Lego Final Audit Book

Estelle Allard, Caitlin Konop, Kelsi Ardaiz,
Joshua Bustamonte, Derek Oldenburg,
and Brianna Rodarte
Brand Audit
0

For nearly a century, The LEGO Group has remained
one of the most recognizable and successful members
of the toy industry. Spurred by a craze revolving around
the simple, yet creatively captivating toy, a global Lego
subculture has developed over the years. Thus,
supporting The LEGO Group’s expansion beyond the
classic brick toy to movies, games, retail stores, brand
partnerships, and six Legoland amusement parks.
Immense success in their category has landed The LEGO
Group various brand distinctions. In early 2015, LEGO
replaced Ferrari as Brand Finance's, "world's most powerful
brand”. According to Interbrand, LEGO is currently ranked the
67th brand in the world - stellar for a company that began in
an old carpentry workshop. While The LEGO Group has
maintained its dominance in recent years, the company must
continue to adapt in order to capture kids’ imaginations as
more focus and consumer revenue is being poured into
avenues of digital entertainment rather than tangible toys.
Introduction
1

Background & history . . . 3
BRAND PORTFOLIo . . . 8
BRAND INVENTORY . . . 10
BRAND EXPLORATORY . . . 20
BRAND RESONANCE PYRAMID . . . 22
SWOT ANALYSIS . . . 25
PRIMARY RESEARCH . . . 26
STRATEGIC RECOMMENDATIONS . . . 27
TACTICAL RECOMMENDATIONS . . . 28
REFERENCES . . . 30
2
TABLE OF CONTENTS

LEGO was founded in 1932 by Ole Kirk
Kristiansen, and is currently one of the world's
leading manufacturers of play materials. They
have headquarters in Billund, Denmark, and main
offices in Enfield, USA, London, UK, Shanghai,
China, and Singapore. The company is best
known for manufacturing LEGO-brand toys,
consisting primarily of interlocking plastic bricks
(Mortensen, 2015).
By 1966, The LEGO Company had expanded
to 42 countries-including locations in Spain, Italy,
and Latin America. Shortly after this expansion, The
Lego Company took its first venture outside of
physical toys with the creation of LEGOLAND
Amusement Parks, which later grew into a chain of
Lego-themed children's/family theme parks
((Mortensen, 2015). The creation and development
of Legoland marked the evolution of The LEGO
Group from a toy producer solely for children to a
family-friendly entity, which was an immense
success for the brand and set the stage for future
expansions.
Guided by the company spirit: "Only the best is
good enough”, Kristiansen dedicated The LEGO
Group to the development of children and aimed
to inspire future builders through creative play
and learning. This motto, which is still used
today, is believed to have been created by Ole
Kirk in order to encourage his employees never
to skimp on quality- a principle he strongly
invested in. Kristensen and his company faced
adverse conditions as general opinion in
regards to plastic toys was unfavorable at the
time. A Danish trade magazine, Legetøjs-
Tidende ("Toy-Times"), made claims that
Kristensen’s plastic toys would never be able to
replace traditional wooden toys (Lauwaert,
2009). Although a popular sentiment at the time
of the company's development, The LEGO
Company seemed to become a significant
exception to the dislike of plastic in children's
toys, mainly due to Ole Kirk’s high standards.
BACKGROUND
& HIstory
3

With Legoland’s growing success well
into the 1970s, The LEGO Group ventured
further into branded expansion with academic
curriculum under their LEGO Education
Department in 1982 (‘’LEGO Education,’’ n.d.).
This monumental extension of the brand
encouraged teachers and educational
specialists to deliver playful learning
experiences that brought subjects to life in the
classroom, while making learning fun and
impactful. LEGO Education offers a wide range
of physical and digital educational resources
that encourage students to think creatively,
reason systematically, and reach their full-
potential. After years of aligning the education
segment of the company with the same set of
beliefs and values as the original LEGO brand,
LEGO Education was able to establish its own
headquarters in Billund, Denmark in 1989
(Mortensen, 2015).
By 1990, the LEGO Group had expanded
to become one of the world's 10 largest toy
manufacturers. Notably, LEGO was the only toy
manufacturer on the list that was located in
Europe (Mortensen, 2015). This distinction
demonstrated LEGO’s unwavering success with
their traditional interlocking blocks, even 60
years after the company’s introduction. This
was due in part because of The LEGO Group's
ability to continually captivate a consumer
audience by partnering with various brands that
were also well-performing at the time. Not only
was The LEGO Group's toy department
maintaining dominance in their product category
well into the 1990s, so was their expansion into
theme and amusement parks. The ‘magic
barrier’, as it is referred to in the theme park
industry, or the one million visitors in a single
year was broken for the first time at Legoland
Billund in 1990 (Mortensen, 2015). By 1999,
Legoland expanded to America with its first park
opening in Carlsbad, California.
BACKGROUND
& HIstory
4

