Lego 5th Largest Toy Manufacturing Company Marketing Essay

1.0 INTRODUCTION

Children’s toy is an object for children to play with which can create enjoyment or pleasure to them rather than for a serious purpose (Oxford, 2007). Toys comes in a wide range of categories such as from dolls, plush toys, vehicles, construction sets, puzzles, physical activity toys, collectibles, educational toys, robotics, electronic toys and etc. The age that will be placed under the children’s toys category will range from 3 to 12 years old. Furthermore, playing is known to be one of the essential activities for children in their growing up stage to let them learn the fundamentals in the world as toys can bring an influence by making children understand better of the things that are surrounding them (playful-thinking.com, 2009).

The toy industry is indeed a competitive sector as trends are always changing around the world where children needs are always changing according to their age and parents would therefore purchase various types of toys for their children to satisfy the children’s needs and wants. The development in trends especially the changes in innovativeness and technology has played an important role in affecting this industry.

Therefore, a research needs to be done by LEGO Group to find out the major changes in this industry over the past 25 years that has contributed to the competitiveness in this industry. The LEGO Group is engaged in the progress of children’s creativity through playing and learning with the worlds famous LEGO bricks that provides toys, experiences and teaching material for children (LEGO.com, 2010). The name LEGO is an abstraction of two Danish words “leg godt” which means “play well” (LEGO.com, 2010). The LEGO Group was founded by Ole Kirk Christiansen in 1932 (LEGO.com, 2010). The company was passed from father to son, and is currently owned by the founder’s grandchild, Kjeld Kirk Kristiansen (LEGO.com, 2010). The company has come a long way over the past 80 years which was established from a small carpenter’s workshop to a modern, global enterprise that is now known as the world’s fifth-largest toy manufacturer (LEGO.com, 2010). The head office for LEGO Group is in Bilund, Denmark and has subsidiaries and branches throughout the world to sell LEGO products in more than 130 countries (LEGO.com, 2010). However, LEGO Group has a sum of competitors around the world and some which are also known to be as market leaders. Although with the strong and well-established brand, the LEGO Group still faces many competitions and challenges to keep up with the ongoing changing trends in the industry to maintain its position in the market.

2.0 CONTENT

For many decades, toys have been known to be the main tool of entertainment for children. However, the most challenging part that the toy industry faces is to capture the attention of the children as well as parents where many factors have been changing rapidly for the past 25 years in terms of demographic and society, innovation and technology, politics and the environment that also brings competitiveness within the industry. By using Mattel, Hasbro, Bandai, Nintendo, Sony and Planet Toys, the analysis of this factors will be further describe according to the major changes in the toy industry over the past 25 years that has contributed to competitiveness with a further discussion of the leading and failing companies.

Demographic and social factors have brought an influence to the toy industry in the changes according to the markets needs and wants. This is because children nowadays are more demanding as they have many choices and options compared to 25 years ago in which consumer demographics are changing. Families are getting smaller and spending power in children increases as parents these days are well to do and are more willing to spend on their children to satisfy their children’s needs (Anand, et al., 2001). Lately children and parents are opting for toys that have finer-look or toys which are embedded with technology. Toys over the past 25 years and the toys nowadays have lots of differences especially in terms of style, design, variety and technology. For example, a comparison of Barbie Doll and Hot Wheels from Mattel during the past 25 years can be different compared to now. Barbie Dolls nowadays come in various designs and styles for children to mix and match with while Hot Wheels have a wide range design of cars and car tracks to choose from (Pickett, 2009). In addition, children nowadays stop playing with traditional toy at a much younger age compare to last time (Shen, 2002). In fact, there is certainly a big change in the trend which can be deduced from the people’s buying behavior where customers purchase more video games these days compared to traditional toys. According to the Toy Industry Association, the total traditional toy industry was $22.4 billion in 2004, $22.2 billion in 2005 and $22.3 billion in 2006 where there is no growth whereas the total video game industry was $9.9 billion in 2004, $10.5 billion in 2005 and $12.5 billion in 2006 (Shadunsky, 2007). Furthermore, influences from media like movies and television programs are also an essential element for this industry and plays an important factor in affecting the society. The reason is because the toy industry and the entertainment industry have become two sides of the same coin in which both sides can leverage on each other to maximise growth and profit according to Clark (knowledge.emory.edu, 2007). On top of this, the entertainment industry is becoming popular in this 21st century. In conjunction with this, movie-licensed toys based on popular movies such as Transformers produced by Hasbro are known to have hit the market with 3 million units of Transformer toys being sold since its launch (Kavilanz, 2007). Therefore, understanding the needs of children based on the demand of the market can be challenging in which the demographic and society trends are always changing.

