1. What makes Lego so unique? What exactly is their business strategy? Has that
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Question
1. What makes Lego so unique? What exactly is their business strategy? Has that changed over the years?
2. How did Lego use Business Process Re-engineering to turn their business around and become the most successful toy company in the world?
3. What kind of business areas did Lego venture out to? What was the result of these ventures? Explain.
4. The video discusses ways in which Lego uses some sort of Customer Relationship Management. What were some ways in which Lego tried to reach out to their customers? Has this been successful? Why or Why not? Explain.
5. What is Lego's next challenge? In your opinion, what are some ways in which they can overcome these challenges?
Explanation / Answer
ANSWER 1.
Lego name originated from the combination of words Lego and Gogt, which mean “Play Well”.The company was formed with the aspiration to do good for children of the world. The company started off with making Lego building blocks out of wood and plastic. However, it realized that the hollow design of the building blocks did not allow them to stick together. This led to the development of the current design of the “Lego bricks”. The bricks had grooves below them that make it the only material in the world that acts as if it has been glued together, but can be removed easily. The number of possible creations out of many building bricks together are endless.
In line with its origin and aspirations, Lego’s business strategy can be broken down to the following:
The strategy has changed over the years. Lego started off with the strategy of making it a fun, easy and educational product for children to play with. It initially only targeted boys.
Later they moved to expanding the business into different verticals like Themed parks, stores, video games division, publishing of books and clothing lines. However, this resulted in the company sales getting hit. The company did not understand where it was making money and where it was losing out. A study was carried out to understand its identity and the company decided to focus only on its core business.
This has resulted in the company working with the current strategy of focus on core business, efficient operations and continuous engagement with customers.
ANSWER 2.
Lego was struggling in 2003 with sales going down year on year. The company was able to turn that around successfully with multiple initiatives of re-engineering. The re-engineering initiatives can be listed out as follows:
ANSWER 3.
Lego had ventured into different business verticals and product lines to expand its business. The different product lines can be listed out as follows:
However, all the ventures did not prove to be profitable. The company started to lose its sales and it had lost about 20% sales in 2004. The company was unable to understand which verticals were making money and which were not. Operations was not disciplined and there was a poor match of manufacturing and forecasting. There was limited sharing of data. It was failing to understand where to invest money.
It then decided to sell off its Theme parks and concentrate only on the core business.
The communities and adult fests were used to get feedback on new designs and products to be innovated. The “Lego Friends line” was used to get new customers on board.
ANSWER 4.
Multiple instances have been mentioned where Lego did reach out to its customers. This was a successful step and it helped the company to achieve a turnaround. The different ways can be discussed as below:
ANSWER 5.
The next challenge for Lego is distribution of Lego products into relatively untouched markets of Latin America and Asia. Lego aims at having a separate manufacturing factory in America, Africa and Asia respectively. The current distribution model does not allow the product to delivered fast to the market.
This problem can be addressed by setting up a manufacturing plant in China as is being planned by the company. Additionally, Lego can look to do the following:
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