LEGO strategy analysis - Gamification is the future.

TO: Niels B. Christiansen, CEO of LEGO
FROM: Ibrahim AbdelMoteleb, Coursera student
DATE: May 26, 2020
SUBJECT: LEGO strategy analysis

In this rapidly changing environment, having a deep understanding of a company’s strategy is crucial to be able to adapt and have a sustainable competitive advantage.

LEGO’s analysis:
It is critical to highlight LEGO’s dynamic capability. Dynamic capability are the capabilities that enable a company to renew its resources and activities to adapt and survive.  LEGO in the 1990s experienced uncontrollable diversification with several non-LEGO bricks related products, this caused a huge financial loss.
In 2004, LEGO brought a new CEO, Jorgen Knudstorp, who brought a new strategy that is cost-driven combined with constrained innovation.  It led to great success and a turnaround for LEGO. Knudstorp’s strategy worked because LEGO spread itself thin on several fronts with several products. Thus, it had a very high unnecessary cost due to non-lucrative differentiation in several fields. Knudstorp realized that he could achieve higher profits by reducing costs and developing relationships with his distributors. He improved his relationships with big retailers such as Walmart, he reduced the number of suppliers and outsourced production. Knudstorp supported innovation, but within a constraint. Therefore, LEGO started using a dual strategy of cost and differentiation. This strategy needs to continue.
 Adopting a single strategy is no longer sufficient for business giants; there are big opportunities that lie in dual strategies. LEGO is a living example of this, if they had only adopted a single strategy, they would’ve failed to sustain their competitive advantage.

LEGO needs to maintain its low strategy as the toys industry has a very intense price war. Accordingly, if LEGO drops its low-cost advantage, it would make it lose the price war and lose its market placement.
LEGO needs to maintain its differentiation as it is the main reason for its survival. The customized high-quality bricks and the LEGO bricks based on movie characters such as Harry Potter and Star Wars, which are exclusive to LEGO due to contracts, makes LEGO the Apple of the toy industry.
The constraint innovation strategy needs to stay, but with less intensity. LEGOs needs to evolve to fit with the growing digital world. LEGO has tried to make several digital games but failed to maintain any so far. However, that doesn’t mean LEGO has to stop searching for a proper video game, it is a must that it finds one. Physical games won’t survive forever and LEGO knows this, they need to find an alternative for their bricks.
LEGO already has an online store that gives VIP points which can later be used to buy other bricks.
LEGO knows that kids are not the only customer segment and markets their products to adults. They market it as a more interactive puzzles and a game to enhance creativity and imagination. It also a nice game that both a parent and kid can enjoy together.

My suggestions:
I suggest that LEGO focus on the developing countries in Asia and Africa as these countries are still rural to a certain extent and kids still enjoy playing with physical games. Although, LEGO needs to change its pricing policy to gain a proper market share in these markets.
I believe that LEGO is missing on a massive growing market which is gamification. Gamification is using games or game-like features to teach something. LEGO can work on developing gamification for education and making LEGO games that are some sort of a curriculum for enhancing teamwork, creativity, vision, and self-discipline, or it can be a visual representation of a geographical map or a historical battle. Instead of kids being taught theoretically in schools about mountains and continents, they can also build it using LEGOs to better memorize it. They can also recreate battles using LEGOs to further understand it and enjoy it whilst learning about it.
Adults can also use it in courses to stimulate team play, communication, vision, and planning as it requires cooperating with several members, and planning to build a huge LEGO structure.

 LEGO can be the pioneer of a new program that makes kids’ education or adult courses a more fun and fruitful experience. Gamification is the future.

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