The Lego Company: The Challenges And Development Of Lego

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The LEGO story began on the tracks of innovation and reinvention. Founded in the workshop of Ole Kirk Kristiansen in 1932, the wooden toy-making business was the product of reinvention of Danish carpenter when the Great Depression hit and threatened his livelihood. He named the business LEGO which was taken after a contraction of the Danish “leg godt” which means play well. The company grew and by the 1980s, LEGO was the most popular toy in the world. The company was an early adopted of new technologies and material, constantly seeking to innovate and for almost 70 years since its inception, Lego experienced steady growth. Challenges and difficulties for LEGO It was not until 1998 that LEGO first started losing money and in the next few…show more content…
As Kids were turning to video and computer games, sales of toys were dropping year on year. Executives, managers and consultants to the company were quick to propose diversification and put in proposals after proposals on plans and directions the company can head towards so as to bring it back to the top. Many felt that the original brick was boring and simple and would not appeal to the children who will grow up with video games. After posting its first losses, LEGO negotiated deals with companies like Disney and diversified into being a lifestyle brand and opened Legoland theme parks in a bid to capture more customers and markets. By doing so, LEGO was stepping into uncharted territories, into markets which it has no experience in and suffered for it. Sales for toys tied up with Disney greatly…show more content…
At 33, he joined the LEGO group after a spell in academia and at Mckinsey & company and was appointed as CEO in 2004. It was a huge risk for LEGO as he was an outsider and a business rookie but given his background, Mr Kundstorp could recognize and identify the problems that the company was facing. Brand innovation With data and insights that he collected over a period of two years from employees and customers, he set out to align the company with its mission “to inspire and develop the builders of tomorrow” and launched his turnaround plan. All product innovation and design under the management had to tie in with the mission and goal of the company. By reestablishing its brand, LEGO has successfully expanded its range product offerings to the same customer segments. Process innovation Manufacturing costs were high and unique LEGO parts were slashed from 12,400 to about 5000. To further reduce cost, up to 80% of production, packing and distribution was outsourced. This represented an overwhelming majority of its plastic brick production and they were sent to cheaper factories in Mexico and the Czech Republic. By doing so, LEGO could save up and divert resources to other core strategic

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