LEGO Competitive Strength Analysis

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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.

		LEGO		Mattel		Hasbro
Key success factor/Strength Measure	Importance/ Weight	Strength Rating	Weighted Score	Strength Rating	Weighted Score	Strength Rating	Weighted Score
Quality/Product Performance	15%	9	1.35	9	1.35	8	1.2
Reputation/Image	20%	9	1.8	6	1.2	6	1.2
Manufacturing Capability	8%	7	0.56	7	0.56	7	0.56
Distribution Capability	13%	9	1.17	7	0.91	7	0.91
Technological Capability	10%	8	0.8	8	0.8	7	0.7
New Product Innovation Capability	16%	8	1.28	7	1.12	9	1.44
Financial Resources	5%	8	0.4	8	0.4	8	0.4
Relative Cost Position	7%	5	0.35	5	0.35	5	0.35
Customer Service Capabilities	6%	7	0.42	7	0.42	7	0.42
Sum of Importance Weights	100%
Overall Weighted Competitive Strength Rating			8.13		7.11		7.18

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.

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