How did the information systems and the organization design changes implemented by knudstorp align with the changes in business strategy? Advances in the field of information technology and introduction of new hi-tech form of entertainment such as tablets and gaming consoles had left Lego trailing in the entertainment field. Jorgen Vig Knudstorp was appointed as the CEO to revamp the company’s business process, organization structure and information systems. Knudstorp was quick to act and first made changes in the company’s production process.He encouraged designers to use the unused components in development of new products and design, thus reducing the number of unused components and reduced losses as the cost of production of each unit was very expensive. Lego created a new strategy to broaden the product range and target a new customer segment. Earlier Lego used to develop products which primarily targeted boys; with this new strategy they started developing products keeping a larger segment into perspective.
They started developing products based on movie themes.Most drastic changes came in the organization structure at Lego, switching the employee pay structure, providing incentive for innovative product designs. Lego also started developing video games thus targeting a new segment of customers. All these changes in the business aspects of the company led to an increased revenue, increased demand and growth in the number of employees. Development of new product based on the internet, addition of new employee and inability to meet the consumer demands led to need for a new advanced and upgraded system which would fulfill all the above mentioned.Lego developed a new modularized and standardized architecture for their information system, which they could easily expand and add functionality and capacity. The latest IT infrastructure in the organization enabled the employees to become more creative in terms of the product development and also business process development.
Lego Essay Example
The new system helped manage data, provided application for operation support and human capital management. Q. 2: Which of the generic strategies does Lego appear to be using based on this case? Provide support for your choice. Based on the case study Lego appears to be using the Focus strategy.Michael Porter proposed three generic strategies Cost Leadership, Differentiation and Focus. Focus is a strategy where organization focuses on specific niche markets; this may include a particular geographic region or particular segment of customers. Organizations which use this strategy develop their products after having a study of dynamics of the segment and unique needs of customer.
Lego before the appointment of the new CEO appear to use the focus strategy as their top priority was always to focus on innovation and creativity with taking profits into consideration.Add to that the case study also mention that Lego used to create products that primarily targeted boys. After the appointment of new CEO Jorgen Vig Knudstorp the company appears to have changed its policy form Focus to Cost-Leadership. Cost-Leadership is a strategy where organizations focus on gaining competitive advantage by offering products and services at the lowest possible price. They achieve this by increasing profits by reducing production cost and other way is to increase market share by reducing the prices of products compared to the competitors.Knudstorp after taking charge of Lego changed their focus on reducing the production cost. He proposed a strategy to reuse most of the components produced by them as the production for each component was too high.
Under Knudstorp Lego started creating products on themes of popular movies, they engaged in online communities through websites and blog which allowed them to create a bond with their proposed market. Knudstorp also changed their organizational structure; Key performance indicators encouraged innovation and thus resulted in cost reduction. Q. : Are the changes implemented by knudstorp an indication of hypercompetition? Defend your position. The generic strategy focus on maintaining a competitive advantage Hypercompetition model suggests that the speed and aggressiveness of the moves and countermoves made in any given market create an environment in which new advantages that cannot be sustained for a long time. Organizations must constantly compete in price or quality, or innovate in, supply chain management, new value creation, or have enough financial capital to outlast other competitors.The hypercompetition model is based on the assumptions that every advantage is eroded, sustaining an advantage can be a deadly distraction, goal of advantage should be disruption and not sustainability and initiatives are achieved by a series of small steps.
The changes made by Knudstorp are an indication of hypercompetion. Organizations try to attain relative competitive advantage in such a competitive market in four ways. Knudstorp’s strategy to revamp the business process, organization structure and production process 1.Cost/ Quality: After taking over Lego, Knudstorp most important task was to get the company out of losses and back in the green. Lego at that time was losing $1Million a day. He revamped the production process to make sure that designers reused their components in new products thereby decreasing the number of unused components from 13000 to 7000 Lego components. This resulted in a decreased production cost which indirectly had its effect on the company revenue.
2. Know-how/Timing: Lego’s supply chain system was out of order before Knudstorp came into the company.The company struggled with missed deadlines and poor delivery. There were instances where the most popular toy would run out of stock and company would not be in a position to meet the demands of the retailers on time or did not have the correct supply infrastructure to deliver the products. Knudstorp changed all this. He fixed the missing links in the supply chain system. He moved the manufacturing and distribution function to locations from which delivery and reach to the market would be easier.
3. Stronghold Creation/Innovation: Knudstorp new strategy was to broaden the product range.He encouraged the designers to develop new products and provide incentives for appropriate product innovation. Under his new strategy Lego created products based on movie themes, developed products for a larger segment of population making toys for adults and girls. Lego expanded into virtual world and started creating video games and virtual interaction games. This helped them by reducing production cost and increasing customer interaction. Q.
4: What advice would you give to Knudstorp to keep Lego competitive, growing and relevant?