Multicolored interlocking plastic bricks along with an array of gears and small figurines that can be assembled and connected in various ways to create and construct vehicles, buildings, working robots, and many other objects bring back childhood memories of playing with Legos. The brilliance of these pieces lies in their ability to be taken apart and re-used to build and construct new things. The brand, Lego, which is the world’s leading toy manufacturer today, derived its name from the Danish phrase ‘leg godt’ that means ‘play well’.
Commonly known as Lego bricks, the creative toys are currently sold in 130 countries. The brand recorded sales worth USD 3.6 billion in the first half of 2021 which was up by 46% YOY. It also owns 10 theme parks, a movie franchise, and above 600 stores globally. It has increased its product line to include DUPLO (which are larger bricks for younger children who are unable to handle smaller bricks) and a range of yellow Minifigures appearing in the company’s themed play sets. The company, which has marked 90 years in existence has been through a winding road of challenges and obstacles to reach the success pinnacle that makes it an unrivaled global toy empire today.
Lego - The Beginning
The Economy of Lego
Lego - The Beginning
The year was 1932 and the world was going through tough economic crises. Ole Kirk Kristiansen, a carpenter in a small Denmark town, Billund, reapplied his skills to make wooden toys like cars, airplanes, etc. He named his company ‘Lego’ to reflect the quality of his products. In the year 1936, Kristiansen created a motto for his company, which when translated from Danish means “only the best is good enough”. A few years later, he was facing difficulty in sourcing wooden materials to make toys and turned his attention to the possibility of using plastic to continue manufacturing.
By 1947, Kristiansen expanded his manufacturing capacity to produce plastic toys and within the next two years, Lego began making their new interlocking bricks and called them ‘Automatic Binding Bricks’ – the early version of the now familiar interlocking tiles. Within the next four years, by 1951, almost half of the Lego-produced toys were made from plastic. Over the years, plastic toys from Lego have overcome the common anti-plastic sentiment, especially in children’s toys. This is mainly due to the high-quality standards set by its founder.
It was Godtfred, Kristiansen’s son, who saw the immense potential in the Lego bricks to become a system for creative play through his conversation with an overseas buyer. Rising the company’s ladder to become the junior managing director in 1954, he set about correcting a few technical issues that existed with the bricks, like versatility and their limited locking ability. By 1958, the modern brick design was finalized and the company filed a patent application for it in Denmark on 28th January 1958. Godtfred said – “We wanted to create a toy that prepares the child for life, appealing to their imagination and developing the creative urge and joy of creation that is the driving force in every human being.” In the next few years, Lego also filed design patents in various other countries.
The DUPLO product line focuses on a range of simple blocks that are double in length, width, height, and depth and was introduced in the year 1969 for younger children. Almost a decade later, in 1978, Lego introduced the Minifigures which have become a staple in most of their play sets.
Two decades later, in 1998, Lego introduced a product line of bricks that was embedded with microchips to create programmable robotic packs. In the same year, the company was inducted into the US National Toy Hall of Fame. A couple of years later, Lego was named the toy of the century by the British Association of Toy Retailers.
Lego was crowned as the ‘world’s most powerful brand’ in February 2015 by the marketing consulting company, Brand Finance.
Over the years, the brand has spent heavily to remain relevant in an ever-evolving consumer market. Currently leading Lego is the grandchild of the founder, Kjeld Kirk Kristiansen. The toy company is producing bricks that are, even now, compatible with those that were produced in 1958. Lego has made significant announcements in 2021 that reflect the company’s deep understanding of a changing society.
Lego’s first announcement was that the company planned to remove gender bias from its products to curtail the harmful effects of stereotypes on the ambition of children. The second announcement was made in March of 2021 as it unveiled ‘Everyone is Awesome’ - the set that explicitly celebrated the LGBTQ+ community.
The Economy of Lego
Lego’s journey to greatness has not been without its obstacles and challenges. But the brand has emerged from its battles ‘the Lego way’.
After filing the first design patent in 1958, the company sailed smoothly for three decades on the founder’s original ideas with no research into emerging trends or new markets. Troubles began when their patents expired in 1988. Apart from dealing with Lego-inspired copies cropping up in the market, the company was also faced with a newer version of child entertainment – video games.
By the late nineties, Lego was struggling for survival. To renew interest in their brick-building sets and keep the brand alive, the company spent enormously to develop television shows, beginning with Jack Stone, a versatile character appearing in various avatars who builds machines to catch criminals. The show was a complete failure along with another one titled Galidor: Defenders of the Outer Dimension. At this time, the only product brand that was keeping the company afloat was ‘Bionicle’.
Lego saw a small success when they sold their first group of Star Wars-themed sets around the release of the movie. However, the next year these sets did not sell as there was no Star Wars movie releasing and Lego had to absorb substantial losses. They repeated the same mistake with the Harry Potter sets and almost filed for bankruptcy. By the year 2003, Lego had built a debt of USD 800 million and recorded a 30% revenue decline.
In a last-ditch effort to save the company, the board changed the management structure and a new CEO was brought in. This proved to be the correct move as he proceeded to make immediate and necessary changes by shutting down most of the unprofitable ventures for Lego. The company began diversifying by finding many production partners creating a channel of reliable income. Lego started creating and telling stories of the brands they partnered with. They began making their own stories and shows and their 2011 show Lego Ninjago proved to be hugely successful. This was followed by another successful show in 2013 – Legends of Chima.
The Lego Movie which was released in 2014 recorded box office collections of USD 468 million. Riding on this success, the CEO Jorgen Vig Knudstorp said – “This has been the best year ever for the Lego Group. If I could sing and dance, I should be singing and dancing because it is a fantastic number of results.” The success of this movie resulted in a sequel and two spin-offs titled The Lego Movie 2: The Second Part, The Lego Batman Movie, and The Lego Ninjago Movie.
With the severity of the downturns that Lego endured, it is truly a miracle that the brand has managed to not only turn around but rise to its former glory again. Their business economics is focused on telling stories that people love. These, in turn, are fueling their sales. The 90-year-old brand has traveled a road with a few twists, turns, and bumps and has emerged stronger leading the global toy market with aplomb and glory.
What is a Lego toy?
Lego bricks are colorful plastic building blocks that can be joined together easily to make a tower, house, and more. It is the most popular building toy in the world.
What is the average cost of Lego?
This value can be calculated by dividing the total set price by the number of bricks.
What is the target audience of Lego?
The main target market for the Lego Company is children between the ages of 1-15 years.
Is Lego suitable for all ages?
Yes, Lego is suitable for all ages. They offer Lego sets for children and adults in all age groups.