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In lugnet.castle, Orion Pobursky wrote:
> Actually the rise in oil prices has the potential to directly affect a
> number of aspects of the LEGO businees:
>
> - Transport costs
> - Plastics are made with oil and other hydrocarbons
> - Industrial machines require lubrication
> - Most electricity is generated using oil and other hydrocarbons
>
> There are many more things I didn't bother to list.
I'm never sure whether to be amused or aggravated when I see people griping
about how much more LEGO sets cost now than they did when they were growing up.
The one simple answer that noone seems to figure out is "inflation". Think
about it. Think back to a specific time when the sets were "more reasonably
priced". How much did candy bars cost then? How much did gasoline cost then?
How much did cars cost then? Why is it so unthinkable that little plastic
bricks are subject to the same market effects? Oil prices are certainly a
contributing factor, but labor is probably at the heart of it. Many American
companies have resorted to transfering their production to China and/or
third-world countries because the reduced labor costs more than compensate for
the increased transportation costs, and yet their products still usually cost
more than they did 20 years ago. The LEGO Company has, until now, kept their
production confined to Denmark and Switzerland, two first-world countries where
labor costs are much higher than they'd be elsewhere, and they've clearly been
losing money as a result. Want proof? Consider the facts. We know they've
been losing money as they've declared their first annual losses in 1998, 2000,
and 2003. That's the simple part. Now look at what they've done recently with
labor. They've enacted massive layoffs in their existing production plants
recently, and now they've started producing parts in South Korea and the Czech
Republic. Two years ago those two locations were only responsible for packaging
and distribution. Okay, that's neat and all, but what makes it so significant?
There are currently only two countries left with major LEGO facilities where
parts are not being produced. One is Germany, but they've been splitting the
mold-making duties with Switzerland for quite a while now. The other one is the
United States. Part of the movie industry migrated to the Czech Republic
specifically because the labor costs were so much lower there than they were in
the US. The US is the single largest consumer-nation of LEGO product, but the
only major stateside activities that I'm aware of are packaging, distribution,
and promotional materials/events, and the only global "exports" from the US
seems to come through LEGO Direct (a satellite company that was founded in the
US) by way of internet content and S@H exclusive set designs.
So annual losses show that they aren't reaping huge profits as a result of the
steady increase in costs, and production has just been expanded into two
countries where labor costs are significantly lower than they were at the
pre-existing plants. That pretty much screams "labor" as a major factor in the
price changes, but there's also one other major consideration that's partly tied
to all of this. In 2001, the BIONICLE Toa sets first showed up at $6.99 and
were instantly popular. Later in the year the price jumped a buck to $7.99,
which didn't make much sense to me (they were floating the company as it was,
and raising the prices risked killing sales which could spell financial
disaster). So I asked them. I was told that the Toa were selling so fast that
they had to set up a new production line just to keep up with the demand for
part production, and the price bump was intended to recoup the cost of all the
new machinery. They've recently opened new production _plants_ in two other
countries, which would require setting up multiple production lines (and it's
generally more economically sound to buy new production equipment than to
transfer old equipment over great distances, so while the Czech plant might have
received hand-me-downs from Denmark and Switzerland, the Korean plant almost
assuredly did not).
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Message has 3 Replies:
 | | Re: New Knight's Kingdom Prices
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| Before you go running off on tangents, let's get one thing straight, Lego was in the red in those years, not because of poor sales for Lego sets, but for poor sales in their other ventures, clothing, pens, etc. Now a different spin I would like to (...) (20 years ago, 8-Jun-04, to lugnet.general)
| | | Re: New Knight's Kingdom Prices
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| Purple Dave wrote: [snip] (...) [snip] (...) [snip] (...) Hi Dave, although your message may have some valid points, the ones about LEGO in Czech Republic are not. Following info is from reliable source: There are about 300 employees in Kladno (...) (20 years ago, 9-Jun-04, to lugnet.general)
| | | Re: New Knight's Kingdom Prices
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| (...) While primarily correct, there have been several examples of TLC farming out some items to China (PRC). The ones I have noticed are: Galidor action figures, The recent McD's promos and (IIRC) the Bionicles from the previous cycle with McD's. I (...) (20 years ago, 10-Jun-04, to lugnet.general)
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Message is in Reply To:
| | Re: New Knight's Kingdom Prices
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| (...) Actually the rise in oil prices has the potential to directly affect a number of aspects of the LEGO businees: - Transport costs - Plastics are made with oil and other hydrocarbons - Industrial machines require lubrication - Most electricity (...) (20 years ago, 7-Jun-04, to lugnet.castle)
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