The document discusses LEGO Group's opportunities and challenges in the Asian market. It notes that the Asian toy market is projected to grow rapidly in the next 5 years. Opportunities for LEGO include focusing on this growing Asian market, while challenges include unpredictability with outsourcing production and responding to different Asian cultures. The response recommends that LEGO build a factory in Asia in the next 5-7 years to help achieve competitive pricing, reduce costs, capitalize on low-cost labor, react quickly to local demand, and meet the needs of retailers expanding in Asia.
The document discusses LEGO Group's opportunities and challenges in the Asian market. It notes that the Asian toy market is projected to grow rapidly in the next 5 years. Opportunities for LEGO include focusing on this growing Asian market, while challenges include unpredictability with outsourcing production and responding to different Asian cultures. The response recommends that LEGO build a factory in Asia in the next 5-7 years to help achieve competitive pricing, reduce costs, capitalize on low-cost labor, react quickly to local demand, and meet the needs of retailers expanding in Asia.
The document discusses LEGO Group's opportunities and challenges in the Asian market. It notes that the Asian toy market is projected to grow rapidly in the next 5 years. Opportunities for LEGO include focusing on this growing Asian market, while challenges include unpredictability with outsourcing production and responding to different Asian cultures. The response recommends that LEGO build a factory in Asia in the next 5-7 years to help achieve competitive pricing, reduce costs, capitalize on low-cost labor, react quickly to local demand, and meet the needs of retailers expanding in Asia.
The document discusses LEGO Group's opportunities and challenges in the Asian market. It notes that the Asian toy market is projected to grow rapidly in the next 5 years. Opportunities for LEGO include focusing on this growing Asian market, while challenges include unpredictability with outsourcing production and responding to different Asian cultures. The response recommends that LEGO build a factory in Asia in the next 5-7 years to help achieve competitive pricing, reduce costs, capitalize on low-cost labor, react quickly to local demand, and meet the needs of retailers expanding in Asia.
ALEX FRANCIS EPGP13A - 012 MANOJKUMAR J EPGP13A - 066 MURALI M EPGP13A - 072 CHANDAN KUMAR ROY EPGP13A – 032 VIJAY KOUSHAL EPGP13A - 122 How attractive is the branded toy Industry? Lego Group has been the world’s third-largest toy manufacturer with a 5.6% market share in the traditional toys and game sector and a 60.9% share in the bricks toy industry. The Branded Toy industry seems to be going through quite a challenging phase, especially in the Asian and emerging markets. It was evident from the declining Inventory Turnover and pushed to adopt low-cost manufacturing. There has been a steep unforeseen decline in the Toy Industry in Asia despite optimistic projections given by Lego. If the construction brick toys are treated as a commodity, customers will move towards buying unbranded bricks, and it would be a challenge for more prominent branded players such as Lego. In addition, the Branded Toy Brick producers such as Lego will have a hard time convincing retailer with the current margin and acquiring the prime display shelves at outlets. It is to be noted that there are many changes in the current market trends of consumer preferences, market trend size development, demographics, regulation, emerging technologies. There are also uncertainties related to “green agenda vs. green debate,” “Free Trade Vs. Lot of Restrictions”, and “Brand Vs. Toy Bricks as Commodity”. The branded companies like Lego were also thinking about creating a factory in low-cost locations in Asia to deal with the price war.
How well has LEGO adapted to the industry Environment?
Lego Group, with its decline or near death from 2002 -2004, has made an astonishing return of making profits by up to 139% by 2010 and doubling the net profit margin with its main competitors. It learned hard lessons by selling its cash- burning business-like theme parks etc.
With hard lessons learned in the past, it had optimized the total number of bricks, increased commonization, restructure the supply chain, developed excellence in product development, customer relationship, shifting its manufacturing to low- cost countries like Mexico & the Czech Republic, and increased its profitability.
PAGE 1 With this, the Lego group fixed its inefficiencies and stuck to the core business with the new strategy:
To be best at creating value for customers and sales channels.
• Refocus on value for customers.
• Increase operational excellence.
One of the main focuses, which was to improve and optimize the product development, started by limiting the number of bricks and raising them to support new themes and products by creating a new marketing segment ( LEGO Friends).In Addition to this, it has increased the commonality of the elements in each set, thus increasing the brick’s commonality by 80%.
The company started to innovate and bring a new line of products every year which comprised nearly 70% of the annual revenue for the company and fixing the timeline for project managers for a 2-year development window helped the company maintain the customer base.
With its optimized supply chain and delivery of the products to retailers during the ten weeks high sale time, short shelf time, and high revenue generation per shelf, it maintained a good relationship with retailers.
Overall, Lego has adapted in many ways to keep up with the market to increase its profitability, revenue, innovate by partnering with global brands to deliver attractive products for customers by keeping more than 60 % share of the market worldwide in the construction toy segment.
PAGE 2 What are the key opportunities and challenges in Asian market? Opportunities.
• Focus should be on the Asian toy markets as the market research team predicts that it was set grow rapidly within next 5 years. There is a high chance that it would outgrow the European and the American Markets. • Research shows that in China there would be an increase in the market size of construction toy from 600 million to 1300 million. • Switching from distribution model to direct sales model to enhance market penetration and getting more responsive to local demand while carrying les inventory in its Distribution Centers. • Coordinating with third parties to create regional distribution centers and build up safety stocks locally that would shorten lead time to local customers.
Challenges.
• Unpredictability in the demand with Flextronics Model.
• Outsourcing Productions would mean there would less control over the quality. • Group productions would not respond to the myriad of cultural differences of the Asian Market. • Moving from larger retailers to small ones would create challenges to build a robust retail network.
PAGE 3 With a specific focus on the Asian market, do a scenario planning and determine the implications and options for the LEGO Group. Should LEGO build a factory in Asia in the next five to seven years?
PAGE 4 Should LEGO build a factory in Asia in the next five to seven years? YES Having factory in Asia will help in the below point - Will help in achieving competitive pricing strategy which is a key success factor for ASIA Market - Help to reduce cost of production - Help in reducing logistic cost - Can capitalize of low-cost labour and labour availability - Can become a main exporting factor to other locations as well - Can help to react to local customer preference quick - Experience gained in low cost production site, can be re-used in other production - Can help in getting a better understanding of ASIA market & customer behaviour - Can cater to biggest economies in the Asia. - Help in capitalizing the increased spending power of customers in developing countries - Helping in meeting the demand of global retailer who are setting up stores across Asia
