Abstract

Toy industry is very vast and different companies are competing with one other. Lego Group is a

huge name in the toy industry whom have faced two difficult decades and know trying to get back.

The main focus of the Lego is to achieve the sustainable growth and profit. We have design the

strategic plan to achieve this goal and also revise the vision and mission of the company. These

strategy includes business strategy, corporate strategy and financial strategy. All these strategies

are linked with each other and reflect the vision and mission of the company.
Table of Contents
Introduction to LEGO: .................................................................................................................................. 4
Identifying the Problems: .............................................................................................................................. 4
Need for strategic change.............................................................................................................................. 5
Stakeholders of the Lego Company: ............................................................................................................. 6
Shareholders:............................................................................................................................................. 6
Employees:................................................................................................................................................ 7
Management:............................................................................................................................................. 7
Customers: ................................................................................................................................................ 7
Identify barriers to change: ........................................................................................................................... 8
Financial Management System: ................................................................................................................ 8
Costs and Sales associated with Lego Products: ....................................................................................... 8
Technology: .............................................................................................................................................. 8
Project Explanation: ...................................................................................................................................... 9
Mission Statement:.................................................................................................................................... 9
Identify Goals: .......................................................................................................................................... 9
Market leader in toy market and financial success: .............................................................................. 9
Explore and to create technology based and diversified product line: .................................................. 9
Identifying Objectives:.............................................................................................................................. 9
Expansion:............................................................................................................................................. 9
To have efficient and cheap production process: ................................................................................ 10
Adding Value to Customers: ............................................................................................................... 10
Strategic Policy: .......................................................................................................................................... 10
Provision of strategic plan: ......................................................................................................................... 11
Vision: ..................................................................................................................................................... 11
Mission: .................................................................................................................................................. 11
Strategic objectives: ................................................................................................................................ 11
Business Policy Strategy: ............................................................................................................................ 11
Corporate Strategy: ................................................................................................................................. 12
Business Strategy: ................................................................................................................................... 12
Competitive strategy: .............................................................................................................................. 12
Cooperative strategy: .............................................................................................................................. 13
Functional Strategy: ................................................................................................................................ 13
Strategy and Policy Implementation: ...................................................................................................... 14
Evaluation & Control: ............................................................................................................................. 14
Introduction to LEGO:

In 1916 the Lego Company firstly began in Denmark engaged with construction of houses and

fixtures for ranchers. In 1932 first wooden building squares were made by Lego It became their

specialty, since then the Lego became motivated to make toys for kids. In the start company started

to make wooden toys later on Lego discovered that plastic is better than wooden blocks and

replaced it with plastic blocks. Lego developed its image by building up a few product offerings

for various age gatherings and practicing its improvement and creation process. Lego invented the

plastic bricks in 1949 and named it “Lego Bricks” (Company, 2014). Lego expanded globally in

1960 and start selling it products in U.S.A, Australia, Canada and Japan and build the Lego-land

theme park. During 1993 to 1998 Lego along with the whole toy industry were faced with slow

growth, this was the time when world was becoming digital. In the early 2000 Lego face a decline

in the growth and in years 2003 to 2004 they suffered with the loss (Company, 2014). The decline

in the development was initially credited to a decline in the youth populace in key socioeconomics,

a reduction in measure of time spent playing and the expansion in innovation driven toy items.

This day and age filled in as a notice for Lego and the organization began to differentiate to push

development. Indeed, even with these new changes Lego still wasn't encountering the development

it expected to end up noticeably a vast player in the toy business this can be certify to a few key

issues inside the Lego framework remotely and inside.

