Strategic Risk Management Framework
5. Summarize the strategic risks using the Strategic Risk Management framework and map the risks on the LEGO PAPA model.
The LEGO Group uses a four step Strategic Risk Management model which is comprised of Enterprise Risk Management, Monte Carlo Simulations, Active Risk and Opportunity Planning, and Preparing for Uncertainty. Using the Strategic Risk Management Framework, there are many different risks on the pyramid that the LEGO Group are open to. They are shaded and explained below.
Customer Risk—LEGO’s products are geared to younger children. It needs to fulfill otherwise unmet customer needs in the Asian market to make a presence and gain market share in that market. “Market research firms noted a strong preference for preschool and educational toys in most emerging Asian economies. For example, Chinese sales of scientific/educational toys and construction toys had grown 20% between 2009 and 2010.”1 The LEGO Group has a plethora of construction toys and it prides itself on its ability to use consumer insight in product development. “Anyone can get consumer insight, but many people have a hard time dissecting this information and utilizing it in their product development.”1 We believe LEGO should proceed with caution and do more research because their own focus groups with Chinese mothers contradicts the preference above. “The post-eighties mums grew up in this hard school paradigm. They don’t want to offer their kids that same experience. These parents want to offer their kids a different life.”
Market Risk—There is large amount of market risk is LEGO doesn’t target the appropriate customer groups. In Japan, the company overexposed its preschool educational products in its brand-building, a mistake which had limited LEGO’s expansion beyond that market segment ever since. LEGO needs to push its products towards age appropriate segments of the market. We think there is much potential for the Technic product line in Asia because it
The LEGO Group uses a four step Strategic Risk Management model which is comprised of Enterprise Risk Management, Monte Carlo Simulations, Active Risk and Opportunity Planning, and Preparing for Uncertainty. Using the Strategic Risk Management Framework, there are many different risks on the pyramid that the LEGO Group are open to. They are shaded and explained below.
Customer Risk—LEGO’s products are geared to younger children. It needs to fulfill otherwise unmet customer needs in the Asian market to make a presence and gain market share in that market. “Market research firms noted a strong preference for preschool and educational toys in most emerging Asian economies. For example, Chinese sales of scientific/educational toys and construction toys had grown 20% between 2009 and 2010.”1 The LEGO Group has a plethora of construction toys and it prides itself on its ability to use consumer insight in product development. “Anyone can get consumer insight, but many people have a hard time dissecting this information and utilizing it in their product development.”1 We believe LEGO should proceed with caution and do more research because their own focus groups with Chinese mothers contradicts the preference above. “The post-eighties mums grew up in this hard school paradigm. They don’t want to offer their kids that same experience. These parents want to offer their kids a different life.”
Market Risk—There is large amount of market risk is LEGO doesn’t target the appropriate customer groups. In Japan, the company overexposed its preschool educational products in its brand-building, a mistake which had limited LEGO’s expansion beyond that market segment ever since. LEGO needs to push its products towards age appropriate segments of the market. We think there is much potential for the Technic product line in Asia because it