Padmashree Dr. D.Y. Patil University

Department of Business Management.

Marketing Management

Project on: LEGO

SUBMITTED TO: Prof ROSHNI SAWANT

SUBMITTED BY:

[Group – 9]

MBA CORE - C: 2011 – 2013

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Padmashree Dr. D.Y. Patil University

Department of Business Management.

Marketing Management

Project on: LEGO

Submitted by

Name: Roll no:

1. Kalyan Mukhopadhyay 011183

2. Pramod Kumbhar 011184

3. Bharat Kumbhare 011182

4. Damodar Kokate 011181

5. Sumeet Ramteke 011180

6. Rohan Naik 011179

7. Ganesh Sawant 011178

8. Nisha Prajapathi 011203

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DECLARATION

We are the students of Padmashree Dr. D.Y. Patil University’s

Department of Business Management (1thsem). We here by assure

that, we have completed this project on LEGO in the academic year 2011-

2013 and the information submitted is true to the best of our knowledge.

ACKNOWLEDGEMENT

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A compendium is never the work of one individual – more a combination

of ideas, suggestion and contribution involving many hands.

My debts are too numerous to be acknowledge individually. A large

number of individuals have contributed directly and indirectly in the

completion of this project. I am immersing thankful to Ms. Roshni

Sawant.

It is pleasure to express our gratitude for the assistance received

from them. Hence we would like to take this opportunity to thank them

wholehearted for helping me in preparing this project.

INDEX

SR. No. CONTENTS PAGE NO.

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1 Executive Summary 6

2 Introduction 7

3 Marketing Mix 8-10

4 Lego’s Product Life Cycle 11-12

5 Lego’s Product Positioning 13-17

6 Lego’s Market Segmentation 18-24

7 Lego’s Advertising 25-27

8 Lego’s Market Research 28-34

9 Consumer’s Buying Behaviour of Lego 35-38

10 Product development in Lego 39-46

11 Lego Distribution Strategy 47-49

12 Conclusion 50

13 Bibliography 51

EXECUTIVE SUMMARY

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Introduction

Lego (trademarked in capitals as LEGO) is a line of construction toys manufactured by the Lego Group, a privately held company based in Billund, Denmark. The company's flagship product, Lego, consists of colorful interlocking plastic bricks and an accompanying array of

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gears, minifigures and various other parts. Lego bricks can be assembled and connected in many ways, to construct such objects as vehicles, buildings, and even working robots. Anything constructed can then be taken apart again, and the pieces used to make other objects. The toys were originally designed in the 1940s in Denmark and have achieved an international appeal, with an extensive subculture that supports Lego movies, games, video games, competitions, and five Lego theme amusement parks.

Early History:

The Lego Group began in the workshop of Ole Kirk Christiansen (7 April 1891 – 11 March 1958), a carpenter from Billund, Denmark, who began making wooden toys in 1932. In 1934, his company came to be called "Lego", from the Danish phrase leg godt, which means "play-well".

It expanded to producing plastic toys in 1947. In 1949 Lego began producing the now famous interlocking bricks, calling them "Automatic Binding Bricks". These bricks were based largely on the patent of Kiddicraft Self-Locking Bricks, which were released in the United Kingdom in 1947. Lego modified the design of the Kiddicraft brick after examining a sample given to it by the British supplier of an injection-molding machine that the company had purchased. The bricks, originally manufactured from cellulose acetate, were a development of traditional stackable wooden blocks that locked together by means of several round studs on top and a hollow rectangular bottom. The blocks snapped together, but not so tightly that they required extraordinary effort to be separated.

The Lego Group's motto is det bedste er ikke for godt which means roughly 'only the best is good enough' (more literally 'the best is never too good'). This motto was created by Ole Kirk to encourage his employees never to skimp on quality, a value he believed in strongly. The motto is still used within the company today. The use of plastic for toy manufacture was not highly regarded by retailers and consumers of the time.[citation needed] Many of the Lego Group's shipments were returned after poor sales; it was thought that plastic toys could never replace wooden ones.[citation needed]

By 1954, Christiansen's son Godtfred Kirk Christiansen had become the junior managing director of the Lego Group. It was his conversation with an overseas buyer that struck the idea of a toy system. Godtfred saw the immense potential in Lego bricks to become a system for creative play but the bricks still had some problems from a technical standpoint: their locking ability was limited and they were not very versatile.

Marketing mix

Marketing mix known as the 4 p’s.used by business as tools to assist them in pursuing their objectives. The marketing mix principles are controllable variables, which have to be

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carefully managed and must meet the needs of the defined target group. The marketing mix is apart of the organisations planning process and consists of analysing the defined:

A marketing mix consists of the following four elements:

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1. Product –

Product or service design that maximize your customers’ satisfaction.  This does not only limit to the physical product you provide but the entire experience.

Lego as a product: In addition, LEGO should never forget the young adult and adults who grew up with LEGO. Products such as Star Wars & NBA Basketball Team appeal to teenagers and young adults. LEGO has extended its brand in it. These young adults also buy LEGO bricks to decorate their rooms of lifestyles.Lego as a product is not only limited to cars and building it has introduced and many more character to attract more customers. In order to tune in with the taste of 20th century children LEGO has to innovate beyond the bricks. Perhaps, bricks that can talk move and fight as it is facing mattel and Hasbro.

The launch of Harry Potter in the LEGO range has proven to help increase sales for the year 2001. Children react towards movies. The toys that they choose relate to their favourite movie or cartoon

2. Price - What pricing strategy is appropiate to use . Pricing is one of the most important

elements of the marketing mix, as it is the only mix, which generates a turnover for the organisation.

Lego prices: The Prices OF Lego products are higher but Lego as a company is concentrating more on product and promotion than on prices. The company is also doing a good job at creating lesson plans for teachers who might already posses the basic block sets.

3. Place –

Channel of distribution.  You could have multiple channel of distribution to get your product to the customer.  For instance, as a manufacturer, you can choose to go direct and Channel of distribution.  You could have multiple channel of distribution to get your product to the customer.  For instance, as a manufacturer, you can choose to go direct and

Lego at places: Lego are available in specialty stores lego are also selling its product online on bricklink.com and various online sites.

4. Promotion:

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Inform and persuade your customers to buy your product.  There are three major types:

i) Personal selling, which involves a group of sales representatives to contact the customers directly via phone or face-to-face meeting;

ii) Mass selling, which include the typical advertising, editorials or publicity to inform a large group of customers all at once;

iii) Sales promotion, such as discounts and trials to speed up your customers’ purchasing decisions.

Lego promotion: Lego is among top 10 companies in Europe but it requires good promotion in india as it is not very familiar with Indians. Lego is advertising on same sets of packets. They do internet advertising to attract the kids. They offer Magazines through which they promote their brand. They have their own website through which they do promotion. customers are very important as they can influence others in buying the product.

Lego’s Product Life Cycle

This is a simplified version of the cycle. There are lots of exceptions to the product life-cycle rules. For one thing, most products never make it past the introduction stage; they die an early death. Second, some products (like some people) avoid premature demise by reinventing themselves. LEGO has been reinventing itself for the last fifteen years, launching new products in an effort to recover its customer base and overcome a series of financial

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crises. Unfortunately, this strategy has been unsuccessful. The introduction of new products and the resulting costs “have not produced the desired results. In some cases,” admits the company, “new products have even cannibalized on the sales of LEGO Company’s core products and thus eroded earnings.

