Introduction
Lego, a Danish toy company founded in 1932, has been successful for nearly a century. Children all across the world have enjoyed playing with its recognizable brick toy, which has gained widespread recognition. The Lego Group has experienced a transition in recent years that has greatly enhanced its financial performance. Over the years, the business has had to adjust to changes in the toy market, but strategic management has been essential to its ongoing success. This analysis will examine Lego’s strategic decisions and their resulting consequences.
Strategic Issues and Choices Facing Lego
Strategic Positioning
One of Lego’s primary strategic concerns was repositioning itself in the market. According to the Lego (n.d.) case study, the company was experiencing diminishing sales and financial losses in the early 2000s. The business understood that in order to be competitive, it needed to reinvent itself in the market. Lego’s initial answer was to concentrate on decreasing costs by restricting the variety of bricks and sets it offered. Meanwhile, this strategy did not deal with the underlying reasons for the company’s issues.
Product Innovation
Lego understood that in order to be competitive, its goods needed to be innovative. With the intention of developing fresh and innovative goods that would appeal to a broader range of consumers, the firm started to invest substantially in research and development. The Lego Mindstorms robotics kit, which lets kids construct and program their robots, was one of the important items that came out of this initiative. Lego’s investment in research and development and its commitment to innovation played a crucial role in the success of the company and its ability to adapt to fluctuating market conditions.
Brand Management
Lego also decided to concentrate on brand management as a strategic decision. Lego acknowledged that its brand was powerful and that it could use this to boost sales. The company started focusing on properly promoting its products across a range of platforms, including television, social media, and in-store displays. By prioritizing brand management, Lego was able to leverage the power of its brand and improve its sales through effective promotion on various platforms.
Types of Strategies Evident at Lego
Business Level Strategies
One of Lego’s key business-level strategies is product differentiation. The patented brick design, which has remained the same over time, has allowed Lego to set its products apart from those of its rivals. The business has made significant investments in research and development, leading to the production of goods like the Lego Mindstorms robotics kit (Lego, n.d.). These goods have aided in separating Lego from its rivals and establishing a competitive edge. Additionally, in order to attract new customers and boost sales, the company has expanded its product line to include licensed themes like Star Wars and Harry Potter (Lego, n.d.). Through these, Lego has developed a competitive edge in the toy business over the past years.
Innovation Strategies
Lego has also employed a product development strategy by continuously developing new and innovative products. Innovation is at the core of Lego’s strategy development. According to the Lego (n.d.) case study, Lego has implemented open innovation by teaming up with suppliers, customers, and other stakeholders to develop new products. The company has also used crowdsourcing to interact with its customer base and produce fresh ideas. A committed group of designers and engineers at the company is in charge of creating innovative products that satisfy customer demands.
Brand Management Strategy
Lego has used a brand management technique by utilizing its powerful brand to boost sales. The business has made significant investments in marketing and advertising, reaching its target market through a number of channels such as television, social media, and experiential marketing events. Furthermore, Lego has established offices and manufacturing facilities all over the world as part of its corporate-level plan to expand geographically. In addition to global expansion, Lego has broadened its portfolio through acquisitions (Lego, n.d.). This has contributed to the brand’s increased visibility and ability to draw in new clients.
Implementation Issues Facing Lego
Leadership
One of the key implementation issues facing Lego was leadership. The company needed strong leadership to make the adjustments necessary to reposition the firm in the market. A significant turning point for the business was the selection of Jorgen Vig Knudstorp as CEO (Lego, n.d.).
Knudstorp was able to offer the direction needed to bring about the adjustments, such as restructuring the organization, cutting costs, and refocusing the company’s efforts on its core products, which were required to turn the business around. Additionally, to monitor the strategic direction of the business and ensure that resources were deployed effectively, Lego established a board of directors.
Resource Allocation
Resource allocation was another key implementation issue for Lego. To properly execute its strategy, the company needed to distribute its resources efficiently. This required careful resource allocation between manufacturing, marketing, and research and development. By developing a solid governance structure and defining distinct objectives for resource allocation, Lego achieved this equilibrium. This allowed the business to dedicate resources to manufacturing to fulfill the demand for its goods.
Conclusion
Lego’s success may be linked to its skillful application of strategy development. The company carried out an in-depth analysis of both its internal and external surroundings, which allowed it to create an organized strategy. Lego’s strategic goals were based on its core competencies and its ability to innovate.
The company created a culture of innovation by investing heavily in research and development and encouraging employees to be creative. Lego also established a strong governance structure and set clear priorities for resource allocation. The company’s success is evidence of the value of developing and implementing an effective strategy.
Reference List
Lego (n.d.). Lego. EU.