Case 12: LEGO Group: An Outsourcing Journey Marcus Møller Larsen Torben Pedersen Dmitrij Slepniov PROLOGUE 1The last five years’ rather adventurous journey from 2004 to 2009 had taught the fifth-largest toy-maker in the world—the LEGO Group—the importance of managing the global supply chain effectively. In order to survive the largest internal financial crisis in the company’s roughly 70 years of existence, resulting in a deficit of DKK1.8 billion in 2004, the management had, among many initiatives, decided to offshore and outsource a major chunk of LEGO’s production to Flextronics, a large Singaporean electronics manufacturing services (EMS) provider. In this pursuit of rapid cost-cutting sourcing advantages, the LEGO Group planned to license out as much as 80 per cent of its production, besides closing down major parts of the production in high-cost countries. Confident with the prospects of the new partnership, the company signed a long-term contract with Flextronics. “It has been important for us to find the right partner,” argued Niels Duedahl, a LEGO vice-president, when announcing the outsourcing collaboration, “and Flextronics is a very professional player in the market with industry-leading plastics capabilities, the right capacity and resources in terms of molding, assembly, packaging and distribution. We know this from looking at the work Flextronics does for other global companies.”1 2This decision would eventually prove to have been too hasty, however. Merely three years after the contracts were signed, LEGO management announced that it would phase out the entire sourcing collaboration with Flextronics. In July 2008, the executive vice-president for the global supply chain, Iqbal Padda, proclaimed in an official press release, “We have had an intensive and very valuable cooperation with Flextronics on the relocation of major parts of our production. As expected, this transition has been complicated, but throughout the process we have maintained our high quality level. Jointly we have now come to the conclusion that it is more optimal for the LEGO Group to manage the global manufacturing setup ourselves. With this decision the LEGO supply chain will be developed faster through going for the best, leanest and highest quality solution at all times.”2 PhD Fellow Marcus Møller Larsen, Professor Torben Pedersen and Assistant Professor Dmitrij Slepniov wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ive ...

1. Case 12: LEGO Group: An Outsourcing Journey
Marcus Møller Larsen
Torben Pedersen
Dmitrij Slepniov
PROLOGUE
1The last five years’ rather adventurous journey from 2004 to
2009 had taught the fifth-largest toy-maker in the world—the
LEGO Group—the importance of managing the global supply
chain effectively. In order to survive the largest internal
financial crisis in the company’s roughly 70 years of existence,
resulting in a deficit of DKK1.8 billion in 2004, the
management had, among many initiatives, decided to offshore
and outsource a major chunk of LEGO’s production to
Flextronics, a large Singaporean electronics manufacturing
services (EMS) provider. In this pursuit of rapid cost-cutting
sourcing advantages, the LEGO Group planned to license out as
much as 80 per cent of its production, besides closing down
major parts of the production in high-cost countries. Confident
with the prospects of the new partnership, the company signed a
long-term contract with Flextronics. “It has been important for
us to find the right partner,” argued Niels Duedahl, a LEGO
vice-president, when announcing the outsourcing collaboration,
“and Flextronics is a very professional player in the market with
industry-leading plastics capabilities, the right capacity and
resources in terms of molding, assembly, packaging and
distribution. We know this from looking at the work Flextronics
does for other global companies.”1
2This decision would eventually prove to have been too hasty,
however. Merely three years after the contracts were signed,
LEGO management announced that it would phase out the entire
sourcing collaboration with Flextronics. In July 2008, the
executive vice-president for the global supply chain, Iqbal
Padda, proclaimed in an official press release, “We have had an
intensive and very valuable cooperation with Flextronics on the

