The Lego group: Building strategy Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction

The Lego group is the toy manufacturer company that started its operations in the year 1932. It was founded by the Ole Kirk Kristiansen and his son in order to manufacture toys for the children. The company provides large range of toys with great quality and creativity on the yearly basis that contribute greatly in the growth of the company in different markets around the globe.

The company has opened stores in different location in order to sell the products that play an important part in the growth of the LEGO. The main objective of LEGO is to enhance the creativity of children through innovation in their product line.

Problem Statement

The management of the company is facing the problem of identifying the market in order to enhance its product line and operations of the business that help LEGO in the formulation of competitive strategy, which can increase the financial and market position in the Toy industry.

Case Analysis

Company Size& Market

LEGO became the fourth largest manufacturer of the toys around the world during the year 2010. This means that the company contains the great portion of market share as compared to the other competing companies in the industry. The company has transformed itself into a global brand by expanding its business operations and also gets the title of “Toy of the Century “by the British Association. The company has markets in different locations all around the world that allow it to capture significant market size. LEGO has faced variety of completion since its inception that has created challenges for the company continuously in order to maintain its position in the market as well as to expand its business operations and markets.

The MEGA brand is among one of the largest competitors of LEGO that is giving tough time to the company. The MEGA brand has introduced products that are directly competing with the LEGO such as MEGA Bloks that has given great competition to the LEGO bricks. The MEGA brand has expanded its product market in different countries all over the world that enhance the sales growth of the MEGA. Although LEGO has higher sales and revenue as compared to the MEGA brand however, MEGA is the largest competitor of LEGO as it is also making modifications in its product lines.

LEGO has significant opportunities for growth in the industry due to its ability to continuously product innovative products in its offerings with the creativity that also differentiate them from other competing firms in the industry. However,it is also important for the company to identify and capture the opportunity at the time by focusing on the growth areas that its rivals are not targeting.

Moreover, awareness about the changes that are occurring in the industry as well as use of latest technology in the business operations is also vital for growth. Since LEGO is known for its innovation and creativity worldwide as it makes innovative products without affecting the main standard,therefore, it has considerable growth opportunity in the Toy industry

LEGO’s Leverage

LEGO’s leverage assessment during the 2006—2010 time period

Lego’s leverage in the start of the period was very high. The debt taken was very high as compared to the equity in the beginning of the period of the year 2006. Due to this, the debt to equity ratio was very high in 2006 which was 4.8. Moreover, the interest coverage ratio is 31.9 and that is normally seen as sufficient to cover the interest expense. However, there is no comparison of the industry benchmarks given so that it could be ascertained how is the company is performing as compare to peers.

In 2007, the debt decreased and equity increased. Therefore,in turn debt to equity ratio decreased to 2.6. This shows lower leverage in this year as compared to the previous year. Over here, the interest coverage ratio increases.

In 2008, the debt increased in percentage; how ever the in crease in equity was more. As a result, the debt to equity ratio further decreased to 2.1. The leverage decreased further. The interest coverage ratio decreased drastically, how ever there is still ample amount of interest cover present for the company.

In 2009, the debt increased to by a small amount, but the rise in equity was more than the rise in debt. So debt to equity ratio decreased further to 1.4. Hence, the leverage decreased further in comparison to the previous year. The interest coverage ratio in this year was at maximum in comparison to any year during this five year period.................................

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