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LEGO A The Crisis Case Solution

Solution Id Length Case Author Case Publisher
2690 1915 Words (8 Pages) Jan W. Rivkin, Stefan Thomke, Daniela Beyersdorfer Harvard Business School : 713478
This solution includes: A Word File A Word File

This case study discussed the history of LEGO Group and the events that led it to the edge of bankruptcy. It has overviewed the numerous changes the organization tried to make to get back on top. It also details the changes in leadership and their accounts of how the company needed to be fixed. The current CEO, Jorgen, is deciding his way forward. The crisis facing him is immense and will take a significant amount of work. However, he has the brand name LEGO to rely on and the highly differentiated LEGO brick, a very versatile toy. Therefore, moving forward, his focus should be to streamline the supply chain and innovate the products in a meaningful and systematic manner. This would enable LEGO to increase its sales and focus its attention on its primary target customers, the children. Thereby enabling the organization to be back on top.

Following questions are answered in this case study solution:

  1. What has led the LEGO Group to the edge of bankruptcy?

  2. What is your assessment of the management moves during “the growth period that wasn’t” and “the fix that wasn’t”? 

  3. As Jørgen, what would you do throughout the LEGO Group in order to turn the company around? 

  4. What is the key problem or challenge?

  5. Conduct a strength, weaknesses, opportunities and threats (SWOT) analysis for LEGO

  6. Analyze LEGO's current competitive situation using Porter’s Five Forces model

Case Study Questions Answers

1. What has led the LEGO Group to the edge of bankruptcy?

Many contributing factors led LEGO Group to the edge of bankruptcy. Some of them include a late effort to evolve with the market. When LEGO realized that the market's demand was changing, it took a bit of time to alter its production and marketing strategies. Moreover, the Ploughman approach to rotating managers did not allow individuals to gain expertise in one area and constantly be on the go. In addition, his move to transfer the production plants to the Czech Republic resulted in delayed production for various reasons. The Group had not made sound financial decisions in the past with regard to their production. For instance, the cost of mold was not factored in to make more complex bricks. 

Furthermore, LEGO lost sight of its target audience in an attempt to expand and gain more of its market share. They did not conduct relevant market research to figure out what kind of toys kids around the world enjoyed. They made hasty assumptions about the market trends and followed others toy makers to produce toys. Under Ploughman's leadership, LEGO was trying to do everything all at once and failing almost all of them. This caused their sales to go down, bringing them to the edge of bankruptcy. In order to stay relevant when all forms of entertainment were digital, LEGO Group tried to adapt by bringing those characters to life, such as Star Wars. This allowed LEGO to stay in the market but did not improve its financial standing. All these were contributing factors to the LEGO Group's bankruptcy.

2. What is your assessment of the management moves during "the growth period that wasn't" and "the fix that wasn't"? 

Firstly, Ploughman's plan of massive layoffs and rotational management was not a smart move. He let go of individuals with years of expertise in managing the company. Massive layoffs in lieu of bankruptcy seem a smart move, but Ploughman did not take into account the expertise he would lose out on. Secondly, in an attempt to expand and grow, the LEGO group tried to do too much that their company could handle. They tried to approach "untapped potential," and in the process, they did not focus on their primary target audience. They tried to branch out and imitate, however poorly, the bigger brands such as Disney. They opened up a LEGOLAND and tried to branch out to different themes, such as bringing movie characters to the toys. This stretched the company thin as all the expansions were done in-house. If they had looked beyond the company and tried to outsource some of these ventures, the company might have had a better chance of success. 

The expansion of LEGO bricks into more complex structures has cost several unprecedented increases in costs per brick. Unfortunately, no one had kept an eye on that, which led LEGO to bear huge costs for expansion into different areas and themes. Furthermore, they also lost track of how production was done, how costing was done and who was responsible for what area of the supply chain. This lack of discipline, accountability and documented process made things much more difficult for LEGO to implement "production fixes." Even though expansion into other areas could have improved LEGO's growth, it was not executed correctly. In addition to that, Ploughman was further hindered in implementing his "fixes" to the company because of the nature of issues becoming more and more complex. 

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