Strategy development at LEGO Essay
Strategy development at LEGO
One of the initial strategy decisions was based upon the oil crisis in the 1980’s. The company reacted favourably by introducing new innovations and penetrating previously unexplored markets. Changes in the market environment in the 90’s also spurred on strategy development at LEGO. The advent of competitors and research contrary to what LEGO was basing its strategy on up to that point proved to be a focal point for the company. Objectives were set out and adopted and the company moved on. LEGO had difficulty in accessing and reading the market. Once this was highlighted, with the aid of a new COO, the company restructured and went on a cost cutting expedition – freeing up resources to assist with the long term objectives. LEGO suffered a sharp decline in the ‘most admired companies in Denmark’ poll. The external image of the company – that which affected the general public’s opinion and the desirability of the LEGO Group as a prospective partner and employer suffered due to the fluctuations in sales and profits. Heavy financial losses resulted in a weaker capital structure and limited investment opportunities for the future. As a result the entire procurement process was re-analysed and restructured and cost reductions in all sectors of the business were significant.
LEGO was fortunate enough to have a strong brand and awareness in the market. The market is more favourably inclined to ‘forgive’ companies that have taken the time to cultivate strong brand awareness. Even though LEGO clearly had bigger problems, they maintained and developed their relationship with their customers in order to better understand their needs and inculcate a higher standard of customer service within the company. Their focus remained strongly on the distribution in retail. The company suffered heavy financial losses and briefly discussed selling LEGO. However, this was clearly a last resort decision for the CEO. The family company and their dedication in making it succeed, worked for them. Had they given up the company, the LEGO brand would not have survived the climate it did. The company enjoyed strong financial backing. Instead of selling the company, it was decided that a loan would be taken. Give the heavy losses experienced, the climate and changes in market share, LEGO still secured a loan. Clearly, someone else believed in them as much as they believed in themselves. The dedication of LEGO’s management and staff is one of their key advantages.
Having staff dedicated to the vision, mission and strategy of the company is essential for the success of their long and short term objectives. LEGO’s bold approach to the global financial crisis in 2009 was part of their great success. This willingness and ability to act boldly saw them in good stead during a time of economic downturns. Another excellent use of resources is in the form of enthusiastic LEGO users for the development of products.