1.0 Introduction

Lego, which name derived from the Danish words “leg godt” (i.e., means ‘play well’) (Brown-Humes, 2004; Carter, 2003), is the toy company originated from Denmark that allows children, and others, to develop their creativity, imagination and curiosity through ‘bricks’ (Allagui, 2008). Upon the company disastrous financially losing year in 2003 (Brown-Humes, 2004), the company had revived and has been growing steadily in the recent decade, of which is currently planning to expand to Asia to seek further growth – given that the toys markets in the western countries are maturing (Hansegard & Burkitt, 2013). Indeed, Lego believe that its future lies upon the growth in Asia, which mainly will be concentrated in China in the future (Milne, 2013; Hansegard, 2014). That is rational given the current statistics show that China generated the most significant growth in Asia, with sales up more than 50% in the first half of 2014, when some of the Lego themes (such as Friends) are welcome in China (Hansegard, 2014b). This report will discuss about the international marketing strategy and tactics of Lego in Denmark (i.e., the domestic country) versus in China. To conduct such report, the report will firstly investigate into the business environment and industry that Lego is operating within. Then, the report will zoom in in the communication mix and techniques of Lego in Denmark, versus in China. The overall strategy and positioning of Lego, as in Denmark versus in China will also be discussed. From there, recommendations on how to enhance the communication mix of Lego will also be outlined.

2.0 The External Environment

Any marketing idea will likely be irrelevant if issues such as the environmental, consumer, socio-cultural and competitive forces were not understood. In this section, an analysis on the external environment will be conducted. Firstly, PESTLE model will be used to analyse the external environment. Then, Porter Five Forces will be used to analyse the industry.

2.1 PESTLE Analysis

2.1.1 Political Dimension

Overall, political situations around the world, especially in country such as Denmark and China are reasonably stable. That is conducive for business operations of Lego.

2.1.2 Economic Dimension

The economy of China is booming, and expected to grow (albeit at slower pace) – to eventually become the biggest consumer market in the world (Torres, 2013; Davis & Chuin-Wei, 2012). Contrary to that, Denmark has a matured economy, and the expected economic growth rate into the future is much slower, as compared to China. That make China a lucrative market, as Lego is also predicting the rise of middle income population in China will make that market the biggest toys market in the world (Hansegard, 2014). Overall, it makes sense for Lego to expand to China aggressively.

2.1.3 Social-Cultural Dimension

Overall, there are critique that Lego might be old-fashioned toys, given that Lego bricks belong to the industrial era when children liked to build things, playing wannabe engineers; while children nowadays would more likely immense in computer games (Allagui, 2008). Such a situation is true in Denmark (as well as in China). In a way, that pose serious threats to Lego, as the societal consumption norms among the children had changed. Other than that, market analysts had also observed that toy makers have historically faced uphill struggles in China, where parents would prefer their children flicking through books rather than playing (Hansegard & Burkitt, 2013). Such special social norms in China would pose some challenge to Lego to win over the heart of the Chinese children (or consumers). Aside from that, it is obvious that people from China and Denmark have different cultures. Generally, people in the west are more individualistic, masculinity, short term orientation, and low context culture; while the Chinese are more collective, femininity, long term orientation and exhibit high context culture (Li & Chia, 2011; Tang & Koveos, 2008). Cultural differences would necessitate different ways to manage business (i.e., including marketing communication mix techniques), so to stay relevant to the local circumstances (Harvey, 1997; Kirkman, Lowe & Gibson, 2006).

2.1.4 Technological Dimension

The world had entered into an internet or information era. Tablet computers and smartphones are becoming more popular (Hansegard, 2014). There are some trends that children have gravitated toward digital games and mobile apps (Rolander, 2014; Brown-Humes, 2004). Such technological changes is against the profitability of Lego, demanding Lego to think out of the box to cope with the technological changes, or better yet – to leverage on technology for better performance.

2.1.5 Legal Dimension

There are different legal circumstances and requirements in China, as compared to Denmark, which demand the attentions from Lego.

