Corporate Strategy1999

Founded in Denmark, 1932Worlds 5th largest toy manufacturerManufactures, distributes and retails plastic building block kits -

LEGO Primo, LEGO Duplo, LEGO System and LEGO TechnicEmployees 10 000 people Revenue US$1.1 billionCEO, Kjeld Kirk KristiansenNew businesses - LEGOland, LEGO Lifestyle, LEGO Media, LEGO

Mindstroms

LEGO Group

1984 Early R+D1986 Launched computerized building set for schools;

deemed premature1993 Strategic business unit created after the successful trial

of a programmable brick1995 Home PC ownership and Internet usage is sky-

rocketing. Market dominated by game-oriented ‘edutainment’ products

1996 Target market identified: Conscious, Caring and Capable parents, (CCC), 20% of US households

1997 LEGO Mindstorms launches

LEGO Mindstorms

Integrate or continue unabated?

Macro Environmental Analysis

Instability in the developing world;WTO free-trade negotiations breakdown; and

European Parliament elections.

Political

Economic

Euro introduced as Denmark abolishes the Krone; changes to the Danish taxation system; and the Internet boom is still aiding economic growth

Sociological

Changing attitudes to early childhood development; away from instructional methods; and leisure time is

evolving from outdoor activities.

TechnologicalSpeed of information technology increasing; communication networks impacting on society; and internet and PC games impacting the toy market.

LegalLabour market reforms in Denmark; and

potential changes to intellectual property laws.

Environmental

Increasing global concern for the environment; over consumption and over population; governments intervening

Industry Analysis

Industry Rivalry

Flexibility Adaptation; speed to market; pricing; and distribution.

Innovation In products; services; support; and technology features.

R+D Continual new and exciting productsBrand awareness Market appealEconomies of scale Vital for profit marginBusiness Synergies Across LEGO group

Critical Success Factors

SWOT Analysis

StrengthsLEGO

Resolved vision;Outstanding reputation;Extensive distribution

network;Success in addressing org.

mindset problems; andHigh brand awareness

amongst target market.

Mindstorms

Astute marketing;Flexible, timely operations;Global vision;Products reflect LEGO’s

foundation; and Strong launch and initial

sales.

WeaknessesLEGO

‘Instructionism’ products;Poor sales growth in recent

years; andViewed as ‘entertainment’

rather than ‘education’ company.

Mindstorms

Partnership conflicts.Staff that lack LEGO

knowledge

OpportunitiesLEGO

New alliances with major players, i.e. Lucas Films and Star Wars brand; and

Economies of scale opportunities through integration with Mindstorms.

Mindstorms

Further market penetration; and

Establish new target market with schools.

ThreatsLEGO

Declining profitability;New competitors; andIncreased internal conflicts;

Mindstorms

Unfamiliar substantive competitors, i.e. Sony, Microsoft, Nintendo and Sega.

Company Analysis

Corporate Strategy Perspectives

LEGO’S Current Corporate Strategy

Since the early 90’s senior management have been working towards an integrated organisation perspective;

CEO was preaching a universal approach revolving around ideas, exuberance and values; and

Merging activities and processes to become more efficient, realizing synergies ahead of retaining responsiveness.

LEGO’S Current Corporate Strategy

Formally structured core business;

Strategy was focused on planning, forecasting trends, and product programming.

The fitness program, involves reducing organisational layers and staff, clearer lines of responsibilities and a greater customer focus.

Predictable product lifecycles;

Continuous marginal improvement;

Business Strategy Perspectives

LEGO’S Current Business Strategy

Variance in business strategies across the SBU’s;

New business units have an outside-in perspective;

Core business has an inside-out perspective; but

Recent core activities project a change towards a market focused strategy (outside-in strategy).

Functional Analysis

Mindstorms CapabilitiesHR Experienced early challenges; hired

externally; global recruitment; seeking fast paced innovative employees.

Marketing Decentralised from LEGO core.

Pricing For price leadership.

Distribution Hybrid non-traditional channeling created conflict with the core distribution.

Promotion Outsourced PR/advertising focused only on the US market.

Mindstorms PerformanceFinancial Sales are 1% of LEGO; goal to increase

growth rapidly; high cash needs; and financial losses in 1998 resulted in 1000 job losses.

Customer Creating awareness; online communities are attracting adults; competitive robotic events are attracting children.

Internal Build strong supply chains; operational efficiency; economies of scale.

Growth Synergies aligned with constructionist values and core competencies; responsiveness to market through innovative.

Recommendations

Hybrid Corporate Perspective

Manufacturing and ProductionSharing value-added activities;

Lean manufacturing;

Parallel production processes; and

Economies of scale.

Suppliers and Channel PartnersAligning positions to improve competitiveness;

Channel partner synergies; and

Strengthening existing relationships

Internal Cultural ChallengesRemain innovative; via

The creation of a Mindstorms Champion Group.

FinanceLeveraging resources; Reduced operating costs; Sustainable growth; and Increased Profit margins.

References

De Wit, B and Meyer, R 2004, Strategy:process, content, context.International Thomson, Singapore

Ireland R D., Hoskisson R E. & Hitt M A., 2008, Understanding Business Strategy, Concepts & Cases 2nd Ed. Cengage Learning,

Hubbard, G 1990, Analysing a Case, in Cases of Strategic Management: Australia and New Zealand, G Lewis, A Morkel, G Hubbard, G Stockoprt, and S Davenport (eds), 2nd ed, pp. viii-xvi, Prentice Hall Sydney

Porter, M, (1998) Competitive Strategy: Techniques for analyzing industries and competitors, Free Press

1999 Statistics, Denmark viewed on August 10, 2009 <http://www.dst.dk/HomeUK/Guide/economico/1999.aspx >

Environmental Issues – Global Issues viewed on August 10, 2009< http://www.globalissues.org/issue/168/environmental-issues>

Lego Financial Accounts 2001 viewed on August 20, 2009< http://cache.LEGO ｮｮ .com/downloads/aboutus/accounts2001eng.pdf>

Lego Mindstorms – What went wrong? Viewed on August 20, 2009< http://www.techuser.net/LEGO ｮ .html>

Lego Pressroom Archives displaying historic financials viewed on August 20, 2009<http://www1.LEGO ｮ .com/eng/info/default.asp?page=pressdetail&contentid=99&countrycode=2057&yearcode=2000&oldXML=true&archive=true>

Effects of Overconsumption and Increasing Populations viewed on August 10, 2009< http://www.globalissues.org/article/216/effects-of-over-consumption-and-increasing-populations>

BCG Growth-Share Matrix viewed on August 20, 2009< http://www.netmba.com/strategy/matrix/bcg/>

Historic Exchange rates viewed on 10 August, 2009< http://www.xe.com/ict/>

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