How can Lego Company be successful in China?

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1.0 Introduction

Over the past decade, most of the European-based companies pondered into the fast-growing Chinese market that has billion-plus potential customers. Meidan and Patey (2016) assert that there was so much promise of realizing profit maximization after investing in China. Presently, thoughts of a European company investing in China are more likely to result in serious conversation and debates concerning the viability of the Chinese market investment opportunities. In spite of the current situation, Lego Company, the Danish toymaker believes that the Chinese market offers a unique opportunity for growth. Wagstaff (2016) opines that the company has initiated strategies that will position it to become China’s leading toy brand. Some of the multinationals that had initially invested in China have stopped their operations and withdrawn. For example, Uber a car-hailing company surrendered its services to its close rival Didi Chuxing after agreeing to gain 18 percent stake in the combined company. Besides, Coca-Cola also has plans to refranchise its company-owned bottling operations in China.

Investing in a new market presents a foreign company with serious challenges hence this situation puts severe doubts about whether a company will be successful. The realization of success by multinationals in the China market presents the different firms with an effective way to leverage core operations resulting in growth. According to Pang (2014, p.1), the process of a business expanding into a new market and subsequently attaining success involves accurate assessment of the targeted economic environment. In 2016, “Lego Company stepped up its business functions in China with plans to set up the company’s largest retail store globally in Shanghai” (Zuo, 2015). As a multinational, the company possesses useful managerial competence complemented by the enhanced industry-specific technology. The success of a multinational in China achieving its objectives is hampered by the race to establish a competitive advantage in the Chinese market. Over the past decade, local companies have beat out international companies investing in China (Meidan & Patey, 2016).

The normal operations of multinationals investing in China are affected by different factors that act as significant handicaps towards the attainment of the set goals and objectives. Tsai and Lardy (2015, p.145) affirm that the inadequate support infrastructure in China prevents most of the multinationals doing business in the country from fully exploiting their advantages. The lack of detailed market research in China also derails the enhanced marketing and brand building skills at the disposal of multinationals. Besides, the lack of competent local suppliers also ensures that companies doing business in China fail to maximize on the potential advantages of effective supply-chain management. This paper-based research aims at investigating how Lego Company can be successful in China. Through discussing the different strategies that will ensure the company understands the complexities of doing business in the Chinese market as well as elaborate on how it can adapt. This will be supported by extensive research into the background, history, and activities of the company as a multinational investing in China.

1.1 Background of the company

Lego Company has its headquarters in Billund, Denmark. It is a private company that manufactures plastic construction toys. According to Wagstaff (2016), “in 1932, Ole Kirk Kristiansen founded the company and named it ‘LEGO' an abbreviation derived from two Danish words "leg godt," meaning "play well."” The ownership of the corporation has been passed down through generations with the current owner being Kjeld Kirk Kristiansen, who is a descendant of Ole Kirk Kristiansen. The most popular brand of the company is the LEGO brick which also doubles up as the flagship product. Over past decades, Lego Company has made significant steps towards establishing itself as a multinational. According to Wagstaff (2016), in 2016, Lego...