...and questions 4 & 5 pertain to the 'Ikea' case: 1. LEGO’s movie-themed products, keyed to popular film franchises such as Harry Potter, Lord of the Rings, and Spiderman, include detailed construction plans. Do you think this is the right strategy? Why or Why not? Justify your assessment of Lego's strategy. LEGO’s detailed construction plans for their products are the right strategy. LEGO’s products can contain hundreds or even thousands of pieces, are very detailed, and can be complex. Without these construction plans, some of their products would could not be constructed correctly. If the products do not turn out as advertised on the box or television, it is a possibility LEGO would lose customers. The construction plans are there to assist in the building of their products. The detailed plans are there to ensure their products are enjoyed as intended. This strategy is sound because the instructions assist children with the building the products and the final product is as advertised. Without the instructions, the more complicated products offered by LEGO would not be able to be assembled. For example, LEGOs Taj Mahal has almost 6,000 pieces. This is an iconic piece and LEGO fans are eager to be able to purchase and assemble this product. 2. Using Porter’s generic strategies framework, assess LEGO in terms of the company’s pursuit of competitive advantage. LEGO’s pursuit of competitive advantage in terms of Proter’s strategies framework is one of differentiation...
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...Section 1: Analyzing LEGO’s Business Environment 1.1 Two Major Trends in the General Environment Worth Considering 1.2.1 Technology Development in technology affects how businesses are run in all aspects. The toys industry is no exception. The leading trend that is relevant in this case is the increase in leisure time spent on digital games as opposed to physical toys. Children are playing computer games at a younger age, eroding the share of their playtime that was once dominated by toys. 1.2.2 Demographics In developed countries, aging population coupled with lowering birth rates are the primary driving forces for industry players going forward. I believe that this should provide implications on the future directions that LEGO should take. 1.2 External Environment – SWOT Analysis 1.3.3 Strengths and Opportunities The LEGO brand itself is entrenched deeply within the building toys industry. This strength is especially valuable to certain sub-industries under the broader toys industry such as infants’ toys and serious gaming. LEGO is also a trusted brand in education and with parents. LEGO can leverage on this strong brand name to perhaps explore opportunities in non-traditional markets such as the silver industry. LEGO, being an established brand that the older generations are familiar with, can expand into these industries. In addition, the trend towards more playtimes spent on computer games opens up the digital market for LEGO...
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...LEGO Group: Building Strategy Professor: Kelly Lecouvie Celeste Chan, Richard Guo Table of Contents Executive Summary 1 Problem statement 2 ANALYSIS 2 External Analysis - Porter’s five FORCES: 2 Internal Analysis – Core Competency 4 Main Issues 4 ALTERNATIVES 5 Recommendation 7 Appendices 8 APPENDIX A – LEGO’s VALUE CHAIN 8 APPENDIX B – Core competencies & LEgo 9 APPENDIX C – FOUNDATION & DIRECTION OF LEGO 10 Problem statement LEGO as a company has withstood many years of changing business environment, and has grown from creating wooden toys to interchangeable blocks, and eventually becoming an international symbol of innovation. It is again facing a changing environment, with its patents expired, its rising number of competitors, and facing losses in court as well as loss of market share to its competitors. ANALYSIS External Analysis - Porter’s five FORCES: Bargaining power of suppliers: LEGO’s suppliers have low bargaining power. After Jorgen Vig Knudstorp took over as the director of strategic development, he was able to cut 80% of LEGO’s suppliers to improve efficiency. The technology needed to create LEGO’s bricks is not specialized, since the company has in house machines to create the blocks. From the above two points, it’s apparent that the bargaining power of suppliers is low, since their services are easily substitutable and disposable. Bargaining power of customers: The bargaining power of customers is rated as high for LEGO...
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... Assessment – 2 Case Study Report Rahul Krishnasamy Student Id – 1838804 TABLE OF CONTENTS 1. Executive Summary 2. Introduction 3. Lego’s Turnaround and business model 4.1 Bringing Back the Bricks 4.2 Improving Quality and Logistics 4.3 Lego Turnover 4. Conclusion 5. Recommendations 6. References Executive summary: The purpose of this report is to analyze the Lego’s turnaround and business model in light of its competitive position from approximately 2003 – 2013. This report will includes the aspects such as new product launch strategies, new collaborations which contributed to the creation of superior value and changes to the business model. It also provides the solutions for Lego’s continues competitive success and recommendations for the future based on what will sustain competitive advantage. Introduction: In 2003, the Lego group was about to bankrupt, as many of its innovative efforts like Clikits crafts sets which were introduced for girls, theme parks and Galidor, an action figure supported by the television show were all unprofitable and were failed outright. The Lego group had a loss of over 400 million dollars on its annual sales with just over 1 billion dollars...
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...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 and by 2007 divide their product line into six product segments including pre-school products, creative building, play themes, licensed products, Lego NXT, and LEGO Education. Fortune Magazine and the British Association of Toy Retailers named the Lego Group Company’s iconic brick the “Toy of the Century.” It was clear that the brand name would forever be connected to their signature brick. A Changing Market The 1990s saw a huge change in Lego’s primary target consumer patterns. With growing technological trends came new psychological trends, the most important of which was called the “kids getting older younger” phenomenon (Hatch and Schultz, 2008). Computer and video games were becoming exceedingly popular....
