Essay on LEGO

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Q1 Evaluate the external environment in which the LEGO Group operates in.
Conducting the external environment analysis will allow us to examine the opportunities and threats that the LEGO Group faced. We will go through the environment level using PESTEL framework followed by industry level using Porter’s Five Forces Framework.
1. PESTEL Analysis
PESTEL Analysis
Positive
Negative
Political

Economic
Highly seasonal

Presents uncertainty over sales

Geographical scope and market presence
Going into new market for higher growth
Stagnant and mature market
Social
Change in playing habits

Stop playing with traditional toys

Large female market
Diversify and take up more market share

Technological
Growth in electronic toys

Might impact
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The differentiation in invocation and quality products will also render new entrants difficult to enter the market. Although the access to distribution channel is low and the expected retaliation in terms of price wars will low due to the being established companies, the threat of new entrants is assess to be moderately.

b. Power of buyer
Buyer can have other alternatives buying from LEGO such as switching to Mega Bloks and the switching cost for them is low. Therefore the bargaining power of buyer is considered high.

c. Power of suppliers
We would consider the bargaining power of supplier to be low as the switching cost is low and materials used for making plastics and generally available and not scarce.

d. Intensity of Rivalry
LEGO group is ranked number three in the market and the fixed cost of the toy industry is high. The exit barrier for toy industry is also high as there might be no buyer since most things are going digital nowadays. Therefore, intensity of rivalry is high.

e. Threat of Substitute Products
The threat of substitute products is high as we can see that there are many other toys available from electronic toys to playing in digital world.

From using the Porter’s Five Forces framework, we can say that the industry faces threat from buyers, competitors and substitute products. Attention should be place on competitors and substitute products as they posed significant threat to the LEGO Group. We can see that competitors have been

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