Case Study Of Lego Company

INTRODUCTION

The LEGO Group is very famous around the world when comes to the global toy manufacturing industry which is based in Billund, Denmark. It is a family owned business initiated in 1932 by Ole Kirk Kristiansen. LEGO has experienced transition from carpenter’s workshop to a global enterprise.

Firstly, it created the play items as wooden blocks and developed further. The wooden blocks were replaced as plastic pieces. Its philosophy is that child’s life can be enriched by “good quality play” and makes the foundation for future adult life. They have mentioned in their website that they believe that play is a main element in children’s growth and development and motivates the imagination and the emergence of ideas and creative expression.

He was also incisive on combining initiatives with a new decentralized management structure. Major new objectives for 10 years were set, plans were made, resource allocated and initiatives were launched in 1995. These objectives were set to become the best-known brand among families with children, to grow sales doubled over a 10-year period, and to establish three or four LEGOLAND parks. Decentralized management style was introduced to strengthen the organization’s management and make it less dependent on Kjeld. Staff of the company was reluctant to accept these changes and many senior and long-serving managers were left. So to adopt the new strategy new managers and specialists were

Expansion and diversification are good strategies for a business but if it exceeds the limits or go beyond the control that will harm to the business.

This is what happened with the Lego. Since the company focused more on new products, the cost increased but it did not give the expected results and eroded earnings.

It is observable that Lego developed the expansion and diversification strategy, which exceeds the business in to lifestyle products, software, theme parks, etc., in order to face for adjust for the new market trends and compete with rivals.

Out of them capital-intensive products such as Legoland Parks provided a less return to the company as mentioned in the company records. Huge amount of money was invested for these theme parks even the company was not financially stable. It seemed to be that these strategies had wasted the company resources unnecessarily and the core toy market was forgotten. It is noticed that Lego did not align its value chain with the correct strategy either. Their main product is Lego bricks. People expect / think Lego is in the toy manufacturing industry not in the entertaining industry. So at that time also they refused to accept Lego’s new businesses. But if the company had been able to use good marketing strategies before launching the products Lego might not ended up with utter