with talking stickers and voice activated locks. Mattel also introduced the Barbie computer, which was available through the Internet.

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BARBIES COMPETITOR
Barbie not only had to deal with changing trends in childrens tastes, it also had to deal with stiff competition from the Disney Princess launched in 2001. Disney launched characters like Snow White and Sleeping Beauty as dolls. The 12 inch plastic doll came with accessories similar to Barbie, such as pyjamas, wrapping paper, magazines and videos. According to reports, Disney dolls were rapidly becoming popular. Reportedly, revenues increased from $136 million in 2001, to $700 million in 2002. Disney expected sales to increase to around $1.3 billion in 2003. Though both Disney and Mattel claimed that they encouraged young girls fantasy, Disney was aware of criticism faced by Barbie for focusing more on fashions. It took care that its doll was not representative of fashion statements of the day. According to Disney sources, its Disney Princess was all about magic and fantasy, while Barbie, with its handbags and high heels focused on new fashions. Commenting on the comparison between Barbie and Disney Princess, a Disney source said, It's about girls wanting to be little girls, rather than encouraging them to grow up fast.17

1. Analysts observed that Barbie, the icon of American culture, reflected changes in American society. Analyze the changes in Barbies image over the years. 2. Analysts attributed Barbies success to the Mattels innovative product development. They pointed out that Mattel's product development reflected changing cultural patterns in American society. Analyze the role played by product development in Barbies success. 3. According to analysts technological innovations and the availability of various other forms of entertainment were turning young girls away from traditional playthings such as dolls. In this scenario, discuss the future of Barbie. Do you think Barbie will be able to retain its dominance? Justify your answer.

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Can a Disney Princess topple the queen of Toyland? The Economist, April 17, 2003. 8

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Analysts felt that with the fast changing preferences of young girls and increasing competition from Disney, Barbie would face tough times in the years to come. However, Mattel sources were confident of retaining Barbies supremacy.

Barbies Success Story

Exhibit I

History of Mattel Co
Ruth Handler, Elliot Handler and their friend Harold Matson formed Mattel company in 1945. Initially it was known as Mattel Creations. The company was located in a garage in southern California. Initially Mattel produced picture frames, then soon, from the scrap of picture frames, Elliot started producing dollhouse furniture. In 1946, due to personal problems, Matson sold his share to the Elliots. Encouraged by the success of dollhouse furniture, the Handlers decide to focus on producing toys. The first successful product of the company, a musical toy Uke-A-Doodle was launched in January 1947. In 1948, Mattel launched its Baby Grand Piano at the toy fair and even got patent protection for the toy. In the same year Mattel was incorporated. The company established its headquarters at Hawthorne, California. Mattel sub-contracted most of its manufacturing activities to save costs. The company also made toys out of various materials to bring down the cost of raw materials. Mattel focused on providing variety and brought out new toys every year. In her autobiography, Ruth said, Wed developed a basic mechanism around which new products could be designed year after year. Around 20 million music toys were produced and sold between 1947-49. Along with new product development, Mattel focused on marketing. One of the major marketing initiatives taken by the company was the sponsorship of a television show. In 1955, the American Broadcasting Company (ABC) (Disneys television network), approached Mattel to sponsor its new program The Mickey Mouse Club a daytime show targeting children. This was the first time that a toy manufacturer had been approached to sponsor a program on television. The Handlers had to consult their auditor before taking decision, since they were asked to pay $500,000 to ABC for sponsorship rights, an amount that equaled the net worth of Mattel. After consulting with their auditor, the Handlers decided to go for the sponsorship deal. In October 1955, The Mickey Mouse Club was aired on television, and it soon topped the rating charts. Along with the program, Mattel launched its new toy Burp Gun. Initially, Mattel did not see any results, however, slowly sales picked up and Burp Gun became the best selling toy that year and its sales touched around one million. Mattel also developed a system to predict and track sales. It had a retail detail team which visited stores to set up displays and check the shelf movement of the products. In 1959, inspired by her daughters fascination for adult looking toys, Ruth designed Barbie, the most successful product of the company. It became very popular, and in its first year recorded sales of 351,000 units. In 1960, riding high on the success of Barbie, Mattel went public and got listed on the New York and Pacific Coast Stock Exchanges. By 1965, Mattel sales touched $100 million and it got listed in the Fortune 500 list. In 1970 it reported profits of $17.4 million. In 1971, its stock was priced at $522.50. Inspired by the success of the Barbie doll, Mattel launched Chatty Cathy, a talking baby doll with a string-activated voice box. The doll was a big hit in 1960. In 1965 it launched N say products, and in 1968 it launched Hot Wheels, die cast metal miniature cars. Hot Wheels were the Handlers last successful product for Mattel. The unrealistic high sales projections of the Hot Wheels line, Sizzlers, resulted in over production and unsold stock. In order to avoid panic among investors, the companys executives resorted to improper accounting practices to hide the losses. In addition, in the late 1960s, Mattel started diversifying into related fields through acquisitions. Mattel acquired Metaframe (a pet products company), Turco (a manufacturer of playground equipment), and Ringling Brothers (Barnum & Bailey Circus). The acquisition of the Barnum & Bailey Circus cost around $47 million. In 1971, since the companies acquired by Mattel had internal problems, Mattel posted its first ever loss. In 1974, the SEC ordered an enquiry into Mattels books for hiding losses from its investors. The enquiry indicted the Handlers for irregular accounting practices. In 1975, the Handlers were ousted from Mattel. In 1978, Ruth was indicted and was ordered to pay a fine of $57,000 and put in 2,500 hours of community service. Contd

