Lego case study
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Assessment : Coursework
Please read the following case study and answer the questions at the end. Each
question has equal value.
Case Study
Lego: Learning From Mistakes
The Lego brand is known around the world as a leader in the toy market. It promotes learning through playing with colourful bricks that can be connected and disconnected to form a wide variety of objects such as robots and cars. The company was founded in 1932 by a Danish carpenter and despite interest from global giants in the toy world such as Mattel, has remained in private ownership.
The company has seen its profits rise and fall over the years. Its first loss was in 1998 as it faced stiff competition from the growth in the computer and electronic games market and difficult trading times followed with a massive loss of US$240 million being posted in 2004.
They had entered into an alliance with Disney to produce Hogwarts Castle Lego sets and sold over one million in line with the success of the first two Harry Potter films making them profitable again. But the dangers of being too reliant on this arrangement were evident when no more Harry Potter films were released after 2002 and sales fell once more.
Further brand extension strategies were tried but failed owing to a poor understanding of what kids wanted from Lego. There was a move away from the core brand into diversified products such as clothes and video games when in reality what the market wanted was for Lego to stick to their unique original product range. An additional threat was the high levels of competition from similar lower cost products.
Resisting takeover moves, the family fought hard to keep the company as a privately owned business appointing an ex McKinsey consultant Jorgen Vig Knudstorp as their new CEO. He quickly implemented a series of measures designed to save the business. Around 50% of the workforce was dismissed, factories were closed in Europe and manufacturing relocated to Eastern Europe and Mexico.
Knudstorp was keen to foster a culture of openness and team building by focusing on open communication between management and staff who had been largely unaware of how the business was run. He also realised that their future depended on returning to their core brand values and winning back loyal customers. By 2006 the company
was gaining sales and had started to be profitable again.
Much of this success was the decision to limit diversification, but the company also needed to listen to customers about what they wanted from the Lego range .Based on their previous success with Disney related products they developed more Harry
Potter and Star Wars toys . The Lego Star Wars video game became a best seller.
Reflecting on the problems that Lego had faced it appeared that management at the time gave designers a completely free hand allowing creativity to rule over good business practice. The components became too complicated for many children and a
vast increase in the number of parts resulted in higher costs of production.
The solution was to listen to their target customer and design products that they wanted, restrict design activity and make all departments work together bringing a balance of ideas and controls.
Lego is not the cheapest product in the market but they have the advantage of being the one that is recognised for quality and creativity. This will allow them to retain a position of competitive advantage.
Questions
1 You are required to assess and critically evaluate the branding strategy that Lego pursued when trying to re-establish itself in the global market after the
problems it experienced.
2 Select a preferred strategic option for Lego and develop an international marketing strategy.
(Adapted from ‘ Lego playing with its strengths’ with kind permission from Cengage Learning)
References: The Economist, 28th October 2006. J. Greene.’ How Lego revived its brand’,
Bloomberg Businessweek,23rd July 2010
Assessment
Assessment Instructions
This coursework will be in REPORT format and is worth 40% of the overall mark. The Harvard referencing style must be used. This is an individual piece of work
• All material such as company information, websites, books, newspaper articles, journals, theory and models MUST be referenced within the report as well as a full reference section at the end of the report.
• Use Appendices where possible to keep to the required word count ( 2500 )
• Please note the marking criteria and weight this accordingly within your assignment.
• Late submissions will be capped at P1 unless extenuating circumstances have been approved.
Marking Criteria
The following framework is a guide to the marks available for the assignment:
Report structure and presentation 15%
Critical evaluation of original branding strategy 35%
Recommended strategy with justified options 35%
References/bibliography 15%
Total 100%
SAMPLE ANSWER
Lego Case Study
#1
Each and every organization or business needs to establish its brand if it wishes to grow and acquire new consumers. There exist different types of branding strategies that firms can employ in attaining growth and acquiring new buyers. Some of these strategies have been noted to more effective than others in different market settings. Thus, firms are required to enter into their respective industries with well-established markets strategies for them to realize or witness success (Rubera, 2013). It is vital to note that the form of marketing strategy employed by a firm depends on the marketing needs of that firm. Prior to its establishment in the market, Lego focused on various branding strategies. However, the major branding strategy that this firm pursued to re-establish itself in the international market was the unique brand strategies. Unique branding strategy focuses on the establishment of a brand with unique characteristics around every service or product available. In some situations, this approach happens to be beneficial to organizations that provide various product lines or products. Furthermore, this strategy enables a product to maintain a positive reputation even when one of the brands performs poorly in the market.
