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Lego Pest Analysis

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Recommended: The impact of lego

Introduction: Brief Overview of LEGO 90

Based on FY2014 revenue and profit, LEGO surpassed its rivals Mattel and Hasbro being the world largest toymaker for the first time (Petroff, 2014). LEGO was founded by Ole Kirk Kristiansen, a carpenter with dream of starting producing wooden toys in a small town in Denmark. LEGO is still a family owned business and is now owned by the founder grandson, Kjeld Kirk Kristiansen. The name ‘LEGO’ was formed from two Danish words “leg godt” which means “play well” but was realized later it also means “I put together” in Latin word (Mortensen, 2012).

Values

Figure 1: Self-create (Source: Lego)

PEST Analysis

To analyze macro-environment, it is vital to be able to identify factors that may be crucial …show more content…

Figure 4: Self-create

Threats of New Entrants (Low)

To compete with LEGO, new entrants required hefty investments to manufacture the same products quality. Due to LEGO strong branding identity, new entrants need to develop excellent and innovative strategies, ideas and technologies to create an instant identity.

Competitive Rivalry (Low)

Although Best-Lock and Mega Brands are lower in price (Clark, 2007) but LEGO strong branding image, customer loyalty and long history allow LEGO to gain competitive advantage over its rivals. In comparison to the existing players in the toys and games industry with expertise helping in decision making and optimising their value chain, new entrants may not reap the economies of scale advantage due to production and resources limitation.

Bargaining Power of Buyers (High)

Big retailers like Wal-Mart, Toys”R”Us are LEGO primary buyers as they purchase in bulk, provide them with leverage in negotiation. Furthermore, switching costs for retailers is low since it is easy to buy competitors toys.

Bargaining Power of Suppliers …show more content…

Besides creating a technically fascinating experience, it also helps to give LEGO stores an extraordinary selling point because buyers can watch the 3D product animation from any angle for detail (Metaio, n.d.). Through LEGO Cuusoo, the online project communities, it enables innovators and A.F.O.L (Adult Fans Of Lego) to submit their designs and ideas, followed by creating these ideas in 3D before assembly free of charge via the LEGO software program. LEGO are willing to pay 2% of the revenue to designers in the event their ideas are being transformed into actual LEGO products in the market. Such approach benefits LEGO from inexpensive creativity and the inspiration that fans provide to one another (Lego ideas,

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