Lego 1p6v3

1. Strategy is defined as the long term goal of an organization. As outlined in section 1.2 there exist a number of different levels of strategy in an organisation. The levels can be basically divided into three categories. Above everything stands the corporate level strategy, which is responsible for the overall purpose of the organisation. In the case of the LEGO Group the corporate level strategy directed the company into the manufacture of the todays famous plastic LEGO Brick, the development of LEGOLAND and the international growth of the company. The second level is the business level strategy, which is also sometimes called the competitive strategy, because it is about how the different businesses of the organisation compete successfully in their markets. For the LEGO Group the Business level strategy is reflected in the development and introduction of new innovative products like LEGO TECHNIC, LEGO Castle, LEGO DUPLO and many other products to compete in the competitive toy market. The third level of strategy are the operational strategies, which are concerned with the delivery of the corporate and business strategy. The operational strategies cover for example processes, designs and people. Operational strategies provoked the introduction and re-organization of management to the LEGO Group. As well as the review of the procurement process and the outsourcing strategies. The development of strategy at the LEGO Group reflects the exploring strategy model (1.4). The model includes understanding the strategic position of the company, analysing the strategic choices for the future and managing the process of strategy in action. The LEGO Group identified its current position on the toys market and analysed their competitors, in order to increase their competitive advantage. This enabled them to determine their future strategy regarding change and innovation. They understood that due to their new competitors the age span of the children playing with LEGO might get smaller. LEGO then explored their strategic choices by asking themselves if they should concentrate on what they are doing or if they should develop new products and incorporate innovations. By analysing their strategic choices, LEGO was able to implement strategic solutions. The strategy in action took place by implementing new products and innovation, but also cost cutting and laying off of staff was part of the change. During the whole time, LEGO managed its strategy by continuously reacting to the changes in the environment. Even if not everything went right and the LEGO Group had some serious crisis in between, their strategy to focus on their customers and innovation ensured that they came back to profitability, development and growth. 2. The environment is the survival factor for an organisation. There are different layers of the business environment, which all affect the strategy and development of an organisation. The highest level layer is the macro-environment, which the PESTEL framework categorises into six main influences: political, economic, social, technological, environmental and legal. The development of the Lego Group was also influenced by those factors. Their first environmental challenge was the oil crisis in the 1970s and 1980s, on which they react with more innovation and the entry to new markets, like the US. Furthermore the Lego Group complained about the rapidly changing environment during this time, due to that they had tot hey had to react immediately with a change in strategy. Another economic features of their macro-environment, which influenced their development was the exchange rate of the US$

against the DKK. Moreover there was a technological change in the toy market, with more advanced technological games on the market. The Lego Group was also influenced by the industry, which forms the next layer. Lego is dependent on topical themes, hypes and movies. As there were no new movies after the Harry Potter and Star Wars success in 2002, their sales went down. Additionally the demand situation in the industry is an influencing factor as well. Most toys are seasonal products and sales are fluctuating during the different periods of the year. The most immediate layer of the organisation is the competitors and the markets. Those environmental factors also influenced the strategy of the Lego Group largely. It was very important for the Lego Group to understand the critical success factors of their competitors. New competitors with more advanced electronic games were entering the market, consequently the Lego Group had to change its strategy to stay competitive. Another challenge for the Lego Group was that most of their competitors produce their toys in China so it was difficult for Lego to stay competitive regarding the price of the toys. As a result of which, they had to change their strategy towards some cost cutting. Moreover customers belong also to the influencing environmental factors of an organisation, because satisfied customers keep an organisation alive. The Lego Group had to deal with a lot of pressure of their retailers and for this reason they decided to change their strategy towards a closer relationship to their retailers in order to understand their end customers.

3. Strategic Capability, which is defined as the resources and competences of an organisation enabled the Lego Group to regain theirs successful position. Resources can be divided into tangible resources, such as plant, labour and finance and intangible resources, such as information, reputation and knowledge. Competences are the ways to use these resources. To get back on the track, the Lego Group had to make some changes regarding their tangible resources. Part of their recovering programme was a cost cutting programme, as a result of which the amount of labour were cut down and the LEGOLAND Parks were sold. The company used a private loan of the owner to regain their position in the global market. Furthermore there were some changes regarding the intangible resources of the Group, such as the changing of their corporate strategy and the shifting of the Management. The knowledge of the company, due to customer responsiveness was another influencing factor for the recovery of the Lego Group. They invited their s to participate in product development, because the s themself know the best what they want. Competences as building up better relationships to retailers and taking risk at the right time were also very important for the Lego Group. Nevertheless, their most important competence which brought them back on track was the innovation. They understood that innovation is essential on the toy market to stay competitive. Innovation was the main factor, which kept the Lego Group alive and growing. So the invented a new online multiplayer game and made a movie, which was part of their new digital strategy. The challenge for the Lego Group was to find the right balance between the new and the old business. By finding this balance it was possible to regain their successful position. They decided to keep the traditional brick as the foundation and their core competence and focus on a new innovation at the same time. Their critical success factor, which also helped them to regain their position, was that their products are

unique and iconic. The understanding of their critical success factor was responsible for the development of their future strategy.