Using the unique branding strategy as in the case of Lego is associated with several benefits. Taking into consideration the fact that this strategy focuses on the unique features of a brand around given product, the failure of one product cannot lead to the failure of the entire products offered by the company. When firms focus on specific products, the failure that arises from such products cannot be associated with other products (Robertson, 2013). This benefit stems from the fact that distinct advantages of every commodity can be attributed directly to specific brands. Focusing on the unique quality of a brand is significant in ensuring that companies invest adequate resources in the establishment of such brands. Focusing on the unique features of a product enables a company to improve in such features, which is vital in ensuring that organizations develop goods that have a competitive advantage over those that are produced by other firms as in the case of Lego. This company’s focus on the unique aspects of its brands helped it develop a product that meets the needs of the buyers. The focus on the unique brand strategy enabled the company to research on the needs of consumers followed by incorporating such needs in the products that it was developing. As a result, Lego managed to develop commodities that had a competitive advantage in terms of creativity and quality. This success was evident in the development of the Lego Star Wars, a video game that managed to become the best seller. It is evident that the use of other strategies such as diversification does not provide organizations with a suitable platform on which the interests of buyers can be taken into consideration. For instance, the company was unable to address the needs of consumers when it shifted to the production of diversified goods such as video games and clothes. On the contrary, the company’s move was wrong as customers were interested in the firm’s unique range of products.
Unique brand approach is significant in ensuring that the company provides value as in the case of Lego and its products. This strategy enables the business to establish and communicate a brand message, which has the potential to influence how buyers perceive the company. Knudstorp employed the unique brand approach in returning the company’s core values, which helped the company in winning back its loyal buyers. A firms core values are vital in the realization of its success in the market. Core values of company help in developing a positive reputation of the business among buyers (Robertson, 2013). Furthermore, maintaining the core values of an organization is significant in ensuring that the firm sends a brand message, which is clear to buyers. In many situations, customers often develop their assumptions about the organization based on how they perceive it. Therefore, the aspect of establishing maintaining positive values of the organization as was done by Knudstorp helps buyer develop a positive about the organization. Research has revealed that for businesses to grow in consistent and repeatable patterns, the companies’ buyers, employees and prospects must be in a position to associate these firms positively with things that offer positive values (Rubera, 2013).
Having a unique brand identity helps businesses grow in sustainable ways. As businesses expand, the presence of defined brands enables such organizations to build on their strengths alongside leveraging their unique values easily in the markets in which they operate. Managing the unique brand strategy is easier than managing other approaches such as the multi-branding strategy. This strategy has an added advantage in that it is not affected significantly by the choice of the business model. On the other side, the use of the unique brand strategy has certain disadvantages. When firm employ this strategy in marketing, each product often requires its marketing approach and budget with the absence of synergy between products (Rubera, 2013). As such, successes of products cannot be linked directly to the firm’s brand. Moreover, focusing on the unique features of the brand requires more resources than those required in other strategies such as the corporate brand approach. Establishing a unique brand requires companies to obtain information from other sources such as customers. Gathering information from buyers can be expensive as it involves methods such as survey that may consume time and resources. In addition, this process is complex as it involves working to comprehend the information gathered via objective analysis followed by an effective and consistent communication of the brand message to via channels of marketing and other touch points of consumers.
The economies of scale generated by the unique brand strategy are not more than those generated by multi-branding strategies. This approach focus on single brands, which makes the company earn more revenues from other products than others. However, using approaches such as the multi-branding strategy enables firms to earn revenues from all commodities that are sold under one brand. The unique brand approach does not address the needs of consumers who often have the tendency to shift to different brands (Rubera, 2013). In many markets, there exist consumers who always shift from one brand to another with the aim of exploring the benefits offered by other brands. Using the unique brand approach does not address the requirement of these buyers as it focuses on single brands. The level of internal competition generated by the unique brand approach is not as high as in other approaches such as the multi-branding strategy. As such, managers in companies that use this strategy are usually not subject to immense or stiff competition among themselves. In addition, this strategy does not provide firms with the opportunity of reaping the benefits of other brands. For instance, the success of one brand cannot be associated with another brand. As such, the company needs to invest adequate resources in developing the features of other brands.
