The LEGO Group: Enironmental Complexity

First, I want to know generally (like an introduction):

How turbulent is your company’s environment and how well do you believe that they adapt to it?

Due to the longevity of the company, LEGO has faced a turbulence a few times in their growth as an organization. Some examples of this turbulence include:

  • Overcoming two workshop fires that drastically lowered revenues (Hoque, 2014).
  • Progressing from woodblocks, to plastic bricks in the 1950’s (Hoque, 2014).
  • Nearly facing bankruptcy due to overly innovating toys, thus increasing costs and causing logistical issues (Feloni, 2014).
  • Overcoming near-bankruptcy and staying relevant in the digital age through simplicity and narrow market focus (aljazeera.com, 2016).

As one can see, the current success of LEGO can be accredited to the organization’s ability to overcome turbulence through strategic adaptations in an ever-changing industry landscape

#1: List out as many elements affecting your company as you can for each of the sectors below. Be sure to support your assertions and reference sources.

Industry (Competitors, industry size, competitiveness, related industries):

  • Competitors: Hasbro, Mattel, Spin Master, MEGA Brands (Schmidt, 2015).
  • Industry Size: Large, with a growing market for “construction toys” it seems that the industry will continue to grow. This industry is starting to transition into other industries (video games).
  • Competitiveness: Competition is high, especially with MEGA Brands and their MEGA BLOKS seeking to gain market share. Other toy companies are continuing to ride the wave of popularity that LEGO has brought to the “construction toy” industry (Schmidt, 2015).
  • Related Industries: Video Games, Minecraft (a massively popular block building game) has proven to show that the video game industry will compete with LEGO.

Raw Materials (Suppliers, manufacturers, real estate, services):

  • Suppliers- Over 90 suppliers of raw materials, parts and finished goods worldwide (The LEGO Group, 2014).
  • Manufacturers- Manufacturing is carried out in the company’s own LEGO manufacturing facilities located around the world. The main raw material produced is ABS thermoplastic, which is used for the creation of their signature bricks. There is a current initiative to reduce the amount of greenhouse emissions that are created from the production of bricks by 2030. (Perella, 2014).
  • Real Estate- The LEGO Group has over 100 LEGO Stores across the world. Locations include Austria, Belgium, Canada, Denmark, France, Germany, Sweden, United Kingdom, and the United States of America (www.lego.com, 2016). In addition to this, there are seven LEGOLAND theme parks located in California, Dubai, Florida, Denmark, Germany, Malaysia, and England (www.legoland.com, 2016).
  • Services- On top of their aforementioned retail outlets, and LEGOLAND theme parks, the organization also offers educational services through their LEGO MINDSTORMS line (www.lego.com, 2016). 

Human Resources (Labor market, employment agencies, universities, unions):

  • Labor Market and Employment- LEGO offers career services directly from their website. Career categories that are available are: accounting, administration/clerical, brand management, business management, communication/PR, controlling, customer service, education, engineering, facility/building management, finance/controlling, health and safety, human resources, information technology, internship, key account management, lean/continuous improvement, legal affairs, logistics/transport, market and consumer research, marketing, product design/development, production and technical, project management, purchasing/procurement, quality management, research and development, retail, sales, storage and warehousing, supply and demand, training, and unlisted positions (www.lego.com, 2016).
  • Unions- none

Financial Resources (Stock markets, banks, private investors):

  • Stock markets- none
  • Banks- none
  • Private Investors-“The LEGO Group is owned by KIRKBI A/S (75 percent) and the LEGO Foundation (25 percent).” (www.lego.com, 2016)

Market (Customers, clients, potential users):

  • Customers- LEGO plays on its sense of nostalgia and provides products for all age ranges, they are: 0-2, 3-4,5-6,7-8,9-11, and 12+ (shop.lego.com, 2016).
  • Potential users- With products that entice people from all ages, potential users are endless. Marketing efforts could be placed heavier on older demographics if more sophisticated LEGO product lines are introduced.

