How Did The Toy Industry Contributed To The Downfall Of The Lego Group?
The changing nature of the toy industry contributed to the downfall of the LEGO Group. As the consumer trend in the toy industry has shifted towards technology and other substitutes like video games and other online activities have reduced the demand for traditional toys. The toy industry was dominated by a few companies that fought over retail space, reduced prices, and launched new product lines to appeal to more consumers. Furthermore, the increasing power of giant retailers like Wal-Mart and Target reduced LEGO’s retail space as LEGO products generated less gross margin and inventory turnover was lower compared to other products. LEGO, the plastic bricks had dominated the construction toy market for decades, but the company struggled to increase sales revenue. After the LEGO Group experienced several years of losses, they hired Jorgen Vig Knudstorp to save the company. The LEGO Group was on the brink of bankruptcy because of the changes in the toy industry, failure to control their increasing costs, did not streamline their operations, and
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His plans to cut costs and lay off employees. For management strategy, he decided to have managers rotate their positions every 6-12 months, which reduces the depth of knowledge they have in a specific area. The perceived benefits of the rotation were to create well rounded managers. Ultimately, the lack of stability in the manager positions has hindered the company’s ability to make the best decisions for the company. The managers were not invested in the overall brand of LEGO and failed to utilize the company’s core strengths in their decision-making process. The lack of coordination between the different areas of supply chain affected the organization deeply. The number of components doubled over an eleven-year period and it greatly affected the manufacturing, demand forecasting, and inventory management of the
His plans to cut costs and lay off employees. For management strategy, he decided to have managers rotate their positions every 6-12 months, which reduces the depth of knowledge they have in a specific area. The perceived benefits of the rotation were to create well rounded managers. Ultimately, the lack of stability in the manager positions has hindered the company’s ability to make the best decisions for the company. The managers were not invested in the overall brand of LEGO and failed to utilize the company’s core strengths in their decision-making process. The lack of coordination between the different areas of supply chain affected the organization deeply. The number of components doubled over an eleven-year period and it greatly affected the manufacturing, demand forecasting, and inventory management of the