Category: Lego

It all started out 80 years ago in a carpenter’s workshop in Billund, Denmark. In 1932, as the global economy collapsed into depression, the Danish carpenter Ole Kirk Kristiansen started to supplement his income by selling wooden toys. He called his company “Lego”, from the phrase leg godt, which means “play well” in Danish.

Founded in 1932, the company was innovative thinking-focused and started its first innovation in 1946 by replacing wood with plastic and allowing locking connection blocks into different shapes which led to patenting the “stud-and-tube” self-locking system in 1958.

In 1970, the family business decided to hand off the management to the grandson of the founder who was able to bring to the company several innovations with a more sophisticated building system to attract the younger generation. This resulted in the great 15 years of growth of the company until 1990s when the competition level increased, slowing the growth trend along with the rise of digital play companies such as Nintendo & Sony. In addition, LEGO patent was nearly expiring and they company had to react fast to defend their position.

In the 2000s, LEGO was nearly bankrupt after several missteps until the company refocused its innovation efforts into revolutionary products that changed the nature of playing. It applied cost reduction measures to be able to defend against competition including layoffs, closing factories in Switzerland & US by moving to eastern Europe & Mexico and selling the majority of Lego land to increase liquidity.

Currently, LEGO has about 6% of global toy market share that makes it the world’s fourth largest toymaker. How was the company able to overcome its difficulties and attain such a level?

Hitting a brick wall!

LEGO started horizontally expanding into theme parks, TV programs, clothes, watches and learning labs and become over diversified, the rise in digital play experiences from companies such as Nintendo and Sony, the rise of Big Box Toys, expiration of LEGO’s brick patents, relocation of production of Mattel’s and Hasbro’s products to China, lowering the cost of their competitive toys, LEGO added more toys to its product line, but did not sell more items overall, thus inflating manufacturing and delivery costs while not increasing revenues and Manufacturing had a lack in quality and poor distribution logistics

In 2003, LEGO was out of cash and the company’s survival was in question. It made a DKr 1.6 billion ($240m) operating loss on sales of DKr 6.8 billion, having about DKr5 billion in debt.

What did LEGO do?

Simplify & Reinvent: LEGO reached a balance between growing through innovation, staying true to its core, and controlling operational complexity.

• Organized Structure: simplified management structure, more commercial culture, performance-based pay scheme and frank communication between management and employees
• Pivot: Through a 360-degree set of innovation projects, Lego reinvented itself and went back to focusing on its basic products and historical success factors.
• Open Innovation: Open Innovation, 120,000 people involved in external innovation work – DesignByMe, DreamtByMe, BuildByMe
• Efficiency: Reduced lead time from manufacturing to store (from 45 to 3 days) Implementation of a quality assurance system
• Closer to Customers: Gaining consumer insights without competing with distributors. Co-Branding with strong and selected partners e.g. Star Wars and Harry Potter
• Profitability: 80% of manufacturing moved to Flextronics/Focus on profitability and lean production with cost saving through offshoring non-core competencies

The company managed to simplify and reinvent itself, so it could shift the S-curve to a new location

Lessons Learnt

Lego diversified to the point of distraction before the 2004 management change. The new management focused on the brick Lego heritage and future in a modern and more digital marketplace, a vision described by the CEO in 2004. Lego drifted too far away from what made its customer fall in love with Lego. After heavy research, they found that the bricks are relevant. Rather than treating digitalization as a threat, they adopted it with the brick in its core to accelerate their business.

Lego’s main takeaway lessons are:

• By respecting what made them great, they understood where NOT to invest, and also the brick alone is no more sufficient. Lego needed to offer a digital experience that complements the core offerings rather than replacing them.
• Creating a culture that caters to the customer’s expectations and wants. Lego adopted a customer-centric approach to factored customers’ inputs and feedback before producing any new toy. Lego’s lesson is instead of fighting the competition, understand the customer and what they care about.
• Innovate around your core. Lego developed a family of complementary innovations that harmonized together.
• Profitability is key. Lego’s excessive diversification led Lego to lose, so the lesson learned is to keep track of the innovation R&D expenses in line with the revenue expectations, among other initiatives like consolidating the suppliers and retailers. It is evident by now that Innovation without direction and structure can put you out of business.

The world’s largest manufacturer of Lego toys, the Danish company, has long been known not only as a producer of plastic construction sets but also as a retailer. The desire for market leadership forces the company to improve the production efficiency and quality of its products. To solve management issues, Lego Group should improve the level of performance, quality management, work conditions, and occupational safety. It is also necessary to improve the systems and structure of the company, which allows successfully achieving the intended goals. This paper aims at identifying and discussing solutions to management issues for the Lego Group.

