...! ! ! ! ! ! ! ! ! ! ! ! The LEGO Case Study 2014 ! ! ! ! ! ! ! ! ! ! The A CONTENTS ! ! ! 1! ! 2! ! Introduction! ! ! ! ! 3! ! 4! ! 5! ! 6! ! 7! ! 8! ! Difficult start to the decade 2001.! Signs of Recovery 2002.! Hopes dashed - 2003.! LEGOLAND parks.! LEGO Brand Stores.! The Knudstorp Review.! Financial Focus - the ! Oveson addition. ! Back to basics and the limit to adjacencies. ! ! ! ! 9! ! 10 ! Developing the strategy ! why do we exist? ! 11 ! First the action plan - first ! things first. ! ! 12 ! Summary and Conclusions! ! 13 !Appendices ! ! 13.1 Knudstorp on! ! communication ! ! 13.2 References and slides The A 1 Introduction ! In 2014, LEGO® announced record results. In the financial year 2013, revenues had increased by 10% to 25.4 billion danish krona. Profits before tax were 8.2 billion DKK. The company had once again delivered an impressive operating margin of 33% before tax.! ! In US dollars, the company had achieved $4.5 billion of revenues and profits of $1.5 billion. Revenues had increased from just over $1 billion some seven years earlier. LEGO® had replaced Hasbro to become the largest toy company in the world second only to Mattel. ! ! In just eight years, revenues at the Danish toy manufacturer had tripled. The company had turned around a loss of 2.5 billion krona in the financial years 2003 and 2004 to an operating margin the envy of high tech stocks around the world.! ! ! ! ! The...
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...! ! ! ! ! ! ! ! ! ! ! ! The LEGO Case Study 2014 ! ! ! ! ! ! ! ! ! ! The A CONTENTS ! ! ! 1! ! 2! ! ! 3! ! 4! ! 5! ! 6! ! 7! ! Introduction! ! ! ! Difficult start to the decade 2001.! Signs of Recovery 2002.! Hopes dashed - 2003.! LEGOLAND parks.! LEGO Brand Stores.! The Knudstorp Review.! 8! ! Financial Focus - the ! Oveson addition. ! 9! ! Back to basics and the limit to adjacencies. ! ! ! 10 ! Developing the strategy ! why do we exist? ! ! 11 ! First the action plan - first ! things first. ! ! 12 ! Summary and Conclusions! ! 13 !Appendices ! ! 13.1 Knudstorp on! ! communication ! ! 13.2 References and slides The A 1 Introduction ! In 2014, LEGO® announced record results. In the financial year 2013, revenues had increased by 10% to 25.4 billion danish krona. Profits before tax were 8.2 billion DKK. The company had once again delivered an impressive operating margin of 33% before tax.! ! In US dollars, the company had achieved $4.5 billion of revenues and profits of $1.5 billion. Revenues had increased from just over $1 billion some seven years earlier. LEGO® had replaced Hasbro to become the largest toy company in the world second only to Mattel. ! ! In just eight years, revenues at the Danish toy manufacturer had tripled. The company had turned around a loss of 2.5 billion krona in the financial years 2003 and 2004 to an...
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...and regained its fame over the time. When Lego was a startup company it was in profits, it Gradually failed to turnout its customers, by implementing his strategic plan, credibly he manufactured almost 90% of products with same components and built the products to attract the customers. It was Successful and it gradually gave a rise in using of the Lego toys all over again. Designers were made to reuse the components in the new products. In this way he cut-shorted the number of products from 13,000 to 7,000. This reduction saved a significant amount to the company. He followed an expression which says “managing at eye level,” meaning his ability to talk to people on the factory floors, to engineers, marketers at home. He emphasized the importance of performance. Knudstorp followed a principle that everyone need to build a mind-set where non-performance is not accepted because there is no place to hide if performance is poor. Lego has introduced computer games with building blocks characters with playing heroes and villains. He introduced theme based building of games. The core theme of Knustorp’s plan is “nourishing a child”. 2. Which of the generic strategies does Lego appear to be using based on this case? Provide support for your choice. Lego was formulated with mainly three business strategies organizational, business and information systems strategy. The Line of Lego mainly aimed at girls. The fact behind this...
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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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...Lego is one of the multinational organizations that is operating its business in more than 130 countries. It is the 6th largest producer of children toys in the world. With the increase of competition and changing technology Lego had huge losses in 2004, the company suffered a situation of bankruptcy. Then as an organizational change to put the organization back on track Jorgen Vig Knudstorp has been appointed as the CEO of Lego. The main challenges for Knudstorp is to provide a good service to its unhappy customers and to keep the production team on track. But its innovative strategy has changed the face of the organization, which made it one of the top producer of toys. The company implemented and organization change in its structure and culture to achieve its goals. Some of its organizational changes include making new innovative products and making changes to existing products to meet the needs of the customers. Lego has also focused on the strengthening customer relationship and maintain a close contact with its customers which can help in knowing their needs better. A perfect example of this is Lego.com in which customers of all ages can experience the values and ideas of Lego through activities and games. Focusing on the requirements of the customers has made Lego a service driven organization and helped in gaining a competitive advantage in the market. It has targeted all channels to market to reach its customers like selling its products directly to the customers without...
