How is Lego currently positioned against competitors in the market? How can it position itself with its new product / service offerings?

Assignment - Operationalizing and Communicating Value

Part A: Prepare a set of Powerpoint presentation slides to answer the case study: maximum 15 slides (which excludes cover sheet and reference list). Speaker notes required for each slide.

Lego - building a plan for the future

Back in 2017, Lego was struggling financially. The company reported its first annual fall in sales and profits for 13 years, with Lego management blaming poor organisational structure and poor product development. In addition, they were battling against global toy giants such as Hasbro and Mattel and facing competition from ‘modern toys` where digital devices increasingly contend for children`s time.

Over the next couple of years, Lego targeted their investment into developing new products. The company recognised that they needed to combine both the physical Lego brick with digital play. They not only needed to expand the number of physical Lego stores, but also invest in ecommerce. As, Niels Christiansen, the CEO of Lego Group notes in an interview with the Financial Times (September 2019): "We have the ambition of getting to as many kids as we can around the world."

Lego has continued to invest in its traditional markets - US and Western Europe. However, the company has recognised that there is also great potential in the Asia markets, with a focus on opening stores in China. There are also plans to open an office in India, where Lego sees opportunities as the number of middle-class families continue to grow in this market.

Fast forward to 2022 where the impact of Covid-19 resulted in the speeding up of the company`s ecommerce and digitalisation plans. Despite the challenges of the pandemic and now a general slump in the toy industry, Lego has actually seen year- on-year increases in sales and profits. Lego attributes this to investments made in its online store, developing its own ecommerce capabilities and continued focus on developing new products with a digital element through different apps and digital experiences.

For example, Lego have teamed up with Nintendo to release Super Mario and in 2021 formed a partnership with Universal Music to allow children to use augmented reality to make music videos for popular songs (i.e. Lego VIDIYO). The company have also introduced web initiatives, including extra discounts, special holiday promotions and set up a membership programme. Christiansen notes that:

"We are accelerating our digital transformation. Every 2.77 seconds someone uploads a Lego creation to our digital platforms that they have created and want to share. The Lego community is based on the brick, but this shows there is no limit to where we can take this."

During lockdown, it also became apparent that nearly 90% of school-age children around the world were no longer in a normal learning environment. This led to Lego promoting suggestions online for building and play ideas, with digital content reaching over 80 million users around the world. It also resulted in locked-down families buying bigger Lego sets that the family could build together.

As Christiansen points out:

"We`ve done it despite Covid-19. Over the last 18-24 months, we`ve invested behind our product portfolio, ecommerce, and our brand.
Fundamentally, this is paying off. It`s less connected to where stores are closed or there are lockdowns."

More recently, the company has announced that they are now entering the next phase of their digital transformation and are investing in digital platforms and products - for examples, opening ‘Digital Talent Hubs` in China, Denmark and the UK and investing in the Innovation Campus to drive product and technology innovation.

However, Lego is still investing in its own branded stores. They want to ensure that Lego products are still widely available - especially with the demise of many retailers who would have traditionally sold Lego. Christiansen feels that this is important to maintain the ‘brand experience`. Despite the pandemic, there have still been a number of new store openings. In the first six months of 2022, Lego opened 66 new stores, of which 43 were in China. This takes the total number of Lego branded stores worldwide to 833. As Christiansen states:

"The shops are not about getting the product across the counter. The stores are much more a brand-builder and experience outlet. A lot of the new stores will be in China. It makes a big, big difference if there is a store in town for creating awareness of the brand."

This view is echoed by industry analysts who advocate that retail is not just a channel; successful retail is about a unique, transparent and engaging experience.

In addition, one of the areas that Lego has continued to focus on is its corporate social responsibility. In 1986, the company launched the Lego Foundation. The aim is to: ‘build a future in which learning through play empowers children to become creative, engaged, lifelong learners`.

Back in October 2020, Lego partnered with FutureLearn (a leading social platform) to develop and deliver a new course aimed to help teachers and parents to provide social-emotional learning support to children affected by the disruption caused by Covid-19. More recently, the Foundation has created and engages across social channels to encourage Lego fans to share building ideas with each other and with the Lego designers and ‘Play Experts`.

As Christiansen states:

"Now we see things coming together, so it`s much easier to link the two [physical and digital products] and it becomes one experience. On that digital journey we`re really upping and increasing our capabilities and we`re insourcing capabilities that were done by consultants before ... today, it`s our single biggest investment."

In addition, as Lego bricks are made of plastic, the company is trying to find an alternative material. They are investing heavily in researching new materials and are looking to introduce a sustainable product by 2030. However, they recognise that they need to consider the durability of the material - something that can last for many generations. Christiansen notes:

"That lasting quality needs to stay there even when we sustainably source. We cannot just go out and buy that material. We are actually trying to develop it."

So, for Lego, the future is about understanding the interaction between all elements of the eco-system - it has to touch all aspects of the organisation from its core operational backbone to encompassing the new digital value propositions.

Therefore, this case considers the issues and challenges facing the Lego Group to remain globally competitive and to continue to build brand equity.

