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Lego Company’s Performance Management Essay

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Updated: Jun 4th, 2021

Introduction

The significance of managerial economics has become increasingly high in the modern economy. In order to function in the global market effectively, a company needs to develop an organizational management strategy that is pliable enough to address emergent risks and use unexpected opportunities (Birch, Warren, Nicholson, & Minifie, 1965). Due to the changes occurring lately to the communication patterns and management strategies within companies, the focus on innovation has to be consistent, which is rather difficult for a firm operating in the domain of the toy industry. Being one of the leaders in the selected sphere, the Lego Group could use some changes to its organizational management regarding the values and corporate ethics for decision-making, as well as the current value chain and the sustenance of competitive advantage.

The Lego Group and the Six Topics

Corporate Values

The reconsideration of the current corporate values should be deemed as an important step for Lego Group to take. While the focus on employee engagement and quality management are noteworthy advantages of the firm, Lego Group could use more focus on the use of innovation as the crucial component of corporate development, philosophy, and decision-making (Egan, 1995). The proposed principle is believed to have a largely positive effect on the company’s competitiveness because of the subsequent increase in product quality.

Competition

Bargaining power of buyers Low: similar products are low-quality toys offered by copycat organizations
Bargaining power of suppliers Low: it is comparatively easy for the company to switch from one supplier to another
The threat of new entrants Low: economies of scale prevent new entrants from gaining influence fast.
Threat of substitutes High: recent focus on gaming applications has made Lego products lose their popularity.
Competition High: companies offering games based on digital applications may surpass Lego Group.

Figure 1. Lego Group: Porter’s Five Forces.

As Porter’s Five Forces analysis performed above shows, the problem of competition is, perhaps, the most complex of the topics that Lego Group needs to address (see Fig. 1). While the organization has been known for its specific brand of toys, the recent rise in the popularity of digital entertainment and especially gaming applications has jeopardized Lego Group’s success. Therefore, the firm should focus on integrating online toys into its line of brands.

Value Chain

Strengths
  • Immense brand name recognition
  • Expansion into the movie franchise
Weaknesses
  • Lack of focus on app development;
  • The complexity of the supply chain
Opportunities
  • Digital technologies
  • Expansion into new markets
Threats
  • Competition of technologically advanced companies;
  • Failure to attract new customers while maintaining prices reasonable

Figure 2. Lego Group: SWOT Analysis.

The value chain of the company could also use several updates. The company has been focusing on the improvement of its in- and outbound logistics and communication with its web-based community recently (Rehse, Dadashnia, & Fettke, 2018). However, the current endeavors are not enough to maintain the firm’s competitive advantage sufficiently large. The introduction of better procurement control tools would enhance the organization’s performance in the global market (Johnson, ‎Scholes, ‎& Whittington, 2009). Overall, since the value chain is active, the Lego Group will need a consistent focus on emergent threats (see Fig. 2).

Organizational Structure

The organizational structure of Lego is one of the company’s problems. With numerous departments and subdivisions, the company has grown to the point where controlling it has become quite difficult. Therefore, it is critical for the firm to improve the connectivity within its framework, which can be achieved by deploying innovative IT and ICT tools.

Employee Motivation

The levels of employee engagement are rather high at Lego Group. The trend toward their increase can be explained by comfortable workplace conditions and impressive employee benefits (Egan, 1995). However, introducing a more coherent approach toward innovative decision-making in staff members would be a welcome improvement.

Project Management

Lego Group has been focusing on the project management principles introduced in PMBOK for years (Rehse et al., 2018). However, given that the new PMBOK guidelines will be rooted in principles rather than processes, the current approach that Lego Group uses to address its performance should be shaped to align with the latest principles of PMBOK (Danish et al., 2019). Specifically, a more active focus on corporate values and the enhancement of manager-employee communication is expected to become a priority.

Importance of Each of the Six Topics for the Lego Group

The significance that each of the topics discussed above holds for the organization is immense. When evaluating their gravity, it is worth keeping in mind that each of the topics mentioned above represents a constituent of a larger narrative in the context of which Lego Group will have to operate. Maintaining success in one of the domains implies supporting the firm’s performance in the other four, and vice versa. The continuity of the organizational processes will allow Lego Group to remain highly competitive by using innovative thinking, focusing on customer satisfaction, and keeping employee engagement.

