An Analysis and Evaluation of LEGO’s Global Marketing Strategy

Lego Toys Making Company

LEGO’s Global Marketing Strategy

Marketing Across Cultures

 

 

Executive Summary

 

Established in 1932 by Ole Kirk Kristiansen, an expert woodworker, the global LEGO Group remains a private and family-claimed organization situated in Billund, Denmark. The name LEGO has been taken from the Danish words ‘leg godt’, which signifies ‘play well’. In 1958 the originator’s child, Godtfred, recorded a patent application for the LEGO block. From that point forward, all the blocks ever created by the organization have been viable with each other. Today, the organization is among the biggest toy producers by income on the planet and continues to develop. Individuals from more than 130 nations worldwide have purchased Lego items.

The Lego interlocking blocks were financially effective. Their ubiquity is attributed to raising the Lego gathering to noticeable quality. As Lego Group filled in ubiquity, they enhanced into various product offerings incorporating toys, computer games, prepackaged games, books, magazines, movies, TV programs, kids’ attire, and amusement parks. The item expansion includes some significant pitfalls, especially in the advancement of specific Lego toy sets.

LEGO has been confronting dangers from its rivals. Hasbro and Mattel are additionally in a similar business and are developing at a decent speed.

This report targets showing how an unmistakable and experienced organization, LEGO manages the difficulties of new contenders, advertising across societies, and obstacles in its own particular manner of working. It additionally proposes numerous measures for the following 5 years of the organization based on a basic examination of various techniques utilized by the Lego organization. The report likewise clarifies the full-scale climate investigation of LEGO through clarifications of political, prudent, social, innovative, and legitimate elements in its PESTLE examination and the microenvironment investigation of LEGO by assessing its opposition. The different promoting strategies and procedures of LEGO have additionally been examined and dissected basically with the assistance of Porter’s 5 Forces Analysis. Based on attentive assessment and examination of different elements, coherent suggestions identified with speculation, brand the board, web-based business, and PC and versatile based games for the following 5 years of LEGO have been joined in the report.

 

 

1. Introduction

The aim of this report is to show a comprehension of how a worldwide company with around 90 years of existence deliberately deals with the challenges of marketing across cultures while fighting with new competitors and their own hurdles. Through the learning, analysis and understanding of the strategies applied by the administration of LEGO, this report will critically evaluate the company’s global marketing operation and will also recommend some suggestions for the next five years based on it.

 

 

2. Review of LEGO’s capability and current product/service portfolio

 

2.1 History of the Company

 

The LEGO group has quite a reputation in the toy industry. This Danish originated company established in 1932, in Billund Denmark (Lauwaert, 2008). The company initiated with making wooden toys and soon these toys became best selling items; later in 1949 the company started its best known plastic brick which became the company’s benchmark.

Two Danish words “leg godt” are abbreviated together to form the name ‘LEGO’. Its literal meaning is  “play well”. The company says – It’s our name and it’s our ideal.

 

Ole Kirk Kristiansen is the founder of the LEGO Group. Since he lost his business in 1932, he began making toys from his leftover wood. Once he constructed a small wooden duck toy for his children which they liked very much. Then he decided to put them into production to sell.

The company has been inherited by son from father and now Kjeld Kirk Kristiansen owns the company, who is a grandchild of the founder.

Jørgen Knudstorp was the first person outside of the family to lead the Lego organization. In 2004, Kjeld advanced him from overseer of key improvement to CEO. Around then his age was only 35 years.

 

The LEGO company was established almost 90 years back. They brought changes in their products with time and let the company in a remarkable position.

 

Some facts about Lego:

 

  • The company was established by the name LEGO in 1934.
  • The production of plastic toys by LEGO started in 1940.
  • Ole Kirk Christiansen is the founder of LEGO, he created the name “LEGO” by abbreviating two Danish words LEG GODT, which means “play well“.
  • Lego is currently the clear leader of the toy industry.
  • Such a huge number of bricks had been created by LEGO till date that if we take an average there are 80 LEGO bricks for every person on earth.

 

LEGO has established the LEGO Brand Framework, which revolves around four Promises:

 

  1. Play – get the happiness of building and the pride of creation
  2. Planet – make a positive impact on the planet
  3. Partner – create values with them mutually
  4. People – get success together.

