The question of what the Lego Group should do in light of its recent situation is a difficult one. The company has a long history, but its future is uncertain, especially under new leadership. With that being said, the company has options, and its longstanding position among consumers provides the company with some time and options.
In conducting the strategic recommendations, one must first consider the SWOT situation for the company. In terms of strengths, Lego has a strong, recognizable brand that has always been loved. That brand came to be in 1916 and has been a staple ever since (Rivkin et al, 2013). It grew to prominence over the next few decades. In addition to being a popular brand with existing adults, there is a generational appeal to Lego because the toy has been in many families for almost a century. Another strength is the total cash flow of the company. While margins and profitability may have been struggling, the company had options financially because of the significant cash flow.
The company had many weaknesses. One weakness was instability at the top. Changes to leadership left the company without a clear strategic direction. Beyond that, one of the major weaknesses for the company is the competitiveness of the marketplace. While Lego might be one of the oldest toy makers, there are many other toy makers out there that provide options that are more interesting and hip for kids. This competitive market has eaten into the margins for Lego. Another weakness is the company’s relative lack of scale when it comes to manufacturing. It makes its own product, which makes it hard to keep up with low-cost producers.
One of the opportunities for Lego is to expand its product line. It can go with something other than the plastic blocks that have been its past. In addition, the company has a chance to get leaner by manufacturing its products somewhere else. This may be a big move for the company, but it presents an opportunity to compete.
In terms of threats, the company is threatened from multiple angles. It is threatened by technology and changing tastes. Consumers may have changed the things they like to play with. During the era when Lego became popular, there were no video games, iPads, and the like. Today, these things exist in spades, and parents can affordably provide their kids with digital entertainment that makes Lego products look less appealing.
In terms of strategic recommendations, the first and potentially most important is for the firm to begin outsourcing its manufacturing. They are making a stubborn decision to manufacture their own products, and it is based on the idea that when a company makes its own products, it is necessarily better. In truth, there is no reason to believe that Lego can make its own products better than a manufacturing company that has experience in this realm. The company can save money and potentially upgrade its products by outsourcing the manufacturing. Lego should not be in the business of operating factories, but rather, it should be using its brand, which has so much history, to promote new types of products. Given that major competitors like Hasbro are outsourcing manufacturing, this is a must for the company to compete.
It must also focus on more innovation and a long-term approach to implementing new technology with its existing blocks. Abandoning the original Lego blocks would make the company lose a chunk of its identity. The better approach is to ensure that it is both using its old brand and product recognition while providing some new twists in order to maintain the attention of the kids who play with the toys. Marketing the toys as being an educational element will also help win over parents who have so many options today.
- Rivkin, J. W., Thomke, S. H., & Beyersdorfer, D. (2013). LEGO (A): The Crisis.