Executive Summary and Introduction
Executive summary.
LEGO is among the world’s largest producers of children’s toys today. This report aims to show the challenges the company is encountering from the environment, both in the market and around the company itself. Kirk Ole formed this company in the year 1932. The main product that is produced by LEGO company is LEGO brick.
In the rankings in the past years, this company has been the number one toy producer of the century, beating the rivals in various factors and market supply and customer service provision. LEGO, as a company which has been in existence, is facing some external threats from the environment, and also the market of its products has been struggling in the current times due to different factors, among them being the COVID-19 influence which heats it just like it happened to any other company.
Also, there has come up many existing companies that produce the same products hence competition in the market for the same products. These factors have been made aware to the company board, and there should be a need and application of immediate strategies which can help revive the market for its products and also other environmental facts affecting the company, be they internal or external, should be well resolved to increase the efficiency of the company.
Though the company is affected by numerous factors, LEGO remains among the selling toy companies worldwide. If not, it’s still the leading toy producer and supplier on the globe by today. Implementing the necessary actions that address the challenges, it is facing today shall imply that the company is still a leading producer and supplier of toys since it shall boost its market entirely and steadily.
Introduction
Strategic management in business is vital as it plays a very important role in deciding the longevity and profitability of the company. It is taken the activities that the business which is not limited to setting the business objectives, analyzing the business environment, how the business competes in the business world, digging deep into the internal elements of the company, and also taking the idea of those strategies which are essential for strategically supporting the business growth.
This company is on the foundation of toy making for children; if not, it is the leading manufacturer of toys around the globe. This implies that the company implements management strategies that bring about decision-making, hence analyzing its environment in terms of business, which is very important in identifying the challenges it goes through in business.
Going by the problems identified, the most recent strategic management ideas bring about some suggestions which require immediate strategic changes and also have to provide an implementation plan. Therefore, a redesign in the organization structure is suggested as a proposal for the betterment of the strategic management in the organization, which is relevant for enhancing and mitigating the performance and challenges faced by the company, respectively (Hitt, M. and Duane Ireland, 2017).
Current Financial position of Lego
For many years, LEGO has always been the leading producer of toys, and its revenue has increasingly been noticed to be over 7.2 billion dollars in the year 2020. By then, the summation of the entire toy market in the world was anticipated to be around 94.7 billion dollars. Hence, this is a clear implication that Lego alone had a market share of 7.6%, putting them in the number one position in market value among the companies producing toys for children and adults worldwide. Among the top toy producers in the world are Mattel, with an estimation of around 4.48 billion dollars; Hasbro, with an estimation of 5.47 billion dollars; Bandai and Lego, with an estimation of 6.57 and 7.2 billion dollars, respectively.
Going by the statistical figures published in march of 2022, there was an increase in the revenue of Lego by about 27% in the previous year, 2021, which is estimated to be around 8.06 billion dollars of revenue increase collected by Lego alone. Having opened more than 165 new stores around the world in the year 2022, Lego now has by today 832 stores around the world, which means that the revenue is by far going to increase by the end of this year.
Among the new stores, 95 opened in China, which has the biggest population in the world, implying the revenue, by all means, has to increase. The total number of stores in China has now risen to 340; China is the leading buyer of Lego as it stands and continues to champion the market of Lego products (LIGHTAILING, 2016).
Focus on the relationships between strategy, stakeholder expectations, and organizational performance, choosing a strategic management theory to explain those relationships and expectations. Justify to the Board why you settled on this approach rather than another one.
Description of strategy
Strategic management assignment includes setting goals and planning to achieve them without failure in mobilizing resources, which are vital in action execution. The term strategy is mentioned to mean the proper ways to attain goals, and this can be attained through setting and going through a set of activities like strategic planning and strategic thinking.
Also, business strategy is a collection of strategic statements. This is the summary of how the goals can be attained while meeting all the client’s expectations while sustaining the competitive market advantage in the workplace. The statement provided by Lego about its domestic strategy has been considered to be original brand as a modern way which comprises stronger and well experiential content which is rich in content, and it is classified to be omnichannel, which is also called Targeting the ideal retailer concerning the make for working with.
However, Lego organization examined the existing strategic management assignment; strategy can mean to be the action plan which is vital in achieving the goals containing some of the limited resources which are used in identifying the challenges in implementing as to overcome the ultimate goal progress (Kuo, T. and Tsai, 2022).
