Challenges Encountered During Growth
LEGO is a well-known Danish manufacturer of toys. As at 2015 the company had seen a 25% rise in revenue and 31% increase in net profits, which was an improvement from the results posted in the previous years. The past poor performance is attributed to problems in strategy which can be traced to the early 1980s. Like any other company that has existed for decades, the main problem for LEGO was the reluctance to change. According to Saebi et al., (2017); most businesses tend to change their strategy to adapt to changes under conditions that threaten their survival. The digital era saw the invention of computer games which was a visible indication of the need to adapt to changing consumer markets. The company relied on the trends generated by big data analytics which indicated that the company would grow obsolete as the future would see a change in preferences of LEGO's target market. According to the LEGO's brand strategist, the company's decisions were made based on these trends.
Change in Strategy
A strategy is a set of policies and behaviors established by management and directed towards the achievement of a specific goal (Pisano, 2015). A successful business strategy relies on the understanding of a company's; business environment, competitive advantage, and weakness/gaps. LEGO has implemented many strategies in the course to surviving market changes. At one point, the company shifted from its core strategy of manufacturing blocks to video games and theme parks. However, the significant turnaround came about when the company changed its focus from big to small data following an ethnographic visit. This made discoveries which disapproved all the knowledge the company had accumulated on digital era markets. Small data was concerned with the tiny clues; this became the new strategy which has seen the company reap massive benefits. The trend in technology is driving the toy industry towards 3D modeling and manufacturing. LEGO already uses 3D printing technology to develop prototypes for its current products. The question is whether LEGO should consider developing 3D LEGO block manufacturing as a new line of LEGO kits or as an addition to existing product lines.
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3D Manufacturing
3D modeling has opened opportunities for unique design and production, especially in the toy and entertainment industry. LEGO has been known to embrace technology and use it to reinvent itself and grow beyond competition. The company has already incorporated 3D technology in some of its products. LEGO's primary market differ in preference, which makes it necessary for the company to maintain a certain level of differentiation in their products. Adopting a new product line (3D) will require further research to analyze many factors which will be costly. The cost of production for 3D blocks is high since it will require re-engineering of product designs. With evolving technology and changing consumer preference, the toy markets will soon be filled with 3D designed products. LEGO might not have enough time to come up with a new product line to meet market demands. The company has already established a strong market presence with its current products; therefore, the 3D block manufacturing should be integrated into existing product lines. This will not only allow the company to improve its current products but also, expand its market presence and gain competitiveness.
References
Pisano, G. P. (2015). You need an innovation strategy. Havard Business Review, 93 (6). 44-54.
Saebi, T., Lien, L., & Foss, N. J. (2017). What drives business model adaptation? The impact of opportunities, threats and strategic orientation. Long range planning, 50 (5), 567-581.
