Complete 8 page APA formatted essay: Lego Mindstorms.Normally diversification strategies can lead to strategic competitiveness and above-average returns. In general firms using related diversification

Complete 8 page APA formatted essay: Lego Mindstorms.

Normally diversification strategies can lead to strategic competitiveness and above-average returns. In general firms using related diversification strategies outperform those employing unrelated diversification strategies. At some point of time the firms can become over-diversified. The level at which over-diversification occurs varies across companies, because each firm has different capabilities to manage diversification. Irrespective of the type of diversification strategies implemented declines in performance result from over-diversification. Even when a firm is not over-diversified a high level of diversification can have a negative impact on the long term performance of a firm. For instance the scope created by additional amounts of diversification often cause managers to rely on financial control rather than strategic controls to evaluate business units’ performance. Without a clear understanding of the objectives and strategies of the business the top level executives tend to rely on financial controls. Though this will ensure short-term gains are generated it may have a severe impact on the long-term investments and prospects of the firm.&nbsp.In the case of Lego several mistakes in its history of last twenty and odd years and the biggest of such mistakes were to confuse growth with success. The sales growth of Lego was phenomenal during the 10 year period from1978 to 1988 with the sales increasing from Danish Kroner 1 billion to 5 billion which is a five fold increase. This sales growth made Lego look great. While during the 1980s VCRs, video games, cable Television and computers started to have their influence on the children Lego was busy expanding its sales to its target market across the world. &nbsp.The main problem with the operations of Lego was that the company became a slow company with its complacency. For instance the company formed an association with MIT in 1984 but until ten years later the company could not invent any ‘intelligent brick’. Though the programmable brick became popular the company could not market it as a mass market product since the company was unable to reduce the price. The real problem was that Lego lost its audience who the children loved at one point of time. It seems that the company had a core play values ‘encouraging the imagination and putting the child in charge’.&nbsp.