Online Information of LEGO

Lego strategic analysis
Introduction:
This essay will consider firstly the position of Lego in relation to both the constraints of the internal
and external environment in the lead up to 2004. The essay will then go on to consider the position of
the Lego group from 2005 onwards paying particular attention to how the company has reacted to
adapt its internal resources in order to meet the needs of the external environment.
The Lego group up to 2004:
In 2004 the Lego group was under the leadership of CEO Kjeld Kirk Kristiansen, the company faced a
large number of problems including posting a loss for the year of DKK 1,800m despite a group
turnover of DKK 6,295m. As a result Kristiansen stepped down from the chiromancy and deposited a
further DKK 800,000 of personal funds into the company. Despite these headline figures the problems
facing the Lego group in 2004 many be considered has having a longer history than the single year of
such great losses and be routed in both problems in the internal and external environment.
Find out more from UK Essays here: http://www.ukessays.com/essays/estate-management/legostrategic-analysis.php#ixzz3GNjG5gJW
Five Forces Analysis
Porter (2004) outlines five forces which have an impact upon a business coming from the external
environment and include the following elements which will now be considered individually:
Level of rivalry
Power of buyers
Power of suppliers
Threat of substitutes
Threat of entrants
Level of rivalry
The overall level of rivalry may be seen as relatively intense for the Lego group in the run up until the
end of 2004. Whilst Lego occupies a strong position in the market for construction toys with relatively
few rivals one must consider that Lego is now competing in boarder market of children's entertainment
which in the lead up to 2004 began in include large incumbents from the electronics sector such as
Sega and Nintendo.
Power of buys
The power of the buyer in the case of Lego may be seen as relatively high with low switching costs
between alternative toys and even substitute products such as video games and television.
Majan College (University College)
Page 1
Power of suppliers
The power of suppliers may be seen as average, Lego's products on the whole may be seen as largely
based upon standardised inputs such as plastics and chemicals. There is the consideration that were
Lego chooses to move into non-traditional areas such as sets associated with films or games the power
of suppliers will increase as a key input becomes that of licences which is a form of intellectual
property.
Threat of substitutes
This may be seen as the largest threat to the Lego group in the run up to the end of 2004. Although it is
difficult to define what market a company occupies (Grant 2008, Porter 2004) for the purpose of
considering the impact of substitution one must consider Lego to be a provider of children's
entertainment. In this case the threat from substitutes are rather high given that consumers may
substitute between alternative traditional toys such as action figures or toy cars through to electronic
products such as video games and television.
Threat of new entrants
The threat of new entrants into both the smaller traditional toys market and the wider children's
entrainments market may be seen as relatively low in the run up until 2004 largely for similar reasons.
In order to enter these markets there is the requirement for significantly high levels of investment in
both the form of capital investments and research and development costs both of which act as barriers
to entry and thus restrict the number of new entrants (Porter 2004).
SWOT analysis
A key tool in considering the overall strategic fit is that of a SWOT analysis, a SWOT analysis
considers both a company's internal elements (Strengths and Weaknesses) and attempts to considers
how these factors fit against the external elements of Opportunities and Threats (Lynch 2008).
Strengths
Lego's key strengths may be seen as coming from both its brand recognition and its ability to use
innovative technology without moving away from the company's core values. Whilst there are many
other competitors in the toy or children's entertainment market Lego remains the brand of choice in the
field of construction toys despite the fall of other long term historical brand such as Meccano (V&A
2010) and the rise of alternative substitute products such as video games (BBC News 2004). As the
case study indicates despite the traditional nature of the Lego offering the company has a strong
association with contemporary IT, design and manufacturing systems which help to make the product
both more durable as well as helping to reduce manufacturing costs thus making the field of
technology as key strength for the business.
Weaknesses
Lego's key weakness in the run up to 2004 may be seen as two fold. Firstly the company has failed in a
key area of the understanding of marketing in regard to understanding the needs of their customers
Page 2
which may be seen as the focal point of the marketing concept (Brassington and Pettitt 2007). This can
be clearly seen in the role out of the Explorer range, in this case the company designed a product which
failed to appeal to those who were not buying Lego products but subsequently didn't meet the needs of
those who were buying the current Lego products. The second weakness of the Lego group in the run
up to the changes at the end of 2004 may be seen as the lack of ability to translate key corporate
strengths and innovations into implemented strategies. Such considerations are demonstrated by Lego's
initial development of such innovative actions such as programmable parts for its Technic range as far
back as 1986 but a contradictory failure to react to further developments in manufacturing processes
such as CAM and CAD or product developments such as those associated with video games until
much later.
Find out more from UK Essays here: http://www.ukessays.com/essays/estate-management/legostrategic-analysis.php#ixzz3GNjSrQHn
Opportunities and Threats

The opportunities and threats to Lego in the run up until the end of 2004 may be seen as indivisibly
linked representing a threat or opportunity based upon Lego's reaction to the element hence they will
be considered together.
The largest threat to Lego may be seen as the changing nature of the market in the run up until 2004.
Whilst Lego has remained the market leader in construction toys there must be the consideration that
for a large part there has been a decline in the overall market for traditional toys has children have
increasingly substituted to alternative forms of entrainments largely in the electronics sector. Despite
the threat to Lego's core product offering in this trend in the run up to 2004 there was also a significant
opportunity for Lego to use such threats as opportunities to generate spine of sales in the form of Lego
sets associated with games and films as well as the development of non-traditional Lego products
presenting Lego with the opportunity to diversify (Johnson et al 2008). Previous to 2004 Lego had
already made some diversifications into the areas of direct retails with its Lego stores and the opening
of its "Lego Land" amusement parks, this however represented at the time a considerable opportunity
for further development.
The Lego group 2005 and beyond:
This section will now consider the position of Lego from 2005 onwards and as such will attempt to
consider how Lego has adapted to the issues highlighted as facing the company in the run up to and
including 2004. In the first instance one should consider that at the start of 2005 Lego started with a
new CEO and by the end of the year posted a profit of DKK 214 a figure which has since risen in 2008
to DKK 1,352.
Structure:
In the first instance the structure of the Lego group may be seen as changing significantly since 2004.
The first change for the company's structure may be seen as beginning with the appointment of a new
CEO an action which may be seen as both a large pragmatic change for any organisation but also a
significant one from a symbolic perspective (Mullins 2009). Such a change has allowed Lego to redefine its operations allowing the company to move into new diversified markets such as the use of the
Page 3
Lego brand in relation to computer games and the production of traditional sets which are related to
television and cinematic spin offs.
Other structural changes relate to the companies operations, operations in counties with relatively high
labour costs such as Europe and the US have been outsourced to companies in Singapore and Mexico
respectively. In addition the company's operations in the Czech Republic whilst remaining under the
ownership of the Lego group have been put under the day to day management of the companies joint
venture partner Flextronics. These structural changes which have taken place within Lego's operational
function have allowed the company to make significant savings in labour costs. Despite these
advantages there must also be the consideration that there are some draw backs. In outsourcing
production there is the consideration that Lego will lose some of the control it had over its operations
previously (Slack 2009), this is a key consideration for Lego as the success of the company and its
brand has previously relied on a high association with good quality, something which may be damaged
if outsourcing is not managed correctly.
HR:
The company's HR policy may be seen as a true test of the organisations wider values against a back
drop of changing economic conditions. On the one hand the company's policies may be seen as
facilitation an organisation which values organisational learning and development through the medium
of its staff. Such considerations can be seen in the specific deployment of such policies of continuous
improvement which is a key contributor to the company's high standards for product quality. Despite
this following such heavy losses in 2004 Lego made significant reductions of staff from 5,604 in 2004
to a low of 4,199 in 2007 a figure which has since recovered dramatically to 5,388 in 2008. As such the
company may be seen as demonstrating that whilst its organisational values are key to its success
reductions will be made to adapt to market conditions were necessary. Another contradiction that one
may consider is that the company in the case study maintains that it will meet the legal requirements as
a minimum in relation to its operations. This raises two concerns in the first case there is the
consideration that all companies should in theory meet these minimum standards in any case and so
this doesn't really form a policy so much as a statement of the obvious. In the second instance Lego in
recent years has outsourced a considerable amount of its operations to areas such as the Far East were
HR standards are often much lower (Hutchings 2001). One may consider that in these cases if Lego
only aims to meet minimum standards then the policies outlined in earlier paragraphs represent an
attempt to present the company in a positive light to consumers rather than attempt to create a genuine
learning organisation.
This essay is an great example of a student's work
Disclaimer
This essay have been submitted to us by a student in order to help you with your studies. This is not an
example of the work written by our professional essay writers.
Essay Writing Service Essay Marking Service Example Essays
Who wrote this essay Place an Order Get a Quote
Page 4
Culture/Values:
Despite the changes which have been made since 2004 one may consider that such changes have not
been at the expense of the company's wider culture and corporate values. In the lead up until 2004 the
Lego group may be seen as largely having a corporate cultured built around offering a high quality
differentiated product (Jobber 2007) in which the experience of the child as an end user is the key
consideration. Despite branching out into alternative products Lego has maintained its commitment to
product quality and key concepts such as not promoting war related themes in its product portfolio.
From a innovation perspective one may see that Lego previous to 2004 had the technical abilities
associated with an innovative culture however in more recent years one may see that the company has
been much more successful at moving such innovations from the ideas stage into the implemented
strategy stage.
IT/Innovation:
One of Lego's key strategies since the restructuring of the company at the end of 2004 has been the
company's attitude towards IT and innovation. In adapting to the new business environment Lego may
be seen as adopting two key strategies in relation to innovation and technology. Firstly the company
has used new forms of technology for internal manufacturing processes. Such innovations include the
use of computer modelling and computer aided design and have allowed the company to speed up the
design process as well as well as maintain the company's values in relation to quality and
manufacturing tolerances which contribute to the consumer experience.
Secondly the company has used IT and innovation in diversifying its product ranges, such innovations
have seen adaptations of Lego's traditional lines to incorporate more electronic features through to the
outright diversification into new product areas such as computer games based upon a Lego theme or
using the Lego brand. Such diversifications may be seen as providing a key hedge against the risk
which is inherent in operating with a lower level of diversification (De Witt and Meyer 2004). From a
strategic perspective this also shows the recognition on the behalf of Lego executives of the need to
compete in a wider market than merely that of traditional children's toys. As such the element of
innovation may be seen as one of the most important elements in the turnaround of the company's
fortunes since the end of 2004.
Conclusions:
Having considered the research there are a number of conclusions that may be drawn. Firstly in
considering Lego's potion previous to 2005 one could argue that the company had a strong set of
internal resources but had failed to respond to changing external considerations in the market. The
result of such a lack of strategic fit ultimately put the company in a relatively weak financial position
generating substantial losses in 2004. Following the appointment of a new chairman in 2005 the
company has successfully turned its fortunes around seeing that the key strengths of the company in
the form of brand, technological innovation and corporate values have been used to create a strategic
fit which matches the challenges of the contemporary business environment. One may take the view
that whilst Lego will face significant challenges in the future due to the continuing nature of changes in
the market the company has not adapted its structure and processes so as to be able to deal with such
challenges successfully in the future.
Page 5
Lego Faces Increasing Competition Marketing Essay

