Project Report on Lego Toys

1. Padmashree Dr. D.Y. Patil University
Department of Business Management.
Marketing Management
Project on: LEGO
SUBMITTED TO: Prof ROSHNI SAWANT
SUBMITTED BY:
[Group – 9]
MBA CORE - C: 2011 – 2013
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2. Padmashree Dr. D.Y. Patil University
Department of Business Management.
Marketing Management
Project on: LEGO
Submitted by
Name: Roll no:
1. Kalyan Mukhopadhyay 011183
2. Pramod Kumbhar 011184
3. Bharat Kumbhare 011182
4. Damodar Kokate 011181
5. Sumeet Ramteke 011180
6. Rohan Naik 011179
7. Ganesh Sawant 011178
8. Nisha Prajapathi 011203
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3. DECLARATION
We are the students of Padmashree Dr. D.Y. Patil University’s
Department of Business Management (1th
sem). We here by assure
that, we have completed this project on LEGO in the academic year 2011-
2013 and the information submitted is true to the best of our knowledge.
ACKNOWLEDGEMENT
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4. A compendium is never the work of one individual – more a combination
of ideas, suggestion and contribution involving many hands.
My debts are too numerous to be acknowledge individually. A large
number of individuals have contributed directly and indirectly in the
completion of this project. I am immersing thankful to Ms. Roshni
Sawant.
It is pleasure to express our gratitude for the assistance received
from them. Hence we would like to take this opportunity to thank them
wholehearted for helping me in preparing this project.
INDEX
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5. EXECUTIVE SUMMARY
SR. No. CONTENTS PAGE NO.
1 Executive Summary 6
2 Introduction 7
3 Marketing Mix 8-10
4 Lego’s Product Life Cycle 11-12
5 Lego’s Product Positioning 13-17
6 Lego’s Market Segmentation 18-24
7 Lego’s Advertising 25-27
8 Lego’s Market Research 28-34
9 Consumer’s Buying Behaviour of Lego 35-38
10 Product development in Lego 39-46
11 Lego Distribution Strategy 47-49
12 Conclusion 50
13 Bibliography 51
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6. Introduction
Lego (trademarked in capitals as LEGO) is a line of construction toys manufactured by the
Lego Group, a privately held company based in Billund, Denmark. The company's flagship
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7. product, Lego, consists of colorful interlocking plastic bricks and an accompanying array of
gears, minifigures and various other parts. Lego bricks can be assembled and connected in
many ways, to construct such objects as vehicles, buildings, and even working robots.
Anything constructed can then be taken apart again, and the pieces used to make other
objects. The toys were originally designed in the 1940s in Denmark and have achieved an
international appeal, with an extensive subculture that supports Lego movies, games, video
games, competitions, and five Lego theme amusement parks.
Early History:
The Lego Group began in the workshop of Ole Kirk Christiansen (7 April 1891 – 11 March
1958), a carpenter from Billund, Denmark, who began making wooden toys in 1932. In 1934,
his company came to be called "Lego", from the Danish phrase leg godt, which means "play-
well".
It expanded to producing plastic toys in 1947. In 1949 Lego began producing the now
famous interlocking bricks, calling them "Automatic Binding Bricks". These bricks were
based largely on the patent of Kiddicraft Self-Locking Bricks, which were released in the
United Kingdom in 1947. Lego modified the design of the Kiddicraft brick after examining a
sample given to it by the British supplier of an injection-molding machine that the company
had purchased. The bricks, originally manufactured from cellulose acetate, were a
development of traditional stackable wooden blocks that locked together by means of several
round studs on top and a hollow rectangular bottom. The blocks snapped together, but not so
tightly that they required extraordinary effort to be separated.
The Lego Group's motto is det bedste er ikke for godt which means roughly 'only the best is
good enough' (more literally 'the best is never too good'). This motto was created by Ole Kirk
to encourage his employees never to skimp on quality, a value he believed in strongly. The
motto is still used within the company today. The use of plastic for toy manufacture was not
highly regarded by retailers and consumers of the time.[citation needed] Many of the Lego
Group's shipments were returned after poor sales; it was thought that plastic toys could never
replace wooden ones.[citation needed]
By 1954, Christiansen's son Godtfred Kirk Christiansen had become the junior managing
director of the Lego Group. It was his conversation with an overseas buyer that struck the
idea of a toy system. Godtfred saw the immense potential in Lego bricks to become a system
for creative play but the bricks still had some problems from a technical standpoint: their
locking ability was limited and they were not very versatile.
Marketing mix
Marketing mix known as the 4 p’s.used by business as tools to assist them in pursuing their
objectives. The marketing mix principles are controllable variables, which have to be
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8. carefully managed and must meet the needs of the defined target group. The marketing mix is
apart of the organisations planning process and consists of analysing the defined:
 A marketing mix consists of the following four elements:
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9. 1. Product –
Product or service design that maximize your customers’ satisfaction. This does
not only limit to the physical product you provide but the entire experience.
Lego as a product: In addition, LEGO should never forget the young adult and
adults who grew up with LEGO. Products such as Star Wars & NBA Basketball Team appeal
to teenagers and young adults. LEGO has extended its brand in it. These young adults also
buy LEGO bricks to decorate their rooms of lifestyles.Lego as a product is not only limited
to cars and building it has introduced and many more character to attract more customers. In
order to tune in with the taste of 20th century children LEGO has to innovate beyond the
bricks. Perhaps, bricks that can talk move and fight as it is facing mattel and Hasbro.
The launch of Harry Potter in the LEGO range has proven to help increase
sales for the year 2001. Children react towards movies. The toys that they choose relate to
their favourite movie or cartoon
2. Price -
What pricing strategy is appropiate to use . Pricing is one of the most important
elements of the marketing mix, as it is the only mix, which generates a turnover for the
organisation.
Lego prices: The Prices OF Lego products are higher but Lego as a company is
concentrating more on product and promotion than on prices. The company is also doing a
good job at creating lesson plans for teachers who might already posses the basic block sets.
3. Place –
Channel of distribution. You could have multiple channel of distribution to get
your product to the customer. For instance, as a manufacturer, you can choose to go
direct and Channel of distribution. You could have multiple channel of distribution to get
your product to the customer. For instance, as a manufacturer, you can choose to go
direct and
Lego at places: Lego are available in specialty stores lego are also selling its
product online on bricklink.com and various online sites.
4. Promotion:
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10. Inform and persuade your customers to buy your product. There are three
major types:
i) Personal selling, which involves a group of sales representatives to contact the customers
directly via phone or face-to-face meeting;
ii) Mass selling, which include the typical advertising, editorials or publicity to inform a large
group of customers all at once;
iii) Sales promotion, such as discounts and trials to speed up your customers’ purchasing
decisions.
Lego promotion: Lego is among top 10 companies in Europe but it requires good
promotion in india as it is not very familiar with Indians. Lego is advertising on same sets of
packets. They do internet advertising to attract the kids. They offer Magazines through which
they promote their brand. They have their own website through which they do promotion.
customers are very important as they can influence others in buying the product.
Lego’s Product Life Cycle
This is a simplified version of the cycle. There are lots of exceptions to the product life-cycle
rules. For one thing, most products never make it past the introduction stage; they die an
early death. Second, some products (like some people) avoid premature demise by
reinventing themselves. LEGO has been reinventing itself for the last fifteen years, launching
new products in an effort to recover its customer base and overcome a series of financial
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11. crises. Unfortunately, this strategy has been unsuccessful. The introduction of new products
and the resulting costs “have not produced the desired results. In some cases,” admits the
company, “new products have even cannibalized on the sales of LEGO Company’s core
products and thus eroded earnings.
 Life Cycle and the Changing Marketing Mix
As a product or brand moves through its life cycle, the company that markets it will shift its
marketing-mix strategies. Let’s see how the mix might be changed at each stage.
