Q1 Evaluate the external environment in which the LEGO Group operates in.
Conducting the external environment analysis will allow us to examine the opportunities and threats that the LEGO Group faced. We will go through the environment level using PESTEL framework followed by industry level using Porter’s Five Forces Framework.
1. PESTEL Analysis
PESTEL Analysis
Positive
Negative
Political

Economic
Highly seasonal

Presents uncertainty over sales

Geographical scope and market presence
Going into new market for higher growth
Stagnant and mature market
Social
Change in playing habits

Stop playing with traditional toys

Large female market
Diversify and take up more market share

Technological
Growth in electronic toys

Might impact
Conclusion
We draw conclusion that the external environment in which the LEGO group operates in present varies threats and opportunities. The PESTEL analysis showed that the general macro-environment was more unfavorable although it presents opportunities and the Porter’s Five Forces highlight certain threats from substitute and competitors to take note of.

Q2(a) Identify and discuss the strategic capabilities of the LEGO Group.
Strategic capabilities of an organization are capabilities that contribute to its long-term survival or competitive advantage. Components of strategic capabilities are the resources and competences. Resources are assets that the organization own and how these assets are used is called competences. We make distinction of strategic capabilities as threshold or distinctive whereby threshold are capabilities that allows the company to achieve parity with competitors and distinctive capabilities attain competitive advantage.

Resources
Competences
Strategic Capabilities
Threshold/Distinctive
Physical (Plants, logistics, distribution)
In-house production
Maintaining quality and ability to respond change in demand
Distinctive
Technological (IP, Patents)
Using existing patent to improve knowledge
Production technologies resulting in leadership in non-poisonous plastics
Distinctive
Financial (Performance, ratios, sources)
Ability to finance its growth from own capacity, manage debt
Divested LEGOLAND reducing