Established in 1949, head-office at Denmark Product puzzle toy Fifth- largest toy- maker in the global in 2009 Long-term contract with Flextronic Sold in more than 130 countries Reduce the cost and find a new strategy to overcome the largest internal financial of company. Development and distribution product would be sorted out. Upgrade procurement process Trimming product complexity (standardization) Improve profitability Strengthen its competitive edge in the competitive toy market Switch from a traditional family model to partnership model That the ineffective and inflexible supply chain was the key problem for the creation of a sound business platform Their decision to outsource comes on the back of an in-depth analysis of the company’s total supply chain A special view to cost structure considerations and geographic proximity to the major markets Effective coordination too complex for LEGO Group Sharing necessary product knowledge in a consistent and timely manner took too long and not executed reliably between two firms It is difficult to find profitable business model for two firms

1. LEGO CASE
Group 1

2. CONTENT
INTRODUCTION
ABOUTLEGO
ANALYZE LEGO THROUGH5
QUESTIONS Q&A

3. INTRODUCTION
• Established in 1949, head-office at Denmark
• Product puzzle toy
• Fifth- largest toy- maker in the global in 2009
• Long-term contract with Flextronic
• Sold in more than 130 countries

4. Question 1:
• Reduce the cost and find a new strategy to
overcome the largest internal financial of
company.
• Development and distribution product would be
sorted out.
• Upgrade procurement process
• Trimming product complexity (standardization)

5. Question 1:
• Improve profitability
• Strengthen its competitive edge in the
competitive toy market
• Switch from a traditional family model to
partnership model

6. Question 1:
• That the ineffective and inflexible supply chain
was the key problem for the creation of a
sound business platform
• Their decision to outsource comes on the back
of an in-depth analysis of the company’s total
supply chain
• A special view to cost structure considerations
and geographic proximity to the major markets

7. Question 2:
• Effective coordination too complex for
LEGO Group
• Sharing necessary product knowledge in a
consistent and timely manner took too
long and not executed reliably between
two firms
• It is difficult to find profitable business
model for two firms

8. Question 2:
• Focusing on the core competencies of the
enterprise
• The new supply chain strategy should be
agile
• Significant risks associated with Loss of
Control and Loss of Innovation

9. Question 3:
• In October 2004, Ole Kirk Christiansen
Jorgen Vig Knudstorp
• 3 core principles:
- “Be the best at creating value for our
customers and sales channels.”
- “Refocus on the value we offer our
customers.”
- “Increase operational excellence.”

10. Question 4:
Finding
the right
partner
1.Preparing
for
Outsourcing
2. A Troubled
Marriage
3. A Bounded
New Start

11. 1.PreparingforOutsourcing
• Urgent transformations in all major areas of the supply
chain
• Major changes in how the company approached its
retailers ( decreas cost)
• The company started to look for external partners to
carry out a larger bulk of its production.
 The most important thing when deciding to outsource
of offshore production is finding the right partner (cutting
costs by relocating production to low-cost countries)

12. 2.ATroubledMarriage
• Decision to outsource major parts of production to
Flextronics
• Flextronics’ long history and vast experience in
standardizing and documenting work routines and
processes to move business activities from site to
site
=> the collaboration did not last for long

13. 3.ABoundedNewStart
• Decide to commit some of their activities to
other companies that apparently seem to be
adequate but it turns out that they have
different necessities.

14. Question 5:
• 2 competences : Molding and packing
• Establishing define service policies:
+ Different approach to retailers
+ Help company focus on large retail chains
 Cost of distribution decrease
Provide more reliable view of demands
Pressure from supply chain reduce

15. Question 5:
• Find partners 2 strategies:
+ Cost saving rationale (relocating
production from high-cost countries
to low cost countries )
+ Targeting large subcontracting

16. Thank for
listening