THE UNIVERSITY OF NORTHAMPTON

Module: PRINCIPLE OF MARKETING

Code: MKT3017

Marketing Audit Plan

of Lego Group in The USA

Student’s fullname: NGUYEN VU MINH NGOC

Semester: I Academic year: 2022-2023
Lecturer: NGUYEN PHUONG ANH

12th December 2022

Executive Summary

The report aims to audit the marketing plan in the United States market of the Lego
Group, which is the current world's leading toy manufacturer. In detail, the report consists
of three main sections. The introduction provides a brief summary of the firm and
explains why Lego's marketing strategy was included in the research. The second part is a
detailed examination of micro and macro factors to define the SWOT analysis table. The
final section concludes with some possible suggestions for future improvements to the
company's marketing strategy.

In the macroenvironment’s analysis section, there are the following important findings:

 The pricing of products has been under a lot of pressure due to drastic rise in
inflation in the United States.
 The chaotic political situation in the US causes negative impact for the company.
 The Covid-19 disease has affected consumers' buying behavior.

The evaluation of internal factors will be the next implement based on Kotler's
microenvironment framework (Kotler & Armstrong, 2017), with some highlights below:

 A talented team with a variety of appropriate strategies.

 Partners and suppliers provide a crucial platform for Lego in competition.
 Compete against several large corporations.

Following that, the received assessments will be put in the SWOT table to propose some
strategic imperatives, which are:

 Prioritize investment in prosperous countries.

 Developing games on digital platforms as a backup plan.
 Using renewable energy, or launching recycling programs to satisfy the criteria of
a sustainable environment.
Table Of Content

Executive Summary........................................................................................................................1

Table Of Content............................................................................................................................1

1. Introduction................................................................................................................................2

2. Company Background................................................................................................................2

3. Macro-environment....................................................................................................................3

3.1. Demographic factors......................................................................................................................3

3.2. Economic factors............................................................................................................................4

3.3. Natural factors...............................................................................................................................5

3.4. Technological factors.....................................................................................................................6

3.5. Political factors...............................................................................................................................6

3.6. Cultural factors..............................................................................................................................7

4. Micro-environment.....................................................................................................................7

4.1 Company..........................................................................................................................................7

4.2 Suppliers..........................................................................................................................................8

4.3 Marketing intermediaries.............................................................................................................10

4.4 Competitors...................................................................................................................................11

4.5 Customers......................................................................................................................................12

5. SWOT analysis..........................................................................................................................13

6. Strategic Imperatives................................................................................................................14

7. Conclusion................................................................................................................................15

References.....................................................................................................................................16

1
1. Introduction

Since the final Lego Group patent expired in 1989, other large corporations, including
Mega Bloks, Best-Lock, and Tyco Toys have created interlocking bricks identical to the
Lego (The Telemark, 2003). In October 2005, The Supreme Court permitted Mega Bloks
to continue production (CBC News, 2005) after rejecting the Lego corporation's appeal.
Due to the inadequacy of trademarks and patents, Lego had to seek other strategies to
reach and attract consumers' interest in its products. According to (Kotler & Keller, 2012)
marketing planning audit should be evaluated in order to enhance a company's
performance and market standing. Therefore, this report will examine Lego's situational
analysis, macroenvironment, and microenvironment in the United States market to
summarise the SWOT analysis. Based on that, some effective proposals would be
provided for the corporation in the near future.

2. Company Background

Danish toymaker The Lego Group was established in 1932 and has its headquarters in
Billund, Denmark (Lego, 2012). It creates Lego-branded toys with the target customer is
mainly kids in 1 to 15 years age group. The majority of its products are made of
interlocking plastic bricks, and the typical smiling yellow humanoid characters which has
became the company's signature over the world. Currently, Lego is leading with a
number of track records such as several large market groups of the firm reaching double-
digit consumer sales growth, and especially the 2021 portfolio was given seven "Toys of
the Year" honours from the Toy Association. (Lego, 2022).

In addition, the firm are operating with more than 24,000 employees and 700 stores in 40
countries around the world. According to the annual report in 2021 (Lego, 2021), its
revenue was 55.3 billion Danish Kroner (DKK) which returned 94% on invested capital.

2
3. Macro-environment

Some external macro-environmental aspects in the US market, including demographic,

economic, natural, technical, political, and cultural factors, will be examined below in
order to perform an assessment of the Lego Group.

