Strategic Management Case Study: LEGO Group's Success and Growth

This case study analyzes the LEGO Group's strategic management, examining its historical success, periods of poor performance, and subsequent recovery. The analysis covers the company's approach to strategic planning, monitoring, and analysis within the global toy manufacturing industry. It high...Read More

Strategic Management
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MODEL FOR EFFECTIVE CASE ANALYSIS............................................................................3
CONCLUSION..............................................................................................................................13
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INTRODUCTION
Strategic management can be stated as the process of regular planning, monitoring and
analyzing of all the essential elements of business. It is planned in order to meet desired goals
and objectives. However, strategic management is the best way through which overall direction
can be provided to the firm. In the given case study, LEGO Group’s success and growth have
been assessed within the global toy manufacturing industry. However, company is historically
successful, innovative and high growth firm among all the top toy companies. But, it also faced a
period of poor performance and resulted in losses. Although, company improved its situation in
2008 and build ongoing efforts that involve varied aspects of strategic management. LEGO
annual report for 2009 states that sales figures of the company are 11,661 million DKK and
operating profits for the year was 3002 million DKK. Thus, it was an impressive figure which
results in increase of 22% in sales in 2008 and a high rise of profits over 50%. However, the
success of business lies in combination of effectual leadership, innovative products and
international growth. Thus, LEGO brand become established among consumers as a unique and
iconic.
Jorgen now needs to find the right strategy for the continued success of the LEGO Group.
What would you advise him to do?
It can be assessed that Jorgen is required to develop effectual tactics so that continuous
growth can be attained. However, as compared to the latest results modest growth has been
attained. Also, production need to be more than double and which requires huge investment in
equipment, human resources and marketing. Thus, in order to overcome the problems business is
required to develop a clear understanding of its roots and maintain a clear priority of developing
unique and innovative products to attract consumers. Hence, business is required to develop
regular growth and overcome challenges through maintaining long term planning. However,
after period of 2004, LEGO is required to undertake effectual strategy so that growth and success
could be attained. Further, till the year 2009, business is required to introduce new board games
for families and young children that help in improving their skills and results in enhancing the
sales of business. Also, the COO of Company should undertake effectual strategy that evolves
innovation within business so that LEGO can continue success for future. Moreover, the risks
faced by business are based on tough rivals. Therefore, it is essential for business to give them
high competition so that results can be accomplished in the form of high sales and profits.
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CSR
It can be stated that it is the commitment done by firm in order to behave ethically and
contribute to economic development in order to enhance the quality of life of individual as well
as business up to a great extent. Further, it can be stated that LEGO Groups is responsible for
different CSR aspects which business need to be considered in order to attain satisfaction-
 Employee welfare- LEGO is required to maintain its responsibilities through providing
proper medical care, providing medical and sick leave etc. Thus, providing all such type
of facilities helps business to gain satisfaction of employees and in result they are more
productive.
 Working conditions- LEGO management needs to focus on providing better working
conditions to employees in order to gain desired outcomes. For instance, providing job
security, best working environment, club facilities, recreational rooms, training and
development and safety norms helps employees to work loyal within business.
 Job design- Also, it is another CSR responsibility of business that they need to determine
the needs of workers and then design the job as per their requirement so that issues faced
by workers at workplace can be easily overcome.
MODEL FOR EFFECTIVE CASE ANALYSIS
1. Framing
Identifying the key question
It can be evaluated that there are different types of objectives that are framed within
LEGO group in order to determine the purpose of case study. Further, with the assistance of
case, it can be analyzed that LEGO is focused on more innovative, new and unique products so
that customers can be satisfied effectively. Also, it can be stated that key questions that are
identified from the case study assist in stating the future strategic development of LEGO group
in order to attain success. However, main question lies within the management of Lego is that
firm should focus on the traditional brick or should use its brand as a platform in order to
innovate within new areas. Thus, it helps firm to work upon a combination of effectual
leadership, innovative products and international growth. With the help of all such factors, it
assists LEGO brand to become successful and build unique and iconic image of firm in the
market. Following are the main objectives that firm needs to be focused in order to attain future
strategic developments in the period up to 2009:
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 LEGO should become the best known global brand among families and children till
2009.
 Further, sales of toys should be enhanced by 100-200% over the next 10 years.
 LEGO should plan to launch its operations within new countries as still business does
not possess a huge presence in the market.
 Moreover, firm is focusing on expansion activities such as dominating children's rooms
through entering into alliances with partners in different areas such as clothing, films and
games.
 Business should try to capture new areas so that they can increase their market share
through raising awareness and attracting new target group towards the product.
 Also, business is trying to develop new board games which focus on the whole families
instead of children.
