Knudstorp's business strategies of Lego

1. What business goals were set by Knudstorp?

Ans.Jorgen Vig Knudstorp, the CEO of Lego set the following goals for the company which was performing very poorly,

* To remain profitable while maintaining growth, continuous innovation and quality of the products
* To reach to broader customer segment
* To cut expenses in production and supply chain and making these processes more efficient

2. What business strategies were set by Knudstorp?

Ans.Knudstorp set up the following business strategies to ensure Lego’s profitability and growth:

* Turning the supply chain into an efficient one by contacting top retailers, filling the blank spaces in the supply chain and reducing cost * Reusing the components in making new products which decreased the number of different Lego component by half in production process, thus successfully cutting expense in production process * Targeting new customer segment by incorporating new ideas with the traditional Lego products.

Lego entered into video games and started making their products based on popular themes based on Hollywood movies.

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They also introduced a new line of Lego product for girls. Working with numerous websites and online communities that feature Lego as a way to create art, Lego also became popular among adults.

3. What organizational design changes (strategies) were made to support the business strategies? What information systems changes (strategies) were implemented by Knudstorp to align with the changes in business strategy?

Ans.Lego made some very important organizational changes to support their business strategies. These organizational strategies are given below, * The new organizational culture of Lego made it clear that the company should not sacrifice the profit for doing innovation; which was a practice often done in past.

* Lego changed its employee pay structure and offering incentives which encouraged employees to strive for continuous product innovation and increasing sales. * Some manufacturing and distribution functions were moved to less-costly location while no compromise with quality was made. * Development time was reduced by 50% which resulted in speed in the business process.

* Reusable parts were created for using in manufacturing process which in turn reduced some pressure in the supply chain. * Lego gave the customers the opportunity to get involved in the discussion and product innovation by providing real-time feedback. Also, brand ambassadors were created to represent Lego among various building communities and thus involving customers in the making and development of the product.

Some necessary changes were made in the information system to support the new business and organizational strategies, they are stated below,

* Lego established an integrated and flexibly structured information system which allowed them to make changes in it as necessary. The new system included applications for human capital management, operation support, product life cycle management and data support which helped them greatly in alleviating problems in order management, fulfillment and employee management, areas that were stumbling to keep up with company’s growth. * New technology was also incorporated as Lego entered into online virtual interaction games and video games.

4. Which of the generic strategies does Lego appear to be using on this case? Provide support for your choice.

Ans.From the case it appears that Lego is following ‘Focus’ strategy with a particular stress on ‘Differentiation focus’. The main reason I think it because Lego’s main product is toy which is aimed at children. In that customer segment, Lego has separate product lines for both boys and girls. Although, Lego has entered into online virtual games, video games as well as in the online communities where many people feature their Lego creations and thus attracted adults, these all are targeted to the younger population as well. Moreover, they differentiated their products to meet different group’s expectations within the targeted segment. For all these reasons stated above, it can be assumed that Lego is using ‘Focus’ business strategy.

5.Are changes implemented by Knudstorp an indication of hypercompetition? Defend your position.

Ans.In my opinion the changes that were brought to Lego by Knudstorp definitely indicate hypercompetition. Speed and aggressiveness of business actions are the two main components of hypercompetition which can be observed clearly in the Lego case. Under Knudstorp’s tenure, the company was transformed into a profitable and strong one in five years which was once performing miserably. By renewing the business, organizational and IS strategies while keeping up the constant innovation and maintain good product quality, Lego made its return possible in the toy industry. While making various changes within the organization to make production process and supply chain more efficient and less costly, Lego started expanding their target customer segment by product differentiation.

Once traditional toy maker, Lego started making toys based on popular movies like Indiana Jones and Star Wars as well as targeting girls and adults by introducing new product line and virtual games. Moreover, Lego got the customers across the globe engaged into product innovation by appointing brand ambassadors and utilizing real-time feedback from them. These actions gave their customers a feeling of involvement brought them much closer to Lego. All these moves were rapid and aggressive when we consider a time span of five years, and altogether they point towards hypercompetition.

6. What advice would you give Knudstorp to keep Lego competitive, growing, and relevant?

Ans.I would recommend Knudstorp to continue the culture of innovation and maintaining efficiency in Lego’s business processes while keeping the good quality of its products. Also, capturing new possibilities for profit in the market and employing effective technology can help them. They should also watch their information systems strategy triangle to make sure all three types of strategies are supporting each other well. While doing all these, Lego should keep a close eye on its competitors so that they do not lose any opportunity to their competitors.