lego change management case study pdf

Lego Change Management Case Study

Lego, the Danish company known for its colorful plastic bricks, has been a beloved toy brand for over eight decades.

 However, in the late 90s and early 2000s, Lego experienced a significant decline in sales and profitability due to poor decision-making and failure to adapt to the changing market. 

To address these challenges, Lego had to undergo a significant transformation in its business model, manufacturing process, and organizational structure. 

This transformation was achieved through a successful Change Management strategy that involved collaboration, communication, and innovation. 

In this blog post, we will explore Lego’s Change Management Case Study and discuss the lessons learned from this transformation.

Brief History and Growth of Lego   

Lego is a Danish company that was founded in 1932 by Ole Kirk Christiansen. The name “Lego” is derived from the Danish words “leg godt,” which mean “play well.” The company originally produced wooden toys, but in 1949 it began producing plastic interlocking bricks.

The Lego brick was invented by Ole Kirk’s son, Godtfred Kirk Christiansen. The brick design was perfected over several years and was introduced in its modern form in 1958. The bricks were designed to be versatile and durable, and they quickly became popular among children and adults alike.

Over the years, Lego has continued to innovate and grow. In the 1960s, the company expanded its product line to include a wider variety of building sets and play themes, such as the famous Lego Space sets. In the 1970s and 1980s, Lego introduced its first licensed products, such as sets based on popular TV shows and movies.

In the 1990s, Lego experienced a period of financial difficulty, as the company had expanded too rapidly and faced increased competition from other toy manufacturers. In response, the company underwent a restructuring and refocused on its core products and values.

In the 2000s, Lego experienced a resurgence in popularity, as the company introduced new product lines, such as Lego Star Wars and Lego Harry Potter, which were based on popular movies and franchises. Lego also expanded its business into theme parks and other entertainment ventures.

Today, Lego is one of the world’s largest toy companies, with a wide range of products and a strong global presence. The company continues to innovate and evolve, as it seeks to provide children and adults with creative and engaging play experiences.

External factors that led to organizational changes at Lego 

Lego has undergone a number of organizational changes over the years, in response to various external factors. Some of the key external factors that have led to these changes include:

• Changes in the toy industry: The toy industry is constantly evolving, with new technologies and trends emerging all the time. In order to stay competitive, Lego has had to adapt its product offerings and business model to keep up with these changes.
• Economic conditions: Economic conditions can have a significant impact on consumer spending, and as a result, on toy sales. During periods of economic downturn, for example, consumers may be less likely to spend money on non-essential items like toys. In response, Lego may need to adjust its pricing or marketing strategies to maintain sales.
• Competition: Lego faces competition from a wide range of other toy manufacturers, some of whom may offer similar products at lower prices. In order to stay competitive, Lego may need to innovate and differentiate its products from those of its competitors.
• Changing demographics: Changes in demographics can also have an impact on toy sales. For example, as the population ages, there may be a shift away from toys and towards other types of products. In response, Lego may need to adjust its product offerings or marketing strategies to appeal to different age groups.
• Technological advancements: Advances in technology can have a significant impact on the toy industry. For example, the rise of video games and digital entertainment has led to a decline in traditional toy sales in some markets. In response, Lego has developed its own digital products and integrated technology into its traditional brick sets.
• Societal trends and attitudes: Societal trends and attitudes can also impact toy sales. For example, as concerns about the environment and sustainability have grown, there has been increased interest in eco-friendly products. In response, Lego has introduced a line of sustainable bricks made from plant-based materials.

Internal factors that led to organizational changes at Lego 

There were several internal factors that led to organizational change at Lego, including:

• Poor Financial Performance: Lego’s financial performance had declined significantly in the late 90s and early 2000s. This was due to several factors, including a lack of innovation, failure to adapt to changing consumer preferences, and over-expansion.
• Lack of Collaboration: Lego’s organizational structure was siloed, and there was a lack of collaboration between different departments. This led to inefficiencies, duplication of efforts, and a lack of innovation.
• Inefficient Manufacturing Process: Lego’s manufacturing process was outdated and inefficient, which led to longer lead times, higher costs, and lower quality products.
• Complexity of Product Lines: Lego’s product lines had become overly complex, which made it challenging to manage inventory, production, and sales effectively.
• Leadership Issues: Lego had experienced several leadership changes in a short period, which led to a lack of strategic direction and a disconnect between the company’s goals and its actions

05 biggest changes implemented by Lego

Here are the 5 biggest changes implemented by Lego:

