The Lego Case
Industry competition & LEGO’s strategic choices: The toy industry has proven to become one of the most competitive and ambitious environments in the global economy’s history. This is because there is little room for companies, such as The Lego Group and its’ competition, to give any downward variability in quality, price and how much their customers value their toys for entertainment. The toy industry is a very saturated market with little room for a drop off in market share.
Most organizations within this industry had to find ways to cut cost through their multiple channels in order to make the largest return on the slim margins that this market has for “luxury items” such as toys. This meant that The Lego Group had to focus on better returns on their supply chain process and lower costs whenever the largest financial in the company’s history took place starting in the early 1990’s and continuing on into the new century.
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The Lego Group’s new strategic vision since the financial crisis and “failed” partnership with Flextronics resulted in better documentation and operational procedures from a logistical process that did not exist before. The documentation of job specifications and requirements in order to succeed are a large part of the success the company is currently experiencing.
Standardization of processes resulted in large cost savings throughout their supply chain, one which was desperately needed and might have been a leading cause of the financial crisis from the start. Also, a lighter production portfolio was a factor within the company strategic vision, as the complex diversity of products that the company had developed over the previous two decades had caused a large production cost increase and entanglement in perceived visions for growth.
The LEgo Company began to realize that they needed to get back to the basics of what made the company so successful to begin with. Through the new strategic vision and research of what made their competition thrive, The Lego Group was able to cut costs through their supply chain and increase revenues in order to thrive once again within the highly competitive toy industry.