Lego Group: Building Strategy Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Threats

The one of the most important threat that the company is facing is the loss of trademark protection as faced in the past. In addition to this many other companies that are competing against the Lego Group are offering the identical product and services like Mega Brand.Another threat for the Lego Group is increasing in the competition in the Toy industry.This increase in competition reduces the barriers for the new companies to enter the market.It also makes it difficult for the company to gain competitive advantage over its rivals in the toy industry.

Secondly, the continuous change in the toy industry as companies are introducing new and different products like electronic games, video games and mobile games. This increases the chances of customer switches as many alternative products are now available in the market, which may include the internet, cartoon channels, etc. The outdoor games activities are another threat for the Lego Group Company as customers are also focusing on the playing games outside the home.

Financial Analysis

The revenue of the Lego Group has increased from 7,798 in 2006 to 16,014 million in the year 2010.This showed that the performance of the company has improved greatly in the 5 years. In addition to this, the company has sold more of its products to its customers and generate more money that enhance the growth of the Lego Group around the world.

The operating profit before special item has also increased from 1,405 million in 2006 to 5,115 million in 2010.the operating profit of the company has enhanced extensively during the time period 2006-2010.Furtheremore, the net profit of the company has grown to 3,718 million in the year2010 from 1,290 million in 2006.

The total assets of the Lego Group that include both current and non-current items have shown high improvement. They are increased from the 6,907 million in 2006 to 10,972 million in the year of 2010. It showed that the company has greatly invested in the assets during the 5 year time period from 2006-2010. The shareholders’ equity of the company has also shown increased from the period of 2006 to 2010.The equity in the year 2006 was 1,191 million, whereas increased 5,473 million in the year 2010.this means that the productivity of the company has effectively enhanced for the duration of these 5 years.

The total liabilities which includes current liabilities and long term liabilities of the company has decreased from the time period 2006 to 2010.The total liabilities of the company in the year 2006 was 5,716 million while it was reduced in the year 2010 was 5,499.This showed the decrease in the total borrowing of the company from the bank or other financial institutions throughout the time period 2006-2010.But the 2007 to 2009 has showed greater reduced in the total borrowing and in 2010 the total liabilities got increased after the decline in from 2007 to 2009.The total cash flows of the company has decreased from the duration of 2006-2010 as in the year 2006 the total cash flows was 1,925 million whereas in the year2010 was negative 8712 million.

The financial ratios of the Lego Group also showed improvement in the performance of the company’s product offerings. The gross margin ratio of the company showed increased from the year 2006 to the year 2010.the gross ratio in the year 2006 was 64.9% which increased to 72.5% in the year 2010.The improvement in the gross margin ratio showed that the productivity of the business has upgraded over the time duration of 5year period.

The operating profit margin ratio of the company from the duration 2006 to 2010 has extensively increased .The operating margin ratio of the company in the year 2006 was17.0 % which was increased to 31.1% .this increased indicated that the company has good control over the cost as well as the sales was increasing much faster than the cost of the production.

The net profit margin ratio of the Lego Group has showed improvement in the performance from year 2006 to 2010 .The net profit margin ratio of the company in the year 2006 was 16.5% while in 2010 was 23.2%.This increased in the net profit margin ratio showed the company has effectively converted the revenue into the actual profit. In addition to this, also indicated that the company has greater control over the cost and hence the overall growth of the company has enhanced efficiently.

The return on equity has decreased from the duration of 2006 to 2010.The return on equity ratio in 2006 was 147.1% while in the year 2010 was 84.8% showed decreased. The ROE in 2006 was higher as compared to the other remaining years, but in the year 2010 it again showed slightly increased after they declined for the period 2007-2009..................................

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