We used many methods in this research and all of them can be taken in the university and the lecturers lesson,
which were quite popular. The most important thing that we used is analysis the market. It was very important to
understand about business environment of the firm. Our tools include 5 FORCES, PEST, and SWOT. In addition,
we used many books, journal articles and material from lectures Learning Resource of Bedfordshire University to
gain more knowledge and theories of strategic management. Moreover, we also used some sources on the
internet to find news about LEGO and information that relevant to case study. All of them will supply in reference
part in this report.
Limitation:
LEGO company:
General information about LEGO group:
The company LEGO is one of the most famous corporations in the world when it engages towards childrens toys
and has developed since 1932. The LEGO Group is headquartered in Billund, Denmark and it was owned by Kirk
Kristiansen family. And it focuses on a key element in growth, development of childrens creativity via playing and
learning by assembling LEGO brick. Nowadays, the company provides their products in more than 130 countries
with approximately 10,000 employees worldwide. In 1949, their brick has taken an adventure. Over the years, the
LEGO brick became more perfect and then it was adjusted a little bit in shape, design and color. Todays brick has
2,400 different types and have multitude of ways to combine them together so its not only attractive, creative and
fun for children but also becoming a challenge for adults.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego-faces-increasingcompetition-marketing-essay.php#ixzz3GNt3oHDA
Current trends:
Over the last 70 years, LEGO have had an evolution process, keeping step with the markets demands and the
consumers desires. The traditional toys are the constructions brick, creative building by unlocking LEGO brick
which were developed in 1958. In 1977, gears, gearbox and many kind of stuffs were added for children to
develop vehicles or other complex machines. After this era, LEGO had a big jump on developing their toys by
combining between classic toys with robot technology, so children can able make for themselves an intelligent
LEGO model.
And now, The LEGO groups core activities are innovation, development, marketing and sell play materials.
According to Annual report of LEGO group (2011), the sales of traditional toys in USA have a little bit decrease. In
Southern Europe, market sales decrease sharply while Asia and the rest of Europe also have higher growth rates.
Generally, many people prefer modern products to traditional products. So the sales of traditional toys decreased
in 2011 in total.
Page 6
The latest product line of LEGO group is LEGO Ninjago. It is a combination of classic toys and so-called spinners
were established at the beginning of 2011, beyond expectation s and become the biggest product in company
history. Besides, other LEGO toys are also on the best-selling list such as: LEGO City, LEGO Star Wars and so
son. In sum, It is a highly satisfactory result reflecting a solid growth in profit. Growth in the North American
market continued undiminished, and also in most European and Asian markets we were able to report double digit
increases in sales, (2011) says Jorgen Vig Knudstorp, LEGO Group CEO.
PEST and SWOT analyses:
PEST analysis:
SWOT analysis:
Lego - 5 Forces:
Threat of new entrants:
+ Strong and large distribution network required. If the company does not have a strong distribution networks
enough, they will have to pay a lot of money to transport and move their product around, and in some cases their
product will not get to the end customers or the stores.
+ High Capital: In order to enter the market, there are the requirements for substantial high level of investment.
LEGO The Company has to spend a lot of money in order to compete when they come to the market in the first
time.
+ The Brand name of the LEGO Company is very important, this is one way to compete when the company is
entering the market, then other competitors in the market will also have to improve the brand value in order to
compete effectively.
+ Advanced technologies: This is one of the barriers that bring many difficulties to new entrants and competitors
when they come into the market. All technologies have to be developed, and then the company will have
opportunities to compete with others in the market.
+ Geographic factor: Existing competitors already have good place and location to allocate their factory and stores
within the market. This is really a challenge for new comers and entrants, they will have a competitive
disadvantage and they will have to compete with each other to have a really good place to have their store,
department or factory in order to run the business and compete.
Threat of substitutes:
+ The pressure will very high, Substitutes come from the entire toy industry. Substitutes are everything, such as
computer games or traditional toys, even outdoors sports. Children will get bored very fast, so they com switch to
substitute.
+ A lower quality product will be the reason why customers dont like to switch from LEGO to another product.
Level of rivalry:
+ LEGO company occupies a strong position in the large Toy industries with a few rivals. The company has a
strong brand loyalty and brand name among customers; the company also provide high quality of product and
Page 7
charge it in premium price. Lego also has advantages with parents because parents will allow their children play
with traditional toy instead of spend their childrens playtime with video games or watching TVs.
- Power of buyers:
+ The pressure of the customers is very high, with switching cost between alternative traditional toys and other
substitutes such as computer games or TVs.
+ The Toy products will be very important to customers, if it is in good quality and acceptable price such as LEGO
toys, the customer will be loyal to the company and willing to spend money.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego-faces-increasingcompetition-marketing-essay.php#ixzz3GNty3pPK
Power of suppliers:
+ Most of the LEGO products are making from plastic, then there will be a diverse distribution, the
company will not have to base on one supplier.
http://www.oxbridgewriters.com/essays/estate-management/lego-strategic-analysis.php
- Opportunities:
+ Many new types of materials and factors such as from movies and films to improve Lego toys. For
example: Toys can base on famous movies in the world such as Star War, the Avengers, Spiderman and
so on.
+ LEGO main markets are Europe and USA, however the company has chance to open in many new
market all over the world, for example Asia, South America and also some countries in Africa.
- Threats:
+ Nowadays, modern technologies are improving and developing very fast, some children are likely
prefer watching TVs or playing computer games with colourful and imaginative scene rather than play
traditional toys like LEGO bricks. The substitutes of modern technologies in toy industries are very
strong and will affect the company business.
+Some countries are very poor, and then almost people cannot handle and will not spend too much
money to buy a toy. For example: some countries in Africa.
http://www.retailgazette.co.uk/articles/00040-lego-uk-retail-sales-up-48
PESTEL Analysis :
- POLITICAL :
Page 8
In order to enter the market easily and without any problems, Lego company has to be awared of the
political situation and other issues related to the political sector. There will be many advantages if the
political environmet change the rule that relate to the Lego companys operations.
- Economic :
The Toy edicational industry is developing and can be seen to be economically stable in the past few
years. The economy is improving well so the LEGO company also improve their products to gain the
best for their customers.The LEGO company not only improve economic of the domestic market but
also the external market in all over the world. For example, the US market has big opportunities to
LEGO and other toy companies.
- Social :
LEGO company is trying to develop and launch the products to the market and make sure that their
products will be accepted by the community and public. The company also want their services are in
good relationship with many kind of customers in some factors of the society.
- Technological:
This is one important force in the Toy industry. In order to have new innovations and good product,
LEGO Company also has and improving new technologies, also this is the way to compete with many
other strong competitors in the market. LEGO Company makes sure they are updated to what
happening in case to adjust the changes.
- Legal:
In order not to lose the customers welfare and the company name, LEGO company doesnt want to risk
by breaking the laws in local or international markets. Then, all LEGO companies are making sure that
they follow all the rules and laws of the market where their transactions are operating in.
Environmental :
Lego company is trying to make their products that they sell are proven to cause minimal problems to
the environment. The company also introduced some strategies that aim to decline pollutants and
create a good environment. The company also invested a huge amount of money in waste system to
protect the environment near companys factories.
Defining problems:
aaaa
LEGO Faces Increasing Competition
Although of the LEGO Companys successes, analysts realized that the companys environment would
change, and in the past 15 years it has some challenges due to:
Page 9
Increasing of the Digital World: growth in electronic games, digital toys and much software make
competition harder
Faster Child Development: Nowadays children grow up faster, it make the global market for
construction toys is restricted because of their changing play patterns.
Fashion Trends in the Toy Industry: fashions of toys go out and in more rapidly and sometime a few
products can make or break annual turnover of the company.
Dependence on Famous Global Mega-Brands: In response to fashion trends, toy manufacturers design
offerings based on a concept or story (e.g., Star Wars) and several companies offer all toys related to
the similar concept (Harry Potter, Spiderman).
Downturns in countrys economies can lead to a reduction in sales of LEGO products.
The reaction of Lego Company to these changes is combining innovation with market adaptation. They
released new digital toys (e.g., LEGO MINDSTORMS, LEGO SPYBOTICS). It created virtual
communities to support users and cross-sell to them. They divide their business into each unit,
including LEGO Interactive (computer-based play materials) and LEGO Direct (catalogue sales). They
concentrated expanded into life-style products, opened new theme parks (in the U.S., UK, and
Germany), and cooperated with other famous global brands such as Lucas Films, Disney, Microsoft,
and Warner Brothers to develop new product concepts.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego-facesincreasing-competition-marketing-essay.php#ixzz3GNuBQ6p3
Compare and contrast with main competitor < Mega Bloks>

