I. What are LEGOs points of difference?Legos points of difference were born from its humble beginnings dating back to 1916. Ole Kirk Kristiansen, the founder preached the importance of quality and felt that only the best was good enough. This value and other important factors like innovation and creativity separate the company from its competition. The companys most well-known product the LEGO brick differentiated LEGO in many ways as it has created value by empowering its customers to explore their creative side. In essence, the product is so versatile that the possibilities are endless. The bricks definable trait was summarized best by CEO Jorgen Knudstrop as the only material that is held like glue, but is able to be taken apart. Its unparalleled uniqueness comes from the level of customization and end users imagination. With innovation and Legos, there are an infinite number of possibilities.II. What has led the Lego Group to the edge of bankruptcy?

The company morphed into a poorly organized firm in its managerial structure. What once was a very effective operation quickly underwent a sudden overhaul of the companys leadership team and operational focus. Most significant was that there appeared to be no assessment of product protability. Operational nightmares and the lack of accountability led to an explosion of inventory costs and write-offs. Management had no idea which products were making money and which were failing to produce an adequate return on investment. Furthermore, management lost touch with major customers. New products were cannibalizing already overstocked with unsold merchandise. Focus on the end users ignored the retailers who became overwhelmingly frustrated with the stock-outs and slow-moving inventory.

III. What is your assessment of management moves during the growth period that wasnt (1993-1998) and the fix that wasnt (1999-2004)? There were several missteps from a strategic standpoint, namely the lack of profitable innovation. The outcome was a series of very expensive failed product launches. The issue that LEGO faced was that they were executing several new ideas, but little value was generated from them.Management lost touch of what made them successful. The hiring of Poul Ploughman was an epic mistake as he sought to change what was already a very effective operation. During his tenure management lost touch with what customers wanted. Prior to the transition to Knudstorps reign, LEGO was obsessed with novelty. The firm was so far removed from understanding what their customers wanted (or even who they were), that these new ideas failed to create value. Several of the new products were based on assuming that they knew what the market wanted, not by the actual research and feedback they received from their customer base. The innovation the firm created was dwarfed by its flawed strategy. They thought that the power was in the brand, but in actuality the power was in the brick.IV. Why did LEGO outsource manufacturing?Upon Jorgen Knudstorps reign, he aimed to streamline operations. He felt that his manufacturing team was overwhelmed and that they would benefit from simplification. He then decided it would be in the companys best interest to outsource any non-core operational processes. Management also felt that manufacturing should be placed lower on the priority scale and that they had lost their overall edge in supply chain management. The company lacked procurement compliance procedures and inventory were being underutilized and led to the waste of materials. V. Why didnt it work out?

Outsourcing ended up being the wrong decision because Flextronics business model differed too much from LEGOs. Effective coordination and control of various production facilities became too complex. Since the outsourcing was done at a very rapid pace, the transfer of production knowledge could not be reliably transferred. The company needed flexible and responsive production to handle seasonal fluctuations and demand uncertainties. Flextronics method designed to optimize economies of scale through predictable, uniform production schedule. The firm did not recognize the "distinctiveness" of their products and needs in relation to Flextronics' expertise. As a result inventory accuracy suffered, quality did so as well, and costs at times rose. To produce exactly what LEGO needed in exactly the right quality they needed to bring manufacturing back in-house.