Lego Case Study

The primary goal of LEGO is to inspire and innovate both children and their parents who purchase their toys. LEGO’s goal is to allow all of its customers to reach their full potential. The corporation works to create a more profitable market than its competitors by rediscovering, exploiting, and expanding its core competencies to have a competitive advantage. LEGO achieves its goals by assisting children with their play and growing their imagination by using the toys.

Customer case identification

LEGO’s primary target customers are children and their mothers, however, any adult who also needs the toys can buy from them since it is a fact that some adults also like to play with toys. The different styles and designs of their products guarantee that the children’s taste is met and there is a reliable brand between options of the male and female child. LEGO has also been a lifestyle company which offered LEGO-branded clothing and accessories where it added another realm of connectedness and personalization to the brand for their consumers. LEGO’s quality products made the customers be comfortable and have mobility which is something that customers around the world are always after. The company serves its customers around the globe.

Nucleus of Control

In 2003, LEGO hired Jorgen Vig Knudstorp as its CEO. The resume of this CEO was unusual since he was at the age of 35 years whereas a fortune 500 CEO is supposed to be 55 years old. He had a doctorate in economics, and he was also a former academic. He had transitioned to McKinsey which was one of the consulting firms for premier strategy in the world. Knudstorp was committed to making LEGO grow by making it stronger due to the emerging markets like China.

Functional Analysis

Top management

LEGO is a famous Danish toy company. The company was founded by Kirk Kristiansen in 1932.

Jorgen Vig Knudstorp, the current CEO, maintains an active role in making the company focus on the core products. Therefore, LEGO had to divest some assets which included its theme parks. As the CEO, he is responsible for the company’s growth, and he is also involved in endorsements, even to meet with people personally to talk about endorsement deals. As the market leader, Knudstorp plays a personal role in focusing on the company’s fundamental strengths and carefully balancing exploitation, applying current knowledge to improve the performance of the firm and in searching for new information for the future performance.

Marketing

The management of LEGO has been particularly aggressive and somewhat risky with marketing. The government officials of China have been endorsing LEGO as a “mind toy” that assists the children in developing their creativity. LEGO has decided to open offices in Shanghai and Singapore together with a factory in Jiaxing in China. For it to address the globalization issue, LEGO has to internationalize is management. The company aims to have its headquarters in six thousand towns of Billund, Denmark. The firm hopes that the children using their products will grow up to drive innovation in companies which is something that many organizations in China lack. Furthermore, the parents and grandparents in China are willing to spend money on the toys that assist their children in succeeding in their academic life. Parents all over the world are happy to pay for games that can keep their offspring away from computers, game consoles, and mobile devices.

Finance

LEGO was able to experience a considerable growth in its revenue from $1 billion in 2005 to $5 billion in 2015 (See Exhibit 1). It was about 11% increase when compared with that of the previous year. LEGO has been doing well regarding profit from 2005 to 2015.

Production and Operation

LEGO has third parties that handle most of the company’s work. Some independent managers supervise to see that the raw materials meet the standards that have been set by LEGO so that they can ensure they stay competitive with their rival firms. The strategy is one of their quality control. They also have a factory located in Jiaxing, China. The companies located in Jiaxing are expected to produce more than the first business due to the rising demand of toys in China. There is a lot of money used when making their products including Danish toys, Cartoons (e.g., Galidor), and movies such as the LEGO movie in 2014 that spent a total of $60 million (See exhibit 2). The different products give the customers a wide range of choice when buying.

Research and development

The analysts in this industry agree that LEGO spends a significant of their sales revenue on research and development, but there are no figures given to support the statement. There are some people employed by LEGO who mainly research the industry designs. There are others given the responsibility of consulting parents and their children to know the items that require improvements. This research is conducted by leveraging crowd-sourcing where they obtain ideas from the consumers by the use of online forums and other internet-based technologies. The information enables LEGO to gain an advantage over similar companies. Further, the search for environmentally friendly materials is another thing that causes a massive spending on R&D project that spends millions.

Legal

LEGO was a firmly held private company managed by the Kristiansen family in 2003.The management had overseen some legal issues that LEGO had. The company was on the verge of bankruptcy where the family had to hire Knudstop for them to avoid this fate and later facilitated the growth of the business. LEGO being a comparatively new entry in China had experienced fear due to the knockoff bricks that may have damaged their brand. The knockoffs were inferior and injured some customers. So, they had to show their certified name to be distinguished from the rampant in China but later overcame this challenge since the Chinese government officials had endorsed their products. The rules of every country are concerned with the environment, and since LEGO uses petroleum-based plastics, they have to search for an eco-friendly alternative to avoid any legal issues in future.

Human resources

LEGO values its employees and has provided a wide range of opportunities to the workers by opening offices in Shanghai and Singapore together with a factory in Jiaxing, China for more people to be employed. They work together with their workers, and it is the reason why they are now growing globally.

Statement of the problem

The main problem faced by LEGO is found in the HR department where employment is not well done since they do not consider the expert’s knowledge before employing them. For example, they had hired a touted expert who had no background in the toy industry. Further, competitor companies such as Tinkertoys and Lincoln Logs pose a stiff competition to their growth and sales.

Strategic Alternatives

The company has to focus on strengthening its business triple-bottom-line performance in social, ecological and economic dimensions and address the challenges of globalization.

The company should change the marketing techniques. They should focus on marketing their products using the social media to reach every customer who may need their items.

They have to improve the quality of their products to enable them to compete with their competitors like Tinkertoys, Lincoln and similar companies found all over the world.

Recommendations

Various recommendations must be made to LEGO. It is necessary for LEGO Company to diversify the techniques used in marketing due to the emerging risks in the market. Further, LEGO has to put effort to ensure that they make more profit for the toys they sell than they do today. They should offer more promotions to their customers and retailers directly. Lastly, I would recommend that LEGO settles any legal disputes and make sure that they avoid them by using eco-friendly materials that do not harm the workers or the environment.

Implementation

The company has to use the social media in their business and run more commercials on the television which is the best way of implementing their marketing strategies. While increasing their toys’ profits, the only possible way is lowering their production costs which can be feasible through research and development; necessarily, they have to use methods that can use less and make more and better products. The company should take care of the legal issues which must be a top priority. Finally, LEGO has to make policies that the other supervisors who oversee their products must treat their employees well to protect the LEGO’s brand.

Problem symptoms

Stiff Competition

Management turnover and the CEO’s role

Production is almost wholly outsourced to a third-party

Poor research and marketing strategy

Environment-unfriendly materials

No promotions on products

Poor recruiting techniques

Planning

Organization

Control

Top Management

1,2,3,4,5,6,7

1,2,4,5

1,2,3,6

Human Resource

4,7

4,7

Finance and accounting

1,2,3,4

1,3,4

2

Research and development

1,3,4

1,2,3

Legal

3,5

3,5

3,5

Production and operations

1,3,4,5

3,4,5

Exhibit 1: Revenue of LEGO (-------) in $Billions, 2002 to 2015.

Exhibit 2: LEGO Movie