Using Porter's strategies framework, we can see that Mega Bloks is a cost leader because they have
increased profits through reducing cost by using different quality of materials to make their products,
while Lego uses a much higher quality resources to make toys, This act is a reason why Lego cost of
products much higher than Mega Bloks, It lead to Mega Bloks gains more market share and take many
profits.
By researching, Mega Bloks had found new segmentation, which now is number one seller
in the preschool market.
In the past, products of Lego are focused on narrow scope because the target customer mainly from 7
to 12 years old.
By changing, now Lego more focuses on differentiation on a broad scope by targeting more than one
market. Lego needs to concentrate in long term innovative products, this way still take its competitive
advantage in the market as being the creator of toys that help develop new skills and learning. Like the
first edition, Lego bricks make children more creative thinking and imagination. It was critical for the
Page 10
management team to identify where to expand Lego's product channels and business operations, in
order to develop a competitive strategy to continue the organization's financial success and dominance
in the building toy market in the future
Solutions:
After face with many problems in market Lego should have clear strategy
+Strategy with social communication online:
Having a strong community is very important for Lego company so Lego company should research
more initiatives, both offline and online, to increase react with children and their parent. Children like
Lego toys however their parent are person who will pay for all of this. While children can pay $70 a
years for Lego, adults may spend more than $900 per years. So how to persuade and make them
reliable our product also a task for Lego.
Use an online database for parents where they can react with other family and its make a community of
parents who appreciate the value of creative, endless ideas, or how to learning fun and effective. In
there (web, forum, site...) Lego can provide information, knowledge how to develop childrens
creative, imagine through their game by professors and analyst. Passionate parents may be provided
much useful content or lesson from this and it make Lego become regular topic in family.
+ Strategy with investment and capital:
To make different with another competitors and reliable for customer also demonstrate Legos
reputation, Lego can open restaurant with the main theme is Lego world. In some countries, there are
few opportunities for kids and their parent approach Lego game, so restaurant can be the way to
introduce products also make more profits from other services, not only from sale toys. Restaurant
provides new trend, innovation point for customers. Brands value, creative are sent to potential
customer by a chain of systems connect with restaurants unique such as new concept theme, dining
area, kids play area , rooms with decoration are toys style, small museum All of those are new
experience for customers who are fans or not.
To attractive more attention and reduce competitive, Lego can use cuckoo strategy. The strategy of the
cuckoo allows developing its business by pressing it on that of an iconic leader. Many company used
this strategy before. Lego should corporate with famous brands in game industry like Nintendo, EA to
expand range of customer and market share and may be Lego can receive capital from this industry to
also introduce their products in Legos markets.
Invest more in line of products. Always change style, concept to suitable with customer in each
country. Find cheaper material to produce and avoid bad effect to environment. Research how to
combine new technology and toys .
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego-facesincreasing-competition-marketing-essay.php#ixzz3GNuI6xqb
Page 11
The survival of lego in changing environment