2. relocation of major parts of our production. As expected, this
transition has been complicated, but throughout the process we
have maintained our high quality level. Jointly we have now
come to the conclusion that it is more optimal for the LEGO
Group to manage the global manufacturing setup ourselves.
With this decision the LEGO supply chain will be developed
faster through going for the best, leanest and highest quality
solution at all times.”2
PhD Fellow Marcus Møller Larsen, Professor Torben Pedersen
and Assistant Professor Dmitrij Slepniov wrote this case solely
to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a
managerial situation. The authors may have disguised certain
names and other identifying information to protect
confidentiality.
Richard Ivey School of Business Foundation prohibits any form
of reproduction, storage or transmission without its written
permission. Reproduction of this material is not covered under
authorization by any reproduction rights organization. To order
copies or request permission to reproduce materials, contact
Ivey Publishing, Richard Ivey School of Business Foundation,
The University of Western Ontario, London, Ontario, Canada,
N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail
[email protected]
Copyright © 2010, Richard Ivey School of Business
Foundation Version: (A) 2010-11-12
3This sudden change in its sourcing strategy posed LEGO
management with a number of caveats. Despite the bright
forecasts, the collaboration did not fulfill the initial
expectations, and the company needed to understand why this
had happened. Secondly, what could LEGO management have
done differently? Arguably, with little prior experience in
outsourcing this large amount of production, the LEGO Group
had had a limited knowledge base to draw on to manage a
collaboration like this. Yet, with Flextronics’ size and
experience with original equipment manufacturers (OEMs), this,

3. in theory, should not have been a problem. Lastly, one could
ponder whether the unsuccessful collaboration with Flextronics
had been a necessary evil for the LEGO Group. LEGO
management’s ability to handle its global production network
after the Flextronics collaboration had surely changed, and
aspects like standardization and documentation had to a much
larger extent become valued.
INTRODUCING THE LEGO GROUP: ONLY THE BEST IS
GOOD ENOUGH
4The LEGO Group’s vision was to “inspire children to explore
and challenge their own creative potential.” Its motto, “Only the
Best is Good Enough,” had stuck with the company since 1932
when Ole Kirk Christiansen, a Danish carpenter, established the
company in the small town of Billund in Jutland, Denmark, to
manufacture his wooden toy designs. As the company itself
said, “It is LEGO philosophy that ‘good play’ enriches a child’s
life—and its subsequent adulthood. With this in mind, the
LEGO Group has developed and marketed a wide range of
products, all founded on the same basic philosophy of learning
and developing—through play.”3 With this simple idea, the
company, through its history, had grown into a major
multinational corporation, and, by 2009, was the world’s fifth-
largest manufacturer of toys in terms of sales. The same year,
the LEGO Group earned DKK11.7 billion in revenues and
DKK2.2 billion in profits, and had a workforce of
approximately 7,000 employees around the world (see Exhibit
1). Its corporate management consisted, besides the chief
executive officer and the chief financial officer, of four
executive vice-presidents with respective business areas
(markets and products; community, education and direct;
corporate centre; and global supply chain) (see Exhibit 2).
Products and Markets
5The LEGO brick was the company’s main product (see Exhibit
3). The iconic brick with the unique principle of interlocking
tubes offering unlimited building possibilities was first
introduced in 1958 and had basically remained unchanged ever

4. since. The underlying philosophy of the brick was that it would
stimulate creative and structured problem-solving, curiosity and
imagination. In the company’s own words: “In the hands of
children, the products inspire the unique form of LEGO play
that is fun, creative, engaging, challenging—all at the same
time …. We strive to accomplish this by offering a range of
high quality and fun products centred around our building
systems.”4 The simple yet multifunctional and combinational
structure of the brick (there were as many as 915 million
possible combinations to choose from with six eight-stud LEGO
bricks of the same color) had therefore been core to the
company’s history and success. In fact, the LEGO brick had
been rewarded the “Toy of the Century” designation by both
Fortune Magazine and the British Association of Toy Retailers.
EXHIBIT 1: The LEGO Group Financial Figures
Source: The LEGO Group Annual Report, 2009.
6To segment the products, however, a number of categories had
been created: First, “pre-school products” comprised products
for the youngest children, who had yet to start school. The
LEGO DUPLO products were examples of this category.
Second, the “creative building” category targeted sets or
buckets of traditional LEGO bricks without building
instructions. Third, “play themes” products were the products
that had a particular story as their basis. This could be themes
such as airports, hospitals and racing tracks. The classic LEGO
City line and futuristic BIONICLE theme products were
examples of this category. Fourth, and related to the play
themes, were the “licensed products,” which were built up
around movies or books that the LEGO Group had acquired the
rights for, such as Harry Potter, Star Wars and Indiana Jones.
Fifth, “MINDSTORM NXT” was a programmable robot kit,
where consumers could construct and program robots to perform
different tasks and operations. Sixth, “LEGO Education”
comprised products that had been specifically developed for
educational purposes. Last, in 2009 the LEGO Group made its