However, it can be assessed that LEGO Group is required to focus on its strategic
capabilities so that key questions can be answered well. Further, it is essential to focus on such
questions so that overall components can be determined in order to look at the bigger picture.
Flipping
Here, it is used to provide a proper look of the overall objectives and content of the case
provided. Thus, it can be articulated from the objectives that LEGO is trying to capture new
market share and enhance sales and profitability. Thus, building long term objectives assists firm
to target new clients and provide them new and innovative toys so that best results can be
attained.
Skimming
Here, it can be assessed that LEGO is required to undertake effective strategic
management practices so that company can attain success. However, firm attained an impressive
increase of over 50% profits in 2008. Thus, it can be assumed by the management of firm that
2009 will be more progressive in the form of performance. Further, the owner of firm undertakes
varied strategic decisions in order to attain growth of the company as well as develop innovative
and new products to attract consumers. Also, it states that business is trying to capture new
markets where they have not entered. However, success had been built through combining
effective leadership, innovative products and international growth. Further, business undertakes
new and more decentralized management style in order to strengthen the management of firm.
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However, due to this fact varied senior managers left the organization being dissatisfied with the
style.
Further, in the later years, business faced varied problems i.e. high inventories within
retailers, sales declined because of change in name etc. Hence, in order to overcome such
challenges, firm should undertake effectual leadership and management style along with
producing innovative products to attract consumers and satisfy their needs. Also, business is
focusing on developing new theme parks such as LEGOLAND and enhancing the sales of firm.
While, within 2008 and 2009 business was facing huge financial crisis on a global scale.
However, business took risk and thus 2008 and 2009 proved to be a very successful year since
1981. The results of such profits led to unique structural changes within company with
improvement in revenue margins as well.
Beginning and end
From the beginning of the case study, it can be evaluated that LEGO group announces
high sales and profits within the year of 2009. It shows high growth rate in the near future.
Further, it has also been noticed that till 2009, it proved to be a period of successful
development. Thus, it is suggested to LEGO that they need to undertake effectual management
tactic so that new target market can be attracted in order to increase sales and profitability. There
are varied key issues which were faced by the company. These are as follows-
 After the huge success of Harry Potter and Star Wars in 2002, business was required to
expand its production capacity but in 2003 there were no new movies that could help
LEGO to enhance its sales.
 Further, in order to expand the small children's segment, famous and strong name of
LEGO DUPLO had been changed into LEGO EXPLORER. But, it was not welcomed by
consumers in market and thus it affected the sales of business.
 While, on the retail side in 2003, retail shops were led with high inventories of LEGO
products so that they could not buy the new one.
2. Labeling
In the next level of case analysis model different micro and macro factor should be
analyzed so that best results can be attained. However, it is essential for enterprise to understand
the macro environment factors and implement it within framework so that desired results can be
attained.
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Label the facts
 LEGO announced 11,661 million DKK sales and 3002 million DKK profit. It is over
50% increase in profits.
 In 1998, company had its first ever deficit.
 In 2003, there were no new movies that drop the sales of firm. While in 2009, LEGO Group and Warner Bros announced to make a LEGO movie.
General
PESTLE
 Political- It can be evaluated that business is affected because of overall government
attitude and local inducement policies. Thus, it is essential for government of the country
to maintain the taxation rate so that company can expand its operations within country. It
can be stated that the political environment in Denmark has been quite impressive due to
its multi party culture. Thus, political parties have made proper government policies
which are based on investment friendly approaches. It gave giving a chance to business in
order to become an iconic business in future time. Also, Denmark has become one of the
best attractive and lucrative places to invest that has benefited LEGO to attain results. For
instance, LEGO Group is required to make political stability so that government spending
can be minimized and attain desired results.
 Economic- It can be assessed that the toy educational industry is developing and can be
seen to be economically stable in past few years. Also, the economy is improving well so
that LEGO can also improve their products in order to gain the best for their clients. For
instance, business activities not only enhance the economic condition of the domestic
market but also external market around the globe. However, the US market seems to be a
big opportunity for LEGO to gain larger market share.
 Social- In 2006, company announces that it will close down its plant in US after 70 years
of business. Also, LEGO eliminated around 1200 jobs causing economic losses.
However, this business was one of the last toy manufacturing operations in America.
Hence, this factor forced LEGO to develop new trends and produce more attractive toys.
 Technological- It is also one of the important factors in toy industry. However, in order
to have new and unique innovations within the toy industry, LEGO should work to
improve for new technologies. This would help the firm to compete with other strong
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competitors within market. Also, firm is required to ensure that they need to update their
technology and make adjustment so that results can be attained.
