Alex Brown Luis Cavero Amedeo Giacomantonio Unni Pedersen Jung-Ho Song Tetsuma Suzuki Group 4 – Section B Strategic Analysis and Recommendations

Presentation Outline Company Overview External Analysis Internal Analysis SWOT Analysis Lego‘s 8-Point Action Plan Additional Recommendations Conclusion

Mission, Vision & Core Values Mission: To encourage self-expression in children of all ages through creation, by enabling them to bring their ideas to life Value Proposition: Develop and distribute toys which positively develop children’s mental and physical abilities while entertaining them and being fun at the same time Core Values: Creativity, Imagination, Learning, Fun and Quality

Company Time Line A company producing stepladders, ironing boards, stools and wooden toys, is established in Denmark The company is called LEGO (Play Well) Plastic toys LEGOLAND® Billund opens its gates The DUPLO line LEGO MINDSTORMS /ROBOTICS Star Wars 2001/03 - LEGO BIONICLE + BIONICLE video game + Movie

External Analysis Mattel: # 1 - strong growth Hasbro: # 2 - diverse portfolio Bandai: strong in Asia and Europe Mega Bloks: substitute bricks Highly fragmented Key success factors: Innovation, Strong Brands, Creativity Distribution moving towards mass retailers Trends: Increase in electronic toys and video games Competitors Industry Continued expansion of the Internet Growth in broadband technology and wireless technology Decreasing costs for sophisticated electronic components Technology Customer is not always the consumer Key considerations: Quality, Satisfaction, Timing Customers Strong growth in emerging markets Improvement in US and European economies Environmental

Internal Analysis Financial Performance Net sales fell by 26% in only the 3 rd loss since 1939 No major investments in 2003 Physical Assets Reduced total assets by 20% by reducing working capital Technical Resources The Vision Lab, setting up in 2003 (researching trends and innovations) 39 Lego Mindstorm centres around the world (working with leading universities and science centres) Costs Cut of 600 positions globally in 2003 Closing Switzerland factory in 2004

S.W.O.T Threats PC / Video Games Increasing power of distributors Increased dependency on licensed products Low cost competitors Opportunities Electronic/technology driven toys Sales to the Education industry Alliances in the Entertainment industry Growth in emerging markets Weaknesses Limited brand image Loss of focus on key businesses Indifferent cultural knowledge Easy to copy Strengths Strong Brand Power Wide product line Well developed global distribution channel

Lego’s Action Plan Cost Reduction -Reduce development and lead times by as much as 50% -Terminate non-core ventures Increasing Value to the Customer -Improve delivery system -Increase focus on classic product lines Improving Speed to the Customer -Increase promotional activity -Establish a simplified global location and operations infrastructure

Realign the Organization Technical Quality Service Quality Timing Quality Reputation Quality Price Relationship Quality Technical Quality Service Quality Timing Quality Reputation Quality Price Relationship Quality Alignment

Strategic Recommendations Leverage Brand and Technical Expertise Education Sector Construction ‘Violent’ Construction Educational Focus on core business

Strategic Recommendations (cont’d) MARKET ATTRACTIVE- NESS COMPETITIVE STRENGTH Strong Average Weak High Medium Low IND CHN EU USA Target Developing Countries Currently less than 10% of sales outside US & Europe 376 million children in China (20 times the US figure) Culturally Customized Toys

Strategic Recommendations (cont’d) Target Parents of Young Children Re-branding Products (problem) Reverting to the original Lego brand Increase marketing aimed at parents of infants and small children, and stress Lego’s educational benefits Strategic Alliances (Entertainment Companies) Major entertainment franchises: Star Wars and Harry Potter Bionicle / Miramax: Mask of Light been translated in 26 different languages

Questions?