Lego Case


Legois a Denmark-based company that deals with children’s toys. It’sa famous brand whose origins can be traced to a carpenter known asOle Kirk Christie who specialized in woodworking. The early productsof the company included piggy banks, wooden toys, trucks and cars.The company has over time revolutionized their products from wood toplastic toys. In 1949, Lego also added the production of interlockingbricks into its production chain. It is this architectural innovationlinked to the son of the founder, thatof propelled the company togreater profitable margins (Crawford &amp Benedetto 18).

Thecompany began reducing the wooden products and specialized in theproduction of plastic bricks and related products. Underpinning thetoys physical structure was an element of storytelling. It involvedlinking the use of traditional stories like pirates, space adventuresor medieval knights with film themes such as the Star wars (Antorini56). The range of diversification among Lego product boosted itsgrasp of market share. The story telling element progressivelytargeted diverse segments. Lego grew to be rated among the top tentoymakers globally. It’s not surprising that fortune magazine namedthe company the toy of the century in 1999 (Antorini 89).

Asa liberalized market would dictate, new entrants began flocking intothe business segment. New competitors destabilized the marketproducts of Lego products. Low-cost products started making inroadsinto their segments. For instance, Megabloks a Canadian companyfiercely disrupted the market with a wide range of low-cost toyswhich quickly pushed Lego out of the shelves. Coincidentally, thetraditional market comprising young boys was increasingly beingattracted to computer games.At the factory unit, there was lots ofcomplexity in developing new products. Supply chains became long andexpensive. The combination of these factors saw the company graduallylose money, and market share and the crunch peaked around 2003 with astated loss of $240million and qualms of a takeover by Mattel Company(Crawford &amp Benedetto 38).

Inorderto save the company from the declining trend, radical measures wereimperative. It involved an immediate change of guard at the topmanagement, coupled with cost-cutting measures and extensiverationalization. The tradition of family management ofthe companyended andan independent qualified CEO Jorgen Knudstrop was appointed(Antorini 46). The family further injected a lump some amount ofmoney for the restoration of the company. The changeover thoughpainful put back the company on profitability stands.

TheLego Company passed through a radical change process that ensured itreturned to profitable margins. The financial success of the companyis primarily due to firm efforts in diverse areas. It involves a moremarket responsive and focused product range, efficient productionprotocols, product mix, and more targeted marketing.Business peopleshould have focus in their business dealings and activities (Crawford&amp Benedetto 67). Focus ensures that an individual is within thecontext of profitability, customer satisfaction and within the goalsand vision of the company.

Despitethe much strength that Lego Company had to its advantage it failed toidentify them and take advantage to propel the company to greaterheights. The company rather engrained themselves in development ofthe similar products annually without any consideration of the marketneeds and wants. In its turnaround strategy, the company had torefocus and reduce certain add-on initiatives.The leading-edgetechnologies were emphasized to provide intelligent designs andanalysis of market needs. It is, therefore, a lesson that newproducts should be in the pipeline.

Tappinginto new markets is another strategy that that Lego used in itscomeback plan. The growth strategy involved tapping into the marketpotential of new regions such as the Japan, United Kingdom and otherEuropean countries. It ensures a growing target population for thecompany’s product this vision is hence a necessity for anyambitious business person. He or she should strive into new regionsto carve a market niche for his or her products (Crawford &ampBenedetto 98).

Theradical modifications imposed on the company fundamentally changedthe way the company transacted business. A major challenge in theproduction channel involved premium based pricing strategy. Itrequires the intervention of gross and net margin targets in order toachieve a return on the sales. The effective execution of theseinitiatives reversed the declining trend of the company. They wereindeed crucial for ensuring a profitable growth and at the same timeupholding a strong global brand among children and families.


Antorini,Yun Mi.Brandcommunity innovation: an intrinsic case study of the adult fans of LEGO community.Kbh: Copenhagen Business School 2007.

Crawford,C M, and Benedetto C. A. Di. NewProducts Management.Boston: McGraw-Hill Irwin, 2008.