Strategic plan for LEGO Group Company - Essay Example

Lecturer: Strategic plan for LEGO Group Company Executive summary The LEGO Group is a company that is family owned with headquarters in BIllund, in Denmark and is renowned for manufacturing toys that are LEGO-branded. Ole Kirk Christiansen established the company in 1932 and presently it has developed to be among the leading manufacturers of play material that target children (Harrison and St. John 93). The company has a commitment to the creative development of children as well as their learning and the products it manufactures are available in more than one hundred and thirty nations. This essay seeks to develop a strategic plan for the LEGO Group while considering various aspects of its operations. Company background The company was started in the founder’s workshop where Ole Kirk Christiansen created toys made of wood in 1932, but the first famous plastic brick was developed in 1949. The name of the company was developed by Christiansen from a Danish term meaning “play well”, however, the company states that LEGO means “putting together” or “assembling” in Latin, but this translation is liberal. In 1947, the company obtained samples of interconnecting bricks manufactured by Kiddicraft through the manufacturer of injection molding equipment based in London that had an interest in development of equipment sales in Denmark (Schroeder, Salzer-Mörling and Askegaard 18). Initially, Christiansen was skeptical but Kiddicraft convinced him to make the plastic bricks instead of the wooden toys he had been making. In 1949, the LEGO Group started making bricks that were similar to the manufactured by Kiddicraft while referring to them as “Automatic Binding Bricks”, using cellulose acetate while being developed in the same spirit of the wooden blocks which could be stacked on each other (Belk and Llamas 310). Nonetheless, the plastic bricks have the ability to be interlocked with each other as they contain a number of round studs on the upper side and a hollow bottom that is rectangular. These blocks were able to stick on each other but not too tightly to make it difficult to be pulled apart. Using plastics to develop toys was not highly favored by retailers as well as consumers at the time when LEGO Group began manufacturing its toys. Numerous shipments that the LEGO Group made were returned as a consequence of poor sales as it was considered that plastic toys had no chance of replacing the ones made of wood. An idea of a toy system was inspired by a conversation between an overseas buyer and Godtfred, Christiansen’s son, who was appointed junior managing director in 1954. He identified the huge potential of the LEGO bricks to develop into a system that could provide creativity in play; however the bricks still had some technical issues as they had limited versatility and ability to lock. The modern-day design of the brick was developed in 1958 and was further enhanced with hollow tubes on the bottom side of the brick with the aim of increasing support and improving versatility (Hirschmann 14). However, in the same year, the founder of the company met his death and his son inherited the company’s leadership. Cellulose acetate was dropped as the material that was preferred in creation of LEGO bricks in 1963, in favor of acrylonitrile butadiene styrene, also known as ABS plastic, which is more stable and continues to be used presently. ABS is not toxic and is less susceptible to warping and discoloration while at the same time having a higher resistance to acids, heat and salts among other chemicals compared to cellulose acetate. The LEGO bricks which were manufactured using ABS plastic as far back as 1963 continue to maintain their color and shape almost half a century later and continue to interconnect neatly with the ones that have been manufactured recently. Through the years, numerous other LEGO sets, pieces and series have been created, with several innovation enhancements and adjustment that have resulted in more colorful and versatile building toys which are common today. Vision The vision of LEGO Groups Company is “Inventing the future of play” as the company seeks to pioneer newer playing materials, ways of playing as well as business models of playing through leveraging on digitalization and globalization (Schultz, Antorini and Csaba 172). This is not only in regards to the products as it is also concerned with the realization of human possibilities. of the LEGO Mission statement The company is committed to developing and inspiring children to think in a creative manner, reason in a systematic way and maximize their potential to shape their future so that they can experience the human possibilities that are endless. SWOT analysis Strength Integrates educational aspects in order to develop critical skills in young children Has a robust brand name all over the globe in more than fifty nations Inspires goals oriented problem solving and play Possess a robust portfolio for its products Its theme parks continue to be popular destinations for tourists The company has differentiated into TV and films, video games and merchandise Extensive advertising has made it easily identifiable by the customers Weaknesses There is a concern about imitation of