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1 1. Explain how the development of strategy at the LEGO Group reflects the keycha racteristics of strategic management outlined in section 1.2 and in themodel in Figure 1.4. According to the authors of the ninth edition of Exploring Strategy as well as th reeof the worlds leading strategy theorists, strategy is defined as the long term directionof an organisation. It aims to incorporate the latitude o f the organisations activitiesand subsequently increase their competitive advant age over their business rivals.Strategy is also aimed at addressing change in th e macro and micro environmentand exploiting resources to enhance the proficienci es of the company.Figure 1.4, as depicted in the prescribed text, depicts the model of ExploringStrategy. It includ es understanding the strategic position of the company, analysingstrategic choices for the future and managing the process of strategy in action.In the initial sta ges of its strategy, the LEGO group identified its current positionwithin the ma rket as well as the evidence of competitors that were vying for marketshare. The y understood that in order to increase their competitive advantage thecompany ne eded to identify and analyse competitors within the market. This wouldenable the m to determine what their long term plan would be with regard to changeand innov ation.LEGO then explored their strategic choices by asking themselves a question : Shouldwe concentrate only on what we are doing now or should we develop fresh productsand incorporate new innovations? By analysing their strategic choices, L EGO wasable to highlight and implement strategic solutions for continued growth anddevelopment of the company.Through this implementation of strategy many chang es were made that affected thescope of the business. Cost cutting and laying off of staff were part of the changethat was necessary to incorporate the strategy of the company. LEGO managed thestrategy by continuously reacting to the changes in the environment. Even thoughsome of their actions failed dismally, the focus on vital customers and innovationensured a progressive climb back to profitabil ity, development and growth.Managing the strategy is key to the long term succes s of the company. The companyexperienced operational and business level failures but continued to manage the

2 bigger picture. The LEGO Group clearly proves that strategic decisions are compl exand difficult and some of the decisions made are undertaken in uncertain times (global recession). However, strategy is an integrated approach and requires all facets of the business to be pushing forward in the same direction.

3 2. What features of the external environment have influenced strategydevelopment at the LEGO Group? One of the initial strategy decisions was based upon the oil crisis in the 1980s. The company reacted favourably by introducing new innovations and penetratingpreviou sly unexplored markets. Changes in the market environment in the 90s also spurred on s trategydevelopment at LEGO. The advent of competitors and research contrary to w hatLEGO was basing its strategy on up to that point proved to be a focal point f or thecompany. Objectives were set out and adopted and the company moved on.LEGO had difficulty in accessing and reading the market. Once this was highlighted,w ith the aid of a new COO, the company restructured and went on a cost cuttingexp edition freeing up resources to assist with the long term objectives.LEGO suffered a sha rp decline in the most admired companies in Denmark poll.

The external image of the company - that which affected the general publics opinio nand the desirability of the LEGO Group as a prospective partner and employersuf fered due to the fluctuations in sales and profits.Heavy financial losses result ed in a weaker capital structure and limited investmentopportunities for the fut ure. As a result the entire procurement process was re-analysed and restructured and cost reductions in all sectors of the business weresignificant.

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