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The LEGO Group is an international company of Danish origin and one of the world's largest toy manufacturers. It was founded by Ole Kirk Christiansen in 1932, when the production of wooden toys started out in a small carpenter shop in Billund. The name of the company comes from an association of two Danish words that means "play well" ("leg godt") However, Lego sells its colorful bricks in 130 countries, claiming that on average everyone on earth has 62 bricks. The toys are measured for the development of a child as they encourage imagination, inventivity and creativity. Even though the LEGO Group had experience tough competition from consumer electronics, it still maintains a strong position as the world's fourth-largest toy manufacturer. In the early 2000â€Ÿs the company experienced a crisis with sales dropping and three years of loss. A new CEO," Jorgen Vig Knudstorp" thorough organizational changes and a rebuilding of the company led the company back on track, and the LEGO Group managed to pull through the financial crisis in a very satisfying way, and presented an impressive surplus of DKK 2,887 million for the year of 2009. The LEGO Group continues its success and has even managed to increase its growth in a toy market otherwise characterized by stagnation. Today, the LEGO Group is a global company with more than 9,000 employees.
In between 1998 and 2004, for a period of seven years, the company had registered losses in four of those years. In the year 2003, the LEGO group had many number of positive aspects; they had a passionate customer base that in many areas was redefined than its internal designers. They even extended their brand into many areas such as toys, games, clothing, theme parks, movies and many other types earning significant revenues but there were no profits. The same year LEGO group went into deep trouble; the industry has changed dramatically resulting changes in poor planning investments and downturn in the sales of some important toy lines which kept LEGO Group out of business.
However, the LEGO classic bricks play was no longer appreciated by children who were in awe of the new and innovative technological developments that offered them exciting video games. Playing with LEGO seemed less entertaining and children got bored of the old conventional bricks. The company quickly sold off assets, reduced headcount, and outsourced production to cut costs and generate cash. But it knew, to turn around the company, it had to improve its overall innovation system. It had to improve the time to market, success rate, and profitability in its innovation system.
LEGO under Jorgen Vig Knudstorp's Leadership:
In March 2004, the former director of strategic development, Jorgen Vig Knudstorp, became part of the management team together with the board and CEO Kristiansen. When CEO Jorgen Vig Knudstorp entered the LEGO Group in October 2004, a more loosely control system has been implemented. Knudstorp was focusing on building credibility with the employees and managing at "eye levelâ€Ÿ, hereby being able to talk to the people on the floor in various departments. To implement the new innovation process and manage and coordinate innovation across the entire company, the LEGO Group created an Executive Innovation Governance Group. This committee decides the portfolio of innovation projects that the LEGO Group will take on, delegate's authority for individual efforts allocates resources and monitors the development process through its different review points.
The leadership team developed the strategy, while the larger group of planners and representatives from sales, logistics, IT and manufacturing corresponded change at the operational level. Additionally, the strategy plan was divided into three stages:
The first stage is to stabilize the company and operationally to get control.
Second stage involves of creating a good range of core products and maintains financial stability.
The final stage was to improve the core business and preparing growth for the company.
In the first phase which was in the year 2004, the brand became more flexible, the company mainly focused on attaining the consumer's opinions on current and future products. For instance, the company had selected four American LEGO fans to help design and innovate the new MINDSTORM series. However, the initial four Lego fans became a hundred volunteers by 2006 that were glad of designing the new product. They tried to connect with consumers online through the design facilities such as LEGO factory and LEGO digital designer which was launched in 2004.
Another most important aspect of this process was they considered of reducing the development time of toys to a half of the time. This was done in order to able to react more quickly to the ever changing environment to the brand. In particular, a particularly innovative client relationship has been established through the creation of a social network dedicated to children and LEGO bricks.
In the year 2006 the second stage of rebranding began. This phase had three main objectives; firstly, According to Knudstorp they had to change their supply chain to have a better circulation system. Second, improving the profitability of the products in the brand and preparing for economic growth. However, at the end of the year by 2006 they increased their sales and revenues for the company because of the new features in the LEGO MINDSTORM which was a great success.
The third phase of the rebranding process started in 2008. Since then, the company has experienced sales growth and revenue growth each year. The basic product lines like LEGO City, Creator, Technic and Star Wars are the ones that bring the most profits part of the strategy for growth and sustainability, LEGO took over production facilities in Eastern Europe and established another one in Monterey, Mexico and started "phasing out" the production agreement they had with company Flextronics.
In 2009, LEGO finished the process of implementing production; it has started in 2008 and was again in control of its own production (production sites are in Denmark, Czech Republic, Hungary and Mexico). The company also made investments in order to increase its production capacity by buying new molding machines and investing in building a new warehouse in the factory in Czech Republic. In 2010, the group continued to have increase sales and fortify their market position and growth strategies.
Innovation at LEGO is user driven. They used crowd sourcing and mass collaboration inviting the public to co-create new products an example was Lego Mindstorms, it actually began as a joint venture with Massachusetts Institute of Technology (MIT) faculty and students. With the introduction of LEGO Mindstorms (LEGO armed with sensors and programmable), advanced users began to hack the system to customize and post it into the internet. Despite od suing these hackers, LEGO finally became aware of the potential that laid behind them. LEGO finally allowed such "forced collaboration". This allowed LEGO to benefit from crowdsourcing, i.e. the ability to connect the creativity and intelligence of a large number of users.
In the year 2003 and 2004 the company was under serious crisis, under the leader ship of the new CEO appointed in 2004, LEGO Group started building its growth sales and revenues.
In 2005, the development of sales of LEGO products from retailers to the consumers was a positive aspect with an average increase of 9% compared with 2004. Retailers have reduced their inventories of LEGO products considerably in in 2005, and the mix of inventories held by retailers at the end of the year has become healthier. The Sales was around DKK 7,020 million. ( Annual Report 2005, The Lego Group)
In 2007, the sales were considerably boosted than expected. LEGO group received an increase in revenue from DKK 7,798 million in 2006 to DKK 8,027 million in 2007. ( Annual Report 2007, The Lego Group )
The LEGO groups revenue increased by 17% in 2011 and DKK18, 731 million in 2010. (Annual Report 2011, The Lego Group)
Sales of Several licensed based product line were considerably above the expectations in 2011. Products Based on Star Wars, Harry Potter and Pirates of the Caribbean continued to show considerable growth rate.
The analysis has revealed that the LEGO Group makes a great effort in order to stay true to its core values. They are emphasized throughout the entire organization, but are also an important part of branding the company to external stakeholders,The LEGO Group experienced an identity crisis in 2004, which led to changes in the organization. The new CEO emphasized a more innovative-oriented approach to the organisations structure and management but also chose a back-to-basics strategy, focusing on values such as quality and creativity, which are implemented into all aspects of the LEGO Group