BACKGROUND
& HIstory
While the development of new products and
sponsored content were keeping LEGO afloat, 2003
marked an unfortunate and financially devastating
deficit due to heavy write-downs that left the company
on the brink of bankruptcy (Feloni, 2014). With the
need to revamp the company, the 2000’s mark a
turbulent time for The LEGO Company as drastic
changes were needed in order to survive its financial
downturn. By 2005, several Legoland parks were sold
and major portions of production were outsourced to
external partners in order to alleviate some of LEGO’s
economic stress. Finally, as the company celebrated
its 75th anniversary in 2007, financial conditions were
stable (Mortensen, 2015).
LEGO entered 2010 by heavily investing into digital platforms; both through video games
and feature length films. With the expansion and growth in digital entertainment, LEGO
continued its growth and presented strong annual results for 2012, nearly tripling the sales of
2007 (Feloni, 2014). In order to keep up with developing technologies and maintain relevance in
their category, LEGO released their first feature film, The LEGO Movie (2014). The film ranked
number one its opening weekend with a box office total of $469.2 million - a roaring success for
LEGO and a sign that following digital trends could pay off immensely (Mortensen, 2015). Along
with a shift from classic LEGO toys to licensed partnerships, in recent years the company has
invested heavily into humanitarian efforts such as a partnership with UNICEF and creating
products that cater to a wider gender demographic.
From its humble beginnings in a carpenter’s workshop to being named one of the
world’s most powerful brands, LEGO has managed to captivate a lifelong brand loyalty due to
its dedication to the customer experience. Parents seem to approve of the back-to-basics
creativity that LEGO products and services foster and have a persistent nostalgia for the brand
long after their own childhoods. In fact, it is the LEGO philosophy that ‘good quality play’ not only
enriches a child’s life, but also lays the foundation for later adult life. Throughout history LEGO
has upheld the belief that play is a key element in children’s development and stimulates the
imagination and the emergence of ideas and creative expression. In the future, it is likely that
LEGO will continue to innovate and adapt to changing trends in the digital entertainment field.
5

Kristiansen started
making wooden toys.
Kristiansen named his
company "LEGO"
Kristiansen began producing
an early version of the now
famous interlocking bricks.
Plastic toys were accounting
for half of The LEGO
Company's output.
The LEGO Company created
the modern brick design.
The official LEGO brick
design was patented.
1932
1934
1949
1958
1951
1958
(”Lego History Timeline,” 2015)
KEY MOMENTS for lego
6

Therefore, the purpose of the
LEGO Brand Group is to
protect and develop the LEGO
brand (Trangbæk, 2016).
LEGO’s OWNERSHIP
LEGO is a private, family-owned
company that commits itself to
active family ownership. LEGO is
75% owned by KIRKBI A/S and
25% owned by The LEGO
Foundation. KIRKBI A/S is the
holding and investment company of
the Kirk Kristiansen Family
(Jensen, 2013).
The Kirk Kristiansen family
announced their decision to
establish a new entity in
December of 2016, the LEGO
Brand Group.
The LEGO brand has proven its
durability and timelessness
through its unparalleled growth
over the years. With this in mind,
the owners believe there is still
untapped potential within the
brand. The LEGO Brand Group
will oversee all of the LEGO
brand related activities.
7

Brand
PORTFOLIO
The LEGO Group has
mastered the art of
collaboration, and is currently
involved with multiple
brands. Pictured are 34
various brands associated
with LEGO products.
8

All subsets and partnerships of
The LEGO Group subscribe to a
shared system of common values
that help to unify each subset of
the brand…
Only the best is good
enough
True to its age old company spirit
‘Only the best is good enough’, the
LEGO Group has consistently
emphasized the importance of high
quality in all of its collections.
LEGO products throughout the
diverse subsets of the brand are all
tested rigorously to live up to the
strictest safety and quality
standards. This approach has
made children and adults return to
LEGO products time and again.
Systematic
creativity
LEGO products are all part
of the LEGO system, which
essentially means that they
can easily be combined and
dismantled in innumerable
ways. The combination of a
structured system, logic and
unlimited creativity
encourages the consumer to
learn through play in a
uniquely LEGO fashion,
regardless of which subset of
the brand they are using.
A positive impact
The LEGO Group wants to leave a
positive impact in all facets of its
brand. All subsets under the LEGO
name are committed to caring for the
environment, the society that
children will inherit, and to inspiring
and developing the future leaders of
tomorrow.
Brand
PORTFOLIO
9

