LEGO Group - Empire Of Toys

Chances are you’ve either played with Lego when you were young or you had a friend who did. The plastic. Construction sets are one of the best ways to promote creativity, and there are very few companies out there that have as much of an impact on the lives of children as Lego. Their business model is pretty simple: they buy plastic for one dollar and sell it for 75. Beneath this simplicity, however, is a very interesting story, and in this article, we’ll learn where these plastic bricks come from.

1.     Ole Christiansen

The father of Lego was a Danish man named Ole Christiansen. He came from a poor family of farmers near the small town of Billund and his favorite hobby was carving stuff out of wood. When he was old enough to travel. He practiced carpentry in Germany and Norway earning just enough money to buy the local woodworking shop in Billund when he returned in 1916. For the next 16 years, he worked as a carpenter and he got pretty good at it. During that time he also married a woman. He met in Norway and together they eventually had four sons. Life was good, but then the Great Depression happened and things took a turn for the worst. Prices across Europe crashed and the Danish farmers could barely earn enough money to get by. Ole Christiansen was forced to fire most of his shop’s staff because he couldn’t pay them. To top things off his wife died that same year, leaving him alone to take care of their four sons.

2.     Ole got his kids to work in the Shop during Great Depression

Ole, got them to work in the shop, and in exchange, he would make the wooden toys. The kids like them very much and soon Ole started making toys. In addition to his regular business. The local farmers didn’t have the income to buy them, though, and most of the time they would offer food in return. In the end, Ole had to sell his toys door-to-door in nearby cities, where people had the money to afford them. In 1934 he came up with a name for his toys. He called them Lego from the Danish phrase, “Leg Godt” which means plays well. Coincidentally, the word Lego also means to assemble in Latin. In 1942, after a disastrous fire burnt down, his shop Ole borrowed money to build an actual factory to manufacture his wooden toys.

3.     Ole Started his Manufacturing Company called Lego

From then onwards, the toys became his main business and the Danish people loved them. Ole made his eldest son Godtfred, a manager of the new company, and together they began expanding their clientele, not only in Denmark but also in Norway. By 1947. The company’s workforce had increased to 40 employees and they were selling over 150 different wooden toys. In 1949, while attending a toy fair in Copenhagen Ole found a merchant who so plastic building blocks that you could use to build towers. Ole liked the idea very much so he brought samples back to Billund to study them.

One year later, Lego started selling a modified version of these blocks called automatic, binding bricks. They look a lot like modern Lego bricks, but their underside was hollow which made them clunky and hard to combine. Most customers didn’t like them and by 1954 the binding bricks barely made up five percent of the company’s revenue. That same year, while traveling to the UK to attend a toy fair Godtfred met, a very enthusiastic department store manager. They talked about the state of the toy industry, and the manager complained about how little incentive people had to buy new toys. He argued that ready-made toys were harming the business because parents wouldn’t need to buy more toys frequently. As soon as Godtfred came back to Billund, he started thinking of a system that would encourage people to buy more of his toys. He drafted up a list of qualities that he wanted his new system to have. Some of the things he listed were, for example, unlimited play potential development of creativity, and is suitable for children of any age and gender.

4.     Lego Started Building New Innovative Products

The obvious choice for this new system was the automatic, binding bricks and one year later, in 1955, Godtfred released the first real Lego Construction set the Lego System of Play. Unlike previous iterations of the binding bricks. This time, kids could build entire cities, not just individual buildings, and the only limit was how many sets they had. Included in this new set, were tiny cars, trucks, and street signs, and as you can imagine, they became extremely popular. Just two years later, Godtfred developed the modern Lego bricks. We know today by introducing tubes on the underside, which made the bricks more stable and allowed for more combinations. Godtfred became the official leader of Lego in 1958 when his father Ole passed away. His first order of business was to accelerate the company's overseas, expansion. Lego’s first international office, open in 1956 in Germany, and soon after that, they started spreading across Western Europe.

In 1961, Lego entered the American market by licensing their toys to Samsonite the guys who you probably know today for their suitcases. By that point, Lego had stopped making wooden toys altogether after a fire in 1960 destroyed their only wooden toy factory. Over the next decade, Lego became one of the world’s largest toy manufacturers. By 1976. They had around $ 300 million in sales across the world and they made up 1 % of Denmark’s total GDP. They released new sets based on various themes, but they always remained true to their design. Principles of simplicity and compatibility. A brick made in 1957, for example, would have no trouble fitting in a modern construction set and although they’ve added a bunch of new parts over the years, everything is backward Compatible. One of Lego’s biggest hits was the Lego Minifigure from 1978, which has since become one of Lego’s most iconic symbols. Estimates from 2003 say that over four billion of these tiny figures have been made and today you’ll find them in almost every construction set. They even made a movie with them in 2014, which is pretty good. It’s got a 7.8 rating on IMDb. Lego was doing great in the 1980s. Their sales were growing at around 10 % annually and by 1992 they controlled 80 % of the construction toy market.

5.     After Patents Expired Lego became Bankrupt

With roughly $ 600 million in annual sales. Lego’s patent for their bricks, however, had expired in 1981, and in the early 1990s other copycat brands were already popping up across the world. They would mass-produce nearly identical construction sets and they would sell them at a cheaper price rapidly cutting into Lego’s profits. Things got so bad that in 1994 the company saw its first annual sales decline by 2 % in Germany and 8 % in the United States. The situation in the Asian market was even worse since you know how loose they are over there with copyrighted and patents. In 1998, Lego posted its first-ever annual loss of $ 30 million, and by 2004 the company was almost bankrupt, having lost $ 228 million. In that year, alone. The CEO at the time was Gotfred’s son, Kjeld Christiansen, and he felt so helpless that he resigned and appointed the company’s first non-family CEO, Jørgen Vig Knudstorp.

6.     Lego initiated Radical changes in their Business and was Successful

His solution to the crisis was a bit radical, but it was effective. Over the next. Three years he cut Lego’s workforce by half and moved their main manufacturing activities to Mexico. This was a huge cut in expenses, but what saved the company was Jørgen’s decision to actively pursue licensing deals. You know all those expensive Lego sets based on Star Wars. Lord of the Rings or Minecraft Jørgen’s idea of combining Lego with popular culture was brilliant and the success of these new sets saved the company from bankruptcy. In 2008 licensed Lego products made up about 60 % of their total sales, and although the world was in the middle of the Great Recession, people were buying more Lego than ever.

Since then, the company has become even larger and in 2014 it overtook Mattel to become the world’s largest toy company. Their most recent report from 2015 put their global sales. It’S $ 5.3 billion larger than Mattel and Hasbro combined. Lego has become so huge that Mattel and Hasbro are considering merging just to stay relevant. The success of Lego as a concept is due not only to its unique design but also to the impressive marketing behind it. One of Lego’s best marketing decisions was to build their Legoland theme Parks.

If you haven’t visited one, you definitely should. There are seven Legoland parks around the world right now with another 4 under construction. All the parks have these huge model cities built out of millions of Lego bricks and they’re worth seeing. The first one, by the way, is in Billund and Lego had to build an airport there, just because of how remote it was.