Key Challenges in Maintaining a Relationship Between Lego and Flextronics

Topics: Outsourcing Pages: 13 (429 words) Published: June 19, 2013
  Key
 Challenges
 in
 Maintaining
 a
 Relationship
 between
 LEGO
 and
 Flextronics
 
 
 
 
Name:
 Shanshan
 Liu
  Andrew
 ID:
 shanshal
 

  LEGO
 Group
 is
 the
 fifth-­‐largest
 toy-­‐maker
 in
 the
 world
 with
 a
 complicated
 global
 supply
  chain,
 while
 Flextronics
 is
 a
 large
 Singaporean
 electronics
 manufacturing
 services
  provider.
 So
 the
 first
 challenge
 between
 these
 two
 large
 companies
 when
 they
  corporate
 is
 to
 achieve
 an
 agreement
 and
 maximize
 the
 common
 benefits
 of
 both
  parties.
 However,
 Lego
 Group
 needs
 a
 flexible
 and
 market-­‐responsive
 business
 because
  of
 the
 unpredictable
 demand
 of
 its
 product,
 while
 the
 business
 model
 of
 Flextronics
 is
  more
 stable
 and
 predictable.
 It
 means
 that
 Lego
 may
 keep
 releasing
 new
 products
  because
 of
 changing
 market
 conditions,
 and
 these
 new
 products
 have
 to
 arrive
 with
 a
  very
 short
 time
 line,
 but
 Flextronics
 cannot
 keep
 up
 with
 these
 changes.
 In
 addition,
  Lego
 bids
 for
 a
 lower
 price
 at
 the
 beginning
 and
 lock
 it
 over
 a
 long
 period,
 which
 is
 hard
  for
 Lego
 to
 convince
 Flextronics
 that
 its
 profits
 has
 been
 considered
 as
 well.
 Without
 a
  profitable
 business
 model
 for
 both
 parties,
 a
 win-­‐win
 solution
 is
 hard
 to
 achieve.
 
  The
  second
  challenge
  is
  especially
  for
  Lego,
  since
  it
  has
  little
  prior
  experience
  in
  outsourcing
  a
  large
  amount
  of
  production,
  but
  decide
  to
  outsource
  80
  percent
  of
  its
  production
 to
 Flextronics.
 There
 will
 be
 many
 unexpected
 situations.
 Lego
 doesn’t
 have
  an
  accurate
  picture
  of
  what
  should
  happen
  when.
  In
  particular,
  Lego
  is
  a
  European
  company
 while
 Flextronics
 is
 from
 Singapore.
 They
 may
 have
 different
 culture,
 thinking
  and
 working
 styles.
 Setting
 up
 processes
 for
 sharing
 information
 at
 all
 levels
 is
 especially
  important
  for
  cooperation
  than
  in-­‐house
  production
  for
  both
  companies.
  Moreover,
  Lego
 has
 several
 categories
 of
 products,
 and
 it
 keeps
 broadening
 its
 portfolio
 into
 new
  areas.
  Therefore,
  transition
  internal
  operations
  to
  an
  outsourcing
  partner,
  typically
  involves
  so
  many
  staff,
  can
  be
  a
  tricky
  time.
  With
 several
 other
 small
 suppliers
 of
 Lego,
  the
 matter
 becomes
 more
 complicated
 in
 a
 competitive
 and
 dynamic
 market.
 
 
  The
 third
 challenge,
 particularly
 with
 Flextronics,
 is
 that
 Flextronics
 also
 have
 many
 large
  multinational
  clients,
  and
  Lego
  is
  only
  one
  of
  them.
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