LEGO Group: Building Strategy

The LEGO Group: Building Strategy

The story of LEGO began during the Great Depression in 1932 when a Danish carpenter, Ole Kirk Kristiansen, faced a fall in demand for his services. Instead, he started to make wooden toys using the highest standards of workmanship and materials. By 1934, the company name, LEGO, had been created using the words ‘leg’ and ‘godt’ meaning ‘play well’. LEGO became increasingly successful despite major setbacks, including the loss in 1942 of the factory and designs in a fire.

The first plastic LEGO bricks were created and sold in sets in 1949, and by 1953, every brick was imprinted with the company name. In this case, Darren Meister and Paul Bigus, Ivey Business School, Canada, explore the huge challenges faced by LEGO in 2011 when it faced numerous threats, including a lost legal challenge against a major rival, MEGA Brands, and Hasbro’s plans to launch a competing product. Darren discusses how the case was written and why it inspires passion in his students. 

Complex problem

At Ivey, we have multiple internal case competitions and this was first written for a strategy-based competition. We wanted to look for an organisation with a complex problem where many strategic options existed. At the time of writing, LEGO was being prominently discussed in the press. It was a challenging time for the company and, given the role that LEGO played in most current students’ childhood years, we found it to be a great case topic.

It’s a fascinating company history and one I started learning more about when as a tourist I first visited Billund, in Denmark, the home of LEGO Group’s head office and LEGOLAND. Probably most kids at some point in time thought about how they’d make LEGO sets differently, either with different colours or packaging. Now, in a classroom situation, it’s exciting for them to ‘play’ with the whole company.

LEGO Writing challenges

We wish we could have received comments from the firm, but it was not possible, particularly with the timeline that we had. However, I think that the lack of specific insight from the company management leaves the students open to many more options. The management team would probably have had their preferences and biases, reducing the options that students are currently able to explore with the case.

Generally, you have to read very widely before writing a case, although much of what you read will not be included. It’s not a matter of writing the story and then looking for facts to support that story; instead, it is similar to the concept of theoretical saturation in qualitative research. Also, where it’s not possible to check the story with the company, it’s useful to have two writers. This ensures the story is covered from all angles. 

Versatile and flexible

The case was originally targeted as a strategy capstone for undergraduate students. However, we’ve now seen it used in international business, innovation, marketing and strategy courses at a variety of levels from undergraduates to executives. It seems everyone loves LEGO!

Passion to succeed

Students continue to surprise us with the range of ideas and options they come up with in response to the challenges posed in this case. I’ve used it in three different countries and I could see the students’ backgrounds come to life in their responses. They are able to take a detached, objective view as they have not worked for years to make the company and the product work. But because we’re talking about LEGO, they are still incredibly passionate about wanting the company to succeed and using their creativity to come up with solutions.

Fun and complex

The case is engaging and rewarding for students because, firstly, it’s fun. Who doesn’t love LEGO? Secondly, it’s complex: the threats are real, the opportunities are not guaranteed. Finally, the affection the students have for the company is important; this leads to a very surprising discussion when students realise how many products – things that they hold personally dear – are sacred to them and therefore difficult to deal with dispassionately. It’s fun for them to realise how hard it is to critically analyse a product when you love it. In contrast, when teaching other cases, I often find students are too dispassionate! The LEGO case makes for an interesting comparison.

Supporting material

The LEGO Book, by Daniel Lipkowitz provides some great insights into the history of LEGO as well as various images of the different product themes the company had offered throughout the years. Depending on the classroom and learning environment, it might be fun to bring in some of the product lines. You can also find videos on YouTube that show LEGOLAND and might be helpful for some students.

Finally, there is an interesting video from 2010 with the LEGO CEO discussing how companies die from indigestion, not starvation:

Continuing relevance

For LEGO, a significant relationship continues to exist between successful entertainment content and toy merchandising. In February 2012, LEGO and Lucasfilm renewed its Star Wars licensing deal. However, in October 2012, the relationship between LEGO and Disney became even more significant, as Disney acquired Lucasfilm along with the rights to the popular Star Wars franchise. This maintenance of licensing agreements with popular entertainment companies is a key factor for LEGO. This video clip reports on the company’s increase in value:

Case details

LEGO Group: Building Strategy
Darren Meister and Paul Bigus
Ivey Business School, Canada
Ref 9B11M086
Also available:
Teaching note
Ref 8B11M086

About the authors

Darren Meister is an Associate Professor, Information Systems, at Ivey Business School, Canada.

Paul Bigus is a Case Writer at Ivey Business School, Canada.

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