First of all, a high level of production automation processes is required for high labor productivity. It presupposes well-qualified and trained service personnel that will increase the level of performance. To solve this problem, it is necessary to invest time and money in the training and development of the employees. Additional training is required for all line managers and engineering personnel. A system of training employees in the workplace should be created as well. Conferences and training courses for the employees who have achieved significant results in their work is a perfect motivation (Porter et al., 2016). It is important to provide additional knowledge to inspire workers to continue learning.

Employees who constantly monitor their activities can notice and document the growth of their professionalism. Any work goal can be measured in a simple grading system. If the task does not involve expressing the result in numerical form, it is possible to create a scale for assessing labor productivity (Porter et al., 2016). One of the possible solutions to the problem of decreased performance level is the periodical measurement of employee motivation. Supervisors may regularly monitor changes in the level of motivation of their subordinates. To increase

motivation, they need to find an individual approach to each employee. One way to do this is by delegating authority, goals, and tasks to each employee when developing an overall plan or project. Another way is to provide them with the opportunity to independently develop their strategic objectives and plans.

Automated production requires quality service and fast repairs as well. The engineering and technical service of the company faces the most important task – to ensure non-stop operation of all units, mechanisms, electronic systems, and the entire infrastructure. It is much more effective to prevent a breakdown than to eliminate the consequences of an accident in an emergency mode (Albrecht et. al., 2018). At the Lego Group, this problem can be solved with an effective system of round-the-clock monitoring, maintenance, and diagnostics of equipment. A dynamic system of the company requires a regular examination of ongoing processes. No carefully planned and implemented business model will work effectively without daily monitoring of every key process (Albrecht et. al., 2018). To reduce the response time to any technical problems, mechanics and electricians must be transferred under the control of shift supervisors.

Another important field that needs to be improved is the quality management. The effectiveness of work depends on a clear distribution of duties and responsibilities of all participants. All key employees must be involved in the process of building the business model. To do this, the company should hold strategic sessions, at which a decision should be made through joint efforts in the process of discussion (Porter et al., 2016). The final document should be formed in which all stages of the production process are written in steps, with an indication of the responsible people. All employees must know who is responsible for each step in the process, who controls it. The value of this document is that it reflects the common collective vision of the employees. Involvement in the process of discussing and building a business model allows consolidating the responsibility and increasing the cohesion of the team. This strategy can also build trust in the relationship between managers and employees.

Production flexibility is also an important solution to the company’s issues. Therefore, Lego Group must implement a system that assumes that production flexibly responds to customers’ needs. In practice, the company must have planning horizons with the specific targets. This will allow the organization to use its resources more efficiently (Albrecht et. al., 2018). The implementation of a production planning system will allow for scheduling each order according to technological redistributions and stages, plan its timely financing, as well as material and technical supply (Wellin, 2016). As a result of the implemented activities, managers will receive simple and understandable tools, such as business process regulations and job descriptions, monthly plans, and daily tasks.

To solve the issues of quality management and performance level of the company, the Lego Group management should take a set of decisive measures. They may include the definition and regulation of business processes for organizing production, optimization of the organizational structure of the company, and the introduction of a production planning system. Besides, a system of mentoring and additional training can help to solve personnel issues as well. With the help of new knowledge, employees will receive career opportunities and additional incentives. For all employees, there must be a motivation system related to the overall result, which reflects the key performance indicators of production. All the mentioned solutions are financially feasible and can be implemented without investing too much money and time. Training of the employees, involving them in business processes, and giving them additional motivation are surprisingly cheap measures compared to their results.

References

Albrecht, S., Breidahl, E., & Marty, A. (2018). Organizational resources, organizational engagement climate, and employee engagement.Career Development International, 23(1), 67-85. Web.

Porter, T. H., Riesenmy, K. D., & Fields, D. (2016). Work environment and employee motivation to lead.American Journal of Business, 31(2), 66-84. Web.

Wellin, M. (2016). Managing the psychological contract: Using the personal deal to increase business performance. CRC Press.

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.

Introduction

Nowadays, Lego is one of the most popular and powerful toy companies that provide children from different parts of the world with the best brick toys and the opportunities to play with enthusiasm day by day. From the date of its foundation, 1932, the company survived several close-to-bankruptcy situations (Wieners, 2011). However, due to several successful business strategies and attention to the information system opportunities, Lego achieved tremendous success in 2015 saying that 2015 was the best year ever with a considerable sales jump (Kell, 2016). Many people admit that they are aware of Lego toys. Still, though many children want to have Lego at their homes, their families could hardly afford to buy these bricks due to high prices.

Therefore, for Lego to stay competitive, it is necessary to consider such business strategies as the investigation of customers, their needs, and interests, the possibilities to cut costs and remove all unnecessary and unsuccessful ventures which may require additional investments, continue supporting the idea of product segmentation, and promote the importance of employee education and training. In this paper, a business model for Lego will be developed regarding the business strategies and the information resources the company could use to stay competitive and successful in front of the existing technological and informative changes.