 Legal- Further, business aims to safeguard the welfare of their client’s. Thus, LEGO
doesn't want to take risk by breaking the laws in local or international markets. Therefore,
LEGO ensures that they should follow all the rules and laws of the market where they are
operating. Environmental- LEGO group is trying to make their products effective. This is to
minimum problems associated with the environment. Further, business also introduces
varied strategies that aim to decline pollutants and also create a good environment.
Moreover, business also invests huge amount of money in waste system in order to
protect the environment around company's products.
Industry
Porter's Five Forces
 Threat of new entrants- It requires high capital in order to enter the new market. Also,
the brand name of LEGO Company is very crucial as it helps firm to compete at the time
of entering into new market and improve the brand value to attain goals.
 Threat of substitutes- There are varied substitutes available for consumers within the
entire toy industry. For instance, it can be computer games, traditional toys and even
outdoor sports. Also, if business does not pay attention to its quality than lower quality
goods is one of the main reasons to switch for another company by LEGO.
 Level of rivalry- LEGO organization occupies a strong position in market thereby it
possess few rivals. However, business has a strong brand image because it provides
quality products to consumers and charges premium prices.
 Power of buyers- The power of consumers is very high as switching cost is very high
with clients within traditional toys and other substitutes such as computer games.
However, if LEGO manufacturers quality products within reasonable prices then people
will tend to buy products and become loyal towards firm.
 Powers of suppliers- LEGO products are prepared from plastic. Hence, firm possess a
diverse distribution so that they will not have to base upon one particular supplier.
General strategies
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 Cost leadership- This strategy involves firm to become the lowest cost business. It
provides them a chance to attain desired results. However, business possess a varied
chances to lower input costs, experience etc. so that LEGO can attain desired goals.
 Differentiation- Further, it states that uniqueness is required to be valued by clients at a
premium price in order to attract target market. Here, business is required to differentiate
among key rivals and develop strategy in order to provide best products as compared to
them.
 Focus strategies- It targets a narrow market that helps in tailoring its products or
services. It is to identify the needs of that specific segment to attain goals.
Ansoff
Ansoff have evaluated three different levels of action. These are as follows: Operational- Here, the LEGO Group is in direct connection with the production process
and thus develops new and innovative toys for consumers. Administrative- Further, it is involved with the maximization of efficiency in production
processes. For instance, LEGO Group is required to maximize its production capacity,
then they are required to enhance the number of toys in terms of production.
 Strategic- The strategic concern is in regard to produce the product by comparing with
respect to environmental benefits as well.
Here, the top management of the LEGO Group is required to think strategically so that
they can understand the big picture of firm and attain goals.
Mintzberg
Mintzberg stated that the business influences the design, its culture and power games. Here,
the top management of LEGO Group is held liable in order to carry out the operations of firm.
However, such type of strategy is helpful in order to provide a rationale so that things can be
accomplished. Following are the 5Ps of Mintzberg theory detailed as follows: Perspective- It can be stated that it is all about the ways of seeing. For instance, the
LEGO Group is required to watch the competition or rivalry within industry so that best
products can be produced in order to attract consumers. Planning strategy- Here, the particular strategy is formulated in order to undertake the
best actions. LEGO Group management undertakes effective planning before launching
any new toy so that best results can be gained in the form of sales and profits.
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 Pattern- LEGO organization top management is required to form a proper path that need
to be followed by the workers for gaining output. However, there should be no confusion
regarding production of toys and other business activities. Position- It refers to the place of business functions and operations within its prevailing
environment i.e. competitors.
 Ploy- It can be stated as state inclusive of playful, unexpected, and unanticipated
environment. For instance, LEGO is required to develop a unique brand image of firm so
that it can be easily recognized.
Whittingtons school theory Deliberate- This strategy is fairly straight forward that is communicated throughout the
business before being implemented within business. For instance LEGO Group is
required to implement deliberate strategy so that set objectives of firm can actually
accomplished.
 Emergent- While, Emergent strategy does not mean that management is out of control in
certain case. However, such type of environment is required for firm to develop in order
to make everything flexible and open. LEGO need to undertake such theory at the time
when they need to develop open environment among top management and lower level
employees so that best actions can be attained.
Here, it can be assessed that management of LEGO Group is required to implement
Deliberate school of strategy so that set objectives can be achieved.
RVB
RBV helps in analyzing certain unique features of particular firms within an industry. It
also helps in making a difference in regard of profit performance. However, strategic
management and economic theory helps to focus on the internal side of business i.e. its resources
and capabilities. LEGO is required to undertake strategic management model in order to identify
the product it manufactures and serve in market. Further, it also suggest that business is required
to position them strategically based on their unique, valuable and inimitable resources and
capabilities.
