Introduction to Strategic Management
Strategic management can be stated as the process of regular planning, monitoring and analyzing of all the essential elements of business. It is planned in order to meet desired goals and objectives. However, strategic management is the best way through which overall direction can be provided to the firm. In the given case study, LEGO Group’s success and growth have been assessed within the global toy manufacturing industry. However, company is historically successful, innovative and high growth firm among all the top toy companies. But, it also faced a period of poor performance and resulted in losses. Although, company improved its situation in 2008 and build ongoing efforts that involve varied aspects of strategic management. LEGO annual report for 2009 states that sales figures of the company are 11,661 million DKK and operating profits for the year was 3002 million DKK. Thus, it was an impressive figure which results in increase of 22% in sales in 2008 and a high rise of profits over 50%. However, the success of business lies in combination of effectual leadership, innovative products and international growth. Thus, LEGO brand become established among consumers as a unique and iconic.
Jorgen now needs to find the right strategy for the continued success of the LEGO Group. What would you advise him to do?
It can be assessed that Jorgen is required to develop effectual tactics so that continuous growth can be attained. However, as compared to the latest results modest growth has been attained. Also, production need to be more than double and which requires huge investment in equipment, human resources and marketing. Thus, in order to overcome the problems business is required to develop a clear understanding of its roots and maintain a clear priority of developing unique and innovative products to attract consumers. Hence, business is required to develop regular growth and overcome challenges through maintaining long term planning. However, after period of 2004, LEGO is required to undertake effectual strategy so that growth and success could be attained. Further, till the year 2009, business is required to introduce new board games for families and young children that help in improving their skills and results in enhancing the sales of business. Also, the COO of Company should undertake effectual strategy that evolves innovation within business so that LEGO can continue success for future. Moreover, the risks faced by business are based on tough rivals. Therefore, it is essential for business to give them high competition so that results can be accomplished in the form of high sales and profits.
It can be stated that it is the commitment done by firm in order to behave ethically and contribute to economic development in order to enhance the quality of life of individual as well as business up to a great extent. Further, it can be stated that LEGO Groups is responsible for different CSR aspects which business need to be considered in order to attain satisfaction-
Employee welfare- LEGO is required to maintain its responsibilities through providing proper medical care, providing medical and sick leave etc. Thus, providing all such type of facilities helps business to gain satisfaction of employees and in result they are more productive.
Working conditions- LEGO management needs to focus on providing better working conditions to employees in order to gain desired outcomes. For instance, providing job security, best working environment, club facilities, recreational rooms, training and development and safety norms helps employees to work loyal within business.
Job design- Also, it is another CSR responsibility of business that they need to determine the needs of workers and then design the job as per their requirement so that issues faced by workers at workplace can be easily overcome.
MODEL FOR EFFECTIVE CASE ANALYSIS
Identifying the key question
It can be evaluated that there are different types of objectives that are framed within LEGO group in order to determine the purpose of case study. Further, with the assistance of case, it can be analyzed that LEGO is focused on more innovative, new and unique products so that customers can be satisfied effectively. Also, it can be stated that key questions that are identified from the case study assist in stating the future strategic development of LEGO group in order to attain success. However, main question lies within the management of Lego is that firm should focus on the traditional brick or should use its brand as a platform in order to innovate within new areas. Thus, it helps firm to work upon a combination of effectual leadership, innovative products and international growth. With the help of all such factors, it assists LEGO brand to become successful and build unique and iconic image of firm in the market. Following are the main objectives that firm needs to be focused in order to attain future strategic developments in the period up to 2009:
- LEGO should become the best known global brand among families and children till 2009.
- Further, sales of toys should be enhanced by 100-200% over the next 10 years.
- LEGO should plan to launch its operations within new countries as still business does not possess a huge presence in the market.
- Moreover, firm is focusing on expansion activities such as dominating children's rooms through entering into alliances with partners in different areas such as clothing, films and games.
- Business should try to capture new areas so that they can increase their market share through raising awareness and attracting new target group towards the product.