Lego’s Business Strategies Evaluation

The current success of Lego as the main toy manufacturer in the whole world could be explained by several strategic decisions made during the last decade. Several years ago, it was hard for the company to deal with mounting competition that was caused by the popularity of different video games and the spread of the Internet (Lutz, 2015). Lego was not ready to compete with several companies, and the opportunities children got with the Internet. Therefore, it was obligatory to take some new strategic steps and attract children to buy the company’s production. Though it was impossible to reduce the price policy, the attempts to cut costs were made. Several unsuccessful and unprofitable projects like Legoland parks were closed. Lego’s leaders had to focus on other issues that could change the work of the company.

As a result, the next strategic decision was to investigate potential customers, i.e. children and parents, their main interests, and personal needs. Parents usually focus on such aspects as price, safety, quality, and segmentation that could help to make the correct choice. Children want to use interesting and colorful toys, participate in games, and be close to their favorite TV or cartoon characters. Therefore, the idea to create Lego for girls regarding their age differences was one of the most successful steps (Wieners, 2011). Little ladies like to play colorful bricks, use human-like figures, and other accessories that could be used during the play. In comparison to boys, who want to guide processes and establish the rules, girls like the idea of being a part of the play. Lego’s bricks make girls’ dreams come true.

Finally, the Lego Company continues educating and training its employees so that they could communicate with customers of different ages and identify their needs in a short period. Lego bricks include such activities as a process of gathering bricks and the possibility to develop different games as soon as the bricks are gathered in one project. Employees have to understand what customers are looking for including the possible size of a set, a gender of a potential user, and a theme. The attention to the themes of the sets has to be paid. Employees should learn all new and famous movies and cartoons to prove that their product is worth buying. For example, the Lego Star Wars sets or such brands as Frozen, Ninjago, or Legends of Chima were introduced. Employees have to know their peculiarities and help parents to learn what could be interesting for their children and why. Sometimes, adults just know that they have to buy Lego for their children and pay no attention to the themes offered. Managers should help such buyers to make the right choice and get a chance to turn a potential customer into a regular one.

Information System in Lego’s Business Strategies

Lego is a company that focuses on information systems a lot. Correct identification of the information system and resources help to succeed in gathering, organizing, and using the information of customers and their needs. The business strategy chosen by Lego could be properly supported by information systems. The company could use observations and forums to learn how children like to play, clarify the peculiarities of girls’ and boys’ games, identify children’s expectations from brick sets, and investigate what size and themes could be in demand at a certain moment. It is suggested to investigate the current movie market and learn what movies and cartoons are frequently discussed. For example, many children, including girls and boys, are fond of the idea of transformations: boys like the way transformers change their forms, and girls enjoy the transformation of horses and fairies. IS could be used to understand children’s passion for all these ideas so that the company could think about new sets and improvements that could be offered. It is not enough to choose a theme and develop a brick set accordingly. It is necessary to comprehend what makes a movie or a cartoon special to choose the right direction in manufacturing.

Information Resources for Competitive Advantage

The evaluation of the concept of resource-based view in regards to the Lego Company enhances its chances to stay competitive and take the leading positions in the market. In Lego, several intangible resources have to be taken into consideration regularly. First, the company is characterized by its creativity and innovation. Each set is a new combination of bricks of different sizes and colors. Each brick has its purpose and promotes the development of a child in different ways. Another point of the analysis is the department of human resources. Professional employees, loyal managers, and educated staff – all this makes the company strong and ready for new challenges and competitions. Finally, Lego has to support its brand name and reputation. During the last decade, several successful projects were developed. People of different ages enjoyed the opportunities they got while buying Lego. Today, there is usually a good system of discounts and sales within the frames of which families with different incomes could buy a set.

Also, to comprehend the resource-based view of Lego, it is possible to use the VRIO model and identify the company’s strengths in terms of value, rarity, inimitability, and non-sustainability. For example, Lego’s leaders start paying their attention to the importance of knowledge. They spend their resources on high professional employees and train them thoroughly. Besides, Lego’s brand and segmentation are the rare aspects that make the company competitive in the marketing field. Its continuous innovations and the introduction of new themes for sets is that inimitable factor that attracts the attention of many customers. Finally, Lego’s design, insight, and property are the non-sustainable factors that are hard to repeat or overcome. When people buy Lego, they know that they get a unique and high-quality set of bricks with several functions and possible developments. Playing Lego means not only gathering interesting projects using small, colorful bricks but also being involved in a captivating process, a game, with favorite characters and numerous opportunities. Lego turns out to be an impressive empire where boys and girls find the required portion of inspiration and enthusiasm (Schmidt, 2014).

