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Analysis of The LEGO Group

Brand Briefing Paper
Lucas Airhart
Penn State New Kensington
3/14/2023
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Executive Summary
The LEGO Group, commonly referred to as just LEGO, is a long-standing toy company
based in Denmark, that is known for its very successful line of plastic construction toys. They are
considered one of the world's largest toy manufacturers and their plastic bricks are easily
recognized by almost everybody. While they have clearly earned the status, The LEGO Group
has not always been completely successful and it took a large amount of strategy and effective
communications, internally and externally, to become who they are today. They have overcome
issues such as supply chain problems, brand identification, the need for constant innovation, and
acquiring brand intellectual properties from major companies. The following will be an
examination into the history, clear issues, reputation, and the organizational structure of The
LEGO Group company.

Identity of the Company

Company History
The LEGO Group was initially founded in the year 1932 by a man named Ole Kirk
Kristiansen. The company officially was started as a small carpenter’s workshop to create
wooden children's toys but was not given a name until 1936. Kristiansen then decided on the
name LEGO. “The name LEGO is an abbreviation of two Danish words ‘leg godt’, meaning
‘play well’” (LEGO, 2023). The company then purchased its first plastic injection molding
machine in 1946 at the close of World War Two, and the design of a molded plastic brick soon
followed. Kristiansen’s son followed in his father's footsteps and joined the Lego group, and he
was responsible for creating “the LEGO system in play - the more bricks you have the more you
can build” (LEGO, 2023). This is when the product started to take the shape of what we know
today and took its present-day interlocking form in 1958. The company continued innovations
through the late 20th century that would continue to build their reputation such as the
introduction of minifigures, the creation of the LEGOLAND Park, and the LEGO name being
licensed to developers for the creation of video games. “In 2000, LEGO was recognized as the
‘Toy of the Century’ - not just once, but twice (Borchers, 2023). LEGO entered the 21st century
with continual upward growth in the marketplace, and new market strategies such as the “LEGO
Ideas” campaign which inspired more creativity. They have continued diversifying their building
system and expanding to new intellectual properties, as well as maintaining a positive and
healthy work environment for their employees which has led them to become a role model
organization in many people’s eyes. In 2022, LEGO commemorated 90 years of operation and
they continue to look towards the future and what direction it may take.

Company Values
LEGO has very clear brand values as they emphasize the importance of the human side
of their product as well as the business side of their product. On the more human side the
company values concepts such as imagination, creativity and learning. They have established a
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reputation for being not only a fun toy for children and adults, but one that can help a person
learn about basic aspects of construction, as well as fine motor skills. Currently and throughout
points in their history they allow for users of their product to submit their own creations and
ideas that can potentially receive approval for a commercial release. LEGO makes it clear that
they value the consumer as they make them one of their major priorities in their decision-making
process. Every successful organization also must have values associated with the business side of
their product as well. LEGO values the quality of their product, and the welfare of their
employees very highly. “We care deeply for our people who are a part of making LEGO play
experiences possible and are committed to upholding human rights and ensuring safe healthy and
respectful workplaces for our employees” (LEGO, 2023). In fact, multiple times over the past 20
years LEGO has been referenced as a company at the forefront of employee rights, and
treatment. LEGO Makes these values readily accessible for anyone to assess on their website,
man they strive to continually adapt to an ever-changing world and marketplace.

Company Reputation
“Based on stakeholder evaluations of companies within different countries they found
that organizations with the strongest reputations are on average characterized by high levels of
visibility, distinctiveness, authenticity, transparency, inconsistency in corporate communication”
(Cornelissen, 2017, p. 130-131). The LEGO Group is a company that usually has a very positive
reputation in the eyes of the consumers and the corporate world and fits most if not all these
descriptions. “The 10th annual Global RepTrak, in which the reputation institute ranks
companies on how they're perceived across seven factors, has anointed the Lego group as the
number one most reputable global company for 2020 list” (Johnston, 2020). They are
consistently highlighted for their ability to connect with their consumers on a personal level, by
consistently releasing innovative and refreshing products, and having great communication in
relationships with their shareholders. All of the effort The LEGO Group puts in gets noticed, and
in turn many people regard them in a very high standing among not only toy companies but all
companies in general.