• Introduction
At this stage, most companies invest in advertising to make consumers aware of a product. If
it faces only limited competition, it might use a skimming-pricing approach. Typically,
because it will sell only a relatively small quantity of the product, it will distribute through
just a few channels. Because sales are low while advertising and other costs are high, the
company tends to lose money during this stage.
• Growth
As the company focuses on building sales, which are increasing rapidly at this stage, its
advertising costs will go up. If competition appears, it may respond by lowering prices and
distributing through multiple distribution channels. With sales going up and costs going
down, the product becomes more profitable.
• Maturity
If a product survives the growth stage, it will probably remain in the maturity stage for a long
time. Sales still grow, though at a decreasing rate, and will eventually stabilize. Advertising
will be used to differentiate the product from competition. Price wars may occur, but profits
will be good because sales volume will remain high. As the product becomes outdated, the
company may make changes in keeping with changing consumer preferences.
• Decline
LEGO is now in this stage: demand has declined as more innovative products absorb the
attention of kids. Price competition has become more intense, and profits are harder to come
by; in fact, in some years they’ve turned into losses. As we’ve seen, LEGO has tried to
revitalize the product, but ultimately the company may have to give up and pull the product
from the market.
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12. Lego’s Product Positioning
 What is positioning?
In marketing, positioning has come to mean the process by which marketers try to create an
image or identity in the minds of their target market for its product, brand, or organization.
Re-positioning involves changing the identity of a product, relative to the identity of
competing products, in the collective minds of the target market.
De-positioning involves attempting to change the identity of competing products, relative to
the identity of your own product, in the collective minds of the target market.
The original work on Positioning was consumer marketing oriented, and was not as much
focused on the question relative to competitive products as much as it was focused on cutting
through the ambient "noise" and establishing a moment of real contact with the intended
recipient
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13. The original work on Positioning was consumer marketing oriented, and was not as much
focused on the question relative to competitive products as much as it was focused on cutting
through the ambient "noise" and establishing a moment of real contact with the intended
recipient.
The growth of high-tech marketing may have had much to do with the shift in definition
towards competitive positioning. An important component of hi-tech marketing in the age of
the world wide web is positioning in major search engines such as Google, Yahoo and Bing,
which can be accomplished through search engine optimization , also known as SEO. This is
an especially important component when attempting to improve competitive positioning
among a younger demographic, which tends to be web oriented in their shopping and
purchasing habits as a result of being highly connected and involved in social media in
general.
 What is brand positioning process?
Effective Brand Positioning is contingent upon identifying and communicating a brand's
uniqueness, differentiation and verifiable value. It is important to note that "me too" brand
positioning contradicts the notion of differentiation and should be avoided at all costs. This
type of copycat brand positioning only works if the business offers its solutions at a
significant discount over the other competitor(s).
Generally, the brand positioning process involves:
1. Identifying the business's direct competition (could include tertiary players that offer
your product/service amongst a larger portfolio of solutions)
2. Understanding how each competitor is positioning their business today (e.g. claiming
to be the fastest, cheapest, largest, the #1 provider, etc.)
3. Documenting the provider's own positioning as it exists today (may not exist if start-
up business)
4. Comparing the company's positioning to its competitors' to identify viable areas for
differentiation
5. Developing a distinctive, differentiating and value-based brand positioning statement,
key messages and customer value propositions.
6. The LEGO brand is more than simply our familiar logo. It is the expectations that
people have of the company towards its products and services, and the accountability
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14. that the LEGO Group feels towards the world around it. The brand acts as a guarantee
of quality and originality.
 What is Product positioning process?
Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the relevant
buyers are)
2. Identifying the attributes (also called dimensions) that define the product 'space'
3. Collecting information from a sample of customers about their perceptions of each
product on the relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the product space
6. Determine the target market's preferred combination of attributes (referred to as an
ideal vector)
7. Examine the fit between.
8. The position of your product.
9. The position of the ideal vector.
 What is measuring the positioning?
Positioning is facilitated by a graphical technique called perceptual mapping, various
survey techniques, and statistical techniques like multi dimensional scaling, factor
anaylsis, conjoint analysis, and logit analysis. POSE Analysis offers a somewhat more
sophisticated approach than perceptual mapping and allows one to not only determine the
positioning of a brand but also the overal strength of a brand's proposition.
 What is Repositioning a company?
In volatile markets, it can be necessary - even urgent - to reposition an entire company,
rather than just a product line or brand. When Goldman Sachs and Morgan Stanley
suddenly shifted from investment to commercial banks, for example, the expectations of
investors, employees, clients and regulators all needed to shift, and each company needed
to influence how these perceptions changed. Doing so involves repositioning the entire
firm.
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15. This is especially true of small and medium-sized firms, many of which often lack strong
brands for individual product lines. In a prolonged recession, business approaches that
were effective during healthy economies often become ineffective and it becomes
necessary to change a firm's positioning. Upscale restaurants, for example, which
previously flourished on expense account dinners and corporate events, may for the first
time need to stress value as a sale tool.
Repositioning a company involves more than a marketing challenge. It involves making
hard decisions about how a market is shifting and how a firm's competitors will react.
Often these decisions must be made without the benefit of sufficient information, simply
because the definition of "volatility" is that change becomes cult or impossible to predict.
The LEGO Group (LEGO Group) is one of the largest toy manufactures in the world. It
is engaged in the manufacturing and distribution of a wide range of toys and computer
games. The products offered by the company include toys, robots and bionicle. All these
products are offered in different categories which include licensed products, creative
building, Play Themes, LEGO SERIOUS PLAY, MINDSTORMS NXT, LEGO
Education and LEGO Factory. All the products offered by the company are sold under
the brand LEGO. In the regions like the US and Europe the company owns and operates
retail outlets. The company is headquartered at Billund, Denmark.
 The LEGO Group Key Recent Developments
Feb 12, 2010: Warner Bros. partners with LEGO Group to launch Harry Potter
merchandise.
 Lego position in market?
The LEGO Group has seen continued growth over the previous five years, and sales have
increased by double-digit growth rates in the last few years. This has happened in a
global toy market characterised by stagnation throughout the last decade.
The LEGO Group expects continued growth in sales in the years ahead. The foundation
for this growth is a constant focus on the company's core products and markets. On this
basis, seven growth initiatives have been defined:
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16.  Increase market share in USA.
USA is the world’s largest market for toys, and the LEGO Group has dramatically
increased its market share in recent years, to approximately five per cent. The LEGO
Group believes this share can be further increased in the coming years.
 Increase market share in Eastern Europe.
The toy market in Eastern Europe is experiencing rapid growth, and the LEGO Group
aims to continue to expand its strong position on these markets.
 Invest in emerging markets.
The LEGO Group does not yet enjoy a strong market position in markets such as China,
Mexico, Brazil and India. These markets are expected to see strong growth in the future,
and the LEGO Group plans to invest in developing them.
 Develop innovative new products.
In addition to ongoing product development based on the existing core portfolio, the
LEGO Group will develop innovative new products which are ideally suited as Lego
products, yet never seen before. An example of such new products is the LEGO Games
board-game series launched in 2009.
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17.  Expand “direct to consumer” activities.
The LEGO Group currently has direct contact to consumers through its own sales
channels, clubs, collaboration programs, etc. The aim is to get even closer to consumers
through greater contact and by expanding offers available direct to consumers.
 Expand LEGO Education.
The aim is to create growth in the area of educational materials for preschools, schools
and educational institutions all over the world.
 Expand electronic activities.
