LEGO Group Analysis

Introduction

LEGO Group—- a popular toymaker company, has been developed in 1932. It has been considered to bring the evolution in the toy manufacturer market across the world in 1992. Basically, the term LEGO derived from a Spanish word which means “play well”. At that time, Knudstorp was a founder of LEGO’s Group.The LEGO Group introduced the high quality of bricks, which is based on different themes. Till 1980, LOGO Group introduced their bricks in five different colours i.e., yellow, red, black, white and blue. In mid of 1980’s LEGO Group extended their business into Asia and Eastern Europe, as well as maintained a high place in Western Europe¹. In order to stabilize their business growth and put the strong grip on the western market, the employee of the LEGO Group works hard to control the growth of sales of the product. In order to attract customer attraction, the company introduced the new theme based toymakers, sponsored promotions and make cooperative ads with the wholesalers. First time in history, in 1998, the LEGO Group experienced the first financial loss. The second financial loss faced the LEGO Group in 2004, which pushed the company to the brink of bankruptcy. At that time Kristiansen was the CEO of the company². After the second financial loss, he retired and gave/donated the position to the Knudstorp.

Discussion

Factors

External factors that led the LEGO Group to the edge of bankruptcy are as follows:

1. The management team of LEGO Group did not focus on the whole influence of the design, manufacturing, managing, forecasting of toys and servicing of suppliers.
2. Product developers debated that the cost of an additional mould was so small, so a number of different shapes did not bother. As a result, the total number of manufacturer toys items was not visible. In 2004, LEGO Group’s revealed that they had 3,560 different shapes, 10,900 components and 157 colours in the category. Each shape demands a mould, and a mould average cost €50,000, or up to €300,000 for complex ones.
3. The management of LEGO Group did not focus on the system of accountability, accounting and discipline In LEGO Groups, the net price of productions were not decided which products were cost-effective. As a result, Balancing supply and demands were very difficult to determine either the demanded products were delivered without delay or not from the stock ².
4. The customers of the LEGO Group’s were unsatisfied with slow-moving and stock-outs inventory. By 2003, it became visible that the strategy related to new growth items was not working very well. The sales of the product items were jumped by 29% to Danish Krones (DKK) 6.8 billion, and the LEGO Group faced lost DKK 935 million.
5. The management of the LEGO Group confirmed that the important/considerable investment in growing the portfolio of the product and increases resultant cost had not produced the expected results. In 2004, the disappointing products sales accounted for additional 50% of the total sales reduction.

Conclusions

The LEGO Group has been considered one of the famous company in Western, Eastern Europe and Asia. He gained a strong position in top 10 toy manufacturer Company across the world. Despite the hard work, top-level management effort the company faced the first financial loss in 1998, and after a second financial loss in 2004, the company led to the edge of the bankruptcy. Due to the management and supply control and a lot of other factors company lost his strong position in the Western and Eastern Europe.

End Notes

1. Rivkin, Jan W., et al. Lego (A): The Crisis. 2013.

2. Karmark, Esben. “Challenges in the Mediatization of a Corporate Brand: Identity-Effects as LEGO Establishes a Media Products Company.” Media, Organizations and Identity, Springer, 2010, pp. 112–128.