Academic Master

Human Resource And Management

LEGO Group Analysis

Introduction

LEGO Group—- a popular toymaker company, was developed in 1932. It was considered to bring evolution to 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 high-quality bricks based on different themes. In 1980, LOGO Group introduced its bricks in five different colors, i.e., yellow, red, black, white, and blue. In the mid-1980s, LEGO Group extended its business into Asia and Eastern Europe, and it maintained a high place in Western Europe1. In order to stabilize their business growth and put a strong grip on the Western market, the employees of the LEGO Group work hard to control the growth of product sales. In order to attract customer attraction, the company introduced the new theme-based toymakers, sponsored promotions, and made cooperative ads with the wholesalers. For the first time in history, in 1998, the LEGO Group experienced its 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 company. 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 mold was so small, so a number of different shapes did not bother. As a result, the total number of manufactured toy items was not visible. In 2004, LEGO Group revealed that they had 3,560 different shapes, 10,900 components, and 157 colors in the category. Each shape demands a mold, and a mold average costs €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 Group, the net price of productions was not decided on which products were cost-effective. As a result, balancing supply and demand made it very difficult to determine whether the demanded products were delivered without delay or not from the stock 2.
  4. The customers of the LEGO Group were unsatisfied with the slow movement and stock-outs of the 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 jumped by 29% to Danish Krones (DKK) 6.8 billion, and the LEGO Group faced a loss of DKK 935 million.
  5. The management of the LEGO Group confirmed that the important/considerable investment in growing the portfolio of the product and increasing the resultant cost had not produced the expected results. In 2004, the disappointing products sales accounted for an additional 50% of the total sales reduction.

Conclusions

The LEGO Group is considered one of the famous companies in Western and Eastern Europe and Asia. He gained a strong position in the top 10 toy manufacturer Companies across the world. Despite the hard work and 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 bankruptcy. Due to the management and supply control and a lot of other factors, the company lost its strong position in Western and Eastern Europe.

End Notes

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

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.

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