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SM___LEGO case

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by

Irene Zhao

on 22 November 2012

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Transcript of SM___LEGO case

Invented variety of “play themes” L E G O LEGO External Internal Main Issues Pre-sourcing Sourcing Post-sourcing The 3rd largest manufacturer of play materials
Since 1932
Over 130 countries; 10,000 employees
“leg godt” = “play well”.
Motto :“Only the best is good enough”
Main product: the LEGO brick/video&online game Lost core competitive edge in market

Over-diversified and complex products portfolio

High number of production components increased cost and complexity of management

Inefficiency of supply chain management in LEGO

High cost in production value chain and huge capital investment required in production countries. Different business models between LEGO and Flextronics caused serious conflicts

Coordination problems about the complex production network and supply chain

Fast transition led to ineffectiveness of the outsourced facilities

Agency problem Complexity in its processes and supply chain

Unbalance between internal supply capacity and market demand

Less focus on customer experience Recommendations Model of Grand Strategy Clusters Economic Factor - Economic recession
Social Factor- People pursue high quality life
Ecology Factor- Environmental friendly material Remote Competitive Position - The world’s third largest toy manufacturer
Customer Profiles - Especially developed regions / Youth & Children
Buyer Behavior - High customer loyalty New Entrants
(Threat of New Entrants – High) Buyers
(Power of Buyers – High) Substitutes
(Threat of Substitute – High) Suppliers
(Power of Supplier–Low ) Industry Competitors
(Intensive rivalry) Industry Operating SWOT Strengths:
Precious experience
- Learn knowledge of documentation and standardization of production
- Expand operations footprint globally (Mexico & Hungary )
Favorable reputation
- Customers are well-informed of its quality and brand mission. Weakness:
Diversification
- Main products: Bricks
- New products: computer games, clothing and television
- Results: inefficient, more complexity, Opportunities:
Operate in a right direction
Lack of developing Children’ mental abilities toy
North American and European markets: sustainable.
Asia market: Rapid Growth Threats:
Competitors: more flexible in producing new types of products.
- Babie dolls, Teddy bears
- High-tech products: racing car models CONCLUSION: Cell 2: strenghts & Unfavorable economic environment Value Chain Creativity Problem-solving Imagination Curiosity 1932 2004 2009 1998 Alternatives and Recommendations Concentrated growth (LEGO bricks )
Vertical acquisition (Supply chain )
Concentric diversification (High-tech toys)
Shared Vision (Work closely with retailers and manage LEGO very tightly)
S&OP (a process gluing all operation)
Standardization (the upper level: our way of thinking; the mid level: how we operate our planning processes and follow-up processes; the lower lever: the machines, lines and the layout in the production) LEGO Villege Northern European style of buildings and street Olympic Games New Central Square There are eleven theme buildings Use more than one million bricks 50 groups of Lego characters Kaii 0930200071
Mia 0930200137
Lucy 0930200086
Sally 0930200037
Irene 0930200135
Candy 0930200118 1960 1949 1947 Establishment Plastic Era The first piece of LEGO plastic bricks “MINDSTORM NXT”; sales decrease Deficit of DKK 1.8 billion; offshore outsource Conquered the hardships
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