Mattel 2003 Annual Report Download - page 26

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Despite the challenges the company is experiencing, Mattel improved its income from continuing operations
in 2003 compared to 2002. To optimize its business and mitigate the impact of the aforementioned challenges,
Mattel continues to focus on the following strategic priorities:
•Core brands—focusing on traditional core brand categories, extending product lines, initiating core brand
promotional programs and targeting profitable licensing arrangements.
•Channels—strengthening relationships with retailers, developing new retail channels, providing quality
service to customers and optimizing its supply chain.
•Costs—controlling costs to help mitigate the impact of anticipated rising commodity, transportation,
employee benefits, and insurance costs.
•Cash—generating and opportunistically deploying cash using a disciplined approach.
Mattel has announced plans to increase its focus on revenue growth in 2004. Mattel plans to implement
value enhancement strategies aimed at strengthening its core brands, including invigorating the Barbie®brand
and expanding its interactive learning toys category. Management intends to re-establish the Barbie®brand into
content-driven product lines pursuant to a “worlds of” strategy in which stories will be told through movies,
books, magazines and music. Product lines, including dolls and accessories, will be created to complement these
stories. The eight worlds of Barbie®to be introduced in 2004 will be geared to different age segments in an
attempt to maintain the brand’s broad appeal among girls and their parents. For instance, for the younger girls,
there will be stories and products with a fantasy theme such as princesses and fairies, while for older girls, the
My Scene™line will include the launch of a full-length DVD accompanied by a product line that targets fashion
play and shopping. In the interactive learning toys category, Mattel plans to introduce new toys designed
specifically for children at different developmental stages, from infancy through grade school. While there is no
guarantee, management believes that these initiatives will promote revenue growth. In recent years, Mattel has
been able to grow net income faster than the rate of revenue growth through successful cost-cutting initiatives. In
2004, Mattel will continue to focus on new cost-cutting initiatives, but management believes revenue growth will
likely be necessary to achieve financial results similar to those of recent years.
Additionally, Mattel intends to continue its emphasis on globalization of its brands and management
believes the reorganization in the first quarter of 2003, which combined the US Girls and US Boys-Entertainment
segments under the Mattel Brands US segment, should allow Mattel to better globalize its brands through
optimizing the strengths and leveraging the talents of personnel managing the brands on a global basis. The
International segment continued to benefit from Mattel’s strategic focus on globalization of brands, including
improved product availability and better alignment of worldwide marketing and sales plans. Management intends
to continue focusing on maintaining a high level of business performance in the eight geographies that currently
represent approximately 75% of Mattel’s International segment: United Kingdom, France, Germany, Italy, Spain,
Northern Europe, Canada, and Mexico. Management believes maintaining a high level of business performance
in these geographies gives Mattel a greater degree of freedom to be opportunistic in markets where its business is
smaller and less developed. Management expects that this strategy should enable Mattel to seek opportunities in
smaller and less developed markets, while maintaining stability in these larger markets. Mattel’s long-term goal
is to generate 50% of its sales in markets outside of the US by continuing to grow its international business at a
higher rate than in the US. However, management believes that while International segment sales growth will
continue to be strong, it will be difficult to maintain the same level of sales growth increases in the International
segment that Mattel has achieved during the last three years, especially if the value of the US dollar reverses its
current trend and strengthens against the major foreign currencies.
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