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Create a 7 page essay paper that discusses Picking up the Lego pieces.The result was a disaster.Lego adopted the diversification strategy of expanding its market to include girls and older boys and se
Create a 7 page essay paper that discusses Picking up the Lego pieces.
The result was a disaster.
Lego adopted the diversification strategy of expanding its market to include girls and older boys and selling new and unrelated products like clothes, watches, video games and theme parks to these new markets. Like other companies that went beyond their core competence – in Lego’s case, mak
ing toys for 5-9 year-old boys – Lego failed miserably and lost money because market share spiraled downwards as it sold lesser products to lesser customers and incurred higher costs.
The CEO hired in 2004, Jorgen Vig Knudstorp, changed the corporate strategy to one of focus and product differentiation. While Lego continued to expand its market to include older age groups, differentiation is not the same as diversification, and in this sense the Economist article was not entirely correct when it claimed “bits of the diversification strategy remained.” Lego continued to offer the same focused brand of “play for all” experience – Lego comes from the Danish leg godt which means “play well” – to a larger market and aligned the rest of the company to be profitably right-sized for it.
Lego’s next steps delivered positive results and showed it could “diversify” into computer based games for an older age group, staying focused and pragmatic while building on its traditional brick-based products (Watts). Its blockbuster Bionicle and Mindstorm product lines led to profitable product extensions like Star Wars and Harry Potter, capitalizing on film tie-ins, and extended market reach to more countries, especially to emerging China and Japan, acknowledged to be Lego’s top market in Asia for construction category toys (McGinn. Lego Website).
Cheaper products made in Asia and sold by Tyco under the Super Block brand eroded Lego’s market share in the 1980s. While Lego enjoys first mover advantage and continues to be number one in the construction category toy market, competitors are fighting a marketing war