Lego Plans to Tackle the Challenge of Globalization at the Back of Movie Success

With 10% increase in revenues, the Lego company CEO is planning to tackle the challenge of globalization as the company’s new direction. Lego bricks have been in the market since 1949. Ten years ago the company was not performing very well and there were reports of losses and layoffs. That turned around with the success of The Lego Movie and the renewed interest in the colorful interlocking plastic bricks.

Market performance not as colorful as its bricks

Lego is a construction toy manufactured by The Lego Group, which is based in Bilund, Sweden. The colorful plastic toy bricks were introduced in 1949. Since its introduction, it became known globally, which saw the development of a Lego subculture. The years saw many Lego-based competitions and games, as well as the creation of six amusement parks with a Lego theme. The company has produced 560 billion Lego parts as of 2013.

But for the past decade, the second largest toymaker in the world was suffering from massive losses. There were job cuts as well. Kjeld Kirk Kristiansen, heir to the company even had to put in his personal money worth 800 million kroners to keep the company afloat. The current CEO, Joergen Vig Knudstorp joined the company in 2004.

He said the company was spreading itself too thin, with its focus on diversification, including apparel and consumer electronics. Although the ideas were not bad, those were not what the company needed, since they did not match with the main product, the Lego bricks. Somehow, the focus on the operation of the original toy was lost, with the revenues were already going down.

The company also seemed to have forgotten that their toys should not only be available in small retail outlets. They forgot and missed out on the fact that stores such as Toys’R’Us and Wal-Mart are big-box retailers where their products should be.

Company overhaul

The CEO, who was the first executive to join the company outside of the founding family, made changes to the supply chain. He transferred the manufacturing from Switzerland, which is a high-cost area, to countries such as the Czech Republic and Hungary, where the manufacturing costs are lower.

They partnered with Merlin Entertainment for the Legoland theme parks. The CEO led the company in refocusing on the core industry once again. At the same time, the adjacent business that were spun off from the main brand were assigned to other operators, with the company earning licensing income in the process.

The Lego Movie

The animated movie was a box-office success, which is a fine example of how a company can profit from other companies that want to use their brand. A team from Warner Bros. immersed itself in the Lego culture for five years before the movie was released.

Ready for the global challenge

Lego is now selling their toys with pre-written story lines, such as the Legend of Chima and the Harry Potter theme. They recognize the cultural differences of children from different countries that play with their toys, especially those that have built in stories. They are now utilizing international talents for their marketing campaigns. They are also planning to have management hubs in Connecticut in the U.S., Shanghai, Singapore and London.

Photo credit: Taken by S.W. Clyde, National Scenic Byways Online under Creative Commons Attribution-Share Alike 3.0 Unported License.