Strategic Management and Lego
1st CASE STUDYWinter term 2012/2013Student: Aitor Martin SantanaProfessor: Ravinder Kaur-LahrmannSubject: Management Tools| THE LEGO GROUP 1. In this case I have identified some key characteristics that are in relation with the strategy that LEGO has been following. In the 1970-1980 decades, environment was hostile.
There was a huge oil crisis, and there were too much difficulties. However, LEGO maintained its philosophy, and their image of unique and iconic brand. Competence was also hard, with Mattel and Hasbro in the market, but LEGO sustained its powerful position.
If we focus, for example, in the strategy that they carried out between 1995 and 1998, an interesting fact is that their objectives (become the best known global brand, increase the sales, etc. ) are set in a long term direction. Another important point is that they wanted to expand the scope of their activities. They entered in new areas such as films, games… and they also built new LEGOLAND parks. However, the turnaround attempts that happened between 1999 and 2003 forced this company to check their strategy. Different factors such as the changing environment, lead times… affected negatively LEGO`s strategy.
This shows that the uncertainty of strategic decisions is also decisive. If we look at the exploring strategy model, we can see that the strategic decisions have affected the three main elements (position, choices and action). Regarding to the strategic choices for example, we can mention the corporate-level and the business level strategies. I think that LEGO took some correct decisions, such as changing their relationship with retailers, renewing their supply chain… 2. There are many external features that have more or less influenced LEGO`s strategy development.
One of this factors has been the competitor`s influence. Due to the high competitiveness in the toy market, LEGO has to make a big effort in strategy in order to be one of the leaders of this industry. Other important issue is the supply and the distribution. The main reason of changing their strategy is that sales were seasonal and they had to adapt their supply system to this. Concerning the distributors we can state that retailers were putting too much pressure on the company, so the solution consisted on bringing their positions in order to achieve better results.
Maybe one of the reasons of starting a digital strategy was the obsolescence of their products. There are other influences worth mentioning, such as the economic (crisis and bad cost management) and social (criticism of the public). 3. Improvements of the capital structure were important resources that have enabled LEGO to achieve their successful results. If we focus on intangible resources, we can say that the reputation of this firm is key element, especially because they created an image of a family-run company, which give consumers, shareholders, suppliers… a feeling of trust.
Kjeld played an important role. On the other hand one of the most important competences of LEGO is their brand. This is one of the oldest and better known toy companies in the world, so we can say that their brand is iconic. In my opinion, this is the main core competence of LEGO. 4. I think that the various internal and external factors responsible for problems were the key element in the development of those alternative strategies. They forced Kejld to take those decisions.
The previous years were adverse, and there were internal problems such as financial and logistic difficulties, longer lead times, etc. Also external factors such as competitor`s rising power and problems with suppliers were determinant in taking the strategic decisions. In my view, two were the most important strategies: focusing on cost and the supply chain and innovating. Managing the costs efficiently is very important, especially for companies that produce seasonal products. This gives security. Innovation provides a company an extra value.
Inviting the consumers to participate in product development was an excellent idea, because in the toy market is necessary to have lots of ideas. LEGO needed new, better and more ideas. 5. In order to approach future strategy development, they could focus on one of the four strategic lenses (strategy as a design, strategy as experience, strategy as ideas and strategy as discourse). If they chose the design lens, their managers would have to take rational decisions with a high grade of legitimacy such as those related to costs, their product`s marketing, etc.
They also should take a look on economic performance, which is very important in LEGO Group. Also, they could focus in the experience lens. Focusing on this lens would be a possible decision, because LEGO has a lot of individual and collective experience. Although LEGO could focus on this lens, I personally think this would not be the best option because LEGO needs innovation and new ideas for the future, and this lens states that the future has to be made based in the past. The next would be the ideas lens. This would be, with the design, the ens which better would fit with LEGO Group`s strategy, and the one that they should develop most. I say this because in the market where this company competes new ideas are very important, in order to maintain competitiveness. Finally there would be the discourse lens, which I think could also be a good strategy for LEGO, but not the best, because we have to remember that LEGO doesn`t want its managers to have too much power and legitimacy. Their work should be more focused on teamwork and cooperation between higher and lower power levels in the company.