CASE STUDY

LEGO: THE FALL AND RISE

Shafique Aftab

Group Members

HISTORY

LEGO comapany was formed by Ole Kirk Cristiansen.

He started from a small shop in 1932 and two years later he adopted name Lego for his business.

Lego word came from Danish words “Leg Godt” which means play well.

Just few years after formation in a small shop, Lego employee almost 50 people.

In 1947 Lego bought its first Plastic injection molding machine for the mass production.

In 1958, Lego renamed their binding bricks as lego bricks.

In 1958 Ole Kirk died and his son Godtfred became the CEO of the company.

In 1960, Lego had gone international and offered its products in many western countries.

Lego won the award of “Toy of the century” twice.

It is estimated that so far Lego has produced 400 billion Lego bricks.

There are about 90 Official Lego stores in the world.

Lego operates in almost 130 countries.

It is said that almost 7 Lego sets are sold every second in the world.

THE FALL AND RISE

LEGO is worlds largest toy company.

But start of the 21st century was not very pleasant for the company.

Company suffered huge losses in 2000, 2003 and in 2004.

But situation was turn around after the appointment of new CEO Knudstorp.

There were many factors involved in the downfall of the LEGO.

One of the major factor was the Shift of focus from their core products.

LEGO try to diversify its business and wanted to be a lifestyle brand and launched its own clothing line and watches.

LEGO LAND theme parks were launched which were not very profitable.

LEGO became victim of marketing myopia as they tried to focus on diversifying their business instead of customers.

The arrival of PCs in late 90s effected the toys manufacturers negatively.

Many competitors arrived in same business and challenged the LEGO toys.

Clones of the LEGO toys hit the stores which impacts the sales of Lego.

Macro Environmental Factors:

After new CEO,LEGO try to focus on its core products and its customers.

Beside children they also give attention to adults who made 10% of their customers.

In order to reduce costs LEGO lay off almost 3500 employees.

Micro Environmental Factors in Lego’s return :

LEGO also introduce new girls specific products known as LEGO FRIENDS.

LEGO friends contribute positively in the bottom line of LEGO. Beside success of LEGO FRIENDS, company was heavily criticized for its launch.

Critics said that it is stereotyping the women by showing them in specific jobs.

While many said that LEGO FRIENDS lack innovation required to develop creativity among kids, which is a core mission of Lego.

I would suggest Knudstorp to continue LEGO FRIENDS products but should add more characters and try to make them more innovative like other Lego products.

SWOT ANALYSIS

Strong hold on European market.

Strong brand name.

Big scale business.

Global retail network.

STRENGHTS :

Coordinating production with demand.

No big share in Indian and Chinese markets.

Expansion of LEGO GROUP with their current product lines are yet to be increased worldwide.

WEAKNESSES :

Should try to capture Indian and Chinese markets.

Should introduce more animated movie characters.

Products for customers with lower income.

OPPORTUNITIES :

Video games for children.

Cartoon channels and animated movies.

Increasing competition.

Asian and African markets.

THREATS :