LEGO: Building for the future
A Comprehensive Case
Shakeel
Anjum
Abrar
Ahmad
Group
Members
Ali
Qurashi
Fahad
Insha
Khuram
Shahzad
Figure
Outline
Introduction
Situation Analysis
Problem Identification (Main & Sub)
We will be
approaching this
case by first
analyzing
situation broadly
and then
narrowing down
our focus right to
the problem and
conclusion stage
Alternative Development
Evaluation
Selection
Implementa
tion
Recomm
endation
Time Of Case
•Year 1999
Industry Of Operation
•Toy manufacturing
Time Of Establishment
•1932 By Ole the founder with few employees
Geographic Area
•Becloud, Denmark
Meanings
•Danish word “Log Godt” meaning “play well”
Key People
•Ole Kirk Christianson (Founder)
•Godtred Kirk Christianson (Son)
Figure
Size Of The Company
More than 10,000 employees in 30 different
countries and among world’s largest toy
manufactures
Only European company to occupy a place
in world’s top ten toy manufacturers
Produces its products in Denmark, US,
Switzerland and Korea and retailed through
60,000 outlets in more than 130 countries
50 years following its inception Some 203
billion LEGO elements have been produced
Figure
Key Dates
• Ole Kirk Christiansen started business with few
employees
1932
1934
• LEGO name was first used
• Ole’s son used new material to create four and eight
stud building bricks
1949
1958
1999
• Godtfred made most important discovery
• LEGO opened 128 acre-theme park in carsbad
Figure
LEGO Group Businesses
LEGO
group
Play
materials
Family
attractions
Lifestyle
products
Media
MACRO ENVIRONMENT
DEEP-LIST Analysis
Social
Environment
• Child searching for a gift sooner or later is going to
encounter the world famous LEGO brand
• Many of today’s parents, each new LEGO
experience bring back memories
• “I remember my brother had a biscuit tin full of
red and white LEGO bricks……..”
Technological
Environment
• Towards 1940s, Ole realize the huge potential of
plastic as new replacement of wooden range
• In 1949, Ole’s son used new material to create
simple four and eight stud building blocks
• In 1958, Godtfred made most important discovery
towards joining inside hollow bricks
Demographic
Environment
• Children as well as people from other age
groups are experienced to use LEGO brands
Note:- No sufficient data regarding Ecological,
Economic, Political, Legal, Informational,
environment provided in the case
An Industry Analysis
PORTER’S FIVE FORCES MODEL
Figure
P o r t e r ’s F i v e F o r c e s
Threat of New
Entrants
Bargaining Power
of Suppliers
Internal
Rivalry
Threat of
Substitutes
Bargaining Power
of Buyer
Table
I m p a c t & s i g n s o f p o r t e r ’s f o r c e s
Sign
Impact
Bargaining power of buyer
Moderate
Moderate
Bargaining power of supplier
Low
Positive
Threat of substitutes
High
Negative
Threat of new entrants
High
Negative
Internal rivalry
High
Negative
Note:- As most of the forces in this model are negative
therefore the industry in which LEGO operates is
unattractive industry
Goals & Objectives
Desire to stimulate children's
creativity
‘Creativity unlimited…..Just Imagine’
Vision
For people to experience positive,
happy association every time they
see LEGO element.
Figure
S e g m e n t a t i o n & Ta r g e t M a r k e t
Demographic
• Age group (play materials 0-5, play materials 4-9, play materials 7-16+,
learning materials 7-16+)
Geographic
• Asia, America, Europe, Japan
Psychographics
• Not provided
Media Graphics
• Not provided
Customer Profile
Includes all the children with target
age range of 0 to 16+
The 4 Hard P’s
The 3 Soft P’s
MARKETING MIX
PLAY MATERIALS
Figure
Product Categories(LEGO Group)
• Category for
children who
haven’t yet started
school
• Those products
that are built up
around a story
• Name given to sets
or buckets with
traditional LEGO
bricks
Pre-school
products
Play
materials
Building
bricks
• With LEGO
MINDSTORMS you
can design your
own robot
• Products have
been developed
specially for the
educational sector
• Based on movies
or books for which
the LEGO Group
has acquired the
rights
MINDSTORMS
LEGO
Education
Licensed
products
Figure
Product lines LEGO (Play Material)
LEGO PRIMO
LEGO DUPLIO
• Children from