#2
An alternative branding strategy that could have been employed by Lego is the blend brand strategy. The blend brand strategy focuses on the incorporation of elements from various branding strategies such as line extension strategy, corporate brand strategy and unique brand strategy. This brand strategy can benefit the company in several ways. Application of elements of the line strategy in this strategy ensures that companies can add new products to the existing ones (Holland, 2013). As such, this strategy could have helped the company manage the products that it had added on its production chain. On the other side, the incorporation of element so the corporate brand strategy within the blend brand strategies ensures that companies can manage to unify their services and products under single gigantic brand. The blend brand strategy is often significant in situations in which firms have well-established reputations. The reputation of a company often takes into consideration all the services and products that are offered by the company (Grebosz, 2013). Taking into consideration the fact that Lego has already established its brand reputations, this strategy can enable the company witness enormous gains in the global market. Therefore, the blend brand approach happens to be the significant alternative brand strategy approach that Lego can employ in witnessing success in the international market.
Marketing happens to be a great concept among organizations that focus on accomplishing success in the market. The aspect of leveraging marketing approach across various markets seems to be extremely beneficial to many firms (Evers et al, 2012). Such an undertaking helps in saving resources, and ensures that a high level of consistency exists between all activities of an organization and in-market branding. However, the question concerning the effectiveness of global marketing is a matter that always presents problems to many organizations or marketers. This topic has been noted to be a frequent conversation among marketers across the globe. As a result, the concept of internationally-led marketing resources can be exposed to skepticism. Marketing departments in big companies often tend to adopt similar mechanisms when developing their global marketing approaches. In some situations central teams are established to oversee territories. In some occasions, such teams are fragmented into local or regional components that focus on their target markets. Marketers should realize that global marketing is effective as it helps in driving economies of scale and synergies, while preserving cultural considerations and local needs. One of the main factors that has been noted to be effective in the establishment of successful global marketing strategies is the incorporation of the element of balance within such approaches. In relation to this, my international marketing strategy will take into consideration five components or elements.
First, this market strategy will focus on the clarification of the products or services that are driven internationally alongside the clarification of services and products that driven locally. An international marketing strategy does not imply the absence of market-specific initiative and plans that are local. In the real sense, such plans and initiatives should be complementary. International marketing serves to establish parameters and framework within which the operations of local marketing can be executed. In relation to this, my international marketing strategy will focus on global or central levels in areas of brand guideline, branding, budgeting and strategic marketing planning among others. In addition, this marketing approach will focus on areas such as social media strategy, social media guidelines, global PR (Public Relations) and large-scale marketing (Hultman, 2011). Other areas that will be managed locally include tactical campaigns, outreach initiatives, PR initiatives and social media channels, local events and partnerships. Markets should have control over the locally-based channels that help in driving their success. One method that will be employed in accomplishing this task is dividing the global market into tiers. In relation to this, a tiered market will help in the identification of territories, which can help in driving high potential gains. Besides, such an undertaking allows top-tier markets to have access to bigger budgets, thereby granting them autonomy. For instance, a company can employ this approach in researching into the behaviors of local users so that the aspect of product development can be addressed. It is vital to note that the local and global areas of ownership can be different from one organization to the other. As such, defining these areas is significant in ensuring that firms avoid inefficiencies and friction.
Second, this international marketing approach will focus on comprehending the needs of the local market and establish a collaborative approach. Studies have shown that global teams should focus on comprehending local markets and develop close associations with local marketing teams for a global framework to be successful (Schilke et al., 2009). In relation to this, the globally defined plans and initiatives employed in this global marketing approach will incorporate a degree of flexibility to address various cultural differences in the market (Kaufmann & Roesch, 2012). Some of the mechanisms that will be employed in accomplishing this goal will be social media competitions, community meet-up and treasure hunt-based campaigns. Moreover, celebrity campaigns will also be used in markets where certain people are considered celebrities.
This global marketing approach will then focus on thorough planning with the aim of managing campaigns. At this stage, several aspects will be taken into consideration. A campaign manager will be appointed to be in charge of coordination and communication around the campaign. The aspect of cross-misunderstanding will be avoided by ensuring that the campaign team members are aware of the accountabilities of the campaign manager (Morgan et al., 2012). Thorough planning will then follow in which the aspects of responsibilities, deadlines and deliverables will be made clear to all persons involved. Consequently, expectations, deliverables and plans will be communicated to all members involved across various channels
Careful tracking and adjustment will then be made. Campaign managers will be required to be disciplined about the tracking of results. One of the aspects that will be taken into consideration at this stage is definition of key goals and metrics at the beginning of campaign at market and global markets (Stachowski, 2012). Besides, buy-in will be obtained from in-market teams followed by the maintenance of a centralized share template for updating market metrics on a daily basis. Lastly, the metrics will be reviewed on a weekly basis by video calls or phone calls followed by the adoption of the necessary actions (Leonidou, 2013). In addition, this stage will provide a suitable platform on which the best practices across the market can be leveraged. During this stage, discussions will be made vibrant and active enabling all local teams to contribute their views, which will be significant in addressing the issue of under-performance.
