Case Analysis

March 29, 2012 Presented by:

Johnny Burns Cara Dickinson Joe Martini Jaime Mizrahi

Executive Summary
LEGO all started in the workshop of Ole Christiansen, who was a carpenter from Billund, Denmark. He began making wooden toys in 1932 and by 1934 the company LEGO was formed. LEGO expanded to producing plastic toys in 1947. By 1949, the infamous interlocking plastic pieces were crafted. The business of LEGO was ecstatic up until the 21st century. However, with an extreme focus on the interlocking brick concept, the wave of the internet was soon to knock LEGO off their brick reliance. With a high concentration on the LEGO Brick, competition providing other entertainment needs for children from computers and video games to software and robotics, LEGO suffered a large threat to dominance among child entertainment. LEGO witnessed this and acted by introducing various products to keep up with the wave of technology. These new product lines were profitable for the company, however, the brand of LEGO suffered. Confusion among consumers on what LEGO actually was and how to differentiate among their other products was occurring rapidly at the employee and consumer level. LEGO must rebrand the entire company at the local and global level to one main concept in order to take control of their brand. The strategy to implement is known as Beyond the Brick. This concept is driven by four simple components: Explore, Make & Create, Stories & Action, and Next. The first step is to drive consumers to the idea of play. LEGOs mission statement is to nurture the child in each of us and this is proven highly in the concept. Once children are in the doors and given the opportunity of playing, they then have the ability to build with LEGO bricks. This construction of bricks and opportunity to construct revitalizes the classic and neglected creative side of LEGO. After using hands on work with bricks, children are given the possibilities of being involved in predefined stores, characters, or universes. Jump into an epic battle of Star Wars, fly around with Harry Potter, or save the day with Jack Sparrow are all possibilities. Finally, the main component is to transition consumers to other product lines from the brick product. One example is for children to realize they have a connection with Harry Potter and to then make that transition to a Harry Potter video game. With the introduction of the Beyond the Brick campaign, the global and local vision of the brand will be static. Having this focus on the heritage of where the company comes from to then transition consumers to other product lines is ideal for the companys success. LEGO will see extreme growth by introducing this strategy for overall brand management.

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Table of Contents
Current Situation and Problem Analysis ................................................... 4 Current Performance Strategic Position Corporate Governance & Key Management SWOT Analysis ......................................................................................... 5 Strengths Weaknesses Opportunities Threats

Situational Analysis ................................................................................... 6 Strategic Factors Strategic Alternatives ................................................................................ 8 Beyond the Brick Independent Unit Concentration Age of Technology Recommendation ....................................................................................... 9 Implementation ........................................................................................ 10 Evaluation ................................................................................................ 10

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Current Situation and Problem Analysis

As with any business, LEGOs audience has continuously changed since the company started. Changes in childrens development and play patterns, the increase in technology capabilities and devices, and a driven focus on getting kids outdoors has generated great competition for the LEGO brand. Additionally with the increased competition, LEGO has caused its own splintering in order to keep up with the ever-changing world.

Current Performance
Although LEGO has enjoyed decades of continuous growth and has always been considered a symbol of a family brand, in recent years the LEGO company has faced a decline in performance due to several adverse factors. Such decline has come in the form of dusty image among children, a fragmented brand, decreased market share, poor management, and almost no effective communication within the organization. This situation has been manifested in the company in many different ways, for example there is a lack of guidelines, follow up processes, and independent department. The result, LEGO has lost considerable territory to its competitors. In divergence with the past, LEGO not only competes with other toy manufacturers; LEGO now competes with many other forms of entertainment for children, such as the digital world, which is gaining more territory every day in todays market.

Strategic Position
Currently LEGO is mainly positioned as a children oriented organization. The brand started focus on toys but in recent years it has expanded its products offerings to software, accessories and lifestyle products. Although the company has made considerable efforts to maintain its historic heritage, LEGO has additionally attempted to keep up with the newer trends and fashions. What has occurred is that LEGO has lost part of its brand identity as it has become a product driven organization; most of the activities are based on keeping up with what the market desires at expenses of the company historic profile. LEGO has identified several niche markets within its target market, theme, technological, and builder toys and decided to focus on keeping up in each individual market (with independent departments). In other words, the LEGO brand is currently fragmented and its identity is no longer reflected in its offerings.

Corporate Governance/Key Management

One of the reasons the LEGO brand is facing a rather complex situation is the inefficiency of its management and corporate structure. With the company operating individual departments, management has done a poor job integrating these departments within the LEGO umbrella. There is a lack of communication within departments and with consumers; each department is working independently on its projects. The inefficiencies that arise from this situation have reduced the manageability and profitability of the company. 4| Page

SWOT Analysis
Strengths Recognizable and credible with parents Number one brand ranked for decades Good company values Wanting to adapt to latest trends in market (i.e. Harry Potter, Star Wars etc) Entering into 3 globally diverse markets Weaknesses Letting other companys gain greater respect among core audience (families) Losing business from changing habits of children into more technical toys. Fragmenting brand architecture with increased product expansion Lacking organizational structure for communication among executive officers.

