Throughout the history of the LEGO group in 1998, its first financial crisis happened b Knudstorp failed to make a fast and right choice. During that crisis, the managerial structure of the company just transformed into a poorly arranged firm. The managing structure that was once considered as the most operative and active suddenly underwent renovation in its effective focus and leadership of the company. Among all the changes that happened the most noteworthy was that there seemed no valuation of the product’s cost-effectiveness. These operative hallucinations and the deficiency of the liability has led to a flare-up of write-offs and registered cost. This overhaul made the management confused about the cost-effectiveness of the products that which one of them is making adequate money and which are failing to produce returns on the venture. Besides these facts, the loss of management has also affected the main customers. Production of new items was cannibalizing the already unsold and overstocked products. The emphasis on the end-user has overlooked the vendors who were frustrated with the slow-moving stocks and the records. In fact, there were many external and internal factors that can explain what has led the LEGO group towards this major crisis. However, the following essay has focused on all the micro and macro external factors regarding this bankruptcy.
After school activities of the children in different parts of the world are and they have less spontaneous time to play in comparison to the past, therefore the need for the products like LEGO becomes much less to have fun in their spare time. Similarly, the need for trending toys appears to be raising and the lifespan of these products was found declining. Children repeatedly change their interests in the games they want to play and which kind of toys they want to keep. So, depending on such factors makes it difficult for the company to have success.
Another important responsible factor was that children over the age of three years started to prefer the activities related to technology e.g. video games etc. the document has suggested that the span of childhood has become shorter and adolescence has become longer, therefore, children usually found less time for the play that is unstructured and requires more attention. They look for games that can satisfy them immediately and are more fashionable as well, like any electronic product.
Furthermore, there was a lot of imitation in the new coming products having very limited protection of the rational property. As a result, the retailing competition heated up e.g. in 2004 Toys R Us in the US needed to review its strategies and many other entrants like Hasbro started to subcontract their orders. During the period between 1993 to 2003, the total profit of the industry decreases by 50%. Domestic spending on toys has also reduced which has directed LEGOs towards bankruptcy.
In conclusion for the LEGO Group, the global toy market has not grown in a constructive way that could make it a bigger company having higher profits. Overall the market remained very unpredictable because the demand for certain toys has shifted quickly. The above described all the external factors are found to be affecting the market of LEGO group.