Chaima Ghodbene
Lego
The LEGO Group is a privately held toy company based in Billund, Denmark.
The company is still owned by the Kirk Kristiansen family who founded it in
1932.
To analyze the External environment of company a Pestel and a SWOT
analysis are conducted:
1- Pestel
Political Factors:
Lego has the approach of not taking an interest intentionally in any political occasion, they
avoid governmental issues and this arrangement is depicted through their activities on
different events.
Economic Factors:
Lego bunch in 2006 it declared that it would shut down its plant in US following 70 years of
business.
The organization wiped out around 1200 occupations causing monetary ruin. It referred to
the developing electronic device messing around culture in US of late. The organization was
one of the last toy organizations assembling child toys in America. This factor constrained
out Lego Gathering out market in light of the fact that the new patterns were more
appealing than their toys. The organization had to migrate to Mexico since activity cost was
less expensive contrasted with different areas. New York-based autonomous toy examiner
Chris Byrne takes note of that dynamic social culture has affected children to begin playing
computerized music players and computer games than conventional toys. From that point
the Gathering has begun contributing on kid-accommodating toys to quit falling deals.
Social Factors:
Lego organization has worked together with UNICEF to secure and defend privileges of
youngsters by taking out kid misuse and kid work. It has an extremely clear position on
these issues and every conceivable activity to improve the present circumstance. Lego has
vowed to be capable in its business direct as toys are most unequivocally and sincerely
associated with kids, accordingly the onus of creating toy characters that are solid for
youthful personalities lies on them. Being the market head now its Lego's duty to help kid
welfare issues and it is doing as such, it has vowed to give UNICEF a complete $8.2 million in
the coming a very long time so as to be put resources into kid welfare ventures, especially
for youngsters living in combat areas. Lego accepts that a youngster's psychological and
scholarly development depends a great deal on the sorts of difficulties and exercises they
perform at a youthful age and these kids who live in combat areas don't develop rationally
as dynamic as others.
Technological Factors:
Lego has worked together with Texas Instruments to make robot that keeps running on
unrivalled innovation. The robots worked with this innovation would be constrained by
remote controls, Bluetooth gadgets and so forth. Lego Robot stage isn't accessible available
to be purchased yet in addition for instructive purposes. Lego is known as the Apple of toy
industry due to its constant development and inventive advertising and circulation system.
It is available in excess of 100 nations everywhere throughout the world.
One magnificent case of viable and astute showcasing by Lego is production of vivified
arrangement utilizing its Ninjago characters, they realized that the more kids will watch
these arrangements the more they will be genuinely joined to these animation characters
and along these lines will request that character explicit toys.
Legal Factors:
Lego operates in different countries, so it has to be very careful regarding the rules and
regulations of the countries in which it is operating. It should check whether the
government policies or judicial don’t affect its business in negative sense. It should also keep
in mind that different countries give different level of protection for the intellectual
property rights. In 2017, Lego has won the copyright case against two Chinese companies.
The products were manufactured under the name Bela and it was the copy of Lego which is
hurting the business of Lego significantly. After winning the case, Lego now has the chance
that it will file more suits against the companies violating its trademark.
Environmental Factors:
Consumers today are becoming more and more conscious about the environment and the
negative impact the companies have on the environment. Lego is making great efforts in
reducing its carbon footprint by making product more sustainable and environment
friendly. The Lego group has met its 100% renewable energy target three years ahead of the
schedule on 2017.
It has now set an ambitious target of finding and implementing sustainable alternatives to
plastic materials by 2030. Lego us also focusing on being energy efficient while producing
Lego bricks and till now it has improved its energy efficiency by 12%. Apart from it, they are
also determined to reduce the CO2 emissions and it is encouraging its support suppliers to
reduce the carbon footprint.
To conclude, the above Lego PESTLE Analysis highlights the various elements which impact
its business performance. This understanding helps to evaluate the criticality of external
business factors for any brand.
Porter 5 forces :
Bargaining power of buyers : Low
In the case of Lego, the larger buyers like Walmart and Toys R US are among the most
significant buyers that buy in bulk from the company. These retail brands purchase from
Lego in large volumes and therefore hold significant bargaining strength. However, none
of these poses a credible threat of backward integration. Apart from that, the individual
customers do not hold a significant bargaining strength.
