After careful analysis of the alternatives and an in-depth look at the company in general we recommend that the LEGO Company should deviate from the construction toy market and begin producing fashion toys.
The children's toy market has changed and as a result the marketing strategies previously employed by LEGO have led to a decrease in market share and consumer sales.
First, we analyzed the threat of substitutes in the industry. A substitute is classified as any product that grabs and holds the child's attention. The overall threat of substitutes in the industry is considered to be high, as a result of the many varying products that children have to choose from in today's growing toy market.
The threat of initial entry into the toy industry is high, because any entrepreneur can produce a trendy product classified in the toy market. These entrants rarely sustain product sales and, over time, lose out to the larger companies who have customer loyalty, brand equity, and financial resources. This idea is further explained in the analysis of rivalry in the industry.
Rivalry is classified as the ability of a company to produce a comparable product. Producing a high quality product that continually adapts to children's fickle tastes in a market that is dominated by a few large competitors, such as, Nintendo, Hasbro, and Mattel, is difficult.
The threat of buyers is low, because the companies that would possibly consider buying one of the toy companies, for example Toys'R US, Wal-Mart, and Kmart, are stocked by many types of products, and within each product many brands. Therefore, this would be astronomically expensive and inefficient.
Additionally, the overall threat of suppliers is low, due to the overwhelming number of plastic chemical suppliers in the industry. As a result, it would never be feasible to purchase all the means of plastic production in the industry, thus making the threat extremely low.