The LEGO Group currently operates on electronic platforms through the
www.LEGO.com website and video games. Our electronic presence will be further
expanded, in particular through LEGO Universe – the first MMOG (massively)
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18. Lego’s Market Segmentation
MEANING
A market can rarely satisfy everyone in a market. Different people have a different taste and
preference. In other the market place is highly diverse in nature. The buyers have
different buying habits, motives, buying requirements etc. Hence, a company needs to
identify the group of customers it can serve more effectively.
Instead of trying to satisfy customers individually it is wiser to target buyers who have
similar tastes and preferences and whom they have a greater chance of satisfying.
Therefore most companies today follow target marketing, which requires marketers to
identify and profile distinct groups of buyers who require separate products or
marketing mixes. It means that marketers need to segment the market into groups and
develop products and marketing programs tailored to each segment as it is not possible
to produce a product, which can satisfy everybody’s expectation.
A ‘market segment’ consists of large identifiable group within a market with similar wants,
purchasing powers, geographical location, and buying attitudes or habits.
Dividing a diverse (heterogeneous) market having different characteristics into small
segments, each segment being identical in many respects, is called market
segmentation. For example Mercedes as a luxury car would be targeted at the high
income group.
 Target Market Segmentation
The LEGO Group segments their market based on demographics, psychographic,
behavioural and geographic bases. This is evident in the LEGO online store, where
products are arranged “By Age”, “By Theme” and “By Product Category”.
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19.  Demographic segmentation
It consists of dividing the market into groups based on variables such as age, gender family
size, income, occupation, education, religion, race and nationality. Fostering creativity
and learning are two of the LEGO Group’s primary goals. As such, the company’s
collection of toys and games are targeted at both genders and different age groups.
There is a product to engage children at every stage of their development, and products
to cater to the needs and interests of older people. In addition, the products for each
target group are designed to be safe for play for the age group it is intended for.
LEGO DUPLO was launched as the big brick for the small hand and is targeted at pre-school
children. The products are specially developed to cater for the capabilities of the youngest
children, encouraging them through creative play to use their hands and develop their motor
skills. Today the series comprises both loose bricks, allowing children to build entirely what
comes to mind, and play themes (e.g. airport, train and castle). The elements are large enough
for children to play with without swallowing them and the unique moulding technology
ensures that no small parts fall off during play. The series is graded in difficulty for children
aged 2-6 years old.
LEGO® DUPLO® Brick Box
World People Set
Tigger’s Expedition
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20.  Psychographic Segmentation Base
Psychographic segmentation is sometimes also referred to as behavioural segmentation.
This type of segmentation divides the market into groups according to customers’ lifestyles
and personality
The target group of The LEGO Group are people who believe in the following six values.
These are also the brand values LEGO aims to be associated with:
1. Imagination
People who believe that free play is how children develop their imagination, and this is the
foundation of creativity.
2. Creativity
People who believe in creativity, the ability to come up with ideas and things that are new,
surprising and valuable. In particular, systematic creativity, a form that combines logic and
reasoning with playfulness and imagination.
3. Fun
People who believe fun is the happiness we experience when we are fully engaged in
something that requires mastery (hard fun); when our abilities are in balance with the
challenge at hand and we are making progress towards a goal. People who see fun in both the
process and in the completion.
4. Learning
People, who believe learning is about opportunities to experiment, improvise and discover.
Learning also takes place when we expand our thinking and doing (hands-on, minds-on),
helping us see and appreciate multiple perspectives.
5. Caring
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21. People who have the desire to make a positive difference in the lives of children,
partners, colleagues and the world we find ourselves in, and considering their
perspective in everything we do. People who understand that caring is about humility
– not thinking less of ourselves, but thinking of ourselves less.
6. Quality
From a reputation for manufacturing excellence to becoming trusted by all, LEGO targets
people who believe in giving others and owning only the best quality products.
In addition to value and attitudes, LEGO also segments their target group by lifestyle. They
want to reach people who enjoy perceptive play, who would set aside time for play and who
see the value in play. The company also has a whole range of digital offerings, online
platforms and games (e.g. LEGO® Universe) to accommodate those who are more tech-
savvy and whom prefer virtual play.
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22.  Behavioural Segmentation Base
Behavioural segmentation divides customers into groups based on the way they respond to,
use or know of a product. One of the most unique aspect of LEGO products is the way it
contributes to learning and development, and this is a clear benefit that the target market
seeks. LEGO bricks are well-engineered, very tactile and robust. It benefits young children
and allows them to build structures without requiring any particular craft skills, while at the
same time provide enormous opportunities for older people to learn and develop their
building skills to advanced levels. LEGO products also provide support for collaborative as
well as individual work to suit the personality of users.
With the many alternatives in the toy and games industry today, people are increasingly less
loyal to brands. As such, LEGO tries to increase brand loyalty by creating platforms such as:
• LEGO Club (http://club.lego.com), a free membership club where members receive
LEGO news, privileges and discounts.
• LEGO CLICK (http://www.legoclick.com/), an online community that brings
together innovators, designers, artists and creative thinkers to develop new ideas
related to toys. This is also an initiative to improve the brand’s level of social media
engagement.
In addition, there are also enthusiast-created online communities, such as LUGNET, and
blogs.
LEGO also segments customers based on their purchase/usage rate. According to Conny
Kalcher, a LEGO representative at the Marketing 2.0 conference, LEGO group their
customers into 6 groups:
• Lead Users – people LEGO actively engage with on product design
• 1:1 Community – people whose names and addresses they know.
• Connected Community – people who have bought LEGO and also been to either a
LEGO shop or LEGO park.
• Active Households – people who have bought LEGO in last 12 months.
• Covered Households – people who have bought LEGO once.
• All Households – those who have never bought LEGO.
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23.  Geographic Segmentation Base
Geographic segmentation tries to divide markets into different geographical units: these units
include:
• Regions: e.g. in the UK these might be England, Scotland, Wales Northern Ireland or
(at a more detailed level) counties or major metropolitan areas
• Countries: perhaps categorised by size, development or membership of geographic
region
• City / Town size: e.g. population within ranges or above a certain level
• Population density: e.g. urban, suburban, rural, semi-rural
• Climate: e.g. Northern, Southern
Geographic segmentation is an important process - particularly for multi-national and global
businesses and brands. Many such companies have regional and national marketing
programmes which alter their products, advertising and promotion to meet the individual
needs of geographic units.
According to The Journal of Commerce Online - News Story Lego is expanding its North
American distribution center by nearly 50 percent as the toy maker builds on a strategy to
sharply expand its market share in the United States.
The Denmark-based maker of iconic children’s building blocks will add 193,500 square feet
to its site at the Alliance Global Logistics Hub in Fort Worth, Texas, the company said.
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24. Lego’s Advertising
 AIDA Marketing Model
The AIDA model consists of 4 different phases that leads to the purchase of a
product/service.
 Attention
Attention is the 1st phase that will spark the interest of a consumer. What sparks attention
is usually by its unique design, pricing, and marketing.
 Interest
Interest is the 2nd phase that can create a desire for the product/service. A consumer will
want to know more about the product/service, its functions and features.
 Desire
Desire is the 3rd phase that stimulates an action to buy. After comparing the pros and
cons of the product/service and cross referencing with multiple sources, desire may grow
which will lead to the purchase of the product/service.
 Action
Action is the 4th phase and the last of the AIDA. The consumer will purchase the
product/service after completing the 3 phases. Desire triggers action, and the consumer will
buy it when the product/service can fulfill his/her desire.
By understanding the AIDA model, you will know what makes consumers tick from the
pricing structure to the designs and features. With such valuable data, you will be able to
craft a product/service to the consumers satisfaction.
• Get attention
• Hold attention
• Create desire
• Make it believable
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25. • Prove it’s a bargain
• Make it easy to buy
• Give a reason to buy now
 Creative Lego Advertisements:
Lego creativity is not limited to building bricks and stop motion movies, it extends even to
advertising. As with plastic bricks, Lego can take the simplest of concepts and make a
powerful, intelligent and often witty statement.