• Simplified Product Lines: Lego streamlined its product lines by reducing the number of themes and sets it offered. This helped the company focus on its core offerings and improve its manufacturing process and inventory management.
• Agile Manufacturing Process: Lego introduced an agile manufacturing process that allowed for greater flexibility and responsiveness to changing market demands. This helped reduce lead times and costs, and improved the quality of its products.
• Collaborative Organizational Structure: Lego implemented a more collaborative organizational structure, which encouraged cross-functional teams to work together and share information. This led to greater innovation, more efficient decision-making, and better alignment with the company’s strategic goals.
• Customer-Centric Approach: Lego shifted its focus to a customer-centric approach, which involved listening to customer feedback and using it to inform product development and marketing decisions. This helped the company create products that better aligned with customer preferences, resulting in increased sales and profitability.
• Brand Expansion: Lego expanded its brand beyond traditional building sets to include video games, movies, and theme parks. This helped the company reach new audiences and diversify its revenue streams, making it less dependent on the success of its core products

05 Positive outcome and impact of change management implemented at Lego 

The successful implementation of changes by Lego led to several positive outcomes, including:

• Increased Revenue: Lego’s revenue grew significantly following the implementation of changes. In 2020, the company reported revenue of $6.5 billion, up from $1.4 billion in 2004.
• Improved Profitability: Lego’s profitability also improved, with the company reporting a net profit of $1.6 billion in 2020, up from a loss of $300 million in 2004.
• Increased Market Share: Lego’s market share in the toy industry grew from 4% in 2004 to 7.7% in 2020, making it one of the largest toy manufacturers in the world.
• Strong Brand Identity: Lego’s successful transformation helped establish it as a leading brand in the toy industry, known for its high-quality products, innovative designs, and commitment to sustainability.
• Diversified Product Line: Lego’s expansion beyond traditional building sets helped the company diversify its product line and revenue streams. This made it less dependent on the success of its core products, resulting in greater stability and sustainability for the company.

Final Words

The successful implementation of change management at Lego serves as a valuable case study for businesses looking to achieve sustainable growth and success in a rapidly changing market. Lego’s transformation was not easy, and it required a significant commitment to collaboration, communication, and innovation. However, the positive outcomes of the transformation demonstrate the importance of effective change management in achieving long-term success.

Lego’s successful transformation was achieved through a combination of strategic changes to its business model, organizational structure, and manufacturing process, as well as a focus on customer-centricity and brand expansion. By simplifying its product lines, implementing an agile manufacturing process, and creating a more collaborative organizational structure, Lego was able to improve its efficiency and responsiveness to market demands. This, in turn, led to increased revenue, improved profitability, and a stronger brand identity.

About The Author

Tahir Abbas

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Innovating a Turnaround at LEGO

• David Robertson and Per Hjuler

Five years ago, the LEGO Group was near bankruptcy. Many of its innovation efforts—theme parks, Clikits craft sets (marketed to girls), an action figure called Galidor supported by a television show—were unprofitable or had failed outright. Today, as the overall toy market declines, LEGO’s revenues and profits are climbing, up 19% and 30% respectively in […]

Reprint: F0909B

Though the overall toy market is declining, LEGO’s revenues and profits are climbing—largely because the company revamped its innovation efforts to align with strategy.

Five years ago, the LEGO Group was near bankruptcy. Many of its innovation efforts—theme parks, Clikits craft sets (marketed to girls), an action figure called Galidor supported by a television show—were unprofitable or had failed outright. Today, as the overall toy market declines, LEGO’s revenues and profits are climbing, up 19% and 30% respectively in 2008.

• DR David Robertson ( [email protected] ) is a professor of innovation and technology management at IMD. Per Hjuler ( [email protected] ) is the LEGO Group vice president of product and marketing development. For more, visit www.innovationgovernance.net.

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HBS Cases: LEGO

Although it isn't part of the admissions criteria, experience playing with LEGOs can come in handy at Harvard Business School.

When Stefan H. Thomke teaches his new case about the iconic toy company, he gives students eight-studded LEGO building bricks to figure out how many different ways they can be combined. Thomke's experience goes back a long way—as a kid growing up in Germany he participated in a LEGO competition. As an adult, though, his interests lie more in the business behind the bricks. "When you've written many cases you have a gut feeling that one like this could be really great," he says.

Thomke, the William Barclay Harding Professor of Business Administration, wrote the case with Harvard Business School's Jan W. Rivkin, the Bruce V. Rauner Professor of Business Administration, and Daniela Beyersdorfer, associate director of the HBS Europe Research Center.

LEGO explores how the company-one of the most profitable toymakers in the world-grew to global dominance from humble beginnings; the mistakes that led it near bankruptcy; and why one turnaround attempt failed while a second succeeded. LEGO executives were unusually supportive about the case-writing process, Thomke says. "We had access to everybody; they wanted the story to be told truthfully, with all the good and the bad."