2.1.6 Environmental Dimension

People around the world have been more conscious and aware about the importance of being environmentally friendly. That is true both in China and Denmark.

2.2 Porter Five Forces

2.2.1 Rivalries among Existing Competitors

There are many other ‘blocks’ or ‘bricks’ oriented toys makers, and that include: Hasbro (i.e., K’Nex), Mattel (i.e., Mega Bloks), Kawada and Oxford (Brown-Humes, 2004; Rolander, 2014). Indeed, in China, some of such competitors of Lego include the following: Coko, BanBao, Cogo, Enlighten Brick, Wange and Sluban (MacCarthy, 2003; Jitpleecheep, 2009). The rivalries among competitors are intense, especially when Lego’s worldwide patent on its ‘stacking method’ expired in 1988 (Tibbetts, 2005), which resulted in many competitors copying such methods. For that, Lego faces intense competition, especially low-cost competitors, from China (Hansegard, 2014). Other than that, as the major markets that Lego is operating within (i.e., western countries) are already established markets, growth is challenging (Hansegard, 2014), which resulted in even greater competition among industry players. Nevertheless, Lego had emerged as the biggest toy company in the world by revenue and profit recently (Hansegard, 2014b), and such condition enable Lego to enjoy certain advantage from its economies of scale.

2.2.2 Bargaining Power of Buyers

The consumers have moderately high bargaining power, as they can choose to buy from competing brand products. Other than that, they may choose different types of entertainment, which may be even more engaging, such as electronic games.

2.2.3 Bargaining Power of Suppliers

As Lego is a gigantic toys maker as compared to the suppliers, Lego has much higher bargaining power against the suppliers.

2.2.4 Threats of Substitute Products

There are many effective substitutes on Lego products. Indeed, the crisis Lego faced in the late 1990s was due to the rise of interactive electronic and computer games (Allagui, 2008; Hansegard, 2014). Other than that, there are also entertainment alternatives such as TV series and print comic books, which are also effective substitutes on Lego (Hansegard, 2014b). It is then not surprising that Lego want to communicate to the external world that its toys have educational benefits, and useful for people to unleash creativity – something that hardly can be delivered by the competitors.

2.2.5 Threats of New Entrants

Given that the industry is competitive; but that the margins gained by Lego are lucrative, it can be expected that threats of new entrants to the industry will likely be moderate.

3.0 Communication Mix of Lego

Theoretically, marketing communication mixes include these aspects: (a) sponsorship, (b) advertising, (c) sales promotion, (d) events and experiences, (e) public relations and publicity and (f) personal selling (Smith & Taylor, 2004; Fill, 2009). As such, in order to discuss about the international communication strategy and techniques of Lego holistically, issues on all of these dimensions will be examined.

3.1 Sponsorship

Lego is not a company that focus aggressively on sponsorship in brand building. Some of the infrequent occasion on sponsorship program executed by Lego is about the sponsoring work at the Media Lab in 1985. In China especially, Lego had yet to have any notable sponsorship programmes. In short, sponsorship is not the medium employed by Lego to build its brand.

3.2 Advertising

Over the years, it is observed that Lego had shifted away from advertising (TV advertising especially), towards the use of more interactive as well as innovative media and communications tools – in order to encourage consumers to interact with the Lego brand (Carter, 2003). That is true in China as well, as while sales in China has been growing fast; there is actually no paid advertisement on Lego. It can be observed that advertising is not the technique employed by Lego to build its brand.

3.3 Sales Promotion

The use of sales promotion is one of the very frequent methods effectively employed by Lego to increase consumer demand within certain period of time. For example, Lego always have Christmas sales promotion (Carter, 2003), and that account for huge portion of Lego’s revenue. Besides, the recent black Friday sales had also attractive many consumers. Nevertheless, the use of sales promotion is rare in China, whereby the places the consumers get their Lego is from online retailers (whom privately take Lego from other countries, especially from United States – to be sold at deep discount to the local Chinese consumers). In that way, Lego had actually never created any hype on its products through the use of sales promotion in China – something that should be attended to in the future. Anyway, it is however noted that Lego had indeed customised special products tailored to meet the festive seasons of Chinese New Year, as shown in Figure 1 below. It is however such promotional activity was not very successful.

