LOGO case study Essay

IntroductionThe judge is a strategical analysis for LEGO Group. LEGO Group is a famous toy union in the creative activity, which schematic in Denmark. LEGO Brand is not only the familiar logo, only if also the expectation. LEGO acts as a batten down of quality and originality. LEGOs burden values argon imagination, creativity, fun, learning, caring and quality. The essay will show strategic analysis by identifying the diligence, analyzing general and industry environment, listing resources and capabilities, analyzing the go withs core competency, SWOT, authorized strategies. Then, loose the key issues. Finally, the essay will recommend the business- take schema.Identifying The IndustryToy sell market increase 4 per cent per year in a moderate pace in 2010, but the demand for the particular(prenominal) fashion toy may surge or collapse rapidly. Thousands of toy manufacturers serve the international market, but the a couple of(prenominal) lead industry. Mattel is the worlds leading toy manufacturer in revenue. LEGO is the worlds the third largest toy manufacturer. There are to a greater extent and much than(prenominal) toy manufactures in Asia beca theatrical role its labor is gilded and some subcontractors are ready to produce goods in behalf of their manufacture. Toy makers sell products through various retail channels, including chain stores, discount stores, independent toy specialists, department stores and online stores. There are three points, which need to give way attention to. Firstly, fad toys are to a greater extent popular and the product livelihood cycle decrease. Additional, children have more later-school activities. Finally, more kids choose online activities more than toys. The substitute product for toys is electronic games. digest of the general environments economic elementGenerally, the words economy is liquid unoptimistic in the recent. Although European debt crisis has been lightened conditionally, its negative e ffect to global economy still last for a certain time. Labor make up is increasing. Because of multiple factors, the total greet of toy improves signifi canistertly, while its profit rate falling sharply.Socio-cultureMulticulturalism is source of innovation and creativity. LEGO instauration department has more than 100 designers from more than 10 countries, satellite support team scattered all over the continents. LEGO design team maintains deliberately the diversity of designers from a variety of educational and professional priming coat. People with any qualifications and background has the potential to become a member of this great design team. LEGO takes part in many an(prenominal) state-supported welfare activities for children, for example, encouraging children to joining in environment protection. LEGO has good human descent and trust. LEGO CEO Knudstrop makes a analyst to train the management team to support the good relationship. The peak of LEGO sale is during the school holidays, especially in Christmas (Yi 2009).Global elementLEGO come products are made by plastic and chemical resource, that the damage of these is influenced by the price of international crude oil. For global market, Knudstrop said that Asia market would be the gilds largest strategic sector in the next and LEGO was discussing the possibility of establishing production bases. LEGO Group has not shared a strong market position in BRIC. The market in BRIC will weaken strongly in the future and LEGO Groups tries to invest in the markets. For outsourcing, LEGO chooses service provider Flextrinics, which has factories in Korea, Denmark, the USA and Switzerland.Technology elementIn 1999, LEGO had the online shop. This finality help LEGO get more consumers. Bases on the most adept building blocks, Lego developed some braining games ground on personal computer and the Internet, such as LEGO Loco, Bionicle, Lego Creator, etc. These innovations have satisfied consumer group ripening in the virtual age. LEGO interact with consumers through Internet. In 2009, LEGO Children Clubs has members or so 3.2 million and a dedicated website. many a(prenominal) adult fans of LEGO share experience, videos and pictures on the Internet.Political/legal elementGlobal political environment is persistent in general in the current. International relation between main political sources in the world has gotten a balance after strong competition, which is relative stable. To creating a favorable atmosphere for economic schooling and encouraging a positive development of the toy industry, most countries seek a stable, peaceful and develop international environment.Analysis of the industry EnvironmentBargaining queen of buyersThere are a few large buyers, which are large retail chains such as Kmart, Target and Big W in Australia. They buy products from many different strike offs. Buyers bargain for melloweder quality, lower price and great level of service.Bargaining p ower of suppliersFor toy industry, there is no bargaining power of suppliers because there are many different suppliers in this industry.Risk of untried entrantsFor toy industry, newly companies are compulsionon to entry the industry because toy industry has fewer berries. The products are similar, which is easy to copy. Toy industry does not