Success can be measured in many
ways. For LEGO, it means exploding
product sales, global brand awareness,
exclusive licensing partnerships,
newfound popularity with girls, a
diversified digital product line, and an
Oscar-nominated song from a wildly
popular movie.
According to a study by consultancy
firm Brand Finance, LEGO zoomed past
Ferrari in 2015 to become the world’s
most powerful brand. LEGO’s underlying
strength is that it appeals to both
genders and all ages. Kids have an
affection for playing with the toys, and
parents see the brand with a sense of
nostalgia (Neal, 2015).
BRAND INVENTORY
10

BRAND
ELEMENTS
LEGO’s most distinguishable brand element is the
unique LEGO brick. It has the compatibility to
interlock with any other LEGO brick, regardless if it
was made in 1958 or 2017. Each LEGO brick
features the name “LEGO” imprinted on it, which
dates back to its launch date. The brick in its present
form was launched in 1958, and comes in an array of
colors. The interlocking principle with its tubes makes
it unique and offers unlimited building
possibilities (Mortensen, 2015).
11

1. Unlimited play potential
2. For girls and for boys
3.Fun for every age
4. Year-round play
5. Healthy, quiet play
6. Long hours of play
7.Development,imagination,cretivity
8. The more LEGO, the greater the value
9. Extra sets available
10. Quality in every detail
(Mortensen, 2015)
10 LEGO
CHARACTERISTICs:
12

The average price of one LEGO brick costs
about 10.4 cents to make. One of the most popular
LEGO sets ever created was the LEGO Star Wars
Millennium Falcon with an MSRP of $179.99 that
contains 1254 LEGO pieces. Analyzing the average
price of pieces compared with the pieces from the
set, the cost to make this set could average
between $130-$140 dollars depending on the
distribution and advertising involved (Allain, 2014).
The LEGO Group also has seven theme parks
around the world. Partnered with Merlin
Entertainments, Merlin oversees the amusement
parks and is responsible for their annual profit. Due
to the rise in profits during the fiscal year of 2015,
Merlin announced that they are opening another
amusement park located in Nagoya, Japan in April
2017 and more in the near future. The amusement
parks generally charge a one-day ticket fee of $84
to enter the park, with an annual pass fee of $279
(Annual Pass Pricing, n.d.).
PRICING
13

In 1932, Ole Kirk Kristiansen started what is
now the sixth largest toy manufacturer in the
world (Cooke, 2009). Up until 2004, LEGO
had 11 warehouses and distribution centers all
throughout Europe that handle order execution
and customer deliveries. However, in 2004
LEGO began experiencing financial problems
that caused the company to adopt an sever
year strategy called “Shared Vision” to
revitalize its sales and profits, in which they
wanted to cut 20% of their distribution costs.
LEGO recognized that they could cut logistics
costs by bundling all of its European
distribution in one distribution center.
1
Along with the changing of distribution
center for LEGO, they also had an
extensive review for their new route of
delivering their orders. Because the single
distribution will shake up the transportation
routes they currently had, they ran parallel
operations until the transition was finished.
LEGO and DHL also teamed up to develop
a web-based transportation management
system. Up to that point, LEGO had 55
transportation providers to 11 warehouses
throughout Europe; because LEGO singled
all its distribution efforts into one location,
that number of transportation providers has
been cut down to 11 (Cooke, 2009).
3
After considering a number of options for
the location of the distribution center,
LEGO decided to settle on Prague in the
Czech Republic. LEGO chose Prague
because of its low labor cost mostly, but
it also offered a larger pool of skilled
workers than other Eastern European
countries. The location of the distribution
center in Prague was also key because
it allowed LEGO to ship to Asian
markets with more ease, and that made
the decision to lease the one million-
square-foot building. LEGO also
partnered up with DHL Exel Supply
Chain to run the day-to-day distribution
operation (Cooke, 2009).
2
DISTRIBUTION
14

To also increase competitiveness
in the toy market, LEGO Group’s
North American division have sign
deals with the PFSweb inc. to fulfill
their online orders from their place
of business in Memphis,
Tennessee. Along with them
LEGO also signed a deal with Exel
Inc. to handle the distribution of
LEGO products to retailers from
their location in Alliance, Texas
(Tode, 2006).
5
Today, LEGO has at least two carriers
handling deliveries to every market it serves.
LEGO also nearly hit their target goal of
reducing their distribution costs by bringing
down costs by 19%. Moreover, it reduced
labor costs by eliminating “unnecessary
touches” the product went through before it
rolls out into the market, now all those
“unnecessary touches” can all be addressed
at distribution center in Prague. The move
also allowed inbound loads to be prepared for
customers more quickly than it did in the past
(Cooke, 2009).
4
DISTRIBUTION
15

