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ABOUT THE LEGO GROUP

Headquartered in Billund, Denmark, the family owned LEGO Group has 12,500 employees worldwide and is the second-largest toy manufacturer in the world in terms of sales. Its portfolio, which focuses on LEGO bricks, includes 25 product lines sold in more than 130 countries. The name of the company is an abbreviation of the two Danish words leg godt that mean "play well." The LEGO Group began in 1932 in Denmark, when Ole Kirk Kristiansen founded a small factory for making wooden toys. Fifteen years later, he discovered that plastic was the ideal material for toy production and bought the first injection molding machine in Denmark.

In 1949, the brick adventure started. Over the years, the LEGO Group perfected the brick, which is still the basis of the entire game and building system. Though there have been small adjustments in shape, color, and design from time to time, today's LEGO bricks still fit bricks from 1958. The 2,400 different LEGO brick shapes are produced in plants in Denmark, the Czech Republic, Hungary, and Mexico with the greatest of precision and subjected to constant controls. There are more than 900 million different ways of combining six eight-stud bricks of the same color.

THE LEGO GROUP STRATEGY

To understand strategic risk management at the LEGO Group, you need to understand the company's strategy. This is consistent with the first step in developing strategic risk management in an organization: to understand the business strategy and the related risks as described in the strategic risk assessment process.[1]

The LEGO Group's mission is "Inspire and develop the builders of tomorrow." Its vision is "Inventing the future of play." To help accomplish them, the company uses a growth strategy and an innovation strategy.

Growth strategy. The LEGO Group has chosen a strategy that's based on a number of growth drivers. One is to increase its market share in the United States. Many Americans may think they buy a lot of LEGO products, but they buy only about a third of what Germans buy, for example. Thus there are potential growth opportunities in the U.S. market.

The LEGO Group also wants to increase market share in Eastern Europe, where the toy market is growing very rapidly. In addition, it wants to invest in emerging markets, but cautiously. The toy industry isn't the first one to move into new, emerging markets, so the LEGO Group will invest at appropriate levels and be ready for when those markets do move. It will also expand direct-to-consumer activities (sales through LEGO-owned retail stores), online sales, and online activities (such as online games for children).

Innovation strategy. On the product side, the LEGO Group focuses on creating innovative new products from concepts developed under the title "Obviously LEGO, never seen before." The company plans to come up with such concepts every two to three years. One of the latest examples is LEGO Games System, which consists of family board games (a new way of playing with LEGO bricks) with a LEGO attitude of changeability (obviously LEGO). The company also intends to expand LEGO Education, its division that works with schools and kindergartens. And it will develop its digital business as the difference between the physical world and the digital world becomes more and more blurred and less and less relevant for children.

Now let's look at the development of LEGO strategic risk management.

Four Elements of Risk Management at the LEGO Group

Exhibit 6.1 Four Elements of Risk Management at the LEGO Group

  • [1] M. L. Frigo and R. J. Anderson, "Strategic Risk Assessment: A First Step for Improving Governance and Risk Management," Strategic Finance 12 (2009), 25-35.
 
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