This essay aims to provide an insight into LEGOs performance in the UK market and the strategies adopted by
LEGO to be acclaimed today as UKs 3rd largest toy seller. Accordingly, a better understanding will be attained
from a consumers perspective in the Toys industry. LEGO a brand which was in shambles in late 2006 stepped
up to perform tremendously well during recession - How did LEGO manage to reach where they are today? In the
following chapters, a detailed description will be provided on how LEGO set an example for many global brands to
follow in a touch economic situation.
2.0 Company Overview
It all started with one mans vision. A man who believed that good play enriches a childs development - Ole Kirk
Christiansen, a carpenter from Billund. He shifted his production from making wooden furniture for local farmers to
childrens toys, owing to the great depression in the 1930s. LEGO originated from the Danish words leg and
godt, which means play well. (Tidd and Bessant, 2009). defines LEGO as The core product is a rectangular
plastic brick, hollow on the inside except for one or more tubes, with rows of studs on the top emblazoned with the
tiny LEGO LEGO. (Wiencekk, 1987)
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/the-survival-of-lego-in-changingenvironment-marketing-essay.php#ixzz3GNuPd1ea
LEGO has a very powerful vision statement of Inventing the future of play. This vision indicates that LEGO is
finding new ways of developing games and moving from being just a simple block of brick. They are aware of the
changing requirements and attitudes of consumers in a globalised sense. As it claims It is not just about products,
it is about realising the human possibility. (LEGO Group, 2010)
Over the years, the LEGO Group has developed several products under its umbrella extending its products to the
digital world as well. LEGO has always known that the Toys and Childrens entertainment industry is a difficult
business to sustain oneself in as it is constantly faced with new innovations, technological advancements and
market entrants. To face this constantly evolving industry, LEGO has invested much of its understanding their
consumers needs and desires. They have studied playing habits, family patters and housing conditions to gain a
deeper knowledge of this market. Another differentiating factor is the belief that has been passed on by
generations that have embraced LEGO. The belief that LEGO will remain relevant to children of all ages and all
generations. The belief to create a world where children have the freedom to build anything that can never be
replaced with cyber experiences. (LEGO Group, 2009)
By the late 90s, LEGOs sales began decreasing. They were challenged by low cost good enough competitors
like Megablok, a Canadian Company. Other reason was their prime target audience were shifting to computer
games. LEGO was also operating in a high cost economic environment Denmark- where the supply chains were
expensive. Another problem LEGO faced was increasing complex product development with so many product
ranges and different permutations and combinations; manufacturing economically became nearly impossible. All
these reasons, led to LEGO running into a $ 240 million loss. In order to revive LEGO from this situation, the
LEGO family invested $ 178 million and appointed of a new CEO, Jorgen Vig Knudstorp. Under Knudstorps
leadership, LEGO saw a successful transition. In order to correct the situation, LEGO improved their supply chain,
factory locations and enhanced their overall product development strategy. (Tidd and Bessant, 2009)
2.1 LEGO Financial Overview
Page 12
Since its foundation in 1932, The Danish Company has great achievements added to its name. However, in 2006,
rumours had it that toy industry giant Mattel were going to buy LEGO since it had faced huge losses. But
restructuring in management and change in strategy helped LEGO pick up their sales in spite of the recession. In
August 2008, LEGOs international sales were reportedly up by 20% in comparison to the year before. In the UK
alone, 2007 witnessed at 24% rise in sales as compared to 2006. (MINTEL. 2008)
The latest report that appeared on November 2010 in The Times London edition states that LEGOs sales have
picked up by 50 per cent this Christmas season keeping both parents and children happy.(Vine, 2010)
According to the Guardian, in 2009 the total sales at the UK division based primarily in Slough, Berkshire, leapt
35% a performance that took LEGO to a record UK market share of 4.1%, up from 3.2% a year ago. (Wood,
2009)
The pre-tax profits rose 68%, which is approximately up by 171.97 million in the first half of 2010. LEGO posts
strong sales (The Times, 2010)
LEGOs financial performance during recession was commendable while other Toy industry competitors like
Mattel, that reportedly faced a 19% fall in second-quarter sales in spite of housing big brand names like Barbie.
(Wood, 2009)
3.0 Consumer Behaviour theories applied to LEGO
From the above, it is clear that LEGO has had a successful track record during recession. In this section, a deeper
understanding will be attained on how LEGO was immune to the recession by placing their consumers in the heart
of their business and understanding their requirements. To achieve this, three theories have been shortlisted they
are namely
Buying Decision Making Process
Attitude Formation and Change
Consumer Identity and Reference Groups
3.1 Buying Decision Making Process
In order to understand, how LEGO survived through the economic downturn, it is important to interpret the buying
behaviour of consumers in the Toys industry. By understanding the dynamics of buying behaviour, successful
insights can be drawn to help identify the gap between the consumer and company.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/the-survival-of-lego-in-changingenvironment-marketing-essay.php#ixzz3GNuXyEjh
In complex decision making process where one is faced with other competitors, there are 6 stages to the decision
making process. The 6 stages are namely:
3.1.1 Problem Recognition (awareness of need)
Problem Recognition is the difference between the actual state of mind and the desired state of mind (Solomon,
2009). In other words, it is the process of recognising the need or desire to own a particular product. Given below
are some reasons why consumers felt the need for LEGO over other products.
Need for learning though play
Page 13
Parents being one of the prime target audiences in this industry also play a major role in the buying behavior
process. LEGO appeals to this market as it has the element of creative play and parents are assured that it is not
a waste of time as compared to watching television or spending time on Facebook. Parents therefore would
choose to buy LEGO as they want their children to learn while they play. Something that most other toys or video
games have failed to achieve (MINTEL, 2008).
Need for retro products during recession
Another interesting point to note is how consumers chose retro products during times of crisis due to its
established legacy. During recession, parents actually found the need to invest in products that are of high quality
and are long lasting in nature as opposed to just purchasing a cheap toy. Gerrick Johnson, toy-industry analyst at
BMO Capital Markets made a comment stating that "In tough economic times, you'll often see retro products
come back. Parents spend money on stuff they know works. Rather than going to Disney World or on a trip, you
get a $30 LEGO set." (Faris, 2010)
Need for up-to date toys and gadgets
During a time when their prime target audience were more inclined towards computer games, LEGO constantly
kept innovating and updating their offerings to suit the needs of this market that is faced by such rapid growth and
evolution.
The company steadily launched new products which resulted in three-quarters of its yearly sales. In 2000, the
British Association of Toy Retailers along with Fortune magazine voted LEGO as the toy of the century. (Oliver et
al., 2007)
Recognizing the need to enter the video game market, LEGO created its own software group providing children
the opportunity to create their own animation for PC and gaming consoles (R. Duane Ireland, 2009). Therefore
people chose LEGO as it had extended its offerings to a medium where most of its consumers lived the virtual
world.
3.1.2 Information search
When it comes to seeking information on which toys you would prefer your children to play with, there are several
factors that play a role. From an internal search perspective, memory and nostalgia could be key determinants
whereas word of mouth, friends, relatives etc. could be external search factors that dominate your purchase
decision (Soloman, 2009)
The market for childrens toys and games is a substantial one A 2.1 billion market for childrens toys and
games, this is a lucrative industry with several competitors. In such a case, information search becomes even
more complex (MINTEL, 2008).
What adds on to the complexity is the ranging age groups and diversity in toys from simple board games to more
sophisticated toys for older kids up to adulthood. LEGO belongs to the range of Activity Toys which incorporates
certain level of creativity and makes playing an enriching experience. Other toys in this range are Meccano and
magnetic building kits as well as arts and crafts products (MINTEL, 2008).
3.1.3. Evaluation of Alternatives
At this stage, consumers evaluate the alternatives that have been shortlisted after their information search.
Rankings, personal preferences, listings, word of mouth to name a few, are determinants while evaluating
alternatives.
Page 14
Today LEGO is the fourth-largest toy manufacturer after Mattel, Bandai-Namco, Hasbro and the fifth position held
by TOMY-Takara (LEGO Group, 2009). In the case of activity toys like LEGO, consumers would potentially ask
these questions. Does the product benefit my child learning ability? Is the product safe and of supreme quality?
Mc Donaldss once used LEGO in the USA as a part of one their sales promotion campaign. 37 billion bricks were
distributed over four weeks out of which only a dozen complaints were received (Harris and McDonald, 2004).
These sorts of cases help a consumer who is looking for top quality decide that he/she wants to purchase LEGO
over other toys.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/the-survival-of-lego-in-changingenvironment-marketing-essay.php#ixzz3GNuh4dhi
3.1.4 Purchase decision
In order to achieve competitive advantage and take the final purchase decision, LEGO pays a lot of attention to
their product, packaging, online store etc. In a Danish newspaper - Jyllands- Posten, an article was published on
the safety of LEGO. Each individual block has a hole to ensure that if a child swallows a brick, the child would not
choke as air could still pass though (Harris and McDonald, 2004). Therefore a consumer, who has safety as
criteria, would decide to buy LEGO as the makers have taken care of this aspect.
3.1.5 Purchase
This decision is based upon the time lapse and product availability. In 2004, LEGO sales began dropping
massively. Poor customer service and unavailability of products were additions to their dilemma. During this time,
customers were faced with many other alternatives. LEGO could not afford to lose out on customers in the big-box
world. LEGO then improved on their supply-chain management and aimed to align its innovation capability. It also
started online sales where customised products could be designed and purchased too (Oliver et al., 2007).
3.1.6 Post-Purchase Evaluation:
When LEGO was voted as Marketer of the Year in 2009, one of the comments by a user from Dallas commented
I have to vote LEGO-for continuing to provide a top-quality product in line with their brand, staying relevant and
