Updated blog
Lego. Those familiar yellow Lego bricks are a part of millions of childhoods worldwide and continue to top Christmas lists every year.
Lego started as a small wooden toy company in Denmark in 1932 and has now grown from those modest origins to a revenue of $9.8B.
These impressive figures mean that the company has been crowned the world’s most valuable toy brand. Indeed, international appeal has been woven into the brand since its very inception – the name Lego is derived from ‘leg godt’ in Danish, which means 'play well.'
International growth? It isn’t always easy
The Lego Group operates hundreds of shops worldwide, from Germany to the US. Additionally, its products can also be found in thousands of different stores and retailers.
There are also theme parks around the world: based in Windsor, Florida, California, Japan, Malaysia, Billund, Dubai and Germany. It seems like Lego must have had a permanent lucky streak to achieve such a powerful international presence.
The truth, however, is that it hasn’t always been easy for the brand.
Lego’s story is a prime example that short-term failure doesn’t always prove fatal to businesses, as long as they continue to adapt and invest in the right places.
While Lego’s initial growth continued for decades, they encountered troubles in the late 1990s, when hi-tech toys like Furby and Tamagotchi started to take the toy market by storm. The methodical nature of Lego became a hard sell against its competitors. Sales had dropped by 30% by 2003, then a further 10% by 2004.
Lego regained its market dominance by cutting down its staff by more than 11,000 and reducing complexity in the supply chain to try and ensure smoother performance. Then sales faltered again in 2017 and Lego decided to cut 1,800 jobs globally, usually a troubling sign for any brand. Rather than just a cost-cutting exercise, this simplification was enforced in order to make the brand clearer to children who are increasingly inundated with new toy brands.
Returning to growth
Even though the cuts were devastating for employees, they allowed Lego to localise their production.
Lego opened a factory in Jiaxing, China in 2016 in order to compete with local companies and reduce costs. Lego estimated at the time that this might save as much as 20% on manufacturing and distribution costs, thus creating an international export strategy which is better value for money.
Away from the production line, Lego also implemented a hiring process that was focused on diversity, resulting in Indian and Japanese employees, amongst others, obtaining key positions in their ‘Concept Lab.’
These positions were previously predominantly filled by Danish employees. Lego found that diversifying their employees diversified the ideas brought to the table and resulted in better cultural insights into new markets and demographics.
Lego also made the wise decision to take a look back at what their loyal global community wanted from the brand and focused on their core brand values. The company carried out research on their existing customers’ needs in order to drive sustainable growth against market storms.
Lego's ingenious balancing act of retaining loyal customers whilst attracting new ones through its international export strategy even lead CNBC to call it ‘the world’s favourite toy brand.’
Global values, localised approaches
Lego has managed to create a consistently impactful brand across many international markets by combining localised marketing with a strong commitment to its values. While concepts such as imagination and creativity may be perceived differently in different overseas markets, Lego skilfully adapts them to different cultures, all the while retaining its key messages.
Lego’s extensive market research also helped. Since research showed that Chinese children enjoyed Lego's current toys, Lego didn’t waste time or money by creating a wide range of unnecessarily localised products. Instead, they differentiated their product range modestly by creating a limited range of exclusive playsets, including one for the Chinese New Year.
The biggest adaptation Lego needed to make was its well-established Western value of ‘learning through play,’ which was a relatively new concept in China. The company invests generously in global programmes through its charity the Lego Foundation.
The Foundation allows Lego to prove the educational benefits of play in sceptical markets.
‘We offer what I would call a very timeless but also very universal brand. You put Lego bricks in the hands of children in China, Afghanistan, South Africa, America, or Germany, the play is the same, the idea is the same.’
International targeting
Lego’s markets have always been carefully chosen and researched.
Every Lego store, anywhere in the world, has its own localised elements. For example, the Lego store in Cape Town, South Africa, displays a model of the suburb of Bo-Kaaap built by a local fan.
Lego doesn’t take its position as a global brand for granted and ensures it tailors everything, from products and manufacturing to marketing for each location.
In Hong Kong, Lego has focused on lavish events marketing to generate a strong brand presence. Troy Taylor, general manager for Lego in Hong Kong, Taiwan and Macau, explained that events marketing is great for Lego products. This is because malls are eager to host events which see more customers going to their stores, allowing children to play with Lego in a ‘hands-on’ manner and allowing families to bond.
Chief Executive, Niels Christiansen said, “The growing middle class, importance of education, and growing economy make India a logical next step in our efforts to reach many more children around the world.’’
Hong Kong is a particularly interesting market because Lego already has a strong brand presence in the region, meaning that they can take more risks with creative campaigns than they would if they had to meticulously build their audience. Hong Kong has the highest amount of AFOLs (adult fans of Lego) per capita in the world. As well as marketing and creating products for a new generation of children, Lego also works to retain this key audience.
Product localisation
The dedicated AFOL's have tracked some interesting variants in packaging across countries as well. Variants seem to have been a main part of Lego's international export strategy in the 60's and 70's.
One example of how Lego varied its products in the early years is the fact that only select markets such as Italy and Germany received a tagline to help clarify the product. Lego was referred to in Continental Europe as the ‘LEGO system,’ whereas it was dubbed ‘The Building Toy’ in Britain, Ireland and Australia.
Lego also created an exclusive Japanese brand ‘OLO,’ and an exclusive Italian brand, ‘Minitalia’ alongside its main product line, to boost sales in these countries.
While the bricks often looked different and seemed to be made out of a different type of plastic, these were still compatible with the main line of Lego.
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