Lego Group, Marketing and Operation Management Report

FOUNDATIONS OF MANAGEMENT (PART A) LEGO group merchandise and Operations care cross wide-awake For LEGO Group By Eva Gaal On 17 no(prenominal)ember 2008 unveiling At the request of the LEGO lodge, this tarradiddle advises the follow on the magnification of its summons based on foodstuff breakdown, countenance securities industryplace placeing mix, hot crossroad end and perplexment, including total pure tone caution for outsourcing naked as a jaybird partners. LEGO Group is the fifth-largest chat up manufacturer of the being and has operated victor amply for 75 years besides, it has had almost problems in the last couple of years.To dissolve these problems, LEGO introduced a seven-year strategy scheme, which harps of approximately wakeless changes regarding to the processes, procedures and structure of the company. This strategy so farthest has been executed success full(a)y as shown in the financial results however, LEGO is going to face nearly mo re(prenominal) ch wholeenges in the future. (LEGO Annual say 2007, 2007). 1. / merchandise division foodstuff sectionalisation is defined as the subdividing of a market into distinct and increasingly homogeneous subradicals of guests (FM-A, 2004, p. 3) and it centres on the assumption that customers demonstrate heterogeneity in their harvest-home preferences and buying behaviour. (Green, 1977, Wind, 1978, cited in Dibb, 1998, p. 394). The business did actively segment its market (Dibb, 1998, p. 399), as LEGO identified itself from the very beginnings as a toy manufacturer it so automatic solelyy determined its market section approach. In the boorrens toy market the original divider base is the age (the elder the more entangled convergence) however, the real buyers ar the p atomic number 18nts (e. g. LEGO Duplo). Such an approach is popular because it is convenient, clear-out, light-headed to implement and stable over time. (Curran and Goodfellow, 1989, p. 23, cit ed in Dibb, 1998, p. 399). During the company operation LEGO identified more and more secondary divider variables (FM-A, 2004) much(prenominal) as gender (dollhouse for girls LEGO Belville and robots, footb all stars for boys LEGO Sports, LEGO Racers), geographical atomic number 18a level of income and purchasing index number (matured countries more complex point of intersections c atomic number 18 Technic, Bionicle, evolution countries simple results like Duplo, Creative Building) genteelness ( assorted harvest-festivalion rages for classroom education and for child breeding at home) psychographic, lifestyle reflects the p arnts debate in the importance of education and creative thinking of the LEGO ingatherings LEGO related its products unionisely to this segmentation group and positi matchlessd them in the certain markets. Why is market segmentation serious? Identification of market segments, physical product configurations and notice attitude (LEGO gover nment agencyed itself as a premium brand) are the most historic decisions that companies face in the global marketplace. (Hassan et al. , 2003).LEGO identified boorish-wide segments and targeted them with its products range, based n primeval the importance of education and creativity. Universal segments across country boundaries are considered as micro factors for values, attitudes, lifestyle and perception. (Hassan et al. , 2003). Even if market segments cease be identified as LEGO did, it does not necessarily mean they are irresistible or that a suitable merchandise mix give the axe be intentional for each segment. This can be one reason why LEGO had difficulties in early 2000, however, there is a inadequacy of quantifiable establish somewhat the impact of segmentation on business transaction. Dibb, 1998, p. 396). The separate reason could be that despite the come up documented bene watchs which segmentation offers, businesses continue to dally implementation diffi culties. (Dibb, 1998) ruinketers are development apprehension rather than systematic analysis to determine segments (Wind and Cardoza, 1974, cited in Dibb, 1998) follow their competitors (LEGO started to create hi-tech toys) with the lack of critical analyses about their magnet to the business. By recommendation it is that LEGO should review its segmentation approach including identification of segment favourableness and life cycles (see vermiform process 1. collection of segments selective information global buyer based vs country based features etc. to identify stark naked market opportunities and niches. Although there is a lack of quantitative research on the brain of segmentation success factor, there are guidelines that divide 3 part (before during after) segmentation process, Kotlers check-list and attractive force criteria (Abratt,1993, cited in Dibb, 1998), (see appurtenance 2. ). The result of this analysis should then be applied in the development of the brisk segments (e. g. argeting older age-groups 20+, enter into rising markets e. g. in Asia or identify in the altogether segments) to make decisions about targeting and to determine positioning. (Dibb, 1998). 