What is the first word that comes into your mind when I mention “block-building toys”? That’s right, it’s Lego. Lego has successfully built its brand name association for construction toys and earlier in 2013, Lego became the world’s second largest toymaker. Its differentiation strategy is rather different from Mattel and Hasbro’s, world’s largest and third largest toymaker respectively. In the market of children’s toys, Lego focuses on one category of product, construction toys; whereas its competitors produce a large variety of products. New Yorker’s article, “The Year of the Lego”, summarizes Lego’s recent sales growth in China and analyses Lego’s SWOT.
The article states that parents in China are purchasing more Lego products under two influences, implicit and explicit recommendations from children’s schools and other experienced parents. Non-profit organizations such as Lego Group and Lego Foundation have been providing Lego products to children through afterschool programs and within school environment to promote “development of thinking skills, problem-solving and creativity”. Of course, with children being more engaged and playing with Lego toys more, Lego’s sales would increase. On the other hand, the one-child policy in China results in more first-time toy shoppers and they are more likely to listen to the experienced parents, which often recommend Lego toys. Both implicit and explicit recommendations push the parents in China to purchase more Lego toys.
“The Year of the Lego” also briefly analyses Lego’s SWOT. Lego’s strength is the fact that Lego is unquestionably the market leader in construction toys. As mentioned earlier, Lego has established a brand name association to the market. With reference to the first half of the article, Lego’s opportunity lies in the market of Asia, especially in China. It is expected that in late 2013, the Lego sales in Asia will reach higher than the sales in North America, Lego’s original primary market. However, one of Lego’s weaknesses is its high price in comparison to other similar products. The high price has driven some customers to other alternative products. Another threat of Lego that drives customers to other competitions is that since 1988, when Lego’s core patent expired, any company can create similar and even identical products. In response to the threat, some believe the competitors are only able to make entry-point imitations and it is only a matter of time until parents switch and “upgrade to the real thing”.
After years of success and experimenting, Lego realizes specializing in one iconic product generates the most sales and Lego’s sales in the market of Asia is growing exponentially. After all, at least to the readers to my blog, who has not heard of Lego, not to mention how Lego has been an essential toy in our childhood. Lego is more than a fun piece of our childhood memories, but also a construction of youth growth and education.
“The Year of the Lego”