Identifying the Problems:

External and internal issues were the main problems for the LEGO. Lego had two main

competitors, Hasbro and Mattel which were the biggest player in the market. Lego lacked the

diversity in their product line. In the beginning Lego had only 5 colors and very few shapes later
on to compete with their competitor Lego reached over 3560 shapes and 157 colors range. The

cost of modeling each shape on average was 50,000 euros and complicated models cost nearly

300,000 Euro (Company, 2014). They realized that only to focus on diversity is not the solution to

beat the competitors. Lego faced with poor product management which caused in the increase in

cost and debts later on the main problem faced by the Lego was growing technology. Technology

had been the one of the main issue for the Lego, it was difficult to break in the kid’s technology

market. Lego’s core value are “development, imagination and creativity”, it had been extremely

difficult to make such toys which are embedded with these core values. As the world was becoming

more and more digital with each day, the kids showed the huge shift towards the online activities

and video games.

The main internal issue faced by the Lego was the very poor accountability and costing system all

through the organization. Lego was unaware of the cost of doing business, they had no idea about

the cost of their products and which products were profitable and which are not. The question

asked by Wal-Mart (one of the biggest customers) in a meeting was “Can you please tell me why

I shouldn’t put dog food on the shelves instead of Lego products?” Lego had no idea about the

profitable products and time to sell these products became massive problem for Lego licensed toys

like Lego Harry Potter and Star Wars. They were not able to identify that the licensed product

were the future of their company. It was discovered that 28% of Lego's best line development was

mainly because of its licensed product.

Need for strategic change

Manufacturing companies such as toy manufacturers or automobile companies need to be creative

and cope with the change in customer’s desires. Even though Lego has thousands of shapes with

the waste range of color to build what you want, still they lack the creativity to gain the competitive
advantage. They were unable to embed their core value in their products. A strong organization

need a strong internal control and accountability system and good management. The need to gain

competitive advantage Lego focused on diversity and increased its product line without realizing

the need and the cost of the product. Company can achieve growth and competitive advantage by

changing it strategies and by focusing on the licensed products. There is need of such strategies

which will make the company able to identify the existing profitable products and products which

can be profitable in future. The Lego manufacturing process should have been more standardized.

Lego should use technology as tool to solve issue he had been facing with the kids. The following

are the three major areas where Lego is required to have strategic change.

 Better and centralized financial management system.

 Cost of the Lego-bricks product and its sale.

 Lego should focused on the use of technology to increase the sales and also need to follow

the competitor’s footstep.

Stakeholders of the Lego Company:

Stakeholders have concerns for an organization as they have made a speculation into the

organization in either type of passionate, mental or money related assets and can either influence

or be influenced by the organization. Customers, employees, suppliers, investors and shareholders

are the main stakeholder for the Lego as they will be directly influenced by the any change in the

company, its performance and it crisis.

Shareholders:

The company Lego is currently owned by two groups Lego foundation and KIRKBI A/S. Lego

foundation has the 25 percent ownership and KIRKBI A/S has 75 percent ownership (Sandgaard,
Ownership , 2013). Kirk Kristiansen family owned the investment company named KIRKBI A/S.

Shareholder of the Lego Company are concerned about the stable future growth and they want to

leader of the toy industry. Right now Lego in terms of revenue is at the top and also the market

leader shareholders wish to keep this growth stable. According to Lego foundation group they

giving the world builder of tomorrow.

Employees:

Since 2011 6,500 people joined the Lego Group and in year 2015 Lego group hired 2,532

employees around the world. Lego claims that they are very much concerned about the safety of

their employees. According to annual report 2015 they 17,294 employees and Lego have given

them the safe, fun, creative and motivating workplace experience. Their employees rate the year

2015 as the best motivating year for them (Group, 2017). Lego group amid to give their employees

the same experience as the children enjoy their playing experience, basically they want to make a

creative and fun work place with culture trust and openness.

Management:

The president and CEO Mr. Jorgen Vig Kundstorp of Lego group is responsible for the strategic

change he is the person who decides what strategy they should follow. According to letter from

CEO in the annual report of 2015, the number of children playing Lego has increased.