4. The unsustainable situation of the company from 1999-2003 and the big losses, caused a remarkable change of the organisations strategy. The Lego Group critically analysed the mistakes they did in the past, like for example to weak and too few product launches. The Lego Group had to find a way to become successful again. They had many different options and it was now up to them to choose the right strategy. One of the most effective ways of creating alternative strategies is a SWOT analysis. This is basically an analysis of the macro and micro environments strengths, weaknesses, opportunities and threats. For the LEGO Group one option was to keep the old management, but the Lego Group decided that part of their new strategy was to build a stable direction, which was necessary after many changes of the management during the last years. A new, relatively young CEO was found, which caused some discussion in the press, but proved to be the right decision. In my opinion the Lego Group introduced the new CEO, in order to get some new and fresh ideas and different way of thinking into the company. The company simplified their corporate strategy, as a result of which the LEGOLAND parks were sold. The alternative could have been to keep the LEGOLAND parks, which could have been successful but also it would have been very risky. In my opinion Lego sold the parks, to focus on their main activities and competences, because the LEGOLAND business differs significantly from the other businesses of the organisation. To stay competitive the company decided on a cost cutting programme, which included some outsourcing. Alternatively the Lego Group could have kept their manufacturing process in Billund, to ensure their well-known and high quality. By outsourcing the manufacturing process in Eastern Europe countries there was a slight risk to lose to reduce their quality, however I think that it was worse taking the risk. To stay competitive on the market and reduce their cost, to earn profit again this was a very important step for the organisation. The restructuring of the company and the new attitude towards innovation was responsible for a new digital strategy. The innovation of more technical advanced products and a movie helped the Lego Group to catch up with their competitors on the rapidly changing toy market. The organisation realized that topical themes and movies, which change very quickly are the driving forces on the toy market and due to that, innovation is the only way to be successful on this market. Nevertheless innovation and new technology was not their only strategy. At the same time they still focus on their quality and manufacturing tolerances, to contribute to the customer’s experience. This was the reason why the traditional brick stayed as the foundation of their products. Another option could have been to only focus on their traditional products, because they were successful with them years ago, but to me it is pretty obvious that they would not have had any chance on the competitive toy market without any innovation. From my point of view, the Lego Group followed these strategies to stay classy and traditional on the one hand and on the other hand be competitive and innovative as well. With this strategy they have the opportunity to get a wider range of customers and increase sales. The worst alternative strategy from my point of

view would have been to sell the whole organisation, because as the Lego Group proved there was a chance to become very successful once again, by following the right strategy.

5. Strategy can be viewed through four different lenses. By developing these lenses, the LEGO Group can adopt some changes to their strategy and ensure the future success of their company. The first lens is strategy as design, which shows that creating new products and encouraging innovation is absolutely the right way to go for LEGO. The next lens is strategy as experience. This can be used really efficiently by the LEGO Group, because they have a lot of experience on the toy market and have to look at their old strategies to see what is successful and which parts should be changed. The third lens is strategy as variety, this means that the LEGO Group should use all their people resources to gain new ideas for diverse innovation. This lens is already really good adopted by LEGO, because part of their strategy is to involve customers in the process of finding new product ideas. The last and very important lens is called strategy as discourse. It is deciding for the LEGO Group to choose the right way of communication and language to ensure that their employees will come up with good ideas. Moreover the lens also examines that the Group should use appropriate and friendly media. To sum it all up, I would suggest that the LEGO Group should keep their attitude towards innovation to ensure a successful development in the future. They have to follow their key strengths, which are the brand, technological innovation and their corporate values. In my opinion they followed the absolute right strategy by staying true to themself. Ensure their quality and their critical success factor, which is their brand and their uniqueness. They should keep their traditional Lego brick and try to expand its popularity all over the world. But in the same time they should focus on innovative product development to ensure their international growth and their customer satisfaction. Innovation is the only way to keep the company alive, they have to respond immediately on new movies, books or other trends. To get more and more innovative should become part of their corporate culture, because innovation is the key on the difficult toy market, where the majority of sales is concentrated in few weeks at the end of the year. It is absolutely crucial for the Lego Group to find the right balance between their traditional business and the new one. By achieving this balance they have the chance to get more diversity in their product range. Furthermore they are more flexible and responsive to different customer needs in different countries and cultures.