The sixth element of this global marketing strategy will involves consolidating and sharing of insights. Once the campaigns will be terminated, all the insights gained from them will be consolidated followed by the organization of debrief (Kumar et al., 2013). Here, the team members will be involved in the discussion of issues that worked and those that did not. Furthermore, the team members will be involved in the sharing and reviewing of results. This step will be vital in ensuring that adequate plans are developed for future campaigns.
The last aspect of this global marketing strategy will involve over-communication. Effective communication has been noted to be effective in all situations apart from campaigns. Being an international marketing role, implies that the marketer will be operating with colleagues around the world (Tan, 2013). Most of these individuals will be sitting several miles away. In such situations, marketers can develop a feeling of disconnection from their colleagues. Consequently, the disconnection between the marketer and other colleagues can lead to the disconnection of the plans, activities and strategies that are employed in campaigns. In relation to this, my global marketing strategy will involve the use of open communication channel in nurturing relationships among campaign team members and developing trust. Regular calls will be employed in updating team members on the events of the campaign, latest global plans and changes (Gabrielsson, 2012). Besides, the team members will be updated on the latest advancements in the international markets. Open communication channels will also be employed in the discussion of novel campaign ideas. Creation of a cohesive team in a campaign is vital in ensuring the success of the marketing process.
Reference List
Evers et al., (2012). “Stakeholders and Marketing Capabilities in International New Ventures: Evidence from Ireland, Sweden and Denmark.” Journal of International Marketing, 20(4), pp. 46-71.
Gabrielsson, P., (2012). “Marketing Strategies for Foreign Expansion of Companies Originating in Small and Open Economies: The Consequences of Strategic Fit and Performance,” Journal of International Marketing, 20(2), pp. 25-48.
Grebosz, M., (2013). “International Expansion of Brands by Realization of Co-Branding Strategy,” Journal of Economics and Management, 14(2), pp. 77-87.
Holland, J., (2013). “Aligning A Company’s People Strategy and Brand Strategy,” Journal of Brand Strategy, 3(2), pp. 245-258.
Hultman, M., (2011). “Export Promotion Strategy and Performance: The Role of International Experience,” Journal of International Marketing, 19(4), pp. 17-39.
Kaufmann, L & Roesch, J., (2012). “Constraints to Building and Deploying Market Capabilities By Emerging Market Firms in Advanced Markets,” Journal of International Marketing, 204), pp. 1-24.
Kumar, V et al., (2013). “Established Profitable Customer Loyalty for Multinational Companies in the Emerging Economies: A Conceptual Framework,” Journal of International Marketing, 21(1), pp. 57-80.
Leonidou, C., (2013). “Antecedents and Consequences of Eco-Friendly Export Marketing Strategy: The Moderating Role of Foreign Public Concern and Competitive Intensity,” Journal of International Marketing, 21(3), pp. 22-46.
Morgan, N et al., (2012). “Export Marketing Strategy Implementation, Export Marketing Capabilities and Export Venture Performance,” Journal of Academy Marketing Science, 40(2), pp. 271-289.
Naidoo, V & Wu, T., (2011. “Marketing Strategy Implementation in Higher Education: A Mixed Approach for Model Development and Testing,” Journal of Marketing Management, 27(11/12), pp. 1117-1141.
Robertson, A., (2013). “The Influence of Employer Branding on Productivity-Related Outcomes of An Organization,” Journal of Brand Management, 10(3), pp. 17-32.
Rubera, G., (2013). “Technology Versus Design Innovation’s Effects on Sales and Tobin’s Q: The Moderating Role of Branding Strategy,” Journal of Product Innovation Management, 30(3), pp. 448-464.
Schilke, O et al., (2009). “When Does International Marketing Standardization Matter to Firm Performance?” Journal of International Marketing, 17(4), pp. 24-46.
Stachowski, A., (2012). “The Niche Marketing Strategy in Internationally-Oriented Small and Medium Enterprises: A Literature Review and Lessons for New Zealand,” Small Enterprise Research, 19(2), pp. 96-112.
Tan, Q., (2013). “International Marketing Standardization,” Management International Review (MIR), 53(5), pp. 711-739.
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