Lego Case Study
CORPORATE BACKGROUND
LEGO was founded in 1932—during the Great Depression–by Danish carpenter Ole Kirk Kristiansen and his sons. LEGO Group continues to be a family owned business. Kristiansen made these toys with high quality standards of workmanship and materials. By 1934, the organization took the name LEGO from the words “leg” and “godt,” which means “play well” and “I put together” in Latin. LEGO Group offers a wide-range of quality products that encourage children to play creatively and utilize their own imaginations. The most popular and significant product creation for the LEGO Group was the LEGO brick. This brick was produced with the new plastic technology and sold in 1949. The LEGO bricks were the first toys to promote connectedness among different products and systems—known as the LEGO System of Play. This System of Play created “a toy that prepares the child for life, appeals to the imagination and develops the creative urge and joy of creation that are the drive force in every human being.” Since then, LEGO Group has expanded considerably. They extended their product offerings and services to their building sets (both licensed and non-licensed) stores and merchandise, online website, board games, theme parks, and video games. By 1990, LEGO became one of the top 10 largest toy manufacturers in the world. Recently, LEGO has become successful in gaining licensed rights to manufacture lines featuring Star Wars, Harry Potter, Spiderman, Batman, Indiana Jones, professional sports organizations and more. These products have also expanded to the video and online game world as well.
PROBLEM
SWOT ANALYSIS
STRENGTHS
WEAKNESSES
Strong brand
Quality of product
Value of product (promotes creativity and learning)
Leadership and management
Market leader
Premium prices
Outsourcing struggles
High costs of manufacturing
Very dependent on licensing rights
OPPORTUNITIES
THREATS
Emerging markets and expansion
New products and product lines opportunities
Competition and substitutes
Age restriction
Short product lifestyle
VALUE CHAIN
Between 1998 and 2004, LEGO struggled and lost money. Revenues had dropped 30 percent in 2003 and fell another 10 percent in 2004. LEGO’s leadership discovered