3.1. Demographic factors

Figure 1:Proportion of U.S Population in different age groups (PopulationPyramid, 2022)

3
In general, the population of the United States is young, and there is not an extremely
differrent in genders. The three working age groups, 25–29, 30–34, and 35–39, had the
highest percentages of 3.6% and 3.4%, respectively. Following by the percentage of
young age group (0-19) and old age group (45-64) not too different, ranging from 3.0%
to 3.1%. The lowest category, with under 2.6% in both genders, is over 65 years old.
Moreover, Lego specifically targets young consumers for its products and services;
hence, the majority of Lego company's target customers will be in the US market.

3.2. Economic factors

Figure 2: United States monthly inflation rate, source: U.S Bureau of Labor Statistics

Because of the Covid-19 pandemic, the US economy is not currently in such a stable
situation. The graph demonstrates that US inflation fluctuated between 2% and 3% two
years before to the outbreak. Since the end of 2021, that figure increased to about 5.7%.
After that, the inflation rate in 2022 was about 9%, which is the highest level in a 40

4
year-period (bls.gov, 2022). The Lego corporation would be impacted negatively as a
result, such as previously manufactured product lines would not be lucrative or even
break even, while the cost of new items must rise in step with market inflation.

Figure 3: United States GDP per capita from 2012 to 2022 (World Bank, 2022)

In addition, statistics on GDP per capita is also crucial for assessing the market. It
increased steadily from $54213 in 2012 to $60687 in 2019. By the Covid-19 in 2020, the
US per capita income decreased dramatically to $58060. However, a year later, that
figure climbed back to its highest spot in a decade surveyed, at $61280. To sum up, the
United States’s GDP per capita is relatively high and constant throughout period; thus,
there is not be a lot of restrictions on how much Americans would pay for non-essentials
like entertainment. And for Lego toy manufacturer, maintaining and growing in this
market will be advantageous.

3.3. Natural factors

It is also one of Lego's most concerns, not only because plastic bricks make up the
majority of its manufacture, but also a huge amount in one production process. In 2017,
Lego expanded its partnership with a non - governmental organisation that is the World
5
Wide Fund for Nature (WWF, 2017) in order to set objectives for reducing emissions
throughout the company's supply chain and production processes in the future. However,
due to high customer demand in purchase, Lego’s factories have to put in extra running
hours. Therefore, it is certain that CO2 emissions from these production facilities would
go over harmful levels. Consequently, Lego has not really addressed suitable options to
the environmental problem.

3.4. Technological factors

The firms need spend significantly in this element if they intend to surpass their rivals
since recently technology advances more rapidly. In the Lego Group, it invested s lot off
funds in the technical infrastructure. Previously, Mexico, a neighbouring nation,
produced goods that were sold in the US. However, Lego could reduce expenses
significantly and stimulate the development of innovation with its planned proposal to
construct a carbon-neutral factory in the US (Lego, 2022). As an outcome, there will be a
long-lasting competitive advantage to fend off imitation from rivals.

3.5. Political factors

Figure 4: United States Political Stability And Absence Of Violence Index (World Bank, 2022)

6
The chart illustrates that from 2014 to 2018, the United States political stability and
terrorism-free index fluctuated between a low of 0.29 and a high of 0.68. However, that
index experienced a massive decrease, dropping to 0.13 in 2019, after the outbreak of the
COVID-19 pandemic. Even two years later, the US political stability rating plummeted to
zero, placing the country at position 96 in the national rankings of the political stability
index (The World Bank, 2021). Overall, the US political situation is not secure. As a
consequence, if Lego makes a significant investment in the US market and has a long-
term operation, there would not be any commitment of long-term development for the
company.

3.6. Cultural factors

Toys are seen as cultural objects. The first aspect is the language. The most widely
spoken language in the world, English, is spoken in the United States. For puzzle games
like Lego, the language printed on the packaging is especially important. Therefore, most
foreign markets can consume products which have a US version. The second factor is
parenting style. Instead of incorporating teaching into the toys, American parents
frequently let their children to select licensed toys based on their preferences. Hence,
Lego could manufacture products based on surveys of its target market's interests.