The approach taken with a typical lego ad is often minimal, as you will see from the fantastic
print ads below.
There really is no end to Lego creativity.
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26. Lego’s Market Research
Definitions of Marketing Research
According to Philip Kotler, "Marketing research is systematic problem analysis, model
building and fact-finding for the purpose of improved decision-king and control in the
marketing of goods and services."
 Lego’s Market Share
LEGO can be clearly cited as the success story in the toys and games industry over the last
few years. The toymaker achieved double digit sales growth in 2010, expanding its presence
both geographically and through category extension.
Its global toy sales stood at US$ 3.7bn in retail value terms in 2010, making the company the
third largest traditional toy player in the world with 5% of the global market, behind only
Mattel and Hasbro.
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27.  Lego’s Market Research through online Communities.
Lego is the brand that has progressed within the market research online communities’ world.
Whilst other toy manufactures have stepped aside and made way for the e-games industry,
Lego has held its own and still remains a firm favourite in homes around the world. Lego
Club to its users is a platform in which people can swap ideas and show off their designs;
however to Lego itself the platform is a strategic market research tool that allows the
company to understand its customer base and segment them in order to implement a
successful social media strategy.
Lego has split their market research online communities into three types:
1) Lead users: These are the people who are actively engages with on product
designs of Lego.
2) Community users: These are the people whose names and addresses are known
to Lego. and
3) Connected community users: These are the people who have bought Lego
product and have also been to either a Lego shop or park.
These customers are defined based on the strength and depth of their relationship with the
Lego brand. Lego use their online communities to work with these customers and get them
involved in developing their product offerings, thus making them an important part of the
development process. Customers like these are important to the brand as they are likely to be
the brands biggest advocates.
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28.  Market Research of Lego
 Product innovation drives growth in last two years.
LEGO's product designers were the main reason behind its growth in 2009 and 2010. As a
company, LEGO has traditionally focused on its home category – construction toys – where it
has enjoyed dominant status for many years. While its share of the category remained steady,
equally its growth prospects were limited by the growth of the category as a whole.
So LEGO got more aggressive, and in the last couple of years expanded its established
building blocks concept into different categories. In 2009, LEGO Games were introduced,
featuring buildable board games, which gained high enough consumer appreciation to make
LEGO the third largest player in the category globally, garnering a share of 6% in Games and
Puzzles. The new line was well received in most of the key geographies, taking a significant
portion of the market.
Similarly in 2010, LEGO released Minifigures which quickly became a hit, and took the
company into the pocket money segment. A coincidence or result of careful planning, the line
appealed to cash-strapped consumers in the post-recession environment.
A large plus of such expansion has been that the new products have avoided cutting into sales
of the main LEGO's business: construction toys. At its core LEGO kept toy buyer interest
high by adding new licenses, and signing leading licenses into its products.
The company's own LEGO City and LEGO Technique lines were joined more recently by
LEGO Ninjago, and the licensed properties kept excitement high with such the roll out of
LEGO Star Wars and LEGO Pirates of the Caribbean.
 Combating age compression
Another key aspect of LEGO's strategy has been its successful partnership with a number of
developers to release LEGO branded video games. While cooperation between traditional-and
video game companies is not new in the industry (Hasbro partners with Electronic Arts to
release electronic versions of its games), LEGO is the most prolific and arguably the most
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29. successful in this area. Over 40 LEGO branded titles have come out since 1997.
Video games provide an effective defence against the trend of age compression trend in toys.
Children, especially boys, are likely to move into video games at an earlier age nowadays,
and the first game they choose is more likely to be something they are already familiar with
from the traditional arena. LEGO's games are primarily aimed at this younger demographic.
Video games also extend the lifecycle of licenses – and help LEGO find game studios to
develop its games, as these studios may not have existing relationships with either Star Wars
or Pirates of the Caribbean licensors.
The most recent addition has been LEGO Universe – a massively online multiplayer game
role playing game (MMORPG).
 Competition is approaching
While LEGO ventures into other categories such as games and puzzles, other toy companies
are responding by targeting LEGO's main construction category. Hasbro has recently
announced the Kreo-X line, bringing existing Hasbro licenses such as Transformers into
building blocks.
Similarly, LEGO's Duplo range aimed at pre-schoolers is coming under competition from a
couple of companies. Mega Brands has been a competitor to LEGO for a number of years,
and recently Mattel announced it was entering the segment with the Fisher Price Trio range,
featuring toys with “click and snap technology”.
In the past LEGO has attempted to fend off competition by actively seeking patent protection
for its technologies, indeed it currently owns over 600 patents. But this hasn't proved
altogether effective at stopping new entrants, and with high activity in the category, we can
expect to see a lot of future innovation coming in construction toys.
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30.  LEGO Fans to Help Build New Products
One of there research that came up with this that “Kids need oxygen, kids need privacy, they
need to have room where they are on their own and they can do what is relevant to them, and
even though it’s something that mum and dad might not always understand, and sometimes
might not even like, that’s just a part of understanding the world and growing up.”
So this toy manufacturer company LEGO has rolled out an online ‘open innovation’ and
crowd sourcing platform, through which consumers can submit and vote for their favourite
new product ideas. Consumers who have their ideas chosen will earn 1% of the total net sales
of the product.
Those ideas submitted on the new ‘LEGO CUUSOO’ site that are supported by 10,000+
votes, have a chance of being selected to become part of LEGO’s product portfolio and sold
in the firm’s retail stores and online shop.
LEGO has worked on a pilot of the site since 2008, with Japanese crowd sourcing specialist
CUUSOO System. During its testing phase, the site attracted hundreds of ideas and generated
thousands of votes cast by a 20,000-strong Japanese fan-base community.
‘Our fans and consumers have proved time after time that they have great ideas that can lead
to products,’ says Paul Smith-Meyer, Head of the LEGO New Business Group. ‘LEGO
CUUSOO’ is an attempt to gather more great ideas while streamlining the way we innovate
and become inspired.’
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31.  Market Research of Lego for Indian Market
The Indian toy industry is worth Rs.6,000 crore and is competent enough to compete with
the Chinese products. It has a ready market domestically with an immense potential as the
country has 2.4-crore kids below the age group of 10. Only 20 per cent of the market is
served by Indian manufactures and rest by import of toys from different countries, including
China. The toy industry in the country is growing by 30 percent has also launched the
campaign ‘We Care’ for safety and stronger guidelines on eco-friendly designs.
The toy market in India has witnessed lot of changes over the last few years and as we see
tremendous potential here. Lego found that there are customers who want to buy toys of high
quality.
Moreover, Indians always have a strong thought that children learn through playing with
toys. Playing helps them in thinking systematically and logically. It's like using mathematical
sciences. They can put pieces together and make new creations. Work collaboratively and see
how they connect things. At present, the toy market in India is highly fragmented.
 Nowadays kids are getting more into virtual world.
The virtual world is indeed becoming very important. But still the global toy market has
improved over the last two years. Global economic crisis, even though it did not have a
big dent in India, made people shift from high-price to low-price products, and this has
benefited the traditional toy market. Also, the virtual world always reaches a saturation
point. Children will always need a toy.
For e.g. Boys who play football online, they also like to play on the field.
So, The traditional toy market is not dead... it's still alive and in markets like India it is
emerging.
 Lego’s Plan in the digital space.
Lego come out with a platform called Lego Universe, which is a massive multiplayer
online game. They had just launched these games in English and in all German-speaking
countries through the Lego.com website. Where Children can meet online and play
games they want. It is seen that this going to be a very important business for Lego in the
coming years.
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32.  Lego’s expansion plan in India.
Lego’s investment is not on a monetary basis; it's more of collaborations and tie-ups.