- Also, business is trying to develop new board games which focus on the whole families instead of children.
However, it can be assessed that LEGO Group is required to focus on its strategic capabilities so that key questions can be answered well. Further, it is essential to focus on such questions so that overall components can be determined in order to look at the bigger picture.
Here, it is used to provide a proper look of the overall objectives and content of the case provided. Thus, it can be articulated from the objectives that LEGO is trying to capture new market share and enhance sales and profitability. Thus, building long term objectives assists firm to target new clients and provide them new and innovative toys so that best results can be attained.
Here, it can be assessed that LEGO is required to undertake effective strategic management practices so that company can attain success. However, firm attained an impressive increase of over 50% profits in 2008. Thus, it can be assumed by the management of firm that 2009 will be more progressive in the form of performance. Further, the owner of firm undertakes varied strategic decisions in order to attain growth of the company as well as develop innovative and new products to attract consumers. Also, it states that business is trying to capture new markets where they have not entered. However, success had been built through combining effective leadership, innovative products and international growth. Further, business undertakes new and more decentralized management style in order to strengthen the management of firm. However, due to this fact varied senior managers left the organization being dissatisfied with the style.
Further, in the later years, business faced varied problems i.e. high inventories within retailers, sales declined because of change in name etc. Hence, in order to overcome such challenges, firm should undertake effectual leadership and management style along with producing innovative products to attract consumers and satisfy their needs. Also, business is focusing on developing new theme parks such as LEGOLAND and enhancing the sales of firm. While, within 2008 and 2009 business was facing huge financial crisis on a global scale. However, business took risk and thus 2008 and 2009 proved to be a very successful year since 1981. The results of such profits led to unique structural changes within company with improvement in revenue margins as well.
Beginning and end
From the beginning of the case study, it can be evaluated that LEGO group announces high sales and profits within the year of 2009. It shows high growth rate in the near future. Further, it has also been noticed that till 2009, it proved to be a period of successful development. Thus, it is suggested to LEGO that they need to undertake effectual management tactic so that new target market can be attracted in order to increase sales and profitability. There are varied key issues which were faced by the company. These are as follows-
- After the huge success of Harry Potter and Star Wars in 2002, business was required to expand its production capacity but in 2003 there were no new movies that could help LEGO to enhance its sales.
- Further, in order to expand the small children's segment, famous and strong name of LEGO DUPLO had been changed into LEGO EXPLORER. But, it was not welcomed by consumers in market and thus it affected the sales of business.
- While, on the retail side in 2003, retail shops were led with high inventories of LEGO products so that they could not buy the new one.
In the next level of case analysis model different micro and macro factor should be analyzed so that best results can be attained. However, it is essential for enterprise to understand the macro environment factors and implement it within framework so that desired results can be attained.
Label the facts
LEGO announced 11,661 million DKK sales and 3002 million DKK profit. It is over 50% increase in profits.
In 1998, company had its first ever deficit.
In 2003, there were no new movies that drop the sales of firm.
While in 2009, LEGO Group and Warner Bros announced to make a LEGO movie.
Political- It can be evaluated that business is affected because of overall government attitude and local inducement policies. Thus, it is essential for government of the country to maintain the taxation rate so that company can expand its operations within country. It can be stated that the political environment in Denmark has been quite impressive due to its multi party culture. Thus, political parties have made proper government policies which are based on investment friendly approaches. It gave giving a chance to business in order to become an iconic business in future time. Also, Denmark has become one of the best attractive and lucrative places to invest that has benefited LEGO to attain results. For instance, LEGO Group is required to make political stability so that government spending can be minimized and attain desired results.
Economic- It can be assessed that the toy educational industry is developing and can be seen to be economically stable in past few years. Also, the economy is improving well so that LEGO can also improve their products in order to gain the best for their clients. For instance, business activities not only enhance the economic condition of the domestic market but also external market around the globe. However, the US market seems to be a big opportunity for LEGO to gain larger market share.
