Name : PRASHAST JAIN
Program : Global MBA
Course : Strategic Thinking
Assignment
Discussion Questions for “LEGO”
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).
2. Why did Knudstorp’s turnaround strategy work? In your opinion, which actions were the most effective? Which actions were the least effective? Be specific.
3. Should LEGO launch the new line of board games?
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Ans 1 :
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All the initiatives like laying people off, streamlining things, globalization was like going by the turnaround book and yet the financial picture grew worse
Secondly, the company's growing complexity was choking it and was a big cause of concern. Adding more bricks made products harder to assemble, forecasts harder to determine, and inventory harder to manage. The complexity had a multiplier effect that went through the entire supply chain
Thirdly, the LEGO Group had also gotten too far away from the core values it had been building on for the better part of a century.
Ans 2
Jorgen Knudstorp was just 35 years old when Kjeld promoted him from director of strategic development to CEO in 2004. Unlike Plougmann, his turnaround attempt succeeded.
Knudstorp's slow-it-down approach of careful cash management, focusing on core products, and reducing product complexity certainly contributed to that success. Re-engaging with customers was also taken to another level. One of the insights Jorgen had when he became CEO was that he needed to reconnect with the community of loyal LEGO fans which according to him was one of the most powerful assets the company had. It was one of the big reasons for the comeback.(Most effective)
Knudstorp recognized that innovation was part of that core, but he'd also seen the result of unconstrained creativity, so new product design began to be informed by market research, user feedback, and how well the toys
It is all about hitting the numbers with Jack Welch. He did this by doing anything to lower the cost and he delivered the growth figures that could only be dreamed by lesser companies. He improved the company’s
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.
The company, Lego was hacked and of course very disturbed by this, however, they discovered these hackers were lego fans and could actually add value to their consumers and the business as a whole. working with hackers who had attacked their systems allowed them to develop new products and grow their revenue. It resulted from speaking to the hackers rather than suing them and created what the Lego director of community development Tormod Askildsen described as 'the platform for the 21st
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.
Following are the changes that Al Dunlap initiated after being hired by Sunbeam Inc and the probable opportunities that Dunlap used to manage earnings:
Prior to the Flextronics offshore outsourcing project, LEGO had a very tight control of all the elements of the value chain. Their production plants were expansive and specialized which, in theory, would create a higher degree of standardization. Their Swiss factories only produced DUPLO toys and Technic products, their Danish factory solely produced LEGO System products, and the U.S. facility focused on American demands, while only 5 to 10 percent of the LEGO Group’s total production was outsourced to Chinese manufacturers.
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.
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
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.
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
At that time, the performance winners for LEGO were speed (of delivery), and flexibility (wide range of products, volume and delivery adjustments at short notice). Cost, dependability and quality were not as vital. To achieve these objectives, LEGO had made several operational decisions: Speed: • Maintain multiple distribution centres, close to key markets: 5 in Europe, 1 in USA • Maintain high stock levels, of finished product, and components so products could be assembled quickly. Flexibility: • Supply retailers both large and small, from relatively close distribution centres • Frequent, small, orders accepted • Introduce new products to the range, and discontinue old
3. State two SMART goals for GM based on the case. Are these goals attainable? Discuss.
This was needed to avoid the problem of toy phenomena, “Beanie Babies” and “Tickle Me Elmo” of getting replaced by newer toys in the toy industry. They developed the LEGO System, which entailed them to only produce the LEGO bricks or something related to it. Because of this structured system, there would be no need to manufacture and develop new products despite the change in children’s preference in toys. The minor changes in toy manufacturing would save the company from spending more than expected (Robertson
Today the LEGO corporation organization’s current state, is having its product sold all over the world. LEGO created a digital world where consumers can design their own designs. Then LEGO has the capabilities to ship exactly what the customer is asking for to countries all around the world. Along with many different product ines to attract the attention of many young consumers, there are are also interactive games and learning activites that the consumers can get involved with. The Company is still privately held with the CEO Kjeld Kirk Kristiansen of Billund, Denmark a net worth of over 8 billion. LEGO created a brand name through the use of their
A couple of interesting things occurred to Lego in its development during the1940s. Denmark was occupied by the Germans and forced Godtfred Kirk Christiansen, who was planning to study in Germany, to instead become a manager at LEGO. In 1955 Godtfred demonstrated the new product at a toy fair in Nuremberg Germany, receiving negative reactions. Before developing a market analysis department in 1959,the stud-and-tube coupling system that we see in every brick to this day becomes patented in 1958, the same year Ole passed away, granting Godtfred as the new owner of the company.