Due to LEGO’s international notoriety, the firm
focuses primarily on institutional advertising and only
distributes two catalogues per year.
The LEGO marketing and communications strategy
has strived to create an eternal product by taking
part in the film industry more recently. The Lego
Movie was incredibly successful in 2014, becoming
the fifth highest earning movie in the US.
Thanks to the movie industry, LEGO has seen an
increase of 32% in popularity. With technology on the
rise, LEGO aims to let kids create their own reality
with virtual characters based on their favorite games
and movies (LEGO Group, 2016).
COMMUNICATION
16

ADvertisingThis is their marketing strategy
in a nutshell. Lego has increased and
folded in sales continuously within the
last few years (Tuttle, 2014). With
successful movies, new video game
releases, brand collaborations, LEGO
art exhibitions, nostalgic magazine ads,
and expansion into social media, LEGO
has made a come-back unlike any
other brand. In 2003 LEGO was on the
verge of bankruptcy. Fast forward ten
years, Lego has seen phenomenal
increases in revenue and profit. They
have quadrupled their revenue
according to CEO Knudstorp. In
addition, they were the largest toy
manufacturer in the world ahead of
Mattel with “first-half profits of $273
million on revenue of $2.03 billion”
(Ringen, 2017).
LEGO has created a sector within The
LEGO Group called the Future Lab. This Lab is
dedicated to creating new “technologically
enhanced ‘play experiences’ for kids all over the
world” (Ringen, 2017). They have not changed the
LEGO block, but how kids around the world can
enjoy LEGO in a technological times.
LEGO has cut advertising funding in areas
like the Daily News, a UK Newspaper (Ryan,
2016). According to AdWeek they have moved
into social media platforms such as YouTube,
Twitter, and User-generated content (Yeoman,
2016). Advertising through social media not only
cuts the price of advertising, but creates
interaction with consumers
With increases such as Lego’s, it is clear that their
marketing and advertising strategy has proven
successful. Julia Goldin, Chief Marketing Officer of the
LEGO Group, was asked how they budget spending
on advertising. His question was if Lego advertises
toward the kids and families that already buy their
products, or if they targeted people who might not care
for the brand. Her response reflected the core of
LEGO. “The priority has always been about the kids,
creating their desires, and making sure they know
what products are out” (Where Does Lego's
Advertising Budget Go?”, 2016). Gildin mentions they
are also focused in expanding in areas where LEGO is
unpopular and unfamiliar to children. For example,
LEGO has begun expanding into China and expect
China to become one of their core markets.They have
also increased exposure in these areas by creating
ways to connect with parents and educate them on
what LEGO can do for their children. 17

Ambassadors
Interestingly, The LEGO Group recruits adult ambassadors only. The LEGO
Ambassador Network (LAN), is a community network for both the LEGO
Group and influential adult fans of LEGO to provide valuable dialog and
initiate activities of relevance to the success between the LEGO Group and
the Adult Fan of LEGO (AFOL) community. Members are chosen from
amongst fans from various communities who are committed to sharing their
knowledge and building expertise with the world-wide LEGO community of
kids, fans and collectors. The mission of the LEGO Ambassadors is to inspire
LEGO builders of all ages from across the world to create, imagine, design
and build (Godwin, 2015).
The LEGO Ambassador Network is the responsibility of the Community
Support Team at The LEGO Group. This team is dedicated to relations
between the company and fans. Members of the community support team,
including AFOLs and members of LAN, regularly attend conventions often
hosting Q&A sessions for attendees.
Sports and Culture
The LEGO Group was heavily involved in a sub-brand they initiated during the
year 2000 entitled LEGO Sports. This toyline included tabletop versions of
popular sports. The sports and activities included in this sub-brand included
LEGO Soccer, LEGO Football, LEGO Football, LEGO Hockey, and Gravity
Games. LEGO created contracts with major sport affiliations including NFL,
NHL, and NBA in order to create the likenesses of the actual brands.
However, due to sales declining for this toy line, LEGO decided to suspend
and ultimately end the themed sets (Sports, n.d.). LEGO is not predominantly
spotted during sporting events. Instead, LEGO products are oftentimes used
by fans to recreate certain events in sports. One example is from the Big Ten
Network that provides film footage to fans throughout the college football
season. Big Ten Network recently hired a client to recreate ten mini-movies
consisting of stop-motion animations showcasing the highlights of the football
season for their division. Although it’s a type of alternative media, the LEGO
Group still finds ways to influence their marketing through sports culture
(Murphy, 2016).
18

