Brief Summary of the Lego Case
The Lego Company, was founded in 1916, by Ole Kirk Christiansen in Billund, Denmark. The company quickly expanded, producing double-digit sales. Then, with the development of social media Lego appeared to hit a brick wall when faced with the challenge of how to market their Lego Bricks on the social web. Jack McKee, a former social media practitioner at Lego, “was able to help change the culture within the organization, so they could use the social web to build relationships with customers, generate new product ideas by sharing propriety information, and better understand their customers.
A strategy was put into place to help understand customer behavior. The social media strategies enabled Lego to create personas to segment their markets. This was accomplished by the use of six distinct personas to categorize customers, according to purchase and usage rate. This was a huge contributor to Lego becoming one of the most successful toy manufactures.
Question #1: Which of the three personas does the Lego Group spend the most social media marketing time and effort? It is likely that different personas will emerge from the Lego Group over time? Explain.
The first three personas spend a great amount of time on social media interaction. However, of the three personas the “Lead Users” of Lego are the most involved with the production. They play a vital role because they help shape product design. Though they have the fewest members they are
Thus, in the LEGO Case study provided, the new CEO Knudstorp has very efficiently aligned the IS and organization design with respective to the business strategy to bring success for the company.
Ryan McMaken defends Lego’s gender marketing issue as he focuses on Lego primarily as a profit-seeking business, as well as a business who has proven to know exactly what they are doing. McMaken concentrates on how Lego’s introduction of their Friends Line increased the worth of the female construction toy industry’s from 300 million to 900 million dollars. Evidently, these Lego sets may appear stereotypical or sexist to some, but there are what many people prefer to buy. He explains that Lego, in a competitive industry, must aim to please consumers, meet their needs, and gain a competitive advantage. To do so, it is crucial to offer products that other companies may not; products that will satisfy the needs of all children. Therefore, after extensivea research, and various
Operationally, LEGO manufactured a wide range of products (many of which were ephemeral, with a life of 12-18 months), sought to supply retailers large and small in the countries it served, and strived to provide short delivery times. Since demand fluctuations could reach 30%, LEGO had to maintain stocks of products, both completed and work in progress (WIP), in order to meet the customer needs for flexibility and quick delivery. The characteristics of the LEGO operations process in place can be shown in a 4Vs typology diagram:
Lego Corp was established in 1932 by founder Ole Kirk Kristiansen. With just 10 employees, they start crafting wooden construction toys. The most famous of these were the wooden duck. As the popularity of plastic toys rose in the mid-1950s, the company did away with wooden toys and started focusing on manufacturing plastic automatic binding blocks. As early as the beginning of the company, their motto was “Only the best is good enough.” High quality and safe products have been the focal point of LEGO Group for decades. Over the years LEGO Group has kept its word on that motto and has supplied millions of families with creative toys that last.
First in 1891, ole kirk founded lego and back then lego made wooden toys that were hand made from wood and paint. In the mid 50s lego started the lego system and made a town plan were you can make your own town and play with it. In the late 60s, legoland denmark opened and was like Disneyland with legos.
There are many barriers to new organizations in the toy industry, making the threat of new entrants low. Lego and other big toy companies like Mattel benefit from economies of scale. An economy of scale is achieved by lower costs through large volume production (Textbook glossary). Economies of scale can occur in many departments within the organization including production, marketing, research and development, and finance. Some manufacturing of Lego products was shifted to Central Europe and Mexico in order to benefit from lower wages and to shorten product supply chains (p. 13 of case). The management of Lego additionally holds expertise on production, distribution and customer needs; which are absent in a new organization. To enter the toy sector a potential entrant needs to calculate the start of production at a level that will give a competitive position and production costs lower than the market.
Lego President and CEO Jørgen Vig Knudstorp was surprised when Greenpeace activists, in an attempt to stop Arctic drilling, mounted a campaign criticizing his popular toy company for its cobranding relationship with Shell Oil. At first, Knudstorp and his executive team at Lego headquarters in Billund Denmark didn’t quite understand Greenpeace’s criticism. Was the criticism justified? Why didn’t Greenpeace tackle Shell directly? Would Greenpeace’s campaign be taken seriously or would it simply fade away? As Greenpeace beefed up its efforts through social media, Lego’s top management was left wondering how to respond to Greenpeace or whether they should respond at all. And more importantly, executives didn’t know whether Lego should continue its business relationship with Shell.
Advances in the field of information technology and introduction of new hi-tech form of entertainment such as tablets and gaming consoles had left Lego trailing in the entertainment field. Jorgen Vig Knudstorp was appointed as the CEO to revamp the company’s business process, organization structure and information systems. Knudstorp was quick to act and first made changes in the company’s production process. He encouraged designers to use the unused components in development of new products and design, thus reducing the number of unused
Growth strategy: With the help of growth strategy, LEGO introduced new toys in the market. Initially LEGO was something that boys liked playing with but Knudstorp introduced LEGO for girls thus targeting girl child audience which increased his market. Not only this, they also entered the video game sector by making virtual games after collaborating with Sony (which was ruling the gaming console market at that point of time). Later, they started making figures with famous characters from Hollywood movies (Star wars, Batman, The Avengers, etc.).
In 2002 and beginning of 2003 LEGO struggle with low sales and an increase in their inventory levels due to an intensification of their competitors, adapting their process as LEGO did in the beginning
1. What led the LEGO group to the edge of bankruptcy by 2004? Please focus on the management moves during “the growth period that wasn’t” (1993-98) and “the fix that wasn’t” (1999-2004).
LEGO Group was formed by a carpenter Ole Kirk Christiansen in 1932 in Billund, Denmark. The Word, LEGO was meant to attract kids of various age groups, it is derived from Danish phrase, “leg godt” meaning: “Play well”. Initially LEGO was produced as a wooden brick, with their motto, “Only the best is the best.” The LEGO Brick was produced in 1958 composed of interlocking tubes that offered unlimited building opportunities. The purpose of The LEGO Brick was to inspire creative and controlled problem solving, while adhering to common curiosity using your everyday imagination (Sandgaard Jensen). It was awarded “Toy of the century” by Fortune Magazine, as well as British Association of Toy Retailers. LEGOs was sold in more than 130 countries. A couple major products include: Pre-school products LEGO DUPLO, Play Themes LEGO city line, BIONICLE, and many more Licensed Products built up around movies or books also including a LEGO Education Board game. Market sizes category US, Australia, United Kingdom, New
In spring 2012, MIT Sloan Management Review had an article about the lessons from the LEGO Group, regarding collaborating with customer communities. The authors explained how the LEGO user communities emerged and how management’s involvement with user groups has evolved and the core principles that LEGO has formulated for successful interaction with its user groups. This article let us explore the answer for an ongoing question to many organizations; how can companies collaborate effectively with their customers? By February 2012, there were more than 150 known user groups, with over 100,000 active adult fans worldwide. In 2005, LEGO created the Ambassador Program to provide a fast and direct way for the company and its pans to get into contract with each other. Representatives, drawn from across the community of LEO user groups, provide a fast and direct way for LEGO managers to get in contact with adult fans. The program has provided considerable value to both sides. Not only do fans inject energy and ideas, but in some cases they help refocus products. For example, after the innovative communication with one of the users who participated on the development team and was in the business
LEGO A/S Aastvej 1 DK-7190 Billund, Denmark Tel: CVR-no: Residence: Reporting Year: Internet: E-mail: +45 79 50 60 70 54 56 25 19 Billund 1 January – 31 December www.LEGO.com sustainability@LEGO.com
the Lego offering the company has a strong association with contemporary IT, design and manufacturing