Global Strategy in LEGO Group

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Global strategy involves the ability of a company to use different productive approaches in order to remain competitive in the present dynamic business environment. A company, therefore, should have a large capital base or high liquidity so that it can survive the fluctuations in the market trend.

In employing strategic management in their operations, companies formulate, implement, and evaluate various decisions in order to facilitate achievement of the set goals and objectives.

These companies have to take command or control of the functions such as managing their Working Capital (WC) and engaging in an effective cash flow forecasting. The management should invent new sources of funds that are mostly internal or externals that attract minimal interests (Sagner 2011).

In avoiding external sources of business finance, organizations try to maintain their high liquidity. The cash flow trend enables organizations to plan into the future on how they intend to navigate various hurdles and tap existing opportunities.

For instance, if an organization predicts that there are times when there will be more cash inflow than outflow, it can develop avenues in which the funds will give good returns to the business other than remaining idle.

Organizations also monitor avenues where they commit their funds. This vivid follow up will enable organizations to avoid engaging in activities that were not planned for at the beginning.

A properly managed WC can also enable an organization to make quick decisions in the products to continue supplying to their customers and those that should be withdrawn from the inventory. This process gives the management the opportunity to study the inventory and stock products that do not hold cash for a longtime.

The customers’ satisfaction remains guaranteed hence their retention. This makes the firm to get profit over a continuous period. Consequently, the firm maintains a competitive advantage over others.

The readily available funds can enable the organization to diversify into other activities with high returns. For instance, there can be risky ventures with immediate returns; this increases the profit base of the organization. These benefits can only arise if there are ready funds to be committed in such projects.

The management will not be under pressure to deliver, and when they work under free atmosphere, they will probably make right decisions that will steer the organization to greater magnitude (Sagner 2011).

Therefore, proper management of the WC is a mandatory activity in every business in order to make sure that all actions in the business remain profitable. It also requires involvement of all stakeholders so that they can operate with the same goal in their minds.

The outlined objectives allow firms to contemplate on the next course of action, and even reflect on how to counter the challenges that can arise from both internal and external environments.

This strategy helps everyone achieve his/her objectives. Organizations, therefore, use different strategic approaches in order to remain vibrant in the global market.

One of such strategy models is the generic model. In this model, the objectives and goals of a firm are outlined clearly in advance. This enables the management to work towards achieving the earlier set targets.

Under these objectives, the firm studies the external and internal parameters that may aid or pose challenges to the attainment of the vision. Under the generic or prescriptive model, different organizations should adopt three aspects so that they can be competitive globally.

The three approaches include the cost leadership, differentiation, and focus (Porter’s Generic Strategies 2011). These generic strategies aim at making an industry gains competitive advantage.

The cost leadership strategy, for instance, targets profit maximization at reduced costs of production and at the same time charging the market average price. This idea is evident in the sales and profit history of LEGO Group in 2002 and 2008.

The company recorded the same sales volume in the two years but different profit margins during the same periods. The reduced cost enables industries to charge low market prices, as a result, increasing market share. It also reduces the costs of producing and delivering goods and services thus increasing profit margins.

These firms have access to large capital base enabling them to invest in modern technology, which helps in bringing down costs. For instance, organizations with updated information management (IM) have all their data well managed in the systems.

This information management fosters growth, as it reduces cost of operation (Bhatt 2010). Since organizations handle large volumes of data, there is need to employ the Information Technology in ensuring proper data storage.

Organizations handle clients’ data, employees’ data, managerial data, suppliers, and procurements data amongst others. There is need to align these information for easy access by the prospective owners and the organization. This is where the Information management comes in.

Research has revealed that businesses that have a well-organized and managed data improve customer satisfaction, minimize cost on IT thus increase revenue, and realize improvement on operational efficiency.

Further, a properly managed IM eliminates decisions based on assumptions as the information can be retrieved within the shortest time possible; it enables organizations understands their customers’ behaviours and preferences.

This enables the organizations to serve their clients better and even retain most of them (Bhatt 2010). IM also increases efficiency as customer care agents can access clients’ data at an instant.

Business outlets are inculcating technological modifications into their systems in order to increase their efficiency and reduce the cost of operation. Organizations should use specifications or approaches that they can undertake.

Remarkably, the success of Information Management depends on their alignment and integration with the Human Resource (HR) and organization’s objectives. Clearly, technology will cut costs far much below that of competitors in the field.

Firms ought to engage continuously in price reduction mechanisms in order to continue improving their status at all times. The cost leadership strategy uses sources, which are always not unique to a specific firm; therefore, other competitors in the entire market can copy the cost reduction strategies.