5. first move into the board game category with the launch of the
“LEGO Games” product line. The underlying logic of the entire
product portfolio was to reflect the fact that children grow older
and develop, and thus demand more challenging stimulation.
(Pearce 12-1-12-5)
Pearce, John, Richard Robinson. Strategic Management, 13th
Edition. McGraw-Hill Learning
Solution
s, 2016-01-02. VitalBook file.
The citation provided is a guideline. Please check each citation
for accuracy before use.
Community Event
The Final Project is your opportunity to demonstrate what you
have learned throughout the course in a summative and
comprehensive assignment. Begin preparing for this assignment
by reading the Week Six Instructor Guidance and by imagining
the following scenario:
In just two months, members of your community will vote on an
$18 million educational technology bond intended to update the
technology infrastructure of both the school district and local
community center. The passing of the bond would provide

6. upgraded technology to improve learning for Pre-Kindergarten
through 12th grade students enrolled in the school district as
well as adult learners enrolled in the community’s blended adult
learning programs. The leadership teams of both the school
district and community have decided to join forces in an effort
to encourage voter participation. The leaders believe that by
raising awareness and interest in technology as a teaching and
learning tool, voters will have a better understanding of and
appreciation for the issues pertaining to the bond, which will
increase the likelihood of it passing at the polls.
Since this is a joint effort between the school district and
community center, you will assume the role of either an
educator in the district, or a representative of the community
center and plan a portion of a local event involving community
members. Your goal for the Final Project is to get residents of
your community into the doors of your school and/or
community center to raise awareness of and interest in
technology integration in the learning environment. As such,
this event will need to provide opportunities for attendees to be
exposed to and interact with various types of technology. In
essence, your event will showcase current examples of
technology use in your respective learning environment as well
as feature the impact that the bond money would have (i.e., how
teaching and learning would improve) if passed.
Once a written plan is drafted, you will propose your event plan

7. to either the school board or community center administrative
team through a professional presentation detailing your plan
along with a written synopsis of the event plans provided to
your audience. Select from one of the two roles shared in the
content expectations below and include each component in your
Community Event Plan.
Create your assignment using the content and written
communication instructions below. Use the Grading Rubri
c to review your assignment before submission to
ensure you have met the distinguished performance for each of
the components described below. For additional assistance,
review the Week Six Instructor Guidance page and, if needed,
contact the instructor for further clarifications using the “Ask
Your Instructor” discussion forum.
Content Instructions
Based on the role you have selected to take (either a district
educator or a representative of the community center), you will
create two components for this assignment: a professional
presentation that will be recorded and a two-to- three page
handout of the specific ideas for your community event that will
be submitted to Waypoint for evaluation. Your community event
will consist of several different stations for attendees to visit
and gather information from and/or interact with. Your
presentation will describe what will be included at each station.

8. Remember that the goal of the event is to inform and excite
local residents about how technology is currently being
implemented in either the schools or community center and how
technology use and thus, instruction and learning would
improve if the bond is passed.
Part One: Presentation Content Expectations: Create a
professional presentation to be shared using any of the digital
presentation tools listed in Week One. You will talk through
your presentation, creating a video and/or audio recording with
the link provided in part two of the assignment. More specific
instructions can be located in the Week Six Instructor Guidance.
In your presentation, describe what will be included at the
following stations at the Community Event;
Station 1: Universal Design for Learning (UDL): Three to four
slides. Information shared on the slide(s) and viewed by the
audience should be succinct and void of excessive detail.
Specific details and descriptions should be included in part two;
the written synopsis.
·
Audience (0.5 point): Discuss how you will get the
audiences’ attention to visit this station. What might the station
look like or include to draw people to it?

