The Lego Group: Building Strategy Case 10 Essay

1745 Words Apr 24th, 2013 7 Pages
The Lego Group: Building Strategy, Case 10

LEGO, the brand of toy that has been played with by multiple generations of people was founded during the Great Depression in 1932 by Ole Kirk Kristiansen, a Danish carpenter. Kristiansen started making toys out of wood and had 12 employees under him. The word LEGO combines two Danish words leg and godt, which mean “play well” and in Latin, fittingly means “to put together”. It’s ironic that LEGO was given that name because it was only later that Ole’s son Godtfred Kirk Christiansen strategically noticed an opportunity of creating the “LEGO system of Play” which was the idea that and every LEGO brick should connect to each other across multiple sets. The strategy was simple. Each
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In 2010, LEGO sales reached a record of DKK 16.014 billion. It’s the fourth largest toy manufacturer in the world with over 9,000 employees. It’s a household name and icon that is found around the world. It started as a twelve man operation and since then has produced over 400 million bricks, with 19 billion new bricks being made each year.
Successful Corporate Strategy in the Past In 1999 to 2004, LEGO lost money. Revenues dropped 30 percent in 2003 and dropped another 10 in 2004. The problem was not with product itself, but with distribution and manufacturing. Kjeld stepped down as CEO and was replaced by Jorgen Vig Knudstorp who was originally director of strategic development in 2001.
He assembled a team of executives that looked at every aspect of LEGO’s supply chain that included materials sourcing, new product development, production, and distribution. What they found was that new product sets were becoming more complicated and provided less profit in return. The cost of materials and production was increasing and becoming too much of a burden on the financial health of the company. Inefficiencies were found in plant plastic molding machines where they were only operating at 70 percent capacity. Distribution costs were too high which created a backlog of more inefficiency in inventory. Too

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