Lego Case Study
1. What business goals were set by Knudstorp?
Ans. Jorgen Vig Knudstorp, the CEO of Lego set the following goals for the company which was performing very poorly,
* To remain profitable while maintaining growth, continuous innovation and quality of the products * To reach to broader customer segment * To cut expenses in production and supply chain and making these processes more efficient
2. What business strategies were set by Knudstorp?
Ans. Knudstorp set up the following business strategies to ensure Lego’s profitability and growth:
* Turning the supply chain into an efficient one by contacting top retailers, filling the blank spaces in the supply chain and reducing cost *
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* Development time was reduced by 50% which resulted in speed in the business process. * Reusable parts were created for using in manufacturing process which in turn reduced some pressure in the supply chain. * Lego gave the customers the opportunity to get involved in the discussion and product innovation by providing real-time feedback. Also, brand ambassadors were created to represent Lego among various building communities and thus involving customers in the making and development of the product.
Some necessary changes were made in the information system to support the new business and organizational strategies, they are stated below,
* Lego established an integrated and flexibly structured information system which allowed them to make changes in it as necessary. The new system included applications for human capital management, operation support, product life cycle management and data support which helped them greatly in alleviating problems in order management, fulfillment and employee management, areas that were stumbling to keep up with company’s growth. * New technology was also incorporated as Lego entered into online virtual interaction games and video games.
4. Which of the generic strategies does Lego appear to be using on this case? Provide support for your choice.
Ans. From the case it appears that Lego is following ‘Focus’ strategy with a
• A situation where a reduction in production will result in less overhead allocated to the respective product
Target Corporation enhance its information warehouses with latest big data that is technologically sophisticated to crunch large data using complex algorithms and provide vital output data for a daily operation as well as strengthen its capabilities over its rival which is a competitive advantage and speed up worker productivity. A quality tracking tool provided by information system tracks each package, parts ensuring the goods meet the quality standard.
Flinchbaugh, J. (2012, December 17). Lessons from the Road: Reducing Lead Time Changes Everything. Retrieved April 02, 2016, from http://www.industryweek.com/
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.
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).
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
The manufacturing cost can be lower as the rearrangement of the production line to meet urgent order can be minimize or even eliminated.
1) How did information systems and the organization design changes implemented by Knudstorp align with the changes in business strategy?
More complex design conflicted with automated production line. It largely increased molding cost / production cost and caused an extremely low inventory turnover, much lower than its competitors. Major customers were frustrated by stock-out and slow-moving inventory.
1. How did the information systems and the organization design changes implemented by Knudstorp align with the changes in business strategy?
An Analysis of the Operations Strategy and Management Decisions in Lego Group between 2004 and 2009
1. How did the information systems and the organization design changes implemented by Knudstorp align with the changes in business strategy?
As their name and ideal, Lego has been beloved by the children as well as the parents for decades. Not only as plastic toy bricks, but also effective educational tools, the LEGO Company enjoyed continuous growth and broaden the global brand value. The LEGO brand moved to third place in 2002/2003 with only Coca-cola and Kellogg having greater respect among families with children. Even though as the overall toy market faces challenges, LEGO’s revenue and profits are increasing rapidly, especially since 2005. This profitability didn’t change even in the current recession in the global market. The LEGO Group achieved record-breaking profits in
Therefore the purchasing department will be able to reduce the cost to more efficient and effective process and it will be able to deliver better process.
Lego is one of the most recognizable companies across the world. The Lego Group was founded in 1932 by Ole Kirk Kristiansen and has since been passed down from generation to generation, currently owned by Kjeld Kirk Kristiansen. The Lego Group has headquarters in Billund, Denmark and main offices in USA, UK, China, and Singapore. The Lego name originated from the abbreviation of two Danish words “leg godt” meaning “play well”. The present-day Lego brick was launched in 1958 with the interlocking principle which allowed for an infinite amount of building possibilities. Because of the Lego Groups mass size there also comes a very precise corporate structure. The Lego company is operated in a five-member Management Board. The Management Board consists of the Chief Executive Officer(CEO), Chief Marketing Officer(CMO), Chief Financial Officer(CFO), Chief Commercial Officer(CCO), and the Chief Operations Officer(COO)/Chief HR Officer(CHRO). From there it is further broken down into a 21-member Corporate Management and a board of directors. This corporate structure allows for individual departments to work successfully within the larger corporation. With the Lego Groups mission to “inspire and develop the builders of tomorrow” they have become one of the world’s largest manufactures of toys, valuing imagination, creativity, fun, learning, caring, and quality.