Lego Brand Structure Overview and PESTLE Analysis

Lego is the world’s and most profitable and successful toymaker (Bhattarai, 2020). “Lego is a Danish company, best known for the production of Lego-brand toys which consist of interlocking plastic bricks” (Barakaat, 2019). Since it was founded in 1932 the brand has made innovative and ground-breaking designs to entertain children, and others worldwide. The iconic brand has a major influence and significance within the toy industry as it is the leading competitor and holds a major market share and a loyal customer base. This report breaks down the Lego brand framework and gives a PESTEL analysis to help further progress the company through a brand extension.

Mission & Key Goal

The Lego brand’s mission is “to inspire and develop the builders of tomorrow” and its purpose is “to inspire and develop children to think creatively, reason systematically and release their potential to shape their own future – experiencing the endless human possibility”. Lego’s Vice President of Digital Consumer Engagement Peter Kim said the Lego mission creates a strong internal culture. “The culture is quite strong. Anyone can tell you what the mission and vision are. We have a goal to reach 300 million children by 2032: these are the things that people who come to (work at Lego) understand and know” (Handley, 2018). Lego is a global company that aims to reach children across the globe in hopes of educating them through their endless product designs. The core values of the brand include imagination, creativity, fun, learning, caring and quality which are combined to create innovative products which millions of people enjoy and use as a creative outlet. Lego is the number one leader in the toy industry due to its solid and fulfilled mission to inspire and develop people across the globe.

Core Customer Group

Lego’s primary audience is children ages 3-15 (Bakaraat, 2019), with the main target being children ages 5-8 (Riley, 2017). However, like many smart toy companies the brand also targets an older audience by marketing to parents and adults. Parents are concerned about the toys their children play with and by creating a parent-approved product, LEGO makes it easy to access the wallets of its target audiences (Dodge, 2020). Lego’s customers range from toddlers to adults as the brand markets towards all ages. Lego bricks can be used for play and education as well as a stress reliever for adults needing a break. Adults have become a greatly desired market for toymakers confronting competition and product growth (Bhattarai, 2020).

PESTLE Analysis

Political

As such a well-known global brand it is important that Lego maintains a political neutrality to attract customers. Getting involved in political affairs can negatively impact the reputation Lego has worked so hard to build and can result in a decrease of consumers therefore political neutrality remains a core value of Lego. (Barakaat, 2019.) Before 1980’s a higher import tax also prevented Lego to enter some markets, therefore Lego has to outsource its production line in certain countries to lower production costs and make the products more of a threat to competitors (Turner, 2002).

Economical

Lego outsources its manufacturing to China to decrease cost of production to produce more and lower costs for consumers. The toy industry has developed strongly over the years and can be seen as economically stable in the recent years which positively impacts Lego’s market and profit.

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Social-Cultural

The Lego foundation has strayed from traditional toys to create more dynamic and modern ways of play. The brand encourages learning through creativity and imagination and works to empower children worldwide through their own ability to think and develop. The brand is inclusive to all ages creating a large customer base and makes the Lego foundation appear to be acceptive and supportive of children and adults globally.

Technological

Lego not only market their classic plastic bricks but have since extended into new technologies to improve products for their customers. The brand has also collaborated with movies to create product lines such as Lego Jurassic World and Lego Star Wars to market to a larger audience by advertising their product in conjunction with other popular movies. In 2014 the Lego foundation released their own animation film, The Lego Movie which resulted in $4.4 billion sales of the plastic bricks in February 2014. (Brown, 2017.)

Environmental

The Lego foundation is constantly striving to make Lego bricks 100% from sustainable resourced by 2030. So far, out of 3,600 elements just 80 are made from sustainably sourced polyethylene. However, Lego is vigorously experimenting with different plant-based materials and recycled sources in hopes of creating more sustainable products. Today, the majority of Lego packaging is cardboard or paper-based which is recyclable however by 2025 Lego hopes to make all packaging from renewable or recycled in hopes of limiting their negative economic impact. Lego also have a replay program, which enables customers to pass along their bricks to others through a donation processor as part of their planet promise (Lego Group, 2020).

Legal

There are multiple laws and regulation associated with copyrights, trademarks, unfair competition, counterfeiting that Lego must obey and also ensure others are obeying in terms of the Lego company. There have been various pirate copies of Lego bricks which Lego have sued over the years. The Lego Group cooperate with manufacturers of branded products on an international basis to enforce and strengthen legislations (Lego Group, 2020). The Lego Group must also be aware of the different laws and regulations within each different country in reference to marketing and producing their products.

Competitive Environment

Lego was the number one ranked toy brand in the world in 2019, with a brand value of 6.7 billion US dollars. In 2019 the toy industry reached 89 billion dollars in annual revenue; competition between brands remaining strong (O’Connell, 2019). Lego is the most valuable brand in the toy manufacturing industry (Bhasin, 2018). However the competition is rising. Lego’s biggest competition in the toy industry consists of Bandai Namco, Fisher-Price, Nerf and Barbie. However, Lego’s revenue is more than four times Bandai Namco who are considered Lego’s biggest competitor and the second most valued toy brand in the world. Despite this, in 2019 there was a 3% decline in sales of Lego which can be attributed to the growing market from digital services such as online gaming (Haigh, 2019). According to Forbes some people predict that by 2025 the video game industry will reach over $300 billion US dollars (Koksal, 2019). This (Milne, 2020) can be detrimental to Lego’s sales as they are already seeing a decline due to the growing online gaming market. Despite Lego’s decline in 2019, in 2020 Lego reported to lift its revenue by 6% and increased its net profit by 3% to 8.3 billion (Milne, 2020). Niels Christiansen, Lego’s chief executive reported a successful increase in market share in 2020: “It was a strong year where we outperformed the toy industry and grew consumer sales and market share in all our largest markets”. Therefore, despite tough competition the Lego Brand is still experiencing growing sales and remains the strongest competitor within the toy industry.