Lego Porter's Five Forces Analysis Essay
ENVIRONMENTAL ANALYSIS
MICRO - Michael Porter’s Five Forces Analysis
1) Threat of New Entrants: The toy industry is highly competitive. Further, the existence of established competitors combined with the need for huge capital investment, economies of scale and strong distribution network; keep the threat of new entrants into the traditional games industry is relatively low.
2) Threat of Substitutes: The highest pressure faced by Lego comes from substitutes. A substitute is anything which competes with Lego for a child’s attention such as other traditional games, video games or electronic gadgets. Hence, there are various substitutes available at all price ranges with minimal switching cost.
3) Bargaining Power of Buyers: The primary buyers …show more content…
Construction Toy Market: The main competitors of Lego in the construction toy industry are the companies producing Lego clones such as Best-Lock, Tyco Super Blocks & Mega Bloks (currently owned by Mattel). These clones are available at a relatively cheaper prices and claim to be compatible with Lego bricks. However, these clones are not on par with Lego. High quality, customer loyalty and their legacy give an advantage to Lego.
b. Toys and Games Industry: Lego faces high competition in the wider toys and games industry. Accelerated child development and changing trends have increased competition. In addition to other traditional toys, Lego now competes with electronic gadgets, videos games, etc.
MACRO - PESTEL Analysis
1) Political: As a multinational company, Lego is quite sensitive to legislation and regulations of its major markets and production sites. As the toys industry targets children, the manufacture of toys is highly regulated. Also, there is a risk of political instability in inexpensive labour countries.
2) Economic: Lego faces high risk due to foreign currency fluctuations. Factors such as decrease in household/ disposable income and economic instability pose a risk. Also, the seasonal nature of buyers in terms of toys affects the sales of
MICRO - Michael Porter’s Five Forces Analysis
1) Threat of New Entrants: The toy industry is highly competitive. Further, the existence of established competitors combined with the need for huge capital investment, economies of scale and strong distribution network; keep the threat of new entrants into the traditional games industry is relatively low.
2) Threat of Substitutes: The highest pressure faced by Lego comes from substitutes. A substitute is anything which competes with Lego for a child’s attention such as other traditional games, video games or electronic gadgets. Hence, there are various substitutes available at all price ranges with minimal switching cost.
3) Bargaining Power of Buyers: The primary buyers …show more content…
Construction Toy Market: The main competitors of Lego in the construction toy industry are the companies producing Lego clones such as Best-Lock, Tyco Super Blocks & Mega Bloks (currently owned by Mattel). These clones are available at a relatively cheaper prices and claim to be compatible with Lego bricks. However, these clones are not on par with Lego. High quality, customer loyalty and their legacy give an advantage to Lego.
b. Toys and Games Industry: Lego faces high competition in the wider toys and games industry. Accelerated child development and changing trends have increased competition. In addition to other traditional toys, Lego now competes with electronic gadgets, videos games, etc.
MACRO - PESTEL Analysis
1) Political: As a multinational company, Lego is quite sensitive to legislation and regulations of its major markets and production sites. As the toys industry targets children, the manufacture of toys is highly regulated. Also, there is a risk of political instability in inexpensive labour countries.
2) Economic: Lego faces high risk due to foreign currency fluctuations. Factors such as decrease in household/ disposable income and economic instability pose a risk. Also, the seasonal nature of buyers in terms of toys affects the sales of