As this case opens, iconic toymaker LEGO stands on the brink of bankruptcy. Jorgen Vig Knudstorp, LEGO's young and newly appointed CEO, must size up changes in the toy industry, learn from the company's recent moves, and craft a strategy that will put LEGO back on track.
Authors :: Jan W. Rivkin, Stefan Thomke, Daniela Beyersdorfer
Swot Analysis of "LEGO (A): The Crisis" written by Jan W. Rivkin, Stefan Thomke, Daniela Beyersdorfer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lego Jorgen facing as an external strategic factors. Some of the topics covered in LEGO (A): The Crisis case study are - Strategic Management Strategies, Crisis management, Financial management, Product development and Strategy & Execution.
Some of the macro environment factors that can be used to understand the LEGO (A): The Crisis casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation,
customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of LEGO (A): The Crisis
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in LEGO (A): The Crisis case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lego Jorgen, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lego Jorgen operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of LEGO (A): The Crisis can be done for the following purposes –
1. Strategic planning using facts provided in LEGO (A): The Crisis case study
2. Improving business portfolio management of Lego Jorgen
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lego Jorgen
Strengths LEGO (A): The Crisis | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lego Jorgen in LEGO (A): The Crisis Harvard Business Review case study are -
Diverse revenue streams
– Lego Jorgen is present in almost all the verticals within the industry. This has provided firm in LEGO (A): The Crisis case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– Lego Jorgen is one of the most innovative firm in sector. Manager in LEGO (A): The Crisis Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Lego Jorgen has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lego Jorgen has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to recruit top talent
– Lego Jorgen is one of the leading recruiters in the industry. Managers in the LEGO (A): The Crisis are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Lego Jorgen is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Lego Jorgen is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in LEGO (A): The Crisis Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Lego Jorgen has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study LEGO (A): The Crisis - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Lego Jorgen is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jan W. Rivkin, Stefan Thomke, Daniela Beyersdorfer can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Lego Jorgen
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lego Jorgen does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Lego Jorgen has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in LEGO (A): The Crisis Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Lego Jorgen is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Strategy & Execution field
– Lego Jorgen is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Lego Jorgen in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Lego Jorgen has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lego Jorgen to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses LEGO (A): The Crisis | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of LEGO (A): The Crisis are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study LEGO (A): The Crisis, is just above the industry average. Lego Jorgen needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lego Jorgen is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study LEGO (A): The Crisis can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Lego Jorgen has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - LEGO (A): The Crisis should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Lego Jorgen has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Lego Jorgen supply chain. Even after few cautionary changes mentioned in the HBR case study - LEGO (A): The Crisis, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lego Jorgen vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study LEGO (A): The Crisis has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Lego Jorgen 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study LEGO (A): The Crisis, in the dynamic environment Lego Jorgen has struggled to respond to the nimble upstart competition. Lego Jorgen has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Lego Jorgen has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study LEGO (A): The Crisis that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case LEGO (A): The Crisis can leverage the sales team experience to cultivate customer relationships as Lego Jorgen is planning to shift buying processes online.
Interest costs
– Compare to the competition, Lego Jorgen has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High bargaining power of channel partners
– Because of the regulatory requirements, Jan W. Rivkin, Stefan Thomke, Daniela Beyersdorfer suggests that, Lego Jorgen is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Opportunities LEGO (A): The Crisis | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study LEGO (A): The Crisis are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lego Jorgen in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lego Jorgen to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lego Jorgen to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Lego Jorgen can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Lego Jorgen can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Lego Jorgen can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lego Jorgen can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, LEGO (A): The Crisis, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Lego Jorgen has opened avenues for new revenue streams for the organization in the industry. This can help Lego Jorgen to build a more holistic ecosystem as suggested in the LEGO (A): The Crisis case study. Lego Jorgen can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lego Jorgen can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Lego Jorgen can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lego Jorgen can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Buying journey improvements
– Lego Jorgen can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. LEGO (A): The Crisis suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Lego Jorgen to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Leveraging digital technologies
– Lego Jorgen can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lego Jorgen can use these opportunities to build new business models that can help the communities that Lego Jorgen operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Threats LEGO (A): The Crisis External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study LEGO (A): The Crisis are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Lego Jorgen needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Consumer confidence and its impact on Lego Jorgen demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Lego Jorgen has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Lego Jorgen needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Lego Jorgen needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Stagnating economy with rate increase
– Lego Jorgen can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lego Jorgen with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Lego Jorgen in the Strategy & Execution sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Lego Jorgen high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lego Jorgen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Lego Jorgen is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Lego Jorgen business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lego Jorgen can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study LEGO (A): The Crisis .
Weighted SWOT Analysis of LEGO (A): The Crisis Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study LEGO (A): The Crisis needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study LEGO (A): The Crisis is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study LEGO (A): The Crisis is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of LEGO (A): The Crisis is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Lego Jorgen needs to make to build a sustainable competitive advantage.