Figure 1

3.4 Events and Experiences

One of the most successful marketing event or communication channel to build greater relationships with consumer is the Leo Users Group programme (http://www.lugnet.com/), that allows Lego to form close bond with the user community (both the children and adults), of which those groups of Adult Fan of Lego (AFOLs) (of which the average age is 40), have the power to influence Lego’s business decisions and to encourage the company to develop better products that suits the consumers (Brown-Humes, 2004; Howell, 2005; Antorini, Muñiz, Albert & Askildsen, 2012). Such Lego user communities are common in Denmark, but are still very rare in China (except in Hong Kong) (Xu, 2014). In a way, there is actually very little ways for Lego to get know about the Chinese market in-depth, given that the feedbacks from passionate Lego users in China can hardly be retrieved.

Aside from that, there is also software, namely: Lego Factory for the Lego users to firstly build his own design or models, before they decided to buy the necessary bricks, of which the employees in Lego will then put all the pieces into a box, along with instructions, and ship it off to the consumers (Prospero, 2005). However, such services are not accessible by consumers in China, and that indicates that the experiences of users were not being taken care of in China. Given that Lego believe that China will be the core engine for growth, such issues shall be solved as soon as possible.

Aside from that, there are also efforts on Denmark to construct the LEGO experience centre (to be built in Billund), which is scheduled to open in 2016 (Trangbæk, 2013). Such facility will likely allow Lego to deliver an educational and inspirational experience to the consumers – which will be useful to further engage the consumers (by offering children and their parents to see and feel what LEGO play offers). Aside from that, there is also the making of film, namely: ‘The Lego Movie’ (Hansegard, 2014), which is also an effective way to deliver the Lego experiences to the consumers. However, there is lack of such techniques to affect the consumers in china. Indeed, while Lego movie is welcome in Denmark (and other part of the western countries), that movie actually was not tailored to the tastes or preferences of the Chinese consumers. Again, should the company want to penetrate the Chinese market or to affect the Chinese consumers, it is necessary to adjust the ways to deliver a unique Chinese Lego experiences to affect the consumers in China.

Nevertheless, it is noted that Lego indeed had performed some event marketing in China. In conjunction with the Lego intention to celebrate the official start of the construction of the new Lego Factory in Jiaxing, China; Lego had organised a total of four days event at Jiaxing Digital Library (Figure 2), which allows the children and parents to play with Lego bricks (Trangbæk, 2014). Such event had indeed effectively engage the local community, or at least to have some knowledge on Lego. Other than that, Lego do have exhibition around cities, such as in ShenZhen, as shown in Figure 3.

Figure 2

Figure 3

Source: http://www.izaojiao.com/huodong/30833

3.5 Public Relations and Publicity

Public relations are the indirect ways of which Lego communicate with the other stakeholders. Some positively publicity of Lego, in recent years include the following: the initiatives from Lego to engage the suppliers to reduce the total impact on the environment (Vestberg, 2013), Lego Group will reduce CO2 emissions by 10,000 tonnes in 2014 (Vestberg, 2014; Vestberg, 2014b), and the built of new factory in China to reduce wastages and environmental pollution due to transport Lego pieces between Europe and Asia (Milne, 2013). It can be seen that many of the public relation or publicity are tailored to build better Lego brand in the western countries, such as in Denmark. These strategies are relevant as it is noted earlier that consumers nowadays are more concerns about preservation of natural environment for sustainability. However, positive publicity on Lego in China is rare. Indeed, the official public relation of Lego is also weak, as it is noted that the website seeking talents in China is fully in English, despite that majority of the consumers in China speak only Mandarin (Figure 4). In other instances (Figure 5), many parts of the website targeted to the Chinese consumers had yet to be translated to Mandarin (whereby the Chinese wording shown in that Figure is about the company apologise to viewers that the webpage had yet to be translated to Mandarin).