7
4. Micro-environment

4.1 Company

Figure 5: Lego's revenue worldwide between 2003 and 2021 (D.Tighe, 2022)

The chart shows that Lego began at 0.9 billion euro in profit in 2003, that climbed by 5
billion euros after 13 years of operation. From 2016 to 2020, there is a slight fluctuation
in the company income approximately from 4.7 to 5.9 billion euros. In the following
year, in 2021, that amount reached 7.44 billion euros, which is the company’s highest
profit earned recorded in nearly two decades. Overall, the amount of Lego revenue
experienced a significant increase from 2013 to 2016. Although that figure fluctuated
over the next 4 years, it grew dramatically after that. Therefore, Lego effectively utilised
its assets to make that massive profit.

Lego's success might well be attributed to a few aspects of its operation. Firstly, the
growth of sales has been supported by the business's global presence. Lego is a strong

8
brand with 833 outlets and 5 factories (September 2022) in more than 40 countries; thus,
its popularity is essential to its current success. Moreover, the company has talented
employees since it has successfully implemented marketing strategies like establishing a
community of Lego enthusiasts (Lego, 2008) where buyers can turn their ideas into
official products of the company; refreshing more than 60% of the product line each year;
or signing agreements with legendary attributes like Harry Potter, Star Wars, Marvel, and
F.R.I.E.N.D.S. These elements helped the company operate efficiently and attain its
current level of record sales.

4.2 Suppliers

Currently, the company is working with 80 suppliers (Lego, 2022). In terms of

production, suppliers might have an average level of operational power since Lego’s
primary products are largely dependent on standardised inputs. However, their impact
could increase noticeably in other complicated manufacturing industries, particularly
video games or movies. They play a major role in lowering production costs, which
would give Lego a competitive advantage. Nowadays, because kids use electronics more
often, their favourite has progressively shifted to characters from online movies and
games so that toy producers face intense competition in this marketplace. According to
survey (Parrot, 2020), toy companies have only scratched the surface of the market for
children's content when only holding 6% out of top global children’s titles (figure 3). As
a result, in order to produce resonating characters, collaborations with streamers are
essential. Indeed, Lego is in a franchise competition with Mattel, Harbo, and SpinMaster
on streaming platforms such as Netflix, Disney+, and HBO Max (Parrot, 2020).

9
 Figure 6: Children's Titles Exclusively owned by Toy Manufactures (Parrot, 2020)

Overall, according to the statistic of quarterly financial statements (figure 6), Disney is
the strongest supplier since it has surpassed three well-known competitors in the
streaming service industry. Its number of members reached a peak of 221.1 million in the
second quarter of 2022. Besides, Disney+, which launched after but has also seen
significant growth. In 2019, it is only about 25 million individuals subscribed to.
However after three years, Disney+ has attracted 152.1 million members, following the
Netflix streamer, which has 220.7 million followers. Moreover, in 2009, Disney approved

10
to give Lego the first and only authority to develop constructing toys based on any of its
contents (John, 2009). To sum up, Lego has produced unique toy product lines because of
the assistance of an impactful partner - Disney.

Figure 7: Lego's suppliers analysis

4.3 Marketing intermediaries

With three channels, Lego distributes its products to customers directly and indirectly.
These are authorised stores, the Internet, and its franchisees.

Although Lego sells via a variety of methods, direct consumer contact through the store
and official website remains to be a top priority. The firm launches close to 1000 verified
stores throughout the world. In the United States, Lego has 98 certified stores (Lego,
2022) to provide its consumers goods and services such as exchange, return, photo shoot,
11
and product experience in reality. Besides, Lego’s official website is also using effective
marketing strategies. For instance, the selling price would be cheaper or on par with the
distributors; or there is a certain number of presents, unique gifts (Lego, 2022) offered
during every festive season.

However, the fluctuations in the economy and politics of some countries are a barrier to
direct distribution. Therefore, products have been indirect sold on domestic e-commerce
networks or franchise partners in order to optimize the shipping process for buyers.

4.4 Competitors

Figure 8: Worldwide revenue of major toy companies in 2021 (D.Tighe, 2022)

12
According to the statistic in figure 8 (D.Tighe, 2022), Lego has three main competitors in
the US market which are Harbo, Mattel, and Bandai Namco. In 2021, Lego is in the lead
with around 8 million dollars in earnings, but there is not much of a gap in that figure
compared to the three main rivals. The toy manufacturer, Bandai Namco, has a profit that
is roughly 7.3 million dollars and nearly resembles Lego's. Despite having third-place
revenues at about $6.4 million in 2021, Hasbro is still considered as the primary
opponent. Due to the rapid expansion of Hasbro's consumer products, in 2017 Lego's
sales dropped for the very first time in 13 years, forcing the company to fire 1,400
employees (Ivana, 2017).