Successful Collaboration with Lego

Regarding the purposes and values of the company, its information resources, and the current technological progress, Lego has various opportunities and directions to be followed to stay competitive and take the leading global position as a toy company. One of the possible strategic suggestions that could be offered to Lego is the development of partnership relations with different companies. For example, nowadays, online shopping is a popular activity. Millions of people from different parts of the world are eager to buy things, food, clothes, drinks, and different services online. Therefore, the idea for Lego to cooperate with such e-commerce organizations as Souq or Amazon seems to be more than reasonable. In comparison to Souq that is popular in the Arab world, Amazon is an international company the services of which are available to the citizens of developed and developing countries.

Strategic cooperation between Amazon and Lego is a unique opportunity for both companies to enlarge their customer databases and investigate some new sales fields. Amazon could focus on the needs of children as their potential customers, and Lego gets access to a huge database Amazon has already got. Also, numerous sales and discounts could be helpful for both organizations. On the one hand, Lego wins certain benefits from cooperation with Amazon because fewer costs could be spent on educating and training managers in real shops, and the number of sales continues increasing. On the other hand, Amazon could offer its variety of services to people, who are interested in one particular product, a Lego set, at the moment.

Conclusion

In general, the analysis of business strategies developed by Lego is a good lesson for people on how to avoid bankruptcy and become one of the most successful toy companies in the whole world in less than one decade. Lego’s leaders do not reject that they made mistakes and wrong choices. However, they also underline the fact that they were able to take certain steps and improve the company’s situation. The investigation of its resources, the attention to information systems, and the readiness to be strategically changed make Lego strong and competitive. The company has many fresh ideas and suggestions, and its leaders understand what steps should be taken shortly. The product segmentation, attention to children and their activities, investigations of potential customers, and the ability to shut down unsuccessful projects in time – all this promotes Lego’s competitiveness and success.

References

Kell, J. (2016). Lego says 2015 was its ‘best year ever’, with huge sales jump.Fortune. Web.

Lutz, A. (2015). Lego made 3 changes to become the world’s most powerful toy company.Business Insider. Web.

Schmidt, G. (2014). Lego builds an empire, brick by brick.The New York Times. Web.

Wieners, B. (2011). Lego is for girls: Inside the world’s most admired toy company’s effort to finally click with girls.Bloomberg. Web.

The Role of the Database in SAP’s Three-Tier System

In the three-tier architecture, the database plays a crucial role in storing a firm’s data, including the supply chain, daily operations of a company, different products of a firm, and all workers’ information in the establishment. The above information relates to the caLego Group case examplewhere varied data are found in the database. The Lego managers acanaccess important information or get vital reports from SAP’s third-tier system – one or more relational databases (Arroyo 1). Notably, the tables in the database are arranged in a so managers with or without technical skills can obtain the needed reports. Besides, the database helps authorized administrators to access a company’s entire information from any location of the globe. In providing employees’ information that can be used in recruitment and promotion, databases are vital in the company’s sustainable growth.

Why Distributed Architectures are Flexible

Flexibility comes with the division of operations and enhanced specialization. In coming up with a three-tier system like that of the SAP Company, information processing takes a shorter time than before, as all the segments have well-defined roles (Arroyo 1). For instance, the distribution at the Lego Group has made it possible for clients to receive feedback in real-time, as they interact directly with the part of the three-tier system. The whole system reduces information processing time. Moreover, such an approach has distinct features that make it easier for conducting workforce administration, travel, reporting, and time management (Arroyo 2). In line with these varieties, managers are able to reduce time meant for recruitment, training, and placement of employees as the distribution has advanced features with specific information.

Business Intelligence Features in SAP’s Business Software

The ability of the system to allow authorized personnel to access the company’s information in Asia, North America, and Europe present a unique business intelligence feature of the location. The officials can view the company’s performance in any region. In addition, the software has an executive dashboard. Managers can easily select, hire, and promote employees with the right skills (Arroyo 2). Organization of training occurs faster as business leaders have reliable information in real-time. With the availability of relevant and conscious data, executives can easily make binding decisions quickly. The metadata layer is also evident in SAP’s Business Software. This is evidenced by the ability of skilled and unskilled managers to operate the SAP query tool to retrieve valuable information from the databases. There is no need to understand the underlying data, as they are presented in simple business language. The possibility of analyzing HR trends as well as track employees’ leadership capability signifies the presence of a “what if” analysis feature. Managers can easily forecast and recruit the right employee for the organization (Arroyo, 2).

Advantages of Multiple Databases

Multiple databases can be accessed from different networks as opposed to a centralized and single database. The distribution of databases ensures continuity of operations even with the failure of one communication link. Moreover, the option in the distributed architecture increases the accessibility of data from any location since there is no control from the main office, as in the case of the Lego Group in Billund, Denmark (Arroyo 1). Overall, the option reduces operational costs and improves efficiency. The Lego Group data can be viewed and adjusted from any location in North America, Europe, and Asia (Arroyo 1).

