2
Background
The Lego Company was initially started in 1916 in Denmark focusing on building homes
and furniture for farmers. Lego found its niche in 1932 when the first wooden building blocks
were created, from that moment the company had found its purpose in creating toys for children.
The toy product was developed further and eventually the wooden blocks were phased out for
plastic pieces. Lego grew its brand by developing several product lines for different age groups
and specializing its development and production process. However, Lego, as well as the rest of
the toy industry, experienced slow growth in the period from 1993 to 1998. The declining growth
was originally attributed to a declining youth population in key demographics, a decrease in
amount of time spent playing and the increase in technology driven toy products. This time
period served as a warning for Lego and the company started to diversify to push growth. Even
with these new changes Lego still wasnt experiencing the growth it needed to become a large
player in the toy industry this can be accredited to several key problems within the Lego
infrastructure externally and internally.
Key Problems
The key problems that Lego faces are primarily external and internal issues. Externally
the market affects how Lego grows tremendously. Lego competes with the two big name toy
brands, Hasbro and Mattel. Both of these brands feature very popular toys such as Transformers,
Play-doh, and Monopoly for Hasbro, and Barbie, Hot Wheels and Fisher-Price for Mattel. One of
the main issues Lego has with their competitors is its lack of diversity among its products. Lego
initially started off with only a few shapes and five base colors. Kjeld was eventually able to add
a sixth color (green) when he was able to convince his father Godtfred the brand needed the
additional diversity to match its competitors. This need to add greater diversity to its core Lego
Exhibit 1
Strengths
Patented Building Block
Educational toy
Strong Branding
Quality
Opportunities
1. Technology Based Branding
2. Licensing for Films and Video Games
3. Licensed Toy Market
9
Weaknesses
1. Internal Record Keeping
2. Cost Of Manufacturing
3. Declining Growth
Threats
1. Childhood Play Decreasing
2. Rise in technology
3. Imitation
Bibliography
http://www.mesirowfinancial.com/mfc/