birth to 36
month
• 37 different set
of toys
• Sets include
rattles, animal
characters, aero
planes and boats
etc
• Baby toys,
stacking toys
and mobility
toys
• 18 months to six
year age
• Basic LEGO
duplio set
includes
Different
products to be
combines with
each other
• Theme LEGO
duplio set
Encourage role
play and
imagination
LEGO SCALA
AND LEGO
BELVILLE
• Especially for the
needs of girls
• LEGO BELVILLE
encourage girls to
enjoy range of
horse riding, fairy
tale,, beach and
other themes
• LEGO SCALA
provide plenty of
opportunity for
play
LEGO SYSTEM
• Designed for
specific needs of
boys
• Includes 157
different sets
• Limitless range
of themes
includes ninja,
city, action,
adventures,
space, star wars,
trains, model
team and radio
control
LEGO TECHNIC
• Older children
• Use technical
design and
construction
system
• CyberMaster,
robots and
computer
sftware to allw
construction of
programmable
toys
LEGO
MINDSTORM
• Revolutionary
new system
based on LEGO
RCX microchip
• Special
programming
language i.e.
RCX to program
microcomputer
which acts as a
robot’s brain
ZNAP
LEGO DACTA
• Recently launched
construction
system
• Features vehicles
which once built
can be
transformed into
something else
such as monster
• For
kindergartens
and schools
FAMILY ATTRACTIONS
Figure
LEGO family attraction business
LEGOLAND
Billund
• Company’s home in billund
• Attract around 1.4 mil visitors a year
• Some 45 mil LEGO bricks are used
LEGOLAND
California
• Carlsbad, north of San Diego in
California
• 1.9 mil visitors per annum
• Designed for children but people
with all age groups have been
witnessed to come
LEGOLAND
Windsor
• Windsor Safari park in UK
• Attracts 1.5 mil visitors per annum
• Britten’s most popular new
attraction
Note:- Company plans to pen up two more parks in
Germany and Japan early in new Millennium
Lifestyle Products
Aim is to raise awareness of LEGO brand
LEGO Kids Wear
Launched in 1993, the result of licensing
agreement with Danish Brandtex Group
Available through number of different outlets
Departmental stores, specialized children’s apparel
shops
Launching its own retail outlets, by 1999, LEGO
opened 15 shops selling LEGO kids wear alone
Media
Offers consumer range of children’s software,
videos, books and music
LEGO CREATOR, LEGO LOCO, LEGO Chess, LEGO
SYSTEM Rock Raiders
ILC: Industry Life Cycle
CLC: Company Life Cycle
PLC: Product Life Cycle
PLC/CLC/ILC
Figure
PLC/CLC/ILC
LEGO Products
Toy Industry (ILC)
LEGO Company (CLC)
PORTFOLIO ANALYSIS
Figure
BCG Framework
High
• Family
attractions
• Lifestyle
products
% age
of
market
Growth
•Media
Star
Question
Mark
Cash
Cow
Dog
•Play
materials
Low
High
•N/A
Market Share
Low
KSF
Stay tuned with changing tastes
Respond quickly to latest fads and fashions
Latest technology
Innovation
Advertising
USP
Stimulate children’s creativity
Creative imagination
Competitors
“LEGO competes with plethora of
toys ranging from Action Man and
Barbie dolls to Furbies and
computer games”
Figure
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
• Strong hold
on European
market
• Strong brand
name
• Big scale
business
• Consistent
commitment
to innovation
• Quality
• Global retail
network
• Coordinating
production
with demand
• Low-tech
constriction
sets
• Distance from
top to bottom
• Overlap
between
functions
• Rattle design
• Japanese
market
• Cyberspace
LEGO world
shop
• Fitness
programme
• Licensing deal
with lucasfilm
Ltd.
• Licensing
route to
Disney film
characters
• Asia/Pacific &
S. African
market
• Stock
reductions by
retail trade
• Computer
and video
games
• Product
recalls
• Shift in
children’s
taste
Figure
Enhanced SWOT Matrix
Strengths
Opportunities
Threats
Weaknesses
Licensing deal with
Lucas Film Ltd. To
produce LEGO Star
Wars products
Increase
production to meet
with the demand
for important LEGO
lines
Increase its focus
on the markets of
Asia/ Pacific & S.
Africa using its
strong brand name
High technology
products to
compete in the
markets of Asia/
Pacific & S. Africa
Table
IFE Matrix
Key Internal Factors
(Strengths)
Weight
Rating
Weight
ed
score
Strong hold on European market
0.06
3
0.18
Strong brand name
0.12
4
0.48