Disadvantages

Even though multiples databases have the discussed merits, the option has some setbacks too. Since anybody can access and change data in the system from any site within the network, the distributed architecture has less security. Additionally, the system requires high maintenance cost given that system to establish a reliable network between different sites; there must be additional hardware. Even though the management cost at the Lego Group went down tremendously with the reduction in the number of employees, the adoption of multiple databases is not cost-effective as well.

Works Cited

Arroyo, Daniel Ortiz. Lego: Embracing Change by Combining BI with a Flexible Information System. 2007. Web.

Maintaining a strong competitive position in the market is essential for all types of businesses to succeed. In order to do that, companies need to understand their competitive environment well and be aware of the factors contributing to their competitive position. Competitive strength analysis is “an assessment of the competition in a certain market to help managers account for the presence of competitors when making business decisions” (Gordiano, 2018, para. 1). It is a useful technique that can support strategic decision-making and assist companies in growing and maintaining their market position.

LEGO, formally known as the LEGO Group, is a private company owned by the family of Kirk Kristiansen, who founded it in 1932. The company produces and sells toys, and it is most famous for its authentic construction kits. The kits contain plastic interlocking bricks and accessories that can be used to make buildings, ships, and various other structures. The company’s mission is to inspire and develop the builders of tomorrow (“About us,” 2019). LEGO has strong brand values and aims to have a positive impact on communities and the planet; this goal is realised partly through the LEGO Foundation.

Despite the advantage of having an authentic product, LEGO still operates in a highly competitive environment. Children’s interests in terms of play vary greatly based on many factors, including technology and geographic location (Shaftoe, 2015). Combined with the high quality and safety requirements with regard to children’s toys, this puts pressure on toy companies to compete with one another in creating innovative, new products continuously (Andreiana, Stoica, & Ivan, 2014). The two largest competitors of LEGO are Mattel and Hasbro, both toy corporations with subsidiaries producing popular toys, including Barbie, Hot Wheels, Transformers, Furby and others. The paper will present the results of competitive strength analysis of these three companies (Table 1).

Table 1. Results of Competitive Strength Analysis.

Quality/Product Performance

Based on the industry analysis, quality and product performance are among the key factors impacting toys’ popularity. Hence, they have a high weight in competitive strength analysis. Based on the report by ECSIP Consortium (2013), quality and product performance affect licensing, and parents are usually more keen to buy licensed toys for their kids. With regards to quality, LEGO and Mattel are in an excellent position, with solid quality assurance procedures in place. Hasbro toys are of high-quality, too, but because they focus on action figures, product performance limits the score to 8.

Reputation/Image

Reputation and image were rated as the primary factors affecting company performance in the toy industry. Parents prefer buying toys from companies with an excellent reputation, and LEGO fits this requirement. Mattel and Hasbro have a good overall image but are less famous for their corporate responsibility than LEGO.

Manufacturing Capability

Manufacturing capability plays a less critical role in toy companies’ performance. This quality refers to the potential level of output generated by a firm’s production plants (Lekurwale, Akarte, & Raut, 2015). All three companies discussed here have similarly high manufacturing capability, which benefits their performance.

Distribution Capability

Distribution capability is more important than manufacturing capacity in the toy market since it affects customers’ access to toys. Toys that are only sold through one store chain are unlikely to drive a company’s sales forward since there are many alternatives for customers to choose. With regard to distribution capability, LEGO fares slightly better than Mattel and Hasbro because the company has a larger chain of specialised branded stores in addition to other distribution channels.

Technological Capability

Technological capability is somewhat important in the toys market, although it is less influential than distribution or innovation capability. Technological capability refers to the organisation’s ability to use new technologies to develop and produce products (Yu, Hao, Ahlstrom, Si, & Liang, 2014). LEGO and Mattel both have excellent technological capabilities and are actively engaging in technology use through creating apps and games and continuously improving production. Hasbro follows suit because it uses technology less than the other two firms, focusing on different aspects of its value proposition instead.

New Product Innovation Capability

Because children’s tastes shift from one generation to another, firms are required to find ways of staying relevant. Lego found a way to do that through thematic construction kits. For example, there are Star Wars, Barbie and Marvel kits, each responding to children’s varying interests. Mattel has lower innovation performance since it focuses on expanding the toy range, whereas Hasbro has a higher rating for its innovative products, such as Furby and Transformers.

Financial Resources

Financial resources have a minor influence on competitiveness since they affect companies’ potential for developing its manufacturing and distribution. The three companies are in a similar financial position because they have consistent profit growth and significant market shares. For example, LEGO is rated 75th in the ranking of best global brands (Interbrand, 2019).

Relative Cost Position

Relative cost position is somewhat important in the toy industry because low-income parents are likely to prefer inexpensive toys. With regard to this factor, the three companies have similar performance because their products are more expensive than non-branded alternatives and are similar to one another in price. For example, there are cheap alternative plastic bricks available to replace LEGO, and less expensive dolls can be bought as an alternative to Barbie.