Organizational Structure
The LEGO Group has an organizational structure that has a very familiar feel to many
other companies. They can be regarded as a complex and large company as they have
approximately 20,180 employees as of 2021 (Tighe, 2022). There are different divisions with
different positions within LEGO, and they all have different management teams, but they answer
to the team at the top. At The LEGO Group, the very top of the company “consists of an
executive leadership team made-up of seven members and a board of directors” (LEGO, 2023).
There are seven members on the board of directors as well for a total of fourteen members in
charge of the company. “Larger organizations such as multidivisional companies and
multinational corporations often locate the corporate communication department at a high level
vertically within the organization” (Cornelissen, 2017, p. 64). This means that the company
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might be structured in different parts around the globe that can operate independently, but they
all still come together four big decisions with the brand. This traditional business set up has kept
many businesses successful throughout the decades, but it will be interesting to see if LEGO has
any shift in its organizational structure in the future.

Audience of the Company

The key audience for LEGO is clear as they are a toy company first and want to market to
children and their parents. “The main target market for the Lego company is children between
the ages of 1-15 years” (Lego Target Market Analysis, 2022). They are careful in their
advertising however as they do not want to come off as aggressive or ill-natured which can be
off putting to the parents. This explains why they take the approach of indorsing learning
programs, and involvement in children's schooling to assist with their target audience. However,
in recent years LEGO has realized there is a secondary audience of nostalgic adults who still buy
and play with the sets. While not as big of a market audience as the children, it has been so hard
for Lego to ignore this growing secondary audience that they have started incorporating new
branding ideas.
LEGO reaches their target audience using intellectual property licensing of popular
children's TV shows, movies, and games. If all the children's favorite characters come with the
brand name LEGO on them, it is more likely to create favorable impressions and brand loyalty.
Children can simultaneously be some of the easiest and most difficult people for marketing, as
they are very impressionable, but can be very blunt about what they like and do not like. The
advantage that LEGO has, as they are incorporating into their branding, is that when these
children grow up, they do not outgrow the product as many other toy companies experience. This
has led LEGO to release adult oriented, eighteen and older toy sets that use intellectual properties
that appeal to an older or nostalgic audience. This can be seen through LEGO Star Wars, LEGO
architecture, and LEGO botanical sets.
“It takes a different mindset than the one that produced the twentieth century marking
paradigm of huckstering to get in sync with the new twenty-first-century marketing paradigm”
(Sisodia et al, 2014, pg. 93). While Lego will continue to be successful with their younger
audience, this creation of adult oriented sets shows that they truly care about their customers,
even as they start to outgrow the typical age where toys are acceptable. While adults would
happily continue buying sets intended for a younger audience, LEGO approaches their new
marketing strategy with a hint of love and a new consciousness covered in the book Firms of
Endearment. They can be seen as one of the only companies strictly focused on children's toys
that take this approach, and I believe they heavily benefit from it.

Messages
The LEGO Group, like most businesses has messages that get relayed internally and
externally. “Many of the most reputable firms and ‘most admired’ organizations spend in fact
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more than three times as much on employee communication than their less admired
counterparts” (Cornelissen, 2017, p. 231). The company put weight on employee opinions and
the suggestions that they might have. They make it their goal for every employee to be up to date
on what is going on with the company, and to engage with their employees through newsletters
pamphlets in various forms of media (LEGO, 2023). This creates a work environment that allows
communication to freely flow and establishes a ‘family’ like feel which can be vastly successful
for a business. The company has gone so far as to create a brand school, in which employees are
educated on the current and upcoming ideas, and they are allowed to have input (LEGO, 2023).
Just as important is the messages that the company put out through their website, through
their marketing, or through general press releases. LEGO’s Official public policy is “We engage
with government and related stakeholders to help shape a global environment where all children
can learn the skills they need to thrive and realize their full potential” (LEGO, 2023). One of the
principles behind a company being a “firm of endearment” was the idea that they embrace
concerns consumers may have and attempt to be part of the solution for them. LEGO has
embraced this caring strategy and has become very vocal about controlling their CO2 impact and
minimizing the waste that comes from the company. The company has released marketing
campaigns showing that they support sustainable practices and that they would like to make a
positive impact on the planet so that future generations benefit. These messaging strategies have
been extremely successful for the company in the past decade.

