Business Decision Making for Management: Lego & Tencent Partnership

This report analyzes Lego's decision to partner with Tencent in China, exploring the background of the company and the factors leading to this strategic move. It examines Lego's trajectory, including the decline in sales in 2016 and increasing competition from Mattel and Hasbro. The report critically analyzes the partnership with Tencent, highlighting both potential benefits, such as increased sales and a safer online environment for Chinese children, and potential pitfalls, like the risk of losing originality and being dominated by Tencent's policies. The report concludes that while the partnership addresses an acute crisis, Lego must maintain its core identity and strengths. It recommends that Lego continue to focus on its mainstream toys, develop innovative ideas, improve promotional strategies, and potentially create its own networking site for children to retain its individuality in the market. Desklib offers a range of similar solved assignments and past papers for students.

Running head: BUSINESS DECISION FOR MANAGEMENT
Business decision making for management
Name of the Student
Name of the University
Author Note

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Executive Summary
The aim of the report is to develop a plan and analyze the corresponding impacts of toy business
in the context of China. The report will focus on the background of toy making company ‘Lego’
and understand the factors that are responsible for the downfall of the company. The report
would also shed light on the factors that can be incorporated by the managers and the officials in
the company that may help to raise the business in the market.

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Table of Contents
Introduction......................................................................................................................................2
Lego’s Trajectory:...........................................................................................................................2
Critical Analysis..............................................................................................................................3
Conclusion.......................................................................................................................................4
Recommendation.............................................................................................................................5
Reference List..................................................................................................................................6
Introduction
Lego is a Denmark based toy manufacturing company that operates chiefly in China.
However, the products are exported elsewhere but all the products are sold within Asia. The
most popular product of the company is its plastic building blocks that have shown an immense
demand with an inflation of fifty percent in the Asian market. This particular product, which is
the plastic building blocks are designed for Chinese children keeping in focus the concern of
Chinese parents towards their children to survive in this era of competition. More or less all the
toys that are designed by the company are with the concern of children’s learning while playing.
However, due to strong deflation in the company sales as recorded in 2016, Lego has recently
collaborated with Tencent games. Tencent is the leading and the largest social networking site
that is specially designed for Chinese children (Tencent.com, 2018). It is popular among kids for

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its online gaming portal. Lego has taken the decision of collaborating up of Lego with Tencent in
order to reorganize the company productivity and increas4e its sales in the Asian market.
Lego’s Trajectory:
The company was running well until 2016. However, it was seen that in 2016, the
company went through hard time when the sales of the company declined. On the contrary it was
observed that toy making business in the Chinese market has been inflated with 25-30 percent
sales in the same year (Us et al., 2018). To focus upon the current competitors of Lego, the
company is facing a ough competition from Mattel (Barbie maker) and Hasbro, that is well
known for ‘Mr Little Pony’. In order to gear up its sales and fight with the rivals, Lego decided
to establish partnership with Tencent that would not only ensure a major inflation in the
company sakes but at the same time would help to build a healthy, safe and protected online
environment for the Chinese children. The main reason that Lego partnered with Tencent apart
from saving its sales was to look for more innovative and creative ways that would help to
enhance the intelligence of children. A number of facets are included in the overall partnership
and perhaps the most important of those is developing Lego video zone for children, that can be
assessed on both Lego and Tencent sites. Apart from that the partnership also includes another
important aspect that is LEGO BOOST, which is essentially an online game that has modified
Lego’s signature product a step up. In this particular online video game the building brick blocks
are movable that allows the children to make more imaginative products (Gweon et al., 2014).
Critical Analysis
The decision of Lego’s partnership with Tencent was taken by Lego assessing the stark
drop in the company sales. Tencent being the leading and the most popular internet firm in China