Life Cycle and the Changing Marketing Mix

As a product or brand moves through its life cycle, the company that markets it will shift its marketing-mix strategies. Let’s see how the mix might be changed at each stage.

Introduction

At this stage, most companies invest in advertising to make consumers aware of a product. If it faces only limited competition, it might use a skimming-pricing approach. Typically, because it will sell only a relatively small quantity of the product, it will distribute through just a few channels. Because sales are low while advertising and other costs are high, the company tends to lose money during this stage.

Growth

As the company focuses on building sales, which are increasing rapidly at this stage, its advertising costs will go up. If competition appears, it may respond by lowering prices and distributing through multiple distribution channels. With sales going up and costs going down, the product becomes more profitable.

Maturity

If a product survives the growth stage, it will probably remain in the maturity stage for a long time. Sales still grow, though at a decreasing rate, and will eventually stabilize. Advertising will be used to differentiate the product from competition. Price wars may occur, but profits will be good because sales volume will remain high. As the product becomes outdated, the company may make changes in keeping with changing consumer preferences.

Decline

LEGO is now in this stage: demand has declined as more innovative products absorb the attention of kids. Price competition has become more intense, and profits are harder to come by; in fact, in some years they’ve turned into losses. As we’ve seen, LEGO has tried to revitalize the product, but ultimately the company may have to give up and pull the product from the market.

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Lego’s Product Positioning

What is positioning?

In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization.

Re-positioning involves changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.

De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.

The original work on Positioning was consumer marketing oriented, and was not as much focused on the question relative to competitive products as much as it was focused on cutting through the ambient "noise" and establishing a moment of real contact with the intended recipient

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The original work on Positioning was consumer marketing oriented, and was not as much focused on the question relative to competitive products as much as it was focused on cutting through the ambient "noise" and establishing a moment of real contact with the intended recipient.

The growth of high-tech marketing may have had much to do with the shift in definition towards competitive positioning. An important component of hi-tech marketing in the age of the world wide web is positioning in major search engines such as Google, Yahoo and Bing, which can be accomplished through search engine optimization , also known as SEO. This is an especially important component when attempting to improve competitive positioning among a younger demographic, which tends to be web oriented in their shopping and purchasing habits as a result of being highly connected and involved in social media in general.

What is brand positioning process?

Effective Brand Positioning is contingent upon identifying and communicating a brand's uniqueness, differentiation and verifiable value. It is important to note that "me too" brand positioning contradicts the notion of differentiation and should be avoided at all costs. This

type of copycat brand positioning only works if the business offers its solutions at a significant discount over the other competitor(s).

Generally, the brand positioning process involves:

1. Identifying the business's direct competition (could include tertiary players that offer your product/service amongst a larger portfolio of solutions)

2. Understanding how each competitor is positioning their business today (e.g. claiming to be the fastest, cheapest, largest, the #1 provider, etc.)

3. Documenting the provider's own positioning as it exists today (may not exist if start-up business)

4. Comparing the company's positioning to its competitors' to identify viable areas for differentiation

5. Developing a distinctive, differentiating and value-based brand positioning statement, key messages and customer value propositions.

6. The LEGO brand is more than simply our familiar logo. It is the expectations that people have of the company towards its products and services, and the accountability

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that the LEGO Group feels towards the world around it. The brand acts as a guarantee of quality and originality.

What is Product positioning process?

Generally, the product positioning process involves:

1. Defining the market in which the product or brand will compete (who the relevant buyers are)

2. Identifying the attributes (also called dimensions) that define the product 'space'

3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes

4. Determine each product's share of mind

5. Determine each product's current location in the product space

6. Determine the target market's preferred combination of attributes (referred to as an ideal vector)

7. Examine the fit between.

8. The position of your product.

9. The position of the ideal vector.

What is measuring the positioning?

Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques, and statistical techniques like multi dimensional scaling, factor anaylsis, conjoint analysis, and logit analysis. POSE Analysis offers a somewhat more sophisticated approach than perceptual mapping and allows one to not only determine the positioning of a brand but also the overal strength of a brand's proposition.

What is Repositioning a company?

In volatile markets, it can be necessary - even urgent - to reposition an entire company, rather than just a product line or brand. When Goldman Sachs and Morgan Stanley suddenly shifted from investment to commercial banks, for example, the expectations of investors, employees, clients and regulators all needed to shift, and each company needed to influence how these perceptions changed. Doing so involves repositioning the entire firm.

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This is especially true of small and medium-sized firms, many of which often lack strong brands for individual product lines. In a prolonged recession, business approaches that were effective during healthy economies often become ineffective and it becomes necessary to change a firm's positioning. Upscale restaurants, for example, which previously flourished on expense account dinners and corporate events, may for the first time need to stress value as a sale tool.

Repositioning a company involves more than a marketing challenge. It involves making hard decisions about how a market is shifting and how a firm's competitors will react. Often these decisions must be made without the benefit of sufficient information, simply because the definition of "volatility" is that change becomes cult or impossible to predict.

The LEGO Group (LEGO Group) is one of the largest toy manufactures in the world. It is engaged in the manufacturing and distribution of a wide range of toys and computer games. The products offered by the company include toys, robots and bionicle. All these products are offered in different categories which include licensed products, creative building, Play Themes, LEGO SERIOUS PLAY, MINDSTORMS NXT, LEGO Education and LEGO Factory. All the products offered by the company are sold under the brand LEGO. In the regions like the US and Europe the company owns and operates retail outlets. The company is headquartered at Billund, Denmark.

The LEGO Group Key Recent Developments

Feb 12, 2010: Warner Bros. partners with LEGO Group to launch Harry Potter merchandise.

Lego position in market?The LEGO Group has seen continued growth over the previous five years, and sales have increased by double-digit growth rates in the last few years. This has happened in a global toy market characterised by stagnation throughout the last decade.

The LEGO Group expects continued growth in sales in the years ahead. The foundation for this growth is a constant focus on the company's core products and markets. On this basis, seven growth initiatives have been defined:

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Increase market share in USA.

USA is the world’s largest market for toys, and the LEGO Group has dramatically increased its market share in recent years, to approximately five per cent. The LEGO Group believes this share can be further increased in the coming years.

Increase market share in Eastern Europe.The toy market in Eastern Europe is experiencing rapid growth, and the LEGO Group aims to continue to expand its strong position on these markets.

Invest in emerging markets.The LEGO Group does not yet enjoy a strong market position in markets such as China, Mexico, Brazil and India. These markets are expected to see strong growth in the future, and the LEGO Group plans to invest in developing them.

Develop innovative new products.

In addition to ongoing product development based on the existing core portfolio, the LEGO Group will develop innovative new products which are ideally suited as Lego products, yet never seen before. An example of such new products is the LEGO Games board-game series launched in 2009.

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Expand “direct to consumer” activities.

The LEGO Group currently has direct contact to consumers through its own sales channels, clubs, collaboration programs, etc. The aim is to get even closer to consumers through greater contact and by expanding offers available direct to consumers.

Expand LEGO Education.

The aim is to create growth in the area of educational materials for preschools, schools and educational institutions all over the world.

Expand electronic activities.

The LEGO Group currently operates on electronic platforms through the www.LEGO.com website and video games. Our electronic presence will be further expanded, in particular through LEGO Universe – the first MMOG (massively)

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Lego’s Market Segmentation

MEANING

A market can rarely satisfy everyone in a market. Different people have a different taste and preference. In other the market place is highly diverse in nature. The buyers have different buying habits, motives, buying requirements etc. Hence, a company needs to identify the group of customers it can serve more effectively.