The second approach under the generic model is the differentiation strategy. This approach involves designing products and services differently and more attractive than those of the competitors (Porter’s Generic Strategies 2011).

The success of this approach requires a good learning organization that will engage in research, development, and innovations. All the stakeholders, especially employees, should be ready to learn new concepts and apply them in their daily activities.

These firms will have the ability to predict the future expectations in terms of customers’ tastes and preferences. All the departments in a company should develop their internal strengths in order to achieve great profit margins.

Organizations should create a favourable environment within their premises to enhance knowledge, improve their standards and efficiency by making use of their employees.

With constant market dynamism and introduction of new technological advancements, it is critical for organizations to ensure that their employees are updated on these changes (Organizational Learning – Maintaining the Competitive Advantage n.d.).

This training will assist the company to have a competitive advantage over other firms. Therefore, organizational learning has a direct impact on competitive advantage of the organization. Firms that constantly engage their employees on trainings, seminars, and workshops do realize growth.

This growth comes in hand with stakeholders trust; for example, the customers will be retained due to quality service provision. Businesses ought to be proactive and remain focussed on achieving their strategic objectives; therefore, the organizations must be open to learn new ideas to develop new knowledge.

Markedly, organizational learning starts with individual learning that experience a favourable environment for learning. The development of the knowledge foundation culminates to organizational learning. It is from this foundation that the organization develops it competitive advantage.

Additionally, the centralized data acquisition improves the decision making process, as the organizations are able to record, tabulate, alter, and retrieve all essential business data in a centralized system. This ease in accessibility makes the stakeholder to decide on what steps of action to take.

There have been numerous legislations that have been past to promote information privacy, for example, the Data Protection Act, Freedom of Information Act, and the Privacy Act. These laws are meant to assure the stakeholders that their pieces of information are highly protected.

Organizations can avoid using hard files in keeping employees data. Therefore, the system enhances a two-way communication process.

The management can delegate duties to employees through the system, as employees can present their needs, clarifications, and problems through the same system (The Need for Effective Information Management 2011). The system also upholds the privacy of the employees.

Therefore, workers profiles are password protected so that their details remain inaccessible to unauthorized personnel. The HR, therefore, adheres to the international data confidentiality laws to avert any court case.

Notably, the information that the HR includes in the database are not always discriminatory, that is, the extent of analysis cannot cause disrespect or discomfort to an employee.

The constant changing market trends demands for personnel that are able to adopt changes at any instance. This culture of accepting new ideas as they come makes firms to remain vibrant among their competitors.

Currently, organizations should ensure that they keep their employees updated on any occurrence that can have some impact on the running of their operations. This culture requires that organizations should employ creative, innovative, and self-motivated individuals who like learning.

There should also be the need to train employees to learn the art of sharing any information that they have and they think can affect the business operations in any way (Sandie 2011).

During these learning processes, employees are updated of new changes in the market and how they expect to approach the issue and still make profit.

For instance, firms, which had constant learning programs during the 2008/2009 financial crisis learnt of ways on how to counter the problem and later remained solvent as other firms went under. Undoubtedly, firms that continuously hold learning programs have competitive advantage over other firms.

In addition, employees who constantly undergo through organizational learning process remain focused in achieving the firms strategic objectives given that they are reminded of the business goals at all the times.

Organizations rely heavily on knowledge management (KM) to progress from a step to another by avoiding repeating mistakes. By avoiding repeating what others had done, the organizations are trying to reduce cost and speed up response time. These occur if organizations already know where to obtain the information.

Effective knowledge management can improve efficiency and quality of services. KM also enable organizations know the tastes and preferences of their customer thus effect changes in time. This will drastically save on cost, which could have been wasted.

Organizations can also benefit from KM if they are quick learners, as the public will develop confidence in their products and services thus increasing profits. Firms can restructure their delivery systems and outsource other services from other participants.

Moreover, firms can develop a well-organized knowledge network and relation to understand the continuously changing economy.

Knowledge management, therefore, is essential in offering organizations with potential or capability to grow and expand in their operations. This will come with speedy response and increased profitability.

Organizations, at all times, strive to remain relevant in the market by being at par with the current information management systems and knowledge management systems. Knowledge management; for instance, enable organizations to inculcate or include changes that arise in the daily operations.

The dynamism in the global market makes organization to change to fit the current trend. Therefore, knowledge management makes organizations profitable, as they remain relevant even with the constant changes in the market.

This trend shows that firms will employ personnel who are flexible and ready to accommodate new changes in their normal operations. Clearly, the quick response to the changes shows improvement in service delivery thus minimizing costs.

