I. Current Strategic Profile
LEGO is a well-known brand of construction toys that operates under the name of The Lego Group. LEGO’s flagship product includes brightly colored interlocking plastic bricks along with many mini figures, gears and other parts. The characteristics of LEGO toys include quality in every aspect, availability of extra sets, more LEGO toys gives the more value, creativity, imagination and development, long duration of play, quiet and healthy play, throughout the year play, fun for people belonging to all age groups, for boys and girls, and limitless play potential.
Mission
The mission of the company is “Inspire and develop the builders of tomorrow” (Vang and Jensen). The main mission of the company is to motivate children to imagine creatively, shape their future and reason systematically.
Vision
The vision of the LEGO is “Inventing the future of play” (Vang and Jensen). Thus, the vision of the company is to lead in a new method of playing, play business models and play materials that leverage digitalization and globalization.
Corporate or business strategy
The business strategy of LEGO is to increase their business expansion in the new markets and increase the number of product ideas lines. Moreover, the company also aims to improve its customer engagement (Bigus, 1). LEGO also aims to create synergy between digital play and physical play. Finally, the business strategy of LEGO is to target middle-class families.
Industry and market conditions
According to Statista, the world toy market is projected to be approximately US$84 billion in the year 2012 out of which US$ 20 billion is of U.S. market. In addition, the leading manufacturers in the toy industry include Namco Bandai, LEGO, JAKKS Pacific, Mattel and Hasbro. The total revenue generated by the top five company’s toy companies amounted to approximately US$20 billion in the year 2012 (Statista). Moreover, as of 2011, the average per dollar spent by each child on toys amounted to US $309 (Statista). The toy industry has favorable market conditions and can take advantage of the changing technology.
Performance results
As LEGO has previously faced serious decline in the financial position, therefore, it will take some time to recover. However, the recent financials shows that the revenue and net income of LEGO are US $4,682.979 and US $1,128.956 (Hoovers).
II. Identification and Analysis of Strategic Issues
Although the company was one of the most popular brand of toys among children, but due to few strategic issues the LEGO faced crisis. However, later under the management of Jørgen Vig Knudstorp in 2004, the company had gradually regained its lost position in the market. Among other strengths, one of the major strength of LEGO is that it caters its customers through diverse retail channels that include independent toy specialists, discount stores, chain stores, department stores and online stores. Moreover, LEGO is one of the most recognizable brands that help in the positive development of small children. The company also adapts to the changing market trends.
There were many weaknesses of the LEGO management. One of the major weaknesses of the LEGO was the poor leadership and management. The leaders that were hired were selected on the basis of their leadership experience and not on the basis of LEGO experience. Moreover, the employees were layoff. The management failed to take timely decision regarding the product line at LEGO and the channel to increase shelf value of the company’s toys. In addition to this, the financials of the LEGO were very weak during 1993-2003 and the profits were reduced by more than 50% that has affected the company. Similarly, slow moving inventory was also one of the problems that reflect poor operations and inventory management. In addition, the company was incurring financial losses, i.e., the profits were squeezed by 50% that has affected company’s operations. The following chart shows the decline in net profit between 1995 and 2004.
The company could also take benefit from its unlimited opportunities. One of the greatest opportunities provided to LEGO is to expand into Asian and Eastern European regions. This expansion will be backed by the strong position in the United States and Western Europe. The expansion in diverse market will also enable LEGO to increase its customers, brand name and profit margins. Similarly, the company can also take advantage from the technological advancement and development in the toy and gaming industry. Due to change in trend of playing and children activities, i.e., shift towards using technological devices for their play time, LEGO can offer animated games that can be used by the children. The technological shift has reduced the childhood life span. However, the technological advancement is a threat for LEGO, but it can also be considered as an opportunity to pave the way for future strategic position. Moreover, the technological advancement also provides an opportunity to LEGO where it can design gaming software that will be used by the children
One of the greatest threats is the change in marketing trend. The market trend has changed largely in the past few years. The use of marketing medium, promotions, retail competitions, etc has changed where it has become important for LEGO to adapt according to the existing marketing trend to remain in the competition, else it will lag behind. Similarly, change in children playing devices and mediums could also affect the sales and profitability of the company. Thus, the change in marketing trend and children’s playing devices has become a strategic issue for the company that requires a strong strategy to overcome this issue.
Thus, the case identifies strategic issues faced by LEGO that includes poor leadership and management, poor financials, change in marketing trend, and change in children’s playing devices and mediums.
- General Recommendations
The following recommendations are proposed to LEGO:
- Create strategies to expand in new product areas while focusing on technological advancement and digital play. Implementation of this strategy will enable LEGO to achieve a leadership position in the toy industry.
- Create strategies that will enable LEGO to achieve economies of scale, i.e., producing low-cost products. The standardization of products at LEGO will help to achieve this strategy.
- Create efficient strategies to tap into more diverse markets to serve diverse customers.
Works Cited
Bigus, P. “The LEGO group: Building Strategy.” 2011. Web. 2 Oct 2014.
Hoovers. “LEGO A/S Revenue and Financial Data.” 2014. Web. 2 Oct 2014.
Statista. “Statistics and facts on the Toy Industry”. 2013. Web. 2 Oct 2014
Vang, Martin and Jensen, Sandgaard. “Mission and Vision.” 18 Jan 2012. Web. 2 Oct 2014.