Building At The Start

Part of that access included a visit to a wood craftsman's workshop in the small town of Billund, Denmark, where LEGO began, in 1916. Carpenter Ole Kirk Kristiansen eventually shifted the business from making houses and furniture to crafting wooden toys. He based the name of his new venture on the Danish words for "play well" (and, as it turned out, the Latin words for "to assemble"). His motto "Only the best is good enough" would later be carved into a wooden plaque and hung in the workshop. These themes of good play and quality products were both bedrocks and touchstones for future generations of LEGO toy makers.

Godtfred Kirk Kristiansen represented the second generation, working alongside his father at age 12. The LEGO brick played with by kids and adults around the globe came into being during Godtfred's tenure. He considered it a unique, sturdy, simple product—a system—that offered endless opportunities for creative fun, and drew up a list of product characteristics including "long hours of play" and "quality in every detail" that was distributed to everyone in the company.

Like his father, Godtfred paid careful attention to every aspect of the business, applying, for example, his knowledge of material science and production technology to the brick-manufacturing process. It's because of these precise specifications that bricks made under his watch are interchangeable with those available today. Godtfred's cautious nature extended all the way to the profit margins: he championed slow, steady growth. Because of this, it could take years for a new product to go to market. Green bricks, for instance, appeared in play sets only after a decadelong decision-making process-and the idea to include them came from Godtfred's son (and third-generation toymaker), Kjeld.

The snail's pace served the company well, as did the grandson of its founder. Under Kjeld's management, product demand was so high at times that executives actually found themselves discussing ways to slow sales.

A Shock To The System

That all changed in the early 1990s as seismic shifts pounded the toy market. Big Box toy discounters trampled mom-and-pops and lowered prices dramatically. Meanwhile, birth rates declined, children had less time to play and not much interest in toys that didn't offer instant gratification. "These changes did not play well to our strengths," observed current CEO Jørgen Vig Knudstorp in the case.

Serious jolts were also taking place in the LEGO Group. Out of work for a year following a serious illness in 1993, Kjeld appointed a five-person management team to help him run the company when he returned. The group focused mainly on driving growth. When a benchmarking study revealed LEGO's global name recognition was on par with industry giants like Disney, the team started churning out new products and ideas to leverage the brand's untapped value. A line of LEGO-branded children's wear was created and a division of the LEGO Group was charged with pitching book, movie, and TV ideas. LEGO building sets became increasingly complex with more unique components.

While the number of LEGO-branded items grew, sales did not, and in 1998 the company suffered its first financial loss. "Their top-line growth was slowing down but their cost was accelerating, so they were starting to lose some significant money," says Thomke.

Danish turnaround expert Poul Plougmann was hired to reassemble LEGO and staunch the red ink. "He comes in and … does things by the book," says Thomke. "He lays people off, he streamlines some things, he globalizes." And yet the financial picture grew worse. "He's basically going by the turnaround book, but it doesn't work."

One continuing problem: the company's growing complexity was choking it. Adding more bricks made products harder to assemble, forecasts harder to determine, and inventory harder to manage. Depending on the kit, there was either too much inventory, or no inventory at all, and restocking could take months.

"You had this multiplier effect of added complexity that went through the entire supply chain," Thomke says.

The LEGO Group had also gotten too far away from the core values it had been building on for the better part of a century. The toymaker found itself needing to turn around its turnaround.

Outside The Family

Enter Jørgen Knudstorp. He was just 35 years old when Kjeld promoted him from director of strategic development to CEO in 2004. (Kjeld retired that same year.)

Like Plougmann, he had no family ties to the company. Unlike Plougmann, his turnaround attempt succeeded. Knudstorp's slow-it-down approach of careful cash management, focusing on core products, and reducing product complexity certainly contributed to that success. It would also take re-engaging with customers, many of whom passed a love of LEGOs to their children while still connecting with the toys themselves. "One of the insights Jørgen had when he became CEO was that he needed to reconnect with the community [of loyal LEGO fans], one of the most powerful assets the company had," says Thomke. "It was a huge part of the comeback."

Knudstorp worked hard to define the core business of the company. "How you work with, and experiment outside of, the core of your business is part of that balance," explains Thomke.

Knudstorp recognized that innovation was part of that core, but he'd also seen the result of unconstrained creativity, so new product design began to be informed by market research, user feedback, and how well the toys matched the vision of quality creative play laid out by its founding fathers. Putting parameters on how people innovate had the paradoxical effect of making them better at it.

Reining in the creative process was part of a larger push by Knudstorp to reduce overall complexity within the organization. On the supply chain side, he did away with many of the unique brick components added during Plougmann's tenure, and eventually decided to bring brick manufacturing back in-house to ensure quality control.

Finally, Knudstorp made big changes to the management team, firing five of seven manufacturing executives and appointing a new leader for the team. A psychoanalyst was brought in to teach the management team how to identify decision-making made by logic versus emotion.

Sustainable And Balanced

It turns out that LEGOs promote lifelong learning. While the bricks themselves teach children the fundamentals of construction and creativity, the company's almost century-old history of management change has important lessons for businesspeople. "Managing sustainable growth is also about managing a balanced business system," says Thomke. "Complexity is something you need to watch very closely."

