Planning Essay There is no single optimal planning system.

To be effective, plans must match the conditions a firm faces and be linked to individual and group responsibilities. This essay will discuss certain components of the strategic plan employed by the Lego group over the years, mainly focusing on the fix that wasnt and the managing for cash phases. Some components of planning include strategy, SWOT analysis, strategy feasibility, strategy development, action programs, implementation and control. After the Growth Period that wasnt, LEGO faced their first financial loss in history when their investments to become an unrelated diversified company such as through expanding into videogame software and childrens wear failed to boost sales. Subsequently, COO Poul Plougmann was brought in and there was a change in strategy. While the company still had a differentiation strategy, there was an increased focus on cost as Plougmann launched a Fitness Program aimed at streamlining production and reducing organizational layers. However, it is possible that the cost reduction initiatives clashed with their corporate strategy of growth, as they made substantial investment in expanding their product portfolio and experienced consequent cost increases. Hence, the feasibility of their strategy is questionable in this period, and the expansion into new product lines and brand repositioning may have diluted the image of their brand, which was supposed to be their source of competitive advantage. For example, the repositioning of their preschool line did not reflect what customers expected of LEGO. The action programs used include the Fitness Program and also new product launches such as LEGO Star Wars as their first in-licensed brand. In terms of implementation, Plougmann sought to lay off up to 10% of total staff and move managers around rapidly to promote general leadership experience rather than direct experience in LEGO toys. Efforts were made to streamline production to match forecasts. However, what can be noted in this period is the lack of proper control systems. For example, nobody monitored the number of new products being developed, which led to problems along the supply chain. There was also a lack of discipline and accountability in the companys operations, for example, individuals would directly call their friends in manufacturing to tell them what to produce and inventory management was poor. In the Managing for Cash period, Knudstorp as the new CEO started the whole planning process from scratch. He knew that there was no quick fix. The strategy for growth was changed to a strategy of putting survivability first. He did a SWOT analysis by talking to people in and outside of LEGO to understand their identity, core business and value proposition for customers. He assessed the feasibility of the strategy and realized that to deliver in the long term, sacrifices needed to be made. He

then developed the strategy based on the vision, mission, goals and core values of LEGO, that is to secure survival and gain control by focusing on core products and processes. Together with his management team, they developed the Shared Vision strategy, a three stage plan to restructure and stabilize the business, boost sales and reduce debt. In terms of implementation, it was decided that any ventures beyond the brick should be curtailed. For example, LEGOLAND parks was divested, the video games unit was shut down and the number of brick components was reduced, and classic product lines were relaunched. Additionally, Knudstorp fired employees who did not have the same view as him in an effort to achieve goal congruence. Effective controls were put in place with financial performance as a guiding framework. For example, setting a target of 5000 brick components to achieve simplification helped streamline costs. In conclusion, we can see that it is important for the planning process and strategy to be structured around the condition the company is in. During Plougmanns time, the strategy was not reviewed; leading the company to veer away from its core values, and insufficient attention was placed on the feasibility, development, implementation and control of the strategy which led to further financial loss. On the other hand, Knudstorp identified the core values of the organization, identified the key things to focus on and subsequently developed and implemented a well-defined strategy which put LEGO back on track.

Nipper v Padda (entering buildable games market) An issue touched on in the case study is whether the company should enter into the line of buildable games. If launched, the new line would pioneer a new, hybrid category of toy and take the Group close to board games, a category dominated by Hasbro and Mattel. This essay will discuss whether entering the buildable games market is the right move in terms of the LEGO Groups strategy. Currently, LEGO Groups strategy is to focus on its core products, which are in line with their brand and values. They want their products to be easily identifiable as LEGO. Knudstorp also believes in incremental continual improvement rather than true innovation breakthroughs. Hence, there is a predefined framework of rules and principles that designers are required to follow. In order to enter the buildable games market, new components will need to be introduced, and this will add additional complexity to design and procurement. Additionally, the company needs to consider the possible dilution of the brand, or cannibalization of its existing products. LEGO should learn from their past. During the building LEGO group period, Godrfret controlled the companys operations very closely, and no new product, brick or color was introduced without his approval. This is in line with the strategy to focus on core products, which led to success during that period. It was during 1993-1998 when the company started diversifying into other product lines, and became an unrelated diversified corporation as they branched out to videogame software, childrens wear and watches, that they started to experience financial loss. This may be attributed to the dilution of their brand and values due to the increased complexity, thus causing them to veer away from their core values and initial vision. From 2004 onwards, when the company revised their strategy to focus on their core products and divested other products which were deemed too far away from the core, the company got back on track. This would seem to indicate the importance of keeping their products simple and easily identifiable. In this case, entering the buildable games market will not only increase complexity, it also differs from the construction toy category, and is more towards the board games category which is not LEGOs expertise. Even though there is potential for growth in that market, LEGO could be diverting away from its core, or cannibalise their existing products. A similar situation happened when their Star Wars line cannibalized their existing products. Hence, risk management plays in here, and LEGO needs to take into account the increment profit of their investments, not just the direct profit. In conclusion, at this point in time, it does not seem wise for LEGO to enter the buildable games market as it may add unnecessary complexity to their products and incur extra costs in their supply chain, and also possibly dilute their brand and image.

Events General privately held by the Kristiansen family and committed to developing the imagination of children revenue growth 165% in 2004-2010 invested capital soared above 160% in 2010 Padda Global Supply Chain VP Nipper Market and Products VP annual negotiations of how many new components available for new products Nipper wants to enter into buildable games market Toy Industry retail market for toys growing at steady rate but demand for fad toys could surge or collapse rapidly Building LEGO Group (1916-1992) aiming for quality, only the best is good enough first in Denmark to have plastic injection molding machine 1949 portfolio grew to making both plastic and wooden toys 1954 external influence: realize that toys lacked systematic organization, considered a LEGO system of play 1960 discontinued wooden toy production after fire, strategy focused on the brick, endless variations strong culture of creativity steady introduction of new products and bricks increase target market, larger audience to children under 5 and teens. high quality of bricks, standardized spacing, bricks still compatible tech as source of competitive advantage three phase production process tight control: no new product/brick/color introduced without his approval added new themes geographic expansaion: to Eastern Europe and Asia strong market share: accounted for 80% of construction toy market Growth Period That Wasnt (1993-1998) several shifts in toy market external environment, risk: decline in spending on toys, mass discounters featuring toys