need new firms to invest a lot and switching hails are low because most consumers so not have the loyalty. If the products are more attractive, consumers will buy, especially major target people are children. It is easy to access to distribution channels, but it is hard to cover the market because many retail ways about toys, including online stores, department stores and so on.Threat of substitute productsSubstitute products perform the similar function as toys, which are electronic games. As technology has improved rapidly, more children p appoint to use iPod or iPad to play electronic games. Threat of substitute products is very high, which is very fundamental.Intensity of rivalryFor toy industry, there are many competitors. The rate of industry growth isslow, so companies try to use resources to expanding consumers effectively. Because product differentiation is lower, the switching constitute is low. More companies enter the industry, which promoting competition.To sum up, for toy industry, threat of new entrants is low, supplier power is low, buyer power is moderately high, threat of substitute products is very high and competition is very fierce.It observes that the toy industry is still an attractive industry. There are nearly no barriers to entry the industry. As technology improves rapidly, new scientific research and manufacturing technology apply to the toy industry continually which due to more and more new toys with high technology. If new companies have wonderful ideas or design teams, it is easy to share the market. However passion of rivalry is high, companies still can get consumer base by cate ring to the demand of consumers. Because buyer power is high, new entrants do not worry about their sale ways.Analysis of Resources and CapabilitiesTangible resourcesTangible resources refer to assets that can be observed and quantified, including financial resources, organizational resources, physical resources and technological resources. LEGO has total assets for 10972 million DKK in 2010, 871 million DKK in cash flows and 5473 million DKK in equity. LEGO has a strong operating system to lease with earlier supply chain problems. The come with developed systems to evaluating all manufacturing greet as well. The optimization of complex operating model is successful, which helps LEGO save cost and time. Additionally, LEGOs trademark is the significant resource.Intangible resourcesIntangible resources are a superior source of capabilities and core competencies. Creativity is the ability to come up with ideas that is valuable. Staffs are important resource because they have employ ee experience and the ability of innovation. LEGO Group has the great reputation from excellence quality. LEGO has the fantastic relationship with suppliers and distributors, which can reduce unnecessary problem and makesoperating system more successful. LEGO has huge loyal consumer bases,CapabilitiesLEGO has a fantastic innovating system. Developers have to follow strict process and use market research insights, which can punish the market demand and avoid design mistakes. In marketing area, LEGO has great connections with consumers. The company has a particular(prenominal) website for customer club, which interact with consumers by games, stories and activities. The club has the member about 320 million. In manufacturing areas, the company has competitive advantage, which is high automation technology. For supply chain management, the companys production planning comes from sales incentives exact forecasts. In distribution areas, the company builds distribution channels in order to simplification the tension on the amplification of the distribution costs.Innovating system is valuable, because this capability promotes the sales levels. The innovation must cover the fashion and make consumers satisfied. to each one company knows this concept well, so it is not closely to imitate. The company informs customer preferences by interaction with customers and builds relationship with children and their parents, who are end users. The company also keeps in touch with retail consumers to ensuring that these links operate well, because they can provide a steady stream of information. This process needs considerable time and much bullion to build the relationship, so it is costly to imitate.Lego building distribution channels in order to reducing the emphasis on the expansion of the distribution costs. Firstly, the company reduces the number of logistics providers to satisfying the flexibility and encouraging suppliers to competing. At the homogeneous time, the company assesses to economies of scale. Redesign the distribution system of the company has the ability to surpass rival. This is rare and valuable. To do this action, the company cost a lot, so it is costly to imitate. The high automation technology is rare and valuable, which reduces labor cost and producing time. This technology needs a long time to researching and developing, which is hard to imitate.SWOT AnalysisStrengthsClosely after the changes of the times perhaps is the most significant feature of LEGO. In 2002, LEGO launches new products, a new have Wars film, which is very popular. LEGO began to taking advantages of internet in designing and researching. Currently, LEGO