using new technologies to create new customer experiences in a kids' toy market that's moving away from brands
with a "low-tech" heritage. This is a company that inspires others to a higher standard. Who can vote for a
company that continues to drive quality down to get to a cheaper price? (Creamer, 2009). These testimonials
prove that consumers overall have been happy after purchasing the product.
3.2 Attitude formation and change
One of the aspects involved in the psychological factor of the decision making process, is attitudes. These
attitudes are either formed on experience or interaction with other people. An attitude of a consumer towards a
firm and its products tends to have a great influence in the firms marketing strategy (Soloman, 2009).
3.2.1 Efforts made my LEGO to track attitudes
For strategic decision making that is driven by insights, it is essential to track attitudes. It could be tracking
changes in different age groups, scenarios about future, identify emerging trends etc (Soloman, 2009). LEGO has
realised the importance of tracking changing attitudes and the following findings can be drawn in this regard:
Scenarios about future
Page 15
One of the most significant changes that LEGO has taken up this decade is that it has begun listening to its
consumers and their changing attitudes. In todays social networking era, it is highly essential to monitor
behaviour and attitudes. It was through the efforts made by LEGO on social media, that they realised their fan
base was not just limited to children but adults too. Courtesy the AFOLcommunity Adult Fans of LEGO LEGO
now has some specialist ambassadors who communicate with them and provide feedback. LEGO also involves
these ambassadors in their product development. They began monitoring blogs and got a deeper understanding
on culture, desires of both potential and existing consumers and changed their strategy accordingly. It was
through this initiative that LEGO decided to make sets based on movies like Star Wars or Indiana Jones and
now these deals make up more than half of their sales (Advertising Age, 2009).
By doing so LEGO gets inputs from probably the most loyal customer base and thus adress unhappy customers
or fill any gaps in the market place. These insights drove their strategy and helped them survive in an atmosphere
where the only words heard off were lay-offs and losses. LEGO is one such example of a brand that has
benefitted by working in partnership with their consumers and predicting the future (Garfield, 2007).
Changes in different age groups
LEGO has a very ambitious mission statement of each and every child in the world to own one cubic metre of
LEGO bricks. (Harris and McDonald, 2004) Children globally are treated the same by marketers no matter which
culture they belong to. However, even if they are treated the same their attitudes may differ due to their upbringing
and external environment. Though most of the concept and product development occurs in the Billund
headquarters, LEGO has trends watching department in their offices in Munich, Los Angeles and Tokyo. Infact, to
ensure that LEGO is an international product that suits ever child needs, the creative team is composed of 120
designers 15 different nationalities (LEGO Group, 2009).
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/the-survival-of-lego-in-changingenvironment-marketing-essay.php#ixzz3GNupAZGZ
3.2.3 Star Power: Celebrities as Communications Sources
The source of the message - the celebrity in this case can have a huge impact on the image of a brand and its
sales. Messages tend to have a greater effect when there is a relation between the celebrity and product. Human
beings tend to pay more attention when they see familiar faces as opposed to ordinary faces, thereby interpreting
and processing the information more effectively (Soloman, 2009).
People tend to associate characteristics of a persons personality, social status, and gender, to that of the brand.
When David Beckham confessed in an interview that if he wasnt a footballer his dream pastime would be building
with LEGO blocks, it set the LEGO sales roaring. In just one day of business, the father of three inspired the sales
of 5,922- Taj Mahal set (The Sun, 2010). Parents formulate the core buyers of this segment six in ten have
bought from five or more of the listed categories of toys or games in the past 12 months (MINTEL, 2008). After all,
if a star figure like Beckham has spoken, why wouldnt parents try mantling Taj Mahal together.
3. 3 Consumer Identity and Reference Groups
Any individual or group that acts a point of comparison of values, opinions, attitude or behaviour towards a
product is a reference group (Soloman, 2009). In case of LEGO, there are several reference groups. LEGO has a
combination of logic and creativity that enhances a childs learning and ability to solve problems. Owing to this
factor, LEGO has been popularly used as creative play tool in institutions and schools i.e; formal reference groups
(LEGO Group, 2009).
3.3.1 Effect of Gender on Consumer Behaviour
Page 16
Gender is a crucial element in consumer behaviour. A boy may perceive different things from a girl. This can be
proven with an example of how LEGO researched playing habits amongst boys and. The findings were that girls
were more likely to build living areas while boys built cars. LEGO introduced a new version of its product for girls
called Paradise which emphasized around socially oriented structures such as homes, pools etc (Soloman,
2009).
3.3.2 Baby Boomers and the role of nostalgia in buying decision making process
Baby Boomers are those who are above the age of 29 and have a significant influence on demands for housing,
child care etc (Soloman, 2010). LEGO has evolved from a box of bricks that baby boomers grew up to a more
diverse product. However, the positive feeling attached with having played with LEGO has passed on through at
least three generations. (Oliver et al., 2007)
Therefore, one may ask how much role does nostalgia play in triggering what baby boomers and generation X buy
as toys for their children? Retro favourites are gaining popularity owing to the fact that they have provided real
quality and value over time, and one of the reasons all these new fans have emerged is through nostalgia.
According to the (Telegraph, 2010), LEGO has performed well in recession as parents due to nostalgia have
shifted to trusted brands. Parents dont intend to buy toys that their children would throw aside in months, instead
they would rather invest in toys that children of all generations would go back to.
3.3.3 Children Pester power v/s parent power
Pester Power is a term used to define a childs influence over the parent in the buying process (Turner et al,
2006). According to Turner, children can be easily influenced by advertising and marketers use this as a medium
to entice children to nag and purchase the product of their desire.
The key factors that influences a childs pestering behaviour is the family type, family communication pattern, the
person accompanying the child to shopping, intent of going for shopping and advertising. (Venkatesh and Ghai,
2010). According to the report by Mintel, 2008, Although adults are the primary purchasers, kids are the ultimate
arbiters of success and failure across much of the market nearly four in ten parents cannot say no to their kids.
LEGO partnered with Kelloggs in 2007 to create LEGO brick shaped candy called Fun Snacks. This created
hype amongst parents as they had spent valuable amount of their time telling their children not to swallow LEGO
bricks. LEGO went on to the extent of advertising in between childrens TV shows, placing the product at the
bottom of the shelf spaces in order to make it accessible for children; thereby making children nag for Fun
Snacks (Franziska_NDT, 2010)
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/the-survival-of-lego-in-changingenvironment-marketing-essay.php#ixzz3GNuw6NtW
Conclusion
On the whole, LEGO has adopted the right measures to immune itself to the market, no matter how the
economic situation is. Given below are few recommendations and discussions with regards to LEGO.
Discussion/ Recommendations:
1. With LEGO factory - LEGOs online design portal- is a gateway to 300,000 designers worldwide. By doing so,
LEGO can get critical reviews on their products and help improve their offerings (Tidd and Bessant, 2009). LEGO
Page 17
could conduct an annual conference or workshop, whereby all these designers meet up and brain storm with key
designers and managers on how to improve LEGO and keep up with changing trends.
2. Christmas accounts for around half of the years sales for LEGO. Keeping this in mind, LEGO should launch
their new products or special Christmas edition toys as nearly seven in ten consumers buy toys and games for
Christmas. (MINTEL. 2008) And after all, who would refuse the latest Christmas edition of LEGO?
3. An emerging trend is gifting new born toys - up from 13% in 2003 to 26% now. Considering this trend, LEGO
could launch its own collection of teether toys meant for new born. This could range from a simple brick soft
chewy toy to its very own Harry potter collection for newborns.
4. Phone applications seem to be the next big trend that is picking up. LEGO already has its own Star Wars LEGO
I phone game version. LEGO must continue entering markets where gaming is a hype.
5. LEGO should push the product more using the scientific connection. According to (Turkle and Smith, 2009)
playing with LEGO helps children enhance their problem solving and discovery skills. This makes a child think in a
scientific, problem recognition and solving approach that most engineers, scientist and designers use. Turkle
claims that the toys that children play with have a great impact on their future careers. Some children may try and
create unrealistic structures, while some may follow instructions, some keep their constructed sets as awards
while some just break them; different children behave differently with LEGO. However, each role play is good to
identify traits about your children and which direction they are progressing towards.
6 Most of LEGO consumers are not price sensitive. They buy LEGO because of the brand and the quality. As a
consumer, you can either buy the simple bricks or a special version of LEGO to add it to your collection.
Therefore, LEGO can afford to release a premium end version of the toys that are suitable to kids that belong to
rich households.
8. LEGO for grey market- Research has shown that playing with LEGO for an hour or two can help old people
fight memory loss and problems that occur due to degeneration like dementia and Alzheimers disease. It makes
your mind active, while your fingers are still moving.
9. The idea of having Brand Ambassadors who use their network pool to get insights and inputs from consumers
is one of LEGOs strongest strategies. LEGO fans discuss, review and suggest new ideas for LEGO on the AFOL
community which helps LEGO look into the future and improve their capabilities.
LEGO has managed to create a consumer experience that combines technology, mass customization and
community -- to enhance and build relevance for its classic toy offering. (Tidd and Bessant, 2009). Indeed, LEGO
has managed to keep up its legacy and set a great example for many international and global companies.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/the-survival-of-lego-in-changingenvironment-marketing-essay.php#ixzz3GNv3GKx8
Introduction
Lego is the sixth largest toy manufacturer for children. Its main product consists of colourful interlocking plastic
bricks which can be assembled to construct objects such as vehicles, building etc.
The concept of LEGO was engineered by Ole Kirk Christensen a carpenter from Denmark, who began making
wooden toys.
Page 18
In 1934, the companies name LEGO was established