Customer Service Capabilities

Finally, customer service capabilities have a weak influence on performance in the toy industry since customers usually buy toys from third-party resellers. Still, the presence of customer support call centres and return capabilities make LEGO, Mattel and Hasbro are equally high-performing in this category.

Conclusion

On the whole, the competitive strength assessment of LEGO shows that the company’s position in the market is better than that of Mattel and Hasbro. This is mainly because the brand has an established reputation both for toy quality and for corporate social responsibility. The decision to focus on producing authentic toys and respond to changes in children’s interests by creating theme-based kits also contributes to its position in the market as it distinguishes LEGO from competitors. Areas that might require attention if the competitive environment becomes more hostile include relative cost position, as it affects the popularity of LEGO toys among low-income customers.

References

About us. (2019). Web.

Andreiana, V. A., Stoica, C. G., & Ivan, C. D. (2014). Influence of marketing environment on the toy market. SEA-Practical Application of Science, 3(1), 48-54.

ECSIP Consortium. (2013). Study on the competitiveness of the toy industry. Web.

Giordano, J. (2018). Competitive strength assessment. Delaware Business Times. Web.

Interbrand. (2019). LEGO. Web.

Lekurwale, R. R., Akarte, M. M., & Raut, D. N. (2015). Framework to evaluate manufacturing capability using analytical hierarchy process. The International Journal of Advanced Manufacturing Technology, 76(1-4), 565-576.

Shaftoe, R. (2015). Industry analysis of toys. Web.

Yu, B., Hao, S., Ahlstrom, D., Si, S., & Liang, D. (2014). Entrepreneurial firms’ network competence, technological capability, and new product development performance. Asia Pacific Journal of Management, 31(3), 687-704.

Main Feature of Organization, Strategic Products and Current Mission

The Lego Group is a toy-manufacturing company which is based in Billund, Denmark. The company was founded as a family organization in the year 1932, by Ole Kirk Christian. Today, the company stands high as a global player in the world of toys, among other strategic entertainment products (LeGoff 557).

Initially, Lego started as a manufacturer of ironing boards, toys, stepladders, and stools. Among these products, the wooden toys have been the best selling items, thus according the firm a strong reputation in the entertainment business. By the year 1949, the firm started manufacturing early versions of the popular LEGO plastic bricks and this was a strategic approach by the organisation, considering the fact that plastics had just greeted the markets as a new material (Simoes and Dibb 219).

However, the outcome was not what the company managers had anticipated, since the public was a bit hesitant in accepting the new material. The company would rapidly gain popularly in most parts of the world, as a result of progressive development of its products. For instance, the basic bricks were sustained with extra figures and features, in a manner that diversified the playing opportunities for children.

The company’s sales and profit scales were rapidly taking a positive charge between 1950 and 1970. However, the period between 1970 and 1990 proved to be a difficult moment for the company, owing to the serious economical implications that greeted the world then, following the oil crisis of the time.

In the course of this era and the period that followed afterwards, the Lego Group underwent serious fluctuations, due to a number of reasons which included; rapid change in the business environment witnessed at the time, complications in logistic matters and financial control, and the extended times that would be required to run into the future plans of the company.

Among the many problems which threatened to shake the firm’s potential, was the issue of the rising competition from much bigger companies such as Hasbro and Mattel (Hicks 41). Other new firms such as Sony, Activision, and Nintendo, who had just ventured the scene with more advanced electronic products, also posed great challenge to the productivity of the Group.

In this regard, the company’s only survival option in the competitive market was to adopt a strategic development plan that would see it come up with new and more exciting products. According to Claus, Riggs & Sekeran, the toy company enjoys a wide range of products that are fit for children of all ages (71).

These products are grouped in various categories, and some of the latest developments include video gaming, pre-school products, play themes, bricks, licensed products, and educational-based products for children, just to mention but a few. This is a clear indication of how the company has managed to remain high in the current competitive business of toy products.

The Lego Group was actively been involved in several turnaround attempts for the better part of 1990s and in the early 2000s, but with little success. No one could have foretold a possible solution to the progressive issues which appeared to claim the company, until towards the end of the year 2004, when a glimpse of hope shone onto the firm.

It was in the course of this period when the company’s serving CEO, Kjeld, took on more involvement in strategies that helped to identify the factors responsible for the company’s downsizing. This helped in the design of effective strategies that would eventually see the firm come back on track. The design and implementation of these strategies was based on the company’s organization, management and business expectation plans.

This involved the replacement of over three quarters of the senior management team with a new batch. Other strategies would be centered on the firm’s operational systems, among other key interventions.

For instance, a thorough revision was carried out on the cost and the supply chain operations of the company, and major changes were inflicted on the sectors right away. More importantly, the Lego Group had realized that working alone would not take them anywhere, and this would see them cooperate with licensing partners in the widely acclaimed gaming sector.