They are investing in marketing as they want to be present in the right stores across
metros, mini-metros and smaller cities.
At present Lego is available in 140 stores across India and will be planning to be
available in another 60 stores by end of 2011. And they are also planning to double this
number over the next two years.
They are more focused on the experience that the consumers get from our products. They
want to find a scalable business model where Lego, its partners and retailers would
benefit on a long-term basis.
Lego also want to activate consumers by creating awareness about engaging kids with
toys - this is what they need is to focus and work on. Lego believe that future business for
them is in the Indian and the Asian markets.
Till date Lego have no plans to set up manufacturing facility in India. As they want to get
closer to the consumers through sales channels, clubs and collaboration programmes, and
not by setting up facilities.
Consumer Buying Behaviour of Lego
Children are an important part of the family buying process. In addition to the obvious role
that the children play as the user, they are also the buyers of the future. Children who plays
with LEGO may be able to hold on to the adult due to brand awareness and brand loyalty
formed at their early age.
As LEGO’s core target market are children age 0-16+, the company face great challenges in
developing products that appeal to the increasingly sophisticated demands of children.
Children are moving into new markets. Children as young as seven buy DVDs, and no
teenage lifestyle is viewed as complete without a mobile phone. This has a knock-on effect.
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33. For example, the money children spend on buying mobile phone reload cards reduces the
money spend on snacks, toys, comic books and etc.
Children are no longer attracted to 2D cartoons like Popeye, . They look forward to cartoons
with computer graphics and animation. Even the once famous Transformers are now done in
3D format.
Children’s needs and expectation in what they want from the toys that they play with are
becoming demanding and sophisticated. With technology advances, LEGO face great
competition with computer and video games apart from the conventional toy manufacturer
like Mattel and Hasbro. As such Lego’s innovation must supplement its traditional lines
offering a wide variety of high technology play.
In order to tune in with the taste of 21st century children LEGO has to innovate beyond the
bricks. Perhaps, bricks that can talk, move and fight. The launch of Harry Potter in the LEGO
range has proven to help increase sales for the year 2001. Children react towards movies. The
toys that they choose relate to their favourite movie or cartoon. Therefore, LEGO should
continue to work closely with film makers on licensing agreement for example Star Wars
movie and some Disney films.
Besides children, parents also play an important role in choosing the type of toys for their
children. Parents decide what is right or wrong for their young ones. Every parents wish is to
develop their child’s imagination, creativity and learning skills at early age. As such, LEGO
has to capture their interest by offering products that nurtures children development and
learning through play. Parents are also very protective towards their children. Therefore,
LEGO has to ensure that all its product innovation meets the safety requirements of the
children.
In addition, LEGO should never forget the young adult and adults who grew up with LEGO.
Products such as Star Wars & NBA Basketball Team appeal to teenagers and young adults
who are vivid collectors of comic books and action figures or like sports game. Thus, the
LEGO values will be passed on to the generation when they become parents in the future.
In conclusion, LEGO has to be market responsive and focused on their product range/mix in
order to develop the right product that appeal to children today. Perhaps, LEGO should
practice market targeting and refocus their core business on the pre-school segment.
 Today’s reality and Lessons for Marketers
Let’s look specifically at what LEGO does to deliver information to a customer that creates a
true LEGO experience.
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34. • LEGO has been delivering consistent content to customers in the form of a print
magazine. They have been doing this at usually a 6x per year frequency for over 20
years (I used to get the original Brick Kicks in the 80s). The content has always
revolved about how target consumers can take their products to the furthest level of
their imaginations.
• LEGO puts on targeted road shows around the country for LEGO fans to meet with
other fans and see LEGO creations, as well as contest opportunities.
• LEGO understands the end-user, but also understands the role of key influencers and
other decision makers. To bring those decision makers into the fold, LEGO promotes
family events and content specifically for parents (i.e., they target C-level
executives).
• LEGO segments their customer base with different types of content. While LEGO
magazine is great for many of their customers, a good portion of their customer base,
which I would consider the “high-spenders,” need more attention and have more
advanced content needs. Thus, Brickmaster was born.
• LEGO created a user discussion forum so that builders could connect with other
builders. They also provide a social networking function where customers. Some
companies outside of LEGO are now dedicated to enhance the LEGO experience
(i.e., BrickJournal.com).
• LEGO is a licensing king and has created non-traditional content channels such as
gaming (LEGO Star Wars), movies (Bionicle and Exo-Force) and hundreds of book
titles.
This is just some of the great content that LEGO is distributing consistently and frequently to
their customers. And, it’s not just good content, it’s great content that mixes interesting
stories with eye-catching design to create a true user experience.
Question is, where would LEGO be without this content? Would they be one of the most
recognized brands in the world? Frankly, it wouldn’t be close. Great products such as LEGO
aren’t enough to create a great brand and differentiate your brand from the competition.
Communications and content is today’s true brand differentiator.
Each of us have the communication tools at our fingertips to create a true community around
our products and services. Each of us have the power to create great content that focuses
purely on the needs of our customers and prospects.
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35.  Essence of customer’s orientation
This study investigates the effect of being customer oriented on service performance
perceptions and outcome behaviours. Specifically, the focus is on identifying the influence
that being perceived as a customer-oriented firm has on consumer quality perceptions,
customer satisfaction, and service value. The impact of being customer oriented on
consumers’ outcome behaviours is also investigated. Responses from 649 consumers indicate
that customer orientation is directly related to customers’ evaluations of employee service
performance, physical goods, and services capes. Indirect effects on organizational quality,
customer satisfaction, value attributions, and outcome behaviours are also reported. The
implications of the research are discussed, as are the limitations.
Effective customer-oriented sales strategies can ensure small business success.
Effective sales strategies for small businesses are strategies that focus on unique customer
needs, by customer segment. A customer orientation to the establishment of sales strategies
can enable small businesses to compete effectively against even large competitors.
Businesses can expect to go through four phases as they develop their customer-oriented
strategies.
 Identifying and Segmenting Customers
Effective customer-oriented sales strategies require the segmentation of customers into
specific groups or areas of focus. Not all customers are the same; different segments will
have different needs. The more precisely businesses can identify the specific customer
segments they want to sell to, the better they will be able to differentiate their
communications to address unique customer preferences. For instance, a company that
sells outdoor furniture will likely have different strategies and messages for the single
adult than for the young married couple or the retired couple.
 Learning About Customer Needs and Preferences
The more a business knows about its customers and their needs and preferences, the more
successful its sales strategies will be. While small business owners certainly have a
wealth of information from their perspective about their products and services and why
they're great, the perspectives of customers are often different and sometimes surprising.
Taking the time to learn about customers--what they know, what they value and what
their communication preferences are--can help ensure the effectiveness of sales
strategies.
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36.  Building Relationships
Hopefully customer interactions will not be one-time events. Businesses need to build
relationships with customers so they will keep coming back and will refer others to the
business and its products and services. Building relationships requires attention to the
customer relationship at all stages, from first point of contact through future sales and
through times when sales are low or absent. It is more costly to acquire a new customer
than to retain an existing one, so efforts spent on building relationships can pay off
significantly.
 Engaging in Service Recovery and Continuous Improvement
Despite a business's best efforts, mistakes can happen and sometimes customers are not
satisfied. Effective customer-oriented sales strategies will include consideration of
service recovery processes to ensure that if errors occur, they are quickly and effectively
handled. In addition, businesses need to be continually seeking input from customers
about ways products and services can be improved, as well as acting on those inputs to
ensure long-standing success.
 Product development in Lego
Every business looks forward to expanding itself, be it in the form of dealings, product
lines, new products, etc. Throwing light upon product development it is of two basic
forms viz. line extension or new product development. Line extension would be making
additional changes to an existing product where as the latter, new product development is
altogether bringing a whole new concept into the market.