In 1940 LEGO started producing plastic toys.
LEGO in Danish means "Play Well".
LEGO's mission statement is "Only the best is good enough".
LEGO (2008) states "It is LEGO philosophy that "good play" enriches a child's life - and its subsequent adulthood.
With this in mind, the LEGO Group has developed and marketed a wide range of products, all founded on the
same basic philosophy of learning and developing - through play."
The LEGO Brick pieces that were made in 1958 will still interlock with the bricks that are made today. LEGO
estimate's that it has sold over 400 billion LEGO Bricks since its start.
This case study analysis looks at The LEGO Groups strategic direction and the battle of the block makers in
particular Mega Bloks. The case study has been summarised for clear understanding of the issues raised.
Summary
LEGO is one of the top toy manufacturers' in the world. Its interlocking plastic bricks have made the company a
sensation for the world's most innovative toy creators through learning and developing while playing.
Each year LEGO produces 14 Billion plastic bricks to distribute around the world for children to play with. Until
Mega Bloks arrival LEGO had a competitive advantage as the only toy maker of interlocking plastic bricks. Mega
Blocks as its major competitor challenged this by introducing similar products as LEGO.
Mega Bloks who are based in Montreal, Canada makes interlocking plastic bricks that cost less than LEGO
products. LEGO however, believes that the high quality of its product justifies its prices, because it uses a higher
quality of resin which is found in paints and vanishes. Mega Blok however uses commodity-grade resin.
LEGO is still the most popular plastic brick toys with the 7 to 12 year old segment of the market, however Mega
Bloks is gaining its market share through the preschool market. The Mega Blok toys are larger and softer
compared to the Lego products, users of the toys think Mega Bloks toys are easier for younger children to play
with. In response to this, LEGO introduced the Duplo Line of oversized blocks made from the same material as its
original design.
Mega Blok also introduced a new line called Micro which is aimed at 7 to 12 year olds or immediate school set.
This new line is interchangeable with the LEGO line. LEGO took Mega Blok to Court in Canada over the issue that
Mega Block had copied its brick design, however the Court ruled that the brick design is functional and entitled to
trademark protection.
Mega Bloks sales doubled between 2000 to 2003. Lego reported its first loss ever of $44 million in 1988. LEGO
was at serious risk of losing its core brick market to Mega Bloks if it did not come up with a strategy to deal with
the problem of how to regain the market share it was losing to Mega Blok. LEGO chose to call for new sources of
growth beyond the core block category. This solution gave them a new line of original robot action figures known
as "Bionicles". The Bionicles were LEGO's best seller in 2003 which led to a direct to DVD animated feature which
was released by Miramax. Lego also formed alliances with Walt Disney Company and Lucasfilms, the creator of
Star Wars. LEGO had its own Harry Potter play sets which in 2003 LEGO were left with millions of dollars of
unsold products. This was relatively blamed on the retail situation and the dollar's weakness compared to the
Page 19
Danish Krone. In 2003 LEGO posted a loss of 166 million. LEGO, in a desperate aim to regain profits, unveiled a
wide range of new products aiming at the preschool market and a new range aimed at young girls.
Questions
What is the most important decision currently facing Kjeld Kirk Kirstiansen?
Ole Kirk Christiansen created LEGO which was popular in 1934 when there was no other product similar
available. However LEGO did not recognise the changing environment and the changes to the needs and wants
of consumers. One of the most important decisions facing Lego/ Kjeld Kirk Kirstiansen is deciding who its main
market is and how to target that market, using data to conduct a segmentation of the different needs and wants of
that market and become the leading toy seller again.
In 2004, LEGO continued its entertainment promotional and product tie-ins with the new Harry Potter and
Spiderman movies. Do you think this was the right strategy?
With LEGO reporting a loss in 2003 and with evidence that the sales of Harry Potter play sets going down, this
was not the right strategic decision. Harry Potter movies go in and out of fashion, they are only popular while the
movies are popular. Choosing to stick to a product that is popular all season would have been the better option for
LEGO. This reflects the need to have a strategy that will be successful in the long term, which will be a
competitive advantage, rather than fill its temporary demand.
An example is LEGO's Mindstorms Robotics Invention system which allows users to build computer-controlled
creatures. This fulfils LEGO's philosophy that the users of its product play while learning because the users are
controlling the creature they creative, which uses the child's creative thinking rather having a action figure that has
already been created and has limited use in regards to improving the creative thinking of the child in terms of
building and making the product.
Using Porter's generic strategies framework, compare and contrast LEGO and Mega Bloks in terms of their
respective pursuits of competitive advantage. Mega Bloks is a cost leader because they have increased profits
through reducing cost by using different quality of materials to make their products then LEGO, who uses a much
higher quality resources to make its products, which in turn will increase their cost, making their products much
higher in price than Mega Bloks. Therefore Mega Bloks gains a bigger market share.
Mega Bloks through research had found a niche, in which it is now the number one seller, in the preschool market.
They developed bricks that are larger and softer which makes them easier and safer to play with according to
parents. Mega Bloks introduced new line of bricks for 7 to 12 years of age which can be interchanged with LEGO
bricks.
LEGO before Mega Bloks arrived was more differentiation focused on the narrow scope because it mainly
targeted one market. 7 to 12 year old.
LEGO now focuses on differentiation on a broad scope by targeting more than one market. For example the
preschool market.
LEGO is trying to be popular through having movie action figures for example Harry Potter play sets which sales
for this went down whereas the Harry Potter movie was still popular. LEGO needs to focus more on long term
innovative products that way it can still keep its competitive advantage in the market place as being the creator of
toys that help develop learning and new skills. As the original LEGO bricks did where children would make objects
with the bricks which involves using the children's creative thinking and imagination.
Page 20
Conclusion
Lego was founded by Ole Kirk Christiansen who a carpenter began making wooden toys. In 1934, the companies
name LEGO was established. Lego is the sixth largest toy manufacturer for children. Its main product consists of
colourful interlocking plastic bricks which can be assembled to construct objects such as vehicles, building etc.
LEGO (2008) states "It is LEGO philosophy that "good play" enriches a child's life - and its subsequent adulthood.
With this in mind, the LEGO Group has developed and marketed a wide range of products, all founded on the
same basic philosophy of learning and developing - through play."
Mega Bloks challenged LEGO brick market by having similar products as LEGO but targeting a new market, the
preschool market.
Mega Bloks products are also cheaper to purchase then LEGO because Mega Blok uses commodity grade resin
where LEGO uses a much higher quality resin which is why LEGO is more expensive then Mega Bloks.
Through many ups and down of LEGO, it had to make strategic decisions on what it wanted for its future and
where they wanted to see themselves in the toy market.
The solution varied but what it needs to do is keep in mind their philosophy and make innovated products that will
help the children learn and develop new skills while playing.
Reference
Fromme J. (2003). Games Studies: Computer games as part of children's culture. Retrieved from:
http://www.gamestudies.org/0301/fromme/
Keegan, W.J., & Green, M.C. (2005). Global Marketing. (4TH ed.). Upper Saddle River, N, J: Prentice Hall. p. 526.
Mind Tools. (2009). Porter Generic Strategies. Retrieved from:
http://www.mindtools.com/pages/article/newSTR_82.htm
LEGO. (2009). About us: company information. Retrieved from:
http://www.lego.com/info/pdf/LEGO_company_profile_UK.pdf
Wikipedia. (2009). LEGO. Retrieved from: http://en.wikipedia.org/wiki/Lego Wikipedia. (2009).
Mega Brand. Retrieved from: http://en.wikipedia.org/wiki/Mega_Bloks
Struggling with your essay?
LEGO Case Study: Analyse Lego's macro and micro marketing environment
LEGO as we know it today first came into being in 1949 when Godtfred Kirk Christiansen used a new material
plastic to create simple four and eight stud building blocks. Today, LEGO has turned into one of the most
famous toy brands in the world. The aim of this case study essay is to asses the macro and micro environment in
which LEGO is performing today.
Micro Marketing Environment
Page 21
The micro marketing environment is defined as the forces close to the company that affect its ability to serve its
customers the company, market channel, firms, customer markets, competitors and publics, which combine to
make the firms value delivery system (Kotler, Wong, Saunders and Armstrong, 2005)
One of the most notable things concerning the micro environment of LEGO is that it is viewed as a strong brand. It
been part of the toy market for so long, that grandparents and parents can remember playing with the toy as a
child, and so often feel they have a relationship or bond with the product. The brand has also infiltrated many
markets world-wide, and its fame is instrumental in its continued success. The case study states, its the only
European company to enter the worlds Top Ten toy manufacturers.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego.php#ixzz3GO0UGcRZ
The product also has a unique selling point. The toy of LEGO is aiming to capture a creative imagination and also
enable it to stand out in the market of dolls, cars, computer games etc. It is promoted as a system of play, which
can be a strong selling point when trying to compete with educational toys.
Another positive aspect of the micro environment of LEGO is the broad of products it sells and its ability to create
products for children of all ages. This is coupled with different products are targeted at different target markets
(determined by age). This may help ensure that consumers (the children) do not stop purchasing because they
feel they have grown out of the product. It also makes the consumer believe that the product is more
personalised to them. The development of target markets over age groups may also help keep the consumer for
