lego case study - the great turnaround
TRANSCRIPT
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LEGO Group – Building StrategyISS 509E Marketing Management – 05.11.13Fatih Coban, Yusuf Oktay, Vanessa Schuller,
Jasper Schwenzow
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Structure
1. Lego – The Company 2. SWOT Analysis3. Strategy Analysis4. Recommendations 5. Lego – Now
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LEGO – Timeline 1
1932 Foundation by Danish Ole Kirk Kristiansenwooden toys
1934 Name LEGO 12 Employees„only the best is good enough“
1947 first plastic injection molding machine
1949 LEGO bricks invention
1960sExpansion to EU,US,CAN,JPN,AUSFocus on LEGO bricksFirst LEGOLAND theme park
1970sProduct differentiation and variation>2500 EmployeesNew CEO
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LEGO – Timeline 2
1980sEducational lineLEGO magazine
1990s>7.000 employeesLEGO storescomputer gamesOne of top 10 toy manufactures
2000sAcquisition of licensesmore product linesVirtual online LEGO universe
Now 2010>9000 employees4. largest toy manufacturerAnnual sales 3.7 billion US$ Net profit 0.86 billion US$
Internal problems4 out of 7 years loss-> production process optimization-> reduction of suppliers-> reduction of design variety-> distribution optimization
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SWOT – Internal
Complex structurePatents lose value
Compatible competition's building setsReduced product design possibilities
Broad differentiation & new computer gamesStrong brand image & media presence worldwideSeveral branches & touching pointsImproved company‘s structureProducts fun & valuableHigh quality productsImproving key figures
STRENGTHS
WEAKNESSES
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SWOT – External
Huge market & building sets‘ fast growthLego market leaderUsage of new computer technologiesGrowing markets worldwide
Design no longer protectedStrong and growing competition
Disney controls entertainment licensing
OPPORTUNITIES
THREATS
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SWOT Focus CompetitionHasbro: - 2. largest toy maker- Long-lasting success- Holds licenses - Kre-O to be launched- Net revenue 4 billion US$- Investment (property etc.) 0.23 billion US$- Investment (intangible assets) 1.6 billion US$- Net earnings 0.4 billion US$
MEGA Brands: - Main rival competitor
(building sets)- Won court battle- LEGO Compatible system- Net earnings 0.13 billion US$- Investment (property etc.) –
0.1 billion US$
Mattel (indirect): - Largest toy maker (revenue 5.8
billion US$)- Popular products- Holds many licenses
Disney (Licensor): - Acquisition of Marvel- License monopoly
LEGO key figuresRevenue 3.7 billion US$Net earnings 0.86 billion US$
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SWOT – Complete Analysis
Strength:- Strong brand- Valuable, differentiated
products
Weakness:- Complex structure
Threats:- Direct & indirect
competition- License market
Opportunities:- Market growth- New technologies
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SWOT – Change Over Time
NOWMain problem: external threats- Strong, growing competition- License market - Trademark protection loss
PASTMain problem: internal weaknesses- Costly designs- Inefficient production,
distribution, sales
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Corporate-level Strategy – Business Units
Business Unit Important Features
Non-licensed Building Sets Company's main product
Licensed Building Sets Company's main product
Video Games Non-violent, recent growth
Board Games
Theme Parks Important touching point
Stores and Merchandise Touching points, discounts
Online Website Innovation possibilities
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Corporate-level Strategy – Segmentation & Targeting
Target Market Applied Products Examples
Communication Channels
Children under 5(Buyer ≠ Consumer)
Duplo Via parents
Children & Teenagers Building sets, Video Games
Magazine, TV advertisement, Website
Fans (adults) Special products Different Websites, LEGO shops
Educational market Extra line for schools, Mindstorm
Probably Website
Families Theme Parks, Board Games
Mouth to mouth, media advertisement
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Corporate-level Strategy – Positioning
Goals:1. Maintain market dominance in building toy market2. Financial success3. Expand and develop product lines
Mission: „Our ultimate purpose is to inspire and develop children to think creatively, reason systematically and release the potential to shape their own future – experiencing the endless human possibility“
Motto: „Only the best is good enough“
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Business-level Strategy – Building Sets
LEGO against competition• High quality and safe products• High customization and adaptation• Educational aspects included and forwarded• Strong media presence
Dangers of current strategy:• Costly • Losing market share by competitor‘s low
price policy• Suppliers dependency (Star Wars)
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Recommendations 1Problem: License monopoly
Idea: LEGO Toy producer LEGO Entertainment producer
Strategic implementation: • Developing own stories• Promotion via movies, magazines, internet
finding partners (e.g. Google)• Adaptation of Merchandising
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Recommendations 2Problem: Competitor‘s building sets are compatible
Idea: Enhancing community / network effect
Strategic implementation: • Stronger dependency between business units
discounts in Theme Parks codes in building sets for website offers segmentation of communities further supporting community events
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Recommendations 3
Further recommendations to maintain LEGO‘s leading status• Acquisitions of smaller toy producers• Keep prices steady, just careful discounts on
special occasions• Enhance position in developing markets (Asia) if needed adapt products
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LEGO NOW
• Own story lines (Chima)• Strong growth in new markets, new
headquarter in Singapore• Forwarding environmental and social
issues
Key figures 2012• Revenue 4.1 billion US$• Net profit 1.0 billion US$
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Thank You For Your Attention!
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Sources
• Case Data• Internet sources
• http://www.shareholder.com/visitors/DynamicDoc/document.cfm?DocumentID=2935&CompanyID=HAS&zid=4d6301e3 (28.10.13)
• http://www.megabrands.com/sites/all/files/media/pdf/corpo/en/reports/Financial_Statements_2010-2009.pdf (28.10.13)
• http://aboutus.lego.com/de-de/lego-group/annual-report (28.10.13)• http://aboutus.lego.com/de-de/sustainability/our-approach (28.10.13)
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