Lego Case Study 2014

Topics: Lego, Legoland, Lego Group Pages: 26 (6642 words) Published: May 18, 2015
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The LEGO

Case Study

2014
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The A

CONTENTS !

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Introduction!!

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Difficult start to the decade 2001.!
Signs of Recovery 2002.!
Hopes dashed - 2003.!
LEGOLAND parks.!
LEGO Brand Stores.!
The Knudstorp Review.!

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Financial Focus - the !
Oveson addition. !

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Back to basics and the limit
to adjacencies. !

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10 ! Developing the strategy !
why do we exist? !

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11 ! First the action plan - first
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things first. !

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12 ! Summary and Conclusions!
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13 !Appendices !
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13.1 Knudstorp on!
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communication !
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13.2 References and slides


The A

1 Introduction !
In 2014, LEGO® announced record
results. In the financial year 2013,
revenues had increased by 10% to 25.4
billion danish krona. Profits before tax
were 8.2 billion DKK. The company had
once again delivered an impressive
operating margin of 33% before tax.!

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In US dollars, the company had achieved
$4.5 billion of revenues and profits of $1.5
billion. Revenues had increased from just
over $1 billion some seven years earlier.
LEGO® had replaced Hasbro to become
the largest toy company in the world
second only to Mattel. !

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In just eight years, revenues at the Danish
toy manufacturer had tripled. The company
had turned around a loss of 2.5 billion
krona in the financial years 2003 and 2004
to an operating margin the envy of high
tech stocks around the world.!

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The transition had boosted prices and
gross margins from 56% to over 70%, slashed operating costs from 70% to 37% of turnover and doubled sales per employee. !

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Return on equity had increased from zero to almost 70% and equity values had increased from 400 million to over 11 billion DKK. Valued on par with NASDAQ’s Facebook, the company would be worth over $150 billion. Not bad for a toy company based in Denmark. !

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The future had not always looked so promising. In presenting his report to management in June 2003, Jørgen Vig Knudstorp, then head of strategic development had pulled no punches, “We are on a burning platform, losing money with negative cash flow and a real risk of debt default which could lead to a break up of the company”. Quite a turn around!!

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How had the remarkable transition been achieved? In this case study we analyse the performance of the company using our corporate strategy framework of analysis. We apply the same techniques to Apple [2012] and Amazon [2014]. The results are fascinating, offering comparison and contrast in the approaches used within each company.! !

Check out also the Excel and Keynote Slides available as a FREE download from the site.! The Lego Case Study.com from John Ashcroft and Company, experience worth sharing. Page 3

2 Difficult start to the decade - 2001!
For LEGO® it hadn’t been such a great start to the decade. In 2000 the company had a loss of DKK 831m, which the Chairman
described as “unsatisfactory”. There had been little or no growth in the year. Global net turnover was DKK 9.5 billion, compared to DKK 9.8 billion in 1999. In US dollars the company has lost $100 million on revenues of around $1.2 billion.!

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2000 had been a very difficult year for the entire toy industry. But despite many strengths and high points, the LEGO Company was impacted because it was believed by many, including key
customers and management, to have lost focus.!

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The LEGO Company planned to reduce or abandon certain
initiatives outside of the core business, including wristwatches, publishing and other lifestyle products. At the same time, LEGO intended to reduce losses in software and the LEGOLAND parks.!

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The strategy was to refocus on the LEGO brand – stimulating imagination, creativity and learning – “it is what children and parents expect from us. We will continue to expand within this area,...
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