longer, and so encourage the consumer to form a greater bond with and more loyalty to the product.
There has also been considerable extension of the brand to outside of the toy market. One of the main ways the
brand has branched out is through the introduction of LEGO based theme parks in several countries, including
one in Windsor in UK. The company has also entered into co-operative agreements enabling them to supply other
licensed products, such as bed-linen, shampoo, childrens wear etc., whose combined effect is hoped to increase
overall sales for all LEGO lines. The coupling of the LEGO brand with brands such as Winnie the Pooh or Star
Wars furthermore helps enhance the strength and the popularity of the brand.
As of late, the company has also entered into the more technologically focussed market. First, it has set up a
website where LEGO products can be purchased and information about the theme parks can be found. Second, it
has created a line of goods titled LEGO Media Products which includes a range of childrens software, videos,
books and music. However, these continued extensions of the brand could also be detrimental for the company.
As LEGO moves further and further away from the simplistic blocks for which it is famously known, the appeal of
the toy may disintegrate as the products it produces become more like substitutes for other toy products. In
addition, it cannot be guaranteed that brand extensions will be successful as the fit with the original block
product decreases.
The product report also mentions that sales of the brand have now mushroomed. In a world of increasing
population, one would assume that sales should also increase. This is therefore an indication that LEGO is no
longer what the child demands in a toy and its popularity is decreasing. An additional problem may have resulted
from the fact that the firm needed to recall a rattle-snake product.
Attention is also brought to the disappointing results of the company in 1998, which is attributed to lack of
efficiency. Specifically, the report draws attention to difficulties in co-ordinating production with demand for the
most popular LEGO lines. This implies problems in the production line. Furthermore, mention is made that the
Page 22
company intends to solve this inefficiency problem by cutting the size of the workforce. Although this may lead to
greater efficiency, it may also lead to a negative effect from a social point of view as a result of the negative
views create if mass unemployment results.
The lack of efficiency, coupled with the increased competition the company faces may help to explain the reduced
sales that were seen in parts of Europe (Germany and France). However, there were also trade increases in
countries such as Poland and Britain which indicates that LEGO is being successful in some areas.
Macro Marketing Environment
The macro marketing environment is defined as the larger social forces that affect the whole microenvironment
demographic, economic, natural, technological, political and cultural forces (Kotler, Wong, Saunders and
Armstrong, 2005).
In terms of the macro marketing environment, the main problem facing LEGO is the cultural change that is taking
place in society as a whole. In todays world, children are much more attracted to the digital and technological
world. Even with the introduction of Media product, it is hard to see how LEGO could compete with companies
such as Sony or Apply in producing products that appeal to the child market.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego.php#ixzz3GO0b3ER3
The company has also faced considerable reductions in sales in several countries that have seen a downturn in
their economic environment. For example, in Korea, the economic crisis caused a 52% reduction in sales of
LEGO products to retailers and distributors. There have been stock reductions by the retail trade which has lead
to a DKK150-200 million sales dip.
The technological environment has also progressed. Where 50 years ago, the use of plastic in a toy may have
been viewed as a highly innovative idea, today the consumer is much more attracted to technologically innovative
toys. An area which LEGO is not known for.
SWOT Chart
Strengths A product with a history and to which all generations feel attatched. Unique selling point capture a
creative imagination, system of play, peaceful oasis far from the tensions and problems of society Famous
brand worldwide. A product that has sub-groups of products enabling it to attract a larger consumer base. Has
successfully introduced line extensions, which should help strengthen the brand
Weaknesses LEGO is beginning to produce products whose fit is far from the original building blocks, and so the
new products may not be as successful in the market. Lack of efficiency in production Creation of faulty products
which require recall. Difficulties in co-ordinating production with demand for the most popular LEGO lines.
Opportunities Has successfully introduced line extensions, which should help strengthen the brand. More childoriented products could be introduced under the brand name. With the innovative focus of the company, focus
should be put on further infiltrating the media market, which is one of the major competitors in children
entertainment. The company has a strong team of innovators The continuous introduction of new cartoon
characters and childhood personalities gives the opportunity for LEGO to create further more licensing
agreements
Page 23
Threats So many toys on the market, many of which have more functions and are more sophisticated than LEGO
and its associated products. Reaction of public to unemployment they may cause in aim of achieving greater
efficiency. Hi-Tech products and companies, such as Sony and Apple. Downturns in countrys economies can lead
to a reduction in sales of LEGO products. Stock reductions by the retail trade Bigger names such as Warner
Brothers and Disney who have progressed much further in creating childhood entertainment empires.
Danish company Lego, the worlds sixth largest toy maker, has transformed the processes of its design function in
recent years; and these changes have streamlined product development and the processes developed by the inhouse design function are now being used as a method to enhance innovation across the entire business (Design
Council, 2007). In the clichd global village we live in, there is no system that can survive in isolation. Especially
when considering a business system, which is integrally dynamic and constantly evolving.
The fundamental concept to become familiar with when managing a business such as Lego, is the idea that the
business has a creative personality in its own right. Hence it is important to understand the advantagees,
disadvantages, and creative implications of such a separate creative personality, as it entails for all the
participants both internal and external, a distinct creative position. The simplest form of business enterprises
utilized by companies is to trade in their own abilities; for Lego this means consistent development and innovation
within its own genre.
Oliver, et al (2007) elaborate the uniqueness with the Lego development case, by criticizing that intricacy and
attention to detail reflects Legos culture of craftsmanship, but also its disregard for the costs of innovation. The
company designers seem to be dreaming up new toys without taking into account the price of materials or the
costs of production. This sort of carefree creativity is unsustainable and difficult to uphold in the current global toy
market, where cost pressures are a constant concern.
Both national as well as international issues have a very strong bearing on the direction of the operations
management in a business. In particular, when considering the work of Multi National Corporations, one cannot
stay oblivious of the circumstances that are prevalent globally, as the entire world stands as their domestic
customer. Lego has continually evolved its system of bricks and applications ever since its invention, wherein the
original system elements have been extended in numerous ways to include, for instance, people and special parts
to allow the construction of moving vehicles and working train sets (Design Council, 2007).
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego.php#ixzz3GO0hcmhD
Lego has been a step ahead in its endeavour for innovation. As early as 1999, computer scientists claimed that a
simple computer-based form of evolution had succeeded in designing Lego structures without any assistance
from humans (Science Daily). This became the first successful leap from current days computer-aided design into
the futuristic realm of fully automated design, and the first primal step toward the artificial intelligence communitys
longstanding dream of evolutionary robotics, where robots might eventually adopt some form of evolution.
Should Lego fall prey to the growing competition at the risk of redundant designs, then this would give rise to
issues that would be beyond the controllable limits of the parent company, thereby making the business
operations vulnerable to the ever-changing international scenario. Wyetheville (2006) argues on the same lines by
elucidating that reflection on the successes, failures, and past experiences of an organization needs to be utilized
on an on-going basis to create an ever-renewing organization, which ends up guaranteeing success as well.
Page 24
The basic element of creative production being at the forefront always, one would go by the notion of innovation.
However, wanting to produce novel products, even though a dire need for the product may not be there, yet the
demand for it would have to be created. And the crucial word here is customer. A new Lego product is not
something that would have a potential buyer everywhere. This requires a certain niche of buyers, with a certain
amount of style and balance in their preferences and likes to accomplish the needful.
For establishment of a new product market for Lego, the first step would be to engage the existing customers of
the company. If the buyer has used one product of the company and is seemingly satisfied, there is every
probability that he can be allured into another one. In such and event, a database for the current clients can be
considered crucial. This is because Lego would want to create and capture new markets, at the same time it
would not like to lose on existing brand loyalty. Then, based on the features of the product, a market sample could
be acquired as to who can be the future lot with possible interest in the product. That area of the population would
then be targeted by means of conventional marketing tools involving print and electronic media. It is important to
create the demand, that the necessity and difference of the new product be highlighted to the maximum.
Perhaps the most important venture would be getting involved in a one-to-one method of communication with the
customers. Once the target areas has been established, then the sales and marketing people, using methods of