Figure 4

Source: http://www.Lego.com/zh-cn/careers

Figure 5

Source: http://www.Lego.com/zh-cn/Legoland

3.6 Personal Selling

In Denmark, personal selling is not really the main techniques to engage the consumers, as Lego is already a well-known brand. This is because Lego is already a well-known brand, and that the Lego website is a good alternative for consumers to shop conveniently from their home. That official website, in Danish language, is shown in Figure 6. Broad ranges of items are sold in the website, which is shown in Figure 7 below.

Figure 6

Source: http://www.Lego.com/da-dk/

Figure 7

Source: http://shop.Lego.com/en-DK/ByTheme

The use of website to reach Chinese consumers is however seemed irrelevant and weak. As shown in Figure 7, there are indeed some customisation of Lego official webpage (for China region) to reach the consumers. However, the webpage seriously ignore the Chinese sensitive feelings against the Japanese, due to the recent political conflicts between the two countries. That can be seen from the promotion of Lego toys that focus on Ninja, a unique culture of Japanese. It would be valid to argue that Lego has been naïve to the societal norms in China do promoting such Lego sets in the country. Then, the range of toys accessible to the consumers in China is also rare. For example (Figure 9), some of the best-selling theme, such as Lord of the Ring and Hobbits are not being promoted (whereas many knock-off Lego from China had fill in the gap by producing mini-figures on such theme).

Figure 8

Source: http://www.Lego.com/zh-cn/children

Figure 9

Anyway, it is noted that interactive videos are also employed in China to engage the children (Figure 10). On overall, it would be argued that personal selling is likely a much more important medium to try to influence the consumers – when they pass by the Lego shop strategically located in the big cities in the nation.

Figure 10

Source: http://www.Lego.com/zh-cn/children

4.0 Overall Strategy and Positioning

Overall, the positioning of Lego in both Denmark and China is similar, one that trying to portray Lego itself as producers of high quality play materials (Trangbæk, 2014), which enabled consumers to develop their creativity, imagination and curiosity through ‘bricks’ (Allagui, 2008). Overall, it can be seen that the current strategy of Lego is well suited to engage the consumers, both children and adult in Denmark. However, the communication mix of Lego in China is weak, given that the company had yet to customise the communication messages and strategies to tailored services and products offering to meet the local consumers. There is lack of Lego User Groups activity in China, and worse, Lego had been neglecting the sensitive feelings of the Chinese against Japanese products. Although there are events being conducted to engage the children and adults in China, these are still insufficient to truly influence the Chinese consumers to purchase the products from Lego – especially given that there are many knock-off Lego producers in China (of which these other brands seemed capable to adjusting their products to the minds and preferences of the Chinese).

5.0 Recommendations

Some strategies that Lego should adopt include these:

• Lego can try to sponsor school events in China, as the brand name had yet been established in the nation. This is crucial to establish or associate Lego to educational toys.
• Aside from that, Lego should also sponsor more Lego User Group activities in china, such as offering cheaper bricks for the Adult Fan of Lego (AFOL) in China. Such community should be engaged to provide feedback to China, as well as to leverage upon to promote possibilities of Lego in unleashing creativity.
• The use of advertising can be employed in the initial stage when Lego tried to penetrate the China market. For example, while Lord of the Rings is a theme famous in the west, Lego should create story line or products on Chinese theme, such as ‘the Monkey God to the West’; and advertise such products after such movies on television programme (of which is frequent in China).
• It is necessary to develop theme that focus on Chinese cultural tradition, rather to promote the Ninja toys to the consumers in the country. It would be wise to stay culturally sensitive to the social norms in a new market, such as in China.
• More events should be created to allow the public in China have the similar opportunities to experience the educational and possibilities offered by Lego, as that will also enable positive publicity on Lego brand in the country.
• To sue the local knock-off Lego in China will likely attract negative publicity, and should be avoided. Rather, longer term strategies (such as a focus on quality and efficiencies) should be employed to beat the competition.