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has a saturated and owns market majority in china. Lego, apart from selling its toys in the Asian
market would also, at the same time focus on selling video games online with Tencent.
Analyzing the saturated condition of toy markets in China, the variety of the products that would
be launched by the company in partnership with Tencent is expected to fetch both the companies
with greater profits. Particularly in the context of the sharp fall in sales of Lego in 2016, the
decision taken by Lego can be interpreted as the last resort to save the company from collapse. It
would be worthy to assert that Lego was a private company, that was family owned having its
headquarters in Billund, Denmark. Quite naturally the business decision till the time Lego had
been independent was taken by the hierarchy of the company. Establishing partnership with
Tencent no doubt was an excellent decision taken by the management bodies at Lego but at the
same time it has its pitfalls (Bem 2017). Lego has witnessed enough hardships like the drastic
fall of its sales, shedding one tenth of its employees, fall in market share etc. In this context, the
partnership with Tencent is justified.
However, at the same time it is imperative to assert that Lego would be answerable to
Tencent for its rise and drop in falls. Tencent is a multi dynamic operator that has myriad portals
like chatting sites, gaming sites, movie sites and search engine. Video gaming is a part of the
same and since Lego has collaborated, the operation of the games will be according to the
policies of Tencent, though the games would bear the brand name of Lego (Sung 2018). This
also indicates that the signature toy products that made Lego a global company would be
hampered of its popularity and demand in the global market. Lego would be shifting its main
product as the online video gaming and this at the same time would be fading away the
originality of the company. If this may be the case then Lego is under threat of getting
completely dominated by Tencent since both the companies are grossly different from one

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another where Lego deals with children’s toy and Tencent being China’s leading internet and
technology company. Adding technological features to the age-old toy products for children
somewhere diminishes the emotional connection. Lego while manufacturing toys maintained
certain aspects like it focused on acupuncture features imbedded within the toys, focused on
keeping the colors bright and lively etc (Howie et al., 2017). Collaborating with Tencent and
putting the focus on online games, without an iota of doubt will be fading the signature products
of Lego.
Conclusion
In the concluding segment it can thus be said that though Lego partnered with Tencent
out of acute crisis, yet it would be apt to maintain the originality of the company. The features
that gained Lego a word wide popularity must not fade away due to the recent collaboration. A
thorough reading of the report would help to enlighten the readers with the conditions under
which Lego partnered with Tencent, the benefits and the advantages that Lego can gain from the
partnership and the threats that the company may face from the same.
Recommendation
It can be recommended that Lego should not lose its focus from the mainstream toys,
since, the company holds expertise in the same. It must incorporate innovative ideas about toys
that would help the company to fetch new customer base, besides concreting the existing one.
Apart from that Lego can also make better promotional strategies, since it has been evaluated
that promotion plays a major role in molding up children minds. In order to retain individuality,
Lego may start up with its own networking site that would be entirely designed for children
containing movies, themes, songs and cartoon clips that would make a difference in the market.

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Reference List
Bem, D.J., 2017. An experimental analysis of self-persuasion. In Attitude Change (pp. 177-204).
Routledge.
Gweon, H., Pelton, H., Konopka, J.A. and Schulz, L.E., 2014. Sins of omission: Children
selectively explore when teachers are under-informative. Cognition, 132(3), pp.335-341.
Howie, E.K., Coenen, P., Campbell, A.C., Ranelli, S. and Straker, L.M., 2017. Head, trunk and
arm posture amplitude and variation, muscle activity, sedentariness and physical activity of 3 to
5 year-old children during tablet computer use compared to television watching and toy
play. Applied ergonomics, 65, pp.41-50.
Sung, J., 2018, April. How Young Children and Their Mothers Experience Two Different Types
of Toys: A Traditional Stuffed Toy Versus an Animated Digital Toy. In Child & Youth Care
Forum (Vol. 47, No. 2, pp. 233-257). Springer US.
Tencent.com. (2018). Tencent 腾 腾 - Home. [online] Available at: https://www.tencent.com/en-
us/abouttencent.html [Accessed 9 Apr. 2018].
Us, A., Group, L., Library, M. and Us, A. (2018). About Us LEGO.com. [online] Lego.com.
Available at: https://www.lego.com/en-us/aboutus [Accessed 9 Apr. 2018].r80