The LEGO Case Study 2014

October 15, 2016 | Author: Ashlee Bennett | Category: N/A
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1 The LEGO Case Study 2014 Dimensions of Strategy from John Ashcroft and Company experience worth sharing2 The LEGO Case...

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The LEGO Case Study

2014

Dimensions of Strategy from

John Ashcroft and Company

experience worth sharing

The LEGO Case Study - New for 2014

About the Author

In 2003 and 2004 LEGO announced losses of over $400 million dollars on annual sales of just over $1 billion. The reorganisation plan announced in 2001 had begun to falter. The company was forced to take a hard look at every facet of the operation including costs, overheads, margins, sales, marketing and the product offer.

John Ashcroft is an economist and expert in Corporate Strategy. The LEGO case study was developed in 2014 following the success of the Apple Case study. An extract from the Apple case study was published in the ninth edition of Johnson, Whittington, Scholes - Exploring Strategy 2011, considered by many to be the "bible" of corporate strategy texts. The Apple Case Study was the second most highly rated case study in the Exploring Strategy text book.

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Non performing assets, including the company's LEGOLAND parks were sold off. A radical plan for recovery and growth was introduced.

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Since then company revenues have increased from $1 billion to $4.5 billion [2013] and profits have soared to $1.5 billion before tax. The company's share of the world toy market has doubled from 2% in 2004 to over 5% in 2012. LEGO has overtaken HASBRO as the second largest toy manufacturer in the world.

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Author of The Saturday Economist, John publishes weekly updates and insights into headline economics news. Other web sites include The Saturday Economist, Dimensions of Strategy, The Apple Case Study, Social Media Experts and the host site John Ashcroft and Company.

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The textbook “Dimensions of Strategy” will be published in the Autumn of 2014. Check out the web site www.thelegocasestudy.com.

How did LEGO achieve this sensational turnaround? We apply our Corporate Strategy framework to help explain how and why. Comparisons with The Apple Case Study abound! It's revealing! Update by John Ashcroft, John Ashcroft and Company from the Dimensions of Strategy series.

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

World Toy Market Toy Market

$ Billions

90 83.3 78.1

80

77.2

83.3

84.1

79.6

72.0 70 60 Data Source

2013

59.0

60.8

63.5

50 40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

World Toy Market

Mattel

Hasbro

Lego

World shares of revenue

World Shares % 8.0 6.0 4.0 2.0 0.0 2004

2005

2006

2007

2008

2009

2010

2011

2012

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

World Toy Market

Mattel

Hasbro

Lego

Revenues $ Billion 7.0

Revenues $ Billion

6.0 5.0 4.0

Lego takes 2nd slot

3.0

Hasbro 2013 data

estimate based on Q3 YTD

2.0 1.0 0.0 2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Lego

LEGO - The Golden Arch 30.0 25.0

Rate of Change of Revenues %

20.0 15.0 Actual Rate of Change

10.0 The Golden arch 5.0 0.0 2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Sales Revenues 1995 - 2000 10.0

9.8 7.5

7.5

7.6

7.7

1996

1997

1998

9.5

6.8 5.0

2.5

0.0 1995

1999

2000

Danish Krona Billions data from 2000 Financial Report

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Profit before tax 1995 - 2000 1.0 0.8

0.7

0.7

0.5

0.5

0.3

0.2

0.0

-0.3

-1.0

-0.3 -0.5 -0.8 -1.0 1995

1996

1997

1998

1999

2000

Danish Krona Billions data from 2000 Financial Report

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Sales Revenues 1993 - 2013 25.0

25.4 23.1

20.0 18.7 16.0

15.0

11.7

10.0 9.5 7.2

6.7

7.1

2003

2004

2005

5.0

7.8

8.0

2006

2007

0.0 2008

2009

2010

2011

2012

2013

Danish Krona Billions data from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Profit before tax 1993 - 2013 10.0

8.0

8.2 7.5

6.0

4.9

4.0

2.9

2.0

0.0

5.5

0.5 -1.5

1.5

1.4

1.8

-1.2 Losses include restructuring costs

-2.0 2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Danish Krona Billions data from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Return on Sales % 40.0 30.0

30.5

29.6

2010

2011

32.6

32.5

2012

2013

24.8

20.0

20.0

17.6

19.4

10.0 6.5

0.0

-20.8

-18.5

-10.0 -20.0 Loss ratios include restructuring costs

-30.0 2003

2004

2005

2006

2007

2008

2009

Data derived from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Cash Flow 7 6.7 6.2

6

5

4

3.7

3.8

2010

2011

2.7

2 1.9

1

1.2 0.7

0.6

2004

2005

0.0

2003

2006

1.0

2007

2008

2009

2012

2013

Danish Krona Billions data from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Gross Margin % 80.0 75.0 72.4

70.0

70.3

70.5

70.6

70.1

2011

2012

2013

66.8

65.0 60.0

64.6

65.0

2006

2007

60.1 58.0

55.0

56.5

50.0 45.0

2003

2004

2005

2008

2009

2010

Data derived from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Overhead Ratio % 80.0 70.0

71.3

60.0

60.6 52.5

50.0

48.7

49.4 45.7

40.0

44.6 40.5

40.3

37.6

37.2

2012

2013

30.0 20.0 10.0

2003

2004

2005

2006

2007

2008

2009

2010

2011

Data derived from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

The Golden Cross

“When Gross Margin exceeds overhead ratios”

80.0 75.0

71.3

70.0

72.4 70.3 60.6

65.0 60.0

80.0

52.5 60.1

64.6 48.7

65.0 49.4

58.0

56.5

Gross Margin %

70.5

70.6

70.1

60.0

66.8 45.7

44.6

Overheads %

40.5

40.3

40.0

37.6

37.2

55.0 50.0

20.0

45.0 0.0 2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Data derived from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Sales per employee 2,400 2,221

2,000

2,159

1,998 1,914

1,912 1,768

1,600

1,600

1,594 1,330

1,200

1,197

800

400

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Danish Krona Millions data from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Working Capital Ratios : Stock 15.0

50.0

14.0

42.2

13.0

38.8

41.1

43

33.3

11.0

10.9

10.0

9.4

33.1

12.1 30.2

13.9 40.0

12.2 30 26.9

11.0

30.0

26.2

9.9 8.9

8.7

8.0

13.5

36.7

12.0

9.0

Stock “days”

Stock turn

20.0

8.5

7.0

Stock Turn : Sales / Stock

6.0

10.0

Stock days : Stock / Sales * 365 0.0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Data derived from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Shareholders Funds

LEG total equity interest

12 11.1

10 9.8

8 7.0

6 5.5

4

4.5

4.2 3.3

3.3

2.6

2

1.7

2003

2004

2005

2006

2007

2.1

2008

2009

2010

2011

2012

2013

Danish Krona Billions data from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

Return on Shareholders Funds 100 90.0 84.7

88.1

89.7 79.8

75

76.5

74.4

50 34.8

25 13.9

0

-35.7

-47.3

Return on Shareholders Funds % Pre tax profit / Total Equity Interest

-25 Pre Tax basis

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Data derived from Financial Reports

The LEGO case study from Dimensions of Strategy : John Ashcroft and Company 2014

The LEGO Case Study

2014

Dimensions of Strategy from

John Ashcroft and Company

experience worth sharing

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