Lego Case Study

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Lego Case Study Introduction

Companies like Lego have to scan their internal and external environments to scan threats, understand their weaknesses, cash on their strengths and grab opportunities. This also helps them to understand the legal and environmental laws to work in accordance to it. Companies like Lego use SWOT and PESTLE analysis to understand such criteria. These two strategies also help companies like Lego to understand the social and environmental aspects in the countries they are operating and thus, building their policies accordingly. The following study sheds light on how an European based company, Lego on the internal and external factors of Lego in relation to SWOT and PESTLE.

Fill the table

Company name

Lego

Type of industry

Toys

Headquarters

Billund, Denmark

Sales/revenue

DKK 36.4 billion (2018)

Areas served

Over 40 locations around the world

Number of stores

All over the world

Competition

Mega Blocks and Best Lock Construction toys. 

USP

Unique designs and quality of toys

Target groups

Children

Products

Toys

Website

https://www.lego.com/en-us

Lego SWOT Analysis

Strengths

Weakness

  • DKK 36.4 billion in 2018
  • Strong brand recall
  • Variety of products to cater to large buyers.
  • Encourages problem solving
  • Intense Competition
  • High cost of products.
  • Increased expenditure on Research and development amounting to 152 million US dollars in 2015
  • Fluctuation in sales by 37.9 billion dollars in 2016 which dropping to 30.0 billion in 2017

Opportunities

Threats

  • Expand to different countries.
  • Release a variety of educational toys.
  • Children inclination toward video and online games.
  • Similar type of toys available at a cheaper price.

Lego Analysis

Strengths

Lego is available at over 40 locations around the world and have a wide range of customers. This provides it a great opportunity to serve a huge number of people hence, increasing its sales. As per the case study of Lego, the company’s sales grew from 35.0 billion in 2017 to 36.4 billion in 2018 (Lego.com, 2019). The sales have also grown because of its strong brand recall. The marketing and advertising strategies of Lego have been powerful enough for the company to grow sustainably. The products of the company are equally liked by the parents as the kids as these products encourage children to use their problem solving skills to make different designs using their blocks. 

Weakness

Competition from companies like Mega Blocks has decreased the sales of Lego as other company products are available at a cheaper price. As per the case study of Lego, 152 million US dollars was spent in research and development of Lego (Sustainablebrands.com, 215) because the company, Lego focuses on not repeating its designs. As per the case study of Lego, its revenue was 37.9 billion dollars in 2016 which dropped down to 30.0 billion in 2017 (Lego.com, 2018).

Opportunities

As per the case study of Lego, its good brand name can help it successfully expand its services in different countries thus, providing it more market and income. The company has been well known for its unique designs and its ability to help children think logically. Hence, Lego can design more toys appropriate for developing learning and logical thinking skills at schools.

Threats

As per the case study of Lego, the main threat that the company faces is making children more interested in their products as children have been spending more and more time online playing games or watching videos (Lego.com, 2013). Technological advancements have helped other companies to develop cheaper products. The availability of similar types of toys available at a cheaper price in the market has hit the company sales in a negative way.

Lego PESTLE Analysis

Political

  • Different tax laws of different countries
  • Toy safety laws (More than 2,000 materials to make toys are approved)

Economic

  • Operating costs of different countries, including manufacturing.
  • Unstable currency value

Social

  • Promotes logical thinking
  • Partnership with UNICEF for children's rights.

Technological

  • Development of video games
  • Fun online videos

Legal

  • Involvement in lawsuit cases.
  • Cheap copies of Lego products.

Environmental

  • Plastic products.
  • Bas aimed to achieve 100% renewable products.
  • 20,000 solar panels (Lego.com 2016)

Analysis

Political

Lego operates and even manufacturers in different countries. The tax laws of different countries affect the income of Lego to a great extent. Countries where Lego does not have manufacturing units have higher prices of its products due to import taxes. The EU legislation lays down strict laws regarding the safety of toys made (Europa.eu, 2019). More than 2,000 materials used for the production of its toys have been approved (Lego.com, 2013). Its chemical have also been said to be less hazardous and meet the requirements of the law by the EU.

Economic

Lego can benefit from outsourcing manufacturing in countries where the production cost is less. This will help dodge the income tax and reduce cost. As per the case study of Lego, unstable value of currency can greatly affect its sales and even manufacturing costs.

Social

As per the case study of Lego, it has been widely accepted socially as it engages the minds of children in active logical thinking activities thus, making it one of the most successful companies. Lego has partnerships with UNICEF (Unicef.org 2019). This partnership supports the rights of children. This has helped Lego reduce people’s hesitation in using its products and help build a better brand image.

Technological

Technological advancements in the gaming sector have lead to negative impact on the company. With the development of games with good graphics and virtual reality, the main concern of Lego is to attract more children to buy its products. Inversely though, such advancements have also helped the company to make better toys that are less hazardous. 

Legal

As per the case study of Lego, cheap copies of Lego products have forced the company to file many lawsuits over the years. The company has mostly benefited due to such lawsuits as a lot of penalties that other companies need to pay. The availability of cheap products has negatively affected its sales.

Environmental

Lego produces plastic based products thus, generating tons of non-biodegradable amounts of plastic. The company has been making efforts to achieve its target of 100% renewable products. The company had decided in 2016 to install 20,000 solar panels on the roof of the LEGO factory in Jiaxing, China (Lego.com 2016) thus reducing the company’s energy consumption. Through this idea it aims at using only solar energy by the year 2020 in China.

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Reference List

Europa.eu (2019), About Europe’s toy safety laws. Available at: https://ec.europa.eu/growth/sectors/toys/safety_en [Accessed on 12 August 2019]

Lego.com (2013), About Lego’s toy safety accomplishments. Available at: https://www.lego.com/en-us/aboutus/responsibility/ourstories/safe-products [Accessed on 9 August 2019]

Lego.com (2016), About Lego’s solar panel installation. Available at: https://www.lego.com/en-us/aboutus/news-room/2016/november/jiaxing-factory-solar-panels [Accessed on 11 August 2019]

Lego.com (2018), About lego’s revenue in 2016 and 2017. Available on: https://www.lego.com/en-us/aboutus/news-room/2018/march/annual-results-2017 [Accessed on 12 August 2019]

Lego.com (2019), About sales of Lego. Available at: https://www.lego.com/en-us/aboutus/news-room/2019/february/annual-results-2018 [Accessed on 20 August 2019]

Lego.com (2019), About the locations of Lego. Available at:https://www.lego.com/en-us/aboutus/lego-group/locations [Accessed on 20 August 2019]

Sustainablebrands.com (2015), About Legos research and development cost. Available at: https://sustainablebrands.com/read/product-service-design-innovation/lego-group-investing50m-in-r-d-for-sustainable-materials [Accessed on 12 August 2019]

Unicef.org (2019), About Lego and UNICEF collaboration. Available at: https://www.unicef.org/mena/stories/unicef-and-lego-foundation-support-more-145000-children-jordan-learn-through-play [Accessed on 10 August 2019]

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