SWOT Analysis of Lego: Strengths & Weaknesses 2021


NameLego
IndustryToys
FoundedAugust 10, 1932
HeadquartersBillund, Denmark
CEONiels Christiansen
Revenues$7 Billion (2020)
Profit$2 Billion (2020)
CompetitorsHasbro, Fisher Price, Nerf, Barbie, My Little Pony, Bandai Namco, Mobile Suit Gundam

Company Overview:

For over eight decades, Lego has been an instrument in family activities where both parents and kids use the stackable bricks to unleash their ideas and creativity. Lego is a family-owned business founded in 1932 by Ole Kirk Kristiansen, who used to be a carpenter. He thought of combining the Danish words “leg godt”, which means “play well”. Today, it is one of the world’s largest toy manufacturers. Lego delivered a strong growth performance in 2020, probably because of the lockdowns brought by the global pandemic, which made everyone stay at home. Lego announced that more children and fans played with Lego as evident in their strong growth of consumer sales, revenue, and operating profit. Their revenue grew by 13% at $7 billion and operating profit increased 19% to $2 billion. In the first half of 2021, Lego’s revenue rose 43% year on year to $3.6 billion and profit reached $1.75 billion.


Lego Strengths 2021:

  • Sustainability initiatives.

    Lego Group recently announced their investment of $400 million to sustainability initiatives. For over three years, they plan to focus on bringing learning through their toys and materials. This learning through play initiatives also aims to reduce environmental impact by reducing its absolute carbon emissions to 37% by 2023 (Lego, 2021).

  • Increased market share. 

    Attributing to pandemic lockdowns where families are forced to stay at home, Lego enjoyed great market share. Sales grew 36 percent and operating profit increased 104 percent. Lego also opened 60 new branches with almost 70 percent of them from China. Lego CEO Niels Christiansen is seeing a stronger demand in the second half of 2021 (Wienberg, 2021).

  • Licensing deals. 

    When Lego decided to incorporate popular icons on top of the stackable bricks instead of the generic yellow-headed characters, they became more popular and profitable (Craig, 2014). Some of the icons are from Toy Story, The Hobbit, Harry Potter, Spiderman, Star Wars, and recently, the popular show, FRIENDS. This innovative step was enthusiastically welcomed by fans of both Lego and the icons.

  • Lego community.

    One of the reasons why Lego is one of the most loved brands is because of its online community called Lego Ideas. It brings together passionate fans to share their ideas and creativity. For as long as there are passionate fans who would participate in the community, who would purchase and evaluate products, Lego will continue to grow its consumer base and market share.

Lego Weaknesses 2021:

  • Counterfeits. 

    In 2020, Lego announced that they have been receiving tips from fans around the world that there are fake Lego sets being sold on some websites. The fake sets look genuine that Lego had to provide steps on how to spot a scam LEGO website (Lego, 2020). This concern may seem that the Lego sets are relatively easy to clone or copy.

  • Pricing. 

    Although it can be justified that the products are high-quality, and they provide happiness to kids and grownups alike, it cannot be doubted that Lego sets and bricks are expensive. The consumers also pay for the licensing fees when they purchase themed Lego sets or bricks. Because of their high price, some consumers might opt to switch to other brands.
  • Competition.

    Most users consider toys primarily for entertainment before anything else. Brand switching is inevitable because of consumers’ spending habits and personal preferences. Online games and entertainment are also distractions.

Lego Opportunities 2021:

  • Virtual/Augmented reality. 

    Virtual reality is not entirely new as millennials enjoy this kind of entertainment. Lego has virtual reality applications where kids can interact with players and surroundings inside the game using VR goggles. However, there was a decline in the demand for virtual reality as some users find it expensive and uncomfortable. According to a report, virtual reality technology will reach over $8 billion by 2030 (Schultz, 2020).

  • Recycled PET plastic. 

    Some people have raised concerns about the environmental impact of plastic toys. As part of Lego Group’s sustainability drive and environment concern, they have recently created their first prototype bricks using recycled PET plastic from discarded bottles. They are still in the process of testing and developing it before it proceeds to production. Lego Group’s sustainability goals include developing products from bioplastic and generating little or no waste (Finney, 2021).


Lego Threats 2021:

  • Online & digital gaming. 

    Playing with Lego sets enhances a kid’s cognitive learning. Although it would be much preferable if the new generation experienced traditional games and learning, online games and reaction are the current trends. According to a report, the global games market is projected to exceed $200 billion by the end of 2023 with more than half of it coming from the mobile gaming market.


  • Competitive market. 

    The toy and games market is intensely competitive with its top players namely Lego Group, Mattel Inc., Hasbro Inc., and Master Ltd, among others. To keep their fans and gain more market share, each of these brands works on introducing products that they hope would become a hit. They also have their own strategies for merging and acquiring. It is projected that this market will register a compound growth annual rate of 9.91% from 2021-2026 (Mordor Intelligence).

Lego SWOT Analysis Conclusion:

Despite the stiff competition in the market and concerns about product cloning and online games distractions, Lego Group performed well last year and they have no signs of slowing down this year. Lego is an iconic toy brand enjoyed by kids and adults alike. Their fanbase grew even more when they added themes of popular shows to their Lego sets and bricks. The licensing of these bricks may have increased their selling price, but fans still welcomed them. Virtual and augmented reality will be the future of entertainment. Lego’s taking steps in preparing for it through their virtual reality and augmented reality applications. Lego is seeing a great future in terms of product innovation and sales growth. They have an active community of Lego players who share ideas and creativity together. Because of these factors and their sustainability initiatives, Lego can experience and upward trends for a long time.


References:

  1. Nasdaq, 2021.  Lego Towers Over Competition With Record 2021 Profit. [online]. Nadaq.
  2. Lego, 2021. The Lego Group delivers strong growth in 2020. [online]. Lego.
  3. Lego, 2021. How to spot a fake LEGO® webstore. [online]. Lego.
  4. Wienberg, C. (2021). Lego Profit Doubles as Consumers Turn to Toys During Lockdown. [online]. Bloomberg.
  5. Craig, E. (2014). How Legos Licensed the Universe, and Ended Up Ruling Us All. [online]. Wired.
  6. Schultz, B. (2020). VR, AR and MR Will Be The Most Disruptive Technologies of the Next Decade. [online]. Wired.
  7. Groenewald (2020). Why Are LEGO Sets So Expensive. [online]. Fractus Learning.
  8. Palermo, F. (2020). Time To Get Your Game On: The Future Of Online Gaming. [online]. Forbes.
  9. Mordor Intelligence, 2021. TOYS AND GAMES MARKET – GROWTH, TRENDS, COVID-19 IMPACT, AND FORECASTS (2021 – 2026). [online]. Mordor Intelligence.
  10. Finney, A. (2021). Lego develops recycled bricks made from discarded bottles. [online]. Forbes.

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