LEGO products as well as its brand name Increased competition leads to loss of market share to online games as well as high market switching Opportunities More diversification into other segments Organizing competitions in school settings Increased branding exercises to reach newer and wider segments Threats Children are increasingly favoring video games watching cartoon channels and the internet Outdoors games are becoming more common Long-term objectives LEGO Group is among the few organizations that have had a defined vision of the role played by creativity in the company The Design for Business model also shifts the strategy that influences innovation to focusing on the company from focusing on the product. This model concentrates on the definition of design and creativity in the organizational strategy, for instance, it connects the design strategy and the objectives of the company with the aim of achieving its corporate goals. Additionally, it also results in increased collaboration between teams that improves the process of innovation. This model needed several tools and processes to make sure that innovation was discussed and presented in a better manner. These tools were categorized as design-related and innovation-related, and this is comprehensible since design is the means through which creativity is turned into innovation. Even though the Design for Business model created an exceptional management process for the LEGO Group and in the process allowed design and innovation to be integrated into the company in a more holistic manner, there was a gap that continued to exist between its creative team and its marketing strategy. This gap was among the causative agents of the dramatic decline faced by LEGO at the end of the nineties and can be traced back to the creative team having ideas that were not aligned to the initial vision of the company. Strategic analysis and choice As an organization that is built on innovation with the aim of meeting the expectations of customers as well as the demands of the market, LEGO first response to the financial crisis was through the invention of new products with the hope that they would lead to new opportunities (Foss 66). A number of resultant products like Star Wars performed exceptionally in the market and seemed to save the company from decline while others like the Galidor failed miserably. Even though this innovation approach might have been appealing to LEGO at that time, the company had to key drawbacks in that the new products did not provide a solution to the problems of the company since they concentrated on customer passion for other products and that the themed products provided success for only a short time since movies eventually grew old. As a consequence of venturing into the new innovative product lines, LEGO Group found itself on the decline while attempting reinvent itself; additionally, the new products resulted in a decline of the market for the consumers who sought and preferred original LEGO bricks. The new products were among the reasons that led to the second decline of the company in 2003 and when the two main themes started declining, the sales of the company fell considerably. The solutions to the initial decline brought into perspective another aspect that needed to be considered in that the problem with LEGO was not innovation but instead the link between business goals and innovation. In the event that innovation gets out of hand, it disconnects from the strategy of the company and thus leaves a gap between creativity and business resulting in loss in sales like it happened to the LEGO Group. Short-term objectives and tactics For the LEGO Group, design for business was part of a strategy referred to as “Shared Vision” that was founded in 2004 with the aim of rebuilding the brand identity of the company as a creative enterprise that manufactures toys for children. The marketing department was supposed to provide a broader vision of creativity and innovation in the process of product development through this strategy (Marsh 84). The strategy was supposed to ensure that the business side as well as the creative side shared the similar aims while comprehensively understanding LEGO’s business strategy in order to achieve strategic objective through team resources. The problem that resulted in LEGO”s decline was not creativity but a disconnect between corporate strategy and creativity. The creative team along with the business team worked in silos with each one of them being authorized to innovate on any aspect it wanted. Even though LEGO Group was struggling with this issue, numerous organizations do not position creativity and design in the appropriate manner in their strategy and business. Possibly, the issue was more severe for LEGO since it is a company whose operations are based on creativity. The Shared Vision strategy is the connection between creativity and the business with the aim of putting the innovation process in its appropriate position in the company. It was able to bring the creative team out of its silo and linked it to the business goals of the company enabling it to create under the umbrella of a strategy that covered the entire company. This move was able to bring the strategy used by LEGO back to life with