36

37. When Lego came to the market with the idea of interlocking bricks it was not a
thoroughly new concept. In fact Kiddicraft was the predecessor of Lego bricks. It was
founded in 1932 by Hilary Harry Fisher Page (1904–1957), who created the self-locking
bricks. The 'Self Locking Bricks' were manufactured as a Hilary Page 'Sensible' Toy,
made in England after the 1939-45 war. Lego copied the design of the Kiddicraft brick
after examining a sample given to them by the British supplier of an injection molding
machine they had purchased. Lego eventually acquired the rights to Kiddicraft in 1981.
 Beginnings:
The Lego Group began in the carpentry workshop of Ole Kirk Christiansen, in Billund,
Denmark. In 1916, Christiansen purchased a woodworking shop in Billund which had
been in business since 1895. The shop mostly helped construct houses and furniture, and
had a small staff of apprentices. The workshop burned down in 1924 when a fire, lit by
two of Christiansen's sons, ignited some wood shavings. Ole Kirk constructed a larger
workshop, and worked towards expanding his business even further. When the Great
Depression hit, Ole Kirk had fewer customers and had to focus on smaller projects. He
began producing miniature versions of his products as design aids. It was these miniature
models of stepladders and ironing boards that inspired him to begin producing toys.
In 1932, Ole Kirk's shop started making wooden toys such as piggy banks, pull toys, cars
and trucks. The business was not very profitable thanks to the Depression. Farmers in the
area sometimes traded food in exchange for his toys; Ole Kirk continued producing
practical furniture in addition to toys in order to stay in business. In the mid-1930s,
the yo-yo toy fad gave him a brief period of increased activity until it suddenly collapsed.
To reduce waste, Ole Kirk used the leftover yo-yo parts as wheels for toy trucks. His son
Godtfred began working for him, taking an active role in the company.
In 1934, Ole Kirk held a contest amongst his staff to name the company, offering a bottle
of homemade wine as a prize. Christiansen was considering two names himself, "Legio"
(with the implication of a "Legion of toys") and "Lego", a self-made contraction from the
Danish phrase leg godt, meaning "play well." Later the Lego Group discovered that
"Lego" can be loosely interpreted as "I put together" or "I assemble" inLatin. Ole Kirk
selected his own name, Lego, and the company began using it on their products.
Following World War II, plastics became available in Denmark, and Lego purchased a
plastic injection molding machine in 1947. One of the first modular toys to be produced was
a truck that could be taken apart and re-assembled. In 1949 the Lego Group began producing
bricks, calling them "Automatic Binding Bricks." Lego bricks, then manufactured
from cellulose acetate, were developed in the spirit of traditional wooden blocks that could
be stacked upon one another but could be "locked" together. They had several round "studs"
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38. on top, and a hollow rectangular bottom. They would stick together, but not so tightly that
they could not be pulled apart. In 1953, the bricks were given a new name: Lego Mursten, or
"Lego Bricks."
Plastic products were not well received by customers initially, who preferred wooden or
metal toys. Many of Lego's shipments were returned, following poor sales. In 1954, Godtfred
had become the junior managing director of the Lego Group. Godtfred's conversation with an
overseas buyer struck the idea of a toy "system", with many toys in a line of related products.
Godtfred evaluated their available products, and saw the plastic bricks as the best candidate
for such a "system". In 1955, Lego released the "Town Plan" as such a system, using the
building bricks.
The building bricks were moderately received, but had some problems from a technical
standpoint: their "locking" ability was limited, and they were not very versatile. In 1958 the
bricks were improved with hollow tubes in the underside of the brick. This added support in
the base, enabling much better locking ability and improved versatility. The company
patented the new design, as well as several similar designs to avoid competition. That same
year, Ole Kirk Christiansen died, and Godfred inherited leadership of the company.
 Move to Plastic Bricks:
1961 and 1962 saw the introduction of the first Lego wheels, an addition that expanded
the potential for building cars, trucks, buses and other vehicles from Lego bricks. Also
during this time, the Lego Group introduced toys specifically targeted towards the pre-
school market.
In 1963, the material used to create Lego bricks, cellulose acetate (CA), was dropped in
favor of more stable acrylonitrile butadiene styrene (ABS plastic), which is still used
today. ABS is non-toxic, is less prone to discolouration and warping, and is also more
resistant to heat, acids, salt, and other chemicals than cellulose acetate. Samsonite
manufacturing in North America did not switch at the same time, and still used some
degree of cellulose acetate in its Lego products.
1964 was the first time that instruction manuals were included in Lego sets.
One of the LEGO Group's most successful series, the Lego train system, was first
released in 1966. The original train sets included a 4.5-volt motor, battery box and rails;
two years later, a 12-volt motor was introduced.
On 7 June 1968, the first Legoland Park was opened in Billund. This theme park featured
elaborate models of miniature towns built entirely from Lego bricks. The three acre
(12,000 m²) park attracted 625,000 visitors in its first year alone. During the next 20
38

39. years, the park grew to more than eight times its original size, and eventually averaged
close to a million paying visitors per year. More than eighteen million Lego sets were
sold in 1968.
In 1969, the Duplo system went on sale. This was a newly developed system, targeted
towards younger children; Duplo bricks are much larger than Lego bricks, making them
safer for very young children, but the two systems are compatible: Lego bricks can be
fitted neatly onto Duplo bricks, making the transition to the Lego system easily made as
children outgrow their Duplo bricks. The name Duplo comes from the Latinword duplus,
which translates literally as double, meaning that a Duplo brick is exactly twice the
dimension of a Lego building brick (2× height by 2× width by 2× depth = 8× the volume
of a brick).
The 1960s were such a period of growth for the Lego Group that by 1970, one of the
biggest questions they faced was how best to manage and control its expanding market.
 Expansion:
The coming decades marked considerable expansion into new frontiers of toy making and
marketing. Lego began to target the female market with the introduction of furniture pieces
and dollhouses in 1971. The Lego universe expanded its transportation possibilities with the
addition of boat and ship sets, with hull pieces that actually floated, in 1972. Human figures
with plausible arms made an appearance in 1974 in "Lego family" sets, which went on to
become the biggest sellers at the time; in the same year, an early version of the "minifigure"
miniature Lego person was introduced, but it was not plausible and had no face printed on its
head.
"Expert Series" sets were first introduced in 1975, geared towards older, more experienced
Lego builders. This line soon developed into the "Expert Builder" sets, released in 1977.
These technical sets featured moving parts such as gears, differentials,
cogs, levers, axles and universal joints, and permitted the construction of realistic models
such as automobiles, with functional rack and pinion steering and lifelike engine movements.
Finally, the Lego world came together in 1978 with the addition of the Lego "minifigure".
These small Lego people have posable arms and legs, and a friendly smile. The figure was
used in many varieties of Lego sets, allowing consumers to construct elaborate towns with
buildings, roads, vehicles, trains, and boats, at the same scale, and populated with the smiling
minifigure Lego citizens.
Another significant expansion to the Lego line occurred in 1979, with the creation of Lego
Space sets. Astronaut minifigures, rockets, lunar rovers and spaceships populated this
successful series. The Scala series debuted in this year as well, featuring jewelry elements
marketed towards young girls.
Lego bricks had always had a constructive potential that was seen by some educators as
being an invaluable asset in helping children to develop creativity and problem-solving
abilities. Since the 1960s, teachers had been using Lego bricks in the classroom for a variety
39

40. of reasons. In 1980, the Lego Group established the Educational Products Department
(eventually renamed Lego Dacta, in 1989), specifically to expand the educational
possibilities of their toys. The second generation of Lego trains appeared in 1981. As before
these were available in either 4.5 V (battery powered) or 12 V (mains powered), but a much
wider variety of accessories were available, including working lights, remote-controlled
points and signals, and decouplers.
