SWOT Analysis And Marketing Strategies For LEGO

Methodology

LEGO A/S is a Danish family owned company with the headquarter located in a town called Billund which is in the western part of Denmark. LEGO produce products for the consumer market. Their products, which LEGO both manufacture, market and distribute, to a wide range of wholesalers, is a wide range of traditional toys, interactive toys, games and brick building sets. All of products reflect LEGO’s concept which is “learning and development through play”. (MarketLine, 2016)

Constant care has to be taken since distance become less important day by day due to the technological development.This report will be focused at “Toys and Games” where LEGO A/S will be compared with Mattel, Inc. and Hasbro Inc.what position LEGO has at the moment and what marketing strategies recommended in order to keep the position in the market. 

In order to answer the

The report has been conducted by using the following sources:

• LEGO A/S official homepage
• MarketLine (Database accessed through RMIT Vietnam)
• Passport (Database accessed through RMIT Vietnam)
• Theory attained through lessons from the course “Marketing for Managers” held at RMIT Vietnam.
• Theory from the book (KOTLER & KELLER, 2012)
• We will also add different academic and internet sources for adding value to the study

All those sources are seen as valid academic sources. 

In order to investigate how LEGO A/S strategic position is and how what recommendations will be for LEGO in the future the following theories will be used: 

• PESTEL Analyse
• Porters Five Forces
• SWOT Analyse
• Market Segmentation
• Positioning
• Marketing mix – 4P’s

Key Players	Market Share (%)	Sales (USDmillion)
Lego	19.11	5,322.6
Mattel	20.48	5,702.6
Hasbro	17.25	4,804.5
Others	43.16	12,021.80

Table 1:  Market presence of toy manufacturers

(Source: marketline.com 2016)

The above figure has illustrated the fact that LEGO A/S have to compete with different other prime competitors in order to create maximum impact on the market. For instance, Mattel Inc. holds greater market share compared to LEGO A/S in the market. Moreover, Hasbro is also very close to capture the similar market share of LEGO A/S. For that reason, it has become essential for the LEGO A/S to analyze the market needs and wants for achieving continues growth in the market.

The SWOT analyse is conducted by using information obtained from (Passport, 2017) and (MarketLine, 2016).The SWOT analysis for LEGO is provided as follows:

Strengths:

• Long successful presence throughout generations in the market for toys for children, LEGO has become a strong brand which people relate to.(Passport, 2017)
• LEGO has partnership / licence agreement with most licensors which mean whenever for example Disney comes out with a new movie, LEGO can benefit from the advertisement spend by Disney, since they are allowed to make toys showing their characters.(Passport, 2017)
• Financial growth, revenue increased by 25% from FY 2014 to FY 2015. This was due to double-digit growth in all markets (com 2017).
• Diversified Geographical Presence, LEGO has minimised operational risk by having operations spread out (reaching 140 countries) and manufacturing plants in Denmark, Hungary, Czech Republic, Mexico, US, Germany and the UK.

Weaknesses:

• Similar products, which expose their risk if the interest for traditional toys change.
• Price, products are expensive which limit LEGO from entering some markets and also limit some customers from buying LEGO’s products.
• Products are easy to copy.

Opportunities:

• Strategic investments such as R&D centers, test-facilities for both manufacturing, production technologies, material development. All which can make LEGO being a first mover and be ahead of others in the industry.
• Increasing sales through E-channels.

Threats:

• Loss of licence agreements with major licensors.
• Additional trade barriers, which can force LEGO to expand with “extra” production facilities and have this extra cost if a attractive market establish tight trade barriers.
• Strong competition whit titan competitors which offer a broader product line.
• Change in rules and regulations for both material and topics.

The market for LEGO is worldwide, in the following there will be taken a closer look at the segmentation.

Demographic Variables:

• Consumers are families with 1 or more kids.
• Middle to high income since the products are relatively expensive compared to other marks, which also was mentioned in SWOT.

Geographic variables:

• LEGO is located in all markets but Europe and North America are the biggest markets.
• LEGO will be in all major cities.

Psychographic variables:

• Motives, is to develop learning through play.

Behavioristic variables:

• End use: kids.
• Benefit expectations: being entertained while getting mentally stimulated as well.
• Brand loyalty: Try to keep brand loyalty high through generations.

From the evaluation of the segmentation variables, it can be assessed that LEGO has already established its presence in the global market. However, it still has to focus on assessing all the segmentation variables for achieving continues success in the market. For instance, demographic variables are likely to provide information about the age group of the children who are purchasing the products of the organization. On the other hand, geographical segmentation will allow LEGO to identify best potential market for business expansion. On the other hand, psychographic variables will help to understand the motive of purchasing. Therefore, LEGO will have to focus on using all these segmentation variables appropriately for achieving continues success in the market.  

