What are the key opportunities and challenges in the Asian market?

Challenges for LEGO in Asian market:

 One of the major issues faced by LEGO is the uncertainty in growth estimates of
Asian toy market. Although Asia-Pacific toy market was poised to outgrow Western
Europe and North American markets by 2014-15, investing billions in building a
robust business infrastructure consisting of distribution, packing and moulding
facilities was a risky proposition to commit to.
 Positioning of LEGO toys in the Asian market is another challenge. Where
educational toys for kids has been favourable in Asian culture, Japan has been a
disaster for the group. To position its toys as fun toys for their unscheduled time or as
compliments to educational products is a choice that needs to be addressed. Also,
there is uncertainty whether the products and researches that worked in developed
markets will also work in Asian markets.
 Asian markets have noticed an uprising in regulatory barriers corresponding to quality
issues and production standards. LEGO will need to tweak its products and business
model to excel in the Asian toy market.
 Outsourcing its production facilities to third party manufacturer has proved to be
inefficient for the group in past. The group will have to commit to huge investments if
it wants to replicate its efficient business model of Europe and America.
 The Asian markets lacked matured retail distribution networks. Retailers’ focused
more on sales margin, which is lower than what LEGO’s competitors offer, than fast
stock turnover or quicker lead times. On the other hand, LEGO wanted to stick to the
robust business architecture to remain attractive to large retail chains which were fast
expanding their network in the Asian market.

Opportunities for LEGO in Asian market:

 The Asia-pacific toy market is estimated to grow bigger than Western European and
North American markets. By capturing large market share early, LEGO can take
advantage of this growth opportunity.
 LEGO has built a tried and tested robust business architecture comprised of efficient
product development, customer relationship management and supply chain
management. It has been hugely successful in western markets and LEGO can take
advantage of this model and the lessons it learned in creating a similar model for the
Asian market.
 The group has built strong strategic partnership with large retailers like Walmart,
Metro, Toys ‘R’ Us etc. All these retailers also wanted to expand rapidly in the
growing Asian market. LEGO can take advantage of their expansion plans to reach
out to a larger consumer base.
 LEGO can take advantage of online retailers like Amazon at the advent of rapidly
growing availability of internet and e-commerce facilities in Asian countries.