Channels of Communication
The LEGO Group has many channels of communication in which they can get
information out to their employees or to the public. One of the greatest channels of
communication is the company's website itself, LEGO.com. This is the home for all of the
information about upcoming products, a store to purchase current products, sections to learn
about the company and its history, meet the leaders of the company, and see where they are
heading in the future. A second channel of communication can be accessed through their
website, in which you can sign up for emails about all the upcoming newsletters from the
company. This is a fantastic and effective way of communication as many people have their e-
mail attached to their cell phone, which is with them all the time. LEGO also has many other
effective channels that are even more convenient.
In the twenty-first century there is almost no better channel of communication that a
company can use than social media to release messages and marketing. The LEGO Group
utilizes social media such as Twitter, Instagram, Pinterest, Facebook, TikTok and YouTube.
They make sure to cover their bases and make a new profile on any major social media that
becomes socially prevalent, as some of the heaviest users of social media fall within their target
marketing range. Social media allows for your messages to instantly be received by millions of
followers, so it is the most rapid and direct method The LEGO Group can utilize. Many of their
social media messages do not directly look like marketing either, they instead showcase their
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product in a play environment. This adds an element of fun and enjoyment to their messages, and
by doing less direct marketing, they end up marketing their product better.
The LEGO Group has methods of internally communicating with their employees
through company emails and messaging systems. While it is like many other companies, they are
constantly praised about how open they were employee communications are. Another key aspect
to internal communications is simply face-to-face interactions. While they are a massive
company, they have many brick and mortar locations that have traditional employees. Whenever
you go to a LEGO store, many of the employees seem happy and enjoy helping the customers,
which is a telling sign of healthy communication.
The final channel of communication for The LEGO Group is through their call center and
online service center chats. They take the quality control of their products extremely seriously
and are willing to replace any broken parts or missing pieces completely for free. All customers
have to do is call the toll-free number or talk to one of their employees through online chat, and
do they even have a monitor on their website to let you know how busy their current
representatives are. It is a very good decision for the company that they reserve an entire channel
of communication for assisting dissatisfied customers and potentially turning them into satisfied
customers.
“Corporate communication is a management function that offers a framework for the
effective coordination of all internal and external communication with the overall purpose of
establishing and maintaining favorable reputations with stakeholder groups upon which the
organization is dependent” (Cornelissen, 2017, p. 37). In my opinion, The LEGO Group has
fulfilled all aspects of this definition of corporate communication, and it can help explain their
success. All these channels combined work together in unison so that anybody interested in the
company can readily find any help or information that is needed. These channels are readily
accessible so that almost everybody can access at least one of them to receive messages from the
company. While it is much easier to accomplish this goal and the environment that we live in
now, they have strived to maintain this ease of communication throughout the years they have
been in business.

Key Issues of the Company

Although The LEGO Group is a vastly successful international company, they have their
share of issues that they are facing. One of the biggest issues is their success itself, and the fact
that they are recognized as the number one toy brand in the world. In some aspects of business
this has forced LEGO to adopt a defensive strategy to maintain their position. This can be
witnessed through their external communications, and this can inhibit their willingness to be
adaptive to new ideas, or innovative with their product because it poses a potential risk to their
reputation. While this can be argued that they are commonly introducing new intellectual
properties and have branched out into video games and TV shows, there is still a lack of
innovation as they are only known for one core product. This is a common issue faced by
organizations that make it to the top of their field, and leads many to a state of stagnation, which
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in turn negatively impacts the company in the long run. “One of the main reasons why LEGO’s
products have failed to entice the clientele is because the management has failed to keep up with
emerging products trends” (Essays Dot, 2020). The LEGO Group must perform risk
management analysis on almost every decision they make regarding their product, to make sure
the positives outweigh the negatives. For this very reason it will be interesting to see if LEGO is
able to maintain their status, as they have had points throughout the company's history where
they were financially struggling on a downward trend and a major innovation was needed to
reverse this. There is a chance that the current environment eventually passes them by, and they
start on a negative swing again.
When The LEGO Group was started in the early twentieth century, hands on physical
toys for the most sought after and used item by children. As we have progressed through the
years and got the invention of the television, the computer, the Internet, video games, and social
media, there are many other activities that children do besides playing with physical toys. “These
changes have forced LEGO to change its marketing and distribution policies and has set some of
its resources aside for online games” (Essay Dots, 2020). There is always a constant threat that
physical toys will no longer be a viable product in the current market, and LEGO’s entire
identity is built around interlocking brick system. Many other toy companies have failed to stay
afloat because their sales rapidly decreased as we entered a new technological age. It can again
be argued that Lego has tried to step into these other marketplaces by releasing TV shows and
video games that bear the companies branding, and they have been very successful, but the
company would not be sustainable without the physical toy currently.
Anytime a company is successful there are going to be new and upcoming companies
trying to replicate or replace that company. The LEGO Group patented their interlocking brick
idea shortly after its invention to make sure other companies couldn't just copy them. They
wanted their system to be compatible only with their own parts as this would help create brand
loyalty with their customers. Throughout the years there have been other companies that have
risen to capitalize on this idea of construction toys, and throughout periods of their history LEGO
has faced fierce competition. Some of the most notable being K’Nex, Nanoblocks, in the very
successful MEGA Blocks. One of the aspects that these competitors have over LEGO and that is
a key issue facing the company, is the cost of the toys. What causes LEGO to be very expensive
is also one of the reasons they are so successful, and that is the licensing for their intellectual
properties of companies such as Disney. This means that all of their rival companies can make
look-alike products for a lot less money, which in the eyes of a money conscious parent can look
more appealing. LEGO would also be able to maintain its dominance over its competition
because of the channels of communication they would have in the earlier days of the company,
but now rival companies have access to the same channels of communication such as social
media and websites which gives them more power.
A company that creates a physical product must rely on a supply chain, and supply chain
management within their business to make sure they can always meet the demand for their
product. A supply chain is never steady and constantly needs to be monitored. As rival
companies are formed and new technologies are invented, different materials are going to be
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needed but there is a finite supply of them. “Since 1998, LEGO group had been losing money
following several internal operation issues. One of these issues was the existence of a
complicated and ineffective supply chain which forced the company to incur huge production
and distribution costs” (Essay Dots, 2020). While they have since corrected these issues by
fixing their logistics costs, there is no permanent fix to this issue into this issue will constantly
loom over the company. This also requires them to keep a close eye on their cost control every
year so that their supply and demand do not fall out of balance. There have been points
throughout the company's history where they have overproduced the bricks, and we're required
to sell them off at a discount just to make ends meet.

