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Managing Controversy: Team Ho Chi Minh City John Busenbark, Aravon McCalla, Michael Behrns, Rajeev Singh Chinese Manufacturing Problems.

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Presentation on theme: "Managing Controversy: Team Ho Chi Minh City John Busenbark, Aravon McCalla, Michael Behrns, Rajeev Singh Chinese Manufacturing Problems."— Presentation transcript:

1 Managing Controversy: Team Ho Chi Minh City John Busenbark, Aravon McCalla, Michael Behrns, Rajeev Singh Chinese Manufacturing Problems

2 Overview Manufacturer of toys, board games, and electronic games – Brands and Licenses: G.I. Joe, Nerf, Star Wars, Marvel, Magic: The Gathering, Toy Story, Monopoly Market cap of $4.28b – American Firm on NASDAQ – Annual sales of about $4.2b Primary competitors – Mattel, Lego, Jakks Pacific, Disney

3 Competitive Strategy Develops internal brands and licenses other popular brands to create toys and games – Success relies primarily on brand recognition – especially with its licensed brands like Star Wars, Marvel, and several others Manufactures most goods in China – Its business unit mix establishes about 58% of sales domestically, 39% internationally, and 3% through licensing Also operates a television network (HUB) and has recently ventured into browser-based video games – The new browser-based game activities are through partnerships with firms like Zynga

4 General Model Almost all of Hasbro’s manufacturing done in low- cost Chinese environment Margins are fairly high domestically, but significantly lower internationally – International margins lower likely as a function of less brand recognition, and thus, the toys don’t serve as much of a purpose beyond being a toy Entertainment and licensing generally developed digitally

5 Problem: Chinese Manufacturing Substantial problems in two specific areas – Both areas problems are materialized mostly through worsened public perception and lower consumer confidence Area One: Labor Problems – Found in violation of paying abhorrently low wages, facilitating unsafe conditions, and poor environmental impact Area Two: Recall Problems – While no specific recalls made, public confidence low in its toys as a result of Mattel’s recalls

6 Capabilities Demanded Area One: Labor Problems – Must integrate more American expats to oversee plants – Must deal with human rights backlash from media – Must have free cash flow to invest in better operations Area Two: Recall Problems – Must regain confidence through stricter controls – Must approach media and begin to re-brand and redevelop perception of industry – Must have managers who are willing to constrain the value chain, as well as focus on the supply side of manufacturing

7 Challenges: Labor Problems Integrating new expats to oversee likely not well- accepted from Chinese plant owners Need to reinvest in Chinese plants will decrease short-term bottom line stock price Need to reconstruct operations and labor process in China will be costly Need to balance Chinese environmental interest with domestic interest and profits

8 Implications for Career: Labor Problems Will require a lot of cooperation and coordination with Chinese plant managers – If done incorrectly, can seriously damage reputation and career Will require discussions with Chinese government officials – Presents great opportunity to help establish better control systems in China and advance career Will require a need to balance improving China with cost expectations from domestic corporate – If superiors see results with the cost constraints imposed, potential career escalator – If superiors are unimpressed with difficult task, career will be seriously hindered

9 Challenges: Recall Problems Increased pressure on value chain management to demonstrate quality to public Need to create media campaign to regain consumer confidence Need to re-construct relationships with licensers who may be afraid of projected public perception Need to divest unpopular lines in order to re- bolster “hot” brands

10 Implications for Career: Recall Problems Will require a complete understanding of the model and how to maximize value out of the value chain – Presents opportunity for upward mobility and increased sales Will require marketing savvy to help regain consumer trust – Presents an especially challenging situation that will likely result in great reward or termination Will require tough decisions regarding employment in divested lines – Presents difficult to decisions to be made about personnel, ensuring the “right” people are around to help make the “right” decisions Will require the ability to sustain and better-develop relationships with licensers – Presents a difficulty, but an opportunity to for future economies of scope benefits and career upward mobility

11 Managing the Controversy The perception from the media and consumers is present in both problem areas of Chinese operations – In this respect, there is a double-controversy This is the most difficult task to correct and most focus should be on it – Understanding the consumer connection to the brand and managing that is even more integral than the actual problem resolution Highest potential to create or derail executive career

12 Managing the Controversy: Focused Solutions Understand the “big-picture” solutions – Allows for smaller segments to be focused and executed with more precision

13 Preparation in the MBA Three distinct concentrations – Strategy (Global), Finance, Operations Ability to interact in setting that requires compromise Ability to understand how Corporate and Competitive strategies interact within Macro and Micro socio-economic environments Ability to understand the global context – Being cognizant of cultural differences and global impact of decisions Ability to following the financial impact of decisions – Understanding how changing operations or developing a new media campaign affects the bottom line Ability to understand how to improve operations without drastically increasing costs

14 Puzzle Resolution Understanding how to effect change in global operations in cultures that don’t desire it Understanding how to identify key global problems and contain them before they expand Understanding how to manage dynamic between domestic and financial expectations with global impact

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