LEGOLAND - Analysis of the toy industry

Résumé du document

Before conducting an in-depth analysis of the toy industry, we will deliver a brief presentation of Lego, which is the core of the subject.
Lego is a Danish company, which was founded in 1934, by Ole Kirk Christiansen. The core activity of Lego is the conception and manufacture of educational toys and the main focus is on the 'Lego Brick'.

The name is derived from the Danish term 'Leg Godt 'which means 'lay Well'. In the beginning, almost everything depended on the invention and protection of the LEGO Brick. It's the 'LEGO play system' which would be the basis of the company.
Today, LEGO is a major actor on the toy industry, and is a world-known brand (A LEGOLAND park was even created in Denmark), and is reputed to be an LEGO is an educative game which stimulates imagination and logic. Carrying a guarantee of very high quality, LEGO games are often handed down from generation to generation. This explains why LEGO is evolving on the toy industry.

We will now present an overview of the global toy industry, from the perspective of the Macro Environment on one hand and Micro Environment on the other hand, with a description of the segmentation in this market, the Porter's 5 forces model, the industry structure and attractiveness, and finally, the Key Success Factors.

At the outset, a brief global overview of the market is mandatory. In 2008, the world toy market had a value of 78 Billion $, which represented a small decrease compared to 2007. However, after the crisis, the industry was able to take off again, and in 2009, the value increased to 80 billion €, and is expected to keep growing in 2010.

Extraits

[...] About Lego : Lowering the costs by delocalizing a part of the production. Indeed,moving a part of its production to Asia, or Eastern Europe, would allow Lego to achieve some scale economies, by reducing the wages. Acting this way, Lego would be able to lower its prices, higher than its competitors, and keeping its brand awareness. The qualitiy won't be affected since some suppliers from Hong-Kong, already in contract with some Lego competitors as V-Tech, or Playmates produce their toys over there, with a quality level similar to the occidental suppliers. [...]

[...] But in 2004, Kjeld Kirk Kristiansen let his seat of CEO to Jorgen Vig Knudstorp, who doesn't belong to the family. But this change brought a new energy to Lego, which was able to rebound after a beginning of the 21th century complicated. Nevertheless, the Kristiansen Family remains present in the board, making Lego a familial company. Through this family spirit, Lego always implemented a code of conduct which aim was to satisfy the employees. For a long time, this social policy has been on the heart of the global policy of the company, until the financial crisis. [...]

[...] It implies a high level of commitment. Young Children segment Same issues than the babies, and in addition, starting to apprehend the entertaining aspect of the toy, and the price Pre-Teens Find something to interest this category, between teens and children by providing new products to satisfy their special needs. Teens Trying to keep their interest for “growing by providing smart toys, in relation with their behaviors, to face up to the giant Video Games. Adults Keep aware of the old trends, and how to satisfy this very small category but very profitable since the price for the old toys are often expensive. [...]

[...] In this table, we will have a look at the main competitors in the industry regardless their specialty or not, only in term of revenue. As we can see, Lego is quite weak compared to its main competitors. But what is noticeable is that Lego is the only European among the American or Japanese toy manufacturers, which remains a good performance. Also, as mentioned before, we have to operate a distinction between the specialists, the generalists, the Multi Services, and those who play internationally, only in Europe and nationally. Here is a table which shows this landscape in the toy industry. [...]

[...] On the other hand, the price range of Lego is very. The simpliest lego are not expensive at all, making them affordable for most of the occidental families, but some of them, especially the licensed products ( Star Wars, Harry Potter) are much more expensive. It will also be false to assume that Lego has no competitive advantage, otherwise they would not be one the biggest actors in the world on the toy industry and such a worldknown brand. That's why the most logical action seems to place Lego in the Middle of the table. [...]