6.0 Conclusion

There are differences of cultures and societal norms that must be attended to in the context of international marketing or international communication mix. Lego should aware of that, and adjust its communication mix accordingly in China. Given that Lego believe China is an important market, it is necessary to truly spend time to understand the needs of the consumers in china, before expanding aggressively in the country. After all, as in the current situation, lego has yet gain any advantage in China, a nation populated by many knock-off Lego that have significant low-cost advantage.

7.0 References & Bibliography

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Antorini, Y. M., Muñiz, Jr, Albert, M., & Askildsen, T. (2012). Collaborating with customer communities: Lessons from the Lego group. MIT Sloan Management Review, 53(3), 73-95.

Brown-Humes, C. (2004). After the crash: Lego picks up the pieces: TOY MANUFACTURE: The iconic Danish brand must reinvent itself after its profits evaporated and consumers drifted away, says Christopher Brown - Humes: Financial Times.

Carter, M. (2003). Building blocks of success: TOYS: Lego is trying to return to growth after badly overstretching its brand, says Meg Carter: Financial Times

Carter, M. (2003). Lego’s bid to rebuild and keep its balance the Danish toy maker nearly over-leveraged its brand in the 90’s, but says its latest rethink is different. Financial Times.

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Fill, C. (2009). Marketing Communications: Interactivity, Communities and Content. 5th ed. Harlow: Prentice Hall.

Hansegard, J. (2014). Boss talk: In a digital world, Lego sticks to its bricks. Wall Street Journal.

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Hansegard, J., & Burkitt, L. (2013). Corporate news: Lego plant in China to target Asia sales. The Wall Street Journal Asia.

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Howell, D. (2005). Grown-ups build on their shared love of Lego brick by plastic brick: Edmonton Journal

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Kirkman, B. L., Lowe, K. B., & Gibson, C. B. (2006). A quarter century of culture’s consequences: A review of empirical research incorporating Hofstede’s cultural values framework. Journal of International Business Studies, 37(3), 285-320.

Li, Y., & Chia, R. (2011). The effect of traditional Chinese fuzzy thinking on human resource practices in mainland China. Chinese Management Studies, 5(4), 431-449.

MacCarthy, C. (2003). Lego wins suit against copycat: Chinese toymaker convicted of infringing patent. National Post.

Milne, R. (2013). Lego army on the march in China. Financial Times.

Prospero, M. A. (2005). BRICK BY BRICK: Lego’s new building blocks. Fast Company, 35.

Rolander, N. (2014). As growth slows, Lego aims to build up China sales. Wall Street Journal.

Smith, P. R., & Taylor, J. (2004). Marketing Communications: An Integrated Approach. 4th ed. London: Kogan Page.

Tang, L., & Koveos, P. E. (2008). A framework to update Hofstede’s cultural value indices: Economic dynamics and institutional stability. Journal of International Business Studies, 39(6), 1045-1063.

Tibbetts, J. (2005). Canadians beat Danes at their own game: Mega Bloks v. Lego. National Post.

Torres, J. A. (2013). China’s influence on the future of global business culture in the 21st century. Journal of American Academy of Business, Cambridge, 18(2), 9-15.

Trangbæk, R. R. (2013). International architects to design LEGO experience centre in Denmark. Lego.com.

Trangbæk, R. R. (2014). The LEGO Group invites Chinese children to build their future city. Lego.com.

Vestberg, M. (2013). LEGO Group partners with WWF and focuses on suppliers to reduce climate impact. Lego.com.

Vestberg, M. (2014). LEGO Group reduces CO2 emissions from packaging production by 10,000 tonnes. Lego.com.

Vestberg, M. (2014b). The LEGO Group increasing energy efficiency by 30% since 2009. Lego.com.

Xu, E. (2014). Lego Buildings Exhibition: By Hongkong Lego User Group. Thecoolgadgets.com.

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