What is Lego's Business Model?

Lego is one of the world's largest toy brands, renowned for its iconic brick pieces that inspire creative play for both children and adults. While Lego's business model has evolved significantly over the years, one element is always present - innovation.

Let's explore Lego's business model in detail and identify its key components.

Customer Segments

• Kids: The primary customer segment, continuously targeted by Lego with various themes and product lines.

• Adults: Recently, Lego has increasingly targeted adults by offering more complex and sophisticated sets, such as Lego sets based on the show The Office.

• Educators: Teachers and educational institutions utilize Lego products to enhance learning experiences.

Value Propositions

• High-Quality Products: Lego is renowned for its high standards of quality control, ensuring that each piece is durable and fits perfectly.

• Creativity: Lego sets allow users to build multiple designs from a single set, fostering creativity.

• Educational Benefits: Lego products are widely used in educational settings to promote hands-on learning and develop skills such as spatial awareness and collaboration.

Channels

• Lego Stores: These flagship stores, located in major cities worldwide, offer immersive brand experiences and exclusive products.

• Retail Stores: Third-party retailers, including major toy stores and department stores, distribute Lego products globally.

• Website: The official e-commerce platform, Lego.com, provides a comprehensive online shopping experience.

• Apps: Digital applications such as Lego Builder enhance the building experience by allowing users to design and create unique shapes and structures.

• Theme Parks: Legoland theme parks around the world offer immersive experiences where visitors can engage with life-sized Lego models and enjoy themed attractions.

• Media (Movies and Games): Lego expands its reach through movies and video games, often partnering with entertainment giants like Warner Bros. to create themed sets.

Customer Relationships

• Personal Assistance: Available in Lego stores, offering personalized shopping experiences.

• Self-Service: Online platforms where customers can independently browse and purchase products.

• Community Engagement: Lego has a community of builders around the world, enhancing the brand awareness and fostering a strong sense of belonging among its customers.

Revenue Streams

• Product Sales: Revenue from the sales of Lego sets, individual bricks and merchandise.

• Licensing fees: Income generated from licensing agreements with popular franchises and collaborations with other brands.

• Theme Park fees: Revenue from ticket sales and in-park purchases at Legoland theme parks.

• Media sales: Sales from apps, video games, and other digital content.

Key Activities

As described in Lego's financial statement of 2023, the main activities are:

• Product Development: Research and development of new Lego sets, continuously innovating to keep the product engaging.

• Manufacturing: Operating factories worldwide to ensure efficient production and supply.

• Supply Chain and distribution: Ensuring products are delivered efficiently from factories to customers globally.

• Media Production: Developing digital experiences, movies, and video games to complement physical products.

Key Resources

• Brand: Lego’s globally recognized brand, synonymous with quality and creativity. Multiple companies can copy the famous brick pieces, but none of them can copy the strength and the reach that the Lego brand has.

• Factories: As highlighted in the key resources, Lego has factories in different countries, such as Mexico, Hungary and China.

• Distribution network: A robust supply chain and distribution network that ensures products reach customers efficiently.

Key Partnerships

• Entertainment Companies: Collaborations with entertainment giants like Warner Bros. for themed sets and media content. Although this is not Lego's core business, those productions contribute to the brand awareness and moreover, increase overall sales.

• Supply Chain partners: Partnerships with suppliers and logistics companies to maintain an efficient supply chain.

• Retail stores: Relationships with third-party retailers to distribute Lego products globally.

Cost Structure

• Product Development: Costs associated with research and development to produce new sets.

• Manufacturing: Costs of producing Lego sets, including materials and labor.

• Staff: Employee salaries and benefits.

• Supply Chain Management: Costs related to logistics and distribution.

• Media Production: Expenses for creating movies, games, and other digital content.

• Licensing Fees: Costs associated with licensing agreements for themed sets.

Now that we have the full picture of Lego's business model, let's jump to main takeaways:

Build Projects that Boost the Core Business: Lego is neither a movie producer nor a video game company, yet it has its own Lego movies and video games. By engaging customers through these channels, Lego has successfully expanded its reach and increased the sales of its core products—Lego sets and pieces.

Adopt a Multichannel Approach Focused on Customer Experience: Lego interacts with customers through various channels, including retail stores, e-commerce, apps, and theme parks. This multichannel strategy ensures that customers can have a complete Lego experience, whether they're shopping online, visiting a store, or enjoying a day at Legoland.

Innovation Supports the Core Business: For Lego, innovation in the form of themed parks and digital experiences complements rather than replaces its core products. Lego sets and bricks remain central to the brand. The company's innovative approach, including new experiences and product lines, supports and enhances the core business, ensuring its continued success and relevance.