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1. Explain how the development of strategy at the LEGO Group reflects the key characteristics of strategic management outlined in section 1.2 and in the model in Figure 1.4. According to the authors of the ninth edition of ‘Exploring Strategy’ as well as three of the world’s leading strategy theorists, strategy is defined as the long term direction of an organisation. It aims to incorporate the latitude of the organisations activities and subsequently increase their competitive advantage over their business rivals. Strategy is also aimed at addressing change in the macro and micro environment and exploiting resources to enhance the proficiencies of the company. Figure 1.4, as depicted in the prescribed text, depicts the model of ‘Exploring Strategy’. It includes understanding the strategic position of the company, analysing strategic choices for the future and managing the process of strategy in action. In the initial stages of its strategy, the LEGO group identified its current position within the market as well as the evidence of competitors that were vying for market share. They understood that in order to increase their competitive advantage the company needed to identify and analyse competitors within the market. This would enable them to determine what their long term plan would be with regard to change and innovation. LEGO then explored their strategic choices by asking themselves a question: Should we concentrate only on what we are doing now or should we develop fresh products and incorporate new innovations? By analysing their strategic choices, LEGO was able to highlight and implement strategic solutions for continued growth and development of the company. Through this implementation of strategy many changes were made that affected the scope of the business. Cost cutting and laying off of staff were part of the change that was necessary to incorporate the strategy of the company. LEGO managed the strategy by continuously reacting to the changes in the environment. Even though some of their actions failed dismally, the focus on vital customers and innovation ensured a progressive climb back to profitability, development and growth. Managing the strategy is key to the long term success of the company. The company experienced operational and business level failures but continued to manage the
2 bigger picture. However. The LEGO Group clearly proves that strategic decisions are complex and difficult and some of the decisions made are undertaken in uncertain times (global recession). . strategy is an integrated approach and requires all facets of the business to be pushing forward in the same direction.
. The advent of competitors and research contrary to what LEGO was basing its strategy on up to that point proved to be a focal point for the company. with the aid of a new COO. What features of the external environment have influenced strategy development at the LEGO Group? One of the initial strategy decisions was based upon the oil crisis in the 1980’s. LEGO had difficulty in accessing and reading the market. The external image of the company .that which affected the general public’s opinion and the desirability of the LEGO Group as a prospective partner and employer suffered due to the fluctuations in sales and profits. Once this was highlighted. The company reacted favourably by introducing new innovations and penetrating previously unexplored markets. As a result the entire procurement process was reanalysed and restructured and cost reductions in all sectors of the business were significant.3 2. Heavy financial losses resulted in a weaker capital structure and limited investment opportunities for the future. Objectives were set out and adopted and the company moved on. the company restructured and went on a cost cutting expedition – freeing up resources to assist with the long term objectives. LEGO suffered a sharp decline in the ‘most admired companies in Denmark’ poll. Changes in the market environment in the 90’s also spurred on strategy development at LEGO.
Having staff dedicated to the vision. The family company and their dedication in making it succeed. Give the heavy losses experienced. Another excellent use of resources is in the form of enthusiastic LEGO users for the development of products. it was decided that a loan would be taken. the LEGO brand would not have survived the climate it did. LEGO still secured a loan. The dedication of LEGO’s management and staff is one of their key advantages. This willingness and ability to act boldly saw them in good stead during a time of economic downturns. someone else believed in them as much as they believed in themselves. Even though LEGO clearly had bigger problems. the climate and changes in market share.4 3. Had they given up the company. Their focus remained strongly on the distribution in retail. . LEGO’s bold approach to the global financial crisis in 2009 was part of their great success. Clearly. However. this was clearly a last resort decision for the CEO. The market is more favourably inclined to ‘forgive’ companies that have taken the time to cultivate strong brand awareness. worked for them. The company enjoyed strong financial backing. mission and strategy of the company is essential for the success of their long and short term objectives. Instead of selling the company. What resources and competences of the LEGO Group have enabled them to regain their successful position in the global toy market? LEGO was fortunate enough to have a strong brand and awareness in the market. The company suffered heavy financial losses and briefly discussed selling LEGO. they maintained and developed their relationship with their customers in order to better understand their needs and inculcate a higher standard of customer service within the company.