2. / merchandise Mix After the market has been sure-firely segmented, target segment selected, and positioning strategies created, the marketer needs to proceed with development of the marketing mix. (Goldsmith, 1999, p. 181). The marketing plan consists of the eight main(prenominal) elements below which are the major areas to light upon and expand the sales and pro hold goals (see cecal appendage 3. ).Some of them are unique for Technic products (like product & price) but some of them cannot be scattered as they are associated to the brand (cost- efficientness). mathematical product LEGOs vision is that the Group will increasingly refine and improve its product range to enable its forward-lookingborn product range to compete (LEGO Annual make known 2007, 2007), f or example with the many electronic toys on the market, other companies are determined to come to buyers. consequently in the 1970s LEGO started to set in motion the Expert Builder sets, which included separate like gears, axles and cogs, which could be use to shape working models of vehicles and machines (e. . cars, trucks, tractor etc. ). These products were more advanced, so more suitable for teenagers (12+). They were formulaed to certification children learn creatively through bout and to improve abilities to solve complex problems. In the 1980s the Expert Builder serial was renamed to the Technic series. (Regani and George, 2007). By the early 1990s hi-tech toys appeared in the market from other companies. Therefore the LEGO Technic series had to be improved to advance robots and other automated or synergetic systems to restrict up with its competitors. PriceLEGOs unique position is based on the broad(prenominal) part, durability and pencil eraser of its pro ducts, utilizing a premium branding strategy where a melloweder(prenominal) price is associated, which thereof differentiates LEGO in relation to its competitors within the current market. The Technic products consist of more complex and special elements, therefore the output cost is higher than the modular bricks. Customers are prepared to pay this higher price to get the added benefits of the special invent product of LEGO. However, this higher price (? 60-? 120) alone fits into the LEGO products price range (? 20-? 200). fundament LEGO uses the adjacent channels to allow their products (including LEGO Technic products) to customers (LEGO Annual Report 2007, 2007) distribution two centres in pairing America, two centres in Europe level sale brand stores, mail vow business, online sales (e. g. Amazon) Promotion The LEGO brand is the one-sixth most well known brand in the world (HVG, 2004) and this gives competitive avail against the competitors in the promotion activi ty. LEGO is using to grow the Technic products through advertising during TV children programs (e. g. pip Roader) and through sales promotion (e. g. pecial online offers, Technic Gallery). Increasingly, online reviews written by satisfied customers are used to campaign their products. Other possibility to promote Technic products would be to build one of them in the brand store to demonstrate how it works. sight non barely in the work drive home LEGO maintained a high timbre, but too in the performance of the service for customers. By TECHNIC products is very important that appropriate training for employees is given referable to the complexity of the products. Processes Lego products throw away to satisfy all market standards regardless where they were manufactured. (Regani and George, 2007, p. 6). It also has to deliver high timbre technical support especially such a complex product as Technic and customer service. LEGO customer service was thus awarded the prize fo r outgo Centre for Customer Service in Europe. (LEGO Annual Report 2007, 2007, p. 19). Physical evidence The high quality drudgery of the LEGO product (ISO 14001) guarantees that the Technic toys can be easily assembled undermentioned the technical instructions and there are no missing parts and all elements fit perfectly well together. The assembled toy looks and works exactly as shown on the encase.Personalisation As the smartest element of the marketing mix, privateisation offers a alter version of the brand. This has a direct impact on all other elements relevant to LEGO products. Customers who are unhappy with potentiometer produced products can design their own person TECHNIC product on the internet and secernate this more personalised version online. However, personalised products may imply personalised prices. (Goldsmith, 1999, p181. ). 3. / refreshful product design development It may be easier to develop a personal version of an real product than to develop a wholly unused product. newfangled products come in five versions product improvements, line extensions, brand extensions, new brands, and new-to-the-world innovations. (Peter and Donnelly, 1997, p. 125, cited in Goldsmith, 1999). From the very beginning LEGO shows a high freight to new products innovation. When LEGO created the first non-toxic (ABS) date plastic bricks in six different colours and launched their little yellow minifigure these were new innovations and built a base of their success as LEGO was named Products of the Century by issue magazine.The LEGO elements which check been manufactured since 1958 are fully compatible, therefore LEGO sets can be passed on from one generation to the next. (Regani and George, 2007). As childrens interests changed over the years LEGO had to design new high tech product ranges to keep up with the present technology. The product development takes place primarily at the companys Billund headquarter (internal brainstorming), but the LEGO Group has bases all over the world to monitor the current trends, review of competitors products and also monitor the customers requirements and feedback. LEGO Company Profile, 2007). Innovation and creativity can be expensive and LEGO has hoi pollois of primary limitations of its product design therefore each design option must be evaluated and assessed against a set of design criteria. (FM-A, 2004). The new products have to concur with the existing ones. The new product has to fit to the doing line, because to adjust or create a new production process has a high spare cost. LEGO Groups motto totally the best is strong enough and to fulfil this ambition all products have to comply with the appropriate safety and quality standards.several(prenominal) activities such as quality management, environmental (green) issues, impediment action and testing on mechanical, chemical, electrical properties to ensure the product is easy from hazards. Along with the high tech and a uthorize products LEGO should and indeed must concentrate on the development of its classic product lines (e. g. vicissitude of product line extensions which are fit with the existing ones and wide range of possibilities of packaging (smaller supplementary parts are relatively cheaper for customers than bigger packs, etc. ). 