Customers:

The main customers of Lego are children all around the globe and the use of Lego play material

has increased this year. Lego has targeted the eagerness in the children to learn something new by

making play tools which are used for education purpose in the schools. As the children are the

main users of their products, Lego from the start target children by increasing their learning
experience through their products. Children of different age group have different likes and dislike,

so it is not easy to make play material according to their likes and dislikes but it can be achieved

through good and strong strategy.

Identify barriers to change:

Every business has its own barriers attached with it, only good and effective strategy can help

business to overcome these barriers. In case of Lego Group following are the barriers which have

been hurting the Lego in different ways.

Financial Management System:

In the past Lego face the poor financial management of their financial records. Lego was unable

to keep proper records of their financial transactions, to overcome this barrier Lego needed the

proper evaluation of their financial management system. Third party audit or internal audit can be

performed to have the proper insight of the company’s financial system.

Costs and Sales associated with Lego Products:

The cost of modeling each shape on average was 50,000 euros and complicated models cost nearly

300,000 Euro. Another issue was that the Lego had no idea about the sale of the product, they were

unable to identify that their licensed product are bread and butter for them.

Technology:

Technology had been the one of the main issue for the Lego, it was difficult to break in the kid’s

technology market. Lego’s core value are “development, imagination and creativity”, it had been

extremely difficult to make such toys which are embedded with these core values. Lego can follow

the footsteps of it competitor to cater the market of those children who have more interest in

technology based toys. Lego used technology in two different way he embedded the technology in
it play material which attracted more children, secondly he use new technology to make new toys

according to their customer demand. This new technology reduced the overall cost their product.

Project Explanation:

Mission Statement:

“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“

Identify Goals:

Market leader in toy market and financial success:

Lego wanted to be at the top of toy building market and aimed to maintain the position and he also

faced the problem in financial success. They planned to have more effective financial management

team and to get the company internally audited.

Explore and to create technology based and diversified product line:

The leader of the Lego group identified the need to expand globally and to have the product live

which is innovative and technology based. They got the license on different characters and build

Lego theme parks. In Lego theme parks kids can explore, design and build whatever they want.

The company also expanded its product line.

Identifying Objectives:

Following are the objectives of the Lego Group.

Expansion:

Lego decided to expand internationally to become the market leader, Lego new that the expansion

will help them to achieve the sustainable growth and will increase their profit. The company build
many theme parks in different with name of “Legoland”, Lego has it theme park in Florida, Japan,

Dubai Malaysia and California.

To have efficient and cheap production process:

In 90’s the cost of the product was very for Lego, management conclude that if will be able reduce

their production and other costs which are associated with the product their profits will

automatically increase.

Adding Value to Customers:

Lego has always made the toys with the perspective to educate the children through play. Lego

toys and Legolands always focused on hidden skills and competences of children. The CEO of

Lego Mr. Jorgen has the stated in Lego responsibility report that “Children inspire us with their

playfulness and curiosity, their eagerness to learn new skills and their courage to try new things.

We apply these qualities to our business. We want to enhance children’s playfulness and while

doing so, it is important to us to make sure we operate in a responsible manner (Group, 2017)”.

Strategic Policy:

To achieve the desired goals company should consider some changes in its strategic policies. The

company planned to expand the globally with expansion and development in their product line. It

is very important to have strategy which connects the vision and mission of the company with its

overall goals and objectives. The company should have centralized system with the top down

approaches. Everyone in the company must be aware of the company’s vision and mission, they

all should work in the same objective to achieve same strategic goals. Authority must be delegated,

managers should have the power to take decisions when it is required. Strategy should promote

collaboration and transparency among the department and also between the top and lower
management. Strategy should promote save environment and a friendly culture where employees

can enjoys working and avoid those activities which increase cost. Leaders of the company should

inspires the employees work creatively and effectively.

Provision of strategic plan:

Vision:

“Inventing the future of play”

Mission:

“Inspire and develop the builders of tomorrow”

Strategic objectives:

Company can have number of strategic objectives to achieve it vision and mission. In case of Lego,

its strategic objectives are to have transparent and collaborative financial management system,

creative products which attracts and inspire the customers and have the production process which

will reduce the overall cost. Company also wanted to expand globally to increase its market share

and develop such products which encourage the learning through play.

