28/11/2014
• Presenta(on of LEGO business case
• Student teamwork
• Discussion
Mission: ‘Inspire and develop the builders of tomorrow’
Vision: ‘Inven7ng the future of play’
“ Children -‐ and their parents -‐ should con3nue to have very high expecta3ons of us”
CEO, the LEGO Group Jørgen Vig Knudstorp
Ownership and locaEon Family owned company The LEGO Group is today owned by the third and fourth generaEons of the Kirk KrisEansen founding family: Kjeld Kirk KrisEansen and his three children. Kjeld Kirk KrisEansen was appointed President and CEO of the LEGO Group in 1979
In 2004, Jørgen Vig Knudstorp succeeded Kjeld Kirk KrisEansen as President and CEO of the LEGO Group.
The LEGO Group is represented in many parts of the world.
Australia Austria Belgium Canada China Czech Rebublic Denmark Finland France Germany
HongKong Hungary Italy Japan Korea Mexico Netherlands New Zealand Norway Poland
Russian FederaEon Singapore South Africa Spain Sweden Switzerland, Taiwan United Kingdom United States
LEGO in numbers
about 3,5 million €
1934 1932
Danish carpenter, Ole Kirk KrisEansen, starts making wooden toys
Company name LEGO formed from the Danish words "LEg GOdt” meaning "play well” ("I put together” in LaEn)
“Only the best is good enough”. He use high quality materials and workmanship to produce toys that were designed to last through years of play.
History short summary of important historic events
1955 1958 1949
The fist plasEc LEGO bricks – named AutomaEc Binding Bricks -‐ are created and sold
The LEGO Brick is launched with a new coupling system -‐ the one we know today
“LEGO System of Play” with the first “Play and Learn”
concept
History short summary of important historic events
1969 1974 1968
LEGOLAND® Park in Billund (Danmark)-‐ “Now you can be LEGO too”
The first minifigure is born – introducing role play and characters in the LEGO play experience. The minifigure as we know it today is launched in 1978
LEGO® DUPLO® is launched for the youngest children
History short summary of important historic events
1980 1988 1977
LEGO Technic is launched. The product challenges older children to construct vehicles and other machines
The first official LEGO® World Cup building
championships are held in Billund
History short summary of important historic events
The EducaEonal Department is formed. It develops and launches educaEonal teaching
materials
1998 1997 1996
www.lego.com is launched
The first computer game is released
History short summary of important historic events
LEGO® MINDSTORMS® is launched based on the collaboraEon between the LEGO Group and Massachuseos InsEtute of Technology, USA
History short summary of important historic events
2003 2010 1999 2008
Online game LEGO
Universe launch
The LEGO brick is elected “Toy of the Century” and LEGO World Shop opens on the internet
The LEGO Group presents a major deficit and faces a
serious crisis
The LEGO Cuusoo, an internet based plaporm which brings new
product ideas to market
History short summary of important historic events
2012 2014
The LEGO Movie premieres in cinemas all over the
world
LEGO Friends is launched introducing a new mini doll figure
hops://www.youtube.com/watch?v=lPnY2NjSjrg&spfreload=10
CompeEtors
Lego becomes world's second-‐biggest toy maker
Direct compeEtor:
Toy Market:
Financial crisis In the late 90s, LEGO market share has begun to decline and the company has reported losses of $228 million in 2003 and a loss of $207 million in 2004. The decline was parEcularly marked in the US where sales dropped by approximately 35 percent compared to 2002. Asian markets experienced a fall of 28 percent.
Causes of the crisis 1. Changes in the toy industry: kids were playing more with video games, and
other toys à LEGO wasn’t cool anymore.
2. Inefficient and expensive distribu(on strategy: 26 different providers that shipped products from mulE-‐levelled distribuEon networks à this creates a backlog of order and inefficiencies in inventory levels. LEGO spends a lot of Eme to deal with thousands of smaller independent stores.
