Briefing LEGO 1 Essay

Submitted By roozbehkey
Words: 1946
Pages: 8

During 2009-2011 LEGO experienced many threats from competitors in the toy industry.
The acquisition of Marvel Entertainment by the Walt Disney
LEGO lost the legal battle with MEGA Brands, resulting in losing LEGO brick trademark
Many competitors in toy industry are entering to building block
The reason for preparing this briefing is to identify where to expand LEGO’s product lines and business operations in order to keep the organization competitive with rivals and continue to be dominance in the building toy market. Also, to develop a strategy to continue the organization’s financial success.
Situational Assessment Findings:
Key External Findings:
By expiration of Lego’s trademark on LEGO bricks facing with competitors such as Hasbro and MEGA Brands that trying to gain higher market shares with low or no switching cost in building toy market. On the other hand, Lego has opportunities to expand more to untapped market by using their brand recognition power all around the world and diversify their products by regions their enter.
(Please refer to appendix 1 for full SWOT analysis)
Key Internal Findings:
Lego during the years built a good brand image among customers and differentiate it self by producing high quality products. They acquired many exclusive licenses and variety of themes that resulted in being number one toy company in building toy market. On the other hand, through this expansion there were poor communications around departments that resulted in high distribution costs, unused capacities and not pay enough attention to the costs of materials or production. Also, Lego count as expensive product that because of Lack of legal protection facing with substitute products in a much cheaper price in the market.
(Please refer to appendix 1 for full SWOT analysis)
Competitor Analysis:
By expiration of Lego’s design patent on plastic bricks entrance barriers are lowered for other companies to enter to the building toy market. Many competitors such as MEGA Brand and Hasbro are going after Lego with similar products such as Kre-O product line featuring the transformers characters. Substitute products are very similar to Lego breaks where they even compatible and go well together with low or no switching cost for customers. Also, the acquisition of Marvel Entertainment by Disney created major effects for toy license agreements. (Please refer to Appendix 2)
Key Financial Findings:
By analyzing the financial statement of LEGO Company during 2006 to 2010 we can see the steady financial growth of company.
Growth margins percentage reached its highest at 2010 by 72.5% where revenues were at highest $16,014 million.
Return on equity was at its highest in 2006 by 147.1%, which means for each dollar that common shareholders invested in company, company generate 147.1% profit. In other word shareholders saw a 147.1 percent return on their investment. However, by 2010 it reached its second highest by 84.8% ROE. This indicates how efficiently firm is operating
Operating margins percentages grow over the years and reached its highest in 2010 by 31.1 percent. It indicates successful reducing costs in operation for LEGO
Identification & Analysis of Strategic Options:

Since, 1932 LEGO has been go through lots of up and downs. Some of key actions that management team took during the years are:
Differentiation strategy:
Innovating LEGO System of Play
First mover advantage
Brand equity, Top quality products

Expand into new business area and expand their product:
Enter to video games/ its growing market
Expand with LEGO Universe and LEGO Digital Design/ Allow users to design their own personalized LEGO mini-figures. Custom made LEGO strength brand loyalty and excels sells
Acquisitions of different licenses give them competitive advantage over rivals over times:
Exclusive licensed agreements with professional sports/ LEGO NBA, LEGO NHL and LEGO Soccer/ Giving them competitive advantage over rivals
Exclusive licensed rights/