Subject:
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Re: Lego changes CEO after new losses
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Newsgroups:
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lugnet.lego, lugnet.general
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Date:
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Sun, 24 Oct 2004 14:40:09 GMT
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Viewed:
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5950 times
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> Follow-up: In the Danish TV News, in two interviews,
> the new CEO said, that most of the production would probably be moved to
> China (where Click-its and many parts are already made)
Okay...
They will be using the same molds so part quality should remain similar. (This
says nothing for color consistency or actually getting the right parts in each
bag/box)
They probably won't save much money because they've often said that the factory
is so automated that very few people are required to run it.
It will probably cost a lot of money to shut down the old factory and set up
operations in China. It will probably take many years for the small labor
savings to cover these setup costs.
After the setup costs have been covered, yearly savings from the cheaper labor
in China will remain an insignificant part of the big picture.
None of TLC's problems will actually be solved, but they will have shaved a bit
of cost out of their production. After they realize that these cost savings
aren't helping them, they will regret shutting down the factory in Denmark, but
it will be too late to do anything about it.
From my own observations and things in the various news articles recently linked
in this thread, TLC has two big problems:
1. Supply Chain Issues - Moving to China does not solve this. At the worst, it
may make things worse. At the best, it will require TLC to restructure the
entire supply chain. (That may prove to be a very good thing in the long run,
depending on how things go.)
2. Low Sales. The article that started this thread said that sales in 2004 are
expected to be 8b compared to 8.4b in 2003. I'm tempted to suggest that this 5%
decrease is caused by the "insignificant" minority of AFOLS who do not like the
new colors, but I wouldn't want this post to get sent to lugnet.color so let's
forget about that. :)
The bigger problem is not the 5% drop compared to last year, but the fact that
it's part of an ongoing trend. I blame the the lower sales volume on high prices
and less appealing set designs.
LEGO prices have risen at an abnormal rate since the year 2000. I believe that
bad set designs since the mid 90s resulted in TLC eventually charging more in
2000 to make up for lower sales. Come the year 2000, less children were getting
into LEGO because it is expensive and the set designs are not very appealing.
Older children are also getting away from LEGO at a younger age because the set
designs are unappealing. Set designs are slowly starting to improve (with some
exceptions), but it's not helping enough. The rate at which older children are
giving up LEGO is probably higher than the rate at which young children are
getting into it. That would explain why TLC's been focusing so much effort on
younger children lately. Sadly, I think it's backwards. Retaining the older
children should be more important than gathering the young ones. Older children
will pass the hobby to their younger siblings anyway.
The problem with the focus on younger children is that TLC is doing so in a
"trendy" way. Movie licenses, flashy boxes, and gimmicky set designs, etc. They
generate the quick sales without creating any brand loyalty. Children get into
LEGO and then give it up after a year or two, so TLC has to keep trying to woo
the next generation of 4-8 year olds year after year while the 8-12 audience is
nowhere near what it once was or should be.
This move to China will not result in lower set prices for customers. The
savings will be used to help offset some of TLC's losses. Turning the company
around will have to come from an increase in sales volume. What's their plan for
that? I guess we'll have to wait and see the 2005 set designs in a few months.
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Message is in Reply To:
 | | Re: Lego changes CEO after new losses
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| (...) Follow-up: In the Danish TV News, in two interviews, the new CEO said, that most of the production would probably be moved to China (where Click-its and many parts are already made) and KKK said that the trouble for LEGO was that they had (...) (20 years ago, 21-Oct-04, to lugnet.lego, lugnet.general)
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