 

Currently, LEGO is taking steps to stay ahead of key trends such as e-commerce, digitalization, and global socio-economic shifts which are reshaping the sector (Lego 2019 Annual Report).

 

2.2. Services and Products

 

The major product and services offered by Lego are Accessories, Backpacks and Lunchboxes, Books and Magazines, Giftcards, Home Decor, Keychains, Polybag, Role Play and Costumes, Stationary, Storage items, Video Games, Boards Games, Films and Television, Clothing.

The Lego interlocking bricks became commercially very successful. Their popularity helped the Lego Group in rising to prominence. Between 1950 and 1970, the profit scales and sales of the company were rising very swiftly. As Lego Group grew in popularity, they diversified as mentioned above slowly with time.

Lego has dispatched Lego sets with various sorts of subjects like Batman, Harry Potter, Jurassic Park, Marvel, and the rundown keeps containing a great many collections. It has likewise dispatched a mechanical line in 1999 named Mindstorms. Since at that point, this line has gone through different innovative headways and augmentations. Separated from its boss vivid plastic blocks, Lego has significantly more in its pack to offer that is simply not confined to toys.

They have extended their space on the lookout. Lego has presented computer games like Indiana Jones, Lego Island, and so forth, and board games, for example, Creationary, Minotaurus to broaden the item base that they are offering.

 

Additionally, they are contacting a crowd of people by means of motion pictures (The Lego film – 2014, The Lego Batman film – 2017 and so on), TV (Lego Masters in the UK that acquired in excess of 2 million perspectives every scene), and magazines (Star Wars). The organization likewise has a line of attire for youngsters up to age 12. The garments are produced by a Danish organization – Kabooki under the permit gave by the Lego organization. Aside from these items, Lego originally dispatched its LEGOLAND PARK in Billund in 1968 and from that point forward, they have opened numerous LEGOLAND amusement parks and LEGOLAND revelation focuses worldwide to additional add to the experience of the buyer.

In June 2015, with its sales amounting to 2.1 billion USD, the Lego Group became the largest toy company by revenue in the world. People in over 130 countries worldwide have bought Lego products.

At the moment, things are going nicely with Lego. The company has posted 6 percent growth in annual revenue (Lego Annual Report 2019).

 

 

3. Analysis of the Market/Environment opportunities and characteristics

 

The misfortune that the organization confronted before fortified its foundations and the organization didn’t confront any huge misfortune because of Covid’19. As Niels Christiansen, boss chief says (Anon., 2021) that they have been focussing on web-based business, item portfolio, and their image which paid off for the organization and is clear by their increment in income by 7% in the first 50% of 2020.

 

3.1 Micro Environment

 

The microenvironment comprises factors that are near the organization and that influence its capacity for serving clients. Perhaps the main thing about the Lego bunch concerning the microenvironment is that according to shoppers, it is seen as a quality arranged solid brand as additionally proposed by (Hatch, 2005). Its leader item has a novel selling cost – that it helps the innovative creative mind of the person. The organization offers Lego sets as well as tabletop games, computer games, motion pictures, magazines, garments, and so forth It has a wide scope of items for a range of old enough gathering that likewise helps organization such that buyers feel a long bond with the organization’s item. It additionally has a bright and simple to explore a site that customers can use to arrange items.

 

3.1.1. Promoting channel

Lego uses both conventional and current showcasing channels. Prior it used to depend on in-store battling, magazine plugs, and so forth In any case, presently the organization has made a colossal move towards internet advertising and online client commitment. Computerized promoting is currently a fundamental part of the organization. They even draw in their client base to submit plan thoughts from which they select 4 plans and push ahead with creation. The client whose thought gets chosen gets 1% cut from deals alongside permitting income of the item. (LEGO, 2021)

 

3.1.2. Competitive Environment 

The significant contenders for Lego are NAMCO Bandai, Hasbro, and Mattel. LEGO is route in front of them right now however in not so distant future they may get its offer in working edges and beat it. Particularly considering the way that Lego isn’t a pioneer in current innovative games. Then again, the contenders are unequivocally zeroing in on current AI, robots and Arduino related games, thusly interior contention is high for LEGO.

