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Marketing Case Study:  Lego Group

Marketing Case Study:  Lego Group

Introduction

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Business managers and entrepreneurs should develop insights into the prevailing conditions in the internal and external business environment (Wetherly & Otter, 2013). There are different models that entrepreneurs and business managers can employ in the quest to understand the business environment. The SWOT analysis model is one of the most effective frameworks that entrepreneurs can employ in analyzing internal and external environments (Bohm, 2009; Hatten, 2015).  Evaluation of the internal and external environment enables a firm’s management team to undertake the requisite strategic changes.  In light of the above issues, this paper entails a case study on Lego Group, a privately owned firm that operates in the Toy industry.

Situational analysis

SWOT analysis

The chart below illustrates a summary of Lego’s strengths, weaknesses, opportunities, and threats.

Strengths

a.     Strong brand name; Lego Group has developed a strong brand name in the toy industry, which is evidenced by the fact that it has previously been named the ‘Toy of the Century’ twice.

b.     Innovation and creativity; the firm has appreciated the importance of integrating the concept of innovation and creativity in developing competitive advantage. Investing in innovation has enabled the firm to succeed in undertaking new and continuous product development.

Weaknesses

a.     Ineffective intelligence management; Lego group has not appreciated the importance exploiting the concept of knowledge management by taking into account the employees’ and customers’ opinions and ideas regarding the firm’s products. The company’s failure to incorporate customer-centric and employee-centric approaches in its marketing limits its ability to develop competitiveness (Kauffman & Panni 2013).

b.     Lack of core competencies; the firm has not developed the requisite core competencies in venturing into some of the market segments. This is evidenced by the firm’s decision to shelf some of its new product initiatives such as wristwatches, publishing, and lifestyle products.

Opportunities

a.     Developing digital products; Lego Group can enhance its competitiveness by developing digital products. For example, the firm should consider developing a digital version of its Lego products.

b.     Product diversification; Lego Group can achieve a competitive advantage by ensuring that its decision to diversify its product portfolio is effectively implemented. By establishing a diversified product portfolio, Lego Group will venture into new market segments hence increasing its likelihood of maximizing sales revenue (Beamish & Ashford, 2005).

Threats

a.     Economic changes; Lego faces a challenge due to the changing economic environment. The firm has experienced a decline in sales in some of its major markets such as the US, Germany, the United Kingdom, Holland, and the Nordic countries.

b.     Intense competition; Lego’s competitiveness might be affected by an increase in competition from other firms such as Tyco Toys and Mega Bloks.

c.     Legal changes; the company’s success is subject to changes in the legal environment. For example, the expiry of the Lego Brick patent may lead to the loss of the company’s ability to control the production of the Lego toy brand. This might lead to the production of counterfeits, hence negatively affecting the reputation of the Lego brand (Daidj, 2015).

Marketing objectives

To improve its competitiveness, Lego Group should focus on achieving the following marketing objectives.

  1. To enhance the firm’s competitiveness by creating awareness of its products and venturing into new market segments. The firm should undertake an extensive marketing campaign aimed at creating awareness of its products and services (Kumar, 2010).
  2. To incorporate periodic market research as one of the firm’s marketing activities. The market research should target different internal and external market variables, which include the customer, competitors, and employees. This approach will enable the firm to develop knowledge and insight which will be critical in undertaking new and continuous product development. The firm should continuously evaluate the value of the market research conducted in enhancing the firm’s competitiveness.
  • To ensure that intellectual property rights such as patenting are adequately integrated into the designing and development of new products. Achieving this objective will safeguard the reputation of the firm’s product by limiting counterfeiting. Thus, Lego Group will benefit from a high return on investment (Smith & Parr, 2005).

Marketing strategy

        The marketing strategy adopted by a firm influences its effectiveness in achieving the set marketing objectives (Stimpson & Farquhason, 2014).  In the quest to achieve the above marketing objectives, it is imperative for the Lego Group management team to integrate an effective marketing strategy.  One of the most effective marketing strategies that the firm should take into account entails the user-generated marketing strategy.  This strategy entails leveraging internet technologies such as social media in undertaking the marketing activities such as creating awareness regarding a firm’s products.  Bowen and Ozuem (2016) affirm that the Internet has remarkably transformed social communication and consumer behavior.  One of the technologies that the firm should consider employing entails social media.

By adopting the user-generated content (UGC) strategy, Lego Group will be succeeding in creating awareness of its brands. This arises from the fact that the firm will provide customers an opportunity to provide feedback, ideas, and opinion regarding the firm’s products through different social media platforms. The product reviews provided by customers through social media platforms will provide the firm’s management team valuable market insight on how it can adjust its products and services.  Therefore, the firm’s new and continuous product development will be aligned to the prevailing customer tastes and preferences. Dwivedi et al. (2016) affirm that business managers and entrepreneurs can mine user-generated content in an effort to gain market intelligence, which constitutes a cost-effective and efficient approach to conducting market research.

Integrating user-generated content strategy in the marketing process will further enable Lego Group to effortlessly influence the target customers’ purchase decisions. This arises from the fact that potential customers are likely to respond to positive product reviews provided by other customers on the social media platform.  However, to caution against the impact of negative product reviews that might be provided by customers, the Lego Group management team should ensure that the issues raised by the customers are optimally addressed.