Moreover, the products sold by the Lego group are highly differentiated or unique and
therefore it reduces the bargaining power of the buyers. Lego is a leading player in the
Toy industry and also one of its kind. The products sold by Lego are highly unique and
their demand is high. As a result, the company can charge premium prices. These
strengths of the company help it control the bargaining power of both the buyers and
suppliers. The overall bargaining power of customers is moderately high.
Threats of substitute : Moderate
The threat of substitutes mainly comes from the products that the rival brands make,
and as in the case of Lego, there are still 4 or five direct competitors apart from smaller
and less notable brands. A high level of differentiation and product quality helps the
company manage the threat from the substitute products. Apart from that, marketing
also plays an important role in helping the company manage the substitute products’
threat.
It is the twenty-first century, and the use of digital technology and digital games and
apps has grown in customer groups of all ages, including children, teens, and adults. Kids
in larger numbers are using online resources to play and learn. While Lego offers an
entirely different experience, digital games and apps have also achieved a high level of
engagement and customer loyalty, making them tough competitors for the brand.
The company has focused on product quality, marketing, and innovation, to reduce the
threat from substitute products, including physical products and online services. Overall,
despite its differentiation and great marketing strategy, the company faces a heavy
threat from the substitute products.
Threat of new entrants : Low
Lego is one of the two largest brands in the toy industry, and that places it at a
significant advantage compared to any new player that may enter the market through
an acquisition or afresh. Marketing also places Lego at a significant advantage. Any other
brand trying to make an entry and compete with Lego will have to spend heavily to
overcome the customer loyalty it enjoys. It will also be required to differentiate its
products significantly to win in the toy industry. Overall, the threat of new players
entering the market and taking away market share from Lego is absolutely minimal.
Rivalry : Moderate
Lego has several competitors in the market, including Bandai Namco, Fisher-Price,
Barbie, Mattel, Hasbro, and others. However, Lego also enjoys substantial advantages
based on its brand image, marketing, market position, and differentiation. The company
has achieved a unique identity in the market. Apart from that, its focus on innovation
has also helped it strengthen its market position and market share globally. The level of
competition grows because of the diversity of players in the industry and the high exit
barriers. Companies have to focus on marketing and brand image to maintain user
loyalty apart from innovation and product quality.
2- We can study Lego’s internal environment by :
- Analyzing the strategic capabilities of the company which can be done using the
VRIN model.
- The internal diagnosis should also include the assessment of the company’s
functions and processes: The different departments of the company have to be
deeply analyzed e;g : -Commercial department can be analyzed using different
matrices such as sales volume, customer loyalty, sales evolution, quality ..
- An assessment of the internal strengths of the company should be done and 3
ways to do it are: - Self-assessment/ Absolute Assessment: Notwithstanding competitors
-As compared to others, Benchmarking: comparison with competitors
- As compared to a pre-established profile to which the company
wants to conform.
- An analysis of the value chain that invites the strategist to think of an organization in
terms of sets of activities – sources of competitive advantage can be analyzed in any,
or all of these activities.
- Swot analysis that summarizes the strengths, weaknesses, opportunities and threats
likely to impact on strategy development.
3- What is its strategic management?
Lego's vision is : “inventing the future of play” and , to help accomplish them, the company uses a
growth and an innovation strategy.
1- Growth strategy: The Lego group has chosen a strategy that’s based on a number of growth
drivers. One is to increase its market in the US. They also want to increase market share in Eastern
Europe where the toy market is growing rapidly. In addition to that, the company wants to invest in
emerging markets but with caution.
2- Innovation Strategy: On the product side, the Lego group focuses on creating innovative new
products from concepts developed under the title “obviously Lego, never seen before”. The
company wants to come up with new concepts every two to 3 years. The company also intends to
expand Lego education, its divison that works with schools and kindergarten. Lego will develop its
digital business as the difference between the physical world and the digital one becomes more and
more blurred and less relevant to children.
Here is a simplified framework of Lego :
Sources:
The LEGO Group- About us- [Link] US. (2021). Retrieved 14 May 2021, from
[Link]
A five forces analysis of Lego. (2021). Retrieved 14 May 2021, from [Link]
forces-analysis-of-lego/
Team, M. (2021). Lego PESTLE Analysis | PESTEL Analysis of Lego | MBA [Link].
Retrieved 14 May 2021, from [Link]
