Negative Cash Flow Reached Boston University Lego

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Negative Cash Flow Reached Boston University Lego

read the mini case and leave common for each answer

the first part

please respond to 3 of the 5 discussion questions below. Be sure to explain your rationale

  • What external and internal factors contributed to LEGO’s possible bankruptcy in the early 2000s?
  • What are LEGO’s core competencies?
  • How might the core competence–market matrix show how LEGO leveraged its competencies into existing and new markets?
  • What explains current LEGO’s competitive advantage?
  • What recommendations would you make to ensure LEGO maintains its competitive advantage?

second part

one paragraph for each people about there three answers so there should be three paragraphs but each paragraph include common for their three answers of the mini case the common should be thoughtful reflection, and clear and concise comments

1

What external and internal factors contributed to LEGO’s possible bankruptcy in the early 2000s?

LEGO faced bankruptcy in the early 2000s because they hired a “highly touted turnaround expert to change its fortune”. However, even though he was an expert, he had no background in the toy industry. The new executive ran LEGO from Paris instead of doing it from Billund, since Billund was too provincial of a town. With new leadership, LEGO started diversifying too rapidly into too many areas. This lead them to stray away from their core areas which lead to their downfall. They moved away from their core and started a morning cartoon called “Galidor” as well as becoming a clothing company with LEGO branded on it. The external factor that helped in their decline was the fact that technology was developing, and kids were turning their attention away from LEGO in order to play video games on consoles.

What are LEGO’s core competencies?

LEGO’s core compentencies are why they compete so well against other toy companies. Other companies are either not durable enough with their toys, or too complex. This is where LEGO shines brightest. LEGO is known for their simplicity. Their simplicity is what attracts kids and adults as well. Their simple bricks are durable, and versatile for people to play with. It also allows for creativity to lead the way as LEGO bricks can be used to create simple shapes, but also complex structures like the Star Wars X-wing spaceship.

What explains current LEGO’s competitive advantage?

Their competitive advantage now is the simplicity of their brick. It is simple, versatile, and durable. Other companies are quite limited with what they can build. With LEGO, imagination is the only limitation. Now that LEGO is such a big company that basically every kid grew up playing with LEGO, it has allowed the company to expand into other markets other than toys. LEGO has released games like the highly renowned “LEGO STAR WARS” video games. It has also released many LEGO movies that have been tremendously successful.

2

What external and internal factors contributed to LEGO’s possible bankrupcy in the early 2000’s?

Global market companies are viciously competing and customer preferences are fickle. Under the competition of many companies, Lego must update its product line every two years. It was always innovating. In response to the trend of children, LEGO shifted their interest in electronic toys at a young age. Bragman also led the Lego team to make a decisive transformation and explore other toy forms outside the building blocks, such as the costly “Darwin Project” and exploring the conversion of Lego blocks into 3D digital building blocks and develop 3D games. In addition, Bragman also led Lego into the retail industry and launched the Lego theme park and brand store plan. Around 2002, four large theme parks were established in Cologne, London, California, and Munich. However, these hastily launched projects not only did not effectively expand the market, but instead put the company on a heavy debt burden. In 2003, Lego’s negative cash flow reached 180 million US dollars. Lego is on the verge of bankruptcy as the company faces a further 30% drop in sales and will consume $ 250 million in operating costs. The wrong LEGO development strategy is the internal factor of the bankruptcy and the external factor is the reducing interest of the electronic devices.

What explains current LEGO’s competitive advantage?

“Lego, there are new toys every day.” This slogan was translated into 6 languages and widely circulated in different countries and regions. A brand with lasting influence should probably be connected with the emotions of the audience. It should be able to soothe consumers’ subconscious needs and satisfy people’s mental illusions. Under the impact of new concepts and methods such as “sensual consumption”, “landscape society”, and “Lohas spirit”.

What are LEGO’s core competencies?

LEGO is trying to make “Playing itself is the child’s learning process” and it combine playing with joys together. From the perspective of value proposition, Lego has refined the joy of playing into “a sense of accomplishment brought by creation”. Therefore, LEGO brand has undertaken a sacred mission-“make children enjoy the joy of construction and the pride of creation”, “Inspire children’s imagination and creativity”, “awaken our children’s mind”. LEGO encourages children to pursue their ideals through “hands-on” and “brainstorming”. The ultimate goal of LEGO is to inspire and train tomorrow’s builders.

3

  1. How might the core competence–market matrix show how LEGO leveraged its competencies into existing and new markets?

Over the last 20 years, LEGO has had to adapt to avoid plummeting into bankruptcy. Throughout their restructuring, they utilized a few of their competencies to expand in in both new and existing markets, as well as being out new competencies. To begin, they refocused on their basic brick offering, which Robin pointed out was a core competency. By cutting down some of the variability of bricks, and protecting their licensing, LEGO was able to expand and grow their market share in existing markets in the Toy space with renewed focus simplicity and interconnections.

LEGO has also looked to bring their core competency to new markets, by trying to venture into the Chinese and other Asian markets. In doing so, their high quality product can hopefully shine above the low cost knock-offs, and especially with the governments support LEGO can hopefully find success. If they are able to do so, China, India, and other developing economies offer huge numbers of potential consumers

Another way LEGO has tried to develop new competencies in existing markets is through their production of the LEGO movie. The LEGO movie was an opportunity for LEGO to build a competency in a previously failed market (TV and Video and Entertainment) and ended up being a huge success. By focusing the movie in being familiar (LEGO characters, LEGO name, LEGO everything) LEGO was able to make it a more incremental step into this market, setting the stage for The LEGO Batman movie in the following years.

At this time, LEGO doesn’t seem to making any massive new competencies in new markets, but for a large established company like LEGO this incremental innovations may make more sense. It well help LEGO test markets and establish market proof before trying to expand and over-invest in projects, something that helped bring them down in the late 1990s.

  1. What explains current LEGO’s competitive advantage?

I agree with both Benjamin and Chengling that LEGO’s competitive advantage certainly comes from the strength of its brand, as well its strong distribution and production capabilities. I also think that LEGO has at this point proven they have an ability to innovate that is challenging to match, allowing them to stay ahead of the competition. Of course, to maintain the competitive advantage, this would need to continue. LEGO also has a large competitive advantage thanks to a network effect of its bricks being usable together – many kids have a LEGO set already, or their parents have one, meaning it makes more sense to get a child another set that can interconnect. As such, LEGO has slowly built an incredible dedicated network of followers who are committed to LEGO and the brand, and help work as insulation from any competition to LEGO’s market position.

  1. What recommendations would you make to ensure LEGO maintains its competitive advantage?

In order to maintain the competitive advantage, LEGO has a few key steps it can take. First, they need to continue to focus on making incremental innovation to both their process and when possible their range of products. This will help ensure they can maintain a lead on the market, and are able to keep a strong core position. In addition, I strongly agree with Yiping’s second point, that LEGO needs to focus on their Asian markets. LEGO should specifically look to projects like Joint-ventures in these markets – by bringing local players in, the Governments will have more vested interest in the success of the project, and may be more willing to help the intellectual property that makes the projects successful. Because the Chinese Government has already endorsed LEGO, this should help ensure LEGO’s continuing success in the market.

LEGO also needs to continue to focus on its Environmental projects to redesign bricks. If they fail to do so, there is an absolute risk that a competitor can produce an inferior alternative that attracts consumers due to its environmental benefit. If LEGO were to lose market share its in core product offering, the auxiliary innovations that are currently successful (i.e. LEGO Movie) could collapse with the strong block LEGO brand behind it.