Philanthropy
The LEGO Group developed The LEGO Foundation in 1986 as a subset of the
LEGO brand that focuses solely on the organization’s philanthropic movements. As
a cohesive extension to the brand, The Lego Foundation benefits immensely from
the 80+ years of established brand equity of The LEGO Group along with the strong
and trustworthy reputation of the LEGO brand. The LEGO Foundation is based in
two locations – Billund, Denmark and Baar, Switzerland. In order to authentically
connect with the greater good of their purpose, the foundation believes in employing
an ethnically diverse working population that is homogenous through a shared
passion of improving children’s lives and building stronger communities by making
sure the fundamental value of play is understood, embraced and acted upon
(Sandgaard, 2017).
The LEGO Foundation’s work is about challenging the status quo by re-defining play
and re-imagining learning. Re-defining play means changing the way people
understand the importance of play –especially the huge value it has in helping
children learn essential skills for life in the 21st century. To re-imagine learning The
LEGO Foundation works with parents, carers, school systems, institutions and
governments to use the transformative power of play to improve learning for millions
of children all over the world. Their focus is on children aged 0-12, with a special
emphasis on early childhood where children develop most rapidly, both physically
and mentally.
The LEGO Group seeks to help children develop their creativity and learning
through play. They focus their philanthropic activities on children who, due to illness
or their social status, have limited possibilities for play experiences. More than 5,000
LEGO sets have been distributed via Save the Children Denmark and SOS
Children's Villages. Close to 10,000 LEGO sets have been used as consolation gifts
for children confined to public hospitals and other major institutions
(’’Who We Are And Our Aim,’’ n.d.).
The LEGO Group’s main wish is to help as many children as possible at a time, for
that reason they primarily donate through major international organizations. LEGO
believes that their donations, both financial and service-oriented, can help children
to develop their play, creativity and learning -- therefore developing a more balanced
society for the future.
19

PEOPLE
• Parents with young children
• Financially stable
• Avid Shoppers
• Ambassador: adult advanced
builder
IMAGE
• Fun
• Creative
• Innovative
• Imaginative
• Accountable
• Family-oriented
• Classic
• Durable
NEGATIVE
• Disorderly Product
• Dangerous for small
children
• Limited demographic
reach
PERFORMANCE
• Relatively affordable
• Creative entertainment
• Exceptional customer service
• Unanimously identifiable
brand logo
ASSOCIATED
PRODUCTS/SERVICES
• LEGO Block/sets
• LEGO Videogames
• LEGO movies/tv entertainment
• LEGO Theme parks
• LEGO education
Brand
exploratory
Consumer
Knowledge
20

CO-
BRANDING
LEGO has experienced the
dangers of co-branding through
their partnership with the oil and
gas company, Shell. While The
LEGO Group and Shell have been
in partnership for more than 50
years, the partnership faced
scrutiny in 2014 from a viral anti-
drilling campaign by Greenpeace
which subsequently linked LEGO
to Shell’s expansion to Arctic
drilling (Matthews, 2014).
While the partnership between Shell and The LEGO Group
offers great commercial/sales sense for LEGO, the risk to
the LEGO brand of cross-branding with an industry capable
of generating negative headlines, consequently negative
consumer knowledge as well, is alarmingly high. The risk of
LEGO being associated with the potential for environmental
disaster in the arctic, signifies a significant reputation risk to
the brand. In response to the Greenpeace campaign, which
put LEGO under direct fire, the brand recognized that the
strategic partnership may offer a commercial benefit
involving no drilling by LEGO, however by association it
appears to stakeholders as if LEGO is indirectly supporting
Arctic oil exploration and drilling. Therefore in order to avoid
a continuation of negative brand associations, Jorgen Vig
Knudstorp, LEGO chief executive, announced that the co-
branding part of the agreement between LEGO and Shell
would not be extended at the end of the current agreement.
21

COMPETITIVE
ANALYSIS
LEGO has many competitors, but none reach LEGO’s
level of success. Competitors are aware of LEGO’s
power in the toy industry. Instead of imitating sets, rival
companies have sought alternative themes within their
building blocks. Companies such as Mattel (owners of
MEGA Brands), McFarlane Toys, and K'NEX have all
adopted themes that LEGO has refused to use in order
to still have a stable market. According to Andrew
Sparks, vice president for MEGA Brands, the goal is to
be “distinguished” from their biggest rival. This is a
common goal between both small scale and large
scale competitors.
23

