mindstorms 1999 strategy
TRANSCRIPT
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Corporate Strategy1999
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Founded in Denmark, 1932Worlds 5th largest toy manufacturerManufactures, distributes and retails plastic building block kits -
LEGO Primo, LEGO Duplo, LEGO System and LEGO TechnicEmployees 10 000 people Revenue US$1.1 billionCEO, Kjeld Kirk KristiansenNew businesses - LEGOland, LEGO Lifestyle, LEGO Media, LEGO
Mindstroms
LEGO Group
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1984 Early R+D1986 Launched computerized building set for schools;
deemed premature1993 Strategic business unit created after the successful trial
of a programmable brick1995 Home PC ownership and Internet usage is sky-
rocketing. Market dominated by game-oriented ‘edutainment’ products
1996 Target market identified: Conscious, Caring and Capable parents, (CCC), 20% of US households
1997 LEGO Mindstorms launches
LEGO Mindstorms
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Integrate or continue unabated?
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Macro Environmental Analysis
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Instability in the developing world;WTO free-trade negotiations breakdown; and
European Parliament elections.
Political
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Economic
Euro introduced as Denmark abolishes the Krone; changes to the Danish taxation system; and the Internet boom is still aiding economic growth
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Sociological
Changing attitudes to early childhood development; away from instructional methods; and leisure time is
evolving from outdoor activities.
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TechnologicalSpeed of information technology increasing; communication networks impacting on society; and internet and PC games impacting the toy market.
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LegalLabour market reforms in Denmark; and
potential changes to intellectual property laws.
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Environmental
Increasing global concern for the environment; over consumption and over population; governments intervening
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Industry Analysis
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Industry Rivalry
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Flexibility Adaptation; speed to market; pricing; and distribution.
Innovation In products; services; support; and technology features.
R+D Continual new and exciting productsBrand awareness Market appealEconomies of scale Vital for profit marginBusiness Synergies Across LEGO group
Critical Success Factors
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SWOT Analysis
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StrengthsLEGO
Resolved vision;Outstanding reputation;Extensive distribution
network;Success in addressing org.
mindset problems; andHigh brand awareness
amongst target market.
Mindstorms
Astute marketing;Flexible, timely operations;Global vision;Products reflect LEGO’s
foundation; and Strong launch and initial
sales.
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WeaknessesLEGO
‘Instructionism’ products;Poor sales growth in recent
years; andViewed as ‘entertainment’
rather than ‘education’ company.
Mindstorms
Partnership conflicts.Staff that lack LEGO
knowledge
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OpportunitiesLEGO
New alliances with major players, i.e. Lucas Films and Star Wars brand; and
Economies of scale opportunities through integration with Mindstorms.
Mindstorms
Further market penetration; and
Establish new target market with schools.
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ThreatsLEGO
Declining profitability;New competitors; andIncreased internal conflicts;
Mindstorms
Unfamiliar substantive competitors, i.e. Sony, Microsoft, Nintendo and Sega.
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Company Analysis
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Corporate Strategy Perspectives
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LEGO’S Current Corporate Strategy
Since the early 90’s senior management have been working towards an integrated organisation perspective;
CEO was preaching a universal approach revolving around ideas, exuberance and values; and
Merging activities and processes to become more efficient, realizing synergies ahead of retaining responsiveness.
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LEGO’S Current Corporate Strategy
Formally structured core business;
Strategy was focused on planning, forecasting trends, and product programming.
The fitness program, involves reducing organisational layers and staff, clearer lines of responsibilities and a greater customer focus.
Predictable product lifecycles;
Continuous marginal improvement;
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Business Strategy Perspectives
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LEGO’S Current Business Strategy
Variance in business strategies across the SBU’s;
New business units have an outside-in perspective;
Core business has an inside-out perspective; but
Recent core activities project a change towards a market focused strategy (outside-in strategy).
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Functional Analysis
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Mindstorms CapabilitiesHR Experienced early challenges; hired
externally; global recruitment; seeking fast paced innovative employees.
Marketing Decentralised from LEGO core.
Pricing For price leadership.
Distribution Hybrid non-traditional channeling created conflict with the core distribution.
Promotion Outsourced PR/advertising focused only on the US market.
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Mindstorms PerformanceFinancial Sales are 1% of LEGO; goal to increase
growth rapidly; high cash needs; and financial losses in 1998 resulted in 1000 job losses.
Customer Creating awareness; online communities are attracting adults; competitive robotic events are attracting children.
Internal Build strong supply chains; operational efficiency; economies of scale.
Growth Synergies aligned with constructionist values and core competencies; responsiveness to market through innovative.
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Recommendations
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Hybrid Corporate Perspective
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Manufacturing and ProductionSharing value-added activities;
Lean manufacturing;
Parallel production processes; and
Economies of scale.