Instead of trying to satisfy customers individually it is wiser to target buyers who have similar tastes and preferences and whom they have a greater chance of satisfying. Therefore

most companies today follow target marketing, which requires marketers to identify and profile distinct groups of buyers who require separate products or marketing mixes. It means that marketers need to segment the market into groups and develop products and marketing programs tailored to each segment as it is not possible to produce a product, which can satisfy everybody’s expectation.

A ‘market segment’ consists of large identifiable group within a market with similar wants, purchasing powers, geographical location, and buying attitudes or habits.

Dividing a diverse (heterogeneous) market having different characteristics into small segments, each segment being identical in many respects, is called market segmentation. For example Mercedes as a luxury car would be targeted at the high income group.

Target Market Segmentation

The LEGO Group segments their market based on demographics, psychographic, behavioural and geographic bases. This is evident in the LEGO online store, where products are arranged “By Age”, “By Theme” and “By Product Category”.

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Demographic segmentation

It consists of dividing the market into groups based on variables such as age, gender family size, income, occupation, education, religion, race and nationality. Fostering creativity and learning are two of the LEGO Group’s primary goals. As such, the company’s collection of toys and games are targeted at both genders and different age groups. There is a product to engage children at every stage of their development, and products to cater to the needs and interests of older people. In addition, the products for each target group are designed to be safe for play for the age group it is intended for.

LEGO DUPLO was launched as the big brick for the small hand and is targeted at pre-school children. The products are specially developed to cater for the capabilities of the youngest children, encouraging them through creative play to use their hands and develop their motor skills. Today the series comprises both loose bricks, allowing children to build entirely what comes to mind, and play themes (e.g. airport, train and castle). The elements are large enough for children to play with without swallowing them and the unique moulding technology ensures that no small parts fall off during play. The series is graded in difficulty for children aged 2-6 years old.

LEGO® DUPLO® Brick Box

World People Set

Tigger’s Expedition

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Psychographic Segmentation Base

Psychographic segmentation is sometimes also referred to as behavioural segmentation.

This type of segmentation divides the market into groups according to customers’ lifestyles and personality

The target group of The LEGO Group are people who believe in the following six values. These are also the brand values LEGO aims to be associated with:

1. Imagination

People who believe that free play is how children develop their imagination, and this is the foundation of creativity.

2. Creativity

People who believe in creativity, the ability to come up with ideas and things that are new, surprising and valuable. In particular, systematic creativity, a form that combines logic and reasoning with playfulness and imagination.

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3. Fun

People who believe fun is the happiness we experience when we are fully engaged in something that requires mastery (hard fun); when our abilities are in balance with the challenge at hand and we are making progress towards a goal. People who see fun in both the process and in the completion.

4. Learning

People, who believe learning is about opportunities to experiment, improvise and discover. Learning also takes place when we expand our thinking and doing (hands-on, minds-on), helping us see and appreciate multiple perspectives.

5. Caring

People who have the desire to make a positive difference in the lives of children, partners, colleagues and the world we find ourselves in, and considering their perspective in everything we do. People who understand that caring is about humility – not thinking less of ourselves, but thinking of ourselves less.

6. Quality

From a reputation for manufacturing excellence to becoming trusted by all, LEGO targets people who believe in giving others and owning only the best quality products.

In addition to value and attitudes, LEGO also segments their target group by lifestyle. They want to reach people who enjoy perceptive play, who would set aside time for play and who see the value in play. The company also has a whole range of digital offerings, online platforms and games (e.g. LEGO® Universe) to accommodate those who are more tech-savvy and whom prefer virtual play.

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Behavioural Segmentation BaseBehavioural segmentation divides customers into groups based on the way they respond to, use or know of a product. One of the most unique aspect of LEGO products is the way it contributes to learning and development, and this is a clear benefit that the target market seeks. LEGO bricks are well-engineered, very tactile and robust. It benefits young children and allows them to build structures without requiring any particular craft skills, while at the same time provide enormous opportunities for older people to learn and develop their building skills to advanced levels. LEGO products also provide support for collaborative as well as individual work to suit the personality of users.

With the many alternatives in the toy and games industry today, people are increasingly less loyal to brands. As such, LEGO tries to increase brand loyalty by creating platforms such as:

LEGO Club (http://club.lego.com), a free membership club where members receive LEGO news, privileges and discounts.

LEGO CLICK (http://www.legoclick.com/), an online community that brings together innovators, designers, artists and creative thinkers to develop new ideas related to toys.  This is also an initiative to improve the brand’s level of social media engagement.

In addition, there are also enthusiast-created online communities, such as LUGNET, and blogs.

LEGO also segments customers based on their purchase/usage rate. According to Conny Kalcher, a LEGO representative at the Marketing 2.0 conference, LEGO group their customers into 6 groups:

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Lead Users – people LEGO actively engage with on product design 1:1 Community – people whose names and addresses they know.

Connected Community – people who have bought LEGO and also been to either a LEGO shop or LEGO park.

Active Households – people who have bought LEGO in last 12 months.

Covered Households – people who have bought LEGO once.

All Households – those who have never bought LEGO.

Geographic Segmentation Base

Geographic segmentation tries to divide markets into different geographical units: these units include:

Regions: e.g. in the UK these might be England, Scotland, Wales Northern Ireland or (at a more detailed level) counties or major metropolitan areas

Countries: perhaps categorised by size, development or membership of geographic region

City / Town size: e.g. population within ranges or above a certain level

Population density: e.g. urban, suburban, rural, semi-rural

Climate: e.g. Northern, Southern

Geographic segmentation is an important process - particularly for multi-national and global businesses and brands. Many such companies have regional and national marketing programmes which alter their products, advertising and promotion to meet the individual needs of geographic units.

According to The Journal of Commerce Online - News Story Lego is expanding its North American distribution center by nearly 50 percent as the toy maker builds on a strategy to sharply expand its market share in the United States.

The Denmark-based maker of iconic children’s building blocks will add 193,500 square feet to its site at the Alliance Global Logistics Hub in Fort Worth, Texas, the company said.

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Lego’s Advertising

AIDA Marketing Model

The AIDA model consists of 4 different phases that leads to the purchase of a product/service.

Attention

Attention is the 1st phase that will spark the interest of a consumer. What sparks attention is usually by its unique design, pricing, and marketing.

Interest

Interest is the 2nd phase that can create a desire for the product/service. A consumer will want to know more about the product/service, its functions and features.

Desire

Desire is the 3rd phase that stimulates an action to buy. After comparing the pros and cons of the product/service and cross referencing with multiple sources, desire may grow which will lead to the purchase of the product/service.

Action

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Action is the 4th phase and the last of the AIDA. The consumer will purchase the product/service after completing the 3 phases. Desire triggers action, and the consumer will buy it when the product/service can fulfill his/her desire.

By understanding the AIDA model, you will know what makes consumers tick from the pricing structure to the designs and features. With such valuable data, you will be able to craft a product/service to the consumers satisfaction.

Get attention Hold attention

Create desire

Make it believable

Prove it’s a bargain

Make it easy to buy

Give a reason to buy now

Creative Lego Advertisements :

Lego creativity is not limited to building bricks and stop motion movies, it extends even to advertising. As with plastic bricks, Lego can take the simplest of concepts and make a powerful, intelligent and often witty statement.

The approach taken with a typical lego ad is often minimal, as you will see from the fantastic print ads below.

There really is no end to Lego creativity.

