Since 1949, the LEGO Group has manufactured over 400 billion plastic bricks, tiny tires, mini-figures, and other inter-compatible play pieces, making it the world's fifth-largest toy manufacturer, and the largest in Europe. From 1932 to 2001, LEGO group achieved remarkable successes, capturing 80% of the US toy market in 1992. From 2001 to 2004 though, LEGO group experienced significant financial difficulties due to adverse industry changes and internal problems. More recently, LEGO has launched a three-phase turn-around strategy with the aim of establishing a profitable core platform, and preparing for growth. In this study, we will walk through the important phases in LEGO´s history, focusing on the changes within the company and the industry at-large, and conclude with a critical analysis of LEGO's turn-around strategy. How attractive has the traditional toys and games industry been over the 20th century? Porter´s Five Forces model provides a framework to evaluate the power of suppliers, threats of new entrants and substitutes, buyer power and the degree of rivalry.
[...] As can be seen, there were many years of drastic losses for all of these companies. Retail pressure was high, as the entire retail industry reported sales below expectations and many retailers announced closures and consolidations Profits -200 -400 - Lego Mattel Hasbro 26 (Mattel, 2002) In terms of retail behavior, the toy industry has had to deal with some major changes. For one, the emergence, especially in the lucrative US market, of powerful retail discount companies such as Wal-Mart have changed the retail landscape. [...]
[...] That is, does the strategy make the best use of LEGO‟s capabilities and resources at every point along the Value Chain? And in those cases where LEGO chose spin-off, outsource, or otherwise separate a potion of its operations, was LEGO‟s method the best alternative? Second, does the strategy have good external fit? One of the largest causes of LEGO‟s recent troubles was change within the toy industry, so does LEGO‟s strategy take advantage of its position within the industry? Or if this is not possible, does (or can) LEGO reposition itself to better take advantage of its competitive landscape? [...]
[...] "Lego's Supply Chain Transformation," Supply Chain Digest (25 Sept. 2007) 33 Keith, Oliver, Edouard Samakh, and Peter Heckmann Product Generation The major problems with the value chain resulted, ironically, from the company‟s core capabilities, the emphasis on innovation and creativity as well as quality. The another name for the product development laboratory was the pride of the company, always shown to customers touring LEGO‟s headquarters. However, the incremental profit obtained from newer products was reducing. Only 30 products generated 80% of LEGO‟s sales of the company‟s 1500 plus SKUs (stock keeping units) were products no longer being produced. [...]
[...] Furthermore, routine manufacturing and distribution processes were not one of LEGO‟s resources that notably contributed to its core competency. On the other hand, some LEGO products require unique pieces for which the product designers (who of course are not being outsourced) must work directly and closely with the manufacturing team to develop a piece according to 66 Pg 18, "Lego Company Profile." Lego Group Website the correct physical and economic specifications67, hence the heavily specialized manufacturing not being outsourced. Second, LEGO Group has divested its non-toy businesses; notably theme parks and video games. [...]
[...] ABI/Inform Nov Gold, Jeffrey. "Wal-Mart, Toys Us Rivalry Little More Cutthroat'" Seattlepi 28 Nov Dec Huhn, Mary. "Building Blocks of Media." Adweek 27 June 1994: s14-s15. ABI/Inform Dec International Directory of Company Histories. Vol St James P 287-291. Keith, Oliver, Edouard Samakh, and Peter Heckmann. "Rebuilding Lego, Brick by Brick." Strategy + Business 48 (2007) Dec Lefton, Terry. "Lego Takes More Direct Approach." Brandweek 7 Jan. 1994: 3. [...]
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