Relationships between strategies
Going by the current strategic management assignment, it is demonstrated that organizational strategy always contains an action plan which is very important in bringing out specific goals and remaining in the best stead with some of the vendors and the customers of the Lego organization. There is a positive affiliation between the structure and strategy of an organization. Mostly, the structure is taken to be the procedure in which the pieces of the organization can have fitness in its internal structure.
Strategy and organizational structure are understood to be interrelated as a major organizational strategy that can help structural building in various organizations. This always presents a clear focus, which helps the organization achieve too much of its goals aligning with the organization structure in some way that is best for achieving.
Stakeholders and diagram
The stakeholders are affected by several objectives and actions for the organization in line with the policy changes. Following the concerned organizations, the stakeholders have always been the major organization’s clients; supply chain; HMRC; Pension Legislators; Lenders, and Trade unions. The Pension Protection Fund, however, has been the major/ key stakeholder.
The reason for the establishment of PPF is to play a part in compensating the former workers who retire from the organization’s work after reaching the age limit. The fund mentioned in the respective strategic management assignment is subsidized in levies for appropriate schemes.
Stakeholder expectations, along with the strategy impacting organizational performance
In strategic management, the sole procedure of managing the stakeholders’ prospects has been a communications movement that deals with the stakeholders’ expectations in line with concerns about the importance of meeting the stakeholders when addressing and resolving issues for attaining the project goals. Evidence shows that the key participant of the PPF in strategic management opposed the organization’s voluntary management since it has no pension scheme, which can be averaged over 25 million.
Lego, having failed in the market by 2003, went back to a brick metra which they used for revival, and all the customers and stakeholders were happy about it. By 2003, Leg had started making losses of millions daily, and this meant that the company could collapse if it didn’t try to revive its ways of running the business. In this strategy, the company innovated the commodities they produced, increasing the market.
The downfall of Lego started at the end of the 90s. The challenge occurred when the firm experienced extreme growth in only some of its products at specific times of the year. Lego had made associations with some significant movie franchises and later began manufacturing kits that portrayed the fame of the Harry Potter films and the Star Wars robots.
The company made various profits when the movies were released, but when they were complete and were no longer showing, Lego had many volumes. Thus, it became hard for it to control the costs incurred. By 2003, Lego was making losses equivalent to millions daily because of the high manufacturing costs and fewer sales since the products made then were not known to the customers. However, Lego bricks were still selling, although other toys like Jack Stone action man, Galidor, and the robot range produced still needed to market.
The strategy that Lego used to become profitable again was the “back to brick” strategy. The company was to return to the initial core products that made it Lego which was the brick. The bricks were standardized so that they could be used to manufacture various products, and thus 30% of the production lines were closed. It was realized that the bricks that were simple to make were not easy to sell, and thus Lego had to make more complex products. Lego had to be very innovative since it is vital for any firm and needs a turnaround. Firms need to balance between concentrating on the core products and innovation, and Lego showed that both were possible.
The Lego movie that was produced in 2014 was so fundamental in increasing the popularity of the products. The respective strategy outlined in this strategic management assignment included some principles for guidance, for example, the easy, expert, and fair. In this, the organization found it easy to manage the expectations of its customers by easily getting the solutions that had fear prices attached for the babies and adult toys that were produced at that time.
Implementation of theories
The stakeholder expectations can easily be managed by following and implementing the Resource Based theory and the game of strategic management, being the most relevant. Resource-based theory in strategic management is all about resource management of resources towards providing a golden opportunity in the organization for a competitive advantage with its rivals in the market. Competition brings about the advantage of making the company enjoy bigger profits within a limited period. On the other side, this resource-based theory came along with the strategic management assignment depiction, which leads to utilization confusion of the resources, which is mostly done in several ways daily in a common language. These strategic resources of the company come along with various games and toys online, which keeps the organization more valuable.
This mentioned theory is implemented in strategic management, enabling communication in the organization at all levels. It also plays a vital role in making the organization reduce the risks which can come along in the business analysis, hence bettering the internal alignment (Posch, A. and Garaus, 2019).
Justification of the Board to settle the approach
Like any manufacturing company, the two theories above are vital in strategic management assignments. Lego, they are taken as the better solution to benefit both the clients and the organization when compared to the rest of the approaches. Taking an assumption, the theory, like that of the resource-based, ensures that the resources used provides capabilities for the developmental foundation, which then leads to the superior performance of the organization.
Identify the major external factors affecting the organization and discuss their impact in an international context. Use a Passport and add relevant data and figures to validate your conclusions.
