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Management: Lego Group’s Current Problems

Lego group has continued being a leader in its market segment focusing on play materials and has managed to create a global brand with a loyal customer base. The company had managed to survive amid transitions into the digital era based on its consistence to push its innovative manually assembled toys to a platform to excite child’s play. However, the seamless transition into the digital age did little to limit management issues at Lego Group starting with financial management issues. The company witnessed a drop in sales starting 2008 where the situation spread across 7 years to 2014. The financial estimates indicated that the company suffered losses of up to $300,000 on a daily basis signaling a crisis. This reality required reexamination with focus on the level of competition from the market and the possibility that diversification at Lego Group was hurting the company’s short-term prospects. Other issues raised related to low-cost producers of play materials and the competition from video games. An internal analysis of the company revealed that Lego had issues related to its supply chain and innovative capabilities to match market trends (Schwartz 34). This understanding provides a basis towards understanding Lego’s current problems starting with reliance on an outdated supply chain. It has emerged that the company has failed in terms of its ability to attain a global foothold especially in emerging markets. Some markets remain locked out the Lego brand indicating lack of efficiency in the supply chain while supply focused on smaller retailers committed to play materials. In addition, Lego has remained committed to a large supply base, which makes sourcing of materials for its play materials inefficient. This has tended to limit in-house innovation resulting in possible resource wastage and a redundant supply chain.

Management issues associated with the Lego Group are also an aspect of its current challenges citing issues associated with gender balance, innovation burnout, and focusing on gender sensitive play materials. For many years, Lego has relied on a management team led by men with only two women taking up senior management positions based on the examination of its status. These management positions are internally facing indicating limited participation in terms of product development and ineffective linking with the customer base. This scenario has raised debate regarding the level of involvement from women to determine the direction of the company especially when dealing with gender sensitive play material. Furthermore, there are indications that failure to establish a gender balanced management team has created problems associated with having a balanced customer citing the need to replace gender-neutral play materials with a gender sensitive dimension that will tap into more market segments. Lack of female scientists at Lego solidifies this argument based on the idea that women have a role in understanding the essence of having play materials targeted differently at boys and girls (Wittenberg-Cox n.p). Even with an early introduction of gender sensitive toys, there was limited compatibility between the sets of toys targeted differently at boys and girls resulting in product redundancies amid a weak value proposition. The need to make the company tap into the other half of the market has become difficult even when signs are there regarding possible success. Instead of committing towards increasing the market size, Lego has applied the gender strategy within a small-scale incremental innovation mindset that has failed to capture the market’s imagination.

Failure to diversify the product line and institute legal protection through patents has limited Lego Group’s value proposition making this one of the core challenges. This has created a market problem based on the presence of substitutes where some cannot be distinguished from what Lego offers. Furthermore, some competitors have focused on using Lego products to innovate equally competitive play materials where some has emerged as market spinoffs. This has created a problem for Lego especially where some users focus on creating competing businesses by creating more versatile brick recreations focusing on themed topics such as Harry Porter and Jurassic Park. Some have emerged within the digital platform where animation of Lego bricks has been achieved to improve customer experience. This seems harmless and supports Lego’s product line but limits the capacity for the company citing the failure to note these transitions early to innovate in-house. However, focus on user-generated content has helped increase product visibility even when some of the content needs to have a business dimension realized at Lego (Schmidt n.p). The level of competition from similar product lines has increased the number of substitutes resulting in high brand switching and loss of market share. Online gaming has exacerbated this situation citing the possibility that based on Lego’s global brand; digital gaming platforms could do well. The need to generate direct to customer activities may help diffuse the negative effects from the market where focus can be drawn towards school competitions to improve product visibility and tap into emerging markets. Failure to make strategic market deals has also limited the capacity by Lego to diversify especially certain associations will improve the product live.

Works Cited

Schmidt, Gregory. Lego’s Success Leads to Competitors and Spinoffs. The New York Times. 20 Nov. 2015. Web. 5 March. 2016. Accessed from http://www.nytimes.com/2015/11/21/business/legos-success-leads-to-competitors-and- spinoffs.html?_r=0

Wittenberg-Cox, Avivah. Lego’s Girl Problem Starts with Management. Harvard Business Review. 15 Sep. 2014. Web. 5 March. 2016. Accessed from https://hbr.org/2014/09/legos-girl-problem-starts-with-management/

Schwartz, Jordan. The Art of Lego Design: Creative Ways to Build Amazing Models. New York: No Starch Press, 2014. Print.