Lego, the ubiquitous Danish toymaker has announced that it will be restructuring and laying off approximately 1400 or 8 percent of its staff. The layoff was sparked by a drop in sales in a number of years after the private company was considering bankruptcy in 2003. It appears that the growth of revenue in China was not enough to offset the declines in both the United States and Europe. Not so coincidently a new CEO will be starting in October 2017 to oversee the restructuring process.
Like all companies contemplating or undergoing restructuring and layoffs, management said, “Lego had pressed the reset-button for the entire group."We will build a smaller and less complex organization than we have today, which will simplify our business model in order to reach more children. It will also impact our costs. Finally, in some markets the reset entails addressing a clean-up of inventories across the entire value chain. The work is well under way.”
Little more than a large interlocking block set, Lego’s main competition is from video games and other internet activities. Fortunately, the product is aimed at a lower-age demographic who may not have mastered electronic devices. By associating with widespread branded entertainment properties, Lego keeps themselves before the younger public and presenting itself as an alternative to electronic toys. Lego appears to be movinginto electronic apps to counteract any further erosion in the physical world.