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Transcript of LEGO Presentation
1. Company Background
2. Porters Five Forces model
3. SWOT analysis of LEGO products
4. Information System Strategy Triangle
5. NetDevil/Gazillion Entertainment alliance
Each year, 45.7 billion LEGO bricks are produced, that's 87 thousand bricks a minute
In the early 1990’s the amount of technology hitting the market was increasing, changing the toy market rapidly
In response, LEGO diversified its product line to include computer games, clothing, amusement parks and movies
In 2004, the company was losing almost $1 million everyday
In 2004, new CEO Jørgen Vig Knudstorp implemented a rescue plan for LEGO:
o Reducing costs
o Eliminating debt
o Returning profitability
Classic toy drawing on companies heritage
Strong brand recognition
Manufacturing simple relying on existing block range
Collaboration with movies & other 3rd parties
Limited to children who will outgrow it
Possible for unnecessary manufacturing complexity to be introduced with new blocks
Further co-opetition with 3rd parties
Adult oriented designs such as architecture line
Competitors such as MegaBloks
Other lines such as Mindstorm
Retain customers as they outgrow traditional toy
Possibility of gaining new adult customers
Foster community support
Too simple for some customers
Requires more R & D than traditional toy
Possible cannibalization of traditional sales
Further community integration
Possible to become educational tool
Fischertechnik direct competition
VIDEO GAMES & MMOG
Brand recognition carries over to video games
Concept of LEGO great match for MMOG
Co-opetition with 3rd parties has yielded good sales
Subscription fee barrier to entry
Late and poor introduction of free to play
Lack of main story content to match the price
Traditional video games not received well in adult markets
Re-launch MMOG with revamped free to play including micro-transactions
Try mobile gaming
Other free to play MMOG’s such as club penguin
PC not the most kid friendly gaming platform
Other child friendly video games
Information Systems Strategy Triangle
Information Systems Strategy Triangle
Is a framework designed to show the relationship business strategy, organisational strategy and Information strategy in a business.
Typically used to show emphasis on the alignment of each area and to show how supportive the information system of a given company is.
It is important to maintain a balance of all three strategies.
The business strategy of LEGO in the early 1950’s was to use similar plastic bricks to encourage long-term consumers.
LEGO were reluctant to change their business strategy
New business plan to maintain the market with its traditional methods, while bringing a new focus to technology related products, such as computer games based on movies, and an MMOG (Massive Multiplayer Online Game).
Simple organisational strategy of developing similar plastic bricks that fit together for multiple purchasing opportunities.
oThe strategy outlined a range of 7000 coloured bricks of varying shape to be produced among 12 production lines, which kept manufacturing costs exceptionally low.
After loses, they allowed over 24, 000 blocks and destroyed efficiency.
LEGO made a partnership with Lucas Arts to enter the gaming scene, to support a vague addition to the business strategy.
There are no details on much of any Information strategy until LEGO began working on videogames.
In 2011, the information strategy let the triangle down when LEGO Universe was released and proceeded to be thoroughly unsuccessful.
For LEGO, a co-opetition method was adopted to respond to the growing wave of competition it faced from electrical products.
LEGO launched a number of cooperative partnerships with media companies like:
NetDevil/Gazillion Entertainment Alliance
The objective of the partnership was for the development of the MMOG LEGO Universe.
LEGO was keen to develop its own range of digital media products to tap into the wider videogame market.
LEGO is not a videogame company. It required the assistance of another company.
The problem with co-opetition is that it increases exposure to unforeseen problems. For LEGO this included:
Greater exposure to risk
Loss of distribution control
Greater layers of complexity
Sony and the Future
The failure of the NetDevil/Gazillion Entertainment alliance identified the need for LEGO to focus on what it does best: make toys.
LEGO needs a strategic alliance that stays true to the core company values.
The new collaboration with Sony is hoping to do just that.
From a failing company in 2004, on the verge of bankruptcy, LEGO has transformed itself into the second largest toy company in the world.
Through the use of Porters Five Forces model, SWOT analysis, Information System Strategy Triangle and co-optetion analysis we've shown how this was done and where its leading LEGO in the future.
LEGO & Sony are working together to make LEGO toys that are powered by video game technology.