These interventions were sustained with a progressive development of the company’s products, to fit the demands of the modern era. The company has shown steady advancements lately, as a result of these interventions. The climax of this success was realized in the 2008-2009 financial year, which saw the company registering the biggest rate of growth in sales and profits, since the year 1981.

With these positive outcomes, there can’t be any doubts that the Lego Group is now back to its place in the development of children’s creativity, after several years of financial loss and failure (Irani, Sharif & Love 59). The objective of the company is to develop innovative products to meet the expansive consumer requirements, as they occur in the market.

As part of their recovery strength, the Group has reclaimed its position in the global listings, where it is ranked among the top five toy companies, with an approximate value of 4.8 percent in market shares. Lego’s success can also be associated with their mission, which aims at inspiring the current generation of children to be able to explore and challenge their own potential in creativity (Stacey 79).

This has been achieved through the group’s brand values, which are tailored on aspects meant to bring a significant impact on children. Some of these aspects would include things such as quality, imagination, fun, creativity, caring, and learning.

Internal and External Environments of the Lego Group

Lego group is a good example of the international companies that have managed to balance the nature and constraints of the internal and external environments, to make a notable difference in the current competitive world of business. From the perspective of various reports about the company, it is apparent how the toy company has reacted in adapting and utilizing the potential offered by its internal resources, in meeting the demands of its external environment.

According to Dyllick, Thomas & Hockerts, the company’s current strategic development has been achieved through the focused leadership of its former CEO, Kjeld Kirk (139). A better part of this success however, has been reached upon through the feedback which had been received regarding the internal competencies of the firm and its external operating systems.

Internal Environment – SWOT Value Change of the Company

A major tool that can be used to assess the overall potential of a firm is the SWOT analysis structure, which stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis basically considers two main parts; a company’s inward elements which normally constitutes of its strengths and weaknesses, and the attempts to consider the way these factors would come to fit against the external aspects of an organisation’s threats and opportunities.

Strengths

The company’s key strengths are commonly associated with its constant ability to apply the concept of brand recognition in all its products and services, without having to compromise their core values. The company also maintains a close mutual relationship with its suppliers and retailers, and this gives it a powerful business advantage over its rivals in the industry.

The toy market is an industry bulging with a big number of competent players, but Lego’s products and services are the most preferred by majority of the people in the world (Oliver and Roos 911). This is due to their effective leadership in the development of a wide range of children products that have been praised for quality and originality. The newest products by the company are real manifestation of how the power of innovation applies, in meeting their goals and objectives in business.

Brand heritage is another strength which has succeeded at keeping the company ahead of its rivals in the industry (Hatch and Schultz 597). This is evident in how the company’s products are manufactured to fit in their brand values, which are aimed at making a significant impact on the lives of children all over the world.

Weaknesses

Lego’s weaknesses in business can be observed through a number of ways. For instance, even though there have been serious attempts by the company to diversify its products, the company has been poor in technology and IT related matters compared to other competitors, who have fully embraced the power of technology in making their products more enticing to the users in the new media age (Schau 43). Lego Group has also been operating through large toy retailers, and this has been one of their biggest drawbacks in the market.

The large retailers are effective marketing outlets, but they normally operate on high costs and this is likely to deprive the company of substantial amounts of money in profits. More importantly, the company has failed to understand the marketing concepts which are in line with their consumers all over the world.

In other words, Lego group seems to be lacking full understanding of their consumer preferences in the market, and due to this lack of a strategic fit, they have often ended up losing more sales to their competitors in the market, who are well informed of the consumer needs regarding toys and gaming products.

It is also apparent that, Lego Group lacks the ability to effectively translate potential strengths into implemented strategies. This actually explains the company’s gradual response to financial and management issues, among other problems which have affected the company previously (Hölzl 39).

Opportunities & Threats

The company’s notable opportunities and threats can be linked together as key aspects which the company can utilize in achieving its goals and mission in the toy business. According to Schultz and Hatch, while the company has been widely acclaimed all over the world for its production of toys and other children products, there has been a decline in the sales of its traditional toys which constitutes the largest part of their products, due to the increasing attention of children on devices from other companies, that are more electronic (21).

The other biggest threat of the group is the growing number of giant competitors, who are utilizing every opportunity possible to thrive in the industry, thus making it one of the most competitive sectors in the world (Johnson 11). However, Lego Group has always seen these threats as opportunities for further developments in business.

New developments and increase on products has always remained the biggest opportunity to the company. More importantly, as a result of the rapid competition in the market, the company has managed to come up with numerous categories of products, a key strategy which has enabled it to be able to meet the needs of children in the modern era of technology.

External Environment – PESTEL, Porter Five Forces

Porter’s five forces analysis is observed to have a significant impact on a business, in relation to elements of the external environment (Michael 13). These forces include level of rivalry, power of suppliers, threat of entrants, power of buyers, and threat of substitutes. Each of these five forces is considered individually in assessing and analysing the external environment of the company in this case.

