LEGO: Building for the future

1. LEGO: Building for the future A Comprehensive Case

2. ShakeelAnjum Abrar Ahmad Group Members Khuram Shahzad Ali Qurashi FahadInsha

3. Introduction Figure Outline • Situation Analysis • Problem Identification (Main & Sub) • Alternative Development • Evaluation We will be approaching this case by first analyzing situation broadly and then narrowing down our focus right to the problem and conclusion stage • Selection • Implementation • Recommendation

4. 1] Introduction

5. Time Of Case • Year 1999 Industry Of Operation • Toy manufacturing Time Of Establishment • 1932 By Ole the founder with few employees Geographic Area • Becloud, Denmark

6. Meanings • Danish word “Log Godt” meaning “play well” Key People • Ole Kirk Christianson (Founder) • Godtred Kirk Christianson (Son)

7. More than 10,000 employees in 30 different countries and among world’s largest toy manufactures Figure Size Of The Company • Only European company to occupy a place in world’s top ten toy manufacturers • Produces its products in Denmark, US, Switzerland and Korea and retailed through 60,000 outlets in more than 130 countries • 50 years following its inception Some 203 billion LEGO elements have been produced

8. Ole Kirk Christiansen started business with few employees Figure Key Dates • 1932 • LEGO name was first used • 1934 • Ole’s son used new material to create four and eight stud building bricks • 1949 • Godtfred made most important discovery • 1958 • LEGO opened 128 acre-theme park in carsbad • 1999

9. Figure LEGO Group Businesses • LEGO group • Media • Play materials • Family attractions • Lifestyle products

10. 2] SITUATION ANALYSIS

11. Macro environment

12. Social Environment • Child searching for a gift sooner or later is going to encounter the world famous LEGO brand • Many of today’s parents, each new LEGO experience bring back memories • “I remember my brother had a biscuit tin full of red and white LEGO bricks……..” DEEP-LIST Analysis • Technological Environment • Towards 1940s, Ole realize the huge potential of plastic as new replacement of wooden range • In 1949, Ole’s son used new material to create simple four and eight stud building blocks • In 1958, Godtfred made most important discovery towards joining inside hollow bricks

13. Children as well as people from other age groups are experienced to use LEGO brands • Demographic Environment • Note:- No sufficient data regarding Ecological, Economic, Political, Legal, Informational, environment provided in the case

14. An Industry Analysis Porter’s five Forces Model

15. Threat of New Entrants Figure Porter’s Five Forces • Bargaining Power of Buyer • Internal Rivalry • Bargaining Power of Suppliers • Threat of Substitutes

16. Table Impact & signs of porter’s forces Note:- As most of the forces in this model are negative therefore the industry in which LEGO operates is unattractive industry

17. Goals & Objectives Desire to stimulate children's creativity ‘Creativity unlimited…..Just Imagine’

18. Vision For people to experience positive, happy association every time they see LEGO element.

19. Demographic Figure Segmentation & Target Market • Age group (play materials 0-5, play materials 4-9, play materials 7-16+, learning materials 7-16+) • Geographic • Asia, America, Europe, Japan • Psychographics • Not provided • Media Graphics • Not provided

20. Customer Profile Includes all the children with target age range of 0 to 16+

21. The 4 Hard P’s The 3 Soft P’s Marketing Mix

22. Play materials

23. Category for children who haven’t yet started school • Those products that are built up around a story • Name given to sets or buckets with traditional LEGO bricks Figure Product Categories(LEGO Group) • Pre-school products • Play materials • Building bricks • With LEGO MINDSTORMS you can design your own robot • Products have been developed specially for the educational sector • Based on movies or books for which the LEGO Group has acquired the rights • MINDSTORMS • LEGO Education • Licensed products

24. Figure Product lines LEGO (Play Material) • LEGO PRIMO • Children from birth to 36 month • 37 different set of toys • Sets include rattles, animal characters, aero planes and boats etc • Baby toys, stacking toys and mobility toys • LEGO DUPLIO • 18 months to six year age • Basic LEGO duplio set includes Different products to be combines with each other • Theme LEGO duplio set Encourage role play and imagination • LEGO SCALA AND LEGO BELVILLE • Especially for the needs of girls • LEGO BELVILLE encourage girls to enjoy range of horse riding, fairy tale,, beach and other themes • LEGO SCALA provide plenty of opportunity for play • LEGO SYSTEM • Designed for specific needs of boys • Includes 157 different sets • Limitless range of themes includes ninja, city, action, adventures, space, star wars, trains, model team and radio control

