Case study: Understanding key strategic issues relating to LEGO

Introduction

This individual assignment will be assessed by means of a 3,000 maximum words report. The assignment has been designed to allow you to develop and use your knowledge and skills in understanding key strategic issues relating to LEGO. You will be required to apply the strategic concepts and analytical techniques studied in this module. All the learning outcomes below will be assessed:

1.Demonstrate critical understanding and application of relevant theories associated with global corporate policies and strategies.

2.Understand the holistic nature of strategy and apply analytical techniques to solve complex problems in real life organizations.

3.Demonstrate knowledge of the strategic decision making process through critical analysis of how strategic decision making enables an organisation to relate to its global business environment.

4.Critically evaluate and monitor the business mission, objectives and policies of international organisations.

5.Use critical reflective skills to reflect on the impact of their understanding on the problem solving process.

Task

Your task is to carry out a critical analysis and evaluation of the strategies adopted by LEGO, using the information provided and other materials researched. You will be expected to select and apply appropriate theories, techniques and models studied during the module whilst having regard to the practical aspects of strategy development. Your assignment should be presented in a business report format and should be within the range 3,000 maximum words (excluding executive summary/abstract, references and relevant appendices). The report should include a title page and abstract and be fully and consistently referenced, using Harvard Referencing style. It is recommended that you research information additional to the case study to support your arguments. This may be obtained from a diverse range of sources and you are encouraged to research the issues in whichever way you deem appropriate.

Question One: Toy industry competitiveness

“We are on a burning platform, losing money with negative cash flow and a real risk of debt default which could lead to a break up of the company”. Fact finding is the first step to problem solving. That would require a back to basics review and assessment”.

Using the information in the case study, and relevant data/information from company annual reports, websites and related journals critically evaluate the nature of the competitive landscape faced by LEGO from its most relevant competitors. Discuss the extent to which you believe that industry dynamics had a significant impact on LEGO’s profitability during the period 1997 to 2006. [30 % marks]

Question Two: Innovation and knowledge management

In the late 90s, LEGO’s market share had begun to decline. Kids were playing more with video games, and other toys, and LEGO wasn’t cool anymore. They decided that they had to disrupt themselves, before someone else did. Lego appointed turnaround specialist, Poul Plougmann, as the new CEO in October 1998. Plougmann launched a number of initiatives to achieve disruptive innovation at LEGO, but ultimately was not able to achieve a successful turnaround, and was replaced in January 2004 by Jørgen Vig Knudstorp, who succeeded where Plougmann had failed.

Using your understanding of sustaining innovation and disruptive innovation, critically analyse and compare the innovation strategies adopted by both CEOs. How did LEGO address the challenges of recruiting and retaining a skilful workforce? [30 % marks]

Question Three: Corporate social responsibility

“When we design and engineer our toys, we strive to make them safe for children. We look to reduce their environmental impact and build them in facilities that adhere to high standards. We are committed to strong ethical and environmental performance both within our company and in our communities”, Mattel Citizenship website.

“It is at the very heart of our company to always strive to do better. We aspire to give children the best play experiences, to be the best partner to work with, to be the best workplace for our employees, and to be the best company for society”, Lego owner, Kjeld Kirk Kristiansen, 2015

Carry out a comparative analysis of the CSR strategies adopted by both Mattel and Lego. [20 % marks]

Question Four: Expansion strategies and global competitiveness

In 2015, LEGO enjoyed an astounding growth of 25% in revenue ($5.2b) and 31% in net profits ($1.3b). Mattel sales dropped by 5% but they still retained the number one spot with $5.7b in revenue whereas Hasbro came in third with $4.45b in revenue. In 2016, Mattel and Hasbro (both US-based corporations) were rumoured to have discussions about a possible merger to take on LEGO though it is highly unlikely to happen.

As a strategic business consultant, what strategies would you recommend and what would be your advice to LEGO management to move forward and to take over the number one spot in the toy industry.

[10 % marks]