Strategic decision making
It can be evaluated that strategic decision is the best method through which long term
business implications can be planned. It helps in attaining key success factors by accessing
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resource to gain appropriate performance. Further, it can be assessed that it is the ability of
business to make crucial strategic decision in order to produce high quality results and goals
accomplishment. LEGO is required to develop rational decision making. It is helpful in
overcoming issues in order to attain maximum sales and profits. However, management of
LEGO is required to make decisions that are based upon strategic directions. It is made so that
best action can be attained in order to implement them within business.
Competition
Following are the main competitors of LEGO Company:
 Mattel
 Bandai-Namco
 Hasbro
 Tomy-Takara
 MGA Entertainment
 Crayola-Hallmark
 Jakks Pacific
 Viech
 Spinmaster
 Playmobil
 MEGA
 Knex
This, it can be assessed that there are varied rivals available within toy industry. It
encourages firms for tough competition so that best results can be attained. However, LEGO
undertakes effectual strategy of unique product development and provide it at premium prices as
compared to other rivals so that results can be achieved. Thus, such specific strategies help
business to build market growth and development in order to gain profits.
Strengths
 LEGO develops educational features within its toys so that it helps in developing skills
among young children.
 It also focuses on encouraging goal oriented and problem solving strategies.
 LEGO possess strong brand name around the globe.
 LEGOLAND theme park is highly famous among tourists.
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Weaknesses
 Business could not copy games due to brand name and loyalty among clients.
 There is high competition among business as it increases brand switching among rivals.
 Also, there is loss of market share that results in increasing popularity of online games or
computer games.
3. Summarizing
Summarizing the facts
It can be evaluated from the above analysis that PESTEL, Porter's five forces etc. helps
firm to carry out desires goals and objectives. The main fact that can be assessed is that Denmark
has become one of the best attractive and lucrative places to invest that has benefited LEGO to
attain results. Further, LEGO eliminated around 1200 jobs causing economic losses. Business is
making sure that they should follow all the rules and laws of the market where they are
operating. Organization is trying to make their products effective so that they could cause
minimum problems to the environment. Also, the brand name of LEGO Company is very crucial
as it helps firm to compete at the time of entering into the new market and improve the brand
value to attain goals. The power of consumers is very high as switching cost is very high with
clients within traditional toys and other substitutes such as computer games.
Eliminate unimportant facts
Here, the most important facts from case need to be selected. It involves that organization
is trying to make their products effective so that they could cause minimum problems to the
environment. Also, the brand name of LEGO Company is very crucial as it helps firm to
compete at the time of entering into the new market and improve the brand value to attain goals.
Thus, all such facts are effective in order to attain desired goals.
4. Synthesizing
Question Option Decision criteria Pros Cons
 LEGO
should
become
one of the
best
known
1. New and
innovative
products
2. Low cost of
products and
New and
innovative
products because
it attracts
customers and
satisfies their
Helps in
improving the
band image of
firm in the
market.
Requires huge
investment.
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global
brands
among
families
and
children
till 2009.
services. needs.
 Business
should try
to capture
new areas
so that
they can
increase
their
market
share
through
raising
awarenes
s and
attracting
new
target
group
towards
the
product.
1. Capturing new
areas to enhance
sales.
2. Online
campaign to raise
awareness
Developing the
market through
online promotion
and thus attain
results.
It assists business
to improve the
market share.
Requires huge
investment.
 Also,
business is
1. Business
should develop
Here, business is
trying to attract
Helps in
increasing brand
Incurs huge
expenditure in
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trying to
develop
new board
games
which
focus on
the whole
families
instead of
children.
learning games so
that young
children can be
attracted.
2. Family games
should be
developed to
improve customer
base.
young children by
providing
learning games to
them.
image of firm in
market.
market.
5. Concluding
It can be stated from the whole research that strategic management is essential for
organization to gain results. However, after period of 2004, LEGO is required to undertake
effectual strategy so that growth and success could be attained. Further, till the year 2009,
business is required to introduce new board games for families and young children that help in
improving their skills and results in enhancing the sales of business. Also, the COO of Company
should undertake effectual strategy that evolves innovation within business so that LEGO can
continue success for future. Moreover, the risks faced by business are based on tough rivals.
Therefore, it is essential for business to give them high competition so that results can be
accomplished in the form of high sales and profits.
CONCLUSION
From the above study, it can be concluded that LEGO Company is required to develop
strategic options so that success and growth can be continued further. However, it also helps
them to overcome challenges and problems with the aim to attain goals. Further, both internal
and external analysis tools such as PESTEL, PORTERS FIVE FORCES and SWOT have been
applied with respect to LEGO. Business faces tough competition from rivals and hence it is
essential for them to develop its strategic management. Also, different competitors have been
assessed such as Mattel, Bandai-Namco, Hasbro, Tomy-Takara etc. who gives tough competition
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