25. LEGO TECHNIC • Older children • Use technical design and construction system • CyberMaster, robots and computer sftware to allw construction of programmable toys • LEGO MINDSTORM • Revolutionary new system based on LEGO RCX microchip • Special programming language i.e. RCX to program microcomputer which acts as a robot’s brain • ZNAP • Recently launched construction system • Features vehicles which once built can be transformed into something else such as monster • LEGO DACTA • For kindergartens and schools

26. Family attractions

27. LEGOLAND Billund • Company’s home in billund • Attract around 1.4 mil visitors a year • Some 45 mil LEGO bricks are used Figure LEGO family attraction business • LEGOLAND California • Carlsbad, north of San Diego in California • 1.9 mil visitors per annum • Designed for children but people with all age groups have been witnessed to come • LEGOLAND Windsor • Windsor Safari park in UK • Attracts 1.5 mil visitors per annum • Britten’s most popular new attraction Note:- Company plans to pen up two more parks in Germany and Japan early in new Millennium

28. Lifestyle Products • Aim is to raise awareness of LEGO brand • LEGO Kids Wear • Launched in 1993, the result of licensing agreement with Danish Brandtex Group • Available through number of different outlets • Departmental stores, specialized children’s apparel shops • Launching its own retail outlets, by 1999, LEGO opened 15 shops selling LEGO kids wear alone

29. Media • Offers consumer range of children’s software, videos, books and music • LEGO CREATOR, LEGO LOCO, LEGO Chess, LEGO SYSTEM Rock Raiders

30. ILC: Industry Life Cycle CLC: Company Life Cycle PLC: Product Life Cycle PLC/CLC/ILC

31. Figure PLC/CLC/ILC LEGO Products Toy Industry (ILC) LEGO Company(CLC)

32. Portfolio Analysis

33. Family attractions • Lifestyle products • Media Figure BCG Framework High • Star • Question Mark • Cash Cow • Dog % age of market Growth • Play materials • N/A Low High Low Market Share

34. KSF • Stay tuned with changing tastes • Respond quickly to latest fads and fashions • Latest technology • Innovation • Advertising

35. USP • Stimulate children’s creativity • Creative imagination

36. Competitors “LEGO competes with plethora of toys ranging from Action Man and Barbie dolls to Furbies and computer games”

37. Figure SWOT Analysis • Strengths • Weaknesses • Opportunities • Threats • Strong hold on European market • Strong brand name • Big scale business • Consistent commitment to innovation • Quality • Global retail network • Coordinating production with demand • Low-tech constriction sets • Distance from top to bottom • Overlap between functions • Rattle design • Japanese market • Cyberspace LEGO world shop • Fitness programme • Licensing deal with lucasfilm Ltd. • Licensing route to Disney film characters • Asia/Pacific & S. African market • Stock reductionsby retail trade • Computer and video games • Product recalls • Shift in children’s taste

38. Figure Enhanced SWOT Matrix Increase production to meet with the demand for important LEGO lines • Licensing deal with Lucas Film Ltd. To produce LEGO Star Wars products Strengths Weaknesses Opportunities Increase its focus on the markets of Asia/ Pacific & S. Africa using its strong brand name High technology products to compete in the markets of Asia/ Pacific & S. Africa Threats

39. Table IFE Matrix

41. Table EFE Matrix

43. Figure Ansoff’s Expansion Grid • Market-penetration strategy • Product development strategy Current Product New Product Current Market • Market development strategy • Diversification strategy New Market

44. Financial Analysis No data as per the requirements of presenting financials has been provided in the case

45. Market Sales Analysis • In company’s heartland (Europe) there was 1% decrease in sales to retail trade • In Italy, Germany and France there was 20% fall in sales to retail trade • Polish, Portuguese, British and Norwegian markets enjoyed retail trade increase • In America there was 13% & 20% increase in sales to retail trade and consumers respectively • Japanese market, sales to retail trade up by 30%

46. Figure Market sales trend analysis

47. 3] main problem

48. Disappointed set of results of the company following year 1998 Evidence: Before tax loss of DKK 282 million, its worst ever set of figures Reasons: Financial problems in Russia and Asia (DKK 150 million wiped off, 40 & 52% decrease in sales in Russia & Asia respectively) Stock reductions by the retail trade Product recall of a rattle design costing business DKK 35 million Difficulties in coordinating production with demand for most popular LEGO lines

49. SUB PROBLEMS • Decrease in sales in markets of Asia/Pacific & South Africa • Difficulties in coordinating production with demand for most important LEGO lines • Change in expectations of children in what they want from the toys they play with

50. 4] DEVALOPING ALTERNATIVES