Free LEGO (A): The Crisis Case Study Solution | Assignment Help

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Written by Gary F. Smith
Publish Date: 2024-12-03

Harvard Case - LEGO (A): The Crisis

"LEGO (A): The Crisis" Harvard business case study is written by Jan W. Rivkin, Stefan Thomke, Daniela Beyersdorfer. It deals with the challenges in the field of Strategy. The case study is 11 page(s) long and it was first published on : Feb 5, 2013

At Fern Fort University, we recommend LEGO implement a multi-pronged strategy to address its crisis, focusing on reclaiming its core strengths in play and creativity, while embracing digital transformation and expanding its global reach. This strategy involves a combination of product innovation, strategic partnerships, and market diversification, aiming to achieve sustainable growth and re-establish LEGO as a global leader in the toy industry.

2. Background

The case study, 'LEGO (A): The Crisis,' depicts LEGO's struggle in the early 2000s. Facing declining sales, intense competition, and a changing market landscape, LEGO grappled with its identity and future direction. The company's reliance on traditional brick-and-mortar retail, coupled with the rise of digital entertainment and video games, posed a significant threat to its core business model.

The main protagonists of the case are Jorgen Vig Knudstorp, the newly appointed CEO, and Kjeld Kirk Kristiansen, the controlling shareholder and grandson of LEGO's founder. Knudstorp faced the challenging task of revitalizing the company, while Kristiansen, deeply invested in LEGO's heritage, needed to be convinced of the necessary changes.

3. Analysis of the Case Study

SWOT Analysis:

Strengths:

  • Strong brand recognition and loyalty: LEGO enjoys a strong brand reputation built on quality, creativity, and play.
  • Unique product offering: LEGO bricks provide a unique play experience fostering creativity and imagination.
  • Global distribution network: LEGO has a well-established distribution network across the globe.
  • Strong financial position: LEGO possesses a solid financial foundation to support its strategic initiatives.

Weaknesses:

  • Dependence on traditional retail: LEGO's reliance on brick-and-mortar stores made it vulnerable to changing consumer habits.
  • Limited digital presence: LEGO lagged behind competitors in leveraging digital platforms and online marketing.
  • Complex organizational structure: LEGO's decentralized structure hindered efficient decision-making and innovation.
  • Lack of focus on emerging markets: LEGO's focus on developed markets left untapped potential in emerging economies.

Opportunities:

  • Growing global middle class: Expanding consumer base in emerging markets presents significant growth opportunities.
  • Digital transformation: Utilizing online platforms, social media, and digital marketing to reach new audiences.
  • Product diversification: Expanding product lines to cater to different age groups and interests.
  • Strategic alliances: Partnering with other companies to leverage complementary strengths and expand reach.

Threats:

  • Intense competition: LEGO faces competition from other toy manufacturers and digital entertainment providers.
  • Changing consumer preferences: Shifting consumer tastes towards digital entertainment and mobile gaming.
  • Economic fluctuations: Global economic downturns can impact consumer spending on discretionary items like toys.
  • Emerging technologies: New technologies and innovations could disrupt the toy industry.

Porter's Five Forces:

  • Threat of new entrants: Relatively high due to low barriers to entry in the toy industry.
  • Bargaining power of buyers: Moderate, as consumers have numerous choices but LEGO's brand loyalty offers some protection.
  • Bargaining power of suppliers: Low, as LEGO has a strong supplier network and can negotiate favorable terms.
  • Threat of substitute products: High, as digital entertainment and mobile gaming pose significant competition.
  • Rivalry among existing competitors: High, with numerous established toy manufacturers vying for market share.

Value Chain Analysis:

LEGO's value chain can be analyzed in terms of its core competencies:

  • Product development: LEGO's focus on innovation and creativity in product design and development.
  • Manufacturing: Efficient and cost-effective manufacturing processes to produce high-quality LEGO bricks.
  • Marketing and distribution: Leveraging brand strength and global distribution network to reach consumers.
  • Customer service: Providing excellent customer support and fostering brand loyalty.

Business Model Innovation:

LEGO's initial business model relied heavily on physical products and traditional retail. To adapt to the changing market landscape, LEGO needed to embrace digital transformation and explore new business models, such as:

  • Direct-to-consumer sales: Expanding online presence and e-commerce capabilities.
  • Subscription models: Offering recurring subscriptions for LEGO sets or digital content.
  • Experiential marketing: Creating immersive experiences in LEGO stores and theme parks.
  • Licensing and partnerships: Collaborating with other companies to expand product offerings and reach new audiences.

