•The Lego Company is a $1.6 billion plastic toy manufacturing conglomerate based in Denmark. It has also spread into allied activities such as theme parks, apparel and computer controlled toys. Every year it manufactures close to 14 billion plastic blocks and sells in about 130 countries across the globe. Not so long ago its market share was as high as 80% in the key North American market and it was looked up to as not just being a toy company but as providing products that help learning and developing new skills. •However for the past several years its lion’s share of the market has been attacked by companies such as Mega Bloks Inc. and Hasbro. Mega Bloks for instance has been creating colourful plastic blocks which are mostly compatible with Lego but relatively cheaper in price. While Lego is the dominant player in the 7-12 yr age group, Mega Bloks is the leader in the preschool market. Mega Bloks has been introducing product lines which make it very easy for customers to shift brands and this has been the cause for a trademark infringement case alleged by Lego. •Lego has been moving with times in terms of product innovation which saw it launch its line of robot action figures range including Bionicles, Mybots, Clikits and computer chip controlled creatures. Further to leverage on the Lego brand it formed alliances with Walt Disney and Lucas Films for selling of merchandise of Harry Potter and Star Wars. However, the initial interest in these memorabilia has gradually worn out inspite of the films enjoying great commercial success. This has forced Lego to sit on millions of dollars worth of inventory. The situation has also been compounded due to the dollar’s weakness against the Danish Krone, which make its products more expensive in the foreign markets and thus lose out to competitors with cheaper alternatives.
•The main problem before Lego is to ensure the high levels of customer loyalty that it has...