Lego Analysis BA3103 Essay

Bargaining power of supplier: High levels of competition among suppliers act to reduce prices to producers. This is a positive for Ford Motor Company. Standardization of parts allowed Ford to reduce dependency on fixed supplier/vendor which goes into producer’s favor.

Lego is known for having small little colorful interlocking pieces that can be potential choking hazard. However when Lego came out with its new movie “The Lego Movie” in February 2014 the Lego profits have gone up drastically. Lego is estimated to make 4.5 Billion annually Finaly at number one we have Mattel.Mattel, was founded in 1945, and since then has produced brands such as Fisher-Price, Barbie, Monster High, Hot Wheels, Masters of the Universe, Little People, Power Wheels and WWE Toys. However despite the recent dispute with Jakks Pacific Mattel is still estimated to makeover 6.3 billion dollars in

According to Statista, a statistic tracking website on global revenues and market shares the global revenue of the global toy market was $84.1bn in 2012, and the U.S. toy market size was estimated to be worth 21.18bn. (http://www.statista.com/statistics/194395/revenue-of-the-global-toy-market-since-2007/) In conducting a five forces analysis of the toy industry as it currently stands, we must look at all five forces that affect competition. This includes factors affecting the strength of buyer bargaining power, factors affecting competition from substitute parts, factors affecting the strength of supplier bargaining power, factors affecting the threat of entry, and finally factors affecting the strength of competitive rivalry.

Through studying the entire retail toy industry, we have been able to understand the complexity of the industry in which Toys "R" Us operates. Upon completion of the analysis, we realized that the industry is growing stably,

The high brand equity of Lego and other well established organizations offer another disadvantage to new entrants. Collaborations with the film industry helped Lego sustain market share and increase sales volume in the toy industry through franchise agreements on Harry Potter and Star Wars.

But since then situation changed dramatically. Toys-R-Us arrived late to the E-business world with Toysrus.com in 1998 losing critical early battles to eToys.com and ceding some of the market to Amazon.com and KBkids.com. The development, launch, and operation of toysrus.com

Based on the case study Lego appears to be using the Focus strategy. Michael Porter proposed three generic strategies Cost Leadership, Differentiation and Focus. Focus is a strategy where organization focuses on specific niche markets; this may include a particular geographic region or particular segment of customers. Organizations which use this strategy develop their products after having a study of dynamics of the segment and unique needs of customer. Lego before the appointment of the new CEO appear to use the focus strategy as their top priority was always to focus on innovation and creativity with taking profits into consideration. Add to that the case study also mention that Lego used to create products that primarily targeted boys. After the appointment of new CEO Jorgen Vig Knudstorp the company appears to have changed its policy form Focus to Cost-Leadership. Cost-Leadership is a strategy where organizations focus on gaining competitive advantage by offering products and services at the lowest possible price. They achieve this by increasing profits by reducing production cost and other way is to increase market share by reducing the prices of products compared to the competitors. Knudstorp after taking charge of Lego changed their focus on reducing the production

PEST analysis is a process of checking and analyzing information relating to the environment. The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business as a business measurement tool. It involves monitoring the changes

Low; supplier power is how easy it is for supplier to force down the price of the product by considering distinctiveness of the product, number of suppliers of each initial input and switching cost from one supplier to another. Supplier power for solar instant cooler is relatively weak. Solar panel made by two suppliers is almost similar, and one can get nitrogen gas from any chemical based industry. So if supplier for solar panel and Nitrogen gas tubes rises their price it is easy to switch supplier and get same raw materials from different source. So, supplier power is weak.

Lego have venture into business like Legoland Parks, Lego Movie and video games in different platform, all these ventures have been successful due to its brand, history and also the confidence of the consumer have given them. Not only that, Lego have also venture its business into the robotics market which is the Lego Mindstorms, this allow the user to use the concept of robotic through the function of programming (Lego, 2016). With such extensive expansion and diversification, this shows that Lego have been listening to the need of the consumers and not losing any focus on its core

The PEST analysis examines changes in a marketplace caused by Political, Economical, Social and Technological factors.

Thanks to the growth generated during the year, the LEGO Group’s global market share of the toy industry at the end of 2012 amounts to approximately 8.6% up from 7.1% in 2011.

A PEST analysis is an acronym for Political, Economical, Social and Technological. A company uses this analysis to view how these 4 areas affect the company. The first area Political, takes a look government policies or regulation and how they could or are affecting the company. The second area is Economic, this looks at factors that include inflation rate, interest rates, foreign exchange rates, and economic factors include inflation rate, interest rates, foreign exchange rates, economic growth patterns. The third area is Social-Cultural Environment in which a firm would examine the social environment of the market, and assess factors like cultural trends, demographics, as well as population analytics. The fourth area is Technology, innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. This refers to automation, research and development and the amount of technological awareness that a market possesses.

The Toy Industry of traditional toys has been around since the fourteenth century and has evolved into a multi-billion dollar industry. The Toy Industry big contenders are Mattel (U.S), Hasbro (U.S), and LEGO (Denmark). Products of this industry include: action figure/accessories/role play, building sets, dolls, games/puzzles, outdoor and sport toys, infant/preschool, and all other toys.

The bargaining power of suppliers: The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources. • Supplier switching costs relative to firm switching costs • Degree of differentiation of inputs • Impact of inputs on cost or differentiation • Presence of substitute inputs • Supplier concentration to firm concentration ratio • Employee solidarity (e.g. labor unions)