The "Expert Builder" series matured in 1982, becoming the "Technic" series. 13 August of
that year marked the Lego Group's 50th anniversary; the book 50 Years of Play was
published to commemorate the occasion. In the following year, the Duplo system was
expanded to include sets for even younger audiences, particularly infants; new sets included
baby rattles and figures with adjustable limbs. The year after, Lego minifigure citizens
gained a realm of knights and horses, with the introduction of the first Castle sets. Light &
Sound sets made their appearance in 1985; these sets included a battery pack with electrical
lights, buzzers, and other accessories to add another dimension of realism to Lego creations.
Also that year, the Lego Group's educational division produced the Technic Computer
Control, which was an educational system whereby Technic robots, trucks, and other
motorized models could be controlled with a computer.
In 1984, the Technic line was expanded with the addition of pneumatic components.
In August 1988, 38 children from 17 different countries took part in the first Lego World
Cup building contest, held in Billund. The Lego line grew again in 1989 with the release of
the Lego Pirates series, which featured a variety of pirate ships, desert islands and treasure;
the series was also the first to depart from the standard minifigure smiling face to create an
array of piratical characters. The Lego Group's Educational Products Department was
renamed Lego Dakta in this year; the name is derived from the Greek word "didactic", which
roughly means "the study of the learning process." MIT's Dr. Seymour Papert, from the
Laboratory of Computer Learning, was named "Lego Professor of Learning Research," after
his ongoing work in linking the Logo programming language with Lego products.
A new series designed for advanced builders was released in 1990. Three Model Team sets,
including a race car and an off-road vehicle, featured a level of detail and realism not
previously seen in any Lego series. Where Technic was mechanically accurate, Model Team
was visually and stylistically accurate. The Lego Group became one of the top 10 toy
companies in this year; it was the only toy company in Europe to be among the top 10.
Legoland Billund had more than one million visitors in this year, for the first time in its
history. The first-ever "Lego Professor of Business Dynamics," Xavier Gilbert, was
appointed to an endowed chair at the International Institute for Management Development
in Lausanne, Switzerland. Lego Malaysia was also established in 1990. In 1991, the Lego
Group standardized its electrical components and systems; the Trains and Technic motors
were made 9V to bring the systems into line with the rest of the Lego range. Duplo was
augmented with the addition of the Toolo line featuring a screwdriver,
wrench, nuts and bolts; the Paradisa line, targeted towards girls, brought a variety of new
pastel colors into the Lego system and focused around horses and a beach theme. 1993
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41. brought a Duplo train and a parrot-shaped "brickvac" that could scoop Lego pieces up off the
floor.
Early prototypes of the Lego minifigure had a variety of skin colors and facial expressions,
but production designs used only a yellow skin color and standard smiling face. Lego Pirates
in 1989 expanded the array of facial expressions by adding beards and eye patches. Soon the
other themes caught on, ranging from sun glasses, lipstick, eyelashes, and so on. However,
many of the older collectors resented the new look, saying they looked too "cartoon-ish" or
"kiddy", and preferred the simplistic nature of the two eyes and smile. Nevertheless, from
1999 licensed series such as Lego Star Wars and Lego Harry Potter gave minifigures the
personas of specific characters from their cinematic counterparts, but it was not until 2003,
with the introduction of Lego Basketball, that the palette of skin tones broadened to include
more lifelike colors.
In the late 1990s, the Lego Group brought out a series of new and specialized ranges aimed at
particular demographics. The Bionicle range uses Technic pieces and specialist moldings to
create a set of action figures for boys, while Belville is a more conventional line aimed at
girls and featuring large plausible figures like those in theTechnic range. A "Lego 4 Juniors"
group features 2-inch (51 mm) tall medium-sized figures ("medi-figure") without jointed
arms, and longer legs than the classic Lego minifigure. In 2003, the Lego Group introduced a
completely new system, Clikits, aimed at girls and consisting of customizable plastic jewelry
and accessories. In 2004, Lego added the QUATRO brick, for ages 1–3. Much like Duplo, a
Quatro brick is four times the dimension of a regular Lego brick, and is compatible with the
Duplo brick. Also that year, they created the second line of Knights Kingdom themed
product.
The late 1990s also saw the first products featuring licensed characters. In 1999, Star
Wars Lego and Winnie the Pooh Duplo were released. These were followed by characters
from Harry Potter to figures from other Steven Spielberg movies. Before this, Lego
characters were always designed in-house, and lacked the strong characterization of these
licensed characters. A number of in-house characters after this point were strongly
characterized with media utilization and non-Lego System merchandising in mind, most
notably Bionicle.
 The Brick Design:
Lego pieces of all varieties comprise a universal system. Despite variation in the design and
purpose of individual pieces over the years, each remains compatible in some way with
existing pieces. Lego bricks from 1958 still interlock with those made in the current time,
and Lego sets for young children are compatible with those made for teenagers.
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42. Each Lego piece must be manufactured to an exacting degree of precision. When two pieces
are engaged they must fit firmly, yet be easily disassembled. The machines that make Lego
bricks have tolerances as small as 10 micrometre.
Primary concept and development work takes place at the Billund headquarters, where the
company employs approximately 120 designers. The company also has smaller design
offices in the UK, Spain, Germany, and Japan, which are tasked with developing products
aimed specifically at these markets. The average development period for a new product is
around twelve months, in three stages. The first stage is to identify market trends and
developments, including contact by the designers directly with the market; some are
stationed in toy shops close to holiday periods, while others interview children. The second
stage is the design and development of the product based upon the results of the first stage.
As of September 2008 the design teams use 3D modeling software to generate CAD
drawings from initial design sketches. The designs are then prototyped using an in-house
stereolithography machine. These are presented to the entire project team for comment and
for testing by parents and children during the "validation" process. Designs may then be
altered in accordance with the results from the focus groups. Virtual models of completed
Lego products are built concurrently with the writing of the user instructions. Completed
CAD models are also used in the wider organization, such as for marketing and packaging.
Since 1963, Lego pieces have been manufactured from a strong, resilient plastic known as
acrylonitrile butadiene styrene (ABS). As of September 2008, the engineers use the NX
CAD/CAM/CAE PLM software suite to model the elements. The software allows the parts to
be optimized by way of mold flow and stress analysis. Prototype molds are sometimes built
before the design is committed to mass production. The ABS plastic is heated to 232 °C
(450 °F) until at a dough-like consistency. It is then injected into the molds at pressures
between 25 and 150 tons, and takes approximately 15 seconds to cool. The molds are
permitted a tolerance of up to two micrometres, to ensure the bricks remain connected.
Human inspectors check the output of the molds, to eliminate significant variations in color
or thickness. According to the Lego Group, about eighteen bricks out of every million fail to
meet the standard required. Lego factories recycle all but about 1 percent of their plastic
waste from the manufacturing process every year. If the plastic cannot be re-used in Lego
bricks, it is processed and sold on to industries that can make use of it.
Manufacturing of Lego bricks occurs at a number of locations around the world. Molding is
done in Billund, Denmark, Nyíregyháza, Hungary and Monterrey, Mexico. Brick decorations
and packaging is done at plants in Denmark, Hungary, Mexico and Kladno in the Czech
Republic. The Lego Group estimates that in the course of five decades it has produced some
400 billion Lego blocks. Annual production of Lego bricks averages approximately 36
billion per year, or about 1140 elements per second. If all the Lego bricks ever produced
were to be divided equally among a world population of six billion, each person would have
62 Lego bricks. According to an article in BusinessWeek in 2006, Lego could be considered
the world's No. 1 tire manufacturer; the factory produces about 306 million tiny rubber tires a
year.
