Since LEGOs inception in 1932, the company has not only experienced extreme pressure from competitors, but it has overcome numerous challenging obstacles from the external environment to become the world’s largest toy manufacturer (Financial Times, 2016). Upon analysis of LEGOs strengths through Institutional Theory (IT) and Resource-Based View (RBV), this essay aims to combine these two theories to explain LEGOs internationalisation process.
Firstly, the two frameworks will be used to analyse the period (1932-1990s) where LEGO established a culture centred on product quality and innovation. As a result, the company achieved legitimacy within the institutional environment ...view middle of the document...
Figure…: Institutions, Organisations and Strategic Choices “Strategic choices are not only driven by industry conditions and firm capabilities, but are also a reflection of the formal and informal constraints of a particular institutional framework that managers confront. “ (Jarzabkowski, 2008)Source: (Peng, 2002, pp. 253) |
In order to effectively analysis the internationalisation process of LEGO, institutional theory and the RBV must be defined:
The comprehensive framework of RBV outlines the resources and capabilities of firms to produce above-normal rates of return and a sustainable competitive advantage (SCA) (Amit and Schoemaker, 1993; Barney, 1986,1991; Dierickx and Cool, 1989; Mahoney, Pandian, 1992; Wernerfelt, 1984). In order to understand RBV, SCA must first be defined: SCA is achieved when a firm has a long-term competitive advantage that is not easily surpassed or replicated by its competitors. In other words, when resources are valuable, rare and difficult to copy, SCA can be achieved.
Figure…: Classification of ResourcesThe diagram shows how resources are split into three categories: Tangible, Intangible and Human. The first two focus on the company, and the third focuses on the employees. Whilst LEGOs tangible resources are important for maintaining efficient production, this essay will mainly focus on the latter two categories as the successful combination of these two into the correct processes is what gives the company its SCA.Source: (Grant, 2005) |
RBV is particularly useful in the analysis of LEGO, as it helps to create a better understanding of the strategic decisions made to make best use of the resources available in order to be successful in international markets. Strategic decisions made when entering foreign markets are part of a dynamic learning process that builds upon resources and capabilities gained from previous foreign market entries (Peng, 2001).
This essay aims to combine the two theories
“Only The Best Is Good Enough” – 1930s-1990s
The introduction of the plastic brick and the creation of the interlocking stud-and-tube design in the late 1950s set the foundation for LEGO to build its competitive advantage. This acts as an appropriate starting point for the analysis of LEGO’s internationalisation process, which will then develop into an evaluation of IT and RBV as tools for explaining the company’s development.
During its early years, LEGOs unique selling point gave it an advantage over its competitors: LEGOs introduction of plastic bricks differentiated it from its competitors who previously made their products out of material like wood. These bricks could interlock and be combined in innumerable ways created a “System of Play” that encouraged creativity and interactive play. This distinguished the product from anything else as it provided a fun yet educational experience for children.
Whilst it had established a quality product, LEGOs primary focus from the...