LEGO® Friends Leveraging Competitive Advantage Case Solution

1. The strategies that TLG adopted to combat the decline in sales in 2004 started with the change in leadership. The new CEO that was appointed was from outside the family. He introduced a three-phase strategy, with the focus on survival. During the survival phase, he made layoffs, reducing 2000 jobs and negotiated with labor unions, to reduce expenditure. Moreover, he sold the theme park business to Blackstone, closed the software division and introduced licensing for video games production. Information technology was also outsourced to IBM. He reduced the design elements of the LEGO kits to 4000 unique elements, which further reduced manufacturing costs.

2. The strategies seem to be successful because firstly, a new set of eyes was driving the company; hence he was viewing things differently rather than as was done previously through family members. Secondly, as per exhibit 6, there was a sharp dip in the profit after tax in 2004, after which this figure seemed to rise steadily, which meant there was a control on costs. If the net sales figure is seen, that also depicts a gradual but steady rise, which meant the company was also improving in sales. Moreover, with a centralized distribution center in Prague, and the consolidation of TLG's logistics providers, the supply chain of the company was more streamlined and resulted in a 30% cost reduction in operations.