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SMG SI 422 (16)
John Kirks (16)
Lecture 17

SMG SI 422 Lecture 17: Class 17 - LEGO

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Strategy & Innovation
SMG SI 422
John Kirks

Carmen Zheng 040417 SI422 Prof. Kirks Class 17 LEGO 1. Think about the five forces: Which have changed in a favorable or unfavorable direction prior to the nearbankruptcy? Buyer power went in an unfavorable direction because parents were buying less LEGO for their kids due to declining births and childhood time was shorter. Substitute power went up and in an unfavorable direction because times were changing and technology was increasing. Kids wanted more fashionable and electronic products because they preferred instant gratification. Buyer power went unfavorable because the retailers werent happy with LEGO and would even be okay with replacing their shelf space with dog food. The people at LEGO had to work hard to convince them not to. 2. ThInk about internal Lego management and strategy: What are the internal causes of decline at Lego? The internal causes of decline was the strategy they choose to go with. The toy industry was changing so they decided to branch into other product lines, but that didnt fix it. They then went into licensing, which was a great idea, but didnt make any revenue when the brand wasnt being promoted. I feel like they didnt have a goal or strategy in mind. They wanted to branch out into different sections like Disney did, but Disney was much larger than them. Their budgets werent the same, so they cant produce everything Disney made. They should have chose one or two main activity and invest their budget into that. 3. What is your assessment of management moves during the growth period that wasnt (1993 1998) and the fix that wasnt (19992004)? In the growth period it wasnt, I believe the management moves were trying to do too much. I liked how they decided to create a website to following the changing time of technology but I think they shouldnt have expanded to so many other products. LEGO is a toy about building. Expanding that into watches and childrens wear might confuse audience so they probably dont see the fit between toys and watches and childrens wear. In the fix that wasnt, I thought it was smart move to start cutting losses and an inlicensed brand to lower cost and increase revenue. However, they realized inventory was slow and stockouts happened frequently and they didnt do anything about it. 4. What do you think that Knudstorp should to turn the company around? Knudstorp should outsource the manufacturing because that was one of the their biggest issues. They experience frequent stockout if they miss only one piece. Each shape required a mold and each mold cost 50,000 pounds on average, or up to 300,000 pounds. Their fill rate was wildly varied, between 5
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