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Lego’s Market Research

Definitions of Marketing ResearchAccording to Philip Kotler, "Marketing research is systematic problem analysis, model building and fact-finding for the purpose of improved decision-king and control in the marketing of goods and services."

Lego’s Market ShareLEGO can be clearly cited as the success story in the toys and games industry over the last few years. The toymaker achieved double digit sales growth in 2010, expanding its presence both geographically and through category extension.

Its global toy sales stood at US$ 3.7bn in retail value terms in 2010, making the company the third largest traditional toy player in the world with 5% of the global market, behind only Mattel and Hasbro.

Lego’s Market Research through online Communities.

Lego is the brand that has progressed within the market research online communities’ world. Whilst other toy manufactures have stepped aside and made way for the e-games industry, Lego has held its own and still remains a firm favourite in homes around the world.  Lego Club to its users is a platform in which people can swap ideas and show off their designs; however to Lego itself the platform is a strategic market research tool that allows the

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company to understand its customer base and segment them in order to implement a successful social media strategy.

Lego has split their market research online communities into three types:

1) Lead users: These are the people who are actively engages with on product designs of Lego.

2) Community users: These are the people whose names and addresses are known to Lego. and

3) Connected community users: These are the people who have bought Lego product and have also been to either a Lego shop or park. 

These customers are defined based on the strength and depth of their relationship with the Lego brand. Lego use their online communities to work with these customers and get them involved in developing their product offerings, thus making them an important part of the development process. Customers like these are important to the brand as they are likely to be the brands biggest advocates.

Market Research of Lego

Product innovation drives growth in last two years.

LEGO's product designers were the main reason behind its growth in 2009 and 2010. As a

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company, LEGO has traditionally focused on its home category – construction toys – where it has enjoyed dominant status for many years. While its share of the category remained steady, equally its growth prospects were limited by the growth of the category as a whole.

So LEGO got more aggressive, and in the last couple of years expanded its established building blocks concept into different categories. In 2009, LEGO Games were introduced, featuring buildable board games, which gained high enough consumer appreciation to make LEGO the third largest player in the category globally, garnering a share of 6% in Games and Puzzles. The new line was well received in most of the key geographies, taking a significant portion of the market.

Similarly in 2010, LEGO released Minifigures which quickly became a hit, and took the company into the pocket money segment. A coincidence or result of careful planning, the line appealed to cash-strapped consumers in the post-recession environment.

A large plus of such expansion has been that the new products have avoided cutting into sales of the main LEGO's business: construction toys. At its core LEGO kept toy buyer interest high by adding new licenses, and signing leading licenses into its products. 

The company's own LEGO City and LEGO Technique lines were joined more recently by LEGO Ninjago, and the licensed properties kept excitement high with such the roll out of LEGO Star Wars and LEGO Pirates of the Caribbean.

Combating age compression

Another key aspect of LEGO's strategy has been its successful partnership with a number of developers to release LEGO branded video games. While cooperation between traditional-and video game companies is not new in the industry (Hasbro partners with Electronic Arts to release electronic versions of its games), LEGO is the most prolific and arguably the most successful in this area. Over 40 LEGO branded titles have come out since 1997.

Video games provide an effective defence against the trend of age compression trend in toys. Children, especially boys, are likely to move into video games at an earlier age nowadays, and the first game they choose is more likely to be something they are already familiar with from the traditional arena. LEGO's games are primarily aimed at this younger demographic. 

Video games also extend the lifecycle of licenses – and help LEGO find game studios to

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develop its games, as these studios may not have existing relationships with either Star Wars or Pirates of the Caribbean licensors. The most recent addition has been LEGO Universe – a massively online multiplayer game role playing game (MMORPG).

Competition is approaching

While LEGO ventures into other categories such as games and puzzles, other toy companies are responding by targeting LEGO's main construction category. Hasbro has recently announced the Kreo-X line, bringing existing Hasbro licenses such as Transformers into building blocks.

Similarly, LEGO's Duplo range aimed at pre-schoolers is coming under competition from a couple of companies. Mega Brands has been a competitor to LEGO for a number of years, and recently Mattel announced it was entering the segment with the Fisher Price Trio range, featuring toys with “click and snap technology”.

In the past LEGO has attempted to fend off competition by actively seeking patent protection for its technologies, indeed it currently owns over 600 patents. But this hasn't proved altogether effective at stopping new entrants, and with high activity in the category, we can expect to see a lot of future innovation coming in construction toys. 

LEGO Fans to Help Build New Products

One of there research that came up with this that “Kids need oxygen, kids need privacy, they need to have room where they are on their own and they can do what is relevant to them, and even though it’s something that mum and dad might not always understand, and sometimes might not even like, that’s just a part of understanding the world and growing up.”

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So this toy manufacturer company LEGO has rolled out an online ‘open innovation’ and crowd sourcing platform, through which consumers can submit and vote for their favourite new product ideas. Consumers who have their ideas chosen will earn 1% of the total net sales of the product.

Those ideas submitted on the new ‘LEGO CUUSOO’ site that are supported by 10,000+ votes, have a chance of being selected to become part of LEGO’s product portfolio and sold in the firm’s retail stores and online shop.

LEGO has worked on a pilot of the site since 2008, with Japanese crowd sourcing specialist CUUSOO System. During its testing phase, the site attracted hundreds of ideas and generated thousands of votes cast by a 20,000-strong Japanese fan-base community.

‘Our fans and consumers have proved time after time that they have great ideas that can lead to products,’ says Paul Smith-Meyer, Head of the LEGO New Business Group. ‘LEGO CUUSOO’ is an attempt to gather more great ideas while streamlining the way we innovate and become inspired.’

Market Research of Lego for Indian Market

The Indian toy industry is worth Rs.6,000 crore and is  competent enough to compete with the Chinese products. It has a ready market domestically with an immense potential as the country has 2.4-crore kids below the age group of 10. Only 20 per cent of the market is served by Indian manufactures and rest by import of toys from different countries, including

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China. The toy industry in the country is growing by 30 percent has also launched the campaign ‘We Care’ for safety and stronger guidelines on eco-friendly designs.

The toy market in India has witnessed lot of changes over the last few years and as we see tremendous potential here. Lego found that there are customers who want to buy toys of high quality.

Moreover, Indians always have a strong thought that children learn through playing with toys. Playing helps them in thinking systematically and logically. It's like using mathematical sciences. They can put pieces together and make new creations. Work collaboratively and see how they connect things. At present, the toy market in India is highly fragmented.

Nowadays kids are getting more into virtual world.

The virtual world is indeed becoming very important. But still the global toy market has improved over the last two years. Global economic crisis, even though it did not have a big dent in India, made people shift from high-price to low-price products, and this has benefited the traditional toy market. Also, the virtual world always reaches a saturation point. Children will always need a toy.

For e.g. Boys who play football online, they also like to play on the field.

So, The traditional toy market is not dead... it's still alive and in markets like India it is emerging.

Lego’s Plan in the digital space.

Lego come out with a platform called Lego Universe, which is a massive multiplayer online game. They had just launched these games in English and in all German-speaking countries through the Lego.com website. Where Children can meet online and play games they want. It is seen that this going to be a very important business for Lego in the

coming years.

Lego’s expansion plan in India.

Lego’s investment is not on a monetary basis; it's more of collaborations and tie-ups. They are investing in marketing as they want to be present in the right stores across metros, mini-metros and smaller cities.