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...1. LEGO’s movie-themed products, keyed to popular film franchises such as Harry Potter, Lord of the Rings, and Spiderman, include detailed construction plans. Do you think this is the right strategy? Why or Why not? Justify your assessment of Lego's strategy. To disect whether the inclusion of detailed construction plans in its film-franchised LEGO sets was the right strategy or not, it’s important to start with what the company itself stands for. The name LEGO means “play well”—the focus of the toy manufacturer being “play.” The perennial toy maker has a brand that stands for “self-expression,” and “sponteneity,” and “innovation.” That is, the core of LEGO is not jus that it’s a toy, but that it encourages children to be imaginative and creative with it’s simple interlocking bricks—a child can build anything that he or she can dream up with LEGO products. In fact, LEGO itself recognizes that two of its sources of competitive advantage are creativity and innovation. These are the decisive points for LEGO. They are what make LEGO, LEGO. Creativity and innovation are the product’s differentiators. They are the source of the company’s competitive advantage and, therefore, a key element in the company’s strategy. These differentiators are what propelled LEGO to a peak 85% market share of the construction-toy market. While licensing film francises into its merchandise wasn’t the wrong strategy, including detailed construction plans with those LEGO sets was the wrong strategy...
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...Potter Value Chain Analysis The value chain analysis identifies all of the activities and strategies the organization must perform to conduct a successful business. (Potter) .The activities are classified into primary and support activities. Each of the activities performed will add value to the product and services provided by an organization. LEGO had incorporated various strategies to gain a competitive advantage. LEGO’s inbound logistics was not in proper shape. There was no control over the inbound logistics and management of inventory. The supply and demand of the goods was not in parity. In most situations, the forecasting was done dynamically without any evaluation of estimates. Later, LEGO management team synchronized the sales supply and demand by starting a sales and operations planning process (S&OP). This technique helped LEGO to optimize their demand planning, forecasting and inventory management. LEGO can accurately estimate their demand, supply and estimate customer demand for particular product during a given period. Using demand planning to develop accurate forecasts is critical for effective inventory management. Forecasts are compared to inventory levels to ensure that distribution centers have enough, but not too much, inventory to supply stores with a sufficient amount of product to meet demand. The optimal amount of raw materials was released to cater to the demand. This played a pivotal role in building an efficient supply chain management. VALUE...
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...LEGO CASE STUDY Discussion Question: Q.1: How did the information systems and the organization design changes implemented by knudstorp align with the changes in business strategy? 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 components and reduced losses as the cost of production of each unit was very expensive. Lego created a new strategy to broaden the product range and target a new customer segment. Earlier Lego used to develop products which primarily targeted boys; with this new strategy they started developing products keeping a larger segment into perspective. They started developing products based on movie themes. Most drastic changes came in the organization structure at Lego, switching the employee pay structure, providing incentive for innovative product designs. Lego also started developing video games thus targeting a new segment of customers. All these changes in the business aspects of the company led to an increased revenue, increased demand and growth in the number of...
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...Chapter 1 LEGO Case Write-Up My key takeaways are 1) Company should combine business strategy, organization strategy and information strategy together in order to make a good innovation. 2) Keep uniqueness and develop new product to attract new segments is very important in a hypercompetitive environment. 3) A strong information management system can be very helpful. 1. How did the information systems and the organization design changes implemented by Knudstorp align with the changes in business strategy? After Knudstorp changed Lego’s business strategy changed, Lego changes its organization structure. They encourage product innovation and sales by offering incentives. They decrease coast by move manufacturing factories to cheaper places. In order to attract more consumers, they develop new series for new segments and extend virtual world and movie business. They also engaged the communities who had already set up thousands of Web sites and blogs. Which also related to IT technology improvement. The information systems of Lego changes too. They develop new technology to support the product design and development, also the virtual and video games. They use the technology to insist the real-time feedback from customers. They created a modularized and standardized architecture for their information systems, making it possible to expand more quickly and add capacity and functionality, as it was needed. They implemented an integrated enterprise system as well. These systems helps...
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...bargaining power over lead times and price. For example, if Lego does not provide the toys quickly enough at Christmas, Wal-Mart could take Lego out of the shelves. Bargaining Power of Suppliers (pressure high): Lego brick stones are made of plastic. Plastic is produced with oil and there is no chance for Lego to bargain with oil companies. Fluctuations in oil prices directly affect Lego’s margin. Competitive Rivarly (pressure low): There is Best-Lock from Hongkong and Mega Brands from Canada. Both compete with lego by low prices. Lego has a strong brand image and brand loyalty among customers and can charge premium prices. Parents know Lego because they played with it themselves. As the parents are the ones who pay the toys and as they are the force that often decides over children’s playtime, they will be the ones who make children play with traditional toys rather than computer games. Lego has therefore a critical competitive advantage over its competitors, as they cannot look back on such a long history. New market entrants (pressure low): There are low market entry barriers. Lego’s patents expired and overseas competitors enter the market. As the oil prices collapsed during the financial crisis in 2008,...
