LEGO Group – Building Strategy

ISS 509E Marketing Management – 05.11.13

Fatih Coban, Yusuf Oktay, Vanessa Schuller,
Jasper Schwenzow
 Structure
1. Lego – The Company
2. SWOT Analysis
3. Strategy Analysis
4. Recommendations
5. Lego – Now
 LEGO – Timeline 1
1947 first plastic
injection molding
1932 Foundation machine
1960s
by Danish Ole Kirk Expansion to EU,US,CAN,JPN,AUS
Kristiansen Focus on LEGO bricks
wooden toys First LEGOLAND theme park

1949 LEGO bricks

invention
1970s
1934 Name LEGO Product differentiation and
12 Employees variation
„only the best is >2500 Employees
good enough“ New CEO
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 LEGO – Timeline 2
2000s
Acquisition of licenses
more product lines Now 2010
Virtual online LEGO universe >9000 employees
1980s
4. largest toy manufacturer
Educational line
Annual sales 3.7 billion US$
LEGO magazine
Net profit 0.86 billion US$

Internal problems
1990s
4 out of 7 years loss
>7.000 employees
-> production process optimization
LEGO stores
-> reduction of suppliers
computer games
-> reduction of design variety
One of top 10 toy manufactures
-> distribution optimization 4
 SWOT – Internal
Broad differentiation & new computer games
Strong brand image & media presence worldwide
Several branches & touching points
Improved company‘s structure
Products fun & valuable
High quality products Complex structure
Improving key figures Patents lose value
Compatible competition's building sets
Reduced product design possibilities

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 SWOT – External
Huge market & building sets‘ fast growth
Lego market leader
Usage of new computer technologies
Growing markets worldwide

Design no longer protected

Strong and growing competition
Disney controls entertainment licensing

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 SWOT Focus Competition
Hasbro: MEGA Brands:
- 2. largest toy maker - Main rival competitor
- Long-lasting success (building sets)
- Holds licenses - Won court battle
- Kre-O to be launched - LEGO Compatible system
- Net revenue 4 billion US$ - Net earnings 0.13 billion US$
- Investment (property etc.) 0.23 billion US$
- Investment (property etc.) –
- Investment (intangible assets) 1.6 billion US$ 0.1 billion US$
- Net earnings 0.4 billion US$

LEGO key figures

Revenue 3.7 billion US$
Mattel (indirect): Net earnings 0.86 billion US$
- Largest toy maker (revenue
5.8 billion US$)
Disney (Licensor):
- Popular products
- Acquisition of Marvel
- Holds many licenses
- License monopoly 7
 SWOT – Complete Analysis

Strength: Weakness:
- Strong brand - Complex structure
- Valuable, differentiated
products

Opportunities: Threats:
- Market growth - Direct & indirect
- New technologies competition
- License market

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 SWOT – Change Over Time
PAST
Main problem: internal weaknesses
- Costly designs
- Inefficient production,
distribution, sales

NOW
Main problem: external threats
- Strong, growing competition
- License market
- Trademark protection loss

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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 Communication
Examples Channels
Children under 5 Duplo Via parents
(Buyer ≠ Consumer)
Children & Teenagers Building sets, Video Magazine, TV
Games advertisement,
Website
Fans (adults) Special products Different Websites,
LEGO shops
Educational market Extra line for schools, Probably Website
Mindstorm
Families Theme Parks, Board Mouth to mouth,
Games media advertisement

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 Corporate-level Strategy –
Positioning
Goals:
1. Maintain market dominance in building toy market
2. Financial success
3. 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 1
Problem: 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 2
Problem: 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) Key figures 2012

• Strong growth in new markets, new • Revenue 4.1 billion US$
headquarter in Singapore • Net profit 1.0 billion US$
• Forwarding environmental and social
issues

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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?Do
cumentID=2935&CompanyID=HAS&zid=4d6301e3 (28.10.13)
• http://www.megabrands.com/sites/all/files/media/pdf/corpo/en/repo
rts/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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