The LEGO Group is recently experiencing a problematic phase, which has situated the organization with a deficit of 1.8 billion DKK. The problems experienced by The LEGO Group can be attributed to not being able to manage as well as stabilize a strategic supply chain. Successful SCM is crucial for a manufacturing firm in order to harmonize the production process and internal information with demand for the product. When considering the importance of supply chain management, organizations need to study its effect on other major business processes as well as how it will influence the organization as a whole. Supply chain management may directly or indirectly influence major process such as inventory, capital investments, distribution …show more content…
LEGO purchased a plastic injection molding machine in 1947 to create the plastic version of LEGO bricks (they were originally wooden), and then expanded to pursue the idea of a toy system where various toys would be included in a line of related products. Items such as doll furniture were also developed as LEGO Group looked to enter different markets. During the 1970’s the foundation of the company’s manufacturing facilities and research and development department were established to keep the manufacturing methods up to date. A LEGO production plant was opened in Enfield, Connecticut in the United States. This growth enabled The LEGO Group to continue expanding their product offering over the decades to eventually land at 6 product segments by 2007: pre-school products, creative building, play themes, licensed products, mindstorm NXT, LEGO Education, and LEGO games. The consolidated portfolio was meant to reflect the need for more challenging stimulation as children grow and develop.
Key Problems
This expansion was not well managed and a host of factors developed leading to the decline in 2004. First was a loss of confidence in the core product, the LEGO brick, as the company continued to diversify its product portfolio. Significant forecast errors driven primarily by unpredictable seasonal demand fluctuations led to inventory issues where LEGO lacked one component or held too many of another in stock. The global toy
Toy World, Inc. was founded in 1973 by David Dunton & Jack McClintock was a manufacturer of Plastic Toys for children: cars, trucks, rockets, spaceships, etc. Toy World, Inc. was originally a partnership when it was incorporated in 1974. Company had grown rapidly since its founding, with profits increasing every year since 1976. Jack McClintock assumed presidency in 1991. In 1993 David Dunton & Jack McClintock hired Dan Hoffman as the production manager. The context of the case study is early 1994 and Toy World faced a large number of foreign and domestic competitors in its industry especially with low barriers to entry, short product life cycles, and significant price competition. The production and sales at
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
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.
Silberbauer and LEGO have been able to accomplish this growth for a variety of reasons. Most notably, however, is LEGO’s ability to provide content that is relevant to the social needs of consumers through Facebook, Twitter, and YouTube, as well as its focus on using user-generated content to increase its reach through creative campaigns and innovative technologies.
Lego, from the Danish words “leg godt” or play well, was founded by Danish carpenter Ole Kirk Christiansen in 1932 (Herman, 2012). Known for producing iconic studded plastic bricks that were enjoyed by both children and adults, Lego produced more than 30 Lego-based video games and, through licensing agreements, popular Star Wars and Harry Potter Lego sets (Baichtal & Meno, 2011). Lego also sold a series of Arctic sets including an Arctic Base Camp, Arctic Outpost, Arctic Helicrane, Lego Ice Crawler, and Arctic Snowmobile. Those sets sold for $89.99, $49.99, $39.99, $14.99, and $6.99 respectively. Lego’s 2014 film, The Lego Movie, grossed more
After careful review of the LEGO Group website and the merchandise sold in stores, it is apparent that the LEGO Group offers a plethora of products for children to enjoy. To sum up a few, there are such products as the popular LEGO City which introduces children to their everyday environment from building Airport terminals and Fire Emergency stations. LEGO Creator lets you build three different items such as a cat, rabbit and a puppy, using all the same LEGO’s in a variety of ways. Of course LEGO goes on to expands its horizons with such collections as “Chima” which revolves around “Chi” a natural resource of the land that is the energy source and the power behind the eight animal tribes in the Lego
By 2004 LEGO was racking up with misfortunes of around 1 million per/day. Knudstrop as the new CEO with his administration ability and insight in business methodology put LEGO in most commended position. The entire business had been a massive disappointment with the huge misfortunes that affected Knudstrop to reconsider the pay structure by focusing on the cream layer of the association.
Currently, LEGO is one of the world’s leading manufactures of play materials. The company is guided by the motto, “Only the best is good enough,” committing to the development of children and aiming to inspire and develop the builders of tomorrow through creative play and learning. Valuing imagination, creativity, fun, caring, quality, and learning is what drives LEGO Group. By sticking to these values, LEGO holds themselves to the expectations that the people have towards the company and its products.
Lego's key weakness in the run up to 2004 may be seen as two fold. Firstly the company has failed in a key area
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.
The case for LEGO’s change in strategy was due to the decline in profit and growth. The company was not up to date with the consumer and market trends. They did not have prepare for future scenarios or have a contingency plan, thus they were very unprepared for the changes in the toy
LEGO started in 1932, when a father and his sons began designing wooden toys. The idea started out very small, but they ended up becoming one of the biggest toy leaders in the world. Although they are a huge success and known globally today, that does not mean they never encountered roadblocks; they actually ran into quite a few, including competitors, lawsuits, and loss of revenue (Bigus, 2011). Like every company, LEGO brand has their strengths, weaknesses, opportunities and threats, presented using a SWOT analysis (Rothaermel, 2017, p. 130).
* Improve Distribution: Bionicle was a successful toy but it was criticised for having poor stocks though the product had a high demand, and the lesser popular toys were available in stores. Hence a weak distribution network can be proving detrimental in such a competitive environment.
Knudstorp then realized that the problem did not lie with the product, but with the company’s attempts in the 1990’s to become a lifestyle brand with its own line of clothes and watches and they built more theme parks as well. By doing this, they started neglecting their core business: the LEGO brick.