Strategic Management Assignment (Coursework Sample)

Strategic Management Assignment
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Executive summary
LEGO group was experiencing a change in fortune with its market share dwindling. For years, it had delighted in being the leading toy making company with one of its brands (Lego bricks) experiencing unparalleled success. Having started as a small time family company, the company blossomed under the stewardship of its founder Kirk Kristiansen which grew into one of the leading brands in the toy making industry up to the early 90s. However, its fortunes hit a snag when emerging trends brought down business. In a quest to rescue his enterprise, Kirk appointed a new COO Poul Ploughman, to manage the enterprise.
He brought significant changes by reorganizing LEGO group so as to bring down production costs. Lego group came up with a corporate strategy with the aim of conjoining the actions of the variety of functional sections of the enterprise in order to achieve the organizational set objectives. To begin with, Kirk introduced five managers to aid him in the administration of Lego group. This was aimed at delegating duties to meet the organizations set goals and to ensure efficient allocation of resources.
Through this, the managers would become more responsive to emerging trends. They established an attainable visor with growth being the aim. Lego group conducted a test on coming up with innovative products. With this, they balanced innovative products with tried solutions. Moreover, in order to guide the organization towards actualizing its goals the enterprises were motivated to come up with their solutions to problems. In order to sustain a competing advantage, they had cut down on production cost by and introducing a new range of products.
After what transpired between the years 1999 - 2004 it was evident that the group had to come up with new strategies since the growth strategy had failed. The company had suffered its first loss, and this had to be mitigated to avoid bankruptcy. The company took its first bold steps in turning its fortunes around when in the year 2003 Kjeld reshuffled the leadership of LEGO group. He fired the five- man management and their assistants. Kjeld stepped down as CEO and instead invested in the firm and appointed Knudstorp as the new CEO. The new leadership had to develop new strategies so as to save the group that was on the brink of bankruptcy. Intensive internal and external analysis had to be conducted (Foss, 2012).
Review of internal business environment.
Knudstorp had to make use of the business system model in addressing the problems faced by the organization internally (Schultz et.al, 2005).He laid down incompetent workers and put in place an efficient accounting and cost system. Discipline on the way the business was conducted had to be instilled.
Working as a consultant in 2001 he noted that the business transactions were carried out in a very casual manner for instance, senior officials would procure goods in very unorthodox way by calling their friend in manufacturing and asking them, to boost supply on LEGO’s behalf. That was not the only unprofessional incidence that he observed. Furthermore, the company could no longer meet the demand of their loyal customers, and most of them complained of having ‘dead stock’ from LEGO.
All the firms strategies were put under scrutiny, and the analyzed financial statements revealed a ‘see-saw’ tendency on the firm’s profit margins (Prencipe, 2003). Finally, the new CEO gave his advice; one, he suggested that the business be sold and secondly, he asked the workforce to keep faith in the Kristiansen family. He recommended that the firm’s core be sold to offset some of the overdue debts so as to ease the surmounting financial pressure from their creditors.
Review of external business environment using Porter’s ‘five forces’ model
To start with, Jorgen observed that the firm had lagged behind in embracing new trends in the manufacturing line. The big players in the toy making industry like Hasbro and Nike had opted to outsource its production processes to companies in the Far East so as to cut down on production costs.
Also, their rivals outsourced the supply chain tasks to specialist's firms. In essence, outsourcing helped its rivals in cutting down on production costs and gave them more time to focus on their strengths. Outsourcing involved contracting other professional companies to conduct some non-core functions of a firm (Greaver, 1999). The following are Porter’s five forces analysis (Porter, 1998):
Force 1: threat of a new entry
The possibility of a new player into an already crowded market is always a cause of concern to the existing players. However, new entrants were unavoidable in the open market. Thus, the firm had to be aware of the effects of such an entry and take the appropriate course of action. For instance, outsourcing would improve access to inputs, increase the scale of production and sells and would further strengthen a brands identity in the market.
Force 2: threat of substitutes
Here, the tendency of a buyer opting for the substitute as a result of the need to switch costs and pricing is what comes to play. Many consumers of LEGO’s products claimed that there were a reduced childhood and an increased adolescence in today’s children. Hence, LEGO had to rebrand their products so as to cater for even adolescents. This would be an ideal technique to counter products from their rivals that appealed to both ages.
Force 3: supplier power.
In comparison to Disney and Nike, LEGO was a significantly small player in the industry. Even though, this was an advantage LEGO had the potential and if harnessed it would be able to stay on as a legitimate competitor.
Force 4: level of rivalry.
The extent of rivalry between the toy making firms was an important aspect and needed proper attention. LEGO had to study their rivals and try to improve on their weaknesses.
Force 5: buyer power
All the aspects that influenced the consumer’s decision making had to be studied by the firm if it was to save itself from bankr...