The Lego Group, SWOT Analysis Example

The LEGO Group has been a mainstay in children’s toys for decades. Privately held by the Kirk Kristiansen family. Founded in 1916 by Ole Kirk Kristiansen that started off as a humble carpenter that brought a Danish wood workshop. Beginning by first building homes and furniture, moved to make wooden toys that he would name LEGO, (LEgGOdt: play well). His family would soon follow in guiding the company first throughout Europe adding plastic toys, and later would discontinue the wooden toys after a fire destroyed the warehouse in 1960. (Rivkin, Thomke, Beyersdorfer, 2012) Their mission is to, “inspire children to explore and challenge their own creative potential.” (LEGO, 2014)

During the 80s to the 90s LEGO sales begin to stagnate, and they suffered their first financial loss.  During the early 2000s, the operations were faltering due to a perceived lack of accountability, and discipline, which was costing the company companies, and revenue.  After the past decade where the company was heading down a rocky road, under the leadership of CEO Jorgen VigKnudstorp, they were able to get back on track.  When Knudstorp stepped I, he implemented a three stage plan that included, “Manage for Cash”, “Manage for Value”, and “Manage for Growth.” (Rivkin, Thomke, Beyersdorfer, 2012)  Within the last decade the company’s revenue has grown over 165% within the toy market, making them the fourth largest traditional toy maker. (Rivkin, Thomke, Beyersdorfer, 2012) The fluctuations in the toy market, brought much apprehension and eagerness to branch out into the games market. However,Padda, the Executive VP of Global Supply Chain was convinced that they should rely on the same business model. The following provides a SWOT analysis on the LEGO Corporation.

SWOT: Strengths

The LEGO companyhas been one of the top 5 largest manufacturers of toys in recent years. The strengths of LEGO are that they are globally recognized brand with products sold in over 130 countries, and several manufacturing companies within Hungary, Czech Republic, Mexico, the US, the UK, Germany, and Denmark. LEGO operates in along with subsidiaries in Europe, Africa, Americas, Australia, and Asia. Along with the recognized LEGO logo, that carries the, “expectations that people have of the company towards its products and services, and the accountability that the LEGO Group feels towards the world around it.” (Rivkin, Thomke, Beyersdorfer, 2012)

Another strength is the ability for the LEGO to reach out to several targeted audiences that include boys and girls from adolescences to teenagers. The boys were one of the first targets, and that quickly expanded to both groups with age ranges from toddler to being used by teenagers with expandable sets, and diversified product lines. LEGO has even begun to appeal to AFOLs (Adult Fans of LEGO), which love of LEGOs is passed down to their children through clubs, conventions, videos, and LEGO conventions that attract tens of thousands people.(3)Expansion of the LEGO lines in order to appeal to more. This expansion includes game boards, multiple themed sets, and several other product lines. This is based on the CEO ability to design, invent, and commercialize products based on the LEGO system of play. These products are used by architects, automobile makers, and other developers. The products lines have expanded to include a reintroduction of Lego city, robot kit Lego mind storms, Duplo, and technic.

LEGO gets one of its core strengths from being an educational toy that encourages play and encourages fundamental growth initiatives such as play learning, problem solving, and the development of useful skills in young children. The LEGOs are fun, where creativity is possible, and the ability to use in the home or classroom setting, and online play. (5)The LEGO blocks and toys are quality, durable, and reusable. This has help with better compatibility for customers that own several sets of LEGOs, better customer service, and more efficient manufacturing. The continuous production of more LEGO components that offer a variety of options for customers means the freedom to expand in international markets such as India and China.

Weaknesses

LEGO has a few weaknesses that include, there lack of more LEGO products that leads to a diversified portfolio. (2) LEGO is trying to branch out into the gaming and online gaming market, however, lack the innovation to produce diversified products for consumers. LEGO currently does not have a strong market position in China, Mexico, Brazil and India. (Rivkin, Thomke, Beyersdorfer, 2012). (3) China along with Japan are largely reliant on online and video gaming, where more than billions in revenues is shared. LEGO has yet to get reputable footing in the online gaming platform and faces vast competition from more establish online gaming companies. (4) The LEGO toys are easily duplicated by new entrants, and emerging toy companies in the global market that offer a lower costs than LEGO products. This creates concern in price adjustment, and the threat of loss of profit share in some global markets. (5) The weakness of the slowness in capitalizing on television, movie, and other markets where others have exceeded in expanding their product and service lines.

Opportunities

LEGO opportunities include offering new products for their expandable brand corresponding with popular Disney and kids movies. (Star Wars, Pirates of the Caribbean, Spider Man, etc.) They already have sets available, but by expanding different uses they are able to gain more profit from customizable sets.(2) By promoting the educational aspects of LEGOs in schools they will be able to expand their market share in international countries such as Mexico, China, and India, where market share is lower.  LEGO Educational can be of value in all schools to promote skills and competition.  (3) Another opportunity is to acquire more licenses from several companies including Barbie, Disney Princesses to get a better market on young girls, and other branding exercises to reach out to more audiences. (4) Opportunity for kids to design their own designs where they are to print out and make their own designs, (color, shape, features, etc.). (5) Develop a low cost sets for markets where the economic growth is lower such as in some areas in Mexico, India, Africa, and others where market share is considerably lower.

Threats

LEGO’s threats include international competition where market share is not

LEGO Games is not on the level of more established gaming companies such as HASBRO, and other popular gaming companies that have a more loyal customer base for traditional game boards and sets. (2) Online gaming has increased significantly that a large portion of toy sales was from gaming consoles and video games. Japan dominates the global video games market, and China leads in web games. (3)There has a been a bigger push for more outdoor games and sport toys that includes, play guns, bow and arrows, and traditional sports equipment with the push for more exercise in schools. This leaves less time for LEGOs that are trying to capture the older market. (4) Competition from imitation groups such as Automoblox, Vtech, Meccano, and K’Nex, Mega Bloks, Littlebits, and others is a major concern to the brand. Most offer products aimed directly towards boys or girls, and have the same educational value in aiding social and intellectual development.(5) There target audience has relied on television as their source of entertainment and imagination that leaves little room for playing with LEGOs.

References

Rivkin, Jan.W. , Thomke, Stefan. H., Beyersdorfer, Daniel A. (2012). LEGO. Harvard Business School. Retrieved from https://cb.hbsp.harvard.edu/cb/pl/23355283/23355285/5901d75ee83a937f5ae52ed4e825ffd

LEGO Group. (2014). About Us. Retrieved from http://aboutus.lego.com/en-us