Lego's Current Strategy

1 What is Lego's current strategy (ie at the time of the case) ? What are strengths and weaknesses of the company in relation to the market and competitive environment?

Traditionally, this company has had a distinctive product, and this has been the basis of its success. The uniqueness of the Lego product is now under threat - with rivals being allowed to produce similar products. The case study presents competitors Hasbro (producing Kre-O) and MEGA Brands (producing MEGA Bloks).

The company goes back a long way, but the early history probably has little relevance to the current situation. There is mention of product innovation in the 1970s, and attempts to engage with consumers in the 1980s to develop brand loyalty.

In the 2000s the company was involved in video games, and online interaction with potential customers to develop

2 In relation to the section The first time management saved the company (pages 5-6), describe the problems faced by the company at that time. To what extent were these solved, and how?

The company's organization and production had become complicated and needed streamlining to remain competitive and efficient. Revenue was dependent on elaborate products with low profitability (the importance of product profitability analysis is highlighted, and the need to use this information to develop new strategies). Innovation was not sufficiently conscious of the issue of profitability. There were too many suppliers. The variety of products led to excessive downtime for re-tooling and machine productivity suffered. Distribution was also inefficient. Dealing with small outlets was far less economical than operating through larger ones such as chain stores.

It is useful to note that these problems seem to have developed over time, through lack of attention to overall strategic considerations.

One of the cost-cutting measures seems to be to cut back on diversity where the customer is not concerned or willing to pay for the difference! Reducing the number of suppliers cuts back on administration time and cost. Better scheduling of production led to further savings. Distribution was rationalized, and the strategic use of discounts was also introduced. Inventory levels were planned more carefully.

The success of these measures can be seen in improved profitability - and created a space for thinking about future development.

Competition takes the form of a) alternative products, and b) imitations (often cheaper). Legal attempts to preserve the product for Lego alone seem to be failing - leaving serious concerns about future development.

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