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LEGO GROUP

BUILDING STRATEGY

Just six bricks can be combined


915 million ways

Agenda
Introduction
Analysis
Strategy
Implementation
Risks and Mitigations
Conclusions

A competitive strategy to continue the


organizations financial success and
dominance in the toy market
Licensing
challenges
influencing
product

New
competitors
taking market
share

Commoditizatio
n of Lego
product

Expanding dominance in a toy


market
with opportunity and uncertainty

Uncertainty in Disney
Licensing
presents a challenge to future
contracts
Lego has
considerable
investment in
licensed building
sets

Lego Star Wars,


Spider Man,
Indiana Jones

Disneys recent
acquisition of
Marvel gives it
rights to over
5000 characters

Disney favoured
partner is Mattel

Marvel had
agreements
with Hasbro to
produce toys

Future of Disney
licencing
opportunities is
unclear

Hasbro has a
strong past
relationship to
Marvel

New Kre-O
product launch
could increase
royalty payment
tolerance

Hasbros
multiple product
lines might act
as stronger
incentive

Hasbros introduction of Kre-O


is a significant threat to market
share

Hasbros brand power

Enlarged marketing budget


Guaranteed Shelf Space
Popular Transformers brand
Compatible with LEGO blocks
LEGO has considerable product brand value
Hasbro cannot mention LEGO in its promotion

Failure to protect LEGO brand


from competitors has lead to
commoditization
MEGA blocks
has challenged
the control
over the brick
ecosystem

All competing
products will
be compatible
with LEGO

Lego must
focus on its
brand values

Brick Ecosystem to Lego


Ecosystem
Brand Engagement

Connect to consumers on multiple platforms


Innovation Focus
LEGOs leadership in the market drives
responses
Develop Experiences
Focus on delivering value beyond blocks

A competitive strategy to continue the


organizations financial success and
dominance in the toy market
Licensing
challenges
influencing
product

New
competitors
taking market
share

Commoditizatio
n of Lego
product

Expanding dominance in a toy


market
with opportunity and uncertainty

High profile brand licensing is an


easy revenue generator
Low Risk
Pipeline of
opportunities

Proven
Spiderman:
$100 million
toy sales

Integrated
Competition

Focus
on
Wester
n
Brands

Disney,
Hasbro, MEGA
Blocks

License Brands in localized areas


to increase product awareness
Lock in
untapped
licenses
Purchase
smaller
brands in
specific area

Unproven brands
Higher risk potential
Lower competition means discount
purchases
Anime
Cartoons and Movies
Popular Media

Strategies to focus on New


Growth
Build

Brand

Avoid

Products

New
Licensing

Popular
Licensing

Customizati
on

Standardizati
on

Expand beyond North America

LEGO stores a
proven
concept in
North America

Bring to
emerging
markets with
localized
content

Create an on
the ground
brand
experience to
engage new
customers

Build Foundation with Lego Stores


Core
Products

Special
Products

LEGO
Themes
LEGO Games

Localised
Content
Collectables

Media

Interactive

PC Games
Ipad Apps
Comics

Play Booths
Building set
Projections
Personalisatio
n's

Engaging the Consumer: Virtual


Media

World is going
virtual

Average 6-year
old has access
to a mobile
device

Mirroring virtual
content is
essential to
continued
success

Engaging the Consumer: Virtual


Media
Mobile Application
Augmented Reality
Stories/comics from licensed/non-licensed
products
Games
Partnerships
with Zynga for

Facebook games

Engaging the Consumer: Point


System
Localisation and customization tied to LEGO brand with
Point System
Add value to all LEGO branded products
Network Effect Each new product adds value to the
system

Engaging the Consumer: Point


System

Gaining
points

Buying products
Completing video game
achievements
Use of mobile
app/Zynga Facebook
games
Any LEGO Theme Park
purchases

Engaging the Consumer: Point


System
Exclusive
DLC

Customizati
on of
products

Buy
products
online or at
a LEGO
store

Why
collect
points
?

Theme
Parks

Engaging the Consumer: Lego


Account
Engage with online community
Upload pictures/videos of LEGO creations
Discussion boards
Share creative ideas

Track and manage points


Connect with LEGO

How is fits together

Get Points

Add Points

Lego Packs

Spend Points
Personalised
-Lego Characters

Game Achievements

Enter via:

Collectable Content
-Special Editions

Comic Purchases

QR Codes

Downloaded Content

Engaging the Consumer: Point


System
Creates unique LEGO experience
Allows LEGO to tap into the creativity of its users
Gives LEGO consumer data that is hard to get
through vendors

Risks and Mitigations


Inability to
procure new
licensing
agreements

This would be a big problem


Mitigation would require extensive
investments into LEGOs innovative
capacity

Competitors copy
our strategies

Hasbros Kre-Os do not have sufficient


brand power
First mover advantage

Competitors steal
our market share

LEGO grew revenue by 37% when the


market increased by 13%
Ecosystem will further mitigate brand
switching

Assumed Costs
Online content development
Agency at $500k

Online content management


$500k per year

Store build-out costs


($200-400k per store) * (50 stores) = $10 million

Marketing costs for emerging markets


($250k year) * (40 markets)

New licensing agreements


($1 million each) * (1 per market) = $40 million

Metrics of Success
Vs. Generic
Blocks

Change in sales after


rollout

Network
Effect

Click through rate on


point system

Total sales of
Local
localised content
Engagement

NonLicensed
Building
Sets
Licenced
Building
Sets

Mobile
Content

Online
Website

The
LEGO
Group

Stores and
Merchandi
se

Video
Games

Board
Games
Theme
Parks

Endless Human Possibility

Our ultimate goal is to inspire and develop children


to think creatively, reason systematically and
release the potential to shape their own future
experiencing the endless human possibility