The LEGO Case Study 2017 Update · How did LEGO achieve this sensational turnaround? ... extract...
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The LEGO Case Study 2017 Update Dimensions of Strategy from John Ashcroft & Co experience worth sharing Now with 2016 Financials included
Transcript of The LEGO Case Study 2017 Update · How did LEGO achieve this sensational turnaround? ... extract...
The LEGO Case Study2017 Update
Dimensions of Strategy fromJohn Ashcroft & Co
experience worth sharing
Now with 2016
Financials included
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2016
The LEGO Case Study - New for 2014
In 2003 and 2004 LEGO announced losses of over $400 million dollars on annual sales of just over $1 billion. The reorganisation plan announced in 2001 had begun to falter. The company was forced to take a hard look at every facet of the operation including costs, overheads, margins, sales, marketing and the product offer.
Non performing assets, including the company's LEGOLAND parks were sold off. A radical plan for recovery and growth was introduced.
Since then company revenues have increased from $1 billion to $4.5 billion [2013] and profits have soared to $1.5 billion before tax. The company's share of the world toy market has doubled from 2% in 2004 to over 5% in 2012. LEGO has overtaken HASBRO as the second largest toy manufacturer in the world.
How did LEGO achieve this sensational turnaround? We apply our Corporate Strategy framework to help explain how and why. Comparisons with The Apple Case Study abound! It's revealing! Update by John Ashcroft, John Ashcroft and Company from the Dimensions of Strategy series.
About the Author
John Ashcroft is an economist and expert in Corporate Strategy. The LEGO case study was developed in 2014 following the success of the Apple Case study. An extract from the Apple case study was published in the ninth edition of Johnson, Whittington, Scholes - Exploring Strategy 2011, considered by many to be the "bible" of corporate strategy texts. The Apple Case Study was the second most highly rated case study in the Exploring Strategy text book.
Author of The Saturday Economist, John publishes weekly updates and insights into headline economics news. Other web sites include The Saturday Economist, Dimensions of Strategy, The Apple Case Study, Social Media Experts and the host site John Ashcroft and Company.
The textbook “Dimensions of Strategy” will be published in the Autumn of 2014. Check out the web site www.thelegocasestudy.com.
40
50
60
70
80
90
100
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
90.187.4
83.781.780.6
78.3
83.379.6
77.278.3
72.0
63.560.8
59.0
Toy Market World Toy Market
$ Billions
Source NPD World Toy Association
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mattel Hasbro Lego
Revenues $ Billion World Toy Market
Revenues $ Billion
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
Lego takes Top slot
0.0
2.0
4.0
6.0
8.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mattel Hasbro LegoWorld Toy Market World shares of revenue
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
World Shares %
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Lego
LEGO - The Golden ArchRate of Change of Revenues
%
Actual Rate of ChangeThe Golden arch
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
0.0
2.5
5.0
7.5
10.0
1995 1996 1997 1998 1999 2000
9.59.8
7.77.67.56.8
Sales Revenues 1995 - 2000
Danish Krona Billions data from 2000 Financial Report
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
-1.0
-0.8
-0.5
-0.3
0.0
0.3
0.5
0.8
1.0
1995 1996 1997 1998 1999 2000
-1.0
0.5
-0.30.2
0.70.7
Profit before tax 1995 - 2000
Danish Krona Billions data from 2000 Financial Report
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
37.935.8
28.6
25.323.1
18.716.0
11.79.5
8.07.87.16.77.2
Sales Revenues 1993 - 2016
Danish Krona Billions data from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
-2.0-1.00.01.02.03.04.05.06.07.08.09.0
10.011.012.013.014.015.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
12.412.1
9.5
8.27.5
5.54.9
2.91.81.41.5
0.5-1.2-1.5
Profit before tax 1993 - 2016
Danish Krona Billions data from Financial Reports
Losses include restructuring costs
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
32.734.033.232.632.629.630.5
24.8
19.417.6
20.0
6.5
-18.5-20.8
Return on Sales %
Data derived from Financial Reports
Loss ratios include restructuring costs
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
2
4
6
8
10
12
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
9.1
10.6
7.9
6.76.2
3.83.7
2.7
1.9
1.01.20.60.70.0
Cash Flow
Danish Krona Billions data from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
45.0
50.0
55.0
60.0
65.0
70.0
75.0
80.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
72.072.671.870.770.670.5
72.470.3
66.865.064.6
58.060.1
56.5
Gross Margin %
Data derived from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
39.138.437.837.737.640.340.5
44.645.749.448.7
52.5
60.6
71.3
Overhead Ratio %
Data derived from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
0.0
20.0
40.0
60.0
80.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
80.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
71.3
60.6
52.548.7 49.4
45.7 44.640.5 40.3
37.6 37.7 37.8 38.4 39.156.5
60.158.0
64.6 65.066.8
70.372.4
70.5 70.6 70.7 71.8 72.6 72.0
The Golden Cross
Gross Margin %
Overheads %
“When Gross Margin exceeds overhead ratios”
Data derived from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
433
867
1,300
1,733
2,167
2,600
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2,253
2,560
2,2712,152
2,221
1,9981,914
1,600
1,7681,912
1,594
1,3301,197
Sales per employee
Danish Krona Millions data from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
0.0
10.0
20.0
30.0
40.0
50.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
42.238.8
36.7
41.143.0
33.3 33.130.2 30.0
26.9 26.327.9 28.0 28.8
8.79.4
9.9
8.98.5
10.9 11.0
12.1 12.2
13.513.9
13.1 13.012.7
Working Capital Ratios : Stock
Stock turn
Stock “days”
Stock Turn : Sales / Stock
Stock days : Stock / Sales * 365
Data derived from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
5.0
10.0
15.0
20.0
25.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
20.0
17.8
12.8
11.19.8
7.05.5
3.32.11.7
4.53.3
2.6
4.2
Shareholders FundsLEG total equity interest
Danish Krona Billions data from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
-25
0
25
50
75
100
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
61.868.4
74.074.476.579.8
89.788.190.084.7
34.8
13.9
-47.3-35.7
Return on Shareholders Funds
Pre tax profit / Total Equity Interest Return on Shareholders Funds %
Pre Tax basis
Data derived from Financial Reports
The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2017
The LEGO Case Study2017 Update
Dimensions of Strategy fromJohn Ashcroft & Co.
experience worth sharing