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Suppliers and Channel PartnersAligning positions to improve competitiveness;
Channel partner synergies; and
Strengthening existing relationships
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Internal Cultural ChallengesRemain innovative; via
The creation of a Mindstorms Champion Group.
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FinanceLeveraging resources; Reduced operating costs; Sustainable growth; and Increased Profit margins.
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References
De Wit, B and Meyer, R 2004, Strategy:process, content, context.International Thomson, Singapore
Ireland R D., Hoskisson R E. & Hitt M A., 2008, Understanding Business Strategy, Concepts & Cases 2nd Ed. Cengage Learning,
Hubbard, G 1990, Analysing a Case, in Cases of Strategic Management: Australia and New Zealand, G Lewis, A Morkel, G Hubbard, G Stockoprt, and S Davenport (eds), 2nd ed, pp. viii-xvi, Prentice Hall Sydney
Porter, M, (1998) Competitive Strategy: Techniques for analyzing industries and competitors, Free Press
1999 Statistics, Denmark viewed on August 10, 2009 <http://www.dst.dk/HomeUK/Guide/economico/1999.aspx >
Environmental Issues – Global Issues viewed on August 10, 2009< http://www.globalissues.org/issue/168/environmental-issues>
Lego Financial Accounts 2001 viewed on August 20, 2009< http://cache.LEGO ョョ .com/downloads/aboutus/accounts2001eng.pdf>
Lego Mindstorms – What went wrong? Viewed on August 20, 2009< http://www.techuser.net/LEGO ョ .html>
Lego Pressroom Archives displaying historic financials viewed on August 20, 2009<http://www1.LEGO ョ .com/eng/info/default.asp?page=pressdetail&contentid=99&countrycode=2057&yearcode=2000&oldXML=true&archive=true>
Effects of Overconsumption and Increasing Populations viewed on August 10, 2009< http://www.globalissues.org/article/216/effects-of-over-consumption-and-increasing-populations>
BCG Growth-Share Matrix viewed on August 20, 2009< http://www.netmba.com/strategy/matrix/bcg/>
Historic Exchange rates viewed on 10 August, 2009< http://www.xe.com/ict/>
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Image ReferencesSlide 1 - http://wallpapers.free-review.net/r?122 - http://www.viajejet.com/wp-content/viajes/fotos-de-uno-de-los-parque-de-legoland.jpg3 - http://perfectgift.exteen.com/images/toys/LEGO_Mindstorms_NXT_2.jpg4 - http://www.robotoys.com/LOGO_PIXEL_01.gif5 - http://www.dep.org.uk/downloads/personalglobaldiagram.gif6 - http://image63.webshots.com/63/3/19/6/453531906Rnpyvp_fs.jpg7 - http://www.digitalbirmingham.co.uk/blog/wpcontent/uploads/2009/03/fibre-optic.jpg8 - http://thundafunda.com/3993/images/1600_1200/children-pictures/cute-boy-playing-video-games-computer.jpg9- http://www.digitalbirmingham.co.uk/blog/wp-content/uploads/2009/03/fibre-optic.jpg10 - http://www.unisa.edu.au/crma/images/criminal_justice_jurisprudence.jpg11 http://www.ban.org/ban_news/2008/images/080415_beware_free_electronic_waste_collection_events_300dpi.jpg12 - http://www.geovista.psu.edu/images/img5-1_industry_analysis_NEW2.jpg14 - http://farm1.static.flickr.com/24/99387355_9ef08fe070.jpg?v=115415814915 - http://lams.epfl.ch/course/marketing2008/mktg2008_week3_wegmann_2_swot_1.jpg16 - http://legomyphoto.files.wordpress.com/2008/09/imgp4895.jpg17 - http://legomyphoto.files.wordpress.com/2008/09/day113.jpg18- http://legomyphoto.files.wordpress.com/2008/09/day117.jpg19 - http://saber-scorpion.com/lego/images/Halo/army_mareenz.jpg20 - http://farm1.static.flickr.com/117/305410323_effd579e8f.jpg 22 & 23 - http://www.a-jenterprises.com/Bios/lego%20people.jpg25 - http://legomyphoto.files.wordpress.com/2009/03/day283.jpg?w=500&h=33426 - http://www.me.unlv.edu/Undergraduate/coursenotes/egg102/9794-parts.jpg27 - http://engk12.ece.missouri.edu/LegoCamp/pictures/NXT%20Robots/LEGO%20NXT%20Brick.jpg28 - http://blogs.wsd1.org/etr/files/browserloop2.png29 - http://www.lego.com/info/images/pho102x170dkMindstorms.jpg31 - http://www.guardian.co.uk/lifeandstyle/gallery/2009/mar/26/lego-pictures?picture=34508121532 - http://images.doublebrick.ru/sets/sl/lego-7734-1.jpg33 - http://www.1000steine.com/brickset/images/852513-1.jpg