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Page 9 8B10M94
costs do exist, as having a large collection of a type of toy gives more possibilities. This is especially true
for LEGO. Furthermore, LEGO has been very good at building a strong user community, especially in the
WHAT HAPPENED AFTER THE CASE?
After the time covered in the case, LEGO managed to continue its high growth. In the first half of 2010,
LEGO presented some of its best results ever. Net sales increased by 34 per cent, results before tax
At the same time, one could begin speculating on whether LEGO was now starting to move away from its
Page 10 8B10M94
Exhibit TN-1
DETAILED TIMELINE
2004 2005 2006 2007 2008 2009
• Jorgen Vig
• LEGO Group
• Contract with
• Swiss and
• Initiates the
• New distribution
• LEGO
• LEGO takes
• LEGO
• LEGO relocates
Page 11 8B10M94
Exhibit TN-2
PROS AND CONS OF OUTSOURCING
Exhibit TN-3
MAIN COST DRIVERS IN OFFSHORING/OUTSOURCING
Costs Description (costs arising from) Impact on LEGO in case
Requirement Specification and
Design Costs
Specification and design of business
tasks
LEGO had a clear plan but failed to
understand the difference in
business models
amount of tacit knowledge made it
more difficult than initial
expectations
• Economies of scale– sourcing
advantages
• Less short-term flexibility to
respond to market changes
PROS CONS
Page 12 8B10M94
Exhibit TN-4
COMPETITIVE ADVANTAGE VERSUS STRATEGIC VULNERABILITY
43-55.
Strategic
control
(Produce
internally)
Moderate control
needed
(Special venture
or contract
arrangements)
Low control
needed (Buy of
f
the shelf)
Degree of Strategic Vulnerability
Potential for
Competitive
Edge
High
Low
High Low
Highest
outsourcing
potential
Page 13 8B10M94
Exhibit TN-5
PEST AND FIVE FORCES ANALYSES OF GLOBAL TOY INDUSTRY
Intensity of rivalry
Medium (increasing)
Threat of substitutes
High
Bargaining power buyers
Medium (increasing)
and different prices through Internet
Threat of new entrants
High
Bargaining power suppliers
Low
•Many suppliers in market
•Currently no critical resource shortage
Technological drivers
Less attractive
Political/regulatory drivers
Unclear
Socio-cultural drivers
Medium attractive
•An increasing focus on creative learning
makes LEGO an attractive product
childhood toy
•Focus on child health gives sports renewed
attention
Economic drivers
Less attractive
•The financial crisis has reduced consumer
spending and global toy industry has been
