Case Study Description of Lego Group: Building Strategy
The world famous toymaker, The LEGO Group (LEGO), assembles an internal management team to create a strategic report on LEGO's different product lines and business operations. In recent years, numerous threats had emerged against LEGO in toy industry. The acquisition of Marvel Entertainment by The Walt Disney Company created major implications for valuable toy license agreements. LEGO also recently lost a long legal battle with major competitor MEGA Brands, makers of MEGA Bloks, with a European Union court decision that removed the LEGO brick trademark. Furthermore, new competition is preparing to enter the marketplace from Hasbro, the second-largest toymaker in the world, with the company launching a new rival product line called Kre-O. It is critical for the management team to identify where to expand Lego's product lines and business operations, in order to develop a competitive strategy to continue the organization's recent years of financial success and dominance in the building toy market.
Swot Analysis of "Lego Group: Building Strategy" written by Darren Meister, Paul Bigus includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lego Toy facing as an external strategic factors. Some of the topics covered in Lego Group: Building Strategy case study are - Strategic Management Strategies, Intellectual property, Motivating people, Productivity and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Lego Group: Building Strategy casestudy better are - – challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, technology disruption, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion,
increasing energy prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Lego Group: Building Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lego Group: Building Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lego Toy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lego Toy 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 Group: Building Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Lego Group: Building Strategy case study
2. Improving business portfolio management of Lego Toy
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 Toy
Strengths Lego Group: Building Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lego Toy in Lego Group: Building Strategy Harvard Business Review case study are -
Effective Research and Development (R&D)
– Lego Toy 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 Group: Building Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Lego Toy has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Lego Toy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lego Toy 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.
Strong track record of project management
– Lego Toy 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 Toy 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 Toy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Lego Toy 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 Toy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lego Group: Building Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Lego Toy are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Lego Toy in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Strategy & Execution industry
– Lego Group: Building Strategy firm has clearly differentiated products in the market place. This has enabled Lego Toy to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Lego Toy to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Lego Toy in the sector have low bargaining power. Lego Group: Building Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lego Toy to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Lego Toy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lego Toy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Lego Toy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Lego Group: Building Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Lego Group: Building Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lego Group: Building Strategy are -
Slow decision making process
– As mentioned earlier in the report, Lego Toy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Lego Toy even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Workers concerns about automation
– As automation is fast increasing in the segment, Lego Toy needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
No frontier risks strategy
– After analyzing the HBR case study Lego Group: Building Strategy, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Lego Group: Building Strategy, in the dynamic environment Lego Toy has struggled to respond to the nimble upstart competition. Lego Toy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Lego Toy products
– To increase the profitability and margins on the products, Lego Toy needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Lego Toy has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Darren Meister, Paul Bigus suggests that, Lego Toy 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.
Increasing silos among functional specialists
– The organizational structure of Lego Toy is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Lego Toy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lego Toy to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Lego Toy, firm in the HBR case study Lego Group: Building Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study Lego Group: Building Strategy 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 Toy 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lego Group: Building Strategy, is just above the industry average. Lego Toy 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.
Opportunities Lego Group: Building Strategy | 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 Group: Building Strategy are -
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 Toy can use these opportunities to build new business models that can help the communities that Lego Toy operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Better consumer reach
– The expansion of the 5G network will help Lego Toy to increase its market reach. Lego Toy will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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 Toy 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 Toy 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lego Toy 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 Group: Building Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Lego Toy has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Lego Toy 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lego Toy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Lego Toy 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lego Toy is facing challenges because of the dominance of functional experts in the organization. Lego Group: Building Strategy case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lego Toy in the consumer business. Now Lego Toy can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Lego Toy can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Lego Toy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Lego Group: Building Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lego Toy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Lego Toy can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lego Group: Building Strategy 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.
Threats Lego Group: Building Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lego Group: Building Strategy are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Lego Toy will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Lego Toy 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lego Group: Building Strategy, Lego Toy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
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 Toy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Environmental challenges
– Lego Toy needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Lego Toy can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lego Toy in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Lego Toy has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Lego Toy 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lego Toy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Toy business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Lego Toy 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.
Shortening product life cycle
– it is one of the major threat that Lego Toy is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Lego Group: Building Strategy 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 Group: Building Strategy 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 Group: Building Strategy 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 Group: Building Strategy 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 Group: Building Strategy 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 Toy needs to make to build a sustainable competitive advantage.
