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TheLEGO Group Case Study
Thiscase study provides a strategic analysis of the Logo Group. LogoGroup is a multinational that deals in making toys based oncontemporary concepts through imagination and creativity. Theanalysis identifies and describes several strategic models used inbusiness to evaluate the market position a company and other factorsthat indicate whether the business is healthy. The models that willform the analysis content of the Logo Group include: The Five ForcesAnalysis, The Pestle Analysis, the value chain, the business model,the SWOT analysis, updated research, Mission, vision, Value analysis,SCP analysis, competitive advantage, and Strategic Groups.
Analysisof the LEGO Group of Companies
FiveForces analysis of the Company
Threatof new entrants: Logo has a moderate threat of new entrants into themarket due to its strong stance on issues of intellectual property.The falling oil prices have created an incentive for new entrants.
Threatof substitutes: The threat of substitution is high due to itssimplicity in design, and the weak intellectual property enforcementin China, which is a huge market.
Bargainingpower of customers: Customers have a high bargaining power due to itsB2B model in which retailer shave immense control.
Bargainingpower of Suppliers: Suppliers have a high bargaining power becausethey determine the materials, content, and themes. They include oilcompanies, the film market, and plastic companies.
Intensityof Rivalry: The intensity of rivalry is low due to a shortdistribution channel and increased online sales.
Complementors:Complementors are moderately few. The major complementors for Logoare Oxford toys, Mattel, and Mega blocks.
The Company has an adverse geopolitical presence. It has a huge presence in the western world but an almost negligible presence in Asia, South America, and Africa.
The pressure to sustain gender neutrality in its productions is real.
The company faces different corporate tax regimes in the different countries they invest hence, the need to constantly adjust their profit expectations
The Lego Group is not immune to labor politics for unionized workers
Exchange rate fluctuations in different countries is a real challenge in valuing risk
The company faces a positive economic downturn because production labor intensive
It continues to experience growth in advanced economies. The LEGO Group controls over 75% of the American toy market.
Falling fertility rates in OECD countries should be a concern for the Lego Group because fewer kids are growing in the market than in the past.
The company has a good social place as an entity that uses renewable energy and has zero waste since plastics can be remodeled into new toys.
China and India is a different cultural segment in which toys with educational themes continue to bring high revenues.
The company invests largely in three-dimensional printing
The virtual platform development remains a defining factor in contemporary innovations
The tablet and mobile market favors the Company since target customers watch toys from anywhere through the internet.
Legal environments for intellectual property rights are different among countries. For instance, Lego is likely to experience more copyright problems in China than elsewhere due to China’s longstanding tradition of not strictly enforcing intellectual property rights (Wang, Gao, Li, and Liu 152).
The company is alive to issues of climate change and the environment by ensuring that it minimizes plastic waste
The company depends on oil for distribution. It is also one of the companies that are under intense pressure to initiate sustainable practices because its products and raw materials have a great impact on the environment.
Thisrefers to the structure-conduct-performance of the Lego Group asfollows
Few sellers and many buyers
High degree of product differentiation
Oil prices and complex supply chains are the barriers to entry
The company has to work through many strategic alliances
The company has advanced vertical integration
Competitive pricing in the high-end market
Internet and traditional advertising combined
Heavy investment in R&D
High economic profits
High accounting profits
A positive Net Present Value (NPV) (Frigo, Mark, and Læssøe 28)
Ahuge market share in western markets
Logo’svalue chain has the following components and activities:
Firminfrastructure with the following features
Delegates operational activities
A cost effective
HumanResource development with the following features
A highly rated human resource development strategy
Connecting with products with the relevant modern technology and themes
Enhanced research and development
Frequent software updates
Strict and efficient quality controls
AAA rating of the procurement process
1.a single main supplier
2.use of high quality commodities
3.Use of 3-D printing
1.Production based on future demand projections
2. Great TQM of 18 to 1 minute
3.Patents on plastic derivatives
2.Use of DHL superior delivery
1.Good strategic 2.partners
A huge web community
Downloadable product manuals
TheCompany has an iconic brand with established brand equity. For thisreason, the Lego Group has opportunities to have more profitablefranchises that would enable it get as closer to the customer aspossible(Hatch, Jo, and Schultz 125).
Thelarge product portfolio diversifies the Companies products. A widerange of creative products minimizes the risk of non-profitabilityand slow clearance of inventory(Schultz, Majken, and Hatch 17).
Recyclablematerial: products are made out of plastic the company can remakeunsold products into other desirable products. The company does nothave the problem of accumulated work in progress since products canas well be made based on demand from customers.
TheLego Group has invaluable experience in the industry. Since itsinception in 1949, the Group has experienced the markets dynamicshence, it is in a position to make the most strategic decisions basedon industry norms and dynamics(Hollensen 51).
Theparent company of the Lego Group was closed down decades ago. Thus,its size in terms of the products produced remains small allowingother imitators to make similar toys at a cheaper price.
