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Lego Case Study - The Great Turnaround

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The presentation was prepared within a Marketing Management course and deals with the well known Lego Case Study on its turnaround from 2003 - 2013

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Lego Case Study - The Great Turnaround

  1. 1. LEGO Group – Building Strategy ISS 509E Marketing Management – 05.11.13 Fatih Coban, Yusuf Oktay, Vanessa Schuller, Jasper Schwenzow
  2. 2. Structure 1. Lego – The Company 2. SWOT Analysis 3. Strategy Analysis 4. Recommendations 5. Lego – Now
  3. 3. LEGO – Timeline 1 1932 Foundation by Danish Ole Kirk Kristiansen wooden toys 1934 Name LEGO 12 Employees „only the best is good enough“ 1947 first plastic injection molding machine 1949 LEGO bricks invention 1960s Expansion to EU,US,CAN,JPN,AUS Focus on LEGO bricks First LEGOLAND theme park 1970s Product differentiation and variation >2500 Employees New CEO 3
  4. 4. LEGO – Timeline 2 1980s Educational line LEGO magazine 1990s >7.000 employees LEGO stores computer games One of top 10 toy manufactures 2000s Acquisition of licenses more product lines Virtual online LEGO universe Now 2010 >9000 employees 4. largest toy manufacturer Annual sales 3.7 billion US$ Net profit 0.86 billion US$ Internal problems 4 out of 7 years loss -> production process optimization -> reduction of suppliers -> reduction of design variety -> distribution optimization 4
  5. 5. SWOT – Internal Complex structure Patents lose value Compatible competition's building sets Reduced product design possibilities Broad differentiation & new computer games Strong brand image & media presence worldwide Several branches & touching points Improved company‘s structure Products fun & valuable High quality products Improving key figures 5
  6. 6. SWOT – External Huge market & building sets‘ fast growth Lego market leader Usage of new computer technologies Growing markets worldwide Design no longer protected Strong and growing competition Disney controls entertainment licensing 6
  7. 7. SWOT Focus Competition Hasbro: - 2. largest toy maker - Long-lasting success - Holds licenses - Kre-O to be launched - Net revenue 4 billion US$ - Investment (property etc.) 0.23 billion US$ - Investment (intangible assets) 1.6 billion US$ - Net earnings 0.4 billion US$ MEGA Brands: - Main rival competitor (building sets) - Won court battle - LEGO Compatible system - Net earnings 0.13 billion US$ - Investment (property etc.) – 0.1 billion US$ Mattel (indirect): - Largest toy maker (revenue 5.8 billion US$) - Popular products - Holds many licenses Disney (Licensor): - Acquisition of Marvel - License monopoly LEGO key figures Revenue 3.7 billion US$ Net earnings 0.86 billion US$ 7
  8. 8. SWOT – Complete Analysis Strength: - Strong brand - Valuable, differentiated products Weakness: - Complex structure Threats: - Direct & indirect competition - License market Opportunities: - Market growth - New technologies 8
  9. 9. SWOT – Change Over Time NOW Main problem: external threats - Strong, growing competition - License market - Trademark protection loss PAST Main problem: internal weaknesses - Costly designs - Inefficient production, distribution, sales 9
  10. 10. Corporate-level Strategy – Business Units Business Unit Important Features Non-licensed Building Sets Company's main product Licensed Building Sets Company's main product Video Games Non-violent, recent growth Board Games Theme Parks Important touching point Stores and Merchandise Touching points, discounts Online Website Innovation possibilities 10
  11. 11. Corporate-level Strategy – Segmentation & Targeting Target Market Applied Products Examples Communication Channels Children under 5 (Buyer ≠ Consumer) Duplo Via parents Children & Teenagers Building sets, Video Games Magazine, TV advertisement, Website Fans (adults) Special products Different Websites, LEGO shops Educational market Extra line for schools, Mindstorm Probably Website Families Theme Parks, Board Games Mouth to mouth, media advertisement 11
  12. 12. Corporate-level Strategy – Positioning Goals: 1. Maintain market dominance in building toy market 2. Financial success 3. Expand and develop product lines Mission: „Our ultimate purpose is to inspire and develop children to think creatively, reason systematically and release the potential to shape their own future – experiencing the endless human possibility“ Motto: „Only the best is good enough“ 12
  13. 13. Business-level Strategy – Building Sets LEGO against competition • High quality and safe products • High customization and adaptation • Educational aspects included and forwarded • Strong media presence Dangers of current strategy: • Costly • Losing market share by competitor‘s low price policy • Suppliers dependency (Star Wars) 13
  14. 14. Recommendations 1 Problem: License monopoly Idea: LEGO Toy producer  LEGO Entertainment producer Strategic implementation: • Developing own stories • Promotion via movies, magazines, internet  finding partners (e.g. Google) • Adaptation of Merchandising 14
  15. 15. Recommendations 2 Problem: Competitor‘s building sets are compatible Idea: Enhancing community / network effect Strategic implementation: • Stronger dependency between business units  discounts in Theme Parks  codes in building sets for website offers  segmentation of communities  further supporting community events 15
  16. 16. Recommendations 3 Further recommendations to maintain LEGO‘s leading status • Acquisitions of smaller toy producers • Keep prices steady, just careful discounts on special occasions • Enhance position in developing markets (Asia)  if needed adapt products 16
  17. 17. LEGO NOW • Own story lines (Chima) • Strong growth in new markets, new headquarter in Singapore • Forwarding environmental and social issues Key figures 2012 • Revenue 4.1 billion US$ • Net profit 1.0 billion US$ 17
  18. 18. Thank You For Your Attention! 18
  19. 19. Sources • Case Data • Internet sources • http://www.shareholder.com/visitors/DynamicDoc/document.cfm?Do cumentID=2935&CompanyID=HAS&zid=4d6301e3 (28.10.13) • http://www.megabrands.com/sites/all/files/media/pdf/corpo/en/repo rts/Financial_Statements_2010-2009.pdf (28.10.13) • http://aboutus.lego.com/de-de/lego-group/annual-report (28.10.13) • http://aboutus.lego.com/de-de/sustainability/our-approach (28.10.13) 19

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