3. Increasing compe((on : some companies introduce plasEc bricks that were compaEble with the LEGO brick design (i.e. Tyco Toy, Mega Brands)
Some court baole with compeEtors. For example with Mega Brands. The European Court of JusEce ruled in favour of Mega Brands, staEng that shapes used for a technical result did not qualify for a trademark. This decision leads to an increase in compeEEon
Causes of the crisis 4. LEGO diversifica(on strategy which included soxware (LEGO Moviemaker),
learning concepts (LEGO educaEon), lifestyle products (LEGO Kid’s wear), girls toys (LEGO dolls), books, magazines, television, theme parks and own retail with a goal of over three hundred retail stores.
These new products are becoming an expensive distracEon to management and to the overall
direcEon of the company. They have lost the focus on the core business ( The Bricks!)
5. Disconnec(on from customers many new products do not saEsfy what kids want, there aren’t feedback from the customer base
Remedies to the crisis The LEGO CEO is decided to change the business strategy and set out a series of specific iniEaEves in order to ensure a stable plaporm for the Company’s development.
The acEon plan to survive, cut costs, sell businesses, restore compeEEveness, generate cash and ignore the dash for growth in the immediate future.
Remedies to the crisis 1. Focus on the core business: THE BRICKS • RaEonalise the product offer -‐ cut 30% of the product offer
• Revitalizing the core product line and transforming them: LEGO DUPLO, LEGO BRAND and LEGO FRIENDS for the girls (beoer segmentaEon)
Profit from the core business
2. Close to customers and beVer understand the end user’s needs: orientaEon would be developed using focus groups and paying more aoenEon to the AFOLs, the Adult Fans of Lego. The program “LEGO Ambassador” consisEng in selecEng around forty ambassadors in over twenty countries around the world among the community of fans that had naturally developed on the Internet. These ambassadors represenEng these communiEes, are responsible for transmi{ng informaEon
Remedies to the crisis 3. Reducing cost of produc(on: cu{ng the selecEon of colours brick in half,
reducing number of mini-‐figures availables
4. Improvement in distribu(on strategy: delivering to stores the right kits in the right volumes at the right Eme, creaEng a balanced porpolio on the shelf. To ensure the right kits arrived at the right Walmart store at just the right Eme, logisEcs would demand the co-‐ordinaEon of operaEons involving warehouses in Mexico and USA with manufacturing operaEons in Denmark, Hungary, Czech republic, China and USA
5. Licence rights acquisi(on: LEGO buys the license to produce toys inspired by successful cartoons or films. The first licence acquisiEon is for Star Wars (Lucasfilm Ltd.),then follow Harry Pooer, Spiderman, Batman, Indiana Jones
Remedies to the crisis 6. From Close innova(on to Open innova(on:
LEGO Architecture. The LEGO® Architecture series presents iconic buildings of world architecture, all realized as LEGO models. Our ambiEon is to inspire minds of all ages as they learn about the world’s most iconic buildings and structures. Lego Mindstroms NXT. LEGO Mindstorms (LEGO equipped with sensors and programmable), advanced users began to hack the system to customize and use it in a way that the Danish company had not foreseen . Axer trying to fight these hackers, LEGO finally became aware of the potenEal that laid behind them. LEGO finally allowed such “forced collaboraEon” and it created Lego Mindstroms NXT . This allowed LEGO to benefit from crowdsourcing . Lego Idea (ex LEGO Cuusoo). It presents a Web-‐based Open InnovaEon and crowdsourcing plaporm where consumers are able to submit and vote for their favourite ideas for new LEGO products. it is the evoluEon of LEGO Cuusoo version beta.
Teamwork
Swot Analysis Helpful
to achieve the objecEve
Harmful to achieve the objecEve
Internal (aoributes of the organisaEon)
STRENGTHS These are the characterisEcs of the business that give you an advantage.
WEAKNESSES These are the characterisEcs of the business that give you a disadvantage.
External (aoributes of the environment)
OPPORTUNITIES External elements that may give you an increase in sales and a future advantage.
THREATS External elements that may hinder your chances to increase sales and may provide you a future disadvantage.
What is/are the success strategy/ies of LEGO?