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, there is increasing trade war between United States & China, 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 , geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing government debt because of Covid-19 spendings, 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 -
Diverse revenue streams
– Lego Toy is present in almost all the verticals within the industry. This has provided firm in Lego Group: Building Strategy 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.
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.
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.
Analytics focus
– Lego Toy 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 Darren Meister, Paul Bigus 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.
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.
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.
Innovation driven organization
– Lego Toy is one of the most innovative firm in sector. Manager in Lego Group: Building Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Lego Group: Building Strategy Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
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.
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.
Organizational Resilience of Lego Toy
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Lego Toy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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 -
Capital Spending Reduction
– Even during the low interest decade, Lego Toy 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.
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.
Products dominated business model
– Even though Lego Toy 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 Group: Building Strategy should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Lego Toy 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.
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.
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 Toy supply chain. Even after few cautionary changes mentioned in the HBR case study - Lego Group: Building Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lego Toy vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Lego Toy 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.
Slow to strategic competitive environment developments
– As Lego Group: Building Strategy HBR case study mentions - Lego Toy takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lego Group: Building Strategy, it seems that the employees of Lego Toy don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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 -
Building a culture of innovation
– managers at Lego Toy 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lego Toy 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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Lego Toy 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.
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.
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.
Creating value in data economy
– The success of analytics program of Lego Toy has opened avenues for new revenue streams for the organization in the industry. This can help Lego Toy to build a more holistic ecosystem as suggested in the Lego Group: Building Strategy case study. Lego Toy can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lego Toy 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.
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 -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lego Toy.
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.
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 Toy needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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.
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 Toy in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing wage structure of Lego Toy
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Lego Toy.
High dependence on third party suppliers
– Lego Toy 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.
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.
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 .
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lego Toy 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 Group: Building Strategy .
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.
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.