emails, telephones, letters and even workshops, would endeavor to convince the potential customer in a
personalized and customized way, making them feel that this product was created in the first place for their
convenience. For a more international clientele in the case of Lego, electronic media would obviously be adopted.
The moment a client starts to feel special, the product is half sold. This also covers the credibility, reliability and
after sales issues for the customer if initially, they are being approached as someone special.
Klassner (2002) purports that based on the sophistication of the projects, the Lego platform has much evolved
since its introduction to become a cost-effective platform worthy of consideration as a supplementing
programming environment to traditional PC programming. As more work is done in the open source community to
address the unaddressed criticisms, the Lego platforms infrastructure viability will only improve. To this end, Lego
should work on extending the basic firmware to include support for targeted message passing and to develop a
system for distributing computation within a robotic network as well. Only this can possibly ensure the evergrowing status of Lego in an ever-growing market.
References
Design Council. (2007). Design at Lego. Eleven Lessons: managing designs in eleven global brands.
Klassner, F. (2002). A Case Study of LEGO Mindstorms 'TM Suitability for Artificial Intelligence and Robotics
Courses at the College Level. National Science Foundation.
Oliver, K. et al. (2007). Rebuilding Lego, Brick by Brick. Strategy + Business.
Science Daily (1999). In First Case Of Fully Automated Design, Computers Shape Lego Bricks Into Various
Designs Without Human Input.
Wyetheville, C. (2006). Organization Renewal Through Participatory Involvement.
Kotler, P., Wong, V., Saunders, J., Armstrong, G. (2005) Principles of Marketing, Fourth European Addition.
Pearson, Prentice Hall.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego.php#ixzz3GO0peGfz
Page 25
ntroduction: A short introduction about the LEGO companies history, before starting this case study. It was started
by a simple carpenter named Ole Kirk Christiansen and with a few employees in 1932. From today more than 60
years ago they started making wooden toys in his workshop in Billund, Denmark. The name LEGO first used in
1934 came from Danish words 'leg Godt' translation this word is ' play well'.
But as when plastic came into widespread use, then Ole Kirk begins to realize the huge potential of plastic as a
new product existing wooden toys. And the first toy produced was a truck that could easily separate and again re
assembled. It was the end of 1940s.
LEGO's external marketing: To understand the external marketing of any business, it can be done by STEP
analysis, for LEGO external marketing environment can be divided into for main groupings, known as acronym
STEP: Sociocultural, Technological, Economic/competitive, and Political. So its necessary to now each part of
STEP analysis for LEGO. So I explain every separate follows as:
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego-case-study-analysismarketing-essay.php#ixzz3GOWfmSg6
(Frances Brassington and Stephen pettitt P.46, 2003)
Sociocultural: in recent years when customer wants to purchase toy or any item they mostly per fur the product
with LEGO brand, this is because of companies motive that they make product according to the needs of
customers either it's age gap or gender. For this LEGO company creates good statement in there website, that
they are progressively finding innovative ideas for new toy product. LEGO company group its business
organisation into four main categories: Play materials in this children's age upto 0- 16+, family attraction, lifestyle
products and media.
Technological: As per LEGO it is world top most toy company with top grand name, and when it comes to the
technology they have good technology but most important thing is that they have brilliant people working for them
how make good use of technology. The technological environment is continuously changing. As we can see a few
years ago toy were made by plastic but today a dramatic changes made in the field of toy, a simple example is
robot how works for you.
Economic/competitive: Today just in the market of toys there are huge number of companies are there. So for
LEGO Company also have to face competition from other manufacture in the market, but as LEGO has establish
a good reputation in the consumer mind, just because of fair policy of LEGO company.
SWOT analysis for LEGO: SWOT analysis is to determine the position of the business, in for four parts:
Strength: Main strength for LEGO is that they have reputation for quality in raw material for making toys and also
their processes, as LEGO brand is in the market for long duration, they prepared a good knowledge of the market
and made good contacts worldwide.
Weakness: Because of worldwide, so higher means of transportation cost and delay in supply. As some time
company do not pay attention to buyers initiate wish.
Page 26
Opportunity: Advance technological give opportunity to LEGO company. Company makes product according to
the needs of consumer which make good relationship between both.
Threats: Main threat is that number of competitors in the market, with huge range of product. And some of
business environment also which can accrued at any time, like credit crunch.
Evaluation of decision making process made by LEGO and effective response after the change in demandWhile consumer buying any product from the market there are many guidance which help in decision making.
Today fashion is changing very fast which also affects the consumer decision making. Following are some ways of
decision making.
Social and educational attraction product- As people always compare with other, so while purchasing toys for their
children's they like to buy the toys which is famous in the society and have a trend at that time and children also
buy the same product because their friend might have same one. So LEGO is always follow the same rhythm
which is going on and makes product according to needs of consumer with new fashion and trend. LEGO produce
product affording to the main target range which is 0 years child to 18years+ boy. They also make product which
helping in education for children's.
Technological attraction product- today world is changing very fast with advance technology. So it also affects the
habit of consumer decision making. What new technology they use in their particular product and what new can
they do in the fields of games. LEGO use advance technology in their process of making product and with
advance computer games. LEGO knows that if it is reverse its changing financial fortunes, its continued
commitment to innovation is essential. They mostly targeted two-to-five year olds how favourite characters like
Winnie the pooh, Tigger, Piglet which they show in Disney film characters.
Belief and attitudes- Company has simple phenomena that they never change their attitude towards their product
making. LEGO always encourage children's creativity, so they use the theme for them. for any company attitude
play an important role for consumer while collecting the information or decision making and Williams 1981in
summarising the literature, describes attitudes have three different comportments cognitive, affective, co-native
(Williams 1981, P. no. 114, Principal of marketing 3 Rd ).
Gender or age attraction product- gender or age also plays an important role while consumer purchases a new
product. LEGO organisation make different product for boys and girls, because wants of every customer is
basically different, so they made according to needs. This gender difference starts from the first year of children's.
And the same in the age difference, as child
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego-case-study-analysismarketing-essay.php#ixzz3GOWpKfX0
Poor results- With the end of 1998 LEGO organisation has disappointed with the results they got, one of their
senior management team realized that it must focus on increasing the efficiency of the business. In that time
organisation recorded a before-tax loss of DKK 282 million, its worst ever set of figures. ( case study )
Role of innovation on brand positioning and the marketing strategyBrand Positioning-
Page 27
Due to drastic change in the economy and in the field of technology LEGO have great effect on this brand name,
ever fast changing want of Consumer Company also think that what they want in the toys and games. Targeting
young adult is anything but child's toy. Todays toys involve highly focused research and the use of sophisticated
technology to attract and to appeal to young people. Yesterday's favourite brand such as LEGO and Biro are now
fighting for top-of-the-toy-box status against electronic upstarts.(by Ron Irwin,
http://www.brandchannel.com/features_effect.asp?pf_id=113 )
But in some research it is find that LEGO have to suffer a lot, not in the brand's but also a loss figures as it is
shown in the case study given to students. But as the time passes LEGO stands and get this brand position name
and set a good picture in the mind of consumer and force them to buy their product which is best from rest. Today
in the market of toys LEGO has become famous and makes an important place in new generation children's.
One more important definition for LEGO from the same case study our vision is for people all over the world to
experience positive, happy associations every time they see a LEGO logo, see a LEGO element or hold it in their
hands. Imagination, exuberance, spontaneity, self-expression, quality-these are some of the words we wish to link
with the LEGO name, together with values like development, concern for others and innovation.
Www.lego.com
Marketing strategies- LEGO organisation always adopted new and creative ideas for making their products which
are currently in trend and in the market. LEGO Company has made an tendency that they use to make server all
the time in the business field, so that they get updated every time.
Find out more from UK Essays here: http://www.ukessays.com/essays/marketing/lego-case-study-analysismarketing-essay.php#ixzz3GOWwbSma
Page 28

Online Information of LEGO

Enviado por

Dados do documento

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Online Information of LEGO

Enviado por

Direitos autorais:

Formatos disponíveis

Lego strategic analysis

Majan College (University College)

Opportunities and Threats

Majan College (University College)

Majan College (University College)

Lego Faces Increasing Competition Marketing Essay

Majan College (University College)

Majan College (University College)

Compare and contrast with main competitor < Mega Bloks>

The survival of lego in changing environment

Majan College (University College)

In 1934, the companies name LEGO was established

Majan College (University College)

Majan College (University College)

Majan College (University College)

Você também pode gostar