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Lego's Dominance in the Market: A Study on Innovation, Competition and Strategy

   

Added on  2019-09-16

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Title
Module Title
Module Leader and Seminar Tutor
Number of Words
Student Assessment Number
1
Lego's Dominance in the Market: A Study on Innovation, Competition and Strategy_1

Contents
Introduction................................................................................................................ 3
Identifying and Evaluating External Environment Features Influencing Lego Group. .4
Economic Factors.................................................................................................... 4
Social Factors.......................................................................................................... 5
Technological Factors.............................................................................................. 5
Environmental Factors............................................................................................ 5
Legal Factors........................................................................................................... 6
Technological Environment..................................................................................... 6
Out of Date Supply Chain........................................................................................ 7
Rivalry and Competition.......................................................................................... 8
Conclusion................................................................................................................ 10
References............................................................................................................... 11
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Lego's Dominance in the Market: A Study on Innovation, Competition and Strategy_2

Introduction
The toy and games industry is very competitive in nature and there is an ever increasing threat of
new entrants. Apart from that, a number of factors greatly affect the manner in which Lego has
performed over the years. While it was a profitable company in the start, it gradually got hold of
the toys and games markets. However, the economic crisis across the globe caused it to suffer
from major losses. However, the crisis was not the only reason for the set back. Technologically
too, the products were very basic and could not retain the interest of the target market. Realizing
the threat of new entrants and the ever evolving technology, Lego must bring about important
changes in its business model. The following essay, attempts to analyze the main threats and
issues faced by the company.
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Lego's Dominance in the Market: A Study on Innovation, Competition and Strategy_3

Identifying and Evaluating External Environment Features
Influencing Lego Group
PESTEL Analysis: To be able to understand the organization better, the factors which will
impact it externally are mentioned below:
Political Factors: Having a global presence, political situations in different countries affect the
company. They already have a presence in Denmark and are building a factory in China that
shall be ready for production by 2017 (Ritzau, 2013). Sincethe company’s products are
distributed to more than 130 nations worldwide, the local political decisions of these places can
affect the company greatly. In nations like the US there are regulations for promoting safer toys
while in other nations there are regulations against gender bias. These regulations affect the way
Lego promotes its products in these nations.
Economic Factors
While the debt crisis and the Eurozone crisis had a major effect of the sales of Lego, it showed
profit of DKK 9.2 billion against the profit of DKK 7.0 billion in 2014. This was much higher
than expected for the company. Their revenue growth was including the foreign exchange impact
was 19.3% year over year. This clearly demonstrates how the economic conditions can greatly
alter the company’s business. While the business was struggling during the economic crisis, it
started improving gradually as the economy got better. The industry has also suffered due to the
emergence of mobile gaming applications. More and more children are drawn towards these
electronic games and do not take interest in physical toys. However, Lego was able to turn
around this situation by getting on board new and exciting ventures and thus reporting profits.
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Lego's Dominance in the Market: A Study on Innovation, Competition and Strategy_4

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