Level of rivalry

The level of rivalry is quite intense and strong for the Lego Group. While it is clear that the company enjoys a strong position in the industry, with relatively few giant competitors, it should be considered that they are taking part in a broader market of toy production, which also includes key players in the electronic sector, such as Sony and Nintendo, among others (Martin 84).

Power of suppliers

The company, whose main products are largely based on standardised inputs, has an average power of suppliers. However, it should be noted that, the power of suppliers is likely to go up, in case the company decides to major in more sophisticated areas of productions, such as games or films.

Power of buyers

The power of buyers is relatively high for the Lego Group, with minimal costs between alternative products.

Threat of entrants

As it would be expected, the toy product industry normally requires huge investments of time and money, in a number of ways that include things such as business capital, research funds, and development costs. All these serve as obstacles to entry in the industry, thus restricting the number of new entrants in the sector. In that case, there is a relatively low threat of new entrants in the wider entertainment market, and this offers the Lego Group a much stronger bargaining power over majority of its competitors in the market.

Threat of substitutes

This is arguably one of the biggest threats facing the entertainment product company today. Even though the company is said to have developed electronic products such as video and games, there is still evidence that some of the company’s products are still made in the traditional form. This has the meaning that, the company is faced by a big threat, given that users are likely to substitute between traditional toy and gaming products through to the ones that are made into electronic features.

Power Interest Matrix of the Lego Group

It is also apparent that the Lego group has touched many people with its products and services in the entertainment sector. Through the engagement of the right people in its management and productivity systems, the company has made a big success in its mission and objectives in business (Beal 29).

As it would be observed in the above internal and external analyses, the company has tried to implement a number of strategies, in order to influence and attract people on their products. Through these interventions, the company has successfully managed to impact a large number of people from all over the world, with both electronic and alternative traditional products for children entertainment. Among other key players in the market, the company has a high interest on its stakeholders and the community.

The firm recognises these as the people who play the greatest role in helping them achieve their business goal and for that reason it treats them with much respect. Both the shareholders and the people from the diverse community have a positive impact to the company’s financial interest and what motivates them most is to get nothing less of the best from the company. In that respect, the Lego group is fully engaged in putting the necessary efforts which are needed to satisfy these significant groups.

New Strategic Directions for the Organization

The Lego group is arguably one of the most successful companies in the toy manufacturing industry. Through a wise interaction of its internal and external systems, sustained by the effective management, the company has gained a sustainable competitive advantage over many of its rivals in the market.

However, there are numerous strategic directions which the product company can utilize, to be able to maintain a more sustainable competitive advantage over its rivals.

The Lego Group may have amassed great reputation and success in the entertainment sector, but changing the company into an all-time winner in the global toy market is something that would require much effort, from the company (Schroeder 54). Some of these efforts would tend to involve numerous aspects of strategic management, whose significance in business has often been underestimated.

Some of the strategic directions which the company can incorporate in its operation systems would include; a focus on international opportunities, expansion of digital systems and strategies, constant focus on cost, expansion of target markets, widening of product range, and focus on effective online distribution strategies.

The Lego Group may have made significant attempts in trying to incorporate some of these strategies in their routine business operations, but there is still room for improvement which can be achieved by revising these strategies over and over, to eliminate all the problems which continue to pose a big challenge to the company’s productivity and accountability in children’s toy and entertainment products (Morgan 45).

For instance, the company should focus on the many opportunities provided by the international community and try to utilize them effectively. A good way of achieving this goal is by ensuring that the toy products are manufactured and distributed in all regions of the world, where they are needed most by families, as a key engagement for their little ones.

It should also be considered that, things are changing with the times nowadays and in that respect, expansion of digital systems and strategies is very crucial for the development of the company to fit in the demands of the modern era, which is defined by technology (Cooper 75). To be able to comply fully with this call of modernity, the company should try to ensure that all their products are made into electronic features, to fit the growing demands of technology (Laudon and Traver 18).

It is also necessary for the company to make a constant focus on cost matters, to ensure that there is a two-sided benefit between the producer and the consumers. More importantly, there is also the need for the Lego Group to conduct extensive research on new developments to widen its product range.

Through a corporate level strategy aimed at increasing international coverage and product diversity, the company would be certain to realize more sales and profits out of its toy products. The company should also consider the vast potential business opportunities that are offered by the upcoming trend of e-commerce, and try to utilise these online mediums as effective distribution channels for their wide range of products.

Apart from these strategies, the Lego Group should also try to make good use of other strategic tools in today’s dynamic business world, such as important business information that would provide them with good lessons on how to achieve and uphold a sustainable competitive advantage in business affairs. All these strategies, sustained with the magical touch of an effective organizational management style are likely to bear promising results in the future operations of the company.

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