Advantages:By doing a marketsegmentation, LEGO learn their customers to know and identify potential opportunities in the market

Disadvantages: Increased marketing costs

Product:

• Toys which is stimulating and encourage creativity.
• LEGO also includes construction toys, online games, video games, robots and educational products for gaining success in the market
• LEGO use different brand names including Minifigure, Mixels, StarWars, BIONICLE, DUPLO, BELVILLE, EXO-FORCE and Ninjago for maximizing the sales volume in the market

Price:

• LEGO use product line pricingsince they offer a whole product line. And how they distinguish is the packet size and price level. (KOTLER & KELLER, 2012)
• LEGO pricing strategy is relatively high, as the company always strives to manufacture best quality toys
• High pricing strategy has restricted many families to purchase toys of LEGO for fulfilling the needs of their children

LEGO have manufacturing plants at strategic locations as mentioned earlier in the report. From there they supply to the regional Wholesalers.LEGO has already established its presence across the globe. It has opened retail outlets in almost all the prime cities of the world for maximizing the sales volume even further. Still, LEGO depends heavily on the Europe market for maximizing their revenue level. However, development of e-commerce activity has allowed LEGO to create some level of parity between the sales volume happening inside and outside of European market.

Theory

Promotion Tools	Practices
Advertisements	LEGO has used different types of advertisements for their different branded products in order to ensure people recognize it easily. It has targeted all the prime television networks to reach close to all potential customers
Sales Promotion	LEGO has also used sales promotion activities for creating desired impact on the market. In the sales promotion, the employees of LEGO has tried to provide live demo about the functionality of different toys
Social Media	Over the years, LEGO has also focused on developing strong social media presence for reaching maximum number of customers. LEGO has 447K Twitter followers along with 1.23 million Facebook followers (lego.com2017).
E-Marketing	LEGO has tried to develop strong digital presence with the establishment of eye-catching websites (Giddings2014). Moreover, It has also targeted different other e-portals for maximizing the impact of the promotional activities

Table 2: Promotional activities of LEGO

(Source: marketline.com 2016)

• LEGO has to deal with different political rules and restrictions in order to achieve success in the market. European Union (EU) has developed “Toy Safety Directives” for all toy manufacturers (com 2017). It has restricted LEGO from using any unauthorized elements at the time of developing any toys.
• It has also faced several political obstacles in different countries at the time of developing toy-manufacturing units (net.au 2017). As a result, majority of the research and production activity of LEGO happens in Denmark

• Currency fluctuation of different countries is one of the prime cause of concern for the organization, as it has affected the overall profit level in a major way
• 2009 financial crisis has created major affect on the business procedure of LEGO

• LEGO has collaborated with UNICEF to safeguards and protect the rights of children
• It has also focused on minimizing the issues associated with child labour or child abuse
• In 2015, LEGO has provided $8.2 million for child welfare projects, which has allowed the organization to represent itself as responsible corporate citizen (com 2017)

• From the beginning, LEGO has focused on using different advance technologies for maximizing the effectiveness of the operational procedure
• It has collaborated with Texas Instruments for constructing superior technology based robots
• LEGO has used advanced graphics for providing animated series of Ninjago characters

• LEGO has focused on minimizing the amount of carbon emission during the manufacturing process
• It has also focused on using renewable energies for the production procedure so that it does not affect the natural resources of the society
• LEGO has planned to achieve 2.5% production efficiency each year for reducing the impact on environment even further (com 2017)
• It has used FSC-certified and recyclable products for packaging

• LEGO has used legislative acts against different Chinese toy manufacturing companies, as they have copied the products of the organization and selling it on cheaper price
• All the products of LEGO duly maintain patent and copyright laws for avoiding any future challenges

LEGO deals within extremely large industry size that estimated net worth is around 30 billion (Hollensen 2015). However, number of organizations dealing in this sector is relatively low. As a result, companies like LEGO, Mattel and Hasbro has able to position itself uniquely in the market.

Organizations do not have to face too many challenges at the time establishing business in toy manufacturing sector. However, LEGO has already developed strong network across the globe. Therefore, it is very unlikely for a new organization to compete with Lego. Hence, threat of new entrants for LEGO is moderate.

LEGO has to face high level of threat from different substitute toy products. The organization has already filed case against different Chinese companies for copying their designs (canplastics.com 2017). Moreover, high cost of LEGO products also providing cost advantage to the competitors that can easily induce customers to switch for cheaper alternative options.

Due to high threat of substitutes, buyers possess greater power in influencing the price level of the products (euromonitor.com 2017). Still, LEGO has able to maintain high pricing structure by providing high quality products and services. The strong brand presence of LEGO has also helped to maintain high pricing structure.

LEGO possess diverse distribution channel along with strong relationship with different distributors. It has helped LEGO to minimize the bargaining power of suppliers to a certain extent.  Moreover, effective development of manufacturing and warehousing unit in different parts of the globe has allowed minimizing the power of suppliers even further.

Recommendation and Conclusion:

The above illustration has highlighted the fact that LEGO has able to develop effective marketing and promotional strategies for capturing major share of the market. Moreover, superior quality of products has allowed LEGO to remain unique from any other smaller toy manufacturing organizations. However, many people believe that the high pricing strategy of LEGO has restricted the business level of the organization in a major way. For that reason, LEGO needs to focus on utilizing mixed pricing strategy so that people from different income group can able to purchase the products of the organization. It will provide higher potential market for LEGO, which is likely to enhance the revenue level in a major way.

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