Sustainable Efforts for Innovation-Lego
1. Introduction
LEGO is a combination of the Danish words “leg” and “godt”, meaning “play well”.
As their name and ideal, Lego has been beloved by the children as well as the parents for decades. Not only as plastic toy bricks, but also effective educational tools, the LEGO Company enjoyed continuous growth and broaden the global brand value. The LEGO brand moved to third place in 2002/2003 with only Coca-cola and Kellogg having greater respect among families with children. Even though as the overall toy market faces challenges, LEGO’s revenue and profits are increasing rapidly, especially since 2005. This profitability didn’t change even in the current recession in the global market. The LEGO Group achieved record-breaking profits in 2011 that secured the health of the company. Interestingly, not far from this climb, the LEGO Group had a deep retreat in the late 1990s and the beginning of the 2000s. Major strategic efforts such as theme parks, Clikits craft sets (marketed to girls), Galidor (an action figure) couldn’t respond to management teams’ goal, and brought failure. As a result the LEGO group created bad financial results: their profit margin was -2.5 and Return on equity was -3.5 in 1998. What intrigues me, as one of thousands of enthusiastic users of its products, is a simple curiosity about what kind of sustainable efforts could enable the LEGO to survive from the turbulent recession and gain even better market share. In order to observe the effective management strategies, this paper will trace the new or consistent strategies under the current CEO, Jørgen Vig Knudstorp (2004 - current). In addition to this, I will take a brief look at progress reports to get better sense of what the LEGO Group’s brand positioning and analyze the annual reports to observe financial status. Some financial ratios need to be drawn for a journey to discover how LEGO’s innovative efforts are effective.
2. Brief History of the LEGO Group
Ole Kirk Kristiansen founded
LEGO is a combination of the Danish words “leg” and “godt”, meaning “play well”.
As their name and ideal, Lego has been beloved by the children as well as the parents for decades. Not only as plastic toy bricks, but also effective educational tools, the LEGO Company enjoyed continuous growth and broaden the global brand value. The LEGO brand moved to third place in 2002/2003 with only Coca-cola and Kellogg having greater respect among families with children. Even though as the overall toy market faces challenges, LEGO’s revenue and profits are increasing rapidly, especially since 2005. This profitability didn’t change even in the current recession in the global market. The LEGO Group achieved record-breaking profits in 2011 that secured the health of the company. Interestingly, not far from this climb, the LEGO Group had a deep retreat in the late 1990s and the beginning of the 2000s. Major strategic efforts such as theme parks, Clikits craft sets (marketed to girls), Galidor (an action figure) couldn’t respond to management teams’ goal, and brought failure. As a result the LEGO group created bad financial results: their profit margin was -2.5 and Return on equity was -3.5 in 1998. What intrigues me, as one of thousands of enthusiastic users of its products, is a simple curiosity about what kind of sustainable efforts could enable the LEGO to survive from the turbulent recession and gain even better market share. In order to observe the effective management strategies, this paper will trace the new or consistent strategies under the current CEO, Jørgen Vig Knudstorp (2004 - current). In addition to this, I will take a brief look at progress reports to get better sense of what the LEGO Group’s brand positioning and analyze the annual reports to observe financial status. Some financial ratios need to be drawn for a journey to discover how LEGO’s innovative efforts are effective.
2. Brief History of the LEGO Group
Ole Kirk Kristiansen founded
References: • Dec. 19 - 25, 2011, B. Wieners, Bloomberg Businessweek • The cycles of Corporate Branding: THE CASE OF THE LEGO COMPANY by M. Schultz and M.J. Hatch, California management Review, Vol. 46, No. 1, Fall 2003 • Innovating a turnaround at LEGO by D. Robertson and P. Hjuler, Harvard Business Review, Sep. 2009 • Collaborating with Customer Communities: Lessons from the Lego Group by Y. M. Antorini, A. M. Muniz, Jr. and T. Askildsen, MIT Sloan Management Review, Vol. 53, No.3, Spring 2012 • www.lego.com • http://en.wikipedia.org/wiki/Lego • http://ycharts.com/rankings/industries/Toys%20&%20Games/current_ratio# • LEGO Group Annual Report 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011 • LEGO Group Progress Report 2011