The Lego Group is one of the most profitable and sustainable companies in the toys industry. This Danish organization has its headquarters in Billund. Currently, it designs, produces, and markets Lego-brand plastic bricks for interlocking purposes and other toys. Additionally, it has amusements parks in different parts of the world. Such parks are given the name Legoland. It has also been operating a wide range of retail outlets. Since its foundation in 1932, this company has grown to become competitive and capable of meeting the demands of its key customers in different sectors. This essay gives a detailed description of the strategic issues associated with the Lego Group. The paper goes further to provide four recommendations that could have helped the organization remain more profitable.
Historical Competitive Advantage
The success of Lego within the past eight decades is attributable to the leaders’ ability to implement proper strategies and approaches that support the level of competitiveness. First, from the 1950s, this organization identifies emerging materials that can produce and deliver superior toys to the targeted customers. For instance, the company’s designers have been able to transition smoothly from wooden to plastic toys due to issues of sustainability (Sommer, 2019). Second, this company has been taking the issues of strategic development seriously. Such a plan is designed in such a way that the organization has been keen to produce and deliver new products that are more attractive and capable of meeting the demands of the targeted uses.
Third, the company’s top managers considered the most appropriate model that will help mitigate most of the challenges experienced in the external and internal environments. For instance, it downsized and transformed the existing supply chain systems to reduce wastes and focus on the best ways to record positive gains. Fourth, focused leadership has been a key asset or a source of competitiveness for the Lego Group over the years. For example, Kjeld Kirk was always focused and ready to monitor the trends in different environments and present powerful systems to improve overall performance (Anderson & Ross, 2016). Finally, Lego’s history would be incomplete without examining how the concept of brand heritage has supporting the intended goals. The manufactured toys and products have continued to transform the experiences of many children across the globe.
The company’s historical data reveals that numerous challenges towards the end of the last century affected performance. For instance, Frigo and Læssøe (2012) reveal that the organization experienced a turbulent period from 1970 to 1990. This company was unable to maintain its profits and compete directly in most of its established markets. These predicaments resulted from the serious economic challenges, the recorded oil crisis, and changing consumer expectations. Issues of sustainability also dominated most of the debates and discussions during the time. The resultant effect was a disoriented business performance. The leaders had to reconsider their strategies and implement additional initiatives that would help the organization recover and continue pursuing its future business aims.
External Environment: Rationale
The external environment dictates the strategy any business organization adopts if it is to remain sustainable and profitable. From the 1950s, Lego has been encountering various forces that have been affecting its goals both negatively and positively. The major aspects that the leaders at this organization have been putting into consideration are described below.
Political Factors
The political situations and developments in different countries have been dictating the operations of this organization. Its multinational status compels the managers to identify the needs and experiences of the anticipated customers in different states. For instance, corporate taxes and sustainability concerns dominated most of the political issues towards the end of the 20th century. Similarly, most of the developing nations are relying on taxation and regional agreements to meet their economic goals (Anderson & Ross, 2016). The company needs to consider these dynamics if it is to remain profitable. The rationale here is that political unrests and uncertainties in the countries the company exports and markets its toys will disorient performance. Consequently, the emerging issues will affect purchasing trends and reduce the recorded profits.
Economic Factors
From the 1970s, the global society encountered various economic challenges due to the recorded oil crises and the reducing production levels in different countries. These forces compelled Lego to downsize and consider how it could continue meeting the demands of its markets. In the recent past, economic challenges experienced in the developing world have affected the company’s ability to produce and deliver its finished products (Xu et al., 2019). The rationale here is that a negative economic trend at the global level will have negative impacts on any company’s performance and profitability. Fortunately, the developing world started to exhibit positive economic indicators from the early 2000s.
Social and Cultural Forces
The global society has been experiencing numerous trends that are changing family setups. For instance, many families in the developed world began to have lesser children in comparison with the years leading to 1950 (Tasgit & Ergün, 2017). Similarly, the developing world started to take the issue of family planning seriously from the 1990s (Daft & Armstrong, 2015). These developments have resulted in a scenario whereby the company’s number of customers for its toys has been declining. The spending power of different family units has been changing over the years. Schools have been changing the manner in which instructional are delivered to learners. The rationale behind such forces is that the Lego Group is no longer able to design and produce toys that can meet the demands of the targeted children. These issues compelled the leaders to consider a superior model that would minimize the dangers of such changes.
Environmental Forces
Before the 1960s, Lego primarily designed and marketed toys made from wood. This practice was appropriate since wood was locally available in different parts of Denmark (Daft & Armstrong, 2015). However, the relevant stakeholders realized that such a practice was unsustainable and capable of contributing to climatic changes. This observation compelled the organization to consider toys that would be environmentally friendly and sustainable. This new transformation would compel the company to change its business model and logistical operations. There was also the need to consider new ways of satisfying the demands of different clients. Such issues contributed to unique forces and challenges that led to negative consequences at the company. The leaders had to consider better ways to adjust its business model and consider the best ways to achieve the intended goals.