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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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...An: Jorgen Vig Knudstorp, CEO LEGO Group Von: Managementberater McKinsey & Company Datum: Februar 2011 Betreff: Innovation durch Förderung und Aufbau von Bildungseinrichtungen Einführung: Das Unternehmen LEGO ist einer der traditionsreichsten und innovativsten Spielzeughersteller weltweit. Nach Jahren der Stagnation in der umkämpften Spielzeugbranche hat sich das Unternehmen durch eine spezielle Neustrukturierung erholen und seine Marktposition stärken können. Jedoch sieht sich das Unternehmen mit neuen Hindernissen, wie dem auslaufendem Patentrecht und zahlreicher neuer Konkurrenzprodukte konfrontiert. Die Potentiale von LEGO liegen vor allem in dem guten Markenimage, den soliden finanziellen Kennzahlen und der innovativen Produktvielfalt. Analyse: Die Analyse bezieht sich auf die Spielzeugbranche für Plastikbausteine weltweit. Externe Analyse: In Bezug auf die externe Analyse wird das Fünf-Kräfte-Modell von Porter herangezogen. Verhandlungsmacht der Abnehmer: Die Verhandlungsmacht der Kunden in der Branche ist hoch. Ein Argument dafür sind die geringen Wechselkosten der Kunden, die aus der großen Anzahl an Wettbewerbern mit einer ähnlichen Produktpalette resultieren. Auch die Informationslage über die Produkte innerhalb der Branche ist durch das gestiegene Medienaufkommen und die Erfahrung der Kunden mit den Produkten ziemlich hoch. Dieses stärkt die Macht der Kunden und ist negativ für die Branche anzusehen. Hingegen ist der Aspekt der...
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...Exam 3 Questions 1 - 3 pertain to the 'Lego' case, 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...
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...1: - Why do you think Lego has been successful in recreating the Lego legend? Lego enjoys enormous advantage in the global market and due to its advantageous position it can rebuilt the structure of an enterprise to a prosperous one. Lego worked too hard to improve its relationship with the retailers and supply them quality goods and services. It also promoted the relationship with the customers, through their involvement in the development of new product and promotional activities. All these encouraged the higher percentage of orders. Lego is stuffed towards creation of innovative product and marketing strategy so as to make the enterprise reach at the successful position in the market. It influences the behavior of the customer and interprets their taste and preferences to make the products available in the market accordingly. It creates customer awareness and also influence brand preference that makes up the confidence of the customer. In order to built a successful enterprise it is essential for Lego to have a marketing and communication objectives effectively and efficiently. Marketing communication helps to establish link between the management and the stakeholders and also provides an environment within which the business can operate. It constructs such new design for product that will be liked by the modern economy. Lego had been successful to a great extent in recreating the Lego Legend. Reference: - * http://www.eurobricks.com/forum/index.php?showtopic=55317 ...
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...1) How did the information systems and the organization design changes implemented by Knudstrop align with the changes in business strategy? Lego Company had a disappointing year in 2003 with its net sales fallen by 26 percent from DKK 11.4 billion in 2002 to DKK 8.4 million. Play material sales declined by 29 percent to DKK 7.2 billion. The underperformance of the organizations was due to misaligned supply chain, the problem was hard to find because these they grew out of the company’s core strengths, its capacity for innovation and its commitment to quality. There intricacy and attention in their product lines has resulted in various new products, disregarding the cost of innovation and misalignment of supply chain. Designers in Lego dealt with an astonishing array of suppliers approximately 11,000 suppliers more than the Boeing uses to build its aeroplane. The company has the largest injection moulding operations in the world with nearly 800 machines. But the teams operated in haphazard and changed them frequently, preventing operations from piecing together a reliable picture of demand needs, supply capabilities, and inventory levels. Knudstrop gathered a diverse group of senior executives and managers to make striking changes to the organizations downfall. The executive made many strategies to rebound and the sales, marketing, development, engineering and designers coordinated to make operational level changes. The executives paid attention to details, priorities to set...