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Contd In 1977, Mattel entered the electronic games market and re-evaluated its diversification strategy. In 1979, it launched the Intellivision home video entertainment system and in 1982 it launched Masters of the Universe toys featuring He-Man the main character. The masters of the universe product series was a big hit and even surpassed the demand for the Barbie doll. The new series reported sales of $400 million in the year of its launch. However, by 1983, Mattel reported a loss of $394 million, and in 1984 it hived off its non-toy ventures due to increasing losses. In 1987, Mattel announced its core brand strategy. Under this strategy Mattel would try to maximize its focus on core brands by creating product extensions. At the same, the company would try to identify new products that had good sales potential. In 1988, Mattel entered into an alliance with Disney. The alliance resulted in the introduction of infant and pre-school toys based on famous Disney characters such as Mickey Mouse, Donald Duck etc. Later on, the agreement was expanded to the manufacturing and marketing of toys based on popular Disney movies such as Toy Story. Mattel also entered into an agreement to produce infant and pre-school toys, dolls, games and puzzles based on classic Disney characters. In the late 1980s and early 1990s, Mattel acquired Corolle S.A. (a France based doll manufacturer), Corgi Toys Ltd., (a Britain based manufacturer of scale model, die-cast cars) and Aviva Sports Inc (a manufacturer of sport toys). To strengthen its core brands, in 1993, Mattel brought in Fisher-Price, the worlds number one infant and pre-school toy brands, into the Mattel family. In 1995, Mattel acquired the rights to manufacture and distribute Cabbage Patch Kids dolls. In 1996, Mattel entered into a licensing agreement with Nickelodeon to make toys based on the channels famous characters. In 1997, Mattel merged with Tyco Toys. The merger strengthened for Mattels infant and pre-school product line. In the same year, Mattel sold its sports brand to WhamO Inc. It also established Global Manufacturing Principles (GMP), which provided a framework of manufacturing principles to its units. In 1999, Mattel entered into licensing agreements with the top five Formula One race teams Ferrari, Jordan, McLaren, Stewart-Ford and Williams F1 to produce adult collectibles, track sets, radio-control cars and electric racing sets (as part of its Hot Wheels series). In 2000, Mattel acquired the license to produce the toys based on characters in J.K. Rowlings Harry Potter series. By 2002, Mattel reported net sales of $4.9 billion and had a presence in around 150 countries worldwide.
Adapted from various newspaper articles, Mattel.com and Mattel Annual Reports.