There will also be changes in product quality, which employees will have to adapt to in order to maintain their customers’ loyalty and even attract new customers.

The shorter the response time in the changes in the market, the more returns the organizations will record. The differentiation approach is also open for imitation by other competitors.

The third approach is the focus strategy. Here, companies concentrate on a specific market. This specialization in a given market makes firms to understand the nature of the market. Therefore, they tailor their products towards the customers’ demands.

Since the firm deals with customers that they understand properly, the approach increases customers’ loyalty thus making it difficult for their competitors to enter the market.

The firm tries to reduce costs and pursue strategic differentiations in a focused market. In understanding customers’ needs, the firm is able to change its products to fit the customers.

Under the strategy implementation, firms that want to use the generic strategy approaches must identify a specific approach to apply in a given situation since the approaches operate in different environments.

The approaches are not compatible; therefore, to avoid being stuck in the middle, Porter advices that a firm should choose one approach. A firm that wants to use all the approaches should create different business units.

It is at this point that the management ought to carry out a SWOT Analysis for each strategy so that they can adopt the best out of the available approaches.

The management will be able to analyze the strengths, weaknesses, opportunities, and threats that they may encounter during their operations. Secondly, the management should be able to comprehend the nature of the market that they operate in after conducting the Five Forces Analysis (Porter’s Generic Strategies 2011).

Finally, the management should compare the viable strategic approach from the SWOT Analysis and the outcomes of the Five Forces Analysis. This process enables firms to be prepared for threats of new entry thus coming at the helm of the competitive rivalry.

On the other hand, a single generic strategy is prone to failure in case a different company using vast approaches forcefully enters the market.

For example, a company that focuses on a niche market, and produces quality products, can suffer greatly if another firm enters the market and offers low quality products, which meets the customers’ needs.

The Rumelt’s model tries to identify the overriding policies among organizations in the global market. In addition, there is the evaluation of the similar or coherent actions and the possible means of solving the challenges that may arise during the management process.

An excellent strategy starts with diagnosis analysis of the situation at hand. For instance, if a business experiences a decline in market share and reduction in profit levels, the problem is not the two issues but these are merely the symptoms of the problem. This calls for a deep diagnosis of the whole problem.

According to Professor Richard Rumelt, an effective strategy involves diagnosis of the situation, choosing a guiding policy, which is an element of the strategy that is translated into actions, and designing coherent actions that can be followed to implement the strategy fully.

He proposes that a clear path of implementing the strategies should be outlined. Moreover, there is need for a proper evaluation before implementing any strategy.

This helps to foresee beyond the shot-term plans of the business to the essential factors that may govern the success of the business (Richard Rumelt: Strategies to Survive Major Global Problems 2012). This approach entails environmental scanning and benchmarking.

The firm analyzes both the internal and external collection of data that help to show trend, expectation, and future changes in the business field. In the scanning, there is a deep analysis of the stakeholders’ views and expected behaviors.

This makes it possible for organizations to lay out strategies and plans on how to handle the scenarios. Therefore, they become alert to deal with any unexpected changes in the internal and external environment.

Businesses ought to perform the above function in order to have a clear roadmap of where they are headed. Presently, mostly firms include Information and Communication Technology in the environmental scanning process since it facilitates the whole process.

Strategic planning for future occurrences assists businesses in making decisions, which could have proved difficult to make at the time of the actual action. Environmental scanning and benchmarking provides a business with varied options and broad vision on how to deal with future challenges.

Such organizations can have different options of dealing with a crisis as they had foreseen it in the environmental scanning.

Another instance, involves predetermination of customers’ possibilities of change in tastes and preferences in the future; it makes the firm to avoid undergoing unnecessary costs but remains active in the market. Firms have to use sources, which are difficult to imitate such as superior resources, better-quality skills, and position.

This enables them to create and maintain a competitive advantage in the specified area of operation. The firm, therefore, must have special problem-solving skills and competences that help in foreseeing how a given strategy will work in actual practice and the immediate challenges that might come along.

During the evaluation process, the management should find out the appropriateness of the business objectives, the appropriateness of major plans or policies and whether the outcomes are in line with the assumptions that the strategy rests or not (Richard Rumelt: Strategies to Survive Major Global Problems 2012).

It is the mandate of the senior management to ensure that goals and objectives are consistent. This will prevent conflicts between different departments that run the business.

For example, a high-technology company can face a strategic choice of producing high-cost products to a highly customized market and producing a standard quality product at a low cost in order to record more sales. This scenario calls for clarity from the senior management on the mode of operations.