Technological Forces
The emergence of the Internet is revolutionizing business operations and processes. The demand for virtual games and toys has been on the rise. Additionally, the emergence of the Internet is transforming the need for physical toys in the classroom. Lego might no longer be able to meet the demand of these new customers. Its physical toys have increased chances of becoming obsolete. The original technology utilized to support performance is easily replicable, thereby making it impossible for Lego to continue pursuing its goals (Daft & Armstrong, 2015). The rationale is that Lego’s business model does not compete from the lens of technology. Additional changes and considerations are essential to minimize the impacts of these trends and prepare the company for additional gains in the near future.
Organizational Strategy and Structure
Lego relies on a horizontal organizational structure that informs the implemented strategy. Such a format allows the current CEO to liaise and collaborate with the other managers. Some of them include Chief Operations Officer (COO), Chief Digital and Technology Officer, Chief Financial Officer, and Chief Commercial Officer, and the Head of Corporate Affairs. The professionals collaborate to make appropriate decisions that resonate with the demands recorded in the market and the changes in customer needs (Daft & Armstrong, 2015). Additionally, this management team coordinates activities and provides the relevant guidelines to the targeted followers in different units across the company. Regional leaders are also allowed to complete a wide range of tasks that are intended to deliver positive results. The Board of Directors is involved in a wide range of activities that will take the company to the next level.
At Lego, the key leaders begin by formulating a strategic plan for a specific period. They identify pioneers and experts to drive the process and implement the best change. The company identifies changing consumer demands ad relies on the acquired information to design high-quality and acceptable products. Within the past three decades, Lego has chosen to diversify by venturing into the retail sector. The creation of amusement parks is a process that has helped the company achieves most of its goals (Frigo & Læssøe, 2012). The elements or approaches have contributed to a unique strategy leveraged through continuous digitalization. Consequently, the company has succeeding in designing and creating superior products that continue to meet the changing demands of many customers.
Organizational Structure: Signs of Deficiency
The above section reveals that Lego has succeeded because of the adaptability and effectiveness of its business strategy and structure. The horizontal model allows the company to have a unique culture were all individuals are involved in organizational activities. Unfortunately, some signs of structural deficiency exist that the leaders can consider to streamline operations. First, the company has not adjusted the formulated strategy in such a way that it resonates with the cultures of different locations. This gap explains why the company has failed to record positive gains over the past decade (Frigo & Læssøe, 2012). Second, the organizational structure is expected to work perfectly across all regions and business segments. The sign of deficiency exists because the west and east countries tend to have diverse expectations in the manner in which guidelines and leadership practices are done. Without customized structures for every region, it remains hard for the leaders to meet the demands of the anticipated followers and deliver the intended gains.
Third, the current horizontal structure creates a scenario whereby the CEO completes his or her roles in collaboration with the other members of the management team. This model creates a deficiency whereby the CEO might not be a position to make key decisions or provide a sense of direction. Consequently, decisions take longer to formulate and transform overall organizational performance (Handley, 2018). Fourth, the present strategy and structure do not appear to be in tandem with the company’s growth and diversification model. The leaders have not been keen to consider the demands recorded in different markets and identify the best approaches to maximize profitability and sales. These gaps explain why the company is yet to become the leading player in the global retailing and toy industries.
Measuring Efficiency and Adequacy
At Lego, efficiency remains a critical issue that dictates the kind of decisions made to promote business performance. The leaders measure adequacy by considering the level of processes and inputs in various manufacturing plants. The accumulated ratio is then equated with the output and impacts on the company. Being an effective company, the leaders focus on this measure of efficiency to calculate sales, quality, and outputs. The individuals are able to examine whether the company is able to achieve its goals and record the intended profits. The company’s top leadership also monitor the performance of key workers to support the process of human capital management (Tasgit & Ergün, 2017). The professionals also focus on the best ways to monitor the nature of communication, leadership, interaction, adaptability, and the nature of the business environment.
From this analysis, it is agreeable that the presented measures of efficiency put in place at this company are effective. The implemented strategy makes it possible for the leaders to analyze the contributions of different workers and compare them with the recorded outputs. The company’s outputs are contrasted with the inputs required to deliver the targeted final products. The process also becomes the best model for identifying some of the recorded gaps and challenges that affect profitability (Rodrigues & Franco, 2019). The recorded findings become the best tools for dictating the necessary changes, transformations, and improvements that can ensure that the company continues to improve its business efficiency and profitability. The research and development (R&D) team examines the recorded gains to make informed decisions to design superior products that fulfill the demands recorded in the global market. Such attributes explain why this company continues to remain competitive.
