Lego Case Study

CORPORATE BACKGROUND

LEGO was founded in 1932—during the Great Depression--by Danish carpenter Ole Kirk Kristiansen and his sons. LEGO Group continues to be a family owned business. Kristiansen made these toys with high quality standards of workmanship and materials. By 1934, the organization took the name LEGO from the words “leg” and “godt,” which means “play well” and “I put together” in Latin. LEGO Group offers a wide-range of quality products that encourage children to play creatively and utilize their own imaginations. The most popular and significant product creation for the LEGO Group was the LEGO brick. This brick was produced with the new plastic technology and sold in 1949. The LEGO bricks were the first toys to promote connectedness among different products and systems—known as the LEGO System of Play. This System of Play created “a toy that prepares the child for life, appeals to the imagination and develops the creative urge and joy of creation that are the drive force in every human being.” Since then, LEGO Group has expanded considerably. They extended their product offerings and services to their building sets (both licensed and non-licensed) stores and merchandise, online website, board games, theme parks, and video games. By 1990, LEGO became one of the top 10 largest toy manufacturers in the world. Recently, LEGO has become successful in gaining licensed rights to manufacture lines featuring Star Wars, Harry Potter, Spiderman, Batman, Indiana Jones, professional sports organizations and more. These products have also expanded to the video and online game world as well.

PROBLEM

SWOT ANALYSIS

STRENGTHS WEAKNESSES

• Strong brand

• Quality of product

• Value of product (promotes creativity and learning)

• Leadership and management

• Market leader • Premium prices

• Outsourcing struggles

• High costs of manufacturing

• Very dependent on licensing rights

OPPORTUNITIES THREATS

• Emerging markets and expansion

• New products and product lines opportunities • Competition and substitutes

• Age restriction

• Short product lifestyle

VALUE CHAIN

Between 1998 and 2004, LEGO struggled and lost money. Revenues had dropped 30 percent in 2003 and fell another 10 percent in 2004. LEGO’s leadership discovered