The article “Unpacking Lego” explores the growth trajectory of a company (Lego) that has expanded to become the second-largest manufacturer of toys in the world. Also, it explores the current challenges that the management of the company is dealing with. Lego has grown into the second-best toy manufacturer over ten years. One of the main reasons for the company’s rapid growth is its effective expansion and management strategies (The Economist par2). Lego’s growth is evident from its revenue, that has increased since its founding. However, the upward growth trajectory is being curtailed by various challenges related to globalization.
The company entered a rapid growth phase after Jorgen Vig Knudstrop became the Chief Executive officer (The Economist par4). Knudstrop introduced a different growth strategy that involved mass production of the company’s main product. On the other hand, he introduced more stringent management strategies (The Economist par5). Knudstrop has grown the company by introducing new products that have increased revenue. Finally, he has improved Lego’s relationship management strategies. Despite rapid growth, Lego is facing a serious problem of globalization. Rapid growth and decline in revenue have introduced numerous challenges about globalization.
Globalization has been a problem about the growth and expansion of Lego. First, growth has slowed down, and revenue has decreased. For example, in 2013, the company’s profit decreased by 26% while revenue decreased by 13% (The Economist par6). Lego is growing rapidly. However, the toy market is not growing at the same rate. Second, its expansion plan has led to the construction of more production facilities and an increase in the number of employees (The Economist par6). Also, it has globalized its management by creating regional offices in countries like Shanghai and Singapore. Third, Lego has suffered due to late entry into certain global markets.
For example, the company is making a late entry into China because other toy companies are exiting the Chinese market due to low sale volumes (The Economist par7). However, prospects of conquering the market are bright because many parents have expressed confidence in the company. They hope that Lego’s products will help their children improve their creativity and reduce dependence on video games. To solve the problem of globalization, Lego should embrace specialization and incorporate technology into its products. Through specialization, the company should focus on manufacturing products that have a monopoly in the toy market and avoid products that have low sale volumes. This will enable Lego to conquer a specific niche.
On the other hand, Lego should incorporate technology into its products in order to gain competitive advantage and quell competition from companies that develop video games and mobile applications. For example, toys should be manufactured with simple games and applications that offer options similar to those offered by video games. This will increase the longevity of toys with regard to their appeal on children and young people.
The Lego case has two main managerial implications. These include the need for innovation to increase the longevity of products and the importance of proper market research about globalization. Innovation is an important aspect of gaining competitive advantage in modern business environments that are volatile and unpredictable (Asefa 67). On the other hand, thorough market research enables managers to create efficient entry strategies into new markets without compromising the growth of their businesses or firms (Asefa 68). Developing proper growth blueprints is important for efficient application of globalization strategies.
Works Cited
Asefa, Sisay. Globalization and International Development. New York: W.E. Upjohn Institute, 2010. Print.
The Economist: Unpacking Lego, How the Danish Firm Became the World’s Hottest Toy Company. 2014. Web.