Alex Brown

Luis Cavero

Amedeo Giacomantonio

Unni Pedersen

Jung-Ho Song

Tetsuma Suzuki

Group 4 – Section B

Strategic Analysis and Recommendations

Presentation Outline

Company Overview

External Analysis

Internal Analysis

SWOT Analysis

Lego‘s 8-Point Action Plan

Additional Recommendations

Conclusion

Mission, Vision & Core Values

• Mission: To encourage self-expression in children of all ages through creation, by enabling them to bring their ideas to life

• Value Proposition: Develop and distribute toys which positively develop children’s mental and physical abilities while entertaining them and being fun at the same time

• Core Values: Creativity, Imagination, Learning, Fun and Quality

Company Time Line

• 1932 - A company producing stepladders, ironing boards, stools and wooden toys, is established in Denmark

• 1934 - The company is called LEGO (Play Well)• 1956 - Plastic toys

• 1968 - LEGOLAND® Billund opens its gates

• 1986 - The DUPLO line

• 1998 - LEGO MINDSTORMS /ROBOTICS

• 1999 - Star Wars

• 2001/03 - LEGO BIONICLE + BIONICLE video game + Movie

External Analysis

• Mattel: # 1 - strong growth

• Hasbro: # 2 - diverse portfolio

• Bandai: strong in Asia and Europe

• Mega Bloks: substitute bricks

• Highly fragmented

• Key success factors: Innovation, Strong Brands, Creativity

• Distribution moving towards mass retailers

• Trends: Increase in electronic toys and video games

Competitors Industry

• Continued expansion of the Internet

• Growth in broadband technology and wireless technology

• Decreasing costs for sophisticated electronic components

Technology

• Customer is not always the consumer

• Key considerations: Quality, Satisfaction, Timing

Customers • Strong growth in emerging markets

• Improvement in US and European economies

Environmental

Internal Analysis

Financial Performance Net sales fell by 26% in 2003 - only the 3rd loss since 1939No major investments in 2003

Physical Assets Reduced total assets by 20% by reducing working capital

Technical ResourcesThe Vision Lab, setting up in 2003 (researching trends and innovations)39 Lego Mindstorm centres around the world (working with leading universities and science centres)

CostsCut of 600 positions globally in 2003 Closing Switzerland factory in 2004

S.W.O.T

Threats• PC / Video Games• Increasing power of distributors• Increased dependency on licensed products• Low cost competitors

Opportunities• Electronic/technology driven toys• Sales to the Education industry• Alliances in the Entertainment industry• Growth in emerging markets

Weaknesses• Limited brand image • Loss of focus on key businesses • Indifferent cultural knowledge • Easy to copy

Strengths• Strong Brand Power• Wide product line • Well developed global distribution channel

Lego’s Action Plan

Cost Reduction-Reduce development and lead times by as much as 50%

-Terminate non-core ventures

Increasing Value to the Customer-Improve delivery system

-Increase focus on classic product lines

Improving Speed to the Customer-Increase promotional activity

-Establish a simplified global location and operations

infrastructure

Realign the Organization

TechnicalQuality

ServiceQuality

TimingQuality

ReputationQuality

Price

RelationshipQuality

TechnicalQuality

ServiceQuality

TimingQuality

ReputationQuality

Price

RelationshipQuality

Alignment

Strategic Recommendations

Leverage Brand and Technical Expertise • Education Sector

Construction ‘Violent’ ConstructionEducational

Focus on core business

Strategic Recommendations (cont’d)

MARKET ATTRACTIVE-

NESS

COMPETITIVE STRENGTH

Strong Average Weak

High

Medium

Low

INDCHN

EU

USA

Target Developing Countries• Currently less than 10% of sales outside US &

Europe • 376 million children in China (20 times the US

figure)• Culturally Customized Toys

Strategic Recommendations (cont’d)

Target Parents of Young Children• Re-branding Products (problem)• Reverting to the original Lego brand • Increase marketing aimed at parents of infants and

small children, and stress Lego’s educational benefits

Strategic Alliances (Entertainment Companies)

• Major entertainment franchises: Star Wars and Harry Potter

• Bionicle / Miramax: Mask of Light been translated in 26

different languages

Questions?