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![References
Hudak (2017) LEGO Group in toys and games (WORLD), Euromonitor International, Available at:
https://www.warc.com/content/article/euromonitor/lego_group_leisure_and_entertainment/90870 [Accessed 20 April 2018]
Jobber, Chadwick (2016) Principles and practice of marketing 8th edn. McGraw-Hill Education
Mattel Corporate (2018) Annual report 2017, Available at https://mattel.gcs-web.com/financial-information [Accessed 15 April 2018]
Sender (2017) Toy Retailing – UK, February 2017, Mintel Academic, Available at:http://academic.mintel.com/display/792539/
[Accessed 07 May 2018]
Slack, Nigel (2016) Operations Management 8th edn, Harlow, England: Pearson
The LEGO Group (2018) About us, LEGO Group corporate website, Available at: https://www.lego.com/en-gb/aboutus/lego-group
[Accessed 1 April 2018]
The LEGO Group (2018) Annual report 2017,2016,2015 Available at: https://www.lego.com/en-gb/aboutus/lego-group/annual-
report/ [Accessed 15 April 2018]
The LEGO Group (2018), How LEGO bricks are made, Available at: https://www.lego.com/en-us/service/help/bricks-building/brick-
facts/how-lego-bricks-are-made-408100000007834 [Accessed 10 April 2018]
Wang, Ip, (2017) Restructuring, brick by brick, Ivey business review, Available at: http://iveybusinessreview.ca/cms/5757/lego-
restructuring-brick-brick/ [Accessed 02 May 2018]](https://image.slidesharecdn.com/legopresentation-180620104731/85/LEGO-presentation-2018-28-320.jpg)
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LEGO presentation (2018)
- 1. Marketing and OperationsAnalysis of Group Name: Alpha Members: Ibrahim Hamdhan Mohamed, Mary Ekwere, Mohamed Abdi Osman, Damy
- 2. Contents Overview 1. Introduction 2.Operations Strategy 3. Macro-environment Analysis 4. Micro-environment Analysis 6. SWOT Analysis 5. Marketing Strategy 7. Conclusion and Recommendation 8. References
- 3. 1932 The LEGO Groupwas founded in by Ole Kirk Kristiansen 1950s The LEGO brick is patented with a coupling principle and LEGO system of play is introduced 1960 - 1980 Introduced the first LEGO building instructions, LEGOLAND, LEGO DUPLO and LEGO Minifigures 1980 – 2000 Launch of LEGO website, LEGO MINDSTORMS, new factory opening in Kladno, Czech Republic 2000 – Present Three factories opened in Europe, NA and Asia, LEGO Movie, Opening of LEGO House MISSION Inspire and develop the builders of tomorrow VISION Inventing the future of play
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- 5. Material Requirement Planning Sequencing ManufacturingProcess Type Manufacturing Process Layout Service Process Type Capacity Planning Push System FIFO Batch Process Cell Layout Service Shops (LEGO’s own retail stores) Lead Strategy OPERATIONSOVERVIEW
- 6. 0.00 2,000,000,000.00 4,000,000,000.00 6,000,000,000.00 8,000,000,000.00 10,000,000,000.00 12,000,000,000.00 January February MarchApril May June July August September October November December Sales(DKK) Months LEGO Sales Forecast 2018 • Festive: Increase in sales during Christmas, Summer, IP partner movies • Behaviour: For kids and adults who prefer construction toys • Financial: LEGO toys are targeted to middle – high income customers • Unpredictable due to short PLC of toys of approximately 1.5 – 2 years as a result of constantly evolving consumer trends • New product launches account for approximately 60% of LEGO’s sales (LEGO Annual Report 2017) Trend Pattern Cause of seasonality Predictability Demand Pattern DKK 38.0 B
- 7. Transformation Process Research Design Prototype Testing Feedback andapproval Production Marketing Distribution Transformed Resources – Materials ABS Plastic granulates, Coloured resins Transforming Resources – Human Capital Design team, Production department, Finance, HR, Marketing, Operations, Sales Transformed Resources – Facilities Factories, Molding machines, Automatic Guided Vehicles, High Bay Warehouse, Packing assembly Input Output LEGO Toys Feedback
- 8. Monterrey, Mexico: Moulding andprocessing of LEGO system elements, packing of system, and LEGO Duplo elements Billund, Denmark: Moulding of LEGO System elements Nyíregyháza, Hungary: Moluding and packing of LEGO System and LEGO Duplo elements, and processing of LEGO Duplo elements Kladno, Czech Republic: Processing and packing of LEGO System elements Jiaxing, China: Moulding and processing of LEGO System elements, packing of LEGO System and LEGO Duplo elements LEGOMANUFACTURINGAND PACKINGFACILITIES TheLEGOGroup:AShortpresentation,2017
