Problem Statement: As a manager of The Lego Group I think the main problem that Lego faces is maintaining its competitive advantage and growth in the complex toy industry. Lego must identify a clear expansion plan to respond to the external (business) threats such as intense competition and new product innovations, changes in the toy industry with mergers and acquisitions and legal battles as well as maintain efficient internal operations in terms of supply chain and logistics in order to keep up their market dominance in the industry which is currently at stake. Company History: Lego first started off during the great depression in 1932 manufacturing children’s toys using the highest quality material and workmanship to always produce top quality products – true to its motto ‘only the best is good enough’ (Refer to Exhibit 2 for strengths). His toys were designed to last through years of play which ensures durability of the product. Two years later the name Lego came into being meaning ‘play well’ in Danish and also ‘I put together’ in Latin. The company had the ‘pioneering advantage’ according to exhibit 2. Ten years later the entire workshop burned down however, Kristiansen rebuilt the factory and remade all his lost designs from memory.
At the end of World War I, Lego purchased an expensive plastic injection moulding machine and one of the first plastic toys’ a fish shaped baby’s rattle was created which was a tremendous success and thereafter Lego quickly expanded its business operations and produced over 200 varieties of plastic and wooden toys. Using this new technology the just plastic Lego bricks named Automatic Branding Bricks were created. In 1953, it was changed to Lego Bricks. Godfred one of Kristiansen’s sons took over and came up with an idea to design a new structured system of toy products using the Lego Brick to create the Lego ‘system of play’. The whole purpose of the Lego system of play was to “create a toy that prepares the child for life which appeals to the imagination and develops the creative urge and joy of creation that are the driving force in every human being”. January 28, 1958 was a landmark in the history of Lego as the new brick design was patented. In the 1960’s Lego experienced phenomenal success expanding sales to many European countries as well as new markets in the U.S. It also introduced building instructions as the standard feature for each set. In 1968, it introduced a new brick called DUPLO for children under 5. In the 1970’s it had grown to over 2500 employees and new innovative sets involving doll houses and furniture were created. It introduced Lego Technie series which created mechanical moving parts. In 1979 it changed leadership again. In the 1980’s it celebrated its 50th anniversary and the company continued to expand operations launching an educational line for schools as well and a DUPLO baby series. Lego bricks were combined with technology and a light and sound series was introduced. In the 1990’s Lego became one of the top ten largest toy manufacturers and employed over 7000 people and included over 1000 injection molding machines in five Lego factories. The use of television helped to build a familiar Lego maniac slogan. It launched its official website and soon after expanded into a new business area with the release of the first Lego computer game. It also diversified its product line by launching new creative play themes such as Lego western, Lego adventurers, ice planet and star wars which was one of Lego’s most profitable product line. In the years 2000 and beyond other popular licensed rights were obtained for new products like Harry Potter, Batman etc. With successful acquisitions of many licensed rights Lego partnered with video game design companies for both computers and video game consoles. The speciality was that at a time when video games were seen as too violent and inappropriate for children Lego provided non-violent video games with content that...
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