Controlling complexity, clarifying the core of its business, and engaging the larger community helped save the LEGO Group. Although he was not a Kristiansen by birth, Knudstorp's management style and business ideals closely mirrored those of its founding fathers. Only the best was, and is, good enough.

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Transforming the LEGO Group for the Digital Economy

An in-depth description of a firm’s approach to an IT management issue (intended for MBA and executive education)

To avert bankruptcy, the LEGO Group had transformed itself starting in 2004. As it entered 2016, the company was poised for a new transformation. This time the transformation builds on the strength of an enterprise platform the company developed to provide needed discipline around core business processes. The goal of the new transformation is “to become a digital company.” Although the company already looked digital in 2016, management felt it had not become digital—in its products and processes. This case describes the LEGO Group’s journey to become a successful digital company.

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Using Lego Serious Play for Change Management

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Originally posted on JeffTagle.com

About a month ago, the business services division of an FMCG company used Lego Serious Play as part of their Change Management initiative. The company has gone through a lot of changes in the previous months, and they want the employees to realize that in spite of these events, they are still in control of their careers regardless if it’s within the company or not.

LEGO SERIOUS PLAY case study by Jeff Tagle

Lego Serious Play was used as a supplementary activity, specifically to apply the company’s career principles in their own and their team’s careers. The first group was composed of managers and mentors, and we focused on how their own career experiences can contribute to their team’s/mentee’s career development. Through Lego Serious Play, they were able to visualize how their own career can affect their team’s career, hence we were able to establish steps moving forward as to how to address the development of their teams and/or mentees.

The second group was made up of tenured rank-and-file employees who more or less had a positive outlook on the changes that happened.  We explored on how we can bridge the gap from their current career situation to their ideal one. From there, action plans were formulated and committed to.

The third, however, had a relatively negative outlook on these changes, hence some of them have handed in their resignation letters (one person was in his last week on the job!). We focused more on the obstacles that were hindering them from moving into their ideal career situation. They realized that these obstacles can be turned around and be used as stepping stones, or even inspirations, to reach their ideal career situation. One commented that they already know what they needed to do, it’s just a matter of what pushes them to make them do it. Lego Serious Play was a first step in committing to their own career development. Another even rescinded her resignation letter and will be staying on instead.

The fourth group was the “lightest” group since they were new employees (2 weeks to 4 months on the job) and wasn’t directly affected by the changes. Similar to the second group, we focused on bridging the gap from their current career situation to their ideal career situation. Action plans and commitments were also made after the session.

As my “first” Lego Serious Play session, I have learned a lot about the process. It made me realize how important breaks were, as some participants can be completely drained after a number of challenges. Though they may be engaged through the builds and their sharing, it’s important to retain their focus while waiting for their turn, or when they are already done sharing.

Lego Serious Play wasn’t designed to elicit certain “right” answers, but it can align mindsets towards a certain direction with carefully planned questions and follow-up discussions. And aligning (or re-aligning) mindsets is important in managing change.

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Lego (a): the crisis change management analysis & solution, hbr change management solutions, strategy & execution case study | jan w. rivkin, stefan thomke, daniela beyersdorfer, case study description.

As this case opens, iconic toymaker LEGO stands on the brink of bankruptcy. Jorgen Vig Knudstorp, LEGO's young and newly appointed CEO, must size up changes in the toy industry, learn from the company's recent moves, and craft a strategy that will put LEGO back on track.

Change Management, Crisis management, Financial management, Product development , Case Study Solution, Term Papers

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What is Change Management Definition & Process? Why transformation efforts fail? What are the Change Management Issues in LEGO (A): The Crisis case study?

According to John P. Kotter – Change Management efforts are the major initiatives an organization undertakes to either boost productivity, increase product quality, improve the organizational culture, or reverse the present downward spiral that the company is going through. Sooner or later every organization requires change management efforts because without reinventing itself organization tends to lose out in the competitive market environment. The competitors catch up with it in products and service delivery, disruptors take away the lucrative and niche market positioning, or management ends up sitting on its own laurels thus missing out on the new trends, opportunities and developments in the industry.

What are the John P. Kotter - 8 Steps of Change Management?

Eight Steps of Kotter's Change Management Execution are -

• 1. Establish a Sense of Urgency
• 2. Form a Powerful Guiding Coalition
• 3. Create a Vision
• 4. Communicate the Vision
• 5. Empower Others to Act on the Vision
• 6. Plan for and Create Short Term Wins
• 7. Consolidate Improvements and Produce More Change
• 8. Institutionalize New Approaches

Are Change Management efforts easy to implement? What are the challenges in implementing change management processes?