The present dynamic industry requires a careful approach that organizations should adhere to lest they be unable to compete in the market thus rendered incapable.

From this dimension, there is need for creation of an effective learning culture within firms in order to ensure proper understanding of the changes and expectations in the market. An organization has to create a favorable environment that can support the learning process.

Some of these knowledge acquisition processes involves seminars, workshops, and internships. Clearly, firms that carry out effective learning process to its employees will realize constant growth and high efficiency in service delivery.

The current market dynamism requires that organizations set up a well-organized strategy on how to ensure that the learning culture is inculcated among their corporate responsibilities. Trained personnel enable a firm to approach critical situations, which other firms with untrained staff cannot go over.

Obviously, the firm has competitive advantage over other firms due to their strategic organizational learning. In evaluating the strategies, there is impossibility in showing that a given strategy will work. This remains the great limitation of the Rumelt’s strategy.

External factors come from outside the company’s premises, and have great impact on the normal operation of businesses. For example, a firm studies its product reception in the market, economics factors both nationwide and globally, and customers’ satisfaction.

This includes the macro-environment, the industry’s environment, and the competitive environment. The LEGO Group noted that the toy market remained stagnant during the 2008-2009 fiscal years. Earlier in 1970s, there was a decline in the world economy due to the oil crisis.

This external feature prompted LEGO Group to introduce other innovative products for example, LEGO TECHNIC and modern play games like LEGO Space and Castle. Remarkably, this approach made the company to go through the crisis successfully hence gaining competitive advantage during this time.

The company went ahead in 1985 to absorb 5000 more employees as other companies were laying-off workers (Johnson, Scholes & Whittington 2011).

There were innovative products, effective and efficient management, and continued international presence. These factors made LEGO Group to be unique and iconic in the entire toy market.

In addition, the competition that the new LEGO brands faced both locally and internationally, from bigger toy manufactures like Hasbro and Mattel, made it necessary for LEGO Group to invent a new strategy in order to remain viable in the market.

There was also the entry of new companies like Nintendo and Sony, who were offering advanced electronic games. Further, there was a change in the duration by which the final users, children, were to use the products.

A market research also revealed that children tended to mature earlier; therefore, the LEGO Group had to develop new and enthusiastic products, which could accommodate the changes in maturity periods.

The continued competition, for instance, was a threat to the survival of the toy company hence required drastic changes to fix.

LEGO Group had to come up with new production techniques that could make them continue gaining competitive advantage over other competitors. The above features were responsible for the LEGO Group Company to design a new strategy between 1995 and 1998.

The LEGO Group had vast resources, such more sources of funds. For example, the company, at one time, received a loan from Kjeld in order to improve their capital structure. Evidently, such type of internal sources of finance has less regulations and interests.

In addition, the company had a large market presence in other parts of the world like Germany, South America, Asia, and US. In these regions, the company engaged in different forms of business like LEGOLAND parks.

During the tough times, the company agreed to sell all these parks in order to boost their capital base and structure. Clearly, the LEGO Group had resources that it could use to advance to a higher sales level than other companies did.

Additionally, the company had competent management that could realize the areas of weakness and strengths that the company had. For instance, the management realized that the LEGOLAND parks were different forms of businesses from the manufacturing of toys; therefore, they required different strategies to run.

The company also had experienced employees who could be involved in forecasting on the performance of the products at certain periods. For example, most toys had high market demand around Christmas periods.

The management also became so close to the retailers so that they could understand the immediate customers’ behaviours and needs. On the other front, the competent management decided to produce some of their products in countries like China, which had low cost of labour and raw materials.

This approach was not only meant to reduce production cost but also to reduce the final market price of the products. The new concepts and enthusiastic end users were paramount for the recovery and continuous growth of the LEGO Group.

Their bricks were appealing to people in the entire world (Johnson, Scholes & Whittington 2011). Interestingly, the company had gone digital, as it designed an online multiplayer games known as LEGO Universe. Evidently, the company took advantage of the new technology to retain and attract new customers.

In 2004, the LEGO Group Company had set up some different strategies to follow to avert the scenario that they witnessed in the previous year. One of the strategies was setting a clear and stable direction for the organization. The senior management had to give a clear outline on the operations within the company.

The sales objectives were also set at the time. There were also write-offs at the parks and other LEGO Group assets. Another strategy that the company could implement was conducting massive layoffs of employees in order to reduce expenses.

The LEGO Group realized that the success of any business does not depend on having a few employees. The company decided to look at other means of sourcing for funds, having recorded the highest negative net profit in history.