Recommendations
The Lego Group has a long history characterized by diverse challenges and turnarounds. The able leadership of different CEOs and managers in the past has led to superior decisions that helped the company to achieve its goals. Currently, the organization has managed to venture in a number of sectors that differ significantly from its original business line, including amusement parks and retail stores (Rodrigues & Franco, 2019). If the company is to overcome some of the pressures experienced in the external business environment and achieve its business aims, there is a need for the leaders to implement new changes.
First, Lego can introduce a superior organizational structure that is customized depending on the cultural attributes and demands recorded in the targeted countries or regions. Presently, the horizontal structure is designed in such a way that all key members of the top leadership are involved in decision-making (Tasgit & Ergün, 2017). While this model can work effectively in the Danish market, the situation for the Chinese market would be different. A paradigm shift in this form of structure will allow the company to address the recorded challenges. The company will find it easier to engage most of the leaders and followers, thereby increasing chances of positive organizational performance.
Second, the global community is currently embracing new technologies that resonate with the demands of many consumers. For instance, many schools and young children are embracing virtual games that are available from computers and handheld devices. This development means that the company’s physical toys and products have increased chances of becoming obsolete. This challenge explains why there is a need for the top leaders at Lego to venture in this new technological sector (Törmer & Henningsson, 2020). This strategy will reduce most of the recorded challenges in the market environment and prepare the company for the increasing level of competition. The organization can also engage the R&D department to monitor the trends recorded in all parts of the world. The company will eventually achieve its business goals and meet the changing technological demands of the targeted customers.
Third, Lego is a leading company in these three sectors: toys, retail, and amusement parks. The past three decades reveal that a proper management approach for every field can deliver positive results and meet the demands of the targeted clients. Unfortunately, these sectors are not enough to support the company’s goals and make it profitable in different regions. The company’s executive leaders can consider additional areas to invest to maximize profits. This strategy should be informed by the changing nature of demand in different markets across the globe (Sommer, 2019). The replication of the company’s business model would be appropriate for the proposed sector if the company is to become competitive and eventually achieve its business goals. Such attributes will make it a leading player in the selected business sectors.
Fourth, Lego has a chance to borrow numerous ideas from some of the successful companies in different industries, such as Toyota and Google. These organizations can provide superior incentives for streamlining production and logistical processes. The company can also examine the initiatives the Walt Disney Company puts in place to support the performance and profitability of its amusement parks (Lubiński, 2020). The organization will use the example of Google to craft a superior culture that brings all employees and customers together. The new culture will become a new opportunity for addressing most of the emerging problems and allow the workers to consider the best ways to improve performance. Such achievements will ensure that the company is on the right path towards achieving its business aims.
Conclusion
The above discussion has identified the Lego Group as a successful company with various competitive advantages that have made it successful within the past five decades. The forces emanating from the external environment have presented negative impacts that compel the leaders to implement superior measures to remain sustainable. The structure and strategy put in place are appropriate and capable of improving Lego’s competitiveness. The consideration of the recommendations presented above can make it easier for the company to stop the decline recorded over the years and become more profitable. The leaders should study the trends recorded in different regions and implement a superior strategy that will eventually improve the organization’s overall performance.
References
Anderson, P., & Ross, J. W. (2016). Transforming the Lego Group for the digital economy. Massachusetts Institute of Technology.
Daft, R. L., & Armstrong, A. (2015). Organization theory & design (3rd ed.). Nelson Education.
Frigo, M. L., & Læssøe, H. (2012). Strategic risk management at the Lego Group. Strategic Finance, 27-35.
Handley, L. (2018). How marketing built Lego into the world’s favorite toy brand. CNBC.
Lubiński, K. (2020). The study of nostalgia-oriented strategy aimed at Millennials on the example of the Lego Group. Journal of Intercultural Management, 12(2), 82-105.
Rodrigues, M., & Franco, M. (2019). The corporate sustainability strategy in organisations: A systematic review and future direction. Sustainability, 11(22), 6214-6235.
Sommer, A. F. (2019). Agile transformation at LEGO Group. ResearchTechnology Management, 62(5), 20-29. Web.
Tasgit, Y. E., & Ergün, E. E. (2017). Corporate culture and business strategy: Which strategies can be applied more easily in which culture? International Journal of Business and Social Science, 8(6), 80-91.
Törmer, R. L., & Henningsson, S. (2020). Platformization and internationalization in the Lego Group. Web.
Xu, H., Hui, K., Fu, C., & Zhang, H. (2019). Computational LEGO® technic design. ACM Trans. Graph, 38(6), 1-14. Web.