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- 10. 0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00 3,500.00 2013 2014 20152016 2017 VALUE(DKK) YEAR LEGO Inventory Levels Raw Material Inventory WIP Inventory Finished Goods Inventory 6% 6% 7% 37% 52% 4% 5% 45% 47% 39% 41% 52% 48% 54% 57% LEGO Annual Reports 2017, 2015, 2013
- 11. 4 V ANALYSIS Legoproduces an average of 36,000 bricks per minute, 2.16 million bricks every hour, 40 billion bricks every year (LEGO Group 2018) Specialised in manufacturing and selling construction toys only using the LEGO brick High variation in LEGO elements with 3,700+ elements in 60+ different colours Customers are able to track online orders through website and the customer service department is highly responsive to enquiries VOLUME VARIETY VARIATION VISIBILITY LOW HIGH
- 12. OPERATIONS PERFORMANCE COST QUALITYDEPENDABILITY FLEXIBILITY SPEED • COST: Due to the high emphasis given on quality, Lego’s raw materials and production costs are high • QUALITY : All manufacturing facilities adhere to the same strict safety and quality regulations and undergo same methods in production • SPEED : The most efficient packaging lines pack over 50,000 boxes every 24 hours • FLEXIBILITY : Moulding machines can only produce a limited variation of LEGO elements • DEPENDABILITY : Fully automated manufacturing process that enables to run for 24 hours a day 7 days a week with little interruption
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- 14. PESTLE ANALYSIS • InternationalTrade Agreements • Tax Policies • Labour Policies Political Economic • Currency Exchange Rates • Economic Growth • Labour Costs • Population size of children aged 0-14 years • Price sensitivity Social • 3D Printing Technology • Augmented and Virtual Reality • Machine learning and Artificial Intelligence Technology Legal • Patents • Legal systems in different countries Environment • Reached 100% Renewable Energy Target in 2017 • Raw materials are recycled in manufacturing • Plant based plastic to be introduced in 2018
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- 16. INDUSTRY ANALYSIS TOYS ANDGAMES USD187.1 BILLION TRADITIONAL TOYS AND GAMES USD82.0 BILLION VIDEO GAMES USD105.1 BILLION CONSTRUCTION TOYS USD10.1 BILLION TOYS-TO-LIFE USD1.4 BILLION Source: “LEGO Group in toys and games”Euromonitor September 2017
- 17. THREAT OF NEWENTRANTS (LOW) Requires a large amount of capital to compete globally at the same level BARGAINING POWER OF SUPPLIERS (MEDIUM) • Raw materials are purchased in large quantities • Selective in sourcing raw materials due to emphasis on quality POWER OF BUYERS (LOW) Customers cannot negotiate prices due to emphasis on high quality, costly production processes, perceived value and brand recognition THREAT OF SUBSTITUTION (MEDIUM) • Availability of cheaper construction toys • Growing market for mobile games INDUSTRY RIVALRY (MEDIUM) • Equally balanced competitors • High degree of differentiation INDUSTRY’S KEY SUCCESS FACTORS: • Marketing investments • Research and development • Brand recognition • Quality perception PORTER’S FIVE FORCES
- 18. VALUE CHAIN ANALYSIS Inbound Logistics Operations Outbound logistics Marketing and Sales Service •Few and selective Suppliers of LEGO. • Biggest supplier Lanxess • Designing and prototyping • Manufacturing • Quality control • Warehousing • Packaging • Maintenance • Order Handling • Dispatch from Warehouse • Distribution centres outsourced to DHL • Invoicing • Customer Management • Order taking • Sales Analysis • Market research • Promotions and advertising • Interactive LEGO retail stores • After Sales Service: Free returns policy for 90 days, full refunds for undamaged returned LEGO toys, responsive customer service via phone, live chat and e-mail • Loyalty programs that allows discounts for future purchases Differentiation Strategy
- 19. COMPETITOR ANALYSIS Brand recognition Innovativeness Product quality Productvariety After sales service Financial strength Distribution network 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 5 5 2 4 5 3 4 4 2 3 4 3 4 4 4 3 4 4 3 5 4
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- 21. • LEGO creationsare limited to imagination • Cross-generational appeal • Continuously innovates the product to stimulate demand : Integrating digital technology around the LEGO brick • Strong Licensed toys portfolio MARKETING MIX PRODUCT PRICE • Price skimming strategy • Highly profitable • Price/brick has remained constant • Customer perceived value driven by high quality and brand recognition There are 915,103,765 ways to combine six two-by- four LEGO bricks of the same colour (LEGO Group 2017)
