Theoretical Review: How can Lego Company be successful in China?

3.0 Application of theories

3.1 Global strategies theories

Hada, Grewal, and Chandrashekaran (2013, p.788) define global strategy as a generalized phrase that comprises three distinct components: international, multinational and, global strategies. These strategies are devised to help an organization attain success during the implementation of international expansion plans. The development of ‘global strategy’ is imperative in the process of differentiating between the different forms of international expansion (Liu et al., 2014). Lego Company still focuses on its home markets; however, the company’s operations and expansion plans in China can be termed as international. For instance, before building the factory at Jianxing, Zhejiang province Lego Company sold the excess LEGO products produced in Denmark to its Chinese market. Despite, this the primary focus for Lego Company remained its loyal home market. For Lego Company, its international activities revolve around treating the world as one market; therefore, the products produced have limited variations. For instance, the company sells the same products across the globe.

            According to Liu et al. (2014), by a company going ‘global,' it merely means that it is moving its operations onto an international platform hence outside its home market. The success of Lego Company in China relies on the company adoption and effective implementation of the principles of global strategies. Lego Company will be successful in the Chinese market through effective utilization of company resources, for instance, have a team that will handle the sales orders from the Chinese market at its home headquarters. The expansion of a company into an international market requires a massive outlay of resources. To fully achieve its objectives and dominate the international market, a company is required to establish a manufacturing plant in the foreign country its plans to operate in so that to reduce the cost of operations. Having a global strategy will enable Lego Company to achieve its goals and objectives in the Chinese market.

            The desire for a company to enhance its market position against its close competitors acts as a motivation behind international expansion. Expansion into new and foreign markets ensures that multinationals get the opportunity to improve sales and enhance profit maximization. In some instances, increased competition, as well as low profits levels in the home market may result in a company coming up with international expansion strategies (Hada, Grewal & Chandrashekaran, 2013, p.793). The growing Chinese toy industry resulting in the constant increase in demand from the billion-customer base was among the most significant reasons that attracted Lego Company to China. Besides, that strategic assets seeking also motivated the company’s expansion. The pursuance of the new sales opportunities in foreign countries by multinationals starts with the establishment of the required infrastructure such as manufacturing plants, retail stores and so on.

Hada, Grewal, and Chandrashekaran (2013, p.793) recognize that exceptional global strategies benefit multinationals thereby making it easy for a company to attain its economic international expansion objectives successfully. For instance, multinationals get to enjoy economies of scope where the sales teams get to sell more than a single product from the total range. The increase in the demand due to market expansion provides a multinational with economies of scale (Liu et al., 2014). For example, by Lego Company increasing its production to a higher volume this subsequently reduces the unit costs. An excellent global strategy also enhances the global recognition of a multinational. Lego Company will achieve success through having a brand that is recognized across the globe. Through the incorporation of global strategies, multinationals attain global customer satisfaction through provision of the same products across the world. There is lower labor cost in China, therefore through global strategies multinationals operating in the country reduce the cost spend on