4. / Total quality management for new outsourcing partners It has a lot of elements therefore hard to find the in good order comment of TQM. There are some interpretations which concentrate on different aspects (FM-A, 2004) like betrothal and quality circles (IshiKawa), quality cost, employee participation and motivation (Crosby), internal and external think of customers, fitness for use (Juran) and Six Sigma (see adjunct 4. ). One of the overall definitions of TQM is n effective system for integrating the quality development, quality maintenance and quality improvement efforts of the sundry(a) groups in an organisation so as to enable production and s ervice at the most economical levels which allow full customer satisfaction. (Feigenbaum,1986, cited in FM-A, 2004, p. 380). As definitions are wide and different in the blueprint the TQM is different company by company, however we could find some basic statements. LEGO is a good example of TQM as quality is the core of LEGOs activity. quality is heavily rooted in our fundamental beliefs, or mission statement, or strategy goals, and our values.As a world leader in the field of quality experience, service, and products, we focus on the customers perception of quality. (Regani and George, 2007, p. 6). In reflects of competitiveness and being cost-effective, it was a strategic decision to outsource its large production to Flextronics. However, outsourcing includes risks can the quality and the time-management (JIT) be aware? What are the crucial factors of the LEGOs successful TQM which they should absolutely recommend to their outsourcing partners? give wayicipation commitment a t all levels Both parties have to participate to successful quality management. senior(a) and middle managers Should avoid Should consider autarchy support individualism team build (team spirit) restrict behaviour training Employees Employees involvement improves morale. (FM-A, 2004). We view the implementation of this policy as the shared responsibility of all LEGO employees. (Regani and George, 2007, p. 6). refining Adopt a quality-conscious philosophy as LEGOs motto The best is good enough Organizational culture, LEGO established e. g. a department for Corporate Quality reign over Training Institute training on the job self-improvement to be towering of their jobs. (FM-A, 2004). LEGO implemented a new competency model which defines the eight most important competences for LEGO employees and regularly asking their workers about their trust of the process. Continuous improvement Quality management is the continual examination and improvement of xisting processe s. (FM-A, 2004, p. 382). Not enough to introduce but also need to open the continuous improvement. As LEGO meets the highest quality standards they independently show how mutable the market is. LEGO takes care to stay street smart in the safety requirements (EU CE, ISO). Monitoring (including observeive activities) LEGO quality management aim to prevent defective production (18 out of either million elements are defected) therefore have to assure quality in the production process internally and externally (quality assurance), rather than inspecting goods after they have been produced. FM-A, 2004). Although the high quality production which avoids defaults LEGO carries out regular inspections of production. What can LEGO provide the company they outsourced to with? Documentation A company quality manual may summarise the quality management policy and system. A procedures manual sets out the functions, structures and trustworthy for quality in each department. dilate work instructions and specifications for how work should be carried out show how to achieve the in demand(p) quality standards. Training Integrated blood (training in LEGOs place) Knowledge sacramental manduction train the trainer program (LEGO provide trainers) Monitoring LEGO can delegate large number from its monitoring team. Summary and conclusions Following the seven-year-strategy plan in the last couple of years, LEGOs situation has already stabilized. The further expansion of the operation is possible. LEGO needs to rethink their attraction of the market segments and approach them to identify new market opportunities and niches.By actively using the appropriate elements of marketing mix (not only the classical 4Ps) and thinking about the product design possibilities they should also consider the existing competitive advantages of their product and the cost of capable to the process involved. In case of outsourcing as a cost-saving LEGO needs to support its partners to k eep up the quality as LEGOs core value. REFERENCES Abratt, R. 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The marketing mix Appendix 4. Six Sigma pic Segment prof itability and life cycle disorder Year 1970 1990 1958 2008 LEGO Brick LEGO Technic LEGO Star Wars Substantial brotherly Measurable Stable Actionable anticipate market growth Competitive position Market size Market fit with organisational objectives and resources Personalisation Product Price People Processes Place Physical evidence Promotion The Marketing Plan Defect reduction conk out improvement Customer delight positiveness improvement