 

 

Global Toys Companies - 2020 Revenues

Table: Worldwide Revenue of Global Toy Companies in 2020. Source: Brandirectory

 

 

3.2 Macro Environment

 

3.2.1. PESTEL Analysis of Lego

 

pestel analysis of lego

Macroenvironment is the bigger social enforcing factor that affects microenvironmental aspects. For instance, Economic, Political, Technological, natural forces, etc. (Kotler, 2005)

 

3.2.1.1. The ECONOMICAL factors in the Lego PESTLE Analysis can be explained as follows:

 

The organization has demonstrated positive outcomes over the most recent couple of years. Prior the organization used to make items just locally yet now they have re-appropriated 80% of creation to Eastern European nations to set aside cash. The 2008 emergency, downturn, unequal interest and supply, European zone emergency are the significant difficulties. By zeroing in additional on more up-to-date fragments like AI-based games basic for enduring the contender’s danger challenge, the R&D cost has gone up. The liabilities have gone up alongside the benefits in the new years.

 

3.2.1.2. The SOCIAL factors in the Lego PESTLE Analysis can be explained as follows:

 

The organization has the philosophy of learning through play which engages youngsters and rouses guardians to purchase toys that enhance the creative mind and innovativeness abilities of their children. Lego has given UNICEF assets to place them into utilization with kids’ government assistance adventures, along these lines indicating their genuineness towards kids as toys are straightforwardly connected with them.

 

3.2.1.3. The TECHNOLOGICAL factors in the Lego PESTLE Analysis can be explained as follows:

 

Lego has been working with current innovations and has expanded its R&D financial plan YoY (Lego Annual Report 17,18,19). They are zeroing in on AI-based inventive present day games. As of late they have additionally centered around distant controlled and Bluetooth contraptions. Lego has teamed up with Texas Instruments to make robot-based games. A decent methodology considering the contenders are likewise vigorously putting resources into current advancements.

 

3.2.1.4. The ENVIRONMENTAL factors in the Lego PESTLE Analysis can be explained as follows:

 

Lego has done numerous CSR exercises and are investing in extraordinary amounts of energy to lessen their carbon impression. The Lego bunch additionally accomplished their 100% environmentally friendly power focuses in 2017. Their next objective is to dispense with the utilization of single-utilize plastic in bundling continuously 2025 (Lego, 2021). Despite the fact that, they confronted an advertising emergency when Greenpeace hauled them into the fights that they were doing to restrict the Arctic penetrating done by Shell organization in mid 2014. In any case, the organization persevered and gave the assertion saying that they work in a dependable way and Greenpeace and shell organization should resolve this issue in the middle of them and that they are disheartened by the reality their name was taken into this (Olsen, 2015).

 

3.2.1.5. The LEGAL factors in the Lego PESTLE Analysis can be explained as follows:

 

Lego is working in excess of 130 nations. For a particularly worldwide organization it is critical to keep the individual standards and guidelines within proper limits. Many copy results of Lego are sold in various pieces of the world. A major test to the economy and brand estimation of the business. Lego has won a copyright body of evidence against Chinese organization (Source:Reuters). A ceaseless lawful test which such enormous organizations ordinarily need to confront.

 

 

 4. Discussion/analysis and evaluation of the marketing strategies and tactics

 

4.1 Mode of Market Entry

 

Method of market section Lego entered different geological business sectors by selling its item online through web based business (Amazon, Lego.com). It has tie-ups with various conveyance suppliers to give convenient conveyances to clients. Lego additionally enters the market by setting up their stores in that nation. At that point customers can straightforwardly buy from the stores. Lego utilizes this section type for nation China. It additionally infiltrates a few business sectors by means of authorizing where they offer to wholesalers who at that point offer their items to retails arranged the nation over. This organization entered India utilizing this technique by joining forces with Funskool in 2014.

 

4.2 Porter’s 5 Forces Analysis for Lego Toys Making Company

 

To comprehend the serious climate of an organization and to comprehend the benefit of a business under the powers that shape a business, Porter’s 5 powers are a viable way. Here we can remark fair and square of contention and rivalry, dealing intensity of providers, bartering intensity of purchasers, the danger of new participants, and danger of substitutes.

