Monday, October 30, 2006

Reminiscing About Legos

The Economist has an article this week about Lego, the Danish toy firm, and how it has turned around its business in the last year or two. Apparently, they worried too much about diversifying their business into video games and clothing instead of sticking to what they know best, which I think is making people with cylindrical heads.

Either way, it is an interesting case study of how new management comes in and reworks a firm. Also, you get this interesting tidbit of information about Lego blocks:
everyone on earth has, on average, 52 of them.

6 comments:

Anonymous said...

I think that what Lego intended with diversifying their products is what most companies in their initial situation would plan to do if they were faced with the decision to shut down or find something else to increase profit. This situation would also need to have a change in management keeping the company focused on their main audiance of 5 to 9 year old boys and only expand their audience to girls as they had intended. Changing their focus to girls threw off what they had already been making keeping them at the same rate of loss that they had already been stuck in. If they had kept their focus and expanded, then most likely they would have been successful.
-Danielle Lunetta

Anonymous said...

I think that the case of Lego's need for restructuring was a very good example of a market that is definitely controlled by the demand. When Lego ignored the demand market of young boys and tried to incorporate things like clothes that they weren't specialized in, they were sucked into debt. The demographics' demands shouldn't be ignored or else the sales will fall quickly. I'm glad Lego has realized that they should stick to what they originally were doing, because sometimes branching out just makes a company spread too thin and lead to drops in profits.
-Kate Vanderlip

Anonymous said...

Legos were basically my life as a kid. I think i got legos every Christmas from ages 4 till 11 or 12. Every year they got better with more advanced pieces and designs. The great thing about legos is that they can be destroyed and put back together again very easily and that a kids imagination can run wild with them. I did start to notice when i was around 10 or so that lego started to replace 5 or so pieces with one large piece which made them less fun to build. I remember the video games and such that started to come out to and i always thought they were silly. I preferred the hands on versus trying to make little colored blocks come to life in a video game. it was just stupid. Its good to know that lego has gone back to its roots because thats exactly what they are good at and i now know that kids these days can have as much fun with legos as i did instead of buying watches...
-Austin Lintault

Hagar the Horrible said...

I would be interested what the distribution around that mean of 52 is. Presumably the median lies somewhere around just a few blocks -- the ones everyone has left over from when they were a kid and the random one tht fell from a plan over the Ghobi Desert and was picked up by a nomad -- and then there is a sizable number of people who have a few hundred and a long tail where there are a couple of people like this:

http://www.smugmug.com/keyword/all/lego

Anonymous said...

They are losing profit due to the fact that they are in a competitive market, and other people are creating high tech toys that boys between the ages of 5-9 might find even better. Even worse for there buisness, the pieces created today still fit with the much older pieces. This is a good thing for parents, but not for sales. Their strategy of just building legos does seem outdated so it does seem smart to try and branch out and create video and clothing. However, it is clear people did not really go for that idea so it is best they are sticking to what they know best. I agree that faced with their situation it was a good idea. But it is hard to compete when other toy companies are producing for much cheaper in China when Legos is not.

Anonymous said...

Kate C