BUSI 1484 – Managing Strategy
The LEGO Group Analysis
June 26, 2013
Word count: 1,517
Table of contents
1. Application of the PESTEL analysis
2. Application of the Porter’s Five Forces Analysis
| 3. Application of the TOWS Matrix
In this assignment the LEGO Group are examined by using a PESTEL analysis (Turner, S., 2002,), Porter’s Five Forces framework and TOWS matrix, based on the information from the case study “The LEGO Group: working with strategy” by Anders Bille Jensen, University of Southern Denmark, and sources from internet.
Application of the PESTEL analysis:#1
| POSITIVE IMPACTS
| NEGATIVE IMPACTS
| Higher import tax in some countries, prevented LEGO to enter these markets before 1980’s.
| Lego has to outsource its production line in those countries, it can lower the production cost, making the products to be more competitive with rivalries.
| Difficult to control intellectual properties, and its supply chain.
| Outsourcing 80% of the products in the Eastern European countries and remain only 20% in its base in Billund.
| Significantly reduce the production cost by outsourcing to developing countries as other direct competitors.
| Possibly unwelcome by their devotees since the product is no longer produced by Danish labors. Meanwhile, supply chain and QC will become a setback to the group.
| According to the market research in 1995, showed that children seem to mature earlier and demanding more from the toys.
| Lego has to strive for strategic, innovative development rather than relying on the past success. (2)
| There is no absolute key for successful strategic plans. Any major change of business decision will face the risk of total failure of the company.
| In the past 25 years, the computer game has taken place in toy industries. The new generations has shifted their interested into digital gadgets from traditional toys.
| The company has developed a strategy in digital in 2009, with Warner Brothers. As an answer the growing demand in ‘new media’ age
| It is difficult to seek for a balance in running the ‘old’ and ‘new’ business together. In the other word, the management must think as a Baby-Boomer and a Generation Y.
| The consumers were hesitant to accept plastic products, when the company first producing Lego bricks. They preferred more traditional wooden rather than plastic ones.
| The plastic Lego bricks had proven to be one of the huge successful toy products in the century. It is durable and easy for mass production.
| The active ingredient of plastic is a by-product of petroleum, which is a highly polluted industry in the World. On the other hand, wooden product can be obtained from renewable forests, a sustainable source compare with plastic.
| The interlocking principle of studs and tubes was patented on 28 January 1958.(1)
| Lego have sold millions pieces of bricks in the past five decades, which proved that the patent is the main asset of the group.
| The future design which based on this existing stud and tube interlocking system model is limited. And the patent will expire eventually.
Application of the Porter’s Five Forces Analysis:
This following analysis is an extract based on the case study The LEGO Group: working with strategy. The LEGO Group has improved the company situation and historical success in 2008 and 2009, after a huge declined in 1999-2003. The following paragraphs will analysis the company with Porter’s Five Forces (Michael E. Porter, 1979) #2 to identify the strengths of the five different competitive drivers within this industry.
1. BARGAINING POWER OF SUPPLIERS
The main ingredient of LEGO bricks are plastic and colorants. The plastic (ABS) that used by LEGO is exclusively supplied by the German chemical...
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