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...The LEGO Group Strategy 1.Strategy development According to Johnson et al (2011), in order for a strategy to be successfully measured, the organization should apply three horizon framework. It could be argued that the crisis of LEGO Group in 2003 was a result of a lack of realistic action plan. The objectives set by the Company were too ambitious considering the highly competitive environment. Also, major changes in the management structure have caused disagreement which resulted in many employees leaving the company. Significant revenue loss from 2003 and 2004 has forced LEGO Group to re-think its strategy and start from the beginning. Using the three horizon framework, it could be explained that the core business was defended by selling the LEGOLAND parks and focusing on LEGO brick concept (a ‘core’ product). Building emerging businesses could be recognized as developing a new digital strategy – launching online multiplayer game as well as entering mobile app industry. Regarding the viable options where nothing can be predicted, I think LEGO Group is doing well by inviting consumers to participate in product development as that way the risk related to new concepts is minimized. 2. External environment. There were numerous aspects of external environment that affected Company’s strategy. The oil crisis from 70’s and 80’s had a serious impact on the world economy therefore organisations had to implement new strategies in order to continue the growth. Lego then introduced...
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...Assignment 1: Individual case analysis report Mahmud Safari (21295746) 1 Individual Case Analysis Report LEGO (A): The Crisis Mahmud Safari 21295746 Assignment 1: Individual case analysis report Mahmud Safari (21295746) 2 Table Of Contents 1.0Introduction 2.0 Analysis of General Environment 2.1 Economic 2.2 Socio-‐Cultural 2.3 Global 2.4 Technological 2.5 Political/Legal 2.6 Demographic 3.0 Analysis of the Industry...
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...Alisa Olson MGT405 Section 7 Sunduramurthy 29 November 2012 Case Write Up: LEGO Group LEGO Group has been a successful company in the toy industry since they started in 1949. As of 2010, LEGO remained a privately held company by the Kirk Kristiansen family. Annual sales reached an all-time high equaling over $3.7 billion. The company’s strongest lines were LEGO Star Wars, LEGO City, and LEGO DUPLO. Even though the company has maintained a competitive advantage, they face some seriously threatening issues. Some of the current issues they face are maintaining patents, company acquisitions, court battles, and new competition. In 1984, TYCO introduced Super Blocks, which were almost identical to the plastic brick design that LEGO has. TYCO had advertisements that stated “if you can’t tell the difference, why pay the difference”. LEGO launched a four year lawsuit against them, but by 1988 the patent for LEGO’s building block design expired, so they lost the lawsuit. All the effort against TYCO was wasted. LEGO should have renewed their patent to prevent incidents such as this one from happening. Once this patent expired, the barriers of competition were lowered significantly in the building toy market. In 2009, Disney acquired the comic book company Marvel Entertainment for $4 billion. This provided Disney with control over Marvel’s vast catalogue of over 5,000 comic book characters to be used in future publishing, movie production, and licensing operations. This was...
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...financial crisis in 2003, is an excellent example of how new capabilities can be made, and existing ones rebuilt to deploy resources using organisational processes to produce a desired effect. Institutional theory Institutional theory describes companies that operate in foreign markets conform to the institutional environments in order to gain legitimacy from the perspective of other institutional bodies. These institutions are the rules, norms and beliefs that define socially acceptable behaviour and therefore influence economic activity (Scott, 1995). The degree to which a company can conform to these institutions determines whether or not the institutions act as constraints or resources in providing the company with a competitive advantage. Scott (1995) also developed three pillars of institutional structure: cognitive, normative and regulative. Kostova’s adapted these structures to the country level which effectively highlights how formal government policies...
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...ICP 2 (LEGO) 1. They helped ultimately minimize wasted resources, simplified processes, and made LEGO’s approach more efficient 2. Differentiation; they develop superior products in more efficient ways than their competitors. They’ve marketed their products in numerous ways to the point where the possibilities for the use of LEGOs are endless. 3. No, his changes have made LEGO much more efficient than its competitors. This has ensured LEGO a spot atop the toy business for years to come. It will be very hard to upset LEGOs momentum due to the change in their business strategies. 4. To continue to find ways to market LEGOs, to continue to make things operate more efficiently, and to continue to delve into new entertainment mediums as they pop up. ICP 3 (Zipcar) 1. Zipcar looked at what other car rental agencies did and tried to do it better. They empowered their customers through transparency and competitive pricing. Due to this, they were able to penetrate the car rental industry successfully as a substitute and a new entrant using the bargaining power of buyers and other suppliers to their advantage. 2. It helped Zipcar monitor numerous things regarding their vehicle and the customer experience so that they could improve it. 3. They use social media and other tools on the Internet in order to spread their name and in order to increase their presence as a brand to be reckoned with in the rental industry. They add value by gathering feedback from consumers...
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