According to authorlist Change management efforts are absolutely essential for the surviving and thriving of the organization but they are also extremely difficult to implement. Some of the biggest obstacles in implementing change efforts are –

• Change efforts are often made by new leaders because they are chosen by board to do so. These leaders often have less trust among the workforce compare to the people with whom they were already working with over the years.
• Change efforts create an environment of uncertainty in the organization that impacts not only the productivity in the organization but also the level of trust in the organization.
• Change efforts are often targeted at making fundamental aspects in the business – operations and culture. Change management disrupts are status quo thus face opposition from both within and outside the organization.
• Change management is often a lengthy, time consuming, and resource consuming process. Managements try to avoid them because they reflect negatively on the short term financial balance sheet of the organization.
• Change management efforts are made when the organization is in dire need and have fewer resources. This creates silos protection mentality within the organization.

LEGO (A): The Crisis SWOT Analysis, SWOT Matrix, Weighted SWOT Case Study Solution & Analysis

How you can apply Change Management Principles to LEGO (A): The Crisis case study?

Leaders can implement Change Management efforts in the organization by following the “Eight Steps Method of Change Management” by John P. Kotter.

Step 1 - Establish a sense of urgency

What are areas that require urgent change management efforts in the “ LEGO (A): The Crisis “ case study. Some of the areas that require urgent changes are – organizing sales force to meet competitive realities, building new organizational structure to enter new markets or explore new opportunities. The leader needs to convince the managers that the status quo is far more dangerous than the change efforts.

Step 2 - Form a powerful guiding coalition

As mentioned earlier in the paper, most change efforts are undertaken by new management which has far less trust in the bank compare to the people with whom the organization staff has worked for long period of time. New leaders need to tap in the talent of the existing managers and integrate them in the change management efforts . This will for a powerful guiding coalition that not only understands the urgency of the situation but also has the trust of the employees in the organization. If the team able to explain at the grass roots level what went wrong, why organization need change, and what will be the outcomes of the change efforts then there will be a far more positive sentiment about change efforts among the rank and file.

Step 3 - Create a vision

The most critical role of the leader who is leading the change efforts is – creating and communicating a vision that can have a broader buy-in among employees throughout the organization. The vision should not only talk about broader objectives but also about how every little change can add up to the improvement in the overall organization.

Step 4 - Communicating the vision

Leaders need to use every vehicle to communicate the desired outcomes of the change efforts and how each employee impacted by it can contribute to achieve the desired change. Secondly the communication efforts need to answer a simple question for employees – “What it is in for the them”. If the vision doesn’t provide answer to this question then the change efforts are bound to fail because it won’t have buy-in from the required stakeholders of the organization.

Step 5 -Empower other to act on the vision

Once the vision is set and communicated, change management leadership should empower people at every level to take decisions regarding the change efforts. The empowerment should follow two key principles – it shouldn’t be too structured that it takes away improvisation capabilities of the managers who are working on the fronts. Secondly it shouldn’t be too loosely defined that people at the execution level can take it away from the desired vision and objectives.

LEGO (A): The Crisis PESTEL / PEST / STEP & Porter Five Forces Analysis

Step 6 - Plan for and create short term wins

Initially the change efforts will bring more disruption then positive change because it is transforming the status quo. For example new training to increase productivity initially will lead to decrease in level of current productivity because workers are learning new skills and way of doing things. It can demotivate the employees regarding change efforts. To overcome such scenarios the change management leadership should focus on short term wins within the long term transformation. They should carefully craft short term goals, reward employees for achieving short term wins, and provide a comprehensive understanding of how these short term wins fit into the overall vision and objectives of the change management efforts.

Step 7 - Consolidate improvements and produce more change

Short term wins lead to renewed enthusiasm among the employees to implement change efforts. Management should go ahead to put a framework where the improvements made so far are consolidated and more change efforts can be built on the top of the present change efforts.

Step 8 - Institutionalize new approaches

Once the improvements are consolidated, leadership needs to take steps to institutionalize the processes and changes that are made. It needs to stress how the change efforts have delivered success in the desired manner. It should highlight the connection between corporate success and new behaviour. Finally organization management needs to create organizational structure, leadership, and performance plans consistent with the new approach.

Is change management a process or event?

What many leaders and managers at the Lego Jorgen fails to recognize is that – Change Management is a deliberate and detail oriented process rather than an event where the management declares that the changes it needs to make in the organization to thrive. Change management not only impact the operational processes of the organization but also the cultural and integral values of the organization.

