Lego Case Study
Industry Analysis- Toy Industry
Building a toy company requires a long process. Patience and creativity are a must if a person wants to build a toy company and trying to enter the toy industry. If that person wants to make a product he/she should come up with something that would please both of the children and adult, since the competition is fierce and fast paced industry. They also need to invest a lot of research and development since they need to introduce product continuously in order to survive in the toy industry. Next step is they should find a buyer, or they can sell their product directly to the customers via online since nowadays everything is about technology. Therefore, they do not have to deal with the buyer to make them lower the price. They should also focus on the safety regulations since this is really important when making a new product to ensure the safety of the consumer and the reputation of their company/brand. Since brand image is really important for a company, this is a way for the customer to differentiate them from their competitors.
Toy industry is very competitive since a lot of new toys would appear in the market and a lot of rivalry. Many people think that toy industry would decline over the years because in this new era, a lot of people are going towards smart toys or games that they can play without the actual toys itself. Nowadays, many kids still want the actual toys since they can keep up with the momentum as they pass down to their children or some people would actual keep it as a collection that would be a profitable for them in the future.
The toy industry from U.S. and around the global have seen an increased on their sales in 2017. A lot of the different toy’s product from fidget, dolls, Lego miniatures, collectibles, and puzzles are seen on their sales because of the social media and the cheap price as well. Most European countries like United Kingdom and France show a decline in the toy industry, while Germany and Italy stay the same on their sales. Meanwhile, Russia, Mexico and U.S sales is increasing so fast. Many toys companies whether they are small or big companies, they react to what their customers want and if they get to the market quickly will get them to stay in the toy industry longer.
The busiest season for the toy companies are during holiday seasons and most of their sales come from that holiday. Some retailers like party city is trying to open an aisle just for toys to provide more toys for the holiday. Many of the companies right now are focusing on how to expand their company. They would license their product to character in movies or video games. Most company are aware of the popularity of the video games and the entertainment film industry and they are trying to cooperate with an entrainment company to make a character well known and create more product related to those characters.
A lot of toy companies are thinking ahead as in what the future toy would be like and of course, the technology would play a big role in it. One of the futures would be artificial intelligence. Artificial intelligence is everywhere now. For instance, it is on our mobile phones and cars. Many of these smart toys are for learning interaction with the user. Remote control toys and application games are also popular among the youngsters, or even adults. One of the added features will be voice recognition, personalization of toys, and the latest one would be the global interaction which they can play with anyone around the world. Of course, there will be disadvantages alongside with the advantages. Firstly, the data privacy of the consumer is on stack since they can breach easily nowadays. Next, the safety of the children if they use this smart technology there is a chance that they would be addicted to it and it can cause health problem since the screen can cause them a vision problem and their eyes can become fatigue for using the technology too long.
The other future toys would be 3D printers, where children can make the toy as how they want it to be without going to the nearest toy shop. This concept would be convenient to the parents since they do not have to go to the toy shop to shop for it, they can just get the printer and let their child create whatever the child wants. The printer would also help the children creativity by creating something and get it at the same time. The downside of this is that if the price of the printer is expensive, not many people would buy it unless if the demand grows, then the printer would be cheaper. This would also affect the toy industry because more people would not buy the actual toys if they have the option to recreate their own toys at home.
The next future toy is already happening now would be augmented reality and virtual reality this could give the children an interaction with the toys that would be impossible before like Pokémon go. These toys would give children a whole new idea of physical, social, interactive engagement to play. The virtual reality headset has seen a growth in the past years and it expected to continue growing. The virtual reality headsets also allow the company to make changes from the headset and they do not have to make a change to the actual product or games itself. And technology company also creating a robot that would help the children interact and play with them.
Firm Analysis
In 1932, the Lego company was founded by Ole Kirk Kristiansen in Denmark. He got the name Lego from Danish words ” leg godt” meaning “play well”. It is a private family owned company. He started with only 10 employees and now, the company has more than 10,000 employees. Their first product was a wooden duck. In the 1940’s, their factory got burn down, and they have to switch from wood to plastic. Back in the day, the Lego just produce a brick with the hollow at the bottom and it set a limitation to the consumer. As the time passed, they develop and produce more Lego which we have today, and we can build anything we want. The grandson of Ole Kirk Kristiansen was the third CEO of the company. They branch out the company, built the Lego land and they also expand their company to the movies, videos, and games.
Some people actually thought that Lego are just for kids, but it is not true. At one time, David Beckham built the London brigade for its therapeutic value of it. During Christmas season, 10 Legos sold every second. In the early 2000’s, Lego did not understand their business core value because of the company underestimated its own strength. They started to branch out to other business as they do not know how to handle since they are having more money and losing $1 million a day because of the branching out. After what happened, Lego decided to hire the CEO. His name is Jorgen Knudstorp, he is young and can relate to the consumer, he received two master’s degrees in economy and business, but he is not from the Kristainsen family. Jorgen first step to rebuilt Lego was to sell all the Lego land and other branch they do not need and cutting jobs. He also focused on production, product development, and, marketing. He wanted to focus on Lego business core value. His plan work and Lego become the largest toy producer in the world. They have 24% net margin in the toy industry.
SWOT Analysis of Lego
Strengths
They have a lot of variety of options/products
They are meticulous to their details
Lego have different combination
Lego is not a brick, consumer can create many things out of Lego
They also collaborate with movie franchises and they also have their own movie and games
They have a lot of themes to choose from
Weakness
They are very expensive
The company focus on research a lot and they its costly
The material they use are expensive
They don’t know their target customer because of kids don’t understand their product
Opportunities
They should create a product that a family can work together
They should increase the learning side of the product
Lego don’t have to concerns of major competitors since they’re the leading toy producer in the world
Treats
There a lot of counterfeits product available at a lower price
Because of its price some customer wants a cheaper building block instead
Lego is not the only company that produce bricks/Lego
Many children want technology gadgets than the actual toy
Lego has its own factory for their toy products which are convenient for them where they do not have to deal with the manufacturing. They are opening a factory in China, not because of the cheap labor but because they are planning to enter the Asian and Latin market. Their plan is to have a closer manufacturing so that they do not have to ship it from a far place and it is convenient since they are closer to the factory. Therefore, they can restock their product easily at a faster speed. They are also planning on to focus their product for the girls, because they think that girls would not like Lego as much as boys, but surprisingly the girls actually do like to construct or build Lego as boys too. Other than that, they are trying to focus on the future lab, where they get inspired by google and other technology firms. Future lab is where the brick is a code instead of the actual bricks itself. Lastly, they are planning to have a green future by focusing on a renewable source to their materials, where their main focus is on the environmental responsibility and make a positive impact to the world.
Citation
Industry Analysis
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