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At present Lego is available in 140 stores across India and will be planning to be available in another 60 stores by end of 2011. And they are also planning to double this number over the next two years.

They are more focused on the experience that the consumers get from our products. They want to find a scalable business model where Lego, its partners and retailers would benefit on a long-term basis.

Lego also want to activate consumers by creating awareness about engaging kids with toys - this is what they need is to focus and work on. Lego believe that future business for them is in the Indian and the Asian markets.

Till date Lego have no plans to set up manufacturing facility in India. As they want to get closer to the consumers through sales channels, clubs and collaboration programmes, and not by setting up facilities.

Consumer Buying Behaviour of Lego

Children are an important part of the family buying process. In addition to the obvious role that the children play as the user, they are also the buyers of the future. Children who plays with LEGO may be able to hold on to the adult due to brand awareness and brand loyalty formed at their early age. 

As LEGO’s core target market are children age 0-16+, the company face great challenges in developing products that appeal to the increasingly sophisticated demands of children.

Children are moving into new markets. Children as young as seven buy DVDs, and no teenage lifestyle is viewed as complete without a mobile phone. This has a knock-on effect. For example, the money children spend on buying mobile phone reload cards reduces the money spend on snacks, toys, comic books and etc.

Children are no longer attracted to 2D cartoons like Popeye, . They look forward to cartoons with computer graphics and animation. Even the once famous Transformers are now done in 3D format.

Children’s needs and expectation in what they want from the toys that they play with are becoming demanding and sophisticated. With technology advances, LEGO face great

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competition with computer and video games apart from the conventional toy manufacturer like Mattel and Hasbro. As such Lego’s innovation must supplement its traditional lines offering a wide variety of high technology play.

In order to tune in with the taste of 21st century children LEGO has to innovate beyond the bricks. Perhaps, bricks that can talk, move and fight. The launch of Harry Potter in the LEGO range has proven to help increase sales for the year 2001. Children react towards movies. The toys that they choose relate to their favourite movie or cartoon. Therefore, LEGO should continue to work closely with film makers on licensing agreement for example Star Wars movie and some Disney films.

Besides children, parents also play an important role in choosing the type of toys for their children. Parents decide what is right or wrong for their young ones. Every parents wish is to develop their child’s imagination, creativity and learning skills at early age. As such, LEGO has to capture their interest by offering products that nurtures children development and learning through play. Parents are also very protective towards their children. Therefore, LEGO has to ensure that all its product innovation meets the safety requirements of the children. 

In addition, LEGO should never forget the young adult and adults who grew up with LEGO. Products such as Star Wars & NBA Basketball Team appeal to teenagers and young adults

who are vivid collectors of comic books and action figures or like sports game. Thus, the LEGO values will be passed on to the generation when they become parents in the future.

 In conclusion, LEGO has to be market responsive and focused on their product range/mix in order to develop the right product that appeal to children today. Perhaps, LEGO should practice market targeting and refocus their core business on the pre-school segment.

Today’s reality and Lessons for MarketersLet’s look specifically at what LEGO does to deliver information to a customer that creates a true LEGO experience.

LEGO has been delivering consistent content to customers in the form of a print magazine. They have been doing this at usually a 6x per year frequency for over 20 years (I used to get the original Brick Kicks in the 80s). The content has always revolved about how target consumers can take their products to the furthest level of their imaginations.

LEGO puts on targeted road shows around the country for LEGO fans to meet with other fans and see LEGO creations, as well as contest opportunities.

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LEGO understands the end-user, but also understands the role of key influencers and other decision makers. To bring those decision makers into the fold, LEGO promotes family events and content specifically for parents (i.e., they target C-level executives).

LEGO segments their customer base with different types of content. While LEGO magazine is great for many of their customers, a good portion of their customer base, which I would consider the “high-spenders,” need more attention and have more advanced content needs. Thus, Brickmaster was born.

LEGO created a user discussion forum so that builders could connect with other builders. They also provide a social networking function where customers. Some companies outside of LEGO are now dedicated to enhance the LEGO experience (i.e., BrickJournal.com).

LEGO is a licensing king and has created non-traditional content channels such as gaming (LEGO Star Wars), movies (Bionicle and Exo-Force) and hundreds of book titles.

This is just some of the great content that LEGO is distributing consistently and frequently to their customers. And, it’s not just good content, it’s great content that mixes interesting stories with eye-catching design to create a true user experience.

Question is, where would LEGO be without this content?  Would they be one of the most recognized brands in the world? Frankly, it wouldn’t be close. Great products such as LEGO aren’t enough to create a great brand and differentiate your brand from the competition. Communications and content is today’s true brand differentiator.

Each of us have the communication tools at our fingertips to create a true community around our products and services. Each of us have the power to create great content that focuses purely on the needs of our customers and prospects.

Essence of customer’s orientationThis study investigates the effect of being customer oriented on service performance perceptions and outcome behaviours. Specifically, the focus is on identifying the influence that being perceived as a customer-oriented firm has on consumer quality perceptions, customer satisfaction, and service value. The impact of being customer oriented on consumers’ outcome behaviours is also investigated. Responses from 649 consumers indicate that customer orientation is directly related to customers’ evaluations of employee service performance, physical goods, and services capes. Indirect effects on organizational quality,

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customer satisfaction, value attributions, and outcome behaviours are also reported. The implications of the research are discussed, as are the limitations.

Effective customer-oriented sales strategies can ensure small business success.

Effective sales strategies for small businesses are strategies that focus on unique customer needs, by customer segment. A customer orientation to the establishment of sales strategies can enable small businesses to compete effectively against even large competitors. Businesses can expect to go through four phases as they develop their customer-oriented strategies.

Identifying and Segmenting Customers

Effective customer-oriented sales strategies require the segmentation of customers into specific groups or areas of focus. Not all customers are the same; different segments will have different needs. The more precisely businesses can identify the specific customer segments they want to sell to, the better they will be able to differentiate their communications to address unique customer preferences. For instance, a company that sells outdoor furniture will likely have different strategies and messages for the single adult than for the young married couple or the retired couple.

Learning About Customer Needs and PreferencesThe more a business knows about its customers and their needs and preferences, the more successful its sales strategies will be. While small business owners certainly have a wealth of information from their perspective about their products and services and why they're great, the perspectives of customers are often different and sometimes surprising. Taking the time to learn about customers--what they know, what they value and what their communication preferences are--can help ensure the effectiveness of sales strategies.

Building RelationshipsHopefully customer interactions will not be one-time events. Businesses need to build relationships with customers so they will keep coming back and will refer others to the business and its products and services. Building relationships requires attention to the customer relationship at all stages, from first point of contact through future sales and through times when sales are low or absent. It is more costly to acquire a new customer

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than to retain an existing one, so efforts spent on building relationships can pay off significantly.

Engaging in Service Recovery and Continuous ImprovementDespite a business's best efforts, mistakes can happen and sometimes customers are not satisfied. Effective customer-oriented sales strategies will include consideration of service recovery processes to ensure that if errors occur, they are quickly and effectively handled. In addition, businesses need to be continually seeking input from customers about ways products and services can be improved, as well as acting on those inputs to ensure long-standing success.

Product development in Lego

Every business looks forward to expanding itself, be it in the form of dealings, product lines, new products, etc. Throwing light upon product development it is of two basic forms viz. line extension or new product development. Line extension would be making additional changes to an existing product where as the latter, new product development is altogether bringing a whole new concept into the market.