Technology (Techniques of productions, computers, information technology, e-commerce):

  • Techniques of productions- LEGO produces their products in their own manufacturing facilities, and are currently in the process of trying to become more eco-friendly, with the aspiration of reducing manufacturing emissions (30% of which are from the production of their signature bricks). An excerpt from an article written by Maxine Perella, writer for http://www.theguardian.com, highlights Tim Brooks’s, LEGO’s senior director of environmental sustainability, thought process when it comes to introducing new technology to production:

“Brooks says due to the complexity of how Lego elements are constructed, this will involve working with cutting edge material suppliers with a view to developing partly and fully bio-based materials.

‘We want to be able to make informed decisions when we evaluate new materials. Unfortunately there is not one single material that can provide all the properties we need and is also more sustainable, so we must look at how we can minimize the environmental impact of new materials without compromising our key requirements on safety, quality and durability,’ he explained.” (2014)

  • Computers- as children become more technologically savvy, they may look to digital mediums for entertainment, which could be troublesome for LEGO.
  • E-commerce- LEGO has an expansive list of products that can be purchased directly from their online shop at shop.lego.com.

Economic Conditions (Recession, unemployment rate, inflation rate, growth):

  • Recession- the current state of the economy has left consumers with less disposable income, this could prove to be problematic as customers look to compete with LEGO using cost-leadership strategies.
  • Unemployment rate- With unemployment being a reality during the recession, less money will be spent on the sometimes-expensive LEGO sets.
  • Inflation rate- inflation rates play a vital role in the success of a multinational company that is marketing to and producing in different countries. Because of this, costs of production may increase in certain areas of operation.
  • Growth- with a powerful brand, and generations of appeal, when families do have the disposable income for LEGO products, the company should see wide success, especially with the popularity of their TV shows, movies, and games.

Government (City, state, and federal laws, regulations, taxes):

  • LEGO is subject to federal laws of their home country and the countries in which they do business. The LEGO Group also has its own written Code of Conduct in order to keep its vendors honest all across the world (www.lego.com, 2016).
  • LEGO paid DKK 2,855,000 in income taxes for 2015.

Sociocultural (Age, values, beliefs, education, religion, work ethic, consumer and green movements):

  • Age- Although LEGO focuses on children’s products, the timelessness of brand tends to appeal to consumers of all ages.
  • Values- The LEGO Group’s core values are: Imagination, Creativity, Fun, Learning, Caring, and Quality (www.lego.com, 2016).
  • Work ethic- The LEGO Group is adamant about instilling work ethic that is in conjunction with their core values and expects the same from its competitors (www.lego.com, 2016)
  • Green movements: see Technology above for detailed information.

International (Competition from and acquisition by foreign firms, entry into overseas markets, foreign customs, regulations, exchange rate):

  • Competition- a majority of the organization’s competitors are located in the United States of America. Acquisition is not probable do to the fact that LEGO has been a family owned company since its creation.
  • Entry into overseas markets- entry into overseas markets is always risky, and has been a cause of financial issues for LEGO in the past, but there is huge potential for expansion in Asian markets (Girard, 2013).
  • Foreign customs, regulations, and exchange rate: The LEGO Group is based in Denmark, but does business in many countries across the world, because of this cultural customs and foreign regulations should always be observed before product releases. Exchange rates also play a vital role in the proper pricing of products in different countries.

#2: Is the organization internationally diversified? Yes/No

If yes, where are they currently (regional or by country, could be broken down by product distribution or brick and mortar locations, etc…? Who are their major competitors? What markets should they expand to?

  • Yes, The LEGO Group currently has locations all over the world, for a detailed list look back at the “real estate” section of this post.
  • The major competitors of LEGO are: Hasbro, Mattel, Spin Master, MEGA Brands (Schmidt, 2015).
  • LEGO is currently expanding their presence in Asia and should continue to do so. According to Kim Gaird, a writer for Harvard Business School, “While LEGO has sold toys in Asia for three decades, there is serious potential to improve market share and maybe even outgrow North America and Western Europe, which together accounted for 72 percent of all LEGO sales in 2011.” (2013).

