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Case Study LEGO

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Matthew Lane

on 25 October 2013

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Transcript of Case Study LEGO

Potential Threat of New Entrants
Low Threat
Set up costs and established competition made the market appear unappealing
Bargaining Power of Buyers
High as
Large retailers gained dominance over the retail market
Chinese made toys cheaper and Danish Kroner rose in price
Bargaining Power of Suppliers
Bad sourcing policies at LEGO
Procurement staff could not leverage the company’s large size in negotiations.
Threat of Substitute Products
LEGO is a toy company that relies largely on children
Any other type of toy could become a substitute for LEGO.
Industry Competitors
LEGO Clones not on same level as LEGO
Traditional Lego Product
• Well established
• Children grow out of lego
• Room for expansion on different platforms
• Threat from similar, cheaper products
Adult Mindstorm
• Keep older audiences interested in Lego
• Limited capabilities
• Allowed Lego to obtain feedback from customers
Lego and NetDevil/Gazillion Collaboration

• Collaborated on Lego Universe which ultimately resulted in failure in a small time period

Factors contributing to the failure include:

• Entering an already saturated market with much more well established competitors.
• Using the wrong metrics
• Inability to decide on a revenue model
Case Study LEGO
MATTHEW LANE – 3980352
Potential Threat of New Entrants
Lower or Higher
New LEGO not an attractive competitor, or slightly higher as
Thriving market for building blocks
Bargaining Power of Buyers
LEGO more powerful
New LEGO initiatives
Bargaining Power of Suppliers
Strengthened LEGO financial position
Fixed sourcing program has strengthened its position with suppliers
Threat of Substitute Products
Still a concern
Successful video game (excluding LEGO universe)
New product lines
Industry Competitors
LEGO still faces competition
Video Games
• Target same audience on different platform
• Relies on popularity
• Partnerships with other companies
• Official games threaten Lego games
• Product awareness and customer loyalty
• Poor revenue model
• Communities dedicated to the product
• Threat MMOG’s with well established player bases
Business Strategy
• Learning Through Play: Existing Strategy
• Adult Users of Lego: Unexpected Wildcard
• Innovation: Dialogue with the Community

Organisational Strategy
• Creative Destruction: Re-evaluating existing resources
• Online Communities

Lego and Sony Co-opetition

• Much more promising business endeavour than Lego Universe
• Introduction of ‘next generation’ toy known as ‘Toy Alive’

Promising due to the following factors:

• Sony has a large stake in the video gaming industry
• More potential buying power as well as a larger business than that of Gazillion
• Differentiating their products from traditional Lego and traditional video games
• Alleviates some of the risks of market uncertainty due to the size of both companies

Alabaster, J 2013, ‘Sony and Lego Collaborating on toy research’, Computerworld, viewed 13 October, <http://www.computerworld.com/s/article/9239519/Sony_and_Lego_collaborating_on_toy_research>

Antorini, YM, Muniz, AM & Askildsen, T 2012, ‘Collaborating with Customer Communities: Lessons from the LEGO Group’, MIT Sloan Management Review, vol. 53, no. 3, pp. 73-95.
Best-Lock 2013, Products, Best-Lock, viewed 13 October 2013, <http://www.best-lock.com/>
Best-Lock 2013, Products, Best-Lock, viewed 13 October 2013, <http://www.best-lock.com/>

Bogos, S 2013, ‘Sony and LEGO team up to put videogame Tech into LEGO bricks’, The Escapist, viewed 13 October 2013, <http://www.escapistmagazine.com/news/view/124537-Sony-and-Lego-Team-Up-To-Put-Videogame-Tech-Into-Lego-Bricks>
COCO Toys 2013, Products, COCO Toys, viewed 13 October 2013, <http://www.cocotoy.com/Products1.htm>

Entertainment Software Rating Board 2012, How much do you know about Video Games?, ESRB, viewed 10 October 2013, <http://www.esrb.org/about/video-game-industry-statistics.jsp>

Flemming, R 2013, ‘Like it or hate it, Free-To-Play gaming is here to stay’, Digital Trends, 24 April 2013, viewed 10 October 2013, <http://www.digitaltrends.com/gaming/like-it-or-hate-it-free-to-play-gaming-is-here-to-stay/>

Greene, J 2010, ‘How LEGO revived its brand’, Bloomberg Business Week, July 23, viewed 30 September, <http://www.businessweek.com/innovate/content/jul2010/id20100722_781838.htm>

Jansen, MT & Hummelgaard, SB 2011, An Analysis of the Organizational Implementation of Core Values and Innovation: A Case Study of the LEGO Group, Thesis, Aarhus School of Business, Aarhus University, Denmark.

Kass, K 2013 “Building Communities at LEGO brick-by-brick” ,Simply-Communicate.com, 06 June 2013, viewed 11 October 2013, <http://www.simply-communicate.com/case-studies/company-profile/building-communities-lego-brick-brick>

KNOWLEDGE@WHARTON 2013, How Lego Clawed Its Way Out Of Near Bankruptcy, Business Insider Australia, viewed 13 October 2013, <http://www.businessinsider.com.au/lego-maintains-innovation-and-success-2013-7>

Lego Group 2011, ‘LEGO Universe to close in 2013’, viewed 13 October 2013, <http://aboutus.lego.com/en-us/news-room/2011/november/lego-universe-to-close-in-2012>
Mega Bloks 2013a, Shop, Mega Bloks, viewed 13 October 2013, <http://www.megabloks.com/en-us/shop>

Mega Bloks 2013b, Collectors, Mega Bloks, viewed 13 October 2013, <http://www.megabloks.com/en-us/collectors>

Megafactories: Lego 2011, television Program, National Geographic, United States of America, 21 January, 2012.

Mortensen, TF 2012, Timeline 2010 -, LEGO, viewed 13 October 2013, <http://aboutus.lego.com/en-us/lego-group/the_lego_history/2010>

O’dell, J 2013, ‘Check out these programmable Lego bots from Sony’, Venturebeat, <http://venturebeat.com/2013/06/03/lego-sony/>

Oliver, K, Samakh, E & Heckmann, P 2007, Rebuilding Lego, Brick by Brick, strategy+business, viewed 13 October 2013, <http://www.strategy-business.com/article/07306?pg=all>

Pearlson, KE & Saunders, CS 2010, Managing and Using Information Systems 4th Edition, Wiley, United States of America.

Ritala, P 2011, ‘Coopetition Strategy – When is it Successful? Empirical Evidence on Innovation and Market Performance’, British Journal of Management, vol. 23, no. 3, pp. 307-324.

Robertson, D & Breen, B 2013, Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry, Crown Publishing Group, United States of America.

TedxTalks 2012, The new campfires of community: Peter Espersen at TEDxTransmedia2012, YouTube, viewed 11 October 2013, <

Wittur, T 2012, Porters Five Forces–Lego, Tobias Wittur's Blog, weblog post, 5 February, viewed 13 October 2013, <http://tobiaswittur.wordpress.com/2012/02/05/porters-five-forceslego/>
Information Systems Strategy
• MindStorm & ReBrick: tools of social media.
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