When Lego came to the market with the idea of interlocking bricks it was not a thoroughly new concept. In fact Kiddicraft was the predecessor of Lego bricks. It was founded in 1932 by Hilary Harry Fisher Page (1904–1957), who created the self-locking bricks. The 'Self Locking Bricks' were manufactured as a Hilary Page 'Sensible' Toy, made in England after the 1939-45 war. Lego copied the design of the Kiddicraft brick after examining a sample given to them by the British supplier of an injection molding machine they had purchased. Lego eventually acquired the rights to Kiddicraft in 1981.

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Beginnings:

The Lego Group began in the carpentry workshop of Ole Kirk Christiansen, in Billund, Denmark. In 1916, Christiansen purchased a woodworking shop in Billund which had been in business since 1895. The shop mostly helped construct houses and furniture, and had a small staff of apprentices. The workshop burned down in 1924 when a fire, lit by two of Christiansen's sons, ignited some wood shavings. Ole Kirk constructed a larger workshop, and worked towards expanding his business even further. When the Great Depression hit, Ole Kirk had fewer customers and had to focus on smaller projects. He began producing miniature versions of his products as design aids. It was these miniature models of stepladders and ironing boards that inspired him to begin producing toys.

In 1932, Ole Kirk's shop started making wooden toys such as piggy banks, pull toys, cars and trucks. The business was not very profitable thanks to the Depression. Farmers in the area sometimes traded food in exchange for his toys; Ole Kirk continued producing practical furniture in addition to toys in order to stay in business. In the mid-1930s, the yo-yo toy fad gave him a brief period of increased activity until it suddenly collapsed. To reduce waste, Ole Kirk used the leftover yo-yo parts as wheels for toy trucks. His son Godtfred began working for him, taking an active role in the company.

In 1934, Ole Kirk held a contest amongst his staff to name the company, offering a bottle of homemade wine as a prize. Christiansen was considering two names himself, "Legio" (with the implication of a "Legion of toys") and "Lego", a self-made contraction from the Danish phrase leg godt, meaning "play well." Later the Lego Group discovered that "Lego" can be loosely interpreted as "I put together" or "I assemble" inLatin. Ole Kirk selected his own name, Lego, and the company began using it on their products.

Following World War II, plastics became available in Denmark, and Lego purchased a plastic injection molding machine in 1947. One of the first modular toys to be produced was a truck that could be taken apart and re-assembled.  In 1949 the Lego Group began producing bricks, calling them "Automatic Binding Bricks." Lego bricks, then manufactured from cellulose acetate, were developed in the spirit of traditional wooden blocks that could be stacked upon one another but could be "locked" together. They had several round "studs" on top, and a hollow rectangular bottom. They would stick together, but not so tightly that they could not be pulled apart. In 1953, the bricks were given a new name: Lego Mursten, or "Lego Bricks."

Plastic products were not well received by customers initially, who preferred wooden or metal toys. Many of Lego's shipments were returned, following poor sales. In 1954, Godtfred had become the junior managing director of the Lego Group. Godtfred's conversation with an overseas buyer struck the idea of a toy "system", with many toys in a line of related products. Godtfred evaluated their available products, and saw the plastic bricks as the best candidate

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for such a "system". In 1955, Lego released the "Town Plan" as such a system, using the building bricks.

The building bricks were moderately received, but had some problems from a technical standpoint: their "locking" ability was limited, and they were not very versatile. In 1958 the bricks were improved with hollow tubes in the underside of the brick. This added support in the base, enabling much better locking ability and improved versatility. The company patented the new design, as well as several similar designs to avoid competition. That same year, Ole Kirk Christiansen died, and Godfred inherited leadership of the company.

Move to Plastic Bricks:

1961 and 1962 saw the introduction of the first Lego wheels, an addition that expanded the potential for building cars, trucks, buses and other vehicles from Lego bricks. Also during this time, the Lego Group introduced toys specifically targeted towards the pre-school market.

In 1963, the material used to create Lego bricks, cellulose acetate (CA), was dropped in favor of more stable acrylonitrile butadiene styrene (ABS plastic), which is still used today. ABS is non-toxic, is less prone to discolouration and warping, and is also more resistant to heat, acids, salt, and other chemicals than cellulose acetate. Samsonite manufacturing in North America did not switch at the same time, and still used some degree of cellulose acetate in its Lego products.

1964 was the first time that instruction manuals were included in Lego sets.

One of the LEGO Group's most successful series, the Lego train system, was first released in 1966. The original train sets included a 4.5-volt motor, battery box and rails; two years later, a 12-volt motor was introduced.

On 7 June 1968, the first Legoland Park was opened in Billund. This theme park featured elaborate models of miniature towns built entirely from Lego bricks. The three acre (12,000 m²) park attracted 625,000 visitors in its first year alone. During the next 20 years, the park grew to more than eight times its original size, and eventually averaged close to a million paying visitors per year. More than eighteen million Lego sets were sold in 1968.

In 1969, the Duplo system went on sale. This was a newly developed system, targeted towards younger children; Duplo bricks are much larger than Lego bricks, making them safer for very young children, but the two systems are compatible: Lego bricks can be fitted neatly onto Duplo bricks, making the transition to the Lego system easily made as children outgrow their Duplo bricks. The name Duplo comes from the Latinword duplus,

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which translates literally as double, meaning that a Duplo brick is exactly twice the dimension of a Lego building brick (2× height by 2× width by 2× depth = 8× the volume of a brick).

The 1960s were such a period of growth for the Lego Group that by 1970, one of the biggest questions they faced was how best to manage and control its expanding market.

Expansion:

The coming decades marked considerable expansion into new frontiers of toy making and marketing. Lego began to target the female market with the introduction of furniture pieces and dollhouses in 1971. The Lego universe expanded its transportation possibilities with the addition of boat and ship sets, with hull pieces that actually floated, in 1972.  Human figures with plausible arms made an appearance in 1974 in "Lego family" sets, which went on to become the biggest sellers at the time; in the same year, an early version of the "minifigure" miniature Lego person was introduced, but it was not plausible and had no face printed on its head.

"Expert Series" sets were first introduced in 1975, geared towards older, more experienced Lego builders. This line soon developed into the "Expert Builder" sets, released in 1977. These technical sets featured moving parts such as gears, differentials, cogs, levers, axles and universal joints, and permitted the construction of realistic models such as automobiles, with functional rack and pinion steering and lifelike engine movements. Finally, the Lego world came together in 1978 with the addition of the Lego "minifigure". These small Lego people have posable arms and legs, and a friendly smile. The figure was used in many varieties of Lego sets, allowing consumers to construct elaborate towns with buildings, roads, vehicles, trains, and boats, at the same scale, and populated with the smiling minifigure Lego citizens.

Another significant expansion to the Lego line occurred in 1979, with the creation of Lego Space sets. Astronaut minifigures, rockets, lunar rovers and spaceships populated this successful series. The Scala series debuted in this year as well, featuring jewelry elements marketed towards young girls.

Lego bricks had always had a constructive potential that was seen by some educators as being an invaluable asset in helping children to develop creativity and problem-solving abilities. Since the 1960s, teachers had been using Lego bricks in the classroom for a variety of reasons. In 1980, the Lego Group established the Educational Products Department (eventually renamed Lego Dacta, in 1989), specifically to expand the educational possibilities of their toys. The second generation of Lego trains appeared in 1981. As before these were available in either 4.5 V (battery powered) or 12 V (mains powered), but a much wider variety of accessories were available, including working lights, remote-controlled points and signals, and decouplers.

