For the purposes of assessment, this case study has been adapted from real events within the organization
Lego has come a long way over the past 80 years - from a small carpenter's workshop to a modern, global enterprise that is now one of the world's largest manufacturers of toys.
The LEGO brick is our most important product. We are proud to have been named "Toy of the Century" twice. Our products have undergone extensive development over the years - but the foundation remains the traditional LEGO brick.
The brick in its present form was launched in 1958. The interlocking principle with its tubes makes it unique and offers unlimited building possibilities. It's just a matter of getting the imagination going - and letting a wealth of creative ideas emerge through play.
Sales have been declining across some of Lego's core markets; in the USA sales dropped by 35% from last year, Germany finished the year approximately 20 percent below prior year's level, and the UK, Holland and the Nordic markets fell by 13 percent. Only the new markets in Eastern Europe and distributor markets maintained sales on a par with prior year. Sales of movie tie-in products developed unsatisfactorily. Interest in the Star Wars range and, to an even greater extent, the Harry Potter series fell below expectations without new movie releases. The drop in sales of these products accounted for more than 50 percent of the overall sales decrease.
One ex-employee is quoted as saying: "Lego's off track and management don't really understand how far it is off track. Most employees and customers are very clear about the problems but there are no lines of communication to enable the key messages to get through to the top."
The owners of the company (Lego is privately owned) had been spooked by the patent expiry of the basic LEGO brick. Competitors like Tyco Toys and Mega Bloks had developed 'me too' products. New products including software, games, PlayStation, Xbox and the like had convinced senior management the move would be digital. "The LEGO brick was going to die!". Hence the rush into adjacent markets in the perceived need to diversify away from the original business.
LEGO had tried to develop a diversification strategy which included software (LEGO Moviemaker), learning concepts (LEGO education), lifestyle products (LEGO Kid's wear), girls toys (LEGO dolls), books, magazines, television, theme parks and own retail with a goal of over three hundred retail stores.
Each move had demanded a special set of skills away from the basic skill set within the LEGO business. Knudstrop was to herald a return to basics, reminiscent of the "Stick to the Knitting" mantra of Peters and Waterman [1982]. The company had been guilty of chasing too many fads and ignoring the focus on key LEGO kit construction products. There had to be a return to the LEGO brick. Back to the brick as a building system. A coherent expandable universe of toys. There had also to be a focus on profitability, especially the basic potential of the core products.
The LEGO Company have recently shelved certain initiatives outside of the core business, including wristwatches, publishing and other lifestyle products. At the same time, LEGO intends to reduce losses in software and the LEGOLAND parks. The strategy is to refocus on the LEGO brand - stimulating imagination, creativity and learning - "it is what children and parents expect from us. We will continue to expand within this area, applying a growth strategy with a huge potential and lower risk"
Assignment Tasks - Answer ALL Tasks
Scenario: You are a marketing Consultant for Lego. The senior management team of the organization have asked you to conduct detailed research on their current situation and then prepare a formal report that includes:
a) A SWOT analysis on Lego highlighting the most important/critical Strengths, Weaknesses, Opportunities and Threats facing Lego at this time.
b) From the SWOT findings recommend and justify 3 SMART marketing objectives.
c) Recommend and justify ONE appropriate marketing strategy to help Lego achieve these objectives.
d) Based on the above tasks justify what changes you would make to the current Marketing mix (7Ps) for Lego.
e) Include an implementation chart
f) Describe what metrics you would use to help you measure the success of the plan
g) Transferable Skills: including professional format, references and in text citations, use of the ICP House Format.
Assignment word count: 1500 words
Core text - Brassington, F . and Pettitt, S ., 2006, Principles of Marketing, FT/Prentice-Hall.