As a starting point, a number of links to news / industry articles have been provided (see below). Also, make use of any further information that you can source yourself:

Assignment Task:

Acting as a consultant, prepare a presentation for Niels Christiansen, CEO of Lego Group, setting out your proposals for developing the company`s products / services (online and in-store):

Your response should include, but not be limited to, issues such as:

- Who are the target market(s) for the new propositions? How can the market be best segmented?

- How is Lego currently positioned against competitors in the market? How can it position itself with its new product / service offerings? (note: you would be expected to present an appropriate perceptual map to indicate this, using relevant dimensions). What is the differential that Lego can compete on? What is the value proposition that needs to be communicated to the target audience?

- What are the implications of developing the online side of the business on Lego`s current operations strategy? What is the impact on its typology of operations (4Vs) or current performance objectives?

- What are the challenges of delivering a high-quality service? Specifically, what tools do you think Lego should use to help it to develop and maintain a high level of service quality?

- Consider how digital media can be used by Lego to reach its target audience for the new propositions. How would this fit in with the company`s overall integrated marketing communications (IMC) strategy?

- How can Lego continue to build its brand equity?

You are to use a maximum of 15 Powerpoint slides for your presentation response. In addition, you should include an initial slide, containing your student number and assignment reference (i.e. OCV/StudentNumber/Jan23/A1WA) and presentation title on it. Please note, this initial ‘cover page` slide does not form part of the maximum 15 slides for your presentation response.

- The marker will be looking for a balance between the marketing and operational elements of your answer.

- You must make use of relevant tools / frameworks, drawing on both industry and academic literature to develop your proposals.

- Make effective use of visuals (e.g. tables, diagrams, images, fly-ins, etc.) and avoid your slides being too ‘text-heavy`.

Successful positioning is often associated with products possessing favourable connotations in the minds of customers. For example, Samsung is associated with high-technology, reliable and fashionable mobile phones. These add up to a differential advantage in the minds of its target customers, whether they are in London, Amsterdam or Moscow. Such positioning is hard won and relies on four factors (4 Cs): clarity, consistency, credibility and competitiveness.

1. Clarity: the positioning idea must be clear in terms of both target market and differential advantage. Complicated positioning statements are unlikely to be remembered. Simple messages, such as: ‘BMW: the ultimate driving machine` and Wal-Mart`s ‘Low prices, always`.

2. Consistency: people are bombarded with messages daily. To break through this ‘noise`, a consistent message is required. Confusion will arise if this year we position on ‘quality of service` and then next year we change it to ‘superior product performance`. An example of a brand that has benefited from a consistent message being communicated to their target customers is L`Oréal (‘Because you`re worth it`).

3. Credibility: the differential advantage that is chosen must be credible in the minds of the target customer. Ford found that its brand image was not compatible with the marketing of upmarket cars. It was this lack of credibility that led it to purchase Jaguar, Land Rover, Volvo and Aston Martin (although these brands have since been bought by other companies). Toyota`s lack of credibility as an upmarket brand caused it to use ‘Lexus` rather than ‘Toyota Lexus` as the brand name for its top-of-the-range cars.

4. Competitiveness: the differential advantage should have a competitive edge. It should offer something of value to the customer that the competition is failing to supply. For example, the success of the iPod was based on the differential advantage of seamless downloading of music from a dedicated music store, iTunes, to a mobile player that produced better sound quality than its rivals.

Perceptual mapping: is a useful tool for determining the position of a brand in the marketplace. This is a visual representation of consumer perceptions of the brand and its competitors using attributes (dimensions) that are important to customers.

The key steps in developing a perceptual map are as follows:

1. Identify a set of competing brands.
2. Identify important attributes that consumers use when choosing between brands.
3. Conduct quantitative marketing research where consumers score each brand on the key attributes (for the purposes of this assignment, you will need to make a judgment on this and be able to justify your proposals).
4. Plot brands on a two-dimensional map.

Assignment Task:
"Building relationships with customers is a fundamental business of every enterprise, and it requires a holistic strategy and process to make it successful." (Parvartiyar and Sheth, 2001)

Critically examine the role of operations and marketing within your chosen organisation in building and managing long-term relationships with external customers (whether this is B2B and / or B2C customers). You need to examine from both a marketing and operations perspective. Some areas that you might consider, but you are not limited to, include:

• Examine the benefits (to both your chosen organisation and its customers) of building long-term customer relationships.

• How are the strategies for operations and marketing organised within your chosen organisation to support the management of its customer relationships? Where and how do improvements need to be made to these strategies?

• Examine the extent to which operations and marketing work together to build / manage customer relationships. Consider if there are any conflicts / challenges that occur between the two functions. How have these conflicts / challenges been overcome (or can be overcome)? Consider if there are any disadvantages in building long-term customer relationships.

Part B: Combined Marketing/Operations question. 1800 words written assignment with a maximum of 1900 words allowed. Note: Any answer to Part B that is greater than the maximum word count set of 1900 words will be penalized in the marking process. Please refer to your Programme Handbook for details relating to word count penalties.