Conclusion
The LEGO Group has a very long history of success, coming from humble beginnings as
a small carpentry shop that turned into an international company. They have learned and there
are many years what it takes to be successful through the ups and downs and changing
environment. They wear their brand identity on their sleeve by clearly stating all their values and
standing by them. The LEGO Group has truly created a company that has a family feel, and
makes their employees and consumers feel like they are part of it. They also strive to make a
connection with and address the problems of their shareholders in an appropriate way that can
benefit everybody. The LEGO Group provides great examples for all the topics we have been
covering in class up to this point.
The LEGO Group is an outstanding company that strives to be a “firm of endearment”
in the business world and is currently succeeding. Through the use of very effectful internal and
external communications the company has gained and maintained a reputation as one of the best
toy companies in the world. They continue to expand their channels of communication with their
consumer in order to make sure they are making the best decisions for not only themselves but
for their customers. The LEGO Group does however need to remain cautious as we continue into
the twenty-first century as some aspects of their business model can be considered outdated, and
they need to make sure they are striving to be innovative and adaptive to survive. I believe the
organizational structure of the company will allow them to overcome any issues they face in the
future.
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References

Borchers, S. (2023). History of Legos: Fun facts to know about the ‘toy of the century’. Fox
News. https://www.foxnews.com/lifestyle/history-legos-fun-facts-know-toy-of-the-
century

Cornelissen, J. (2017). Corporate Communication: A Guide to Theory & Practice. SAGE.

Essay Dots. (2020). Supply chain management issues in LEGO Group. Essay Dots.
https://essaysdot.com/supply-chain-management-issues-lego-group-research/

Johnston, L. (2020). Everything is awesome for legos reputation. Consumer Goods Technology.
https://consumergoods.com/consumer-good-brands-dominate-most-reputable-companies-
ranking

Lego. (2023). The LEGO Group history. The LEGO Group.

https://www.lego.com/en-us/aboutus/lego-group/the-lego-group-history

Lego Target Market Analysis. (2022, September 01). Edubirdie. Retrieved March 15, 2023, from
https://edubirdie.com/examples/lego-target-market-analysis/

Qian, J. (2020). LEGO: The creating strategy behind the toy industry titan. ContactPigeon.
https://blog.contactpigeon.com/lego-marketing-strategy/

Sisodia, R., Wolfe D. B., & Sheth, J. (2014). Firms of endearment: How world class companies
profit from passion and purpose. Pearson Education.

Tighe, D. (2022). Workforce eyes of the Lego group worldwide 2009- 2021. Statista.
https://www.statista.com/statistics/292314/number-of-employees-of-the-lego-group-
worldwide/
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Appendix
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B.
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C.
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Highlighted Concepts from COMM 200

Channel of communication - the method used to relay messages internally or externally from
an organization.
Firm of endearment - A firm of endearment is a company that takes into consideration the
wants and needs of their stakeholders and aligns it with the company.
Organizational Structure - is how a company or organization is constructed to allow
communication and work to flow.
Risk Management - “Risk management refers to the process of calculating and evaluating
financial risks alongside the identification of procedures with the ability to avoid or limit their
effects” (Essay Dots, 2020).
Stakeholder - person who has an interest or stake in a company.
Supply Chain Management - “Supply chain management can be defined as activities
characterizing the planning control and execution of the flow of products from the time that raw
materials are acquired through the production and distribution, to the time they reach the targeted
customer” (Essay Dots, 2020).