An analysis of LEGO’s Business Strategies

An analysis of LEGO’s Business Strategies

1. Prior to 2004, was LEGO focused on its products or its marketplace? Why?
   By analyzing this case we can see that from 1998 things started to backfire for the company, Lego started losing money and by the mid 2000 ́s sales had dropped by 26%, the following year a further 20 %. The company was struggling against a failing dollar, cheap imported Chinese toys and new fascination for gadgets. LEGO seemed to have been primarily focusing on its product and forgot about the marketplace, since the company’s priority should have been analyzing the marketplace and its trends, but instead it focused on just the product; which was not enough since the cheap imported toys from China and the new gadgets were the new priority for children. LEGO should have adjusted and responded to those demands adequately.

1. Using the product/market expansion grid, which approach has LEGO adopted under the leadership of Jochen? Is this different to past approaches?
   Jochen focused primarily on a market penetration approach., meaning that the focus was on increasing sales of the existing products on current market segments. He met with the top 20 LEGO suppliers, listened to the 1% of complaints, measured bonuses on customer satisfaction, and rejected the precious attitude of complacency. His focus was on building customer loyalty, encourage existing customers loyalty and tempt people from cheaper Chines products to invest in LEGO. Comparing it to past strategies, Jochen ́s approach is different, he emphasized on customer satisfaction rather than on sales.
2. On which internal and external partners did Jochen ́s approach concentrate? Why?
   Jochen ́s approach was concentrated mainly on the external partners. His team focused on their partnerships with their suppliers, distributors and customers. The company cut the number of colors by half and reduced the number of stock, which was necessary and the focus on the customer was to find out what they wanted/needed. LEGO then proceeded to meet with its top 20 clients, who represented 70 percent of LEGO ́s total business, and proved to have revealed one very important finding. Customers wanted less frequent deliveries, so LEGO decided to take orders in advance and have the distributors deliver less frequent. Regarding the internal partners he focused mainly on his employees. One of his first challenges was winning the support of his subordinates who he left behind in the wake of his rapid rise to the top of the company. He told them that he could not do it on his own and he needed them to work with him, so keeping a good relationship with employees was crucial for him and for the company to be coherent.

4. Implementing change is never easy. In implementing their plans, what did LEGO do right and what did they do wrong? How would you have done things differently?

POSITIVE: Lego made a lot of positive moves leading them to becoming the world’s third biggest toymaker. Moving production was one of them, as well as creating a more disciplined work environment, making the running of LEGO like a ruthless equity firm focusing solely on the mission. Emphasis on customers was also a positive move, the proceeded to meet with their biggest clients and address their concerns. Furthermore the reduction of stock needed to be done, since they were over producing prior to these changes.

NEGATIVE: I could only think of one negative move by LEGO, which was their reduction of lego range. It is always good to stay diverse and innovative and offer a large variety of products, especially in the toy business.

5. What could LEGO do for the future?

In terms of how they could improve I cannot really think of many things, since they have gained International recognition and huge success. The fact that LEGO refuses to diversify its products and just wants to stick on the one is excellent. They should stick to their core values and stick to their one brand, since this has proven to be more successful anyway.