Business and Entrepreneurship

Assignment
LEGO Case Study & Indonesian Toys Markets Potential

1. What have we learnt about LEGO? Please Make 2 pages of summary of what we have
learnt from LEGO
In 2003, LEGO was according to the Knudstorp review on a burning platform, losing
money with negative cash flow and a real risk of debt default which could lead to a break up
of the company. The company had reported losses of $228 million on sales of just over $1
billion in 2003 and a loss of $207 million on sales of $1.1 billion in 2004.
In 2013, the company achieved $4.5 billion of revenues and profits of $1.5 billion.
LEGO had replaced Hasbro to become the largest toy company in the world second only to
Mattel. Return on sales had increased to 33% and sales per employee had doubled.
Lego achieved this sensational turnaround under the leadership of Jurgen Knudstorp. A
focus on core products and values. Clear leadership with a command structure focused on
profitability. A premium pricing strategy and a high return on sales target. A return to core
values on product quality, the lego legacy and a value for money proposition for end users
and the retail customers.
Understanding the KSFs, the key success factors were instrumental in this process. Close
to the customer became a Knudstorp mantra. Using focus groups for kids and AFOLs, the
adult fans of Lego in the process, new product ideas were tested during the product
development process.
The sometimes short product life cycles demanded a steady new product development
programme in which products were brought to market within a much shorter time frame and
within a given cost base.
A process of market segmentation and customer segmentation, led to the refocus on
DUPLO for the younger market, LEGO as the core brand and Lego FRIENDS, opening the
brand to the young female market.
The company analysed the offer into Fantasy and Reality matrix. Excitement in the offer
was maintained by products such as Star Wars, Harry Potter and Pirates. The more technical
were inspired by Technic and Architecture. The younger age group enthralled with Bob the
Builder.

The Knudstorp process had created a clear vision for the future direction of the company.
Set a clear direction for LEGO and fundamentally changed the way the company did business
with major retailers. Created a clear command structure within the organisation with an
emphasis on performance and profitability. Defined gross and net margin targets defined as
the major challenge within product development including a premium price strategy and a
13.5% return on sales target. Restored competitive advantage by focusing on retail customers,
in particular their profitability. Understanding the importance of STAMP the impact of
Stock Turn and (Margin Performance), gross margins achieved in store. Reduced the level of
risk by right sizing the activities, cost base and assets to a lower overhead base, reducing the
break even level for a given level of turnover. Introduced back to basics, focussing on the
Lego brick legacy. A focus on the brick and the system, developing core products for a
clearly defined group of customers. Avoiding the lure of too many adjacencies. Encapsulated
the belief in the brand and the company, In Knudstorps own words Passionate about what
you are doing, living your dream.
A key strategy that Lego should develop Involves the marketing strategy. This strategy
should address important threats identified in the previous section. Reviews These threats
Consist of intense competition the which highlights the need to be responsive to changes in
customers' needs and wants and competitive moves in the market of construction toys
segment. The marketing strategy of Lego should seek to build closer relationship marketing
with customers and faithful enthusiasts. This will increase of the switching costs Because The
relationship built with customers will provide additional value to the customer, the which will
be lost if the customer switches to a competitive or substitute product. Relationship marketing
Also increases the responsiveness of the organization to customers' needs and wants.
In order to develop effective relationship marketing it is important that the entire
organization places the emphasis on the needs of the customers at different levels. Reviews
These comprise the following levels: economic, social, technical and legal. Relationship
marketing for toy products can take the accountable form where the organization sends
information to customers about the product categories issued by the organization (Kotler et
al., 1999). Open days can also be-adopted where customers are encouraged to visit the
organization and see the product categories and collections available.
Innovation is the key for the development of diversified products. The organization
should the make every effort to develop innovative products that can complimentary
Strengthen Reviews their standing in the industry and be competitive even for many of the
products of the electronics industry. In order to sustain innovation Appropriate funding

should be-provided for innovative ideas and the organization should be designed in a way
that Stimulates creative behavior. It must, however, REMAIN faithful to the basic purpose
with is providing a good, safe and educating entertainment for children, so that they were
Able to face the challenges ahead. Barriers to creativity like excessive criticism and
bureaucratic management style should be removed
2. What is the potential of Indonesian Toys Market?
Potentially, the toy market in Indonesia is very tempting. Given the Population Census
2011, the number of children aged 0 to 15 years in Indonesia reached 73.8 million. More
than 30% are children aged 0 to 4 years, not to mention the annual growing birth rate of
about 4.7 million. The rapid growth of the child, have an impact on demand for toys that
cannot be separated from the world of children. Chairman of the Indonesian Employers
Association Toys (APMI) Sudarman Wijaya estimated market value of toys in Indonesia
reached Rp. 1.5 trillion to Rp. 2 trillion per month or Rp18 trillion per year. Not
surprisingly, Indonesia has become an easy target toy manufacturers from around the
world. Moreover, since the free market that raises the possibility of imported products
invade Indonesia.
Deputy Trade Minister Bayu Krishnamurthi explains toy trade Indonesia enjoyed a
surplus in 2013. Its value reached Rp 8.2 trillion. There are roughly 5 trillion traded in the
country. Approximately 3.2 trillion exported. He also added that there are three countries
that supply the greatest toys from Indonesia, the United States 40 percent, eight percent of
Singapore, and the United Kingdom eight percent. Meanwhile, 80 percent of imported
toys Indonesia supplied from China.
Indonesia's toy market potential is enormous. This is supported by the growth in
population, the economy and the needs of the domestic toy. If there is an incentive,
creativity in making modern toys will continue to grow. Indonesia tends to emphasize
more in traditional toys than the toy that followed the recent technology. The toy market
in Indonesia can be more successful if we develop both traditional toys and modern toys.

References:

Csikszentmihalyi,
M.
Creativity. New York: Harper Collins Publishers.

http://www.ciputraentrepreneurship.com/bisnis-madya/potensi-besar-di-balikbisnis-mainan-anak

http://industri.bisnis.com/read/20140419/12/220524/sni-wajib-mainanurgensi-lindungi-pasar-anak

(1997).