Lego: Management Moves Assessment

Junior (College 3rd year) ・Art ・MLA ・2 Sources

All firms want to have a competitive advantage over their competitors in the market industry. Michael Porter proposed five forces that are useful in understanding the competitive business environment for any organization to compete effectively. Porter's five forces were industry rivalry, supplier bargaining power, consumer bargaining power, the threat of new entrants, and the threat of substitute products or services. The forces are primarily used to assess the market industry's profitability, competitive intensity, and market attractiveness to new entrepreneurs (Gans, Joshua, and Michael D. Ryall, 2017, 17-41). Porter's forces can be used to clearly explain the crisis of the LEGO Company encountered in the execution of its activities.

i. Industry Rivalry

Existing businesses in the industry using different strategies to meet their goals. Therefore, industry rivalry is the competition brought by existing firms in the industry to the LEGO business. Competitors of the LEGO Company are many with market leaders like Mattel, the leader in the toymaker with revenue of $5.1 billion as in 2004 and Hasbro the second largest player with revenue of $ 3.0 billion. The competitors also have brought new strategies such as the introduction of new products, reducing the cost of their toys, supporting retailer promotions, carrying out in support, reducing costs of their commercial and increased advertisements. These many strategies are a great challenge to the LEGO firm in its strive to get a competitive advantage.

ii. Bargaining Power of Suppliers

The vendor provides companies with the raw materials to be used in production. The existence of few providers makes them compelling thus able to increase the prices or change the quality of the raw materials. In the case of LEGO firm, suppliers have no great power as they are many. However, suppliers of toys many thus making the decreasing number of buyers in the future have the authority to control the market to their advantage.

iii. Bargaining Power of Customers

Customers are the users of the products or services a firm produces for sale in the market. The customers are influential in a situation characterized by many sellers while they are few. This scenario provides clients with a wide variety to make choices. Hence they determine the prices and quality of goods and services they receive. The LEGO firm the customers are many, but their needs are changing. Parents who buy the toys to their children have reduced as the children concentrate more on the internet than playing with the toys. Additionally, the children had many after-school activities thus limiting their time to play with toys. The decline in the number of customers makes them become powerful and be able to manipulate the scores of the supplier to their advantage since they have many alternatives.

iv. Threat of New Entrants

Lucrative markets attract many businesses thus new entry into a market industry may cause a challenge as this reduces market or profits to the existing firms. However, in many cases, new entrants into any market do not bring a lot of challenges to the existing businesses. China entry in toys manufacturing has led to high competition with it having a significant market share in the USA. These are a great problem to the LEGO firm.

v. Threat of Substitute Products or Service

Substitutes are products that can be used by customers to satisfy needs same as the prior goods and services they used. Substitute means an alternative good and service that the clients can acquire while meeting the same earlier need. Technology shortened childhood and increase adolescence period. Therefore, technology has been the greatest substitute to the usage of the toys of LEGO firm and other toymakers in the industry (Dias, Patricia, and Rita Brito, 2017, 266).

Management Moves Assessment

The Growth Period That Wasn't (1993-1998) and the Fix that Wasn't (1999-2004)

In the period between 1993-1998, the started with a decline in the company sales due to the decrease in birth rates hence fall in household spending in toys in Western Europe and North America. The move made leading competitors move to the Far East. In 1993, Kjeld Kirk Kristiansen sickness slowed the business performance, but upon his return, he made changes in the management which led to change of the production line. However, despites the many changes the company was stagnant in growth and also headed up making massive losses in 1998.

In 1999-2004, the new CFO Poul Plougmann brought many changes like cutting down the number of employees and managers. The managers were also put in rapid rotation in different departments. Changes made were great, but the management did not focus the complexity in implementing them this led to many customers' dissatisfaction and losses to the LEGO firm.

Moves Jørgen Knudstorp Can Use Make the Firm Successful

Entry of Jørgen in the enterprise is at a critical time due to the poor performance in the industry almost leading to its failure. He should carry out the following things to make the company successful;

i. Carry out intensive research on the markets trends to be able to know what exactly the consumers need and also competition level.
ii. Engage in outsourcing of services like leading competitors Hasbro as it is more cost effective.
iii. Carefully plan the execution of activities' not to have ideas LEGO firm cannot implement.

Work Cited

Dias, Patricia, and Rita Brito. "Young Children and Digital Media in the Home: Parents as Role Models." Family Dynamics and Romantic Relationships in a Changing Society (2017): 266.

Gans, Joshua, and Michael D. Ryall. "Value capture theory: A strategic management review." Strategic Management Journal 38.1 (2017): 17-41.

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