4. Recommendations

  1. Product Innovation and Diversification:

    • Focus on core strengths: Reinforce LEGO's commitment to play, creativity, and imagination through innovative product development.
    • Expand product lines: Introduce new product categories catering to different age groups, interests, and skill levels.
    • Embrace digital integration: Develop digital products and experiences that complement physical LEGO sets, such as interactive apps, virtual worlds, and online building platforms.
    • Leverage AI and machine learning: Use AI to personalize product recommendations, enhance customer experiences, and optimize production processes.

  2. Strategic Partnerships and Alliances:

    • Collaborate with technology companies: Partner with tech giants to develop innovative digital products and experiences.
    • Engage with content creators: Collaborate with influencers, YouTubers, and other content creators to promote LEGO products and reach new audiences.
    • Explore strategic acquisitions: Acquire companies with complementary strengths in digital technology, entertainment, or emerging markets.

  3. Global Expansion and Market Diversification:

    • Target emerging markets: Focus on expanding into high-growth emerging economies with a strong focus on cultural adaptation and localization.
    • Develop localized marketing strategies: Tailor marketing campaigns to specific cultures and demographics to resonate with local consumers.
    • Invest in local manufacturing facilities: Establish manufacturing facilities in key emerging markets to reduce costs and improve responsiveness.

  4. Digital Transformation and Marketing:

    • Enhance online presence: Develop a robust online platform with engaging content, interactive features, and personalized experiences.
    • Leverage social media: Utilize social media platforms to connect with consumers, build brand awareness, and drive engagement.
    • Implement data-driven marketing: Utilize analytics and customer data to personalize marketing messages and optimize campaign performance.
    • Embrace digital storytelling: Create compelling digital content that showcases LEGO's values and inspires creativity.

  5. Organizational Culture and Leadership:

    • Foster a culture of innovation: Encourage experimentation, risk-taking, and collaboration within the organization.
    • Develop leadership skills: Invest in leadership development programs to equip managers with the skills to navigate change and drive innovation.
    • Embrace diversity and inclusion: Create a diverse and inclusive workplace that values different perspectives and experiences.

5. Basis of Recommendations

These recommendations are based on a comprehensive analysis of LEGO's strengths, weaknesses, opportunities, and threats, as well as the changing dynamics of the toy industry. They align with LEGO's core competencies in product innovation, manufacturing, and brand building, while embracing digital transformation and global expansion.

  1. Core competencies and consistency with mission: The recommendations focus on leveraging LEGO's core competencies in product development, manufacturing, and brand building, while aligning with the company's mission of inspiring and developing children through play.
  2. External customers and internal clients: The recommendations prioritize meeting the needs of both external customers and internal clients, ensuring a seamless and engaging experience for all stakeholders.
  3. Competitors: The recommendations consider the competitive landscape and aim to differentiate LEGO from its rivals through innovation, digital transformation, and global expansion.
  4. Attractiveness ' quantitative measures if applicable: The recommendations are expected to drive revenue growth, improve profitability, and enhance shareholder value.
  5. Assumptions: The recommendations are based on the assumption that LEGO will continue to invest in product innovation, digital transformation, and global expansion, and that the toy industry will continue to evolve with a growing demand for digital experiences and personalized products.

6. Conclusion

LEGO's crisis presented a critical juncture for the company. By embracing a multi-pronged strategy that focuses on reclaiming its core strengths, embracing digital transformation, and expanding its global reach, LEGO can overcome its challenges and re-establish itself as a global leader in the toy industry. This strategy will require a commitment to innovation, strategic partnerships, and market diversification, while fostering a culture of collaboration and innovation.

7. Discussion

Other alternatives not selected include:

  • Focusing solely on traditional products: This approach would have limited LEGO's growth potential in a rapidly evolving market.
  • Merging with a competitor: While a merger could have provided some short-term benefits, it could have also diluted LEGO's brand identity and stifled innovation.
  • Exiting the toy industry: This option would have been a drastic measure and would have alienated LEGO's loyal customer base.

Risks and key assumptions:

  • Execution risk: Implementing the recommended strategy requires effective execution and coordination across multiple departments.
  • Financial risk: Investing in innovation, digital transformation, and global expansion requires significant financial resources.
  • Competitive risk: Competitors may respond with similar strategies, leading to increased rivalry in the market.
  • Technological risk: Rapid advancements in technology could render current strategies obsolete.

8. Next Steps

  1. Form a cross-functional task force: Assemble a team of experts from different departments to develop and implement the recommended strategy.
  2. Develop a detailed implementation plan: Outline specific actions, timelines, and resource allocation for each aspect of the strategy.
  3. Communicate the strategy to stakeholders: Ensure that all employees, investors, and partners are informed about the new direction of the company.
  4. Monitor progress and adjust as needed: Regularly assess the effectiveness of the strategy and make adjustments based on performance metrics and market trends.

By taking these steps, LEGO can navigate its current challenges, achieve sustainable growth, and re-establish itself as a global leader in the toy industry.

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Case Description

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.

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