K’NEXMEGA Brands McFarlane Toys
MEGA Brands has
earned an enviable reputation
over the past 40 years with
consumers worldwide. Millions
of families trust the brand to
deliver quality products that
offer stimulating, fun, and
educational play experiences
for kids. This is the foundation
on which the company was built
(Mega Brands Inc., 2007).
Victor Bertrand started
Ritvik Holdings in 1967 - a toy
distribution company. Victor
became interested in building
blocks a few years later. At the
time, LEGO was already the
leading toy company. Victor
Bertrand ignored competition,
and began building his own
style of giant blocks for toddlers
- Mega Bloks. By 1989, Mega
Blocks were sold in 30
countries and dominated in
Canada and The US. In 1991,
MEGA Brands began selling
Micro Mega Bloks, similar to
LEGO’s blocks. LEGO sued,
but the suit dragged for years
because LEGO’s patent had
expired. Unfortunately for
LEGO, MEGA Brands won
since they were able to
distinguish their brand from
LEGO. During the time of the
suit, MEGA Brands’ Micro
Mega Bloks became popular
and were in direct rivalry with
LEGO (Scott, 2010). MEGA
Brands was bought by Mattel
for $460 million in 2014. MEGA
Brands is still LEGO’s biggest
rival to this day, and strives to
create sets that are realistic
and unthought of.
Mcfarlane Toys was
started in 1994 by Todd
McFarlane. Originally, the
brand was created to build
action figures for comic book
characters. Today, they also
sell toy construction sets.
They have brought new and
older audiences into their sets
with themes like The Walking
Dead and Assassins Creed.
Mcfarlane worked with Mattel
in 1994, but could not come to
an agreement on the
production of their toys and
had many disputes.
McFarlane Toys (previously
Todd’s Toys) ended their
contract with Mattel and
began producing new styles of
construction sets and action
figures. They provide an
alternative to the classic
LEGO block.
McFarlane Toys action figures
are sold worldwide in the U.S.
and Canada, and by
distributors in Europe, Japan,
and Australia. The online
McFarlane Toys Collector’s
Club gained a lot of popularity
when it was first launched in
1996. The club serves as a
means for collectors to
purchase exclusive action
figures only available to
members, and caters to over
100,000 members worldwide
(Mcfarlane Toys, 2007).
Similar to LEGO, McFarlane
caters to a diverse audience,
primarily males. However,
McFarlane’s USP
differentiates itself from LEGO
because its toys cater
primarily to its Spawn comic
series (MBA Skool, n.d.).
K’NEX began with an idea by
its founder, Joel Glickman. He
was intrigued with connecting
straws within other straws and
how he could make shapes
with them. The original
concept for K’NEX closely
resembles the LEGO formula,
where instead of bricks, the
K’NEX formula relied on
straw-like rods and connector
pieces. As the formula grew,
more pieces were added into
the mix to make moving
contraptions with gears and
motors. K’NEX initially
reached out to LEGO to help
invest in their company, but
denied their claim. Instead,
K’NEX partnered with retail
giant Toys R Us and began
distribution in the early 1990s
(About K'NEX, n.d.).
However, K’NEX never
partnered with popular sets
until the late 2000s.
Opportunities to acquire the
rights of Harry Potter and Star
Wars were acquired by LEGO
making their partnership with
popular brands early on very
difficult. K’NEX initially
partnered with Sesame Street
to create a branded line of
new construction sets. Later
on, they made another great
deal in 2011 when they
acquired the rights to a
licensed brand with Nintendo.
Consumers could now
purchase themed sets of
Mario Kart and build tracks
and karts to compete with one
another. K’NEX will continue
to be one of the leading
competitors of the LEGO
Group now and into the near
future.
24

• Incorporates educational features to
develop key skills in young children
• Strong brand name across several
countries
• Strong product portfolio
• The cars are prepared from
automoblox range, which gives the
modern technique for car assembly
to kids
• Encourages goal oriented play and
problem solving
• Lego Based theme parks are popular
tourist destinations
• The brand has diversified into video
games TV, movies and merchandise
• Limitation of product
• Intense competition means
high brand switching and a
loss of market share to online
games
• Strong competition from toys
of different brands
• Look for new customers and attract their
attention
• Grow New trends and technology to up
the growth rate of products
• Organize competitions in schools to grow
kids’ knowledge and liking of products
• Diversify branding exercises to reach out
to newer segments
• Various TV channels and video
games could reduce or replace
time spent playing with Lego
products
• Outdoor activities could hinder the
brand’s progress
• Other Companies making similar
products
• Higher use of the internet lowers
kids play-time with traditional toys
(“LEGO SWOT Analysis, USP and Competitors,’’ 2017).
SWOT
ANALYSIS
STRENGHTS WEAKNESSES
OPPORTUNITIES THREATS
25

