LEGO GROUP: AN OUTSOURCING JOURNEY Harvard Case Solution & Analysis


The company, in the year 2004, faced financial crises and decided to outsource most of its products manufacturing to the company Flextronics. The idea behind the outsourcing was to decrease the cost of production and give the company some time to regain from its operations.

The company was one of the largest toy manufacturers in the European market and it covered almost 60% of the market in Europe. The company has a wide range of toys and is versatile in its products. The product line of the company includes creative buildings, MINDSTORM NXT, LEGO Games, Play themes, LEGO education, pre-school products and licensed products.

The company went into crisis and the reasons behind the crisis came out to be the loss of confidence in the core products of the company, which demotivated the employees and the top management of the company. The loss of faith in the products created a gap between the company and the core products.

The company was always positively looking towards the innovation towards the products and its manufacturing. The company experimented too much, which ultimately increased the cost of production for the company. The excessive pressure on diversification made the company bear extra ordinary expenses.

In order to reach the demands of the products, the company was pressurized.Moreover, the suppliers and ultimately the company came in contact with a number of suppliers, which in the end, came out to be a mess for the company. The use of too many suppliers made the company bear the variation in the quality of supplies and much more.

The company was considering increasing the market share by increasing in diversity of products of the company and increasing the production of the products. The company was relying on the new products to pay off but the plan back fired.

The effects of too much diversification and use of a number of suppliers came out as a decrease in sales by 40%. The loss of money was the major contributor to the shift of productions and changing the thinking of the top management of the company. The company faced a loss of DKK 1.8 billion in the year 2004.

The loss had a major impact on the mindset of the company and the top management of the company. The top management of the company shifted its focus from the core products of the company to the dynamic competitive market products. Moreover, the idea behind the shift was the lack of confidence in the core products of the company.........

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