Lego-1

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Table of contents1. Introduction ............................................................................................................................................. 2 1.1 Background ........................................................................................................................................ 2 1.2 Problem formulation .......................................................................................................................... 2 1.3 Market definition ............................................................................................................................... 3 1.4 Methodology ..................................................................................................................................... 3 2.The External environment......................................................................................................................... 3 2.1 Macroenvironment ............................................................................................................................ 3 2.1.1: PEST- analysis ............................................................................................................................. 3 2.1.2 Macroenvironment: Friend or Enemy? ........................................................................................ 5 2.2 Immediate industry and competitive environment ............................................................................. 6 2.2.1Dominating economic features of the toys and games industry: ................................................... 6 2.2.2. Competition ............................................................................................................................... 6 2.2.3. Industry driving forces ................................................................................................................ 7 2.3 The external environment strategically: Opportunities and threats .................................................... 8 3: The internal environment: strength and weaknesses ............................................................................... 9 3.1. The LEGO Groups Strength and weaknesses ..................................................................................... 9 3.1.1. Strengths .................................................................................................................................... 9 3.1.2. Weakness ................................................................................................................................... 9 3.1.3 Overall the LEGO Groups internal environment .......................................................................... 9 3.2. Think Global, act local strategy. ........................................................................................................10 3.3. Recommendation .............................................................................................................................10 3.3. Goals and results ..............................................................................................................................11 4. Conclusion ..............................................................................................................................................11 Bibliography ...............................................................................................................................................12 Books ......................................................................................................................................................12 Articles and reports.................................................................................................................................12 The LEGO Groups information ................................................................................................................12 Online sites and databases ......................................................................................................................13 Appendixes .................................................................................................................................................14

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1. Introduction1.1 BackgroundThe story started in 1932, when the founder Ole Kirk Kristiansen a Danish carpenter, decided to extend his carpentry business by manufacturing a line of simple, hand-carved, wooden toys. 1Today the LEGO group is a global brand of toys, with 78.7% of its total value sales in 2008 generated in Western Europe and North America2. Furthermore the LEGO group ranked number 8 in the world, and has a world market share around 1.4%3 The Danish global toy company the LEGO group has seen ups and downs throughout its history. However, the LEGO group has seen continued growth over the previous five years, and sales have increased by double digit growth rates in the last few years4. (See appendix 2 for the LEGO Groups financial highlights) In 2009, value sales in the global market for toys and games declined by 1.3% from prior year, reaching just over US$138.6billion5.Furthermore Value sales of traditional toys and games declined by nearly 3% from prior year.6 The LEGO group is interesting to analyze, because it is a company that experienced growth from 2008 to 2009, when the world market for toys and games declined. Expecting continued growth in sales, The LEGO group has a focus on growth in the years ahead.7 On the basis of growth, the LEGO group has defined seven growth initiatives, one of them being: Seed emerging markets: The LEGO group does not yet enjoy a strong market position in markets such as china, Mexico, Brazil and India. These markets are expected to see strong growth in the future, and the LEGO group plans to invest in developing them.8 This project will focus on the LEGO Group, and their expansion of its market share in china.

1.2 Problem formulationBased on the above background for the project, the specific problem being analyzed is:

How can the LEGO group strategically expand its market share in china?The problem formulation will be answered through a couple of sub questions that will be answered throughout the analysis: 1 2

What are the opportunities and threats for the LEGO group in China? What does the market for toys and games look like in china? How is the competition for toys and games in China? What type of strategy should the LEGO group execute in order to increase market shares in China?

International directory of company histories pg. 287 Euromonitor InternationalLEGO group toys and games world April 2010, pg. 15. (see appendix 1) 3 Eurominotor International: Toys and games 2010: Treds, Development and prospects, December 2009. However the LEGO group is ranked number 4 in the world of traditional toys according to the LEGO Groups company profile 2010 pg. 9. 4 Company profile: An Introduction to the LEGO group 2010, pg. 6 5 Euromonitor International: toys and games: Treds, developments and prospects pg. 4 (see appendix 3) 6 Euromonitor International: toys and games: Treds, developments and prospects pg. 4 (see appendix 3) 7 Company profile: An introduction to the LEGO group 2010, pg. 6 8 Company profile: An introduction to the LEGO group 2010, pg. 6

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1.3 Market definitionFor a consistent analysis, the market must be defined. The LEGO group is operating on the market for toys and games. This industry is further divided into a market for traditional toys and games9 and one for video games10 The LEGO Group has a number of products in its product line, with its core product being the LEGO bricks (see appendix 4, for some of the LEGO Groups products)

1.4 MethodologyThis project is based on desk-research. The models, graphs, and calculations created are enclosed in the appendixes at the end of the project, along with the most important numbers, figures and graphs found and used. The strategic analysis begins with an analysis of the external environment; first an analysis of the macroenvironment , followed by an analysis of the immediate and competitive environment on the Chinese market. The macroenvironment is analyzed using the PEST model. The political, economical, societal and technological factors that may affect the LEGO Group in China are indentified in the model (see appendix 5), and the primary weak forces that are concluded from the PEST are analyzed. The Legal, and environmental factors are not included in this analysis, since the project is primarily based on the different societal values and consumer differences there are in China. The competitive forces are analyzed with a Porters five forces (see appendix 13). Furthermore the dominating economic features and driving forces of the industry is identified, and analyzed to get an overall idea of the market, to find the opportunities and threats that the LEGO Group must be aware of. After the external analysis, the focus turns inward, towards the LEGO Group itself, with looking at the internal situation. This is a short analysis of the LEGO Groups strengths and weaknesses. These are needed to look at to see if the LEGO Group has the means to follow through with the opportunities they should siege. From the analysis, a strategy is crafted for the LEGO Group, on how it might increase its market share in China.

2. The External environment2.1 MacroenvironmentIn order for the LEGO Group to craft a strategy in China they must be aware of the macroenvironment there. 2.1.1: PEST11- analysis The overall PEST model, and identified factors can be found in appendix 5 The PEST factors are used to identify weak signals that may change the LEGO Groups environment in the future, and affect the LEGO Groups strategy. The factors and forces in a companys macroenvironment

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This includes: dolls/figures, activity/construction, indoor games, infants, pre-sc