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Strategic Analysis and Recommendations

Group 4 – Section B Alex Brown Luis Cavero Amedeo Giacomantonio Unni Pedersen Jung-Ho Song Tetsuma Suzuki

Presentation Outline

Company Overview External Analysis Internal Analysis SWOT Analysis Lego‘s 8-Point Action Plan Additional Recommendations Conclusion

Mission, Vision & Core Values

• Mission: To encourage self-expression in children of all ages through creation, by enabling them to bring their ideas to life • Value Proposition: Develop and distribute toys which positively develop children’s mental and physical abilities while entertaining them and being fun at the same time • Core Values: Creativity, Imagination, Learning, Fun and Quality

Company Time Line

• 1932 - A company producing stepladders, ironing boards, stools

and wooden toys, is established in Denmark

• 1934 - The company is called LEGO (Play Well) • 1956 - Plastic toys • 1968 - LEGOLAND® Billund opens its gates • 1986 - The DUPLO line • 1998 - LEGO MINDSTORMS /ROBOTICS • 1999 - Star Wars • 2001/03 - LEGO BIONICLE + BIONICLE video game + Movie

External Analysis

Competitors Industry • Mattel: # 1 - strong growth • Hasbro: # 2 - diverse portfolio • Bandai: strong in Asia and Europe • Mega Bloks: substitute bricks • Customer is not always the consumer Customers • Key considerations: Quality, Satisfaction, Timing Technology • Continued expansion of the Internet • Growth in broadband technology and wireless technology • Decreasing costs for sophisticated electronic components • Highly fragmented • Key success factors: Innovation, Strong Brands, Creativity • Distribution moving towards mass retailers • Trends: Increase in electronic toys and video games Environmental • Strong growth in emerging markets • Improvement in US and European economies

Internal Analysis

Financial Performance

Net sales fell by 26% in 2003 - only the 3 rd No major investments in 2003 loss since 1939

Physical Assets

Reduced total assets by 20% by reducing working capital

Technical Resources

The Vision Lab, setting up in 2003 (researching trends and innovations) 39 Lego Mindstorm centres around the world (working with leading universities and science centres)

Costs

Cut of 600 positions globally in 2003 Closing Switzerland factory in 2004

S.W.O.T

Strengths

• Strong Brand Power • Wide product line • Well developed global distribution channel

Opportunities

• Electronic/technology driven toys • Sales to the Education industry • Alliances in the Entertainment industry • Growth in emerging markets

Weaknesses

• Limited brand image • Loss of focus on key businesses • Indifferent cultural knowledge • Easy to copy

Threats

• PC / Video Games • Increasing power of distributors • Increased dependency on licensed products • Low cost competitors

Lego’s Action Plan

Cost Reduction

-Reduce development and lead times by as much as 50% -Terminate non-core ventures

Increasing Value to the Customer

-Improve delivery system -Increase focus on classic product lines

Improving Speed to the Customer

-Increase promotional activity -Establish a simplified global location and operations infrastructure

Technical Quality Service Quality Timing Quality Reputation Quality Relationship Quality Price

Realign the Organization

Alignment Technical Quality Service Quality Timing Quality Reputation Quality Relationship Quality Price

Strategic Recommendations

Leverage Brand and Technical Expertise • Education Sector Focus on core business

Construction ‘Violent’ Construction Educational

Strategic Recommendations (cont’d)

Target Developing Countries • Currently less than 10% of sales outside US & Europe • 376 million children in China (20 times the US figure) • Culturally Customized Toys

High MARKET ATTRACTIVE NESS Medium COMPETITIVE STRENGTH Strong Average Weak CHN IND USA EU Low