LEGO Company in Germany: Business Expansion Strategy Report

This report provides a comprehensive analysis of the LEGO Company's potential for expansion in the German market. It begins with an introduction to the company and its global operations, followed by an examination of the business environment in Germany, including political, social, technological, legal, economic, and environmental factors using PESTLE analysis. The report then applies analytical approaches such as Porter's Five Forces to assess the competitive landscape and industry dynamics. Furthermore, it incorporates relevant data on foreign direct investment (FDI) to illustrate Denmark's investment in Germany, highlighting the potential for LEGO. The report concludes with a summary of findings and recommendations for LEGO's market entry strategy, emphasizing the importance of adapting to the local market conditions and leveraging existing investment relationships. The report aims to provide insights into the opportunities and challenges LEGO faces in the German market.

LEGO COMPANY IN GERMANY/
REPORT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Introduction to company..............................................................................................................1
Allocated business environment..................................................................................................2
Applying analytical approach......................................................................................................4
Implication of appropriate data with examples...........................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
The impact of organisation which are approaching towards becoming global leader have
impact on the nation economy. Therefore, there are various multinational organisations which
are being operating activities in the world and have supported the national economic scale. In the
present report, there will be suggestion given to the LEGO toy company of Denmark which
operate the business in Germany. However, there will be analysis over the business environment
as well as implication of various analytical approaches which will help the managerial
professionals in analysing the efficiency of business as well as market scenario to make
corrective actions. This whole study is based on foreign direct investment which is used as
method of entering a new market by investing in the other country for expanding the business or
establishment of new business in that country. Foreign direct investment assist in increasing the
market share of company by investing in other country to expand their business or increase their
customer base through providing their products and services in the allocated country. LEGO by
using the foreign direct investment can enter the new market in Germany for enhancing their
profitability by identifying the scope of their business in Germany.
MAIN BODY
Introduction to company
LEGO company have been engaged in operating the construction of plastic toys as stated
in Denmark since 1949. This organisation have been spread widely in various nation as per
developing the toys with considering the proper quality such as use of good quality plastic,
recycling the plastics etc. Thus, as per initiating the business Germany there will be requirement
of analysing the market conditions such as consumer preferences, competitors, governmental
regulations and various legal aspects. LEGO is going to expand their business in Germany
through use of foreign direct investment which will assist in entering the new country with their
existing operations. Foreign direct investment is the way which will assist LEGO to enter in the
Germany market for increasing their profitability and achieving market share in manufacturing
industry in that company. LEGO through analysing the business environment will be able to
adopt to the changes and get the ideas regarding the issues which will be faced by the company
during their expansion in Germany.
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Allocated business environment
By considering the consistency in improving the operational activities of the business on which
there must be ascertainment of various analytical methods which would lead the firm in retaining
higher success. It includes various models that will bring a clear look through of organisational
concepts and making corrective actions (Mets, 2018). The following the external environment
of the Germany for identifying the factors which may affect the business environment in their
operations to reduce the changes of threat and provide the competitive advantage to the firm by
understanding the business environment in Germany. By using the Pestle analysis company will
be able to understand the factors which have their influence on the business operation in
Germany so that the firm is able to make decision regarding the foreign direct investment in the
allocated country.
PESTLE Analysis
This is the external analysis over operational aspects of organisation which have been relates
to corporate environment in Germany.
Political: This is the factor which indicates political influences of a nation over the
companies which are being operating or planning to operate. It consists of analysing the
governmental policies, rules, regulations and various legal aspects based on the process on
which a business would perform (Phadermrod, Crowder and Wills, 2019). As per
considering the political influences of LEGO company on which it can be said that,
professionals have been engaged in managing the neutrality in politics which has been
demonstrated as core value of organisation. The political environment to Germany is stable
which means there are not more changes in the taxation and other polices of government. It
means LEGO will have smooth operation sin investing in Germany.
Social: In this aspect there must be consideration over the social, cultural and traditional
variations in each country would affect the business operations. Germany have been denoted
as socially dynamic nation on which one would have better operational practices, in relation
with the social approaches by LEGO company on which it can be said that, the company is
operating a foundation which encourages learning of children through playing activities
(Sammut‐Bonnici and Galea, 2015). Therefore, implicating the dynamic social culture
which influences children away from traditional toys.
