Strategic Analysis and Corporate Valuation of LEGO

Question: Discuss about the Strategic Analysis and Corporate Valuation of LEGO. Answer: Introduction: By using the Porter Five Forces analysis, following is the understanding of the market and the aspects of productivity in the industry can be identifies. The framework of Porter Five Forces will support in forecasting and managing the market competition in the future: There are several big brands which are entering in the toy market such as Target and Wal-Mart. Thus, there is high threat of new entrants in the toy industry. But as a global brand, it is very hard to imitate the products of Lego in a short time period. The key suppliers of the company are the subcontractors from China. There are present vast numbers of Chinese toy suppliers who supply toys to several other companies too. Thus, there is low bargaining power of the suppliers and Lego has a squat dependency over these suppliers because of enormous number of suppliers present in the market. Also Lego works on the basis of production-in-house, so there is no differentiated needs of supply as well as switching cost is also very low if switch from one supplier to another (Smith, 2008). Bargaining Power of Buyers The products offered by Lego are exclusive and are not imitable in nature by the local suppliers. Therefore, the buyers cannot easily switch to other brands. Lego enjoys a competitive market position because of its differentiated product portfolio. There are number of digital and technological products which are increasingly used by the kids. But still, Lego is challenging the global trend by incorporating new and pioneering technology in some of the products of Lego. The threat of the substitutes is low for Lego but high for the industry (Zackariasson and Wilson, 2010). The primary market competitors for Lego are Bandai NAMCO, Hasbro, Mattel, etc. but the main and the primary competitors of the company are Hasbro and Mattel. In present scenario, the market position of Lego is strong in terms of revenues and market share but in future there might be high internal rivalry and also several other companies can give threat to the market position of Lego. Sign Impact Internal Rivalry High Negative Threat of New Entrants High Negative Threat of Substitutes High Negative Bargaining Power of supplier Low Positive Braining Power of Buyer Moderate Moderate ((Zackariasson and Wilson, 2010) Five implications to Legos marketing strategy Following are the few implications to the marketing strategy of Lego associated with the analysis drawn by the Porter Five Forces Analysis: 1st implication: The first implication for the marketing strategy of Lego is that it should incorporate pioneering and innovative technologies and all its products so that it can fetch the attention of the potential customers who are moving towards the online games (Foss, Pedersen and Pyndt, 2012). 2nd implication: The second implication for the marketing strategy of Lego is that for having increased customer base and achieving higher competitive benefits, Lego must expand its roots in all the untapped areas. This will provide improved brand visibility to Lego. 3rd implication: The third implication for the marketing strategy of Lego is that Lego must continue with the element of uniqueness in its products so that the new entrants or the other toy companies cannot easily imitate the products of Lego and it will help the company in leading the market position (Andersen and Friedrichsen, 2016). 4th implication: The fourth implication for the marketing strategy of Lego is that Lego should have joint ventures and mergers with other major players so that there can be development os synergy. This will save the company from the threat of substitutes as well as from the internal rivalry present in the toy industry. 5th implication: The fifth implication for the marketing strategy of Lego is that there must be production of new products for defending the core business of the company. There must be enhanced efficiency and innovativeness in the in-house production of Lego. This will help Lego in attaining more competitive benefits (Woufack, et al., n.d.). References AndersenAA89481, A. E., Friedrichsen, O. (2016). Strategic Analysis and Corporate Valuation of LEGO A/S. Foss, N. J., Pedersen, T., Pyndt, J. (2012).Innovating organization and management: New sources of competitive advantage. Cambridge University Press. Smith, R. D. (2008, November). Five forces driving game technology adoption. InProceedings of the Interservice/Industry Training, Simulation, and Education Conference (I/ITSEC)(No. 8023, pp. 2-7). Woufack, R. M., Fulop, S., Pavalkis, V., Markauskas, I. LEGO.Zackariasson, P., Wilson, T. L. (2010). Paradigm shifts in the video game industry.Competitiveness Review: An International Business Journal,20(2), 139-151.