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• The LEGO Group leadership playground: Energizing everybody every day (A)

In 2018, the LEGO Group defined a new way of leading to enable the company to move more quickly, to make the right decisions, to deliver its mission and the commercial momentum that sustained it, and to shape the LEGO® culture in a positive way. This new way of leading would need to be modeled at the top of the organization. That was certain. But CEO, Niels Christiansen, and Chief People Officer, Loren Shuster, believed that the task of defining the new way of leading should not be done by the Executive Leadership Team or by HR. It should be developed bottom up. The LEGO Group was no longer the patriarchy it had once been under its founder, but Shuster saw that patriarchal assumptions about leadership lingered in its culture. If the LEGO Group was going to move towards a balanced system where leadership responsibility was more distributed and less hierarchical, it would be ironic to impose this top down. A better way to start would be to invite people from different levels and different functions of the organization to answer the question: What kind of leadership do we need in the LEGO Group and how can we embed the new way of leading into the fabric of the organization so that it can be self-generative? Case A describes the process that the LEGO Group used to create what they called The Leadership Playground and bring it to life in the company.

• How to create a leadership model to change the culture of the LEGO Group in a bottom-up way.

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• The LEGO Group leadership playground: Energizing everybody every day (B)

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Lego Case Study: The Lego Group Competitive Advantage & Strategy

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Main Feature of Organization, Strategic Products and Current Mission

Internal and external environments of the lego group, internal environment – swot value change of the company, external environment – pestel, porter five forces, power interest matrix of the lego group, new strategic directions for the organization, works cited.

The Lego Group is a toy-manufacturing company which is based in Billund, Denmark. The company was founded as a family organization in the year 1932, by Ole Kirk Christian. Today, the company stands high as a global player in the world of toys, among other strategic entertainment products (LeGoff 557).

Initially, Lego started as a manufacturer of ironing boards, toys, stepladders, and stools. Among these products, the wooden toys have been the best selling items, thus according the firm a strong reputation in the entertainment business. By the year 1949, the firm started manufacturing early versions of the popular LEGO plastic bricks and this was a strategic approach by the organisation, considering the fact that plastics had just greeted the markets as a new material (Simoes and Dibb 219).

However, the outcome was not what the company managers had anticipated, since the public was a bit hesitant in accepting the new material. The company would rapidly gain popularly in most parts of the world, as a result of progressive development of its products. For instance, the basic bricks were sustained with extra figures and features, in a manner that diversified the playing opportunities for children.

The company’s sales and profit scales were rapidly taking a positive charge between 1950 and 1970. However, the period between 1970 and 1990 proved to be a difficult moment for the company, owing to the serious economical implications that greeted the world then, following the oil crisis of the time.

In the course of this era and the period that followed afterwards, the Lego Group underwent serious fluctuations, due to a number of reasons which included; rapid change in the business environment witnessed at the time, complications in logistic matters and financial control, and the extended times that would be required to run into the future plans of the company.

Among the many problems which threatened to shake the firm’s potential, was the issue of the rising competition from much bigger companies such as Hasbro and Mattel (Hicks 41). Other new firms such as Sony, Activision, and Nintendo, who had just ventured the scene with more advanced electronic products, also posed great challenge to the productivity of the Group.

In this regard, the company’s only survival option in the competitive market was to adopt a strategic development plan that would see it come up with new and more exciting products. According to Claus, Riggs & Sekeran, the toy company enjoys a wide range of products that are fit for children of all ages (71).

These products are grouped in various categories, and some of the latest developments include video gaming, pre-school products, play themes, bricks, licensed products, and educational-based products for children, just to mention but a few. This is a clear indication of how the company has managed to remain high in the current competitive business of toy products.

The Lego Group was actively been involved in several turnaround attempts for the better part of 1990s and in the early 2000s, but with little success. No one could have foretold a possible solution to the progressive issues which appeared to claim the company, until towards the end of the year 2004, when a glimpse of hope shone onto the firm.

It was in the course of this period when the company’s serving CEO, Kjeld, took on more involvement in strategies that helped to identify the factors responsible for the company’s downsizing. This helped in the design of effective strategies that would eventually see the firm come back on track. The design and implementation of these strategies was based on the company’s organization, management and business expectation plans.

This involved the replacement of over three quarters of the senior management team with a new batch. Other strategies would be centered on the firm’s operational systems, among other key interventions.

For instance, a thorough revision was carried out on the cost and the supply chain operations of the company, and major changes were inflicted on the sectors right away. More importantly, the Lego Group had realized that working alone would not take them anywhere, and this would see them cooperate with licensing partners in the widely acclaimed gaming sector.

These interventions were sustained with a progressive development of the company’s products, to fit the demands of the modern era. The company has shown steady advancements lately, as a result of these interventions. The climax of this success was realized in the 2008-2009 financial year, which saw the company registering the biggest rate of growth in sales and profits, since the year 1981.

With these positive outcomes, there can’t be any doubts that the Lego Group is now back to its place in the development of children’s creativity, after several years of financial loss and failure (Irani, Sharif & Love 59). The objective of the company is to develop innovative products to meet the expansive consumer requirements, as they occur in the market.