Innovation and technology factors also contribute to changes in the toy industry. Technology has been gradually penetrating into the toy industry for a number of years but the development has been accelerating (Richtel & Stone, 2007). This industry does not only depend on technology itself but also innovativeness to create new toys and develop toys that will give excitement, profits and also possibilities to re-innovate (knowledge.emory.edu, 2007). At present most children who are 7 years and above favours hi-tech toys such as electronic toys, video gaming consoles and handhelds. Video gaming started booming when major players such as Nintendo and Sony produce its consoles with a constant upgrade to higher technology features. For instance, Nintendo was actually famous for their handheld which is Game Boy where they further produce Game Boy Advance, Game Boy DS and so on and with their now famous video game console known to be Nintendo Wii (Nintendo.com, 2010). As for Sony, it started with just video gaming console which is Play Station 1 (PS1) followed by Play Station 2 (PS2), and Play Station 3 (PS3) to its popular video gaming handheld which is Play Station Portable (PSP). In fact, many toy manufacturing companies like Mattel, Hasbro, and Bandai have partnership and licensing together with these companies to produce video games for a particular toy brand. For instance, Hasbro the manufacturer for Monopoly board game has design a video game format for this product to be played with Sony Play Station consoles (Allen, 2010). Toy manufacturing company also incorporate the uses computers and internet into toys where both of this has greatly influence children’s playing pattern in recent years (Hardy, 2009). Even traditional toys with no typical connection with technology are wired these days (Richtel & Stone, 2007). For example, Barbie Dolls produced by Mattel are tied to the uses of computer and internet sites for children to dress up the dolls online with supporting software and websites known to be Barbie iDesign (Rice, 2008) and Barbie Girls online (Richtel & Stone, 2007) accordingly. Even, games like Monopoly can also be played online these days (Sanornoi, 2008). Not only is the technology of the toy important but also the technology production of the toy. For example, it is better to produce in bulk to gain more profit to have economies of scale as by producing more, toy manufacturers are able to sell their product at lower price for customers to afford in order to have a high demand. According to Clark, Mattel and Hasbro have obviously developed their economies of scale as they produce toys cheaper than competitors do where both of this company have grown to control one third of the US toy market (knowledge.emory.edu, 2007).

Political factors also play a role in affecting the children’s toy manufacturing company where the toys must meet with the safety requirements. This is because many people are concern with children’s toy safety where the governments also emphasises on it and came out with certain policy for the safety requirements in toys. Furthermore, different toys are normally meant for different group age as certain toys are hazardous and unsuitable for children who are too young. Therefore, manufacturers will need to ensure regular testing on toys and set adequate benchmarks to prevent safety incidents (Kuneva, 2008). At the same time, the environmental factors also influence the changes in toy industry in terms of the material used for the toys and the toy production process. As many people are emphasising on eco-environmental friendliness, the toy manufacturing companies will also move towards this motive to grab the people’s attention by showing they value the environment by avoiding wastage and prevent pollution during toy production process. Furthermore, new laws for toy safety and toy production process will force toy manufacturers to make toys that are sustainable and eco-environmental friendly that uses raw materials and materials from reused and recycled materials (Hardy, 2009). Increasing awareness among the people will therefore lead parents to go for toys green toys (Hardy, 2009). For example, Planet Toys was actually filed bankruptcy and was sued by the nonprofit Asbestos Disease Awareness Organization claiming that they sold toy crime-scene kits that contained cancer-causing substance (Chasan & Nadgir, 2009) known to be asbestos which can lead to serious health problems if inhaled.

The leading companies in this industry will obviously be Mattel, Hasbro and Bandai in which these companies produces both traditional toys and video games that has a wider market by comparing with Nintendo and Sony that only produces video gaming consoles and handhelds in the children’s toy industry segment. Their non-stop research to keep up with the trend has brought them to have their own competitive advantage among the market. Furthermore, the leading companies do understand the factors that will influence the children’s toy industry segment to actually be competitive in the market by diversifying into technology in the video game segment. However, the failure in this industry will be Planet Toys as they did not abide the law and the safety requirements that are needed among children.

3.0 CONCLUSION

In conclusion, it is important for LEGO Group to understand these factors that will contribute to the trend and changes in the toy industry in order to be competitive in the market. By doing so, LEGO Group can then take proper action plan to face these challenges from the market and competitions together with a strong knowledge in understanding the factors for the segment. Therefore, LEGO Group will then need to have proper objectives and strategic plan in order to maximise growth, create demand, increase sales profit and increase market share. Even though, the company has been quite a successful company globally – 5th largest toy manufacturing company, the most recent economic information do not allow any immediate conclusion about the success or failure of the company as the company can be subjected to any changes anytime which can either lead to opportunities or threads for the company. As a result, the LEGO Group must always know and understand its strength and weaknesses to cope with changing trends. However, there is always a long journey and process that every company needs to go through in the world of business even in good times or bad times. The only main thing that the company needs to do is to focus and always be alert in changing times by doing the things that needs to be done so that the company would not be left behind in the future.