Businessmodel of Lego Group

Customer Segments

The end-users of Lego’s products are general consumers, most notably children. The Company, however, directly serves a range of companies and businesses that are consumer-facing. Lego’s customers largely comprise physical and online retailers and distributors, such as chain stores, online stores, toy shops, supermarket chains, department stores and independent toy shops.

Lego’s largest market is in the US, where it has longstanding relationships with large retail chains such as Walmart, Toys “R” Us and Target. The Company also makes considerable sales across Europe, and experienced growth across the UK, France, and Italy in 2015. Lego also serves customers across Asia, with China representing an important growth market.

Value Propositions

Lego provides value to its customers in the following ways:

• Its brand reputation and industry standing, with the Company being one of the largest and most well-established toy companies in the world, with a track record for producing popular, high quality products for children;
• Its commitment to innovation, with the Company constantly seeking to create new and original products designs, providing a broad range of products targeted at a range of ages;
• Its licensed franchise products, with the Company partnering with intellectual property owners to provide officially licensed franchise products, such as Star Wars and Marvel toy sets;
• Its global reach, with Company serving consumers across the world, including across the Americas, Asia, Europe and the Middle East; and
• Its proprietary designs, with the Company owning a number of patents and trademarks that prevent the unique design of its bricks to be copied. ### Channels

Lego operates a website at www.lego.com, which provides information on the Company’s business activities and allows customers to access online content, including videos, games and news. The Company also operates a number of online stores via the www.shop.lego.com domain, which are organised by region and language, with separate online stores for Australia, Canada, Belgium, Korea and the Netherlands, among others.

Lego also operates its own in-house sales teams, also arranged geographically, which deal directly with the Company’s larger corporate clients. The Company operates its principal offices in the US, the UK, China, Singapore and Denmark, as well smaller offices across the rest of Europe, Asia and North America. Its own sales team is supported by a number of distributors in jurisdictions where the Company does not have a direct presence.

Lego also operates a network of physical retail stores, where consumers are able to purchase products directly from the Company. This includes stores in Austria, Belgium, Canada, Denmark, France, Germany, Sweden, the UK, and the US.

Customer Relationships

Lego provides its products to customers on a self-service basis, both through its regional online retail sites and through its network of physical retail stores. Through these channels, customers are able to purchase products from the Company directly. Online purchases can be completed autonomously, without interacting with Lego representatives. The Company’s network of physical stores allows the Company to provide a greater degree of personal care to consumers during the sales process.

Large bulk orders from corporate clients, notably large retail chains, must be completed through consultation with Lego’s in-house sales teams. This enables the Company to provide a more tailored service and establish more effective and long-standing relationships with its customers. This is apparent in the Company’s ongoing relationships with some of the world-s largest retailers.

Lego provides a range of support services to its customers and consumers, including building instructions and replacement parts, and enables customer to contact its support staff directly over the phone or via email. The Company also operates Facebook, Twitter, Instagram and YouTube accounts, through which it is able to interact with its customers.

Key Activities

Lego manufactures, markets and sells toys and play materials to a global consumer base spanning all age groups.

The Company’s products are based around its signature building blocks, with the Company providing a range of building sets for both licensed franchise brands – such as Star Wars and Marvel, its own proprietary brands – such as Ninjago, as well as non-franchise-brand products.

The Company also licenses its brand and intellectual properties for use in various forms of media, including video games, television programming and motion pictures.

Key Partners

Lego collaborates with a range of companies in producing and marketing its products and content. The Company organises its partners into three principal categories:

• Customers, comprising distributors, resellers and wholesalers that operate both as customers and partners, serving to extend the marketing and sales reach of Lego worldwide;
• Suppliers, comprising suppliers of all sizes across multiple sectors, including consultancy firms, utility suppliers, suppliers of raw materials, manufacturing companies, and packaging companies; and
• Intellectual Property Partners, comprising intellectual property owners such as motion picture studios and media groups. Lego’s intellectual property partnerships are divided into three categories: instances in which

LEGO acts as the licensor, allowing a third party companies to use the LEGO brand in products; instances where the Company acts as licensee, using the intellectual property rights of another company in its own products; and instances where Lego and a third party invest their brands or parts of their intellectual properties in creating cross-promotional products or content. Lego’s Intellectual Property Partners include Disney, Nickelodeon, Cartoon Network and Warner Brothers.

Key Resources

Lego’s key resources are its products and intellectual properties, its design and manufacturing facilities, its sales and distribution channels, its various partnerships, and its personnel. Lego has a number of patent applications filed with the US Patent and Trademark Office, including patent applications entitled ‘Plate element for a construction set’, ‘Building block from a toy building set’ and ‘Toy brick, a method of manufacturing a toy brick and a moulding tool for the manufacture of a toy brick’.

Cost Structure

Lego incurs costs in relation to the design and development of its products, the acquisition of supplies, consumables and raw materials, the licensing of franchise-branded content, the sale and distribution of its products, and the retention of its personnel.

In 2015, Lego had an average of 13,974 employees, representing DKK 5.96 billion in employee expenses, including salaries and benefits, for the year. The Company also incurs utility and rental costs in relation to its operations of an international network of offices and retail stores.

Revenue Streams

Lego derives revenue form the production and sale of its toys and games sets, and the licensing of its brands and intellectual properties, including Lego-branded video games, television programming and motion picture content.

In 2015 Lego generated DKK 35.78 billion (approximately $5.37 billion) in annual revenue, up just over 25% on the DKK 28.58 billion recorded by the Company in 2014, which included revenue from the Company’s successful Lego Movie. Revenue from the sale of products and goods makes up the vast majority of the Company’s total revenue, amounting to DKK 35.36 billion in 2015, compared to the DKK 421 million generated by the Company’s licensing activities.