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Technical: There have been implication of various technologies which will be effective and
approaching to enhance the product quality. Increment in the technology will be a corrective
action which in turn will be influential in improving the product features, design and
convenience for kids to learn and develop (Aithal, 2017). Along with this, it can be said that,
these techniques will lead LEGO in retaining the adequate success in the market. As per
business scenario of LEGO company on which it can be said that the company is digitally
transformed as per becoming a game changer in the toy industries (Shabanova and et.al.,
2015). Moreover, there have been use of significance investments in R&D activities which
will improve the quality of product by sustainable materials.
Legal: In considering laws, rules and regulations which have been implicated by the
governmental authority has been based on managing the economic, environmental and
cultural aspect in the nation. Germany have been approaching towards bringing the best
operative actions to improve the growth of domestic organisations. Due to this, there will be
higher tax rates on imports and selling activities (Stenberg, 2017). In addition, considering
the business operations on which LEGO have been weakened in several areas such as poor
copyrights in various geographical segmentations as well as cheap imitations.
Economic: Influences of various economic factors such as inflation, employment rates,
foreign exchange, interest rates etc. are the key indicators which would affect the operational
aspects of a business. Thus, making a connective action will be necessary for a business to
retain the qualified success (Gupta and Mishra, 2016). Therefore, LEGO will face issues
relevant with the changes in the foreign currency fluctuations. Thus, the exchange rates will
affect the business operations with a motive to have adequate ascertainment of the
operational practices.
Environmental: It defines the corporate environment as well as operating environment in
particular nations. The Germany have been bringing leverage and support to the FDI ins
nations which in turn helpful to the organisation in retaining the best market share in the
proposed time (Phadermrod, Crowder and Wills, 2019). It has been aimed by the
organisation that they would track to achieve the 100% goal based on renewal energy by
2020. Along with this LEGO have been determined as the first toy company in Unites
nations global compact.
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Applying analytical approach
Porter's five forces: It is the analysis of industry to identify. By using this analysis
organisation is able to understand the industry and competitiveness existing in the industry. The
following are the factor which are considered during this analysis :
Threat of new entrants : The threat for new entrants is a weaker force because achieving
economies for scale is difficult for the firms. Moreover, it make the production costlier for new
entrants. Also, the capital requirement in this industry is high which act as barrier for the entry
of new firms because high expenditure is incurred. the access to distribution network is easy for
new entrants which means they can set up their distribution channel (Kano and Verbeke, 2018).
Also, there are various government policies and strict legal requirement which are required to be
fulfilled. This strict legal requirement makes difficult for new entrants in this industry. So, It can
be said that there is moderate threat of new entrants in this industry which may affect the LEGO
business in Germany. To reduce this threat organisation is required to have strong brand image
which LEGO have because it is multinational company operating in different countries.
Threat of substitute products: There are few substitutes available in the industry which
may affect the business of LEGO in Germany. Due to advancement in technology there have
been changes in the way of production of toys there are different computer games etc which are
attracting the consumers due to which the demands of the toys is decreasing (Dowlah, 2018). So,
in order to reduce the threat of substitute the firms is required to modify their products and
services as per the demands of customers.
Bargaining power of consumers: The customers in this industry have high bargaining power
due because there are various options available for customers in this industry. There are various
suppliers available in this industry due to which the LEGO have to face problems if the company
does not provide the customers with the product demanded by them (Laffineur and Gazaniol,
2019). So, it is required that LEGO should provide the products according to the requirement of
the customers in order to retain the customers in business for long run.
Bargaining power of suppliers: It means the suppliers of raw materials. The suppliers of
the raw materials are more than that of Buyers. Due to which the bargaining power of suppliers
in this industry is high. The LEGO products are made up of plastic and plastic is produced with
oil so there are no chance that LEGO to bargain with oil companies (Mayrhofer and Prange,
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2015). The LEGO is required to maintain good relation with the suppliers in order to reduce their
bargaining power of suppliers.
Rivalry exiting in Industry: There are various firms involved in this industry due to
which there is high competition existing in the market. LEGO in order to reduce the
competitiveness is required to provide the high quality products to its customers in Germany
which will assist in building customer base for the firm (Paik, Warner‐Søderholm and Huse,
2019). Moreover, LEGO have a strong bran d image due to which it will helps the firm in
gaining more market share in that country through entering the market of Germany use of
foreign direct investment.
Implication of appropriate data with examples
There are appropriate data which will assist in understanding the strength of expanding the
business in Germany through use of foreign direct investment. By using this data and tables the
LEGO comp nay will be able to understand the scope of their business in Germany and the
requirement of the company in the Germany . The following information is about the Foreign
direct investment of FDi which shows the percentage of Denmark invested in that country.