Social- In 2006, company announces that it will close down its plant in US after 70 years of business. Also, LEGO eliminated around 1200 jobs causing economic losses. However, this business was one of the last toy manufacturing operations in America. Hence, this factor forced LEGO to develop new trends and produce more attractive toys.
Technological- It is also one of the important factors in toy industry. However, in order to have new and unique innovations within the toy industry, LEGO should work to improve for new technologies. This would help the firm to compete with other strong competitors within market. Also, firm is required to ensure that they need to update their technology and make adjustment so that results can be attained.
Legal- Further, business aims to safeguard the welfare of their client’s. Thus, LEGO doesn't want to take risk by breaking the laws in local or international markets. Therefore, LEGO ensures that they should follow all the rules and laws of the market where they are operating.
Environmental- LEGO group is trying to make their products effective. This is to minimum problems associated with the environment. Further, business also introduces varied strategies that aim to decline pollutants and also create a good environment. Moreover, business also invests huge amount of money in waste system in order to protect the environment around company's products.
Porter's Five Forces
Threat of new entrants- It requires high capital in order to enter the new market. Also, the brand name of LEGO Company is very crucial as it helps firm to compete at the time of entering into new market and improve the brand value to attain goals.
Threat of substitutes- There are varied substitutes available for consumers within the entire toy industry. For instance, it can be computer games, traditional toys and even outdoor sports. Also, if business does not pay attention to its quality than lower quality goods is one of the main reasons to switch for another company by LEGO.
Level of rivalry- LEGO organization occupies a strong position in market thereby it possess few rivals. However, business has a strong brand image because it provides quality products to consumers and charges premium prices.
Power of buyers- The power of consumers is very high as switching cost is very high with clients within traditional toys and other substitutes such as computer games. However, if LEGO manufacturers quality products within reasonable prices then people will tend to buy products and become loyal towards firm.
Powers of suppliers- LEGO products are prepared from plastic. Hence, firm possess a diverse distribution so that they will not have to base upon one particular supplier.
Cost leadership- This strategy involves firm to become the lowest cost business. It provides them a chance to attain desired results. However, business possess a varied chances to lower input costs, experience etc. so that LEGO can attain desired goals.
Differentiation- Further, it states that uniqueness is required to be valued by clients at a premium price in order to attract target market. Here, business is required to differentiate among key rivals and develop strategy in order to provide best products as compared to them.
Focus strategies- It targets a narrow market that helps in tailoring its products or services. It is to identify the needs of that specific segment to attain goals.
Ansoff have evaluated three different levels of action. These are as follows:
Operational- Here, the LEGO Group is in direct connection with the production process and thus develops new and innovative toys for consumers.
Administrative- Further, it is involved with the maximization of efficiency in production processes. For instance, LEGO Group is required to maximize its production capacity, then they are required to enhance the number of toys in terms of production.
Strategic- The strategic concern is in regard to produce the product by comparing with respect to environmental benefits as well.
Here, the top management of the LEGO Group is required to think strategically so that they can understand the big picture of firm and attain goals.
Mintzberg stated that the business influences the design, its culture and power games. Here, the top management of LEGO Group is held liable in order to carry out the operations of firm. However, such type of strategy is helpful in order to provide a rationale so that things can be accomplished. Following are the 5Ps of Mintzberg theory detailed as follows:
Perspective- It can be stated that it is all about the ways of seeing. For instance, the LEGO Group is required to watch the competition or rivalry within industry so that best products can be produced in order to attract consumers.
Planning strategy- Here, the particular strategy is formulated in order to undertake the best actions. LEGO Group management undertakes effective planning before launching any new toy so that best results can be gained in the form of sales and profits.
Pattern- LEGO organization top management is required to form a proper path that need to be followed by the workers for gaining output. However, there should be no confusion regarding production of toys and other business activities.
Position- It refers to the place of business functions and operations within its prevailing environment i.e. competitors.
Ploy- It can be stated as state inclusive of playful, unexpected, and unanticipated environment. For instance, LEGO is required to develop a unique brand image of firm so that it can be easily recognized.
