Lego case study analysis

1362 WordsJan 26, 20156 Pages
Lego Case Study Analysis Pallav Mathur Q 1. What led the LEGO group to the edge of bankruptcy by 2004? By the end of 2003 Lego was already facing crisis owing to dipping profits and declining market pool for toys. Lego had planned to expand into markets beyond building toys and needed huge investment to be made in it. But it found difficult to compete when fad players and other toy manufacturers were giving them stiff competition in a market that already was supposed to be giving lesser returns every year. This was mostly due to factors out of the control of Lego and other toy companies because, firstly, a research suggested that the demand of children who were primary customers of these companies were changing rapidly to fashionable and…show more content…
This was a survival strategy based on focusing on the core strengths. Basically, the company was trying to do too many things at the same time, including surviving a competitive and declining market and also expanding at the same time. The essence of “Shared Vision” strategy was to divide it into stages where the company could focus on survival first and gradually have its stronghold by expanding into new markets. The first step Lego took was to improve the efficiency of its plants and synchronizing its activities to cut down cost on factories, distribution systems, supply, shipping etc. The focus was not on imitating Disney anymore but surviving the market and generating profits. Effectiveness of this action: 1. Lego focused on its core strengths once again including establishing the brand name, going back to Lego brick games, creating a community around their products to increase participation. 2. The Logoland parks were sold while it kept its stake in profitable Merlin Entertainment parks which generated cash for the company. 3. The focused efforts resulted in greater profits from lesser products. Lego Duplo, Lego City and Lego Mindstorms were the core products generating profits for the company. 4. The management had clear idea of when to focus on business survival and when to go for growth. The growth timeline made company postpone non important expansion plans to later in future. 5. Lego reduced the number of components
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