The factors that affect the organization in the international context are always political, environmental, social, technological, legal, and economical, and PESTLE can analyze them. These factors can be looked at through the table below, as they play a big part in impacting the Lego organization as below (ABDUL MOMIN, 2021) ;
| Factors | Analysis |
| Political | In 2015, there were works submitted by Maia Weinstock showing female supreme court justices for international women’s day. Her work couldn’t be taken as it consisted of a political view, yet Lego doesn’t allow such a political stance in its organization’s support. They then faced a backlash that year since the element of women’s day celebration is a concern that is not political.
Also, there was a story of AI Weiwei, a Chinese artist, 2015 who was to have an exhibition in Melbourne of his work made from Legos. He is one artist known to speak against the governments entirely in the world though he is always doing works that are often courageous and bold about the brink of controversy. Lego never went on back to support his project hence making his exhibition, meaning it was not colorful as it could have been if Lego had supported him through the fans still supported him. This controversy impacted a big change, and Lego 2016 only asked clients about buying in bulk if they didn’t promise to include Lego in political works. |
| Economic | Lego firm has a range of border product that is the major contributor to the income/cash flows of the entire organization. Analysis of how the company is performing is always done on the branches and departments of the firm. After, the judgment about the financial performance is always made by considering the Operating earnings, Net sales, and Gross margin. The company has over 800 stores around the globe, and among these, 49 are in the USA, which is among the top economies in the world, 817 chain stores, and 257 stores are licensed are located across 38 countries in the world. |
| Social | Lego paid a partnership with UNICEF in 2015 for 3years so that children’s rights could be protected entirely worldwide. The fundamental aim of this partnership is to let other big business organizations copy from Lego so that children are only sometimes exploited. Some of the best practices for safeguarding children from exploitation and abuse is letting big business companies promote good cultures fighting for children.
Because Lego is a global brand, it has to take responsibility since it can easily be included in several identities. However, not just fighting for children’s rights and all that; at Lego, there is no existence of sexual abuse, racial discrimination, culture, etc. Lego continues to hire people from different communities to work for them to show the community and the world how the business world has to run, mostly when operating a big brand. This, however, increases its trust and love for its products in people of various communities and backgrounds. Hence, it has been among the reasons Lego has remained on top of the toy manufacturing companies in the world till today. Also, outside the business world of Lego in terms of toys, Lego as a firm has a very big impact on the entertainment industry. Several movies have been premiered and supported by Lego right away, from Harry Porter, Lego Batman, and so many others. This has been so good and attracted attention and support to its business. |
| Technology | Lego has been among the companies participating in developing technology for developing children; it has played a big role in investing in research to help increase the number of children who would develop a lot from toys.
In 2017, Lego came up with the Lego Boost, which was a robotic kit designed for young children who are seven and less. This helps improve children’s engineering and thinking abilities and coding skills. Lego, just like other companies, was affected by the corona pandemic. However, it is recovering at a faster rate and also, and it is working on a 10-year program of having an online ecosystem which is to look just like the physical one. Improvement in technology still shall see the revenue raised, hence growing the organization’s income. |
| Legal | There is a company called ZURU which is also a manufacturing company. ZURU was affected by the fire, having existed for only two years. This company afterward grew so fast and caught the attention of many people in the year 2018, which attracted the attention of Lego. ZURU’s action figures became similar to that of Lego in that it reached a time when Lego filed a lawsuit against ZURU under copyright infringement.
However, ZURU company had to go for a hearing and defend, and during its defense, it presented its figures which were aesthetically different hence not posing a threat to Lego. However, Lego had also stated, on the other hand, that whatever products ZURU was producing were of poor quality, and it was tarnishing its name. Lego also insisted that the products produced by the ZURU company were similar to that of Lego. The court ruling favored ZURU since Lego didn’t produce similar products as ZURU. |
| Environmental | . Because of this partnership, they have worked endlessly on reducing their environmental impact while inspiring others to do the same.
For a long time, company of Lego has been a partner of WWF, which still happens now. With these combined efforts, these two had set goals which are to be attained by the year 2020 before the corona pandemic became a disaster in the entire world, and among these was reducing the levels of CO2 emission in the globe by around 10%. This is a good strategy for environmental conservation. Also, Lego always works hand in hand with its suppliers so to identify how it impacts the environment in terms of reducing the carbon emission, and Lego still has a plan that it is working towards achieving by the year 2030, the plan being to become 100%sustainable however much they depend on plastics. |
Formulation of a New Strategy for facing the challenges and objectives of the organization
The management scientist from Canada Mintzberg 1987 came up with a theory aiming at the strategic development of a firm, and this was called the 5p strategy of Mintzberg. The strategy focuses on planning, ploy, pattern, and position. These perspectives are important in the company’s objective identification process (WenJun, 2019).