Opportunities Threats Recognizable brand is easily grown Changing children toy habits and from being in the business for decades growth/ development Incorporating other levels of the Quick changes in the popular trends entertainment market. Dependence of global brands and Using changing trends in technology to trends advantage and use resources Competition

Strengths
With an evaluation of LEGO, it is clear how it has been a huge part of the toy market for decades, which plays to its strength of pure brand recognition. The good reputation they have carried for so long has now passed through generations and has given them an advantage in the market. In 2002- 2003, they were considered the third most respectable company to families with children (Shultz, 8). Seeing they are trying to work with new trends in media and entertainment Lego can really grow their global presence.

Weaknesses
Even with LEGOs great reputation among families with children, the brand that was once a mainstay has become diluted. The described uncoolness of LEGOs toys forced LEGO to grow their brand into many areas; this has in turn created less brand awareness in their new products. Their brand architecture is fragmented from product expansion and, by doing so, the organizational structure lacks needed internal communication.

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Opportunities
Growth in the current market is an enormous opportunity for LEGO. With such brand recognition, it will be easy to link other developments to the brand for fast development and growth in the entertainment market. They supplied decades of entertainment for children and can continue to grow with new products while updating traditional products.

Threats
Since LEGO has many traditional factors that come with their business and lack of organizational structures, they face many industry threats. Without the proper preparations, LEGOs competition, which is continually growing, will be able to market to the customer more effectively. The advances of technology and ever changing trends make it difficult to have one product while maintaining to own most of the market for long periods of time. With children developing faster than before, and those children losing imaginative play toys to advanced technology, is a huge threat to LEGOs mainstay toy. This threat means that LEGO must evaluate and update their product and allow for organizational changes, as well as, continue to be successful.

Situational Analysis
Strategic Factors
LEGOs current situation indicates that the company is facing a complex branding problem, but more specifically, LEGOs consumers have lost the brand image and identity that the company enjoyed in the past. In order for LEGO to be able to efficiently reach and target its desired consumers, so it can promote and advertise its redefined proposed image, the company must pay close attention to four main factors surrounding its desired target market. These four factors are namely the cycles of corporate branding: the stating, linking, involving, and integrating cycles. These previously mentioned cycles, in the order presented, are considered to be a standardized set of steps corporations follow in order to brand or re-brand an organization. Focusing on the LEGO case, we find that the first cycle, has to deal with stating or setting the foundation that will provide the source and base for the corporate brand. The stating cycle will provide the answer to what LEGO stands for which is to nurture the child inside each and every one of us. The idea is that LEGO sets a new foundation where it can encounter a balance between what it wants to become and what it was. Such balance will only be achieved if the position proposed is in line with the heritage, image, and stakeholders perceptions.

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After the cycle of stating is finished, the second cycle, linking, comes into play. Linking has to do with how the organization will use and take advantage of its current position, activities, images, etc. to support the proposed vision of the organizations brand. In the case of LEGO, the linking cycle will be extensively related in identifying how the different independent departments, product lines, and overall image will enable the implementation of a desired new brand image and identity. After conducting the linking cycle, the next factor to consider is the involving cycle. The involving cycle has to do with reaching the different stakeholders of the organization and selling them the proposed brand image and identity. What this means, is that LEGO will have to consider all the parties involved with its operations and check with each if the proposed desired image is in lines with their perception of the company. As an example, LEGO will have to check with its suppliers as well as its retailers to see if the proposed change is in lines with their expected image and of the company. Additionally, consumers play a huge role in this cycle. The last cycle is the integrating phase. After an organization has laid the foundation for its brand, revised this proposed brand image with the own organization culture, heritage, mission and objective, and check with the stakeholders involved, the next step is to integrate all this process into the business environment of the firm. This boils down to carrying out the message of a new corporate brand to the businesses and markets, as well as individuals involved with the current performance of the organization. For LEGO this will mainly be related to advertising and promoting its new brand image to the important parties involved.

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Strategic Alternatives
Alternative #1: Beyond the Brick
The first alternative to developing a brand image is through a concept that has four components/steps known as Beyond the Brick. These components are Explore, Make & Create, Stories & Actions, and Next. Explore Young children explore themselves and the world around them through play. Make & Create Consumers engage in construction and building processes creating their own universe, which revitalizes classic and neglected LEGO creative construction. Stories & Action Consumers involve themselves in predefined stories, characters, or universes. Next Consumers find the most innovative construction play materials that go considerably beyond the brick.

These four stages allow for LEGO to rebuild their image based around the consumer. These steps have direct time for implementation and will be followed in order as all of the concepts build to the end goal of a stronger brand. Utilizing this strategy will bring growth for the brand itself while also developing upon other product lines based out of the brick concept.