As part of their recovery strength, the Group has reclaimed its position in the global listings, where it is ranked among the top five toy companies, with an approximate value of 4.8 percent in market shares. Lego’s success can also be associated with their mission, which aims at inspiring the current generation of children to be able to explore and challenge their own potential in creativity (Stacey 79).

This has been achieved through the group’s brand values, which are tailored on aspects meant to bring a significant impact on children. Some of these aspects would include things such as quality, imagination, fun, creativity, caring, and learning.

Lego group is a good example of the international companies that have managed to balance the nature and constraints of the internal and external environments, to make a notable difference in the current competitive world of business. From the perspective of various reports about the company, it is apparent how the toy company has reacted in adapting and utilizing the potential offered by its internal resources, in meeting the demands of its external environment.

According to Dyllick, Thomas & Hockerts, the company’s current strategic development has been achieved through the focused leadership of its former CEO, Kjeld Kirk (139). A better part of this success however, has been reached upon through the feedback which had been received regarding the internal competencies of the firm and its external operating systems.

A major tool that can be used to assess the overall potential of a firm is the SWOT analysis structure, which stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis basically considers two main parts; a company’s inward elements which normally constitutes of its strengths and weaknesses, and the attempts to consider the way these factors would come to fit against the external aspects of an organisation’s threats and opportunities.

The company’s key strengths are commonly associated with its constant ability to apply the concept of brand recognition in all its products and services, without having to compromise their core values. The company also maintains a close mutual relationship with its suppliers and retailers, and this gives it a powerful business advantage over its rivals in the industry.

The toy market is an industry bulging with a big number of competent players, but Lego’s products and services are the most preferred by majority of the people in the world (Oliver and Roos 911). This is due to their effective leadership in the development of a wide range of children products that have been praised for quality and originality. The newest products by the company are real manifestation of how the power of innovation applies, in meeting their goals and objectives in business.

Brand heritage is another strength which has succeeded at keeping the company ahead of its rivals in the industry (Hatch and Schultz 597). This is evident in how the company’s products are manufactured to fit in their brand values, which are aimed at making a significant impact on the lives of children all over the world.

Lego’s weaknesses in business can be observed through a number of ways. For instance, even though there have been serious attempts by the company to diversify its products, the company has been poor in technology and IT related matters compared to other competitors, who have fully embraced the power of technology in making their products more enticing to the users in the new media age (Schau 43). Lego Group has also been operating through large toy retailers, and this has been one of their biggest drawbacks in the market.

The large retailers are effective marketing outlets, but they normally operate on high costs and this is likely to deprive the company of substantial amounts of money in profits. More importantly, the company has failed to understand the marketing concepts which are in line with their consumers all over the world.

In other words, Lego group seems to be lacking full understanding of their consumer preferences in the market, and due to this lack of a strategic fit, they have often ended up losing more sales to their competitors in the market, who are well informed of the consumer needs regarding toys and gaming products.

It is also apparent that, Lego Group lacks the ability to effectively translate potential strengths into implemented strategies. This actually explains the company’s gradual response to financial and management issues, among other problems which have affected the company previously (Hölzl 39).

Opportunities & Threats

The company’s notable opportunities and threats can be linked together as key aspects which the company can utilize in achieving its goals and mission in the toy business. According to Schultz and Hatch, while the company has been widely acclaimed all over the world for its production of toys and other children products, there has been a decline in the sales of its traditional toys which constitutes the largest part of their products, due to the increasing attention of children on devices from other companies, that are more electronic (21).

The other biggest threat of the group is the growing number of giant competitors, who are utilizing every opportunity possible to thrive in the industry, thus making it one of the most competitive sectors in the world (Johnson 11). However, Lego Group has always seen these threats as opportunities for further developments in business.

New developments and increase on products has always remained the biggest opportunity to the company. More importantly, as a result of the rapid competition in the market, the company has managed to come up with numerous categories of products, a key strategy which has enabled it to be able to meet the needs of children in the modern era of technology.

Porter’s five forces analysis is observed to have a significant impact on a business, in relation to elements of the external environment (Michael 13). These forces include level of rivalry, power of suppliers, threat of entrants, power of buyers, and threat of substitutes. Each of these five forces is considered individually in assessing and analysing the external environment of the company in this case.

Level of rivalry

The level of rivalry is quite intense and strong for the Lego Group. While it is clear that the company enjoys a strong position in the industry, with relatively few giant competitors, it should be considered that they are taking part in a broader market of toy production, which also includes key players in the electronic sector, such as Sony and Nintendo, among others (Martin 84).

Power of suppliers

The company, whose main products are largely based on standardised inputs, has an average power of suppliers. However, it should be noted that, the power of suppliers is likely to go up, in case the company decides to major in more sophisticated areas of productions, such as games or films.

Power of buyers

The power of buyers is relatively high for the Lego Group, with minimal costs between alternative products.