Going to Lego, planning the supply chain management is key and helps evaluate the major challenges. Poly, the next step, is where the competitive strategy is built in the strategic management assignment. Here, the company aims to reduce the prices of the products to maximize sales and outcompete the competitors in the market. In the next step of the pattern, Lego needs to focus on and analyze past failures so that it can be guided on which direction it is right to take in the future for strategic operation. The selling strategy should always be unique, and this should be aimed in the position phase, hence ensuring customer enhancement. And lastly is the perspective phase. Here, culture must be focused on and analyzed to enhance the company’s position in the environment.
Critical Analysis of the Strategy Based on Justification.
Going by the above strategy, it is evidenced that 5p is vital in enhancing the viable advantage of other organizations in the market. This is based on past experiences; hence the business’s position would be enhanced with new ideas. In SWOT analysis, it is important to effectively consider strategies to overcome the issues of high prices of the products and the safety of all that is produced; hence this defines why the 5P strategy is the best.
Explain how your business strategy encourages and supports innovation and change and evaluate your strategy against competing strategies based on its contribution to the success of your organization
Change in the organization is critical since it helps enhance its competitive advantage, attainable through efficiency improvement at management levels. It is significant always to emphasize the changes in management other than supply chain management since this benefits the company, is less expensive, and doesn’t consume time. Under critical moments, the primary focus always has to be organization changes, which enhances the great relationship with all the company suppliers, making the business run smoothly. This helps the company to increase member cohesiveness, enhance productivity, bringing about cultural changes.
This business strategy encourages the practices of coaching and progressive disciplines, which are essential to innovation and change in the organization. These practices lead to giving employees new skills and also eliminating behaviors that are not job-oriented in the organizational performance standards. The sole purpose of progressive discipline is to let the employees know the need for performance improvement and equip them with the necessary skills they require to attain the necessary improvement in performance. There must be a commitment that enables one to get moving forward, hence attaining innovation. The necessary steps which are taken towards attaining discipline are coaching the employees, giving them written warnings in case they go wrong, giving them final warnings in case they don’t adjust, suspension, and finally separating in terms of termination of their contracts.
Innovation comes through identifying new investment areas to raise the organization’s performance. Also, cultural changes are key when it comes to the enhancement of stakeholders’ relationships. Based on the 5P strategy, it is observed that innovation in culture is considered to enhance supplier relationships (Narayanan, V. and Adams, 2017).
Develop an implementation plan for your chosen strategy and document how your plan will fulfill major stakeholder expectations.
Implementation plan for the strategy
The implementation plan here is called the 5P strategy having the phases of the plan, position, poly, and perspective as discussed above. The organization can implement effective implementation of effective strategy by implementing respective components. The implementation plan takes the following strategy in the table below;
The implementation plan follows a particular sequence when attaining it. The sequence should be attained following a particular time frame set to avoid delays. The above table describes each activity, which one comes first, and for how long. It can be noticed that evaluation and communication of the strategic plan come first in the first week, followed by implementation of the development structure in week two, formulation of the structure there comes in, making the budget for accountability then comes in, and allocation of the resources follow in the next week and then lastly is letting the plan flow in the discharging stage.
The strategy implementation is best when it takes the cascade model, which is very vital in structuring the business, which is illustrated by the following framework (Vuorinen, L. and Martinsuo, 2021);
Recommendations and Conclusion
Recommendations
Going by all the many strategic management Lego organization has used. Plans to use; it has to look at how to better its relationship with its stakeholders, both the internal and external stakeholders of the organization. It is always important to have a better structural change which is essential in strengthening the organization’s business strategy, and so should be done by Lego. Ultimately, this shall enhance production and quality, and market diversification shall be attained to make the organization more profitable.
Conclusion
The conducted studies about the strategic management of Lego shows the organization faces challenges that are both financial and management aspect in line with its business. Here the internal stakeholders are the experts, the sales team, the manufacturers, the marketers, and the designing team. Two major theories, the resource-based view and the game for strategic management, can best be used to improve the Lego business strategy. Among them should be international strategic management which enhances the company’s performance. Also, PESTLE analysis has been so important in classifying different features that still have impacted the organization’s company growth businesswise.
References
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