Lego Case Study

1473 words - 6 pages

The LEGO Group Strategy

1.Strategy development

According to Johnson et al (2011), in order for a strategy to be successfully measured, the organization should apply three horizon framework. It could be argued that the crisis of LEGO Group in 2003 was a result of a lack of realistic action plan. The objectives set by the Company were too ambitious considering the highly competitive environment. Also, major changes in the management structure have caused disagreement which resulted in many employees leaving the company. Significant revenue loss from 2003 and 2004 has forced LEGO Group to re-think its strategy and start from the beginning.
Using the three horizon framework, it could be ...view middle of the document...

Financial crisis in 2008 and 2009 was the time when Lego decided to take risk and order new equipment as well as increase the production for upcoming years - for example, the production of The Lego Movie (2014) had started in 2008 (Ashcroft, 2014).

3. Alternative strategies in 2004

Re-organizing company’s structure by handing the CEO position over to 35-years old executive, which was risky but, with time, it proved to be a right decision. Moreover, targets and expectations were set at the level from 1998.

Supporting company with the loan, which was necessary as the capital structure had weakened due to significant financial loss from previous years. In addition, decision was made about selling the LEGOLAND parks, mainly because this business was different from the rest, but it has also significantly improved the Company’s financial situation.

Getting closer to smaller retailers enabled LEGO group to understand the demand better. It was a good move because it took out the pressure which was previously put by major retail customers (such as Wal-Mart which kept demanding innovative products and short delivery times). It also helped in getting closer to the customers who were invited to participate in product testing so the Company could understand the demand.

The initial idea of cooperation with Flextronics and outsourcing the production to other locations was naturally to cut the costs of manufacturing. However, it soon turned out that there were more challenges than advantages of this agreement. There was a slow reaction to short term changes in the demand (related to the product being highly seasonal). But there could be more reasons such as not enough training and education provided for the staff and poor level of communication with products facilities abroad (Meyer, 2008). Before starting the partnership with Flextronics, LEGO Group should have done research about possible candidates for partnership in terms of effectiveness and efficiency, transportation options, time adequacy and other important criteria. The partnership ended in 2008 with changing Company’s strategy about supply chain and distribution..

5. PESTEL and key drivers for change

LEGO Group is a global organization therefore political factors can have a significant influence on its growth. For example, LEGO has numerous manufactures in politically unstable countries such as China. Moreover, the Company aims to continue to expand its position in Russia; however, in current political situation it might be very challenging.

There are few economic factors that could have an effect on LEGO’s performance. The most important would be the general economic situation in the countries which are LEGO’s crucial markets. For example one of biggest challenges is financial stability in southern European countries which, if spread out to other regions, could affect Company’s revenue growth.

One of the social impacts that can affect LEGO’s strategy could be an...

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