9. ·
Information (1 points): Describe the most essential
information attendees should know about UDL and how it
specifically pertains to the population of Pre-Kindergarten
through 12th grade students in the school district or the adult
learners at the community center. Include references for at least
two sources to support this information.
·
Demonstrate (1 point): Discuss how would you
demonstrate UDL in action. For example, would you include a
video of it being modeled, a sample instructional plan, or an
example of a resource or source of technology that supports
UDL such as what was reviewed during Week Four?
·
Differentiation (2 points): Discuss the impact UDL has
on teaching and learning for the specific population of PK
through 12th grade students at the school district or adult
learners at the community center. In your discussion, include
how incorporating UDL principles enhances learning by
providing differentiated learning opportunities. Also include a
reference for at least one source to support this information.
·

10. Interaction (1 point): Describe how attendees could
interact in this station. How might this increase their interest
and appreciation for educational use of technology?
Station 2: Technology and UDL for All Learners: Two to three
slides. Utilize information gleaned from your state’s
Department of Education website, your local school district’s
website, and/or the
Office of Career, Technical, and Adult Education
(OCTAE) website to support your ideas for this station.
Information shared on the slide(s) and viewed by the audience
should be succinct and void of excessive detail. Specific details
and descriptions should be included in part two; the written
synopsis.
·
Mission, Belief, and Goals (3 points): Craft an original
mission and belief statement for your school district or
community center as it pertains to technology integration and
career and technical education (CTE). Construct two to three
specific goals for the educational programs or courses offered to
the respective population served that align with the mission and
beliefs.
·

11. Course and/or Program Offerings (1 point): Construct a
list of eight to ten courses or programs including CTE courses
offered in either the school district or the community center to
serve as examples to attendees of this station. The school
district’s courses should include courses or programs that
impact all three levels of learners and school environments
including elementary, middle/junior high school, and high
school students.
Station 3: 21st-Century Skills Acquisition and Employability:
Two to three slides. Information shared on the slides and
viewed by the audience should be succinct and void of
excessive detail. Specific details and descriptions should be
included in part two; the written synopsis.
·
Technology and 21st-Century Skills (5 points)
: Showcase one specific course from the courses offered
list that integrates technology. Describe at least one 21st-
century skill from each of the four 21st-century outcomes
represented in the
Partnership for 21st-Century Skillsframework that
students should gain as a result of participating in the course.
Describe how
Information, Media, and Technology Skills (ICT)

12. Literacy outcomes ICT Literacy outcomes are addressed,
specifically for applying technology effectively, and how such
applications will support future employability.
·
Tools (1 point): Include an additional example of a
tech/digital tool used in one or more courses.
·
Interaction (1 point): Describe how attendees might
interact with the information and tool(s) presented at this
station. How might this increase their interest and appreciation
for educational use of technology?
·
New Technology (1 points): Discuss how school or
community programs, courses, and students would benefit from
upgraded technology from approved bond.
·
Slide Design and Format (2 points):
Total of
8 to 10 slides including the title and references slides.
Use relevant graphics to enhance the presentation without
distracting from the main focus. Slides should have a consistent

13. theme, format, and font that augment the readability of the
presentation. Rather than using the speaker’s notes on each
slide, details that would be shared with the audience will be
provided in the second part of the assignment; the written
synopsis. Save the presentation as a pdf., pwpt., or pwptx. file
that shows speaker’s notes for viewing in Waypoint and
Turnitin.
·
Title & References Slides (1 point): The Title slide
should include your name, course name and number (EDU620),
instructor’s name, the date, a title for your event and the role
you have selected to take for the project (district educator or
community center representative).
Part Two: Written Synopsis
Follow the same outline for all three stations of your event
featured in the Part One: Presentation. Here, you will provide
the details for each part that would help inform the audience
during your presentation. The details are what cannot be
included on the slides. This three to five page document will
include the link to your presentation and be submitted to
Waypoint for evaluation. Your instructor will use your recorded
presentation and the written synopsis to evaluate your work.

14. ·
Link to presentation (0.5 points)
·
Follows presentation guidelines (2 points)
Written Communication Instructions
·
Syntax and Mechanics (0.5 point): Display meticulous
comprehension and organization of syntax and mechanics, such
as spelling and grammar.
·
Source Requirement (0.5 point): Utilize a minimum of
five resources in addition to the Edyburn (2013) text. All
sources on the references page need to be used and cited
correctly within the body of the assignment.
·
APA Formatting (1 point): Use APA formatting
consistently throughout the assignment. Refer to the Ashford
University Writing Center for assistance with APA style and
formatting or your copy of the APA Style Manual.
Carefully review the

15. Grading Rubric for the criteria that will be used to
evaluate your final project.