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LEGO: CASE STUDY

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by

Jackson Ng

on 17 October 2014

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Transcript of LEGO: CASE STUDY

LEGO: CASE STUDY
Co-opetition Analysis
- A new alliance is being formed between LEGO and Sony.
- Experimenting with tiny motors and cameras into LEGO blocks. The minature robotic LEGO toys can be controled by a PlayStation controller or by hand.
- Not much information about the alliance is available so far. To make sure that the alliance succeeds, communication between the two companies is very important.
The strategic goals between LEGO Company
and Sony must be aligned.
Co-opetiton Analysis
- Co-opetiton: Companies in the same market, sharing resources and knowledge but at the same time still competing for the market.
- LEGO developed an MMOG game called LEGO Universe with Gazillion Entertainment and NetDevil. It was not a success.
- The game had a monthly subscription which turned free to play. By then the game had lost too many players.

SWOT Analysis
Traditional Children's Toy
Outline
IS Strategy Triangle Analysis
Conclusion
- We explored various competitive forces and identified key driving forces that helps a company be successful.
- With the LEGO case study, we concluded that in 2004 the company's strategic strategy was not alligned with its organizational strategy and information strategy due to LEGO trying to diversify.
- By focusing on the organizational structure of LEGO, the company was able to regain its balance and get out of bankruptcy.
Porter's Five Forces Analysis
Outline

1. Five Forces Analysis
2. SWOT Analysis
3. IS Strategy Analysis
4. Co-opetition Analysis
5. Conclusion


THREAT OF NEW ENTRANTS
BARGAINING POWER OF CUSTOMERS
THREAT OF SUBSTITUTION
BARGAINING POWER OF SUPPLIERS
COMPETITIVE RIVALRY
Threat of New Entrants

- High and Low
- High in 2004 (competing against other toy companies)
- High and low in 2014 (very high start up cost to invest and develop toys from scratch)

Bargaining Power of Customers

- Low
- An individual customer cannot affect the prices of the toys
- Affected by economic conditions

Threat of Substitution

- High and Low
- In 2004, LEGO had a few competition for brick toys
- As of 2014 the threat of substitution is high due to cheap imitations

Bargaining Power of Suppliers

- High and Low
- LEGO Company have freedom in choosing manufacturers
- Purchasing licensing rights of movies causes the bargaining power of suppliers to go up in 2014

Competitive Rivalry

- High
- Competes against other companies that sell similar LEGO bricks
- Competes against Mattel who are trying to take LEGO's market share


Strengths
- Well established Company
- Quality Product
- Education and value of product
Weakness
- Premium prices
- Easy to duplicate
- Outsourcing in Asia
Opportunities
- Room for expansion
- Movie tie-in partnerships
Threats
- Digital age
- Cheaper alternatives
- Growing out of LEGO
Adult Mindstorm
Strengths
- Strong launch and initial reactions
- Retaining existing customers
- Obtaining a new customer base
Weakness
- Premium prices
- Easy to duplicate
- Outsourcing in Asia
Opportunities
- Cooperation with customers to improve product
- Expanding market share
- Possible education tool
Threats
- Unfamiliar product
- Competes with companies such as Song, Microsoft and Nintendo
Video Game
Strengths
- Loyal Customer Base
- LEGO brance recognition
Opportunities
- Room for expansion
Threats
- Digital age
- Cheaper alternatives
Weakness
- Dependent on success of movie
MMOG Lines
Strengths
- New Product
Weakness
- Poorly Implemented
Opportunities
- New partnerships
Threats
- Online games
- PC gaming isn't best suited for young children
Business Strategy
- 1950s (using plastic bricks to make toys for young children
- Business strategy stagnates as children out grow LEGO bricks
- Early 2000s, LEGO attempts to use a diversifying strategy and almost goes into bankruptcy
- LEGO needed to realign its original business strategy with their organizational strategy and information strategy
Organizational Strategy
- In 2004, Jorgen Knudstorp became the new CEO
- Knudstorp’s plan was to cut costs, sell off businesses and to restore competitiveness.
- Introduced back to basics – focusing on the LEGO brick legacy.
- Later due to the success, restarted the MINDSTORM line. The process led to a collaborative movement with consumers, gaining wisdom of the crowd and crowdsourcing the development process.
- Resulted in high value for both LEGO and for the consumer.

Information Strategy
- Only started having an impact due to the MINDSTORM line and LEGO video games.
- Adults hacked the MINDSTORM software for more functionality.
- Instead of suing, LEGO formed a collaboration with the hackers.
- Quoting Knudstorp: “We think innovation will come from a dialogue with the community" (Ashcroft, 2014).
- The Ambassador Program formalized the relationship between LEGO and the adult fan community in 2004. The relationship offered fast communications through an internet forum share feedback and suggestions with LEGO managers.


By Jackson Ng
Hiroshi Tou
Danny Liu

References
Lego pictures: http://www.lego.com/en-us/movie/explore/characters/

Ashcroft, J. (2014)
The LEGO Case Study 2014
, viewed on 15 October 2014 http://www.thelegocasestudy.com/uploads/1/9/9/5/19956653/lego_case_study_2014.pdf
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