The company could not lay off all the employees, as they are the work force that drives the firm forward. In accepting to sell their parks, I think that they realized that running two different types of businesses using one generic strategic approach only make the two businesses to be stuck in the middle.

According to Porters, all the approaches under the generic strategy are incompatible. For that reason, one has to make a choice on the type of strategy after outlining its goals and objectives, and carrying out both the external and internal analysis. Notably, after 2004 the company started to record a positive net profit margin.

Secondly, a reduced cost of production implies that excess funds that could have been used in the production process are diverted to other projects within the company like recruiting more employees or reserving them as savings (Johnson, Scholes & Whittington 2011).

Goods that are supplied to the market should meet the customers’ needs irrespective of their cost of production. The LEGO Group acceptance to outsource services from Flextronics in Eastern Europe was a major boost in averting layoffs in Denmark.

This agreement meant that 80% of the LEGO Group products are manufactured outside Billund, Denmark and at a cheaper cost. Therefore, consumers will prefer standard products, which are of low prices. This nature of forecasting and cooperation is beneficial to the company and the consumers.

A strategy-oriented company is that which believes that it has the potential to overcome present and future challenges that may come on its way. Additionally, such company put more emphasis on technological changes, innovations, and organizational redesigns in order to gain competitive advantage in the market.

The LEGO Group used different approaches to be updated with the modern technology. For instance, when they came up with online games that one could play over the internet known as the LEGO Universe, it was evident that they wanted to remain dominant in the global market (Johnson, Scholes & Whittington 2011).

Their move to accommodate all consumer’s tastes and preferences reveals that they are a strategy-oriented organization. Notably, at one point, the LEGO Group fell to position eight from two among highly recognised companies.

However, the management did not give up and viewed their status as a challenge that had solutions. The management worked towards the profitability of the company. Surprisingly in 2008, a report that ranked toy companies worldwide showed the LEGO Group as position 5 with current market share of 4.8%.

The company inculcated numerous approaches in case they had challenges until they started reporting steady progress in their operations from 2005. After 2009, the company engaged in defining its future strategy that will make it record an average growth of 7% per annum.

This was to be achieved by investing in people, marketing, equipment, and product development. Jorgen, the CEO from October 2004, outlined their plans to increase their market share in areas where they do not have huge presence.

On the other, hand in areas where they already have presence, they want to find new target groups. In this line, the company strategic objective is to retain and attract more customers.

Moreover, the company had redesigned its managerial system and even changed the management so that fresh ideas could be inculcated into the management system. This shows great concern for personnel management. For instance, Kjeld handed over the CEO’s position to Jorgen.

Moreover, the company is greatly involved in innovation activities. In 2004, the CEO predicted that the company would make dice and boards, which are buildable and changeable. Earlier, the LEGO Group had developed movies and films that they could use to promote their brands.

Under the management of Jorgen, the company used funds in innovation so that they could understand the significance of customer responsiveness. Jorgen admitted that in every 50 original ideas, only one is gives a real product (Johnson, Scholes & Whittington 2011).

This reveals the dedication that the company had on product development. The selling of the LEGOLAND parks also justifies the LEGO Group as a strategy-oriented business. Openly, the management approaches in the two businesses were quite different.

All these activities aim at minimizing cost of production and maximizing profits for the LEGO Group Company. Consequently, making the company gains competitive advantage over other competitors in the global market.

Organizations ought to have a broad view of various tools of analysis that they use to forecast into the future happenings. This is because a mere view may not represent the actual expectation; the analysis must be from a wide perspective.

For organizations’ ideas to remain viable, they should consider both the internal and external factors that have impact on the business operations. For instance, the organizations must specify their missions, possible challenges from internal and external environment before actual implementation.

References

Bhatt, Y. 2010, Information Management: A Key for Creating Business Value. The Data Administration Newsletter – TDAN.com. Web.

Johnson, G., Scholes, K., & Whittington, R. 2011, Exploring strategy (9th ed.), Harlow: Financial Times Prentice Hall.

Organizational Learning – Maintaining the Competitive Advantage n.d., Management Study Guide – Free Training Guide for Students and Entrepreneurs. Web.

Porter’s Generic Strategies 2011, Mind Tools – Management Training, Leadership Training, and Career Training. Web.

Richard Rumelt: Strategies to Survive Major Global Problems, 2012, UCLA Anderson School of Management. Web.

Sagner, J. S. 2011, Essentials of Working Capital Management, Hoboken, N.J: John Wiley and Sons.

The Need for Effective Information Management 2011, March 16, Jisc infoNet. Web.

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Global Strategy in LEGO Group

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