Lego Group should also consider integrating brand ambassadors which can be achieved by developing an online community of brand ambassadors. The role of the brand ambassador is to provide Lego Group management team feedback regarding the performance of the firm’s products. Thus, the brand ambassadors will play a fundamental role in enhancing the firm’s effectiveness in undertaking new product development (Wollan, Smith & Zhou, 2010).

Change to the current marketing mix

The firm’s management team should make the following adjustments to its marketing mix strategies.

  1. Product strategy; Lego Group should ensure that its products are adequately designed in order to align with the customer’s tastes and preferences. The firm should further ensure that its products are progressively improved in order to align with the changing market demand (Brassington & Pettitt, 2006).
  2. Pricing strategy; Lego Group should integrate a premium pricing strategy. The rationale of this approach is to communicate the value and quality of its products. By employing premium pricing, the firm will be able to attain a high-profit margin.
  • Distribution strategy; the firm should adopt an extensive distribution strategy in an effort to ensure that its products are easily accessible to a large number of customers. With regard to digital products such as games and software, the firm should consider adopting an online distribution strategy.
  1. Promotion strategy; the firm should adopt integrated marketing communication (IMC) approach, which entails integrating print, broadcast, and online channels of communication (Smith & Taylor, 2004).  With regard to print and broadcast channels, the firm should consider creating awareness of its products and services through different mediums such as television, radio, and entertainment magazines. Conversely, the firm should employ different social media platforms such as Twitter, Facebook, and YouTube amongst others in creating awareness of its products.
  2. People; the firm should further consider integrating employees as one of the fundamental elements in the marketing process. The firm should consider seeking the employees’ opinions on the changes that the firm should undertake in the marketing process in order to deliver superior products to the target customers.
  3. Process; the firm’s management team should further ensure that effective and efficient processes and procedures are integrated into the marketing process in order to stimulate the customers’ level of satisfaction. For example, the management team should ensure that the process of accessing the firm’s digital products such as software and games is seamless and secure. This move will play a fundamental role in improving the customers’ level of satisfaction.
  • Physical evidence; in the quest to establish a strong market presence, the firm should focus on developing a strong brand. This will play a fundamental role in creating a positive customer perception. Thus, customers will incline toward selecting the firm’s products from the marketplace.

Implementation plan, evaluation criteria, and budget

The Gantt chart below illustrates the plan that the firm should take into account in implementing the recommendations above.

Marketing activityTimeline  in weeks   
 1234567891011
Marketing research; consumer and competitor market research           
Evaluating the relevance of the firm’s marketing mix in enhancing the firm’s competitiveness.           
Adjusting the components of the marketing mix

i.               Product strategy; developing a product diversification plan

ii.              Pricing strategy; integrating premium pricing

iii.            Promotion strategy; integrated marketing communication

iv.            Physical evidence (branding)

v.              Distribution strategy

vi.            People

vii.           Process

           
Implementing the recommended changes           

To measure whether the recommended changes have contributed to improvement in the firm’s competitive advantage, the firms should take into account the following evaluation criteria.

  1. Change in customer base and sales revenue; the firm should evaluate the change in the firm’s customer base and sales revenue. This metric will aid in determining whether the changes made have had a positive impact on the customers’ perception of the firm’s products. Change in the level of sales revenue will enable the firm to determine whether the marketing strategy adopted is effective.
  2. Market position; the firm should evaluate the size of its market share this will aid in determining whether it has gained a competitive edge over its competitors.

Budget

The table below illustrates the estimated marketing budget

BudgetCost in $ ‘000’
Market research 
Consumer market research50,000
Competitor market research30,000
Cost of designing an social media marketing

Platform

15,000

Estimated total cost                                              95,000

References

Beamish, K., & Ashford, R., 2005. Marketing planning. New York: Routledge.

Bohm, A., 2009. The SWOT analysis. New York: GRIN Verlag.

Bowen, G., & Ozuem, W., 2016. Competitive social media marketing strategies. Hershey, PA: Business Science Reference.

Brassington, F., & Pettitt, S., 2006. Principles of marketing. New York: Prentice Hall.

Daidj, N., 2015. Developing strategic business models and competitive advantage in the digital sector. Hershey, PA: Business Science Reference.

Dwivedi, Y., Mantymaki, M., Ravishankar, M., Jansenn, M., & Clement, M., 2016. Social media; the good, the bad, and the ugly.  Cham, Switzerland: Springer.

Hatten, T., 2015. Small business management; entrepreneurship and beyond.  New York:  Cengage Learning.

Kaufmann, H., & Panni, M., 2013. Customer-centric marketing strategies; tools for building organizational performance. Hershey PA: Business Science Reference.

Kumar, P., 2010. Marketing of hospitality and tourism services.  New Delhi: Tata McGraw-Hill.

Smith, G., & Parr, R., 2005. Intellectual property; valuation, exploitation, and infringement damages. New Jersey: Wiley.

Smith, P., & Taylor, J., 2004. Marketing communication; an integrated approach. London:  Kogan Page.

Stimpson, P., & Farquharson, A., 2014. Cambridge international AS and A level business course book. Cambridge: Cambridge University Press.

Wollan, R., Smith, N., & Zhou, C., 2010. The social media management handbook; everything you need to know to get social media working in your business.  Hoboken, NJ:  John Wiley & Sons.

Weatherly, P., & Otter, D., 2013. The business environment; themes and issues. Oxford: Oxford University Press.

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