The LEGO Group Case Study Executive

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TheLEGO Group Case Study

ExecutiveSummary

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.

ThePESTEL Analysis

Political:

  1. 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.

  2. The pressure to sustain gender neutrality in its productions is real.

  3. The company faces different corporate tax regimes in the different countries they invest hence, the need to constantly adjust their profit expectations

  4. The Lego Group is not immune to labor politics for unionized workers

Economic:

  1. Exchange rate fluctuations in different countries is a real challenge in valuing risk

  2. The company faces a positive economic downturn because production labor intensive

  3. It continues to experience growth in advanced economies. The LEGO Group controls over 75% of the American toy market.

Social:

  1. 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.

  2. 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.

  3. China and India is a different cultural segment in which toys with educational themes continue to bring high revenues.

Technological:

  1. The company invests largely in three-dimensional printing

  2. The virtual platform development remains a defining factor in contemporary innovations

  3. The tablet and mobile market favors the Company since target customers watch toys from anywhere through the internet.

Legal:

  1. 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).

Environmentalfactors:

  1. The company is alive to issues of climate change and the environment by ensuring that it minimizes plastic waste

  2. 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.

TheSCP analysis

Thisrefers to the structure-conduct-performance of the Lego Group asfollows

Industry Structure

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

Firm conduct

Competitive pricing in the high-end market

Internet and traditional advertising combined

Heavy investment in R&ampD

Performance

High economic profits

High accounting profits

A positive Net Present Value (NPV) (Frigo, Mark, and Læssøe 28)

StrategicGroups

CompetitiveAdvantage

Highbrand equity

Ahuge market share in western markets

Strong partnerships

TheValue Chain

Logo’svalue chain has the following components and activities:

Firminfrastructure with the following features

  1. Delegates operational activities

  2. A cost effective

HumanResource development with the following features

  1. A highly rated human resource development strategy

  2. Satisfactory remuneration

Technologydevelopment

  1. Connecting with products with the relevant modern technology and themes

  2. Enhanced research and development

  3. Frequent software updates

Procurement

  1. Strict and efficient quality controls

  2. Adequate financing

  3. AAA rating of the procurement process

Inbound L-s

1.a single main supplier

2.use of high quality commodities

3.Use of 3-D printing

Operations

1.Production based on future demand projections

2. Great TQM of 18 to 1 minute

3.Patents on plastic derivatives

1.Outbound L-s

Seasonal sales

2.Use of DHL superior delivery

M&ampS

Brand value

1.Good strategic 2.partners

3.High availability

Services

  1. A huge web community

  2. Loyal fans

  3. Downloadable product manuals

SWOTAnalysis

Strengths:

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).

Weaknesses:

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.

Opportunities:

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.

Threats:

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.

TheMVV Analysis

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).

BusinessModels

Logouses a Canvas Model that fulfills all the requisite components asshown in the illustration below:

Key partners:

Disney

Sony

Schools

Paramount

EA

Warner

Key activities:

Producing

Research &amp Development

Promoting

Value propositions:

Logo

Friends

Games

Videos

Movie

Legoland

Education

Duplo

Customer relationships:

Pick-a-brick

Corporate Social responsibility

Designs

Customer segments:

Children

Theatre

Visitors

Children in schools

Families that are theme park visitors

Key resources:

Human resources

Brands

Inspiration

Channels:

Stores

Legoland

Schools

Cost culture:

Production

R &amp d

Legoland and stores

Promotion

Revenue streams:

Purchases

Tickets

Advertising

Partnerships

Partnerships

UpdatedResearch

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.

Creativityand Imagination

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

Options

Developinnovative processes from outside the organizations

Identify,select, and develop creative talent through outsourced initiatives

Developshared identities with other organizations

Recommendations

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. The company should invest in more complementary partners and make exclusive agreementsto further penetrate the market.

  6. The Lego Friends segments still needs more expansion.

WorksCited

Frigo,Mark L., and Hans Læssøe. &quotStrategic risk management at theLEGO Group.&quot StrategicFinance2.2012 (2012): 27-35.

Hatch,Mary Jo, and Majken Schultz. &quotAre the strategic stars alignedfor your corporate brand.&quot Harvardbusiness review79.2 (2001): 128-134.

Hollensen,Svend. Marketingmanagement: A relationship approach.Pearson Education, 2015.

Ind,Nicholas, and Rune Bjerke. &quotThe concept of participatory marketorientation: An organisation-wide approach to enhancing brandequity.&quot Journalof Brand Management15.2 (2007): 135-145.

Rickey,Jeff, Evelyn Gebhardt, and Am Moosfeld. &quotVirtual ProductDevelopment.&quot (2005).

Rizzo,Albert, and Gerard Kim. &quotA SWOT analysis of the field of virtualreality rehabilitation and therapy.&quot Presence14.2 (2005): 119-146.

Rothaermel,Frank. Strategicmanagement.McGraw-Hill, 2012.

Schultz,Majken, and Mary Jo Hatch. &quotA cultural perspective on corporatebranding.&quot Brandculture. London: Routledge(2006): 15-33.

Wang,Gao, Fei Li, and Xi Liu. &quotThe development of the retailingindustry in China: 1981–2005.&quot Journalof Marketing Channels15.2-3 (2008): 145-166.

Woufack,Rosaline MK, et al. &quotLEGO.&quot