 

1. Level of Competition:

Lego holds an exceptionally solid ruling situation in the market as of now yet it has not many monster contenders. Hasbro and Mattel are likewise in a similar business and are developing at a decent speed.

2. Power of Suppliers:

Lego has now reevaluated a considerable lot of its assembling activities which have diminished the expense. Nonetheless, as the organization is entering the trend-setting innovations in the gaming industry where the opposition is high, the decision of choosing the best providers may build their haggling power.

3. Power of Buyers:

Purchasers have less choices to browse and along these lines they don’t have control of costs. The nature of the item that Lego offers is essential to purchasers consequently in the clash of value v/s quality, the purchasers will in general pick quality which further decreases their bartering control over cost. Notwithstanding these variables, to extend the client base, the organization saves sensible costs for its item.

4. Threat of new Entrants:

Lego is inferable from the manner in which it works, the new participants should have enormous speculations to rival Lego’s quality which makes it hard for different organizations to enter this market. Subsequently, the organization has not many dangers from new participants. The way that the organization is around for a serious time and has not confronted any gigantic danger from any new participant legitimizes the way that Lego has less danger from new contestants.

5. Threat of Substitute:

Customary games are getting supplanted by current PC and versatile games. In spite of the fact that Lego is likewise trying their hands in this, they are not a market chief in this portion. With the development of innovation and progression, a tremendous danger for Lego is getting supplanted by current games.

 

 

5. Recommendations

 

According to the definite investigation and moment investigation of the different viewpoints identified with Lego the accompanying proposals appear to be well-suited for better development and achievement of the Lego organization in the following five years –

 

5.1. Invest in Innovation

 

As talked about in the danger of substitute, there is a high possibility that in future present day toys will totally assume control over the customary toys. In the event that Lego proceeds to simply zero in just on the “block games” and other customary games which were an achievement in the past then there is a high possibility that the contenders will surpass Lego’s predominance on the lookout.

It is basic for Lego here to put resources into R&D and produce AI, small scale robo, and arduino based current toys. Advancement and Creativity ought to be in center thinking about the future standpoint.

 

5.2. Invest in emerging economies with younger population

 

The world is very different today from the day when Lego started. Now, many developing countries have the purchasing power which they were not having a couple of decades ago. A country with a good purchasing power means a good market. If Lego starts selling its expensive products in poor nations, then there is a high chance that the plan will fail. But a country where the citizens are having enough money to buy such products, it will be a mistake not to enter those markets. According to the IMF’s report of 2021 the growth rates of India, China, United States of America and Japan has been projected at 7.4 per cent, 9.2 per cent, 4.5 percent and 3 per cent respectively.

list of countries by number of births

As per the United Nations World Population Prospects, India, China, Nigeria, Pakistan, Indonesia and the United States will have the maximum births. For a company like Lego this is a great opportunity to come and invest in these markets. As the newborns will grow, they will be the potential customers of Lego products.

 

5.3. Leverage E-commerce + Online Marketing

 

Lego should invest in e-commerce and online platforms in a planned way so that it won’t lose deals to online rivals like Amazon, which was accused of a year ago’s breakdown of Toys R Us (Lego’s Growth Strategy: How the Toy Brand Innovated to Expand).

ecommerce sales by country in 2019

Moreover, the company should also focus on digital marketing. Since the company has a positive social profile, they should use this as a strength in promoting their business and creating brand loyal customers through ‘word of mouth’ in a network process.

 

5.4. Focus on Computer and Mobile based games

 

The LEGO had a go at getting into various spaces other than plastic squares and blocks, yet they ended up with negative turn of events and persevered through a dreadful hardship. They got into PC games however the arrangement didn’t turn out great. By and by, they have a choice to rethink their previous decision of shutting down the movement.

global games market by revenue

Source: Ironsource

 

In 2004, the number of PCs was less and was significantly less famous, and the cost of making games and various applications was additionally an issue. In 2004, PC games delivered $25.4 billion. The typical gaming bargains in 2020 is $180 billion. They were not getting enough advantage out of this thought in 2004. As of now, things have improved an incredible arrangement. The quantity of individuals approaching PCs and cell phones is a lot bigger.