Big scale business
0.08
4
0.32
Consistent commitment to
innovation
0.10
3
0.30
Global retail network
0.11
4
0.44
Quality
0.11
4
0.44
Key Internal Factors
(Weaknesses)
Weight
Rating
Weight
ed
score
Coordinating production with
demand
0.10
1
0.1
Low-tech constriction sets
0.07
2
0.14
Distance from top to bottom
0.13
Overlap between functions
0.12
Total
1.00

1
1

0.13
0.12
2.65
Table
EFE Matrix
Key External Factors
(Opportunities)
Weight
Rating
Weight
ed
score
Japanese market
0.09
4
0.36
Cyberspace LEGO world shop
0.1
4
0.4

4

Fitness Programme
0.06
0.24
Licensing deal with lucasfilm Ltd.
0.15
4
0.6
Disney film characters
0.06
3
0.18
Key External Factors
(Threats)
Weight
Rating
Weight
ed
score
Asia/Pacific & S. African market
0.07
1
0.07
Stock reductions by retail trade
0.05
1
0.05


Computer and video games
0.12
2
0.24
Product recall
0.10
1
0.10
Shift in children’s taste
0.20
2
0.40
Total
1.00
4
2.64
Figure
A n s o f f ’s E x p a n s i o n G r i d
Market-penetration
strategy
Product
development
strategy
Market
development
strategy
Diversification
strategy
Financial Analysis
No data as per the requirements
of presenting financials has been
provided in the case
Market Sales Analysis
In company’s heartland (Europe) there was 1%
decrease in sales to retail trade
In Italy, Germany and France there was 20% fall in
sales to retail trade
Polish, Portuguese, British and Norwegian
markets enjoyed retail trade increase
In America there was 13% & 20% increase in sales
to retail trade and consumers respectively
Japanese market, sales to retail trade up by 30%
Figure
Market sales trend analysis
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Sales to
retail/distributors (%
change)
Sales to consumers (%
change)
Disappointed set of results of the
company following year 1998
Evidence:
Before tax loss of DKK 282 million, its worst ever set of figures
Reasons:
Financial problems in Russia and Asia (DKK 150 million wiped off,
40 & 52% decrease in sales in Russia & Asia respectively)
Stock reductions by the retail trade
Product recall of a rattle design costing business DKK 35 million
Difficulties in coordinating production with demand for most
popular LEGO lines
SUB PROBLEMS
1. Decrease in sales in markets of Asia/Pacific
& South Africa
2. Difficulties in coordinating production with
demand for most important LEGO lines
3. Change in expectations of children in what
they want from the toys they play with
Alternatives to the Main Problem
• Maintaining close control over costs to
overcome financial problems
• Concentrate on its aptly named “Fitness
Programme” to improve customer focus
and establish clearer individual
responsibility
• Supplementing its traditional lines with
wide variety of high technology play
offerings
EVALUATION OF EACH ALTERNATIVE
Maintaining close control over costs to
overcome financial problems
Concentrate on its aptly named “Fitness
Programme”
Supplementing its traditional lines with
wide variety of high technology play
offerings
Best Alternative
• Concentrate on its aptly named “Fitness
program” to improve customer focus and
establish clearer individual responsibility
IMPLEMENTATION
What to do?
• Improve customer focus and establish
clearer individual responsibility within the
business
When to do it?
• As soon as possible
How to do it?
• Reduce no of organizational levels and
cutting overlap between functions
Who will be responsible for the
implementation?
• Company’s president and chief executive
RECOMMENDATIONS
– Supplementing its traditional lines with wide
variety of high technology play offerings
– Increase the production of important LEGO lines to
meet the demand of it.
– Pursue new ideas and stretch the LEGO concept
into unexplored areas
– Licensing deal to link up with other blockbuster
Hollywood movies to produce LEGO movie
products