The "Expert Builder" series matured in 1982, becoming the "Technic" series. 13 August of that year marked the Lego Group's 50th anniversary; the book 50 Years of Play was published to commemorate the occasion. In the following year, the Duplo system was

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expanded to include sets for even younger audiences, particularly infants; new sets included baby rattles and figures with adjustable limbs. The year after, Lego minifigure citizens gained a realm of knights and horses, with the introduction of the first Castle sets. Light & Sound sets made their appearance in 1985; these sets included a battery pack with electrical lights, buzzers, and other accessories to add another dimension of realism to Lego creations. Also that year, the Lego Group's educational division produced the Technic Computer Control, which was an educational system whereby Technic robots, trucks, and other motorized models could be controlled with a computer.

In 1984, the Technic line was expanded with the addition of pneumatic components.

In August 1988, 38 children from 17 different countries took part in the first Lego World Cup building contest, held in Billund. The Lego line grew again in 1989 with the release of the Lego Pirates series, which featured a variety of pirate ships, desert islands and treasure; the series was also the first to depart from the standard minifigure smiling face to create an array of piratical characters. The Lego Group's Educational Products Department was renamed Lego Dakta in this year; the name is derived from the Greek word "didactic", which roughly means "the study of the learning process." MIT's Dr. Seymour Papert, from the Laboratory of Computer Learning, was named "Lego Professor of Learning Research," after his ongoing work in linking the Logo programming language with Lego products.

A new series designed for advanced builders was released in 1990. Three Model Team sets, including a race car and an off-road vehicle, featured a level of detail and realism not previously seen in any Lego series. Where Technic was mechanically accurate, Model Team was visually and stylistically accurate. The Lego Group became one of the top 10 toy companies in this year; it was the only toy company in Europe to be among the top 10. Legoland Billund had more than one million visitors in this year, for the first time in its history. The first-ever "Lego Professor of Business Dynamics," Xavier Gilbert, was appointed to an endowed chair at the International Institute for Management Development in Lausanne, Switzerland. Lego Malaysia was also established in 1990. In 1991, the Lego Group standardized its electrical components and systems; the Trains and Technic motors were made 9V to bring the systems into line with the rest of the Lego range. Duplo was augmented with the addition of the Toolo line featuring a screwdriver, wrench, nuts and bolts; the Paradisa line, targeted towards girls, brought a variety of new pastel colors into the Lego system and focused around horses and a beach theme. 1993 brought a Duplo train and a parrot-shaped "brickvac" that could scoop Lego pieces up off the floor.

Early prototypes of the Lego minifigure had a variety of skin colors and facial expressions, but production designs used only a yellow skin color and standard smiling face. Lego Pirates in 1989 expanded the array of facial expressions by adding beards and eye patches. Soon the other themes caught on, ranging from sun glasses, lipstick, eyelashes, and so on. However, many of the older collectors resented the new look, saying they looked too "cartoon-ish" or "kiddy", and preferred the simplistic nature of the two eyes and smile. Nevertheless, from

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1999 licensed series such as Lego Star Wars and Lego Harry Potter gave minifigures the personas of specific characters from their cinematic counterparts, but it was not until 2003, with the introduction of Lego Basketball, that the palette of skin tones broadened to include more lifelike colors.

In the late 1990s, the Lego Group brought out a series of new and specialized ranges aimed at particular demographics. The Bionicle range uses Technic pieces and specialist moldings to create a set of action figures for boys, while Belville is a more conventional line aimed at girls and featuring large plausible figures like those in theTechnic range. A "Lego 4 Juniors" group features 2-inch (51 mm) tall medium-sized figures ("medi-figure") without jointed arms, and longer legs than the classic Lego minifigure. In 2003, the Lego Group introduced a completely new system, Clikits, aimed at girls and consisting of customizable plastic jewelry and accessories. In 2004, Lego added the QUATRO brick, for ages 1–3. Much like Duplo, a Quatro brick is four times the dimension of a regular Lego brick, and is compatible with the Duplo brick. Also that year, they created the second line of Knights Kingdom themed product.

The late 1990s also saw the first products featuring licensed characters. In 1999, Star Wars Lego and Winnie the Pooh Duplo were released. These were followed by characters from Harry Potter to figures from other Steven Spielberg movies. Before this, Lego characters were always designed in-house, and lacked the strong characterization of these licensed characters. A number of in-house characters after this point were strongly characterized with media utilization and non-Lego System merchandising in mind, most notably Bionicle.

The Brick Design:

Lego pieces of all varieties comprise a universal system. Despite variation in the design and purpose of individual pieces over the years, each remains compatible in some way with existing pieces. Lego bricks from 1958 still interlock with those made in the current time, and Lego sets for young children are compatible with those made for teenagers.

Each Lego piece must be manufactured to an exacting degree of precision. When two pieces are engaged they must fit firmly, yet be easily disassembled. The machines that make Lego bricks have tolerances as small as 10 micrometre.

Primary concept and development work takes place at the Billund headquarters, where the company employs approximately 120 designers. The company also has smaller design offices in the UK, Spain, Germany, and Japan, which are tasked with developing products aimed specifically at these markets. The average development period for a new product is around twelve months, in three stages. The first stage is to identify market trends and

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developments, including contact by the designers directly with the market; some are stationed in toy shops close to holiday periods, while others interview children. The second stage is the design and development of the product based upon the results of the first stage. As of September 2008 the design teams use 3D modeling software to generate CAD drawings from initial design sketches. The designs are then prototyped using an in-house stereolithography machine. These are presented to the entire project team for comment and for testing by parents and children during the "validation" process. Designs may then be altered in accordance with the results from the focus groups. Virtual models of completed Lego products are built concurrently with the writing of the user instructions. Completed CAD models are also used in the wider organization, such as for marketing and packaging.

Since 1963, Lego pieces have been manufactured from a strong, resilient plastic known as acrylonitrile butadiene styrene (ABS). As of September 2008, the engineers use the NX CAD/CAM/CAE PLM software suite to model the elements. The software allows the parts to be optimized by way of mold flow and stress analysis. Prototype molds are sometimes built before the design is committed to mass production. The ABS plastic is heated to 232 °C (450 °F) until at a dough-like consistency. It is then injected into the molds at pressures between 25 and 150 tons, and takes approximately 15 seconds to cool. The molds are permitted a tolerance of up to two micrometres, to ensure the bricks remain connected. Human inspectors check the output of the molds, to eliminate significant variations in color or thickness. According to the Lego Group, about eighteen bricks out of every million fail to meet the standard required. Lego factories recycle all but about 1 percent of their plastic waste from the manufacturing process every year. If the plastic cannot be re-used in Lego bricks, it is processed and sold on to industries that can make use of it.

Manufacturing of Lego bricks occurs at a number of locations around the world. Molding is done in Billund, Denmark, Nyíregyháza, Hungary and Monterrey, Mexico. Brick decorations and packaging is done at plants in Denmark, Hungary, Mexico and Kladno in the Czech Republic. The Lego Group estimates that in the course of five decades it has produced some 400 billion Lego blocks. Annual production of Lego bricks averages approximately 36 billion per year, or about 1140 elements per second. If all the Lego bricks ever produced were to be divided equally among a world population of six billion, each person would have 62 Lego bricks. According to an article in BusinessWeek in 2006, Lego could be considered the world's No. 1 tire manufacturer; the factory produces about 306 million tiny rubber tires a year.

