Question

Based on the case study, use Porter's Generic Strategies framework to assess LEGO in terms of the company's pursuit of competitive advantage..

CASE 16-3 LEGO he LEGO Company is a $4 bilon global business built out of the advantage-creativity, inrovation, and super or quality-were also numblest of materials interlocking plastic toy bricks. From its base in sources of weakness. The company had become overly compex, witn Denmark, the family-owned IEG0 empire extends around the world and 12,500 stock-keeping units (SKUs), a palette of 100 different block has at tmes included theme oarks, clothing, and computer-coled co nd 1 1,000 suppliers. toys. Each year, the company produces abou: 15 billion molded p as tic blocks as well as tiny human figures to populate towns and operate children's clothing, and software games had been the wrong strat- gizmos :nat spring from the maginators of young people. LEGO orod- Knucstorp launched a restructurng initiative ro nas sa ucts, which are especially copular with boys, are available in morean Vision. Within a few moriths, cross-furnctional teams collaborated to 130 countries, in the key North American market, the company's overall reduce the number of SKUs to 6,500, the number of color options was share of the construction-toy market has been as high as 85 percent Acknowledging that tne company's forays into therme parks, slashed by 50 percent. Production was outsourced to a Singaporean Kjeld Kirk Kristianser, thegrandson of the company's founder swell ascompany with production facilities in Mexico and the Czech Republic, the mainsharenol der, served as CEO from 1979 unt 2004, Kristiansensays resuting in the elimination of more than 2.000 jobs hat LEGO procucts stand for "exuberance, scontaneity, self expression, concen for others, and innovat.on." The comaany's name comes from the Danish phrase leg godt, which means "play well.") Kristiansen also surveying these customers, Knudstorp and his task force learned that attribuzes his company's success to the esteem the brand enjoys among the customers do not require express product deli parents "Parents consicer LEGO not as just a toy company but as provi prompted a cnange toonce-week'y deliveries of orders that are placed ing products tnat help learning and developing new skil s. ne says any's retail custom After Knuastoro also decided to focus on the c ch include Toys 'R us, Metro, Kars:adt, and Gal This insight in advance The result improved customer service and lower costs In LEGO has always been an innovator. For example, Mybots was athe 3-year period from 2005 to 2008, on-time deliveries increased by $70 toy set that included blocks with computer (nips embedded topro- 62 percent to 92 percent. LEGO aiso logged improve ments in other vide lights and sound A $200 Mindstorms Robotics Invention System key performance indicato allows users to build computer-controlled creatures, To further leverage 2008, LEGO was awarded the Europea Supply Chain Excellence the LEGO brand, the corrpany also formed alliances with Walt Disny Award in the category "Logistics and Fulfilime Company and Lucasf Ims, creator of the popular Star Wars series, For several years, sales of licensed me chandise relating to tne popularbucket of bricks is the core of tne core." Still, he adas, "There's more Harry Petter and Star Wars movie franchises sold extremely we l such as package quality and quantit In terms of competitive acvantage· Knudstorp has rotec, "A to being a global successful company than being able to build a plas- After a disappointing Christmas 2003 season, LEGO was left with tic brick." Evidence of the company's magic touch can be found in millions of dollars worth of unsold goods. The difficult retail situa LEGO Friends, a new theme targeting girls that has sold extremely tion was compounded by the dal ar's weakness relative to the Dish well Moreover, the company's forays into video games such as Lego krone: LEGO posted a record loss of S166 milion for 2003. The com Batman 2 children's books such as The Lego ideas Book, and TV ser es pany then unveiled a number of rew initiatives aimed a: restoring on the Cartoon Net profitability A new line, Quattro, consisting of arge, soft bricks, is targeted directly at the preschool market. Clikits is a line of pastel colored bricks targeted at young girls who want to create jewelry e proven to be successful as well In 2004, after LEGO had posted several years of losses, Jergen Vig Knudstorp succeeded Kristiansen as LEGO's chief executive. Knudstoro corvened a task force corsisting of company executives and out side consu tants to review the company's operatiors anc business model. The task force discovered that LEGO's sources of competitive Exhibit 16-12 Source AP Images

Answer 1

Porter's generic strategies framework can be used to assess LEGO’s pursuit of competitive advantage. Some of LEGO’s competitors in the toy manufacturing market include Hasbro and Mattel. However, because LEGO specializes in building blocks, their generic strategy for achieving competitiveadvantage would be considered differentiation. When a product has “actual or perceived uniqueness in a broad market” it is said to have competitive advantage through differentiation (Keegan & Green, 2015, p. 495). LEGO has achieved differentiation by offering extensions like Quattro, products including softer bricks and targeted towards preschoolers, and Clikits, buildable jewelry products targeted towards young girls (Keegan & Green, 2015, p. 521). Although Hasbro and Mattel also have products that target the same consumer market, LEGO’s ability to differentiate their building block product has given them a competitive advantage over these company.