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Exhibit II

About Lilli Doll

Lilli was based on a comic strip, which appeared in Bild Zeitung, a German paper, in the early 1950s. Reinhard Beuthien created the comic strip. Lilli was a semi-pornographic character who targeted the wealthy men for their money. As the comic strip increased in popularity, Greiner & Hauser GmbH produced Lilli doll in 1955. Lilli was 11 inches tall and was made of flesh colored plastic. She had a well-shaped body, a tiny waist, heavy make up, a ponytail and provocative eyes. Greiner & Hauser retained the character of Reinhard Beuthiens Lilli and promoted the doll as sexy, cunning and immoral. They positioned Lilli as the kind of girl every man wants to own. The Lilli doll was targeted towards adults. The dolls clothes were transparent and the doll was available in careless styles. The doll was basically sold as a pornographic gift for men and was displayed in many bars and beer gardens.

Adapted from various newspaper articles.

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Exhibit III

Happy Holiday Series Barbie

1988 1989 1990

Source: www.dollectibles.com

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Exhibit IV

Barbie Doll Over the Years

1959 Barbie 1961 Bubble Cut Barbie 1966 Color Magic Barbie

1975 Olympic Barbie

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1986 Astronaut Barbie 1988 - Doctor Barbie

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1965-66 Teacher Barbie

1967 Twist n Turn Barbie

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1971 Malibu Barbie

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Contd 1992 President Barbie Busy Girl Barbie

Source: www.dollectibles.com, www.barbiecollectibles.com

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Exhibit V

The Barbie Classical Ballet Series 1997 1998 1999

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2001

Source: www.dollectibles.com

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Barbies Success Story

Additional References & Readings:

1. This Barbie Even Knows Your Name, BusinessWeek, 1997. 2. A Doll For All, www.pbs.org, February 26, 1998. 3. Mattel Celebrates the Birthday of the Barbie (R) Doll with the Launch of Barbie.Com For Girls, www.prnewswire.com, March 9, 1998. 4. Nash Sherly Nance, A Look Back, Fortune, May 5, 1998. 5. Humpherys Christine, Mattel Relies on Dollhouse Diva Barbies Big Business, www.abcnews.com, June 11, 1998. 6. Goldstein Lauren, Barbies Secret Plan for World Domination, Fortune, November 23, 1998. 7. Barbie Doll Gala Kicks off Year-Long Celebration; An All-Star Salute to the Barbie Doll's 40th Anniversary, BusinessWire, February 8, 1999. 8. Taub Daniel, New Reality For Mattel: Girls Grow Out of Barbie Earlier, Los Angeles Business Journal, February 8, 1999. 9. Kim J. Nancy, Barbie Gets An Image Makeover, www.bizjournals.com, March 12, 1999. 11. Searching For Turnaround Barbie, BusinessWeek, September 6, 1999. 12. Barbie Teams with Working Woman Magazine and Girls Incorporated to Encourage Girls to Celebrate Their Dreams, www.prnewswire.com, October 5, 1999. 13. Grassel Kathleen, Barbie Around the World, www.ru.org, 1999. 10. Barbie's Midlife Crisis, www.sfbg.com, May 19, 1999.

15. Haley Kathleen, Barbie Gets a Political Makeover, www.alternet.com, April 1, 2000.

18. Barbie Career Girl, www.abcnews.com, 2000. 19. Barbie Boxes: Trends in Barbie Packaging for 2000, www.collectdolls.about.com, 2000. 20. The Barbie Doll Story, www.toymania.com, April 2002. 21. Ruth Handler, The Economist, May 2, 2002. 22. Life in Plastic, The Economist, December 19, 2002. 23. Lukas Paul, Mattel: Toy Story, Fortune, March 19, 2003. 24. A Challenge to Barbie, The Economist, April 17, 2003. 25. www.mattel.com 26. www.barbie.com 27. www.dollcollectibles.com 28. www.people.virginia.edu 29. www.collectdolls.about.com
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17. Mattel Creates a New Era of Collecting with Celebration Barbie(R) Series; Celebration Barbie(R) Tops Toy Wishes Hot Toy List for Holidays, www.prnewswire.com, November 21, 2000.

16. Barbie Doll Marks New Millennium With Hipper Look, Logo And Attitude, www.collectdolls.about.com, July 11, 2000.

14. Gorchov Jolie, Mattel Giving Middle-Aged Barbie a Major Makeover, Los Angeles Business Journal, March 20, 2000.

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Barbies Success Story

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