the development of products that are able to meet both business and creativity requirements. Financial projections and analysis The company experienced a budget deficit of approximately two hundred and twenty US dollars in 2003 that resulted in PoulPlougmann being replaced as the president by Kjeld Kirk Kristiansen. The next year saw the laying off of about one thousand workers as a result of budget cuts and Kristiansen was also forced to step down as the president in 2004 when the company reported a bigger deficit regardless of the fact that he had injected a considerable amount of his private funds into the organization. In 2005, the company returned some profit after it increased its revenue by twelve percent; additionally, it also reduced its expenditure and sold a factory in factory as well as its amusement parks. By 2011, the sale for the company had grown by eleven percent after they rose from 2.847 billion dollars in 2010 to almost 3.5 billion dollars. This increased profit was as a consequence of the huge popularity of the newer brand Ninjago that had become the biggest product introduction of the company in history. The rise in profits continued into 2012 where the company experienced a twenty five percent increase in revenue where more than sixty percent of the profits were as a result of the launch of new products like Friends. Reports also stated that the company had become the most valuable toy company in the world surpassing Mattel with a value of more that fourteen and a half billion dollars. Critical success factors Various factors have been critical to the success of LEGO Group over the years and continue to affect the performance of the company today. LEGO considers consistency as a critical aspect of its operations and maintains top-notch standards of quality (Scott 174). All the LEGO bricks are given unique numbers that correlate with the mold from which they were created. Through this approach, the company has been able to continue boosting products that have remained consistent in history. Pieces that were created as far back as the fifties continue to interconnect with the LEGO’s that were created recently. The LEGO Group has created different play set as well as other components but its consistency in the creation of the actual product has not changed in any way. Another success factor is the fact that the company builds collaboration in its process of designing products. However, even though design is critical in the success of LEGO, it was in some way the architect of its decline. The late nineties could be considered as a boom for LEGO Group as sales were up, it opened the first LEGOLAND theme park in the US and children were fascinated by its products. Nonetheless, in the midst of this success, the company made errors in judgement as it allowed its design team to over-innovate. The number of bricks that were uniquely designed increased from seven thousand to more than twelve thousand resulting in increased production costs but the demand remained the same. Rather than causing a decline, the crisis was an inspiration to the company to reconsider its design process and thus its came up with a collaborative process of making decisions so that all proposals had to be voted upon by the design team. Through the mission statement that describes developing and inspiring children to think in a creative manner, reason in a systematic way and release their potential of shaping their future, LEGO has been able to make its mission clear. It is relatively simple to identify this concept in all LEGO products and this focus makes the product a favorable decision for parents. Companies should take time on their mission statements when launching their startups as it is the foundation of the company and will assist in keeping the business on track while the value it provides will ensure that customers remember the business. LEGO has also continued to inspire and the adult fans of the company’s products are made up of devotees who organize conventions globally through online and offline sites. They are an indication of the ability of the company to arouse imagination of various kinds and follow them through to adulthood. Through the development of a product that has continued to evoke creativity, LEGO Group had made people remember and also return to it. Works cited Belk, Russell W, and Rosa Llamas. The Routledge Companion To Digital Consumption. London: Routledge, 2013. Print. Foss, Nicolai J. Innovating Organization And Management. Cambridge: Cambridge University Press, 2012. Print. Harrison, Jeffrey S, and Caron H St. John. Foundations In Strategic Management. Mason, Ohio: Thomson/South-Western, 2004. Print. Hatch, Mary Jo, and Majken Schultz. Taking Brand Initiative. San Francisco: Jossey-Bass, 2008. Print. Hirschmann, Kris. LEGO Toys. Chicago: Norwood House Press, 2009. Print. Marsh, Jackie. Changing Play.Open University Press, 2013. Print. Schroeder, Jonathan E, Miriam Salzer-Mörling, and SørenAskegaard. Brand Culture. London: Routledge, 2006. Print. Schultz, Majken, Yun MiAntorini, and Fabian F Csaba. Corporate Branding.Køge, Denmark: Copenhagen Business School Press, 2005. Print. Scott, Sharon M. Toys And American Culture. Santa Barbara, Calif.: Greenwood, 2010. Print. Read More