2 the Lego Group
The Lego Group: Building Strategy Problem Statement:
The Lego Group has been making toys successfully for 80 years and has grown to having close to 3.16 B USD in sales for the 2010 year. They specialize in toy building sets, a sector of the market that has seen 13% growth in 2010 and is forecasted to grow further. However, the Lego Group is at a cross-road in their business plan and requires a strategic plan going forward.
Currently, the company needs to look at its existing partnerships with Disney after Disney’s significant mergers and acquisitions in the past year. Lego is regarding Disney’s purchase of Hasbro and Mattel as a threat to their market share of the toy building block sets due to potentially losing kids who want to buy themed sets based on Marvel comics. Meanwhile, the Lego Group is straying from its core competency and is developing video games. Furthermore, the Lego Group is not retaining a majority of its cash flows and therefore is not following a corporate structure designed for growth.
Strengths & Weaknesses of The Lego Group, Market Opportunities and Threats
Strengths: Lego Group
• Incredible brand equity (quality, history, loyal following) and called ‘toy of the century’. Lego has global growth potential
• Recent (2005) overhaul of supply chain has increased efficiency and resulted in a huge cost savings. Lego is leaner and profitable
• Major market share at 9:1 vs. their closest competitor, Mega Bloks indicates leadership in the toy building sets market (Lego 3.16 B vs. Mega Bloks at 0.368 B in2010 note: conversion factor 1 DKK = 0.1925001925 USD)
Weaknesses: Lego Group
• Dividends of DKK 1,500 million were paid in May 2010, corresponding to DKK 7.3 million in average per share. Expected dividend for 2011 is DKK 2,500 million. Lego is paying the Kristiansen family too much money.
• Had slipped into financial trouble early in the 2000 decade and was not aware of costing and expenditures.
• Core
The Lego Group has been making toys successfully for 80 years and has grown to having close to 3.16 B USD in sales for the 2010 year. They specialize in toy building sets, a sector of the market that has seen 13% growth in 2010 and is forecasted to grow further. However, the Lego Group is at a cross-road in their business plan and requires a strategic plan going forward.
Currently, the company needs to look at its existing partnerships with Disney after Disney’s significant mergers and acquisitions in the past year. Lego is regarding Disney’s purchase of Hasbro and Mattel as a threat to their market share of the toy building block sets due to potentially losing kids who want to buy themed sets based on Marvel comics. Meanwhile, the Lego Group is straying from its core competency and is developing video games. Furthermore, the Lego Group is not retaining a majority of its cash flows and therefore is not following a corporate structure designed for growth.
Strengths & Weaknesses of The Lego Group, Market Opportunities and Threats
Strengths: Lego Group
• Incredible brand equity (quality, history, loyal following) and called ‘toy of the century’. Lego has global growth potential
• Recent (2005) overhaul of supply chain has increased efficiency and resulted in a huge cost savings. Lego is leaner and profitable
• Major market share at 9:1 vs. their closest competitor, Mega Bloks indicates leadership in the toy building sets market (Lego 3.16 B vs. Mega Bloks at 0.368 B in2010 note: conversion factor 1 DKK = 0.1925001925 USD)
Weaknesses: Lego Group
• Dividends of DKK 1,500 million were paid in May 2010, corresponding to DKK 7.3 million in average per share. Expected dividend for 2011 is DKK 2,500 million. Lego is paying the Kristiansen family too much money.
• Had slipped into financial trouble early in the 2000 decade and was not aware of costing and expenditures.
• Core