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43. Since it began producing plastic bricks, the Lego Group has released thousands of sets with a
variety of themes, including town and city, space, robots, pirates, trains, Vikings, castle,
dinosaurs, undersea exploration, and wild west.
New elements are often released along with new sets. There are also Lego sets designed to
appeal to young girls such as the Belville and Clikits lines which consists of small
interlocking parts that are meant to encourage creativity and arts and crafts, much like regular
Lego bricks. Belville and Clikit pieces can interlock with regular Lego bricks as decorative
elements.
While there are sets which can be seen to have a military theme – such as Star Wars, the
German and Russian soldiers in the Indiana Jones sets, the Toy Story green soldiers and Lego
Castle – there are no directly military-themed sets in any line. This is following Ole Kirk
Christiansen's policy of not wanting to make war seem like child's play.
The Lego range has expanded to encompass accessory motors, gears, lights, sensors, and
cameras designed to be used with Lego components. Motors, battery packs, lights and
switches are sold under the name Power Functions. The Technic line utilizes newer types of
interlocking connections that are still compatible with the older brick type connections. The
Technic line can often be motorized with Power Functions.
Bionicle is a line of toys by the Lego Group that is marketed towards those in the 7–16 year-
old age range. The line was launched in January 2001 in Europe and June/July 2001 in the
United States. The Bionicle idea originated from the earlier toy lines Slizers (also known as
Throwbots) and Roboriders. Both of these lines had similar throwing disks and characters
based on classical elements. The sets in the Bionicle line have increased in size and
flexibility through the years. Bionicle was replaced with Hero Factory in 2010.
The Lego group's Duplo product line, introduced in 1969, is a range of simple blocks which
measure twice the width, height and depth of standard Lego blocks, and are aimed at younger
children.
'Fabuland' ran from 1979 to 1989. The more advanced 'Lego Technic' was launched in 1977.
'Lego Primo' is a line of blocks by the Lego Group for very young children that ran between
2004 and 2006. In 1995 'Lego Baby' was launched for babies.
One of the largest Lego sets ever commercially produced is a minifig-scaled edition of the
Star Wars Millennium Falcon. Designed by Jens Kronvold Fredericksen, it was released in
2007 and has 5,195 pieces. It was surpassed, though, by a 5,922 piece Taj Mahal.
In May 2011, Space Shuttle Endeavour mission STS-134 brought 13 Lego kits to the
International Space Station, where astronauts will build models and see how they react in
microgravity, as part of the Lego Bricks in Space program. The results will be shared with
schools as part of an educational project.
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44.  Lego Distribution Strategy:
Five years ago the Lego Group was in serious trouble. On the surface it was business as usual
- its products as popular as ever and maintaining a firm grip on the market - but beneath the
surface its supply chain was crumbling. After racking up huge losses over several quarters,
mainly as a result of over-ambitious ideas for product lines, and inefficient manufacturing
processes, Lego's supply chain and logistics structure was due a major overhaul.
Today, despite once being a laughing stock in the logistics field, its supply chain and
logistics innovations are seen as exemplary. Its progress was acknowledged last year when it
won the European Supply Chain Excellence award for logistics and fulfilment.
The company, whose name derives from the Danish words "leg godt" which mean "play
well", appointed Egil Møller Nielsen to the position of vice president, global distribution
logistics, to help transform its distribution network.
Møller Nielsen began his career in freight forwarding and shipping. "I was born out of
logistics," he says. Nevertheless, the mammoth task he faced at Lego was like no other he'd
dealt with before, and was what he describes as "the most challenging point" of his career.
"Five years ago there was nothing right," he says, "In 2004 we didn't even know what we
spent."
One of the first decisions was to consolidate all distribution. Historically, Lego had multiple
logistics providers and suppliers, all running separate warehouses, each operating under a
different warehouse management system. As a result, visibility across the supply chain was
virtually non-existent and cross-business communication and orders were fragmented.
Now its logistics operations are centralized. Stock from seven of its former distribution
centres across Europe are now consolidated into DHL Supply Chain's one million square foot
global distribution centre in Jirny, near Prague in the Czech Republic. From this giant hub -
the equivalent in size to ten football pitches - the toy manufacturer serves 14,000 customers
worldwide, spanning 135 countries. The centre’s activities include inbound and outbound
logistics, storage and value added services such as assortment packing and customization.
The Jirny site is going to be one of DHL Solutions’ strategic locations from where DHL is
offering the complete range of logistics services to the market.
This move has brought Lego's distribution channels closer to its customers, and the biggest
population centres in Europe, reducing transport costs as a result. Since consolidating all
distribution, inventory is now easier to track and stock shortages have been reduced.
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45. However, closing distribution centres led to job losses. "One of the biggest challenges was
that the knowledge we needed was in the people we had to let go when we shut down the
other 12 DCs," admits Møller Nielsen. He also points to changing the management structure
as one of the biggest challenges he faced. "People don't like change. One of the difficulties
was to transform my ideas and get the support from the entire organisation and the suppliers -
it was tough but in the end it succeeded."
Since Møller Nielsen took charge the company has slashed 25 per cent off its cost base. Its
carbon footprint has also dropped 25 per cent. One of the major changes he made was to
redesign the box packaging to fit the pallets more snugly. "A few years ago only 70 to 75 per
cent of the pallet cube was being used," he says. Just altering the box dimensions by one
centimeter has made a big difference - now pallet utilization is up 95 per cent, and we're
transporting 20 per cent less volume of pallets, which has made massive savings on transport
costs, he says.
The Jirny hub is the heart of Lego's global distribution, and channels 2,750 different
products. "60 to 70 per cent of the product assortment is changed every year," says Møller
Nielsen. As such, it works closely with retailers to determine forecasts, so that it can react
quickly to volume fluctuations. It is now gearing up for its busiest time of year - Christmas -
which accounts for 60 per cent of its yearly income.
Lego's supply chain is unrecognizable compared to that of five years ago. "One of the things
I'm most proud of is how we are now regarded as a logistics provider," says Møller Nielsen,
"in 2004, we carried out customer surveys, and we were ranked the worst in class in logistics.
We have done the same surveys each year since then, and in 2008 were voted best in class.
Now the company's supply chain is held up as an example."
 LEGO and Funskool:
Funskool India, a joint venture of tyre company MRF and US-based toy maker Hasbro Inc,
has bagged the rights from Denmark-based toy manufacturing firm LEGO Group to
distribute their toys in India.
Initially, Funskool would retail toys like LEGO Duplo, LEGO City, LEGO Creator, LEGO
Technic, LEGO Atlantis, LEGO Racers, LEGO Mindstorms and LEGO Starwars in the
country. The Lego toys will be available through Funskool's retail network of over 4,500
points of sale across the country, including large format departmental stores.
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46. R Jeswant, Vice-President, sales and marketing at Funskool said that the distribution of
Denmark’s Lego toys began in April 2010 and the products are now available across leading
toy retail outlets in the country.
He added that depending on future demand and requirements, further categories will be
added.
Funskool plans for intensive campaigns on TV and print media to promote its product. The
initiatives will also be backed by on-ground activities such as conducting games for children
in retail outlets.
Besides its latest deal with Lego, the company also sells the complete range of toys from its
joint venture partner Hasbro and also represents Japanese toy maker Tomy in India.
It also owns licenses from Walt Disney for board games and Warner Bros for board games
and puzzles.
Bibliography
 www.aboutus.lego.com
 Economictimes.indiatimes.com
 www.commculture.com
 www.marketreasearch.com
 www.business-standard.com
 www.lego.com
 www.legoland.com
 www.legolanddiscoverycenter.com
 www.sitelogicmarketing.com
 www.recordholders.org
 www.supplychainquarterly.com
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47. Reference Books
 Marketing Management - by Ramaswamy
 Marketing Management - by Philip Kotler
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