Essay About Lego Competitive Analysis And World Toy Market

Lego Competitive Analysis: The World Toy Market
Competitive AnalysisTHE WORLD TOY MARKETThe traditional toy market is a phenomenally crowded space in which to compete. All one has to do is take a trip to your local Toys ‘R’ Us or Wal-Mart to see the wide array of toys competing for a parent’s dollars and a child’s entertainment.In the 10 years from 2003-2012, the World Toy Market saw substantial growth from US$59.0 billion iin sales in 2003 to $84.1 billion in 2012. However, the bulk of that growth came between 2003 and 2007. Sales in 2011 were flat from 2010 at $83.3 billion while growth in 2012 was minimal as sales hit $84.1 billion.The largest market in the world is the United States which accounts for slightly more than one quarter of the world’s toy sales dollars.The world’s three largest toymakers are LEGO, Mattel – whose product lines include Barbie, Fisher Price and Hot wheels – and Hasbro whose offerings include the Transformers and Mr. Potato toy lines as well as board games such as Scrabble and Monopoly.LEGO had traditionally been behind both Hasbro and Mattel in terms of global sales. However in 2012, LEGO surpassed Hasbro to become the world’s second biggest toymaker sales dollars and then took the top spot from Mattel in the first half of 2014.LEGO also outperforms both Mattel and Hasbro in most other key metrics such as gross margins where LEGO sits at approximately 70 percent compared to Mattel and Hasbro which sit closer to 50 percent.A stark contrast between LEGO and its two main rivals for world toy supremacy is how Mattel and Hasbro as Brands are really parent companies with a wide range of very different toys and sub-brands, while LEGO is both the company and the flagship brand. When you think Mattel you tend to think Barbie or one of its other toys, same for Hasbro, but when you think LEGO, you immediately think of the little plastic brick with knobs and tubes for building.

Another key difference between LEGO and the other two is that LEGO is a privately held family company owned primarily by the Kristiansen family in Denmark, while Hasbro and Mattel are publicly held firms, answerable to shareholders.CONSTRUCTION TOYSWhile the overall World Toy market seems to have hit a period of stagnation, the construction or building toy segment, in which LEGO primarily operates, continues to grow. In the United States, sales revenue on building sets totalled $2 billion in 2003, roughly 10 percent of the total toy market in the U.S. In this segment, LEGO’s closest rival in the segment is Mega Brands Inc. a Canadian subsidiary of Mattel who makes a similar building block to LEGO that can actually be used with LEGO constructor sets. LEGO has previously attempted to block MegaBloks use of the similar interlocking bricks, however, court rulings in North America and Canada have gone against LEGO, and allowed MegaBloks to continue marketing their version of the bricks.The essence of the rulings is that all of the patents around LEGO’s designs are expired and that the functional design of the bricks cannot be trademarked. As such, anyone can theoretically create a brick that looks and works like LEGO’s that could be used interchangeably.