PRIMARY
RESEARCH
We conducted a survey at Cal State Fullerton of
about 51 students with various question
regarding people's views and knowledge on
LEGO. 92% of our surveyees knew the brand.
When we asked what people loved about LEGO
most of the responses were based on the
freedom of creating whatever they wanted.
Through a different question we asked the
students what they loved most about LEGO and
their response was the LEGO brick itself. This
means the LEGO brick is still the heart of the
brand. We moved on to determine if the classic
LEGO brick or the themed bricks were more
popular.To our surprise, the classic LEGO set
was the favorite. Many Students mentioned they
loved the set because it reminds them of their
childhood. From just those few questions we
were able to find out LEGO is a “cradle to grave”
brand and here to stay. LEGO has also created
many themed sets such as Batman and Star
Wars. 66% of students still preferred the classic
LEGO set over themed sets. Although the
majority of respondents prefered the classic set,
34% of students enjoyed the theme sets more.
Some mentioned feeling accomplished with the
theme sets because their was an end goal.
Others enjoyed the storyline of the themed sets
and described them as exciting.
Next, we wanted to know how familiar
students were with digital LEGO games. To
our surprise digital LEGO is nowhere near
as popular as the brick sets.Although digital
seems to be the future, 84% of students
still prefer the classic LEGO set over their
digital products. In addition, only 10%
preferred the digital products LEGO has to
offer. When enquired about what brand
extensions of LEGO surveyees were
familiar with 94% answered their toys and
theme parks, 4% with their video games,
and 1% with their movies. This let us know
that digital and production of movies are
doing poorly in brand recognition.
LEGO has created a game that may be a
segway for how toys are played with in the
future. The game is called “LEGO
Dimensions”. It allows players to build their
game components with bricks then upload
their designs into the game. Only 14% of
students knew of “LEGO
Dimensions”.When we asked those who
knew of the game how they heard of it,
most mentioned word-of-mouth
recommendations. The game is enjoyed,
so the problem may not be the game itself;
this can be a marketing issue instead.
We asked our surveyees questions regarding the future and the relevance of LEGO in a digital
world. Many believe LEGO will continue to do well because they adapt well with trends and
collaborations. When asked about bridging LEGO and virtual reality, 78% of respondents said the
collaboration would be successful. Our last question was an open-ended question on what they
would change about LEGO. 42% said they would not change a thing. We ulitmately want to
know: Do people personally prefer the classic LEGO blocks over LEGO’s digital products or is it
more of a marketing issue on LEGO’s end?
26

STRATEGIC
RECOMMANDATIONS
Points-of-Parity
LEGO is very similar to other
construction set toys in the
consumer market. Companies
such as MEGA and K’NEX both
utilize interconnecting blocks and
fixtures made of plastics and other
hard-coated materials. All
companies share the common
goal of creating sets that would be
profitable while building brand
attachments with the consumers.
Points-of-Difference
LEGO sets itself apart from its competitors
with unique marketing strategies & concepts.
The quality of LEGO blocks is superb
compared to the pieces the competitors use.
LEGO has also marketed itself with global
theme parks advertising the brand where it’s
competitors have not achieved such
success. LEGO has also achieved global
awareness and is a top-of-mind brand
compared with other competitors that are
located mostly on a national level. Lego has
established itself as a household name in the
international marketplace and has kept its
prestige with innovative ideas & strategies.
Brand Mantra
LEGO has been extremely successful in building a
global brand with exceptionally strong brand equity
through value-based marketing campaigns and
traditions. Without compromising the brand values of
imagination, creativity, fun, learning, & exceptional
quality LEGO has managed to cultivate a timeless
product that has steadily become a novelty good with
a dedicated following of consumers. The success of
The LEGO Group heavily relies on the strategically
crafted belief in the extended lifecycle of the traditional
product, LEGO Blocks, which consequently opens the
brand to further extensions of the brand/product that
connect with evolving generations & technologies
such as LEGO movies, video games, and trending
license deals. Essentially, LEGO has crafted an
inventive and inspiring culture that grows with its
users. A brand mantra that captures these ideas might
be, “Innovative play from cradle to grave." 27