Hasbro has several competitive advantages. Firstly, Hasbro's product cost is lower than
Lego. Secondly, its business model is totally different from that of Lego (Mary, 2022).
Beginning as a toy manufacturer, Hasbro used to only have a narrow product line-up and
traditional promotional campaigns, however, with more innovative and successful
campaigns in recent years, the firm has experienced substantial growth. In recent years,
Hasbro even advertise its brand and its products on TV programs like Family Game
Night. Furthermore, the digital games sector, which is the one that Lego is not heavily
involved in, boosts Hasbro revenues to grow considerably by nearly 17% to more than
$6.4 billion (Toy World, 2021). Hasbro's well-known brands, including Power Rangers
and My Little Pony, are another competitive advantage. According to CEO Brian
Goldner (Motley Fool, 2019), the production of animated series based on those two
brands generates recurrent profit because the firm's target customers – kids – love a
wonderful story with the endearing characters they know and appreciate. To conclude,
Lego is able to identify its weaknesses and potential threats by evaluating a competitor's
strategy.

13
 4.5 Customers

According to the demographic data, Lego's customers are diverse in age. The largest
proportion of goods purchased, 33% and 38%, respectively, were made by Millennials
and Gen X, who were of childbearing age.. The smallest group, with only 3% of

consumers, is Generation Z. Furthermore, whites with high incomes consumed more than
half of company’s products. It is obvious that the toy pricing of Lego is significantly high
as compared to that of other enterprises in the same industry.

14
 Figure 9: Demographic data in the Lego Group (Lego, 2022)

5. SWOT analysis

SWOT analysis is an important operational tool that may provide Lego a clear
understanding of its internal and external environment in the US market. The SWOT
tool's factors are detailed in the following table:

Strengths Weaknesses

- Carbon-neutral run factory with - Its manufacturing activity leads to

modern production technology environmental controversy
- Strong brand awareness - Prices are higher than other
- Reputable suppliers, especially the companies in the market
exclusive supplier – Disney

Opportunities Threats

- Great potential for product - The increase of inflation in covid-

development in the US market 19 period impact negatively on the
because of its young and high- business revenue
income population - Politics in the US has many issues,
- Shopping behavior of the US which affect the company’s long-
customer boosts Lego’s sales term development
- Many substitue products with
competitve price

15
 Figure 10: SWOT Analysis

6. Strategic Imperatives

In order to support Lego improve its operations and be sustainably competitive in the toy
industry, some suggestions will be made based on the SWOT analysis (figure 10).

Firstly, although the political unrest in the US market poses a threat to Lego's long-term
development, the firm still should keep concentrating on manufacturing its product in
developed Western and European countries over other areas, such as Asia or Africa.
Since there will not be a significant difference in the currency exchange rate, cultural
norms, or customer purchase behavior, allowing Lego to increase its sales.

The second proposal is investing in the development of virtual games since the COVID-
19 pandemic threatens its financial growth. Currently, that pandemic is still happening all
over the world. Both the transportation of people and commodities is being limited and
tightly monitored in many areas (Alexandra, 2022), for example in China, which is one of
Lego's most potential markets. Therefore, by establishing a strong platform for digital
games, Lego will have its own backup for the company’s revenue in any bad situations
that covid-19 or other epidemics might cause in the future.

Lastly, Lego should construct additional renewable energy-powered facilities or launch

recycling projects to address pollution problems. Global warming and climate change
cause more disasters than ever before; hence society, especially consumers, is seriously
concerned about environmental protection. Moreover, the old toy collection campaigns
would encourage clients to keep buying new items while also meeting a sustainable
environment.

16
7. Conclusion

To sum up, in spite of some weaknesses, the Lego Group is still the market leader in the
toy sector globally. In order to retain its current standing, the company needs to conduct
an annual marketing planning audit. This research has completed that by an evaluation of
the macroenvironments, microenvironments, and SWOT tool. Thereby, several feasible
suggestions are offered to enhance the firm’s strategic plan onward.