 

Lego can utilize its image character in getting a stream start on the off chance that they select to go into this enhancement. It will be similarly simpler for Lego than another organization as a result of the brand acknowledgment that they are having.

 

Going into any new broadening will expand the use of the organization. Nonetheless, there is no preferable time for Lego over now to enter this portion thinking that they are posting customary benefits on a YoY premise (Lego Annual Report 2017, 18, 19).

 

 

6. Conclusion

 

The Lego organization has been around since 1932 and has its a lot of good and bad times however the explanation the organization has flourished is on the grounds that it has advanced with evolving times. Lego is extraordinary compared to other marketeers on the planet yet even they can’t generally anticipate shopper conduct. It has submitted a few mix-ups however gained from them and conceived approaches to battle those circumstances. We have summed up the advertising strategies utilized by the organization throughout the long term and afterward with our own arrangement and examination, suggested organization with item and market proposals.

 

The organization is consistently filling over the most recent couple of years and is performing great. According to the organization’s yearly reports of 2019, the yearly income developed by 6 percent which is a truly sure sign. Probably the best outcome came from China, where the organization posted solid twofold digit development. This is a great sign as Lego is wanting to enter India likewise which has much more extended births in the middle of 2015 to 2020 as determined by the United Nations.

Not at all like when Lego began, they delighted in strength without the danger of any such enormous contender. Nonetheless, today numerous organizations are attempting their hands in your market. Lego is as yet a pioneer yet the danger of contenders is as yet on the higher side.

Different suggestions have been made in the report of what Lego ought to do in the following five years to improve their procedure and be effective on the lookout.

 

 

7. References

 

Lauwaert, M. (2009) The Place of Play: Toys and Digital Cultures, Amsterdam University Press.

McGee, J., Thomas, H. and Wilson, D. (2005) Strategy: Analysis & Practice, McGraw-Hill Education.

Mintzberg, H. (1994) The Rise and Fall of Strategic Planning, Basic Books.

Nickols, F. (2012) Strategy: Definitions & Meanings, Distance Consulting LLC.

Porter, M. (1996) "What is Strategy?", Harvard Business Review.

Gary Armstrong, P. K., 2019. Marketing. S.l.:s.n.

Jean Claude Usunier, J. A. L., 2013. Marketing across cultures. S.l.:s.n.

Kotler, P. & Keller, K. L., 2005. Marketing Management by Philip Kotler. S.l.:s.n.

David Oliver, C. J., 2007. Developing guiding principles: an organizational learning perspective. Journal of Organizational Change Management.

Booker, B., 2019. Lego: How toy brand innovated to expand. [Online] Available at: https://www.askattest.com/blog/brand/legos-growth-strategy-how-the-toy-brand- innovated-to-expand

Lego, 2021. Lego. [Online] Available at: https://www.lego.com/en-gb/aboutus/lego-group/the-lego-group-history/

Lego’s Growth Strategy: How the Toy Brand Innovated to Expand, Available at: https://www.askattest.com/blog/brand/legos-growth-strategy-how-the-toy-brand-innovated-to-expand

Mobile gaming growth and industry statistics in 2019, Available at: https://www.ironsrc.com/blog/mobile-gaming-growth-and-industry-statistics-in-2019/

India still one of the only 2 nations to have at least some GDP growth this year, says IMF, Available at: https://www.financialexpress.com/economy/india-still-one-of-the-only-2-nations-to-have-at-least-some-gdp-growth-this-year-says-imf/1928351/

Wikipedia, 2021. About Lego group. [Online] Available at: https://en.wikipedia.org/wiki/The_Lego_Group

Tucker, E., 2015. Ai Weiwei appeals to public after Lego refuses to provide bricks for ”political” work. [Online] Available at: https://www.dezeen.com/2015/10/26/ai-weiwei-lego-building-blocks-political- work/

LEGO’s Annual Report 2019 https://www.lego.com/cdn/cs/aboutus/assets/blt55a9aaa4253b2fa5/Annual_Report_ 2019_ENG.pdf.pdf

Available: https://www.unicef.org/rosa/children-south- asia#:~:text=South%20Asia%20is%20home%20to,remarkable%20progress%20in% 20human%20development. Bel Booker, “Lego’s Growth Strategy: How the Toy Brand Innovated to Expand”[September 12, 2019]