Since it began producing plastic bricks, the Lego Group has released thousands of sets with a variety of themes, including town and city, space, robots, pirates, trains, Vikings, castle, dinosaurs, undersea exploration, and wild west.

New elements are often released along with new sets. There are also Lego sets designed to appeal to young girls such as the Belville and Clikits lines which consists of small interlocking parts that are meant to encourage creativity and arts and crafts, much like regular Lego bricks. Belville and Clikit pieces can interlock with regular Lego bricks as decorative elements.

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While there are sets which can be seen to have a military theme – such as Star Wars, the German and Russian soldiers in the Indiana Jones sets, the Toy Story green soldiers and Lego Castle – there are no directly military-themed sets in any line. This is following Ole Kirk Christiansen's policy of not wanting to make war seem like child's play.

The Lego range has expanded to encompass accessory motors, gears, lights, sensors, and cameras designed to be used with Lego components. Motors, battery packs, lights and switches are sold under the name Power Functions. The Technic line utilizes newer types of interlocking connections that are still compatible with the older brick type connections. The Technic line can often be motorized with Power Functions.

Bionicle is a line of toys by the Lego Group that is marketed towards those in the 7–16 year-old age range. The line was launched in January 2001 in Europe and June/July 2001 in the United States. The Bionicle idea originated from the earlier toy lines Slizers (also known as Throwbots) and Roboriders. Both of these lines had similar throwing disks and characters based on classical elements. The sets in the Bionicle line have increased in size and flexibility through the years. Bionicle was replaced with Hero Factory in 2010.

The Lego group's Duplo product line, introduced in 1969, is a range of simple blocks which measure twice the width, height and depth of standard Lego blocks, and are aimed at younger children.

'Fabuland' ran from 1979 to 1989. The more advanced 'Lego Technic' was launched in 1977. 'Lego Primo' is a line of blocks by the Lego Group for very young children that ran between 2004 and 2006. In 1995 'Lego Baby' was launched for babies.

One of the largest Lego sets ever commercially produced is a minifig-scaled edition of the Star Wars Millennium Falcon. Designed by Jens Kronvold Fredericksen, it was released in 2007 and has 5,195 pieces. It was surpassed, though, by a 5,922 piece Taj Mahal.

In May 2011, Space Shuttle Endeavour mission STS-134 brought 13 Lego kits to the International Space Station, where astronauts will build models and see how they react in microgravity, as part of the Lego Bricks in Space program. The results will be shared with schools as part of an educational project.

Lego Distribution Strategy:

Five years ago the Lego Group was in serious trouble. On the surface it was business as usual - its products as popular as ever and maintaining a firm grip on the market - but beneath the surface its supply chain was crumbling. After racking up huge losses over several quarters, mainly as a result of over-ambitious ideas for product lines, and inefficient manufacturing

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processes, Lego's supply chain and logistics structure was due a major overhaul.

Today, despite once being a laughing stock in the logistics field, its supply chain and logistics innovations are seen as exemplary. Its progress was acknowledged last year when it won the European Supply Chain Excellence award for logistics and fulfilment.

The company, whose name derives from the Danish words "leg godt" which mean "play well", appointed Egil Møller Nielsen to the position of vice president, global distribution logistics, to help transform its distribution network.

Møller Nielsen began his career in freight forwarding and shipping. "I was born out of logistics," he says. Nevertheless, the mammoth task he faced at Lego was like no other he'd dealt with before, and was what he describes as "the most challenging point" of his career. "Five years ago there was nothing right," he says, "In 2004 we didn't even know what we spent."

One of the first decisions was to consolidate all distribution. Historically, Lego had multiple logistics providers and suppliers, all running separate warehouses, each operating under a different warehouse management system. As a result, visibility across the supply chain was virtually non-existent and cross-business communication and orders were fragmented.

Now its logistics operations are centralized. Stock from seven of its former distribution centres across Europe are now consolidated into DHL Supply Chain's one million square foot global distribution centre in Jirny, near Prague in the Czech Republic. From this giant hub - the equivalent in size to ten football pitches - the toy manufacturer serves 14,000 customers worldwide, spanning 135 countries. The centre’s activities include inbound and outbound logistics, storage and value added services such as assortment packing and customization. The Jirny site is going to be one of DHL Solutions’ strategic locations from where DHL is offering the complete range of logistics services to the market.

This move has brought Lego's distribution channels closer to its customers, and the biggest population centres in Europe, reducing transport costs as a result. Since consolidating all distribution, inventory is now easier to track and stock shortages have been reduced.However, closing distribution centres led to job losses. "One of the biggest challenges was that the knowledge we needed was in the people we had to let go when we shut down the other 12 DCs," admits Møller Nielsen. He also points to changing the management structure as one of the biggest challenges he faced. "People don't like change. One of the difficulties was to transform my ideas and get the support from the entire organisation and the suppliers - it was tough but in the end it succeeded."

Since Møller Nielsen took charge the company has slashed 25 per cent off its cost base. Its

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carbon footprint has also dropped 25 per cent. One of the major changes he made was to redesign the box packaging to fit the pallets more snugly. "A few years ago only 70 to 75 per cent of the pallet cube was being used," he says. Just altering the box dimensions by one centimeter has made a big difference - now pallet utilization is up 95 per cent, and we're transporting 20 per cent less volume of pallets, which has made massive savings on transport costs, he says.

The Jirny hub is the heart of Lego's global distribution, and channels 2,750 different products. "60 to 70 per cent of the product assortment is changed every year," says Møller Nielsen. As such, it works closely with retailers to determine forecasts, so that it can react quickly to volume fluctuations. It is now gearing up for its busiest time of year - Christmas - which accounts for 60 per cent of its yearly income.

Lego's supply chain is unrecognizable compared to that of five years ago. "One of the things I'm most proud of is how we are now regarded as a logistics provider," says Møller Nielsen, "in 2004, we carried out customer surveys, and we were ranked the worst in class in logistics. We have done the same surveys each year since then, and in 2008 were voted best in class. Now the company's supply chain is held up as an example."

LEGO and Funskool:

Funskool India, a joint venture of tyre company MRF and US-based toy maker Hasbro Inc, has bagged the rights from Denmark-based toy manufacturing firm LEGO Group to distribute their toys in India.

Initially, Funskool would retail toys like LEGO Duplo, LEGO City, LEGO Creator, LEGO Technic, LEGO Atlantis, LEGO Racers, LEGO Mindstorms and LEGO Starwars in the country. The Lego toys will be available through Funskool's retail network of over 4,500 points of sale across the country, including large format departmental stores.

R Jeswant, Vice-President, sales and marketing at Funskool said that the distribution of Denmark’s Lego toys began in April 2010 and the products are now available across leading toy retail outlets in the country.

He added that depending on future demand and requirements, further categories will be added.

Funskool plans for intensive campaigns on TV and print media to promote its product. The initiatives will also be backed by on-ground activities such as conducting games for children in retail outlets.

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Besides its latest deal with Lego, the company also sells the complete range of toys from its joint venture partner Hasbro and also represents Japanese toy maker Tomy in India.

It also owns licenses from Walt Disney for board games and Warner Bros for board games and puzzles.

Bibliography

www.aboutus.lego.com

Economictimes.indiatimes.com

www.commculture.com

www.marketreasearch.com

www.business-standard.com

www.lego.com

www.legoland.com

www.legolanddiscoverycenter.com

www.sitelogicmarketing.com

www.recordholders.org

www.supplychainquarterly.com

Reference Books

Marketing Management - by Ramaswamy

Marketing Management - by Philip Kotler

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