1.
1 BACKGROUND OF THE PROBLEM
The problem started when there were reports of injuries and intoxication to the children users
because of using hazardous paint with lead and putting tiny magnets to the toys of Mattel Inc.
Several injuries had been reported in an earlier recall last November . At least one U.S. child died
and 19 others have needed surgery since 2003 after swallowing magnets used in toys. On
Nov.21,2006, 3 children have been injured by swallowing more than one magnet. All three suffered
intestinal perforation that required surgery. March 2006, after the date of recall one child died and
four others were seriously injured after swallowing tiny magnets in them. The discovery that lead
paint and small magnets are hazardous to children was too late because there were already
casualties reported. Also, the recall was only concentrated to the main source,the Mattel,Inc.,not
knowing that there were other companies likewise who produces toys with hazardous lead paint
and ingestible tiny masgnets namely, Mega Brands,Inc. it made a big blow to the U.S. toy industry,
which relies on China for about 80% of toys it sold. The general public particularly the consumers
will be more aware, fearful, cautious or neutral at all to demand the purchase of toys, hence,
jeopardizing not only the alleged toy companies but it would generalize the global toy industry.
1.2 STATEMENT OF THE PROBLEM
Why do they use pain with lead and put tiny magnets on their toys?
1.3 STATEMENT OF OBJECTIVES
The company wants to recover the large portion of the market share or demand they lost during
the contingency. The company is striving to win back the trust of the once disappointed patronizers
of their toy products. Also, to recover the financial loss that the company suffered from.
1.4 SWOT ANALYSIS
For a change, they maybe able to make new innovations and strategies to improve the
quality of their toy products.
Weakness
The employees or workers might have lost their sense of direction since the
management made a great mistake in using lead-based paint and putting tiny magnets to their
toy products.
They would incur significant costs for the contingencies that occurred due to the
use of paint with lead on their toy products and putting small magnets to it.
Opportunity
The population is young, therefore, the demand for toys is dramatically high.
The more popular cartoon characters are, the more variety of toys would be
produced that would be patronized by the masses.
Threats
The company would experience total recession of demand due to the fear of the
consumers and will cause the company to incur significant losses on their sales and on the
company, as a whole.
They may not be able to recover the market share they lost , and loyalcustomers
may have switched to competitors.
The impact of this incident may have shook the global toy industry and made a
backfire of negative effects to the alleged companies themselves.
1.5 ALTERNATIVE COURSES OF ACTION
1. Use paint which does not contain lead and any other toxic elements. Do not attach tiny magnets
and small parts to the main toy,however, if necessary make sure it is undetachable.
2. Produce toys which are as large as possible that children would be unable to ingest or swallow
it.
3. Heighten their standard operating procedure to improve the quality of their product, as well as
to preserve the safety and health of the consumers, specifically, the children.
1.6 ANALYSIS OF ALTERNATIVES
1st Alternative
ADVANTAGES
a. The basic root problem would be solved.
b. As effect of solving the problem, they would regain their customers’ trust and maximize their
profit.
DISADVANTAGES
a. The quality of the toy would somehow diminish because of the absence of lead on the paint
applied on the toy.
b. They would incur significant costs for the company to make total shift by eliminating current
stocks of toys and materials such as the paint.
2nd Alternative
ADVANTAGES
a. The children would not be able to swallow the toy neither its parts.
b. There would be a uniform size among the produced toys.
DISADVANTAGES
a. The style of the toys regarding its size would be sacrificed.
b. Toys would be less portable for small children to carry.
3rd Alternative
ADVANTAGES
a. The basic root problem would be cured as well as the other problems, in general.
b. The company would uplift its product quality and customer service by preserving their safety
and health.
DISADVANTAGES
a. Increase in production costs, hence, additional burden to the company.
b. Timeliness of the product to be readily available in the market would be compromised because
inspection would cost too much time.
1.7 DECISION STATEMENT
The best alternative would be the use of paint which does not contain lead and any
other toxic elements and the not using of tiny magnets and small parts to the main toy but if
necessary, make sure it is not detachable. This alternative was chosen mainly because it directly
addresses and cures the problem. The company would be able to win back the trust of the
masses and retrieve their market share. The other alternatives were not chosen because they
only support the first alternative.
CASE ANALYSIS
ON ECONOMICS 3
Prepared by:
Baqueros, Christian A.
Briso, Rolando L.
Cordova, Leonardo A.
Gumaroy, Gladys April H.
Lego, Irma O.
Orejola, Lisma
Pajares, Jasmine M.
Presented to:
Mr. Jimmy C. Lasmarias
