Lego Case Strategic Management
1.
What has led the LEGO group to the edge of bankruptcy?
External threats (macro PEST, micro Porter’s 5 forces)
giant conglomerates dominating industry (risk of being taken over) p.2
competing rising costs while competitors outsource p.2
pressure from big retail customers with power? e.g. Walmart, Target p.2
negative industry trends in toy industry p.1
1) fad toys are rising and product life cycles declining. threat of shortening/declining life cycle despite rise of fad toys, steady growth of industry at 4%
2) children had more afterschool activities and less unscheduled time to play
3) demand shifts towards technology (inc., videogames and online activities
4) parents prefer to buy toys which they consider good for children rather than the kids really want
5) rapid imitation and limited protection of IP harming new product introduction Internal problems (weaknesses?)
Godtfred controlled the operations closely (new product, brick or color must be approved by him before introduction. color were very limited to only 5 types.)
It took very long for his son Kjeld to persuade him to add new color. > slow down responsiveness to market
unmet demand
old heritage to be preserved, structure impeding
lacking direction, over diversifying?
LEGO Group History in Timeline
1916 – Ole Kirk Kristiansen found a wood workshop
1932 – production of wooden toys, LEGO name formed, Ole’s son Godtfred joined
1947 – plastic injection – molding machine put in place
1949 – plastic + wooden toys, incuding the automatic binding brick
1958 – “LEGO system of play”, change design of bricks to match the current form.
Bricks made by then were all fully compatible (product improvements for market penetration based on quality and careful considerations of costs p.3)
1960 fire destroyed the wooden warehouse, wooden production discontinued as it was vulnerable? 1963 10 principles of “good play” to define LEGO product
What has led the LEGO group to the edge of bankruptcy?
External threats (macro PEST, micro Porter’s 5 forces)
giant conglomerates dominating industry (risk of being taken over) p.2
competing rising costs while competitors outsource p.2
pressure from big retail customers with power? e.g. Walmart, Target p.2
negative industry trends in toy industry p.1
1) fad toys are rising and product life cycles declining. threat of shortening/declining life cycle despite rise of fad toys, steady growth of industry at 4%
2) children had more afterschool activities and less unscheduled time to play
3) demand shifts towards technology (inc., videogames and online activities
4) parents prefer to buy toys which they consider good for children rather than the kids really want
5) rapid imitation and limited protection of IP harming new product introduction Internal problems (weaknesses?)
Godtfred controlled the operations closely (new product, brick or color must be approved by him before introduction. color were very limited to only 5 types.)
It took very long for his son Kjeld to persuade him to add new color. > slow down responsiveness to market
unmet demand
old heritage to be preserved, structure impeding
lacking direction, over diversifying?
LEGO Group History in Timeline
1916 – Ole Kirk Kristiansen found a wood workshop
1932 – production of wooden toys, LEGO name formed, Ole’s son Godtfred joined
1947 – plastic injection – molding machine put in place
1949 – plastic + wooden toys, incuding the automatic binding brick
1958 – “LEGO system of play”, change design of bricks to match the current form.
Bricks made by then were all fully compatible (product improvements for market penetration based on quality and careful considerations of costs p.3)
1960 fire destroyed the wooden warehouse, wooden production discontinued as it was vulnerable? 1963 10 principles of “good play” to define LEGO product