Lego : The Crisis Write Up

Did you know that LEGOs can boost young children’s engineering skills (MIT School of Engineering)? It’s true! Studies show that LEGOs can prove important for developing skills used later in life. From pink, to blue, to long or thick, LEGOs are building blocks that come in all colors, shapes and sizes. With dots on the top, and holes on the bottom, LEGOs are designed to interlock enable to form structures. LEGOs help many young children develop skills such as early engineering, fine motor skills, an creativity.

There was the change in the business strategy in the company that was brought up by the new CEO. The strategy was to survive, cut costs, sell businesses, generate cash and ignore the dash for the growth in the immediate future. Lego was known for the traditional blocks and components that will allow children to build anything with their imagination. The business strategy was to broaden the Lego products for the other customer segments. They created the

On one hand, partnering with such supplier has offered the company the greatest freedom to operate. One the other hand, technological spillover and inventions came up from the developmental stage are also likely to occur. The worst case is that competitor might protect those inventions which prevent the LEGO Group form using their own innovation. Protection of those inventions is deemed necessary to the growth of the

LEGO, today, has become a household name but it hasn't always been that successful. Throughout the years, it has survived and thrived against all odds, repeatedly.

The Lego Group tried to catch up the market trends during the period, but they ignored that the industry total profit pool decreased by 50% Between 1999 and 2003. It's naturally for players to reduce mass production and focus on core competency. However, the Lego Group invested significantly in expansion not only in brick-based product lines, but also beyond the brick. The expansion was not focusing on its core competency.

By 2004 Lego was in considerable trouble; it had made a loss of approximately £200m; sales fell by 40%. One reason for this was lack of success in moving into new markets, such as computer games and clothing. However, a major cause for the financial woe was due to issues in the supply chain; costs were not being squeezed out, and the increase in specialised LEGO models had led to an explosion in the total number of unique bricks; each requiring expensive moulding, production and inventory. LEGO rightly decided to address this supply chain cost issue, and turned to Flextronics, a company with considerable experience in

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.

LEGO,  like  most  companies  in  the  toy  industry  are  fighting  to  stay  profitable  in  this

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.

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.

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

Ever since LEGO started experiencing double digit annual sales growth, (by launching new toy games, branded theme parks, entering the video game sector, introducing mobile applications, introducing toys for girls, etc.) they realized they needed a model that was standardized, modular and scalable. Hence, allowing them to expand to new markets in a less amount of time. They already had a decently established market in USA and UK; they were looking for an expansion in other countries as well. This model had to tackle major issues like scalability challenges, employee

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

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

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