Lego Case

Legos Turnaround & repositioning strategy

Issues related to Legos Crisis
E.g. Demand is declining, product life cycle is shorter,
management complexity
Structure of the traditional toy industry
1) Buyers(consumers)-parents: not powerful
-retailers: control channel, purchase in big volumes, many
alternatives to choose from, switching cost is low
> the use of Walmart
Squeeze whole-sale margins
2) Substitutes
Internal causes of the decline (1993-1998)
Add video game , Lego media (movie, TV programs, books),
Children wearwristwatches, robotic bricks, theme in Windsor
1999-2004
Add in-licensed play themes (e.g. Star Wars), theme park in
California and Germany, videogames (changes: exit from
wristwatches and publishing, streamlining production,
consolidation of offices)
Problems with 1999-2004 changes
1) Package of changes is incomplete (managers rotation is
frequent)
2) Responds to environmental changes in a way not typical Lego
(designers hired in London, San Francisco, Milan Vs.
Designers traditionally hired in Billand)
3) In-licensed products: profits flow back to licensers (unique
components; sales volatility)
4) Direct sales cannot makeup sales through Walmart
Turnaround Strategy
1) Focus on brick-based products and loyal customers
2) Back to operations efficiency
3) Understand and respond to customers tastes not designers
tastes
4) Approach retailers as true customers and partners
(tailored offering:
- Exclusively to Target
- Breadth and selection to ToysRus
- Price leadership to Walmart)
Conclusion: Repositioning and diversification based on core
where you can create competitive advantages