From Near-Bankruptcy to Most Valuable Company: Inspiring Story of Lego - MBA Case study analysis

From Big Losses to Most Successful toy company - Inspiring story of Lego's Game Changing business Model*


Once upon a time, Lego was the most beloved toy for children all over the world. But as time went by, the company started to face a lot of problems. It was in 2004, Lego was in trouble. The toy company had just reported its biggest-ever loss of $285 million. Things were not looking good for the beloved Danish brand. But just eight years later, Lego became the most valuable toy company in the world. They achieved a revenue of $4.5 billion and profits of $1.5 billion. Even more impressive, Lego replaced Hasbro on the Leaderboard of toy manufacturers. This is the story of how Lego pulled off one of the greatest turnarounds in business history. Lego had been experiencing flourishing growth for years. But at the end of the 90s, the toy manufacturer realized they had reached a natural end of expansion. Their massive increase in sales was mostly due to a rapid globalization strategy. The growth was sugar-coating a lot of the problems arising. Given that sales were good, they lost track of their profitability. After sales declined in the mid-90s and the company faced its first-ever loss in their history in 1998, they realized something had to be done. This turnaround was achieved through a focus on their core products and sustained competitive advantage. The company's former strategy of massive expansion into peripheral businesses had left them inflexible and unprofitable. The new CEO, Jørgen Vig Knudstorp, focused on stopping the bleeding and transforming the company to be more customer-driven. They tapped into the vast Lego fans community and implemented crowdsourcing and open innovation. Knudstorp's leadership and clear vision played a significant role in achieving the remarkable turnaround of the company.

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