Indeed, the organizational structure of the firm defines the environment in which staff members work, determining the chances for successful collaboration and, therefore, effective implementation of a project. In turn, corporate values will set the principles for staff members to adhere to when making important decisions in the context of the firm. As a result, the value chain of the firm will remain effective, with products enjoying broader popularity, and the company reaching a new level of competitiveness (Scuotto, Caputo, Villasalero, & Del Giudice, 2017). Thus, each of the six topics covered above is crucial for Lego Group’s performance in the global market.

The usefulness of Understanding This Topic in Today’s Corporate Structure

The concepts and ideas listed above hold especially high relevance in the environment of the modern economy. Presently, the corporate structure is geared toward expansion and the interdisciplinary dialogue, which necessitates enhancing communication and reciprocity within a company’s departments. In addition, a firm has to be guided by the concept of innovation-driven management in order to hold its competitive advantage at a reasonable level. By integrating the innovative ideas linked to each field, such as employee and employer engagement, innovation-driven value chain, and principle-driven project management, Lego Group will create a cohesive framework for performance. In the global market, the described change is crucial for the firm’s advancement, especially given the presence of competitors who have developed an impressive product line in the digital setting. Thus, Lego Group has to understand the gravity of failing to connect the six topics in question in its corporate philosophy.

Strategies for Excelling over other Strategically Grouped Companies

As emphasized above, Lego Group may encounter several difficulties soon as a result of ignoring the digital market for quite a while and allowing its competitors to take charge of it. Therefore, to excel over the companies that have been grouped strategically in the global market, Lego will need to reconsider its approach toward digital technology and its role in its organizational context. By exploring the potential of the digital market and creating applications, games, and similar products, Lego Group will use the current momentum gained due to exposure to the global media via the movie industry (Andersen & Ross, 2016). Consequently, Lego Group will be able to outgrow its competitors and retain its position as a leader in the toy industry, at the same time attracting new audiences to its products. The reinforcement of organizational values and introduction of the principles that will empower the company’s members and partners to collaborate will also lead to building a more impressive competitive advantage by strengthening logistics-related processes within the supply chain

Conclusion

While being one of the leaders in the toy industry, Lego has been performing quite well in the global market, especially given the recent expansion in the franchise to the movie domain. However, to maintain its competitive advantage and the position of a leader, Lego Group will require a focus on employee empowerment, innovation-driven management, and focus on the digital market. The reinforcement of the firm’s supply chain should be incorporated into the list of objectives that the firm should pursue in the nearest future. The described changes will help Lego Group to cement its position as a global leader and prevent emerging competitors from posing a tangible threat to the organization’s popularity.

Therefore, it is recommended that Lego Group should revisit its corporate values and philosophy, targeting the concept of innovation instead of the current focus on efficient performance in the market. The described step will entail vast changes to the organizational structure, leadership, and project management. The redesign of the data management process across the supply chain and the introduction of more challenging quality standards into the organization’s setting are believed to be the essential changes that Lego Group will have to sustain in order to keep its success streak uninterrupted.

References

Andersen, P., & Ross, J. W. (2016). Web.

Birch, C. M., Warren, J. H., Nicholson, O. C. P., & Minifie, W. C. J. M. (1965). Managerial economics and management decisions. The Business Quarterly, 30(3), 70-76.

Danish, M. S. S., Senjyu, T., Funabashia, T., Ahmadi, M., Ibrahimi, A. M., Ohta, R.,… Sediqi, M. M. (2019). A sustainable microgrid: A sustainability and management-oriented approach. Energy Procedia, 159, 160-167. Web.

Egan, T. P. (1995). Updating managerial economics. Business Economics, 30(3), 51-56.

Johnson, G., Scholes, K., & Whittington, R. (2009). Exploring corporate strategy: Text and cases. New York, NY: Pearson Education.

Rehse, J. R., Dadashnia, S., & Fettke, P. (2018). Business process management for Industry 4.0–Three application cases in the DFKI-Smart-Lego-Factory. IT-Information Technology, 60(3), 133-141. Web.

Scuotto, V., Caputo, F., Villasalero, M., & Del Giudice, M. (2017). A multiple buyer–supplier relationship in the context of SMEs’ digital supply chain management. Production Planning & Control, 28(16), 1378-1388. Web.

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