Thehigh prices in Asia sets the cost of production up, almost twice thecost of production in China. Import and distribution costs increasethe price(Rothaermel 34).The high-price will continue to be a weakness as long many otherlow-cost brands enter the Asian Market.
Theproduction idea of the company thrives on variations of prior themes.In some cases products may not sell to their fu potential becausecustomers feel, the product is not very different from the previousversion.
Newemerging markets in Asia, South America, and South Africa provideexpansion opportunities
TheGroup can use its brand equity to outsource many of its complexlogistics
There are many companies in the market with the potential tocomplement the Lego Group. For example film companies are a greatsource of ideas for future production.
LegoGroup has the capacity use high content to create a new version ofelectronic toys for leading customers as a way of staying head ofcompetition.
Thecompany lacks a strong copyright protection background, leaving itvulnerable to unauthorized imitations.
Thecompany faces the threat of strong competition from small imitatorswho have the potential to encroach into the Group’s high-endmarket.
Changeof playing habits among kids can render traditional toy modelsoutdated hence, affecting its market position.
Mission:“To invent the Future of Play,”(Woufack 13)
Vision:“Inspire and develop the builders of Tomorrow,” (13)
Values:Imagination Quality: Creativity Learning and Care (14).
Logouses a Canvas Model that fulfills all the requisite components asshown in the illustration below:
Research & Development
Corporate Social responsibility
Children in schools
Families that are theme park visitors
R & d
Legoland and stores
Logo’supdated research focuses of changing the company’s innovationmodel. Previously, Logo’s innovation model focused on tangibleproducts. The new model, launched in 2015, was improved along fourmain themes: process, communication, pillars of business, and product(Ind, Nicholas, Bjerke 137). The model enhances resource management and the company is able topredict future competences of project undertaken to continue beingthe market leader.
TheLego Group is conventionally referred to as the “The Hub ofCreativity,” or “The perpetual machine of motionless Creativity,”(Rickey, Jeff, Gebhardt, and Moosfeld 20). The productivity of the Lego Group thrives on extraordinarycreativity and imagination. There are many creative Lego productsranging from real events to virtual events such as films. A few yearsago, the company was producing simple Lego bricks that were usedmanually by children. Due to the heavy investment in creativity andimaginative art, Lego can recreate the events in a film and make kidshave an experience with cinema hits such as The Hobbit or even theStar Wars. Lego replaced manual toys with automatic ones that canfollow instructions and fulfill the kid’s desires in real-life. Theability of the company’s creative team to connect the abstract andconcrete through creative art earned it a place among the world’scorporate giants(Rizzo, Albert, and Kim 119).Considering that the modern market place in any business depends onthe level of innovation, Lego’s high-class innovation propelled tobe the most powerful company, replacing Ferrari.
IntellectualConnections: Disney,Sony, Schools, Paramount, EA, Warner
Developinnovative processes from outside the organizations
Identify,select, and develop creative talent through outsourced initiatives
Developshared identities with other organizations
The Lego Group has a huge presence in the western developed markets. To continue thriving in this market, the Company has to keep reviewing its value chain with more investments in creativity based on extraordinary imagination. However, there still room for expansion into the eastern European markets that remain untapped.
Emerging markets are also viable investment destinations. Markets such as India, China, Mexico, and South Africa have not had a convincing market presence from the Lego Group.
In contemporary business business-to-customer distribution models create customer loyalty. The Lego Group can initiate personalized services for its customers through direct deliveries after online orders have been placed.
The Group should increase its product placement in trending films since they have proved to profitable and market resilient. Whenever a film comes out, customers anticipate commensurate production from the Group.
The company should invest in more complementary partners and make exclusive agreementsto further penetrate the market.
The Lego Friends segments still needs more expansion.
Frigo,Mark L., and Hans Læssøe. "Strategic risk management at theLEGO Group." StrategicFinance2.2012 (2012): 27-35.
Hatch,Mary Jo, and Majken Schultz. "Are the strategic stars alignedfor your corporate brand." Harvardbusiness review79.2 (2001): 128-134.
Hollensen,Svend. Marketingmanagement: A relationship approach.Pearson Education, 2015.
Ind,Nicholas, and Rune Bjerke. "The concept of participatory marketorientation: An organisation-wide approach to enhancing brandequity." Journalof Brand Management15.2 (2007): 135-145.
Rickey,Jeff, Evelyn Gebhardt, and Am Moosfeld. "Virtual ProductDevelopment." (2005).
Rizzo,Albert, and Gerard Kim. "A SWOT analysis of the field of virtualreality rehabilitation and therapy." Presence14.2 (2005): 119-146.
Rothaermel,Frank. Strategicmanagement.McGraw-Hill, 2012.
Schultz,Majken, and Mary Jo Hatch. "A cultural perspective on corporatebranding." Brandculture. London: Routledge(2006): 15-33.
Wang,Gao, Fei Li, and Xi Liu. "The development of the retailingindustry in China: 1981–2005." Journalof Marketing Channels15.2-3 (2008): 145-166.
Woufack,Rosaline MK, et al. "LEGO."