Threat of entrants

As it would be expected, the toy product industry normally requires huge investments of time and money, in a number of ways that include things such as business capital, research funds, and development costs. All these serve as obstacles to entry in the industry, thus restricting the number of new entrants in the sector. In that case, there is a relatively low threat of new entrants in the wider entertainment market, and this offers the Lego Group a much stronger bargaining power over majority of its competitors in the market.

Threat of substitutes

This is arguably one of the biggest threats facing the entertainment product company today. Even though the company is said to have developed electronic products such as video and games, there is still evidence that some of the company’s products are still made in the traditional form. This has the meaning that, the company is faced by a big threat, given that users are likely to substitute between traditional toy and gaming products through to the ones that are made into electronic features.

It is also apparent that the Lego group has touched many people with its products and services in the entertainment sector. Through the engagement of the right people in its management and productivity systems, the company has made a big success in its mission and objectives in business (Beal 29).

As it would be observed in the above internal and external analyses, the company has tried to implement a number of strategies, in order to influence and attract people on their products. Through these interventions, the company has successfully managed to impact a large number of people from all over the world, with both electronic and alternative traditional products for children entertainment. Among other key players in the market, the company has a high interest on its stakeholders and the community.

The firm recognises these as the people who play the greatest role in helping them achieve their business goal and for that reason it treats them with much respect. Both the shareholders and the people from the diverse community have a positive impact to the company’s financial interest and what motivates them most is to get nothing less of the best from the company. In that respect, the Lego group is fully engaged in putting the necessary efforts which are needed to satisfy these significant groups.

The Lego group is arguably one of the most successful companies in the toy manufacturing industry. Through a wise interaction of its internal and external systems, sustained by the effective management, the company has gained a sustainable competitive advantage over many of its rivals in the market.

However, there are numerous strategic directions which the product company can utilize, to be able to maintain a more sustainable competitive advantage over its rivals.

The Lego Group may have amassed great reputation and success in the entertainment sector, but changing the company into an all-time winner in the global toy market is something that would require much effort, from the company (Schroeder 54). Some of these efforts would tend to involve numerous aspects of strategic management, whose significance in business has often been underestimated.

Some of the strategic directions which the company can incorporate in its operation systems would include; a focus on international opportunities, expansion of digital systems and strategies, constant focus on cost, expansion of target markets, widening of product range, and focus on effective online distribution strategies.

The Lego Group may have made significant attempts in trying to incorporate some of these strategies in their routine business operations, but there is still room for improvement which can be achieved by revising these strategies over and over, to eliminate all the problems which continue to pose a big challenge to the company’s productivity and accountability in children’s toy and entertainment products (Morgan 45).

For instance, the company should focus on the many opportunities provided by the international community and try to utilize them effectively. A good way of achieving this goal is by ensuring that the toy products are manufactured and distributed in all regions of the world, where they are needed most by families, as a key engagement for their little ones.

It should also be considered that, things are changing with the times nowadays and in that respect, expansion of digital systems and strategies is very crucial for the development of the company to fit in the demands of the modern era, which is defined by technology (Cooper 75). To be able to comply fully with this call of modernity, the company should try to ensure that all their products are made into electronic features, to fit the growing demands of technology (Laudon and Traver 18).

It is also necessary for the company to make a constant focus on cost matters, to ensure that there is a two-sided benefit between the producer and the consumers. More importantly, there is also the need for the Lego Group to conduct extensive research on new developments to widen its product range.

Through a corporate level strategy aimed at increasing international coverage and product diversity, the company would be certain to realize more sales and profits out of its toy products. The company should also consider the vast potential business opportunities that are offered by the upcoming trend of e-commerce, and try to utilise these online mediums as effective distribution channels for their wide range of products.

Apart from these strategies, the Lego Group should also try to make good use of other strategic tools in today’s dynamic business world, such as important business information that would provide them with good lessons on how to achieve and uphold a sustainable competitive advantage in business affairs. All these strategies, sustained with the magical touch of an effective organizational management style are likely to bear promising results in the future operations of the company.

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IvyPanda. (2019, May 14). Lego Case Study: The Lego Group Competitive Advantage & Strategy. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/

"Lego Case Study: The Lego Group Competitive Advantage & Strategy." IvyPanda , 14 May 2019, ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

IvyPanda . (2019) 'Lego Case Study: The Lego Group Competitive Advantage & Strategy'. 14 May.

IvyPanda . 2019. "Lego Case Study: The Lego Group Competitive Advantage & Strategy." May 14, 2019. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

1. IvyPanda . "Lego Case Study: The Lego Group Competitive Advantage & Strategy." May 14, 2019. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

Bibliography

IvyPanda . "Lego Case Study: The Lego Group Competitive Advantage & Strategy." May 14, 2019. https://ivypanda.com/essays/case-study-the-lego-group-working-with-strategy-case-study/.

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