Posted: March 12th, 2022
1. How did LEGO become one of the largest in the toy market?
Lego is presently one of the biggest and most renowned toy manufacturers across the globe. The actuality that a product offering as basic as the Lego Brick has continued to be considered pertinent within a progressively more digital world is remarkable. The company had been founded established in 1949 by founder Ole Kirk Christiansen. The main headquarters of the company are situated in Denmark. Over the years, the company has advanced from being a basic manufacturer of playsets made of wood to a conglomerate renowned for the manufacture of board games, plastic toys, books, retail stores, and theme parks.
In contemporary, LEGO is highly renowned for its product offerings utilized by consumers across the globe. The mission of the LEGO Group is to inspire and develop builders of the forthcoming days. On the other hand, the vision of the company is devising the future of play. Throughout the decades, LEGO has grown and developed into one of the biggest firms in the market through its growth strategy and innovation strategy (Holbrook, 2013).
Regarding the growth strategy, the entity has selected a tactic centered on different growth drivers. A fitting example of one of these drivers is Lego increasing its market share within the United States. Numerous Americans might perceive that they are purchasing numerous products from the company, but in reality, they are purchasing solely 30 percent of what German consumers purchase. As a result, there are significant growth prospects within the United States market (Frigo and Laessoe, 2014).
The second approach is an innovation strategy. It is imperative to note that LEGO emphasizes the generation of innovative, fresh products from ideas. Notably, the plans of the corporation to establish such conceptions. For the most part, the firm establishes such concepts twice every year or thrice (Frigo and Laessoe, 2014). A fitting example is the Games System that has been developed by the company that comprises board games for the entire family. Also, LEGO purposes for undertaking the expansion of its department responsible for working in tandem with schools and nurseries (Holbrook, 2013).
2. How is an ERM database useful in risk management at LEGO?
Fundamentally, enterprise risk management is a plan-oriented business tactic that endeavors to pinpoint, examine, and get ready for threats, hazards, and other prospects for hypothetical and physical disasters that might cause interruption in the firm’s business operations and objectives.
ERM is pivotal owing to the reason that its accomplishment is a determining factor of its health and life of the entity (Segal, 2011). If a firm is unable to determine risks to its existence, it implies a lack of adequate preparation to deal with any risk events. ERM can institutionalize risk management processes within the firm by homogenizing and systematizing the tools, approaches, and people procedures in supervising risks for every individual project (Monahan, 2008).
An ERM database is beneficial in risk management at LEGO. The incorporation of traditional ERM, together with strategy risk, was done in the year 2006. Before this year, LEGO was unable to control strategic risks effectively. ERM was established in LEGO by Hans Lassoe. Considering that LEGO’s business has ownership of the pertinent risks, Hans is liable for line management training and support to undertake a mechanized procedure to cope with such risks (Frigo and Laessoe, 2014).
One of the key components of ERM that has been useful to LEGO is Monte Carlo Simulations. This alludes to a mathematical approach that permits an individual to perceive all the conceivable results of decisions and assess the effect of risk. This sort of simulation has been beneficial to LEGO as they permit better decision-making during periods of uncertainty and improbability. LEGO can compute the 5 percent worst case compared to the prevailing budget and utilize that to delineate risk appetite. Imperatively, this information has been beneficial to LEGO in terms of having the capacity to take additional risks and being more aggressive (Frigo and Laessoe, 2014).
Monte Carlo Simulation for LEGO is capitalized for three specific areas. The first one is a budget simulation. In this regard, the business’s volatility is taken into consideration, together with examinations centered on the previous performance of budget precision. This enables the company’s management to comprehend financial volatility. The second area is the credit risk portfolio, and the final area is the consolidation of the risk portfolio (Frigo and Laessoe, 2014).
A second aspect that has been useful to LEGO is active risk and opportunity planning (AROP). This encompasses dealing with the necessitated risk evaluation of new business projects. Importantly, projects that can meet a level of intricacy must have a business case that encompasses an outright delineation and approach of dealing with both risks and opportunities. Consequently, LEGO formed a spreadsheet to standardize this procedure and permit persons that deal with risks to obtain a methodical approach to capitalize on the similar approach from the first project to the second project (Frigo and Laessoe, 2014).
The third aspect of the ERM database that is beneficial to LEGO’s risk management is uncertainty preparation. LEGO’s main aim is to guarantee that longstanding strategies are pertinent for future changes that may vary from the prearranged ones. After LEGO’s management, deciding on a certain strategy can conduct testing for resilience (Frigo and Laessoe, 2012). The company does this by examining the trends and preferences in the world. Society in general is advancing quite quickly and this also causes the industry to progress as well. The Park, Adapt, Prepare, and Act (PAPA) model is used in this process. In the Park element, the company puts at bay the slow aspects that have low likelihood of taking place. However, they are not disregarded. Adapt includes espousing to the slow things that will take place or have a high likelihood of happening. Prepare includes being ready for the aspects that have a low likelihood of taking place, but when they do, they usually emerge fast. Lastly, Act encompasses taking action on the things that have high probability and materialize fast, which need to be taken care of at the present moment (Frigo and Laessoe, 2014).
3. Was the change in a strategic direction beneficial to LEGO?
The change in strategic direction was beneficial to LEGO. Implementing the ERM system has facilitated the company’s ability to attain sustainability, which guaranteed that LEGO is monetarily valuable and competitive within the market. This is through the assimilation of strategic planning and stakeholder value within the enterprise risk management framework (Fraser, Simkins, and Narvaez, 2014).
LEGO has implemented a strategy that generated returns in the structure and thereby guaranteed longstanding productivity. Secondly, this framework that outlines the strategic procedure of managing risks within LEGO enables the company to carry out suitable decisions, plan, and implement strategies to increase its value (Stanton et al., 2015).
The transformation in strategic direction is useful to the company because it strategically pinpoints risks at various levels, which makes it simple to deal with risks that are considered adverse. LEGO’s different models are beneficial in pinpointing and reacting to risks of various levels of severity and haste and guidance on how to react to them (Fraser, Simkins, and Narvaez, 2014).
This uniqueness enables LEGO to attain cost savings on management risk by emphasizing the company’s rapid and high risks. Moreover, the organization espouses return on investment that guaranteed that there is backing from the top-level managers. This impels stakeholders’ involvement, thereby giving rise to greater value for enterprise risk management (Fraser, Simkins, and Narvaez, 2014).
Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing enterprise risk management: Case studies and best practices. John Wiley & Sons.
Frigo, M. L., Laessoe, H. (2012). The LEGO Group’s Four Elements of Risk Management. Poole College of Management. Retrieved from: https://erm.ncsu.edu/library/article/the-LEGO-groups-elements-risk-management
Frigo, M. L., & Læssøe, H. (2014). How can organizations manage strategic risks in a volatile and fast-paced. Implementing Enterprise Risk Management: Case Studies and Best Practices, 93.
Holbrook, E. (2013). Not Just Child’s Play: Strategic Risk Management at Lego. Risk Management Magazine. Retrieved from: http://www.rmmagazine.com/2013/02/01/not-just-childs-play-strategic-risk-management-at-lego/
Monahan, G. (2008). Enterprise risk management: A methodology for achieving strategic objectives (Vol. 20). Hoboken: John Wiley & Sons.
Segal, S. (2011). Corporate value of enterprise risk management. Hoboken (NJ): Wiley.
Stanton, T. H., Fraser, J. R. S., Simkins, B. J., & Narvaez, K. (2015). Constructive dialogue and ERM: Lessons from the financial crisis. Implementing enterprise risk management: Case studies and best practices.
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