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...LEGO - EMBRACING CHANGE BY COMBINING BUSINESS INTELLIGENCE WITH A FLEXIBLE INFORMATION SYSTEM History of LEGO Company The LEGO Group was founded in 1932 by Ole Kirk Kristiansen. The company has passed from father to son and is now owned by Kjeld Kirk Kristiansen, a grandchild of the founder. It has come a long way over the past almost 80 years - from a small carpenter’s workshop to a modern, to a global enterprise that is now, in terms of sales, the world’s fourth-largest manufacturer of toys. The name 'LEGO' is an abbreviation of the two Danish words "leg godt", meaning "play well". The original Lego toys started with a wooden duck. But the first LEGO automatic binding brick is their most important product. The products have undergone extensive development over the years – but the foundation remains the traditional LEGO brick. The Lego Group began in the carpentry workshop of Ole Kirk Christiansen, in Billund, Denmark in 1916. In 1961, Lego wished to expand sales to North America, but did not have the logistical capabilities to do so. Lego made an arrangement allowing Samsonite to begin producing and selling Lego products in the United States and Canada. On 7 June 1968, the first Legoland Park was opened in Billund. This theme park featured elaborate models of miniature towns built entirely from Lego bricks. The three acre (12,000 m²) park attracted 625,000 visitors in its first year alone. During the next 20 years, the park grew to more than eight times...
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...EASEgTUtsY The LEGOGroup: workingwith strategy Anders BitLe Jensen beena successf L fanily led, innavative highgrowthcornpany thegllb.t fhe LEGj 6raup has histaricaUy and in periodaÍpaaf performance strategic toyindustry'Thenit experienced a and The uncertainty, conpanyimpfawd its situatianin 2008and aqainin 2a09 DeveLoping Canpanyrequireson7oing the eÍÍarts WhichinvoLve naal ; ; I i t i ln its annual repo.t lor 2009 the LEGO Group announccd sales of 11.661 million DK(' (= 11397m = S21l4m = € 1 566m) and operating prolits o| ]002 million DKK (=|]6om= s549m = € 4 0]m] (ligues 1 .Úd 2)' This was incleae o|22 per.ent in sales(oveY2008) a im!Íessive even more impre$ive inoease of over 50 pe. cenl and an id ptulits.Even though 2008 had beena soo.l yee frr lhe IDCO Group with sales 19 per cent up. the performance in 2009 was even better.What made this padicularly encourasingwas thal the globaltoy markel was stagnant lookedas itthe LEGO Group in 2010 o. cven decLiDitrg.It could bc ba.k on a healthy groM{hback aftera turbulent T | ' e c r e a t i o n é n d i n i e í n é t i r B a l€ x p a n s i o n . f i h e F I I i LEs0síoup I LlGo wás lbunded jn l9]2 in the village of Bi]lrrnd' Denmark. by Ole Kirk Christialrsen and remained a lamily run lirm lbr mosl olits history. The .ompany manufactu.cd ícpladdere.ironing boards'stoolsmd wooden to],s'The woodcnioys quickly becamethe bestseljng item.In 1914 the company chDged its name to IEGO a conjunction o| the l)ánish...
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...deals with The LEGO House, an experience venue LEGO built by The LEGO Foundation. The research design is using positivism paradigm with qualitative interviews in an inductive approach where the design science is used with a Socio-Technical perspective (Bækgaard, 2011). 1.1.1 Stakeholders To make the problem background and problem formulation clear a simple organization chart has been developed. Table XX authors creation The LEGO Foundation has 100 % ownership of The LEGO House. The LEGO Group has a department called Corporate IT marketing. Corporate IT marketing from The LEGO Group is hired to find a...
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...is investigating and exploring the impact of outsourcing on one of the most iconic Danish companies (LEGO), which attracted our attention during the preparation of this project. We decided to focus on a single case study, because we felt that dividing our efforts by investigating more than one company, would not allow us to focus in sufficient detail on the domino effects that outsourcing can have on a singular institution. The main question of this project is “How could LEGO improve the Make-or-buy- decision and the relationship management when it comes to outsourcing”? In order to answer the main question, we must consider two sub-questions stemming from the main issue, namely: “How could LEGO improve the decision-making-process to outsource by taking more influencing factors into consideration?” and “What could LEGO have done differently in its relationship to the outsourcing vendor Flextronics”. We used the Case Study Research method to work on these questions. Doing that, we reviewed theories, which explained the phenomenon of outsourcing on a theoretical basis. After creating a theoretical framework and the database, we analyzed the case (LEGO) for parallels between the theories and their practical experience. Finally, we were able to drawn some conclusions to both the central and subsidiary questions initially posed. In summary, it can be said that LEGO did not take all aspects into consideration which the theories describe as being useful to make the...
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...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. By including detailed construction plans with its products, the company is sending cues to its customers that its products are not designed for creative, innovative play. Instead, construction plans are prescriptive step-by-step instructions—a dichotomous concept to the one that LEGO stands for where it wants to encourage...
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