Lego Case Study

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Who are Lego’s key stakeholders?

The major stakeholders of the LEGO Company are the children around the world, who form its clientele and whose parents are ready to buy the Lego products.

What are some of the short and long term issues facing the company? (What are the main strategic options for dealing with the most important of these issues?)

Some of the biggest setbacks for the company was maintaining the revenue streams. For instance, the company had highly unpredictable turns between profits and losses. In 2001 and 2002, it made good profits. However, the sales dipped in 2003, making a 26% loss in net, and 29% in play material sales. This setback is caused by the constant changing in the characteristics of the dynamic markets. In 2002, the new company invested in a new collection of toys to spice up its catalogue. It created a euphoria around the world in its selected markets. However, the markets were soon saturated, and the sales declined. Behemoths in the retail world, the likes of Wal-Mart incurred losses in stalled movement of the toys.

The reason for the declining demand for the over-produced products was the insufficient innovativeness to quench the fast-changing market demands. Also, there was evident lack of market research. The company lost a lot of money before 2001, and they simply fixed the problem by making new products that were an internal thought, instead of inquiring the desires of the market. Also, a survey would have predicted the rate of change of market characteristics, which was predominantly the causative factor for the losses. Once the company heads focus on the lessons learnt from the period of losses, the company jumps from the negative margin to the positive, and sky-rockets to a whopping 8.2 billion Danish Kroner in 2013, up from a loss of about 1.5 billion 10 years before.

Was the plan successful? (If not, what might have been done differently? Could a STEEP analysis have provided vital information? If so, how?)

In 2000, the company planned to quit production outside its mainstream business of toy making. Some of the products that the company had been dealing with include lifestyle products, publishing, and wristwatches. It intended to focus on software and toy making only, thus building the LEGO brand. Among the products that the company focused on creating are the LEGO MINDSTORMS which would enhance learning and playing experiences through LEGO studios, on which children would interact with moviemaking equipment. The Power product program, BASIC and the TECHNIC brands was also on the line among the many other games. The company sought to tap the potential in the world’s leading markets such as the UK, Japan, and the United States. It also targeted countries in which market saturation was far from real.

This plan, which the company began implementing in 2001 started to bear fruit in the same year, with the company jumping from a 1.07 billion loss in 2000 to a pre-tax profit of 530 million Danish Kroner. Their bet on the USA and the Asia/Pacific bore fruit as it contributed to the highest sales increase. The company, from the CEO’s insight, had made a cash cow in the new products such as Harry Potter, LEGO BIONICLE, and Bob the Builder, selling in the named markets and other countries in the European Union. A sign that the new strategy was working, many of the toy-making companies started to realign themselves with the products of LEGO as competition intensified

The STEEP analysis is an acronym. The Social aspect would have helped the company to determine consumer behavior in terms of market demands and changes, in order to match it with its Technological reforms that would have activated conformation. In the process of market evaluation, the company would have to determine the most Economically viable markets, along with pricing strategies. Since their main stakeholders are children, the company’s regard for Environment-friendly products would be an advantage. Political goodwill includes favorability of taxes, antitrust, trade and market laws which determine the stability of any company (PESTELAnalysis, 2015).

Since the case was published in 2003, what steps has Lego taken to readdress their strategic plans? (Think about concepts such as vision, mission and mandates. Find 2-3 sources to support your response.)

LEGO is a brand that was built on the promise of nurturing the creativity of children, something that the company has maintained to date. In their constant overhaul of the business model to suit the emerging market trends, the company has kept the initial vision, which was “Inventing the future of play” (LEGO, 2016). Its mission is to “inspire and develop the builders of tomorrow.” The company CEO Jorgen Vig Knudstorp and Mark Stafford admitted that while they were a worldwide player in the toy industry, the fiscal aspects had loose ends that leaked out money. The company made toys but had no idea how much it took to manufacture them. Once this irresponsible act was fixed, the company was fixed on a profit train that has accelerated since 2003 (Feloni, 2014).  The company, hence, focused on streamlining its manufacturing operations, reducing its complexity, thus reduced costs.

A major turnaround was the customer feedback phase introduction, where the market would propose, and by extension, dictate what they wanted LEGO to make. In doing so, the company gave its clients absolute control over what they wanted, which hastened sales. In this chain, the customers increased in value, and by extension, revenues skyrocketed (Amarsy, 2015).

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