As a first step in cutting costs. Laying off staff. weaknesses. Another factor in this decision was that toys are a seasonal commodity and LEGO felt that they had the capacity to accommodate the high costs of manufacturing with the high seasonal demand of the product. The cost of moving operations (distribution channels).5 4. LEGO believed that they could save the company (they’d done it before) and they set about to do just that using bold ideas and innovative thinking. The decision to move operations would have resulted in more layoffs of staff in Denmark and less flexibility in its distribution strategies. This was only one of the alternatives suggested and discarded. The case indicated that the company did indeed carry out a similar analysis with the CEO identifying a combination of internal and external factors responsible for their problems. would have resulted in a poor public perception of the company. This resulted in huge cost savings for the company. opportunities and threats. This is basically an analysis of the macro and micro environments strengths. One of the more successful alternatives. Disintegrating this image in the public eye would have proven to be detrimental to the life of the company. the entire procurement process was reviewed. . If they sold the company they’d also risk the LEGO legacy being associated with something other than their stated mission. What were the alternative strategies facing the LEGO Group in 2004? Why do you think the LEGO Group followed the course that they did? One of the most effective ways of creating alternative strategies is a SWOT analysis. By this time the company had decided not to sell its business interests and would therefore have made the correlation between diminishing company image and sales. The decision to axe this solution was taken after LEGO changed its philosophy about its supply chain. However there was the added issue of distribution channels. Another alternative was to move 80% of its manufacturing operations out of the country into the Eastern market where operations were generally cheaper. cost cutting would have freed up resources to pay back the loan as well as stabilise the capital position of the company. This would have severely affected the focus on distribution to key customers. It was briefly discussed that they would sell the business. The LEGO brand had thrived for many years on its family owned operations. affiliating with Flextronics and laying off staff would far outweigh the cost of keeping manufacturing as it was.
The creation of new ideas will only come when people are exposed to the strategy of the company. optimizing resources and highlighting areas for improvement. By developing these lenses. . Strategy as Experience LEGO has in its favour the advantage of dedicated and loyal employees who have stood with the company through its most trying times. Strategy is an outcome of decisions about positioning and repositioning of the organization in the fast-changing environment. The employees experiences within the company and externally will allow for a broader perspective on where the company should be going. This variety of people adding ideas can be a huge strategic advantage for the company. Strategy as design This lens emphasises the use of tools and concepts that encourage objective analysis. Creating new products and encouraging innovation is clearly the way to go. Historical data and information as well as experience in the specific industry cannot be discounted as a strategic tool. the strategy of LEGO can be enhanced to include changes in the current business environment. logistics and supply chain fundamentals. Strategy as Variety Utilise the people resources within the company to ensure more diverse innovations and creations. The LEGO group highlights innovation as one of its key strategic advantages. In a market that is dominated by digital and electronic toys LEGO has to continuous come up with new and exciting products to stay on top. Looking at the LEGO Group today how would you approach strategy development to ensure a successful development of the company in the future? Strategy can be viewed through four different lenses. Open door policies ensure that employees who are not part of the strategic management team can also contribute in some way. This in turn will ensure the success of the company’s development in future.6 5. Factors affected on a business and operational can also be looked at. Distribution channels and methods.
Language and the use of it can be a huge resource for the company. The strategy team should use media that is user friendly and comfortable to communicate the strategy. Management should not restrict themselves to one specific method of operating. Another important element of strategy is management styles and approaches to different situations. .7 Strategy as Discourse The strategy should be communicated and explained in language that is acceptable. Managers should be adaptable – this is crucial for change management within the company strategy. Different situations may call for different methods for resolutions. This will eliminate harmful barriers to communication between lower and higher level staff.
scribd.wikipedia. Available: http://www. G. K. 2 March 2012 . Available: http://en. Text and Cases. Scribd. Exploring Strategy.com/doc/20524239/Strategy-Lenses.8 References 1.org/wiki/Strategic_lenses. 2011. February 2012. R Scholes. Whittington. Wikipedia. 10 February 2009. Johnson. 2 March 2012 3. Nawal Bakou. Essex: Prentice Hall 2.
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