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LEGO GROUP COMPANY
The Lego Group Company is one of the world's largest toy manufactures and the largest in construction toys. The Lego Group is a family-owned company located in Billund, Denmark and best known for the production of LEGO-brand dolls. The company was established in 1932 by Ole Kirk Christiansen, and today it is one of the leading manufacturers of play materials for children. The company has its headquarters in Enfield, Connecticut. Children across the globe spend billions of hours a year playing with Lego bricks. The company is committed to children's creative development and learning, and its products can be purchased in more than 100 countries all over the world. The company name LEGO was developed by Christiansen from the Danish phrase leg godt, meaning "play well." The company claims that "LEGO" means "I put together" or "I assemble" in Latin. I chose to analyze this company because of its uniqueness in the manufacture of its products and its ability to penetrate the international market (Antorini, 2012).
According to data from Brand Finance, Lego company is a valuable brand in toy manufacturing and packaged goods industries. However, there are some industries posing competition to the already established Lego Company. One of the main competitors of the company is Bandai Namco Entertainment based in Tokyo, Japan. The company manufactures video games, music, and other entertainment products. This is the most valuable brand after Lego. Some of the subsidiaries include; D3 publisher, Banpresto, Bandai, Sunrise, just but a few. Another main competitor is Fisher Price. The company has a brand value of $773 million which positions as the third largest producer of infant and children toys. The company has its headquarters in NY, USA and it is a subsidiary of Quaker Oats Company and Mattel. Barbie is another main competitor of Lego Company (Antorini, 2012). Barbie is an American company that dwells in the manufacture of toys and is estimated at a brand value of $388 million. Nerf, a company whose products include: Nerf sport that deals with sports balls, Nerf Blasters which are toy guns, Nerf dogs, just but a few, poses competition Lego Company. Other competitors in the market include Mattel, Mobile Suit Gundam, Hot Wheels, Hasbro, and My Little Pony.
Even though Lego Company remains as one of the biggest companies in toy manufacturing, the company faces some challenges in the market. Another main challenge faced by the company is deficient quality. The risk is materializing because the company is growing so fast. Suddenly there are hundreds of people in factories in new territories who did not play with Lego toys as children, and so all of this is new to them. If they don't understand the quality issue being faced in the company, then there are chances of losing quality. Another strategic challenge the company is facing is the pursuit of creating innovative product lines that instill the interests of the company's brand. With more visual graphics toys that perform technology advanced entertainment, the company needs to reinvent the original concept that is current to the interests of the target group of customers. As a manufacturing company, the biggest challenge is to deal with rapidly increasing globalization and competition. Some of the competitors as mentioned pose a significant risk to the Lego Company since every company ones to penetrate the international market. Rival companies with different branding methods are competitors to Lego. An example is Bandai Namco Entertainment which produces toy cars which can be a competitor for Lego toys.
Globalization is one other aspect that most companies have to embrace. Supply chain management has been one of the areas vulnerable to posing a challenge to most companies. Producers and consumers today are becoming more aware of supply chain management, and so the companies need to adjust to meet their demands (Schultz, 2003). This awareness shifts the focus from internal logistics efficiency to the external network of relationships between various parties in the supply chain. Poor customers service and spotty availability of products have been for a long time eroding Lego's franchise in crucial markets. Lego Company has not been insusceptible to these changes. The company has included the transformation of the company's supply chain management system. Inefficiency and inflexibility have been realized in the company's supply chain management leading to low selling of its products. Today, Lego Group chief executive Niels Christiansen admitted it had made too many bricks, which is a problem for the company. Niels admitted that sales and profits had fallen for the first time in thirteen years which is linked to the weak performance on having to sell off excess stock cheaply.
These challenges being faced in the company may, however, be dealt with to make the company more successful. Lego Company has ventured into more technical parts, computer interaction with games and peripherals, franchises with films and vehicle companies, but the "system" of Lego remains the same, still based on molded parts of 5/16" stud spacing. The stud connection method has changed with the addition of axles and pegs in holes as well as 3.2mm rods, all at the same spacing. As a reality of stepping on LEGO bricks, the solution is to have a round piece of material with a drawstring threaded around it, enabling all the blocks on it to be gathered quickly. Moreover, the company has set a target to replace conventional plastics used in making its bricks with sustainable materials by 2030 to help reduce the company's total carbon dioxide emissions. One solution is to embrace the use of bioplastics, derived from plants and other biodegradable materials (Robertson, 2009).
One other short-term solution to the problems facing Lego Company is putting their label on their toys so that their customers can distinguish their products from other toys manufactured by fake companies. Many companies are manufacturing the same products like Lego Company, and some are counterfeit products. Also, local carpenters produce toy materials which are not of the same quality as those of Lego Company. Therefore, it is essential for Lego Company to brand their products for their customers to get quality products they have always associated the company with. Long-term changes solutions have between realized over time to streamline the supply chain. One of the ways has been the reduced unique parts (every color of every brick requires its tool). Also, another change has been cutting off extraneous products. Also, the company relocated their U.S. factory to Mexico for cost saving. The company established strategies to focus on core markets (Prahalad, 2004. However, with the need to expand to new markets, they require a dramatic shift in supply chain strategy. Just recently, the company reported stalling sales in Europe and North America, but tremendous growth in China. However, toys imported to China are subject to high import taxes, a result of China's isolationist trade policies. To sell in China, the company's costs must become more competitive. At the same time, they need to protect their market share in Europe and North America, both which have uncertain futures related to isolationist trade policies.
To get their market share in a country like China with strict policies on trade, the company should consider to partner with a major Chinese company, such as Alibaba, to increase the speed of penetration into their market. Unlike companies that manufacture large and more complex products like the automobile industry, LEGO plants require lower-skilled workers, smaller machinery, and shorter lead times and therefore have more flexibility in deploying plants (Prahalad, 2004. The company should consider reopening US manufacturing in the short term to maintain their US market share and protect the company from potential isolationist. The company also needs to look into the supply chain for additional diversification and consider new raw materials apart from oil. They need to do this to avoid oil as a raw material which is dominated by many political issues and price fluctuations.
In conclusion, Lego Group Company remains to be one the largest toy manufacturer in the world today. However, it faces competition from companies such as Bandai Namco Entertainment, Fisher Price, Barbie, My Little Pony, just but a few. The future of Lego looks bright as the Lego group continuously explores the opportunities offered by new technologies to create fun and new experiences for children. The Lego creative lab is at the core of realizing their future dreams as it focuses on inventing the future play. It does this by viewing new trends in the market and integrating them to their technology. The company has also planned to replace their plastic materials with biodegradable materials to reduce environmental pollution.
Bibliography
Antorini, Y. M., Muñiz Jr, A. M., & Askildsen, T. (2012). Collaborating with customer communities: Lessons from the LEGO Group. MIT Sloan Management Review, 53(3), 73.
Prahalad, C. K., & Ramaswamy, V. (2004). The future of competition: Co-creating unique value with customers. Harvard Business Press.
Robertson, D., & Hjuler, P. (2009). Innovating a Turnaround at LEGO. Harvard Business Review, 87(9), 20-21.
Schultz, M., & Hatch, M. J. (2003). The cycles of corporate branding: The case of the LEGO company. California Management Review, 46(1), 6-26.