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Lego SWOT & PESTLE Analysis

Last Updated : 14 Sep, 2017

OVERVIEW

Name of the Company: Lego A/S

Business Sector: Media and Entertainment, Toys

Operating Geography: Europe, Denmark, Global

About the Company: Lego A/S (The Lego Group) is a Danish company, best known for the production of Lego-brand toys which consist of interlocking plastic bricks. Established in 1932, the company is headquartered in Billund, Denmark and has more than 19,000 employees as of 2017. The company surpassed Mattel to become the world’s largest toy company by revenue in 2015. The company also has set up Lego branded amusement parks globally, known as Legoland.

Revenue: DKK 37.9 billion - FY ending December 31st, 2016

SWOT & PESTLE Analysis

The SWOT analysis for Lego is presented below:
Strengths
Weaknesses
1. Strong brand name and reputation
2. Investments in capacity expansion and digital developments emerging as strong growth drivers
3. Emphasis on quality and safety
4. Strong financials with sustainable growth
1. Negative impact of Lego’s operations on the environment
2. Premium pricing with respect to other players in the market
Opportunities
Threats
1. Expanding global presence in emerging markets such as China and India1. Intense competition from other toys and online gaming segments
2. Threat from counterfeits and cheap imitations
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Strengths

1. Strong brand name and reputation: Lego is world’s leading suppliers of creative play and learning materials and enjoys a strong brand name and reputation which is one of its key strengths. Lego products are sold in more than 140 countries and the company sees children as its role models and continuously strives to create the best for them. The company is regarded on top globally in terms of corporate reputation and for seven consecutive years, the Lego Group is ranked in the Top 10 of the Reputation Institute annual RepTrak 100 survey, with the rank being second in 2017. This is a strong testimony of the company’s commitment to creativity, innovation and ethical business practices.

2. Investments in capacity expansion and digital developments emerging as strong growth drivers: Lego Group has made significant investments in capacity expansion and digital play domain which are turning out as strong growth drivers. The company in FY16 announced expansion plans for manufacturing units at Nyíregyháza, Hungary, and Monterrey, Mexico, in order to meet future demand for Lego products. Further, in Novemeber 2016, the new Lego factory in Jiaxing, China, was inaugurated which will help to cater to Asian markets and help the company in its pursuit of its global ambitions. The company is pursuing the digitalization strategy as an enhancement to its core business - physical Lego play and make it more exciting and appealing by creating a hybrid physical-digital experience. A recent initiative in this regard is the LEGO® NEXO KNIGHTS series which combines physical and digital play. These initiatives has helped to lay a strong foundation to bring Lego play to more children around the globe.

3. Emphasis on quality and safety: Lego deeply invests in quality and safety to ensure that the children enjoy a safe high-quality Lego play experience. Lego products adhere to the strictest global safety and quality standards and the company’s focus on quality has ensured that it has zero product recalls since 2009. LEGO and LEGO DUPLO elements undergo a series of rigorous physical and chemical tests such as bite test, impact test, drop test, color and substance migration, hazard migration, compression test and hazard classification. Lego also plays a leading role in European (CEN) and International (ISO) Toy Safety Standardisation Committees which promote and regulate toy safety.

4. Strong financials with sustainable growth: Lego Group reported strong results in FY16 with the highest revenue in the company’s 85-year history. FY16’s revenue increased by 6.0% to DKK 37.9 billion compared to DKK 35.8 billion for FY15. The company also registered an increase in net profit to DKK 9.4 billion in FY16 versus DKK 9.2 billion in FY15. The growth in profit was lower than in the recent past due to capacity expansion and organization restructuring initiatives which will equip the company for future growth.

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The PESTLE / PESTEL analysis for Lego is presented below:
Political
Economical
1. Maintaining political neutrality a core value of Lego1. Foreign currency fluctuations pose a major risk for Lego
Social
Technological
1. The Lego Foundation encouraging learning through play, thus empowering children
2. Dynamic social culture influencing kids away from traditional toys
1. Digital transformation to be a game changer for the toy industry
2. Significant investments in R&D for sustainable materials
Legal
Environmental
1. Poor copyright laws in many geographies
2. Lego’s involvement in various lawsuits against cheap imitations
1. Lego on track to achieve goal to be based 100% on renewable energy by 2020
2. First toy company to be a signatory to United Nations Global Compact
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Political

1. Maintaining political neutrality a core value of Lego: Lego has maintained a company policy of political neutrality and refuses to be involved in any event, program or movement with political affiliation. However, the company’s corporate policy was the face of criticism in 2015 when it refused to supply building bricks to Chinese artist Ai Weiwei who wanted to use them in an exhibition related to freedom of speech and 'political art. This move was construed as an act of censorship and discrimination on part of the company. Lego at a later date accepted the above refusal as a mistake on the organizations part due to misconstruing the company’s policy by an employee. As seen from the above incident, the company needs to carefully evaluate its decisions in the global context to uphold its values.

To get the complete detailed PESTLE report on Lego please mail us at: support@swotandpestle.com. or contact us here.

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Copyrights and Disclaimer

Lego SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

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