has a large number of fans, including children and kids. The company pays more attention to reflection of consumers. The company expands the market in many countries.WeaknessesThe price is higher than other toys and the company does not have enoughhypostatic stores to satisfy the consumers. Most LEGO pro ducts sell in department stores and retail stores. It is not convenience for consumers to purchase products. The high cost of manufacturing products.OpportunitiesLEGO products sale is concerned about seasons. The peak of sales in one year is during school holidays, especially Christmas (Yi 2009). The consumers are no concerned about ages. LEGO products are no age-limited toys and anyone can collect LEGO products. The Asia market has the great potential.ThreatsThe substitute is the threat, which are online games. Online games affect the LEGO sales, however, LEGO has the solutions. For example, improve products to make it technological.Analysis of current strategiesCurrently, LEGO redesign the distribution channel to reducing the inflating distribution cost. As for this, LEGO closed 5 distribution centers in Denmark, France and Germany, establishes an only new distribution center in Czech, which is operated by DHL (walwenfanyi, 2012). Lego keep interacting with consumers to get more i nformation the about market needs, which takes the strength of the company. Now the company develops computer games based on the LEGO products by cooperating with game firms. The company cooperates with film organizations to making movies as well (walwenfanyi, 2012). These cooperation has bee a part of LEGO Group that has long history. These actions take the strength and are the solutions to face threats. Articulation of key issues and/or problemHow to reduce the manufacturing cost?Although LEGO Group grows up continually and rapidly, its consumers can not follow the increasing rate? What should the company do? How to expand the Asia market?RecommendationsCost lead strategyCost leadership strategy forces on reducing cost to maintain competitive advantages and relative to standardized products. To achieving cost leadership, the company must strictly cover costs in the management, will reduce costs as much as possible. Considered the Asia market, Costleadership strategic is a good c hoice. There are more developing countries in Asia, so the life standard is lower than Europe. If LEGO can reduce the price, there are consumers will purchase goods. However, manufacture area is the weakness of the company and the company has redesigned the distribution channels. There are no more space to reducing the cost.Differentiation strategyDifferentiation strategy refers to a strategy to make their products and competitors products have obvious differences. The core of this strategy is to acquire some unique value to customers. For LEGO Group, this strategys benefits are that the firms innovation system that pays more attention to consumers demand can be appeared. LEGOs consumers have brand loyalty and there are millions of fans in the LEGO Club. There are some risks about differentiation strategy. When the company enters the Asia market, the firm will face the lower-cost imitation.Focus strategyFocus strategy gets the balance between cost leadership strategy and differentia tion strategy. Firms can serve a specific segment of an industry more effectively than industry-wide competitors. This strategy fits the toy industry a lot, because the major target consumers of this industry are children. However, for LEGO, the instruction strategy is hard to reach. The reason is that LEGOs target consumers are no age-limited people, which is its strength.In Conclusion, differentiation strategy is the best choice for LEGO Group. LEGO products were different from other products when it launched in the beginning. LEGO has the great brand loyalty, so that a identify product tends to reduce the chances for consumers to testing new products or other brands. Currently, the manufacturing cost is a problem. However, LEGO Group cannot use low cost instead of good quality. The firm can produce well-differentiated products to reduce consumer sensitivity to price increase. Using the better quality products to cover the high producing cost. The firm should use its strengths t hat are brand loyalty and innovation to expand the markets. The differentiation strategy also candefend against new entrants, because if new entrants want to share the market from LEGO, they must produce the same quality products at lower price, which is really trying to reach.ConclusionThe above paragraphs recommend differentiation strategy by analyzing the industry, general environment, industry environment and the companys resources, capabilities, core competency, SWOT and current strategies. LEGO can use differentiation strategy as the solutions to current issues. Using the features of differentiation to taking strengths to covering weaknesses and getting up the opportunities and avoid threats.ReferenceJan, WR, Stefan, HT & Daniela, B, 2012. LEGO, Harvard Business work 7 September 2014 Waiwenfanyi, LEGO competency analysis, 2013. Available from http//www.waiwenfanyi.com/fanyi-1492.html 9 September 2014 Yi, FL 2009, LEGO sales strategic plan, Dongding. Available from 9 Septemb er 2014