Business Policy Strategy:

 Company should restructure its supply chain process, the top retailers should be contacted

and the blank spaces must be filled in the supply chain. The process will be become more

efficient and cost will be reduced.

 To speed up the business process company should aim to lessen the development time by

50%.
  In order to reduce the pressure on the supply chain company should consider to create

reusable parts.

 A real time feedback system should be developed to get customers perspective about the

existing products and also to give the chance to the customers to involved in product

innovation discussion.

 It is important to have an effective information which will support and connect the

corporate and business strategies. It will be necessary to make some changes in the existing

information system.

 To tap the in the online video games and virtual interaction games require to have the new

technology which will support this strategy.

Corporate Strategy:

Lego should advertise its product through effective channels. Lego should consider digital

marketing, most of children use internet in their daily life. The kids which are under the age of five

are not the buyers, they are the consumers of the Lego toy. We should convince parent to approach

these kids under five years. Lego’s advertising campaigns should be based on learning though play

and show how the Lego toys will bring hidden skills out.

Business Strategy:

Business Strategy includes the competitive strategies and cooperative strategies.

Competitive strategy:

To gain competitive advantage Lego should open more Lego theme parks and give discounts and

promotion on different events. Lego should by license on different charters like harry potter and

batman etc. The concept of education through should be more encouraged through their products.
Lego is the only toy company which provides learning through their toys it is the very huge

advantage over competitors. Lego must be innovative and creative in development of new products

to sustain competitive advantage. Lego should also tap the in the online video games and virtual

interaction games and these game also reflect the vision of the company.

Cooperative strategy:

As we discussed earlier Lego should develop a system to get feedback on the existing products

and this system also allow the consumers to give their idea about the new toys and what type of

toys they are looking for. It will help to understand Lego about the need of the consumers and also

the innovation can be achieved. The information system that is used in the Legoland must be user

friendly. The information system should be fully integrated and have flexible structure with the

user friendly interface. The system should be able to change with requirements and have

applications which will support and connect the company at the departmental level. Applications

for human capital administration, operation management, management of product life cycle and

data management which helped them significantly in mitigating issues all together administration,

satisfaction and worker administration, and territories that will be important for company’s growth.

Functional Strategy:

In order to implement above strategies successfully effective functional strategy is required. The

good management and new talent is required with the creative and innovative minds. As the

company is aimed to achieve the increase in profit and the business function should be done

efficiently. All those activities should be discouraged which cause in increase of unnecessary cost.

Production process and supply chain should be restructured, retailers like Wal-Mart should

approach to sell their product. The company should have an efficient and effective performance

management system through which the performance should be measured. Company should plan
motivational strategies to motivate workers at Lego. The company should provide safe and trusting

environment.

Strategy and Policy Implementation:

All the strategies are made around to achieve vision and mission of the company. All these

strategies are linked with each other and functional strategies are the most important in the

implementation process. The code of ethics should be printed on the letter and also the companies

polices should clearly communicated to each employee of the company. All the employees and

company’s subsidiaries are being held responsible for the possible breach of the law.

Evaluation & Control:

A performance management and evaluation system id developed through which the performance

of the each employee should be measured and different method of evaluation should be followed.

References
Company, J. A. (2014). The LEGO.
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www-live-s.legocdn.com/r/www/r/aboutus/-/media/aboutus/sustainability/the-lego-group-gri-40-
disclosures-2015.pdf?la=da-DK&l.r=-1664447384
Klausen, G. (2014, July 1). Management . Retrieved from https://www.lego.com/en-us/aboutus/lego-
group/management
Sandgaard, M. V. (2013, December 17). Ownership . Retrieved from https://www.lego.com/en-
us/aboutus/lego-group/ownership
Sandgaard, M. V. (2016, Feb 22). The LEGO® Brand . Retrieved from https://www.lego.com/en-
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