Alternative #2: Independent Unit Concentration

Since LEGO is currently operating with individual independent silos, Alternative 2 proposes that each LEGO unit carry outs separate advertising and promotion efforts within a single theme for the branding campaign. The idea is that LEGO generates a single brand theme that each individual unit will have to demonstrate with it singular efforts. The main idea proposed allows for the interaction and creativity of LEGO users by taking them to their own universe. As mentioned before, since the company is already fragmented it will make sense that each unit, that already knows its market, products, and how to advertise them, provides separate advertising and promotion strategies. Although this alternative can be more costly than the other proposed alternatives, it also offers a greater degree of possible efficiency in the way it will unify the brand image of the company. More in depth, we expect that the different departments of LEGOs as it are Toys, Softwares, and Accessories, review and understand the brand theme LEGO is trying to propose, that in this case is allowing interaction and creativity take the user to its own universe. After understanding the central theme, each department will proceed very similar to the steps proposed in the corporate branding cycles, in order to create a more adequately branding strategy for each 8| Page

of their products. In the end this will allow the organization, while internally working on individual departments, to offer a unified image and brand to the external parties.

Alternative #3: The Age of Technology

With the LEGO brand being well known in the family market, it spreads across a wide range of ages. Since we live in a constant changing world of computers and video games it makes sense to keep up with the ever changing technologies available. As we see, during the past decade or so, childrens play patterns have become more technological based and, in some part, use less imagination and ingenuity with building block foundations. With this turn we bring in the new age of LEGOs. The new age will entail phasing out the original and physical building blocks and creating a virtual game. This will accommodate the technology age and allow children to still design and create, but on a new level. The virtual game will be similar to an architectural simulation and allow players to link virtual blocks together and have more options to create structures. The virtual game will have layouts or blue prints of basic models but also allow for users to create completely different structures freehand. We can also capitalize on different packages for the game with more advanced models and advanced shapes. This will appeal to parents who can cut back on boxes of LEGO blocks used through the generations of LEGO lovers. Introducing the virtual world of LEGO will also bring more attraction to our theme parks because it will be a new, real life experience for the younger generations who use the virtual game and be a reminiscing place for the generations before. We can cut costs of packaging, storage for large inventory, and factories and maximize profits with an intuitive look at our future generations LEGO.

Recommended Strategy
After evaluating the three alternative strategies, the one we decided to recommend is the Beyond the Brick alternative. Alternative 2 Independent Unit Concentration was disregarded as it wouldnt help getting the LEGO organization within a single corporate structure. Although there were several benefits to this alternative, such as effectiveness, the high expected costs and efficiency problem are a major setback for this alternative. Looking to Alternative 3, we encounter a similar situation. The Age of Technology alternative is convenient as it will allow tailoring the company to the current market demands; still it is key for LEGO to maintain its heritage and history, for this reason the third alternative cannot be considered.

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Given the previous analysis of the second and third alternatives, we decided to maintain LEGOs proposal and recommend doing the first alternative Beyond the Brick. This option allows for many opportunities, first it permits the brand to rebuild its image and re-appeal consumers with a fresh new look. As this happens, we expect that this alternative also engages the market to closer ties with the brand and products. This option will also allow for flexibility within product development given the age groups and theme groups already determined by the organization. Besides the brand, product, and market development options of this alternative, we consider the Beyond the Brick option to be the one easily to implement by LEGO, as the company already has the structure and resources for such project. By using the Beyond the Brick option, we believe LEGO will experience an extreme positive impact on its overall brand.

Implementation
As mentioned before, the Beyond the Brick alternative is the easiest and smoothest alternative available to implement. Currently, LEGO has the resources, structure, and infrastructure needed to support this alternative. We believe the most important action to support this alternative is the corporate management buy-in. If the managerial leaders of the organization believe and support this option, we expect that this creates a top-down or trickledown effect through the rest of the organization. The action plan has already been created and the only thing needed is to follow each step carefully and dont try to rush results. With topmanagement committed to the idea, it wont be difficult to implement the plan. Still there are some areas that should be deal with precisely and carefully if LEGO want this alternative to succeed, being getting every department of the organization together, and unifying research methods, procedures, evaluations, follow up and other type of techniques.

Evaluation
Successful evaluation and control of the first alternative will be needed to succeed with this option. We recommend evaluating the different parties within the organization, as well as departments, products, suppliers, retailers, consumers, or any other type of entity involved. We believe the right way to asses these different areas of the organization are based on statistics, data, and surveys that apply to each section. For example we can measure a product by looking at sales data, or distributing follow up surveys or calls to customer or retailers. Similarly we can evaluate different departments of LEGO to see if they are working more integrated, for that we can measure at communication data as well as distributing survey among the employees. There are different options of how to evaluate and assess each entity involved with the LEGO organization, by doing so effectively, the alternative implemented would be constantly checked and assed to see if the implementation and impacts are as expected or not, something that will allow to adapt to different situations and strategies. 10 | P a g e