TactiCAL
RECOMMANDATIONS
Connect With A Wider Demographic:
While LEGO prides itself on its large following, the brand struggles to get the attention of
African American and Hispanic markets (Lego Consumer Insight and Demographics, 2017).
There are a variety of factors that weigh into this market disconnect; however, it offers The LEGO
Group an opportunity to be an innovative force in the industry to attract minority consumers.
Recent trends in higher education, greater household income, and overall population growth, are
driving the substantial purchasing power of the African-American and Hispanic consumer. It is
crucial for The LEGO Group to connect with this diverse audience to capitalize on their
purchasing power and establish brand loyalty.
A recent report shows that the overwhelming majority of African-Americans and Hispanics
want companies to recognize their unique culture. Compared to the general population, African-
Americans and Hispanics are almost 30% more likely to believe diversity in advertising is
important. 38% are more likely to make a purchase when the advertisement features people they
can easily identify with (Connecting Through Culture, 2014). This is an opportunity for LEGO to
diversify marketing and advertising efforts.
Emphasize “Social Responsibility” As A Part Of LEGO’s USP:
According to figures supplied by the company, more than 90% of waste from the
LEGO Group’s production site was recycled in the year 2015. The company improved its
energy efficiency by 5% after decreasing its total energy use by 20% over the last five years
(Roderick, 2016). Jørgen Vig Knudstorp (LEGO’s CEO) stated, “With the massive growth the
company is experiencing, we can offset this by using renewable energy. We are producing
more products, but using less energy. We’ve also invested 1 billion Danish Krone in
developing sustainable material for our bricks that consume less CO2 during manufacturing.”
(Roderick, 2016).
This development and responsibility towards sustainability by such a large-scale
company is not only eco-friendly, but incredibly appealing for the modern consumer.
According to the Cone Communications & Ebiquity Global CSR Study (2015), global
consumers feel personally responsible for addressing social and environmental issues; they
look to companies as partners during these issues. Nearly anonymous in their demands for
responsible companies, 9 out of 10 consumers expect companies to make a profit and
operate beneficial social and environmental causes. While The LEGO Group has done an
exceptional job of innovating their means of production, there has been little effort to extend
this information to consumers. In the future, it is recommended that The LEGO Group put
more effort into marketing the sustainable benefits of the brand; this will likely result in greater
purchasing behaviors.
28

Position Consumer Usage of Imitators as Entry Point Exposure
For LEGO Products:
One of The LEGO Group’s greatest weakness worldwide is that the last of its core patents
expired in 1988, which left the brand vulnerable to competitors selling nearly identical products at lower
prices. Mattel has its Mega Bloks, Hasbro has Kre-O, and China is home to at least a dozen imitators,
including the brazenly named Ligao. However, the price and quality of LEGO products and those of its
imitators are so far apart that they are not necessarily competing for the same customers. If anything,
more affordable imitation products serve as an “entry point” to playing with LEGO bricks, from which a
family might later upgrade to the real thing.
Indeed, authentic LEGO products are an upgrade from their imitators: manufactured with an extremely
high degree of quality, they can flex just a thousandth of a millimeter making it so a child can actually
play with the things he builds without them crumbling in his hands. Many Lego imitators make their
bricks more cheaply, on the logic that lower prices will make up for looser bricks. While there has been
pressure in the market for LEGO to lower the cost of their products, this is not recommended. Instead, it
is crucial for The LEGO Group to continue to position the product at the high end of the market and
utilize the poor quality of imitators as entry point exposure to the higher quality LEGO products.
Promote Sustainability By Planting
More LEGO Manufacturing Factories To
Keep Up With High Demand:
LEGO made a lasting come-back as the number one
toy maker in the world, but have had difficulties
keeping up with the growth. In the beginning of 2016
LEGO saw a drop in their revenue. According to the
company, they saw a decrease because the
production of their products did not meet the high
demand from their consumers. According to John
Goodwin, Chief Financial Officer of LEGO, each year
in the last 12 years LEGO had an increased revenue
of 15%. In 2015, on the other hand, LEGO exceeded
their consistent trend with an increase of 25% (’’Lego
Says It's Having a Hard Time Keeping Up With
Demand,’’ 2016). In addition, sales in Asia and China
had nearly doubled .In North America, they
experienced high volumes of consumption as well.
They are the largest market for toys in the world.
LEGO found they could not keep up with consumption
and cut back on their marketing efforts. This also
attributed to their 2016 slow down. In order to combat
high demand without stopping profit flow, LEGO began
building more production plants. They expanded in
China, Mexico, and Hungary. Currently LEGO is still
expanding which means they may need to continue
building more sustainable factories. The advancement
of LEGO also promotes more jobs. In 2016 LEGO
added 3,500 new jobs[45]. If they continue to build more
locations, they will increase jobs, keep production
consistency, and get good company exposure.
Increase Awareness For Digital
LEGO & Older Audiences:
LEGO’s heart lies in younger age groups and
the classic LEGO bricks. In our survey
conducted at Cal State Fullerton, students
were asked if they knew of digital LEGO
games, only 14% responded yes. LEGO has
video games available for all ages. One
game specifically, “LEGO Dimensions,” is
designed to utilize the classic LEGO set and
Digital technology. In “LEGO Dimensions”
players build their game components with
LEGO bricks, then download the design for
their creation into digital form. The game is
quite popular and it allows children and
adults to experience both new and old school
fun. The issue is not enough people know
about it, specifically college students. In the
college survey, the students who knew of
“LEGO Dimensions” heard it via word of
mouth. This means the product isn't
necessarily bad, but the advertising on the
game may be. The following question was
regarding bridging LEGO with virtual reality
games. 78% of students said the
collaboration would be successful. By driving
awareness to the college market, LEGO will
stabilize themselves in yet another form of
play. 29

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