- 22. MARKETING MIX PLACE • Selectivedistribution strategy • Independent LEGO certified retail stores : Hamleys, Toys R Us, Tesco, etc • LEGO owned retail stores • E-commerce : LEGO official online store, Amazon, Smyths Toys, etc PHYSICAL ENVIRONMENT
- 23. MARKETING MIX Promotion 5.1Million subscribers 12.8 Million likes 521.1K Followers 6 Million Users Over 600,000 uploads 7.5Milliondaily consumerengagements (LEGO2017Annualpressconference) Allows LEGO fans to submit own LEGO creations and get a chance to launch it as a LEGO product LEGO creations competition program on TV Collaboration with teachers and educational specialists to deliver playful learning experiences LEGO Movies, cartoons and digital games : The LEGO Movie, LEGO Batman Movie, LEGO Ninjago, etc
- 24. MARKETING MIX People • Passionateand highly innovative culture in the company • Total workforce of 17,500 + full time employees around the globe • More than 250 highly qualified designers from more than 40 different countries Process • Manufacturing equipment such as the moulding machines are specifically designed and created for LEGO • High emphasis on quality – The moulds used to process LEGO elements are accurate to within 0.0004 mm (LEGO website 2018) • Invests heavily in research and development that places LEGO in the forefront
- 25. STRENGTHS • High brandrecognition and perceived value • High quality • Innovation • Strong License partners WEAKNESSES • Expensive • Limited to construction toys • Gender imbalance in product portfolio • E-commerce reach is limited • High WIP inventory levels OPPORTUNITIES • Expansion to growing markets • Growth in educational toys • Growth in AR and VR integrated toys THREATS • Cheaper products from competitors • Growth of digital games • Loss of major licenses • New technologies such as 3D printing
- 26. CONCLUSION • Even thoughrevenues dropped in 2017, the LEGO group is in a strong position in terms of market share in relevant categories and is in a financially strong position to recover and compete well against major competitors • LEGO is a brand well known globally and is a company that continues to work closely with its major customers; Adult fans of LEGO (AFOL) and kids • Due to high quality requirements in the company and unpredictable demand, there are inefficiencies in the supply chain of LEGO which can be improved • Key factors that will determine future success will be innovation, new markets, widening the product portfolio, and license partners
- 27. RECOMMENDATION • Expand “LEGOFriends” range which is targeted for girls • Extend e-commerce business and shipping worldwide • More integration of AR and VR experience to physical toy products with a focus on educational play experiences • Focus on expanding operations into emerging markets that will drive revenue growth of LEGO as a result of current slowdown in mature markets • Increase localisation of supply chain to bring down logistics costs • Increase the volume and speed of information sharing across the supply chain
- 28. References Hudak (2017) LEGOGroup in toys and games (WORLD), Euromonitor International, Available at: https://www.warc.com/content/article/euromonitor/lego_group_leisure_and_entertainment/90870 [Accessed 20 April 2018] Jobber, Chadwick (2016) Principles and practice of marketing 8th edn. McGraw-Hill Education Mattel Corporate (2018) Annual report 2017, Available at https://mattel.gcs-web.com/financial-information [Accessed 15 April 2018] Sender (2017) Toy Retailing – UK, February 2017, Mintel Academic, Available at:http://academic.mintel.com/display/792539/ [Accessed 07 May 2018] Slack, Nigel (2016) Operations Management 8th edn, Harlow, England: Pearson The LEGO Group (2018) About us, LEGO Group corporate website, Available at: https://www.lego.com/en-gb/aboutus/lego-group [Accessed 1 April 2018] The LEGO Group (2018) Annual report 2017,2016,2015 Available at: https://www.lego.com/en-gb/aboutus/lego-group/annual- report/ [Accessed 15 April 2018] The LEGO Group (2018), How LEGO bricks are made, Available at: https://www.lego.com/en-us/service/help/bricks-building/brick- facts/how-lego-bricks-are-made-408100000007834 [Accessed 10 April 2018] Wang, Ip, (2017) Restructuring, brick by brick, Ivey business review, Available at: http://iveybusinessreview.ca/cms/5757/lego- restructuring-brick-brick/ [Accessed 02 May 2018]
- 29.