#3: How complex and unpredictable is the organization’s environment?

Which environment does your organization exist in?

The LEGO Group exists in a Simple-Unstable environment. Since The LEGO Group is a toy manufacturer and specializes in the specific competitive niche of construction toys which is simple in nature. Although there are relatively few elements to take into consideration, the environment is unstable due to the ever-changing tastes of the consumer paired with changes in technology that tend to cause an element of unpredictability.

#4: Does your organization’s strategies and goals fit their environment?

Circle one of the types in the following categories that you have found your company to portray: environment, strategy type, and organizational goals.

  Type 1 Type 2 Type 3 Type 4
Environment Calm Varied Locally stormy Turbulent
Strategy types Reactor Defender Prospector Analyzer with/without innovation
Organizational goals Neither Efficiency Effectiveness Efficiency and Effectiveness

The LEGO Group is a defender, which is concerned with their position in the market. Too much innovation has led to failure in the past, because of this, LEGO relies on its “bread and butter” to succeed. Expansion and efficiency are the main concerns of this organization.

#5: Did your organization align across environment, strategy type, and organizational goals (i.e., all goals, if not then the correct response is NO)? Yes/No

If yes, where do you think the organization should go now? Do you predict changes in their environment?

I do not predict many changes in the environment of LEGO. I feel that the best avenue to success is focusing on what they have done well for generations, selling quality plastic construction bricks, to children of all ages. Rather than expanding too far into different industries, LEGO should use their licensing of other popular titles (Star Wars, Marvel, Minecraft) to draw children to their specialized product. This has proven to be a successful strategy in the past. I do feel that LEGO’s steps toward being more environmentally friendly are a great ethical and PR choice, and think that taking steps to expand in Asian markets will help them secure more market share and protect their position in the industry.

References

 About Us. (n.d.). Retrieved from http://www.lego.com/en-us/aboutus/lego-group/the_lego_brand

About Us. (n.d.). Retrieved from http://www.lego.com/en-us/aboutus/lego-group/ownership

About Us. (n.d.). Retrieved from http://www.lego.com/en-us/aboutus/lego-group/annual-report

About Us. (n.d.). Retrieved from http://www.lego.com/en-us/aboutus/responsibility/caring-ethical-and-transparent/ethics-in-our-conduct

Brick by brick: Lego in the digital age. (n.d.). Retrieved from http://www.aljazeera.com/programmes/countingthecost/2016/03/brick-brick-lego-digital-age-160306101112638.html

Feloni, R. (2014). How Lego Came Back From The Brink Of Bankruptcy. Retrieved from http://www.businessinsider.com/how-lego-made-a-huge-turnaround-2014-2

Gaird, K. (2013). Can LEGO Snap Together a Future in Asia? Retrieved from http://hbswk.hbs.edu/item/can-lego-snap-together-a-future-in-asia

Hoque, F. (n.d.). How Lego Survived Against All Odds–And You Can, Too. Retrieved from http://www.fastcompany.com/3027147/leadership-now/how-lego-survived-against-all-odds-and-you-can-too

Jobs. (n.d.). Retrieved from http://www.lego.com/en-us/careers/searchpage

Kids’ Toys & Children’s Toys, Kid Toys by Age | LEGO Shop | LEGO Shop. (n.d.). Retrieved from http://shop.lego.com/en-US/ByAge

LEGO.com LEGO Stores Home – All Stores. (n.d.). Retrieved from http://stores.lego.com/en-us/stores

LEGOLAND Parks. (n.d.). Retrieved from http://www.legoland.com/

Perella, M. (2014). Lego: How the signature brick is going green. Retrieved from http://www.theguardian.com/sustainable-business/lego-design-sustainability-circular-economy

Schmidt, G. (2015). Lego’s Success Leads to Competitors and Spinoffs. Retrieved from http://www.nytimes.com/2015/11/21/business/legos-success-leads-to-competitors-and-spinoffs.html?_r=0

 

 

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