The following table shows the information about the countries invested in Germany :
Main investing countries 2017 in %
The Netherland 19.0
Denmark 2.1
United states 9.8
United kingdom 8.7
Switzerland 8.3
France 6.5
Italy 3.9
Japan 3.0
Spain 2.1
Sweden 1.9
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From the above graph and table it can be interpreted about the main investing countries
which had invested in Germany. It shows that Denmark is Investing 2.1 % in Germany. It means
that Denmark companies have invested in Germany before which provide understanding that the
Denmark and Germany have investment relations which will be beneficial for LEGO company
to expand its business in that country. The LEGO company by investing in that country will be
able to increase the percentage of foreign direct investment of Denmark in that country. It is
beneficial for LEGO to invest in Germany because it have political stability and good anchor in
international relations. Thos country have advanced technology and expertise which is beneficial
for the growth of LEGO in that country and for the development of their products and services
by using the advanced technology of that country. Also, By investing in Germany the firm will
be able to have highly qualified workforce which is beneficial for the success of firm after
expanding the business (GERMANY: FOREIGN INVESTMENT, 2017). But on the contrary,
there are various disadvantages of foreign direct investment by LEGO in Germany because it
have insufficient infrastructure for development of startups. The company investing in Germany
will have more benefits then the drawbacks which is good for the company as well as increasing
the share of Denmark in Germany foreign direct investment.
The following information provide understanding about the main invested sectors in which
the different countries has invested :
Main invested sectors 2017, in %
Manufacturing 27.7
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Information and communication 6.6
Wholesale and retail trade and maintenance 10.7
Financial and insurance activities 9.6
Real estate 5.3
Administrative and support service activities 3.2
From the above graph and table it can be interprted about the main invested sectors of
Germany in which different companies from different countries have invested for expanding
their business through establishement of business in Germany. This shows that major invested
sector is manufacturing and also the LEGO compnay is also involved in Manufacturing sector
which means this compnay will be able to increase the share of manufactureing sector in
Germany. it will be benficial for the lego company to invest in Germany manufacturi nbg sector
as it will provide advanatage to the firm because it have the largest population of european union
and it is the strtagic location in centre of Europe which means it will attract more customers for
toys in that country which will assist in increasing company profitability and attracting potential
customer towards the company. Germany is the most attratciuve place for foreign direct
investment. LEGO by investing in manufacturing sector of Germany will be able to increase
their profitability and attract their potential customers. It shgows that the LEGO compnay by
expanding their business in germany will be able to enhace their profitability by attratcing more
customers towaqrds their products because it have strong brand image.
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CONCLUSION
From the above assignment it has concluded about the foreign direct investment which is
way of entering the market in the different country. Foreign direct investment is the way of
investing in the business of the other country to enter the new market. Moreover, This study has
provided understanding about the expansion of business of LEGO in Germany for which it will
consider the business environment of Germany. Also, it has conducted the PESTLE analysis of
the Germany in order to identify the various factors which have their influence on the business
operations. Furthermore, it has also provided understanding about the industry analysis of the
Germany manufacturing sector to understand the competitiveness of that industry by analysing
the factors such as bargaining power buyer, bargaining power of suppliers, threat of new
entrants, threat of substitute products and threat of rivalry existing in industry. It has also
included information about the foreign direct investment in that country by identifying the
statistical data regarding the main invested countries in Germany through foreign direct
investment and their main invested sectors.
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REFERENCES
Books and Journals
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Investment. In Transformations of Global Prosperity (pp. 7-73). Palgrave Macmillan.
Cham.
Gupta, G. and Mishra, R. P., 2016. A SWOT analysis of reliability centered maintenance
framework. Journal of Quality in Maintenance Engineering. 22(2). pp.130-145.
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International Social Research. 10(51).
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of bifurcation bias. Global Strategy Journal. 8(1). pp.158-183.
Laffineur, C. and Gazaniol, A., 2019. Foreign direct investment and wage dispersion: Evidence
from French employer-employee data. International Economics.
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61(2). pp.105-118.
Phadermrod, B., Crowder, R. M. and Wills, G. B., 2019. Importance-performance analysis based
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Sammut‐Bonnici, T. and Galea, D., 2015. PEST analysis. Wiley Encyclopedia of management.
pp.1-1.
Shabanova, L. B and et.al., 2015. PEST-Analysis and SWOT-Analysis as the most important
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Online
GERMANY: FOREIGN INVESTMENT. 2017. [ONLINE]. Available through:<
https://en.portal.santandertrade.com/establish-overseas/germany/foreign-investment>
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