Whittingtons school theory
Deliberate- This strategy is fairly straight forward that is communicated throughout the business before being implemented within business. For instance LEGO Group is required to implement deliberate strategy so that set objectives of firm can actually accomplished.
Emergent- While, Emergent strategy does not mean that management is out of control in certain case. However, such type of environment is required for firm to develop in order to make everything flexible and open. LEGO need to undertake such theory at the time when they need to develop open environment among top management and lower level employees so that best actions can be attained.
Here, it can be assessed that management of LEGO Group is required to implement Deliberate school of strategy so that set objectives can be achieved.
RBV helps in analyzing certain unique features of particular firms within an industry. It also helps in making a difference in regard of profit performance. However, strategic management and economic theory helps to focus on the internal side of business i.e. its resources and capabilities. LEGO is required to undertake strategic management model in order to identify the product it manufactures and serve in market. Further, it also suggest that business is required to position them strategically based on their unique, valuable and inimitable resources and capabilities.
Strategic decision making
It can be evaluated that strategic decision is the best method through which long term business implications can be planned. It helps in attaining key success factors by accessing resource to gain appropriate performance. Further, it can be assessed that it is the ability of business to make crucial strategic decision in order to produce high quality results and goals accomplishment. LEGO is required to develop rational decision making. It is helpful in overcoming issues in order to attain maximum sales and profits. However, management of LEGO is required to make decisions that are based upon strategic directions. It is made so that best action can be attained in order to implement them within business.
Following are the main competitors of LEGO Company:
- MGA Entertainment
- Jakks Pacific
This, it can be assessed that there are varied rivals available within toy industry. It encourages firms for tough competition so that best results can be attained. However, LEGO undertakes effectual strategy of unique product development and provide it at premium prices as compared to other rivals so that results can be achieved. Thus, such specific strategies help business to build market growth and development in order to gain profits.
- LEGO develops educational features within its toys so that it helps in developing skills among young children.
- It also focuses on encouraging goal oriented and problem solving strategies.
- LEGO possess strong brand name around the globe
- LEGOLAND theme park is highly famous among tourists.
- Business could not copy games due to brand name and loyalty among clients.
- There is high competition among business as it increases brand switching among rivals.
- Also, there is loss of market share that results in increasing popularity of online games or computer games.
Summarizing the facts
It can be evaluated from the above analysis that PESTEL, Porter's five forces etc. helps firm to carry out desires goals and objectives. The main fact that can be assessed is that Denmark has become one of the best attractive and lucrative places to invest that has benefited LEGO to attain results. Further, LEGO eliminated around 1200 jobs causing economic losses. Business is making sure that they should follow all the rules and laws of the market where they are operating. Organization is trying to make their products effective so that they could cause minimum problems to the environment. Also, the brand name of LEGO Company is very crucial as it helps firm to compete at the time of entering into the new market and improve the brand value to attain goals. The power of consumers is very high as switching cost is very high with clients within traditional toys and other substitutes such as computer games.
Eliminate unimportant facts
Here, the most important facts from case need to be selected. It involves that organization is trying to make their products effective so that they could cause minimum problems to the environment. Also, the brand name of LEGO Company is very crucial as it helps firm to compete at the time of entering into the new market and improve the brand value to attain goals. Thus, all such facts are effective in order to attain desired goals.
From the above study, it can be concluded that LEGO Company is required to develop strategic options so that success and growth can be continued further. However, it also helps them to overcome challenges and problems with the aim to attain goals. Further, both internal and external analysis tools such as PESTEL, PORTERS FIVE FORCES and SWOT have been applied with respect to LEGO. Business faces tough competition from rivals and hence it is essential for them to develop its strategic management. Also, different competitors have been assessed such as Mattel, Bandai-Namco, Hasbro, Tomy-Takara etc. who gives tough competition to LEGO. Thus, through following case analysis model, it helps firm to evaluate the strategic management model and achieve desired goals.