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5. Describe the competitive environment of the industry and how it relates to LEGO's strategic choices.
LEGO is one of the major players in its industry as it is the world’s largest manufacturer of toys in terms of sales. The environment is highly competitive and recently was largely affected by the financial crises. Since 1958, LEGO’s core and original product, composed of bricks with interlocking tubes, has represented a competitive advantage for the company. However, as the company operates in an extremely competitive and ever-changing environment, it decided to re-innovate itself by extending its products lines by adapting its unique product to several age segments, widely increasing the consumers target, from a infants to adults.
Another strategic choice took by LEGO in order to maintain its status of toy leader, was to start outsourcing almost all of its production activities as the industry’s trend dictates.
CHAPTER 16
STRATEGIC ELEMENTS OF COMPETITIVE ADVANTAGE
SUMMARY
In this chapter we focus on factors that help industries and countries achieve competitive advantage. According to Porter's five forces model, industry competition is a function of the threat of new entrants, the threat of substitutes, the bargaining power of suppliers and buyers, and rivalry among existing competitors. Porter's generic strategies model can be used by managers to conceptualize possible sources of competitive advantage. A company can pursue broad market strategies of low cost and differentiation or the more targeted approaches of cost focus and focused differentiation. Rugman and D'Cruz have developed a framework known as the flagship model to explain how networked business systems have achieved success in global industries. Hamel and Prahalad have proposed an alternative framework for pursuing competitive advantage, growing out of a firm's strategic intent and use of competitive innovation. A firm can build layers of advantage, search for loose bricks in a
LEGO is one of the major players in its industry as it is the world’s largest manufacturer of toys in terms of sales. The environment is highly competitive and recently was largely affected by the financial crises. Since 1958, LEGO’s core and original product, composed of bricks with interlocking tubes, has represented a competitive advantage for the company. However, as the company operates in an extremely competitive and ever-changing environment, it decided to re-innovate itself by extending its products lines by adapting its unique product to several age segments, widely increasing the consumers target, from a infants to adults.
Another strategic choice took by LEGO in order to maintain its status of toy leader, was to start outsourcing almost all of its production activities as the industry’s trend dictates.
CHAPTER 16
STRATEGIC ELEMENTS OF COMPETITIVE ADVANTAGE
SUMMARY
In this chapter we focus on factors that help industries and countries achieve competitive advantage. According to Porter's five forces model, industry competition is a function of the threat of new entrants, the threat of substitutes, the bargaining power of suppliers and buyers, and rivalry among existing competitors. Porter's generic strategies model can be used by managers to conceptualize possible sources of competitive advantage. A company can pursue broad market strategies of low cost and differentiation or the more targeted approaches of cost focus and focused differentiation. Rugman and D'Cruz have developed a framework known as the flagship model to explain how networked business systems have achieved success in global industries. Hamel and Prahalad have proposed an alternative framework for pursuing competitive advantage, growing out of a firm's strategic intent and use of competitive innovation. A firm can build layers of advantage, search for loose bricks in a