References

1. Alexandra, S., 2022. nytimes.com. [Online]

Available at: https://www.nytimes.com/2022/11/11/business/china-zero-covid-
markets.html
[Accessed December 2022].

2. CBC News, 2005. Mega Bloks wins SCOC ruling on Lego trademark, s.l.: s.n.

3. D.Tighe, 2022. statista.com. [Online]

Available at: https://www.statista.com/statistics/241241/revenue-of-major-toy-
companies-worldwide/
[Accessed 2 December 2022].

4. D.Tighe, 2022. statista.com. [Online]

[Accessed 27 November 2022].

17
5. Ivana, K., 2017. cnn.com. [Online]
Available at: https://money.cnn.com/2017/09/05/investing/lego-job-cuts/index.html
[Accessed 2 December 2022].

6. John, F., 2009. thedisneyblog.com. [Online]

Available at: https://thedisneyblog.com/2009/02/15/disney-and-lego-announce-
strategic-partnership/

7. Kari Liuhto, Marika Heikkila & Eini Laaksonen, 2009. Political risk for foreign firms
in the Western CIS — An analysis on Belarus, Moldova, Russia and Ukraine. Journal
of East European Management Studies, Volume 14, pp. 395-407.

8. Kotler, P. & Armstrong, G., 2017. Principles of Marketing. 14th ed. s.l.:Pearson.

9. Lego, 2012. lego.com. [Online]

[Accessed 18 November 2022].

10. Lego, 2022. lego.com. [Online]

Available at: https://www.lego.com/en-il/aboutus/news/2022/march/2021-annual-
results
[Accessed 18 November 2022].

11. Lego, 2021. lego.com. [Online]

Available at: https://www.lego.com/de-de/aboutus/lego-group/policies-and-reporting/
reports
[Accessed 18 November 2022].
12. Lego, 2022. lego.com. [Online]
Available at: https://www.lego.com/en-gb/aboutus/news/2022/june/the-lego-group-to-
build-us-1-billion-carbon-neutral-run-factory-in-virginia-usa
[Accessed 6 December 2022].

18
13. Lego, 2008. ideas.lego.com. [Online]
[Accessed 28 November 2022].

14. Lego, 2022. lego.com. [Online]

Available at: https://www.lego.com/en-us/stores/directory
[Accessed 2 December 2022].

15. Lego, 2022. lego.com. [Online]

Available at: https://www.lego.com/en-us/holiday-gifts?icmp=LP-SBT-Standard-
NO_Sticky_B_December_Holiday_Campaign-OC-NO-5UJ4D4HRLK
[Accessed 2 December 2022]

16. Mary, S., 2022. Hasbro to announce new corporate strategy, s.l.: Chris Cocks.

17. Motley Fool, 2019. fool.com. [Online]

Available at: https://www.fool.com/earnings/call-transcripts/2019/10/22/hasbro-inc-
has-q3-2019-earnings-call-transcript.aspx
[Accessed 3 December 2022]

18. Parrot, 2020. parrotanalytics.com. [Online]

[Accessed 29 November 2022].

19. Parrot, 2020. parrotanalytics.com. [Online]

Available at: https://www.parrotanalytics.com/insights/the-franchise-battle-of-lego-
mattel-hasbro-and-spinmaster-in-the-streaming-wars/
[Accessed 1 December 2022]
20. PopulationPyramid, 2022. populationpyramid.net. [Online]
[Accessed 5 December 2022]

21. The Telemark, 2003. Kirkbi AG et al. v. Ritvik Holdings Inc.. Volume 10.

19
22. The World Bank, 2021. theglobaleconomy.com. [Online]
Available at: https://www.theglobaleconomy.com/rankings/wb_political_stability/
[Accessed December 2022].

23. Toy World, 2021. toyworldmag.com.uk. [Online]

Available at: https://toyworldmag.co.uk/hasbro-full-year-2021-results-reveal-strong-
revenue-profit-and-growth/
[Accessed 2 December 2022].

24. World Bank, 2022. data.worldbank.org. [Online]

Available at: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?
end=2021&locations=US&start=2010&view=chart
[Accessed 6 December 2022].

25. WWF, 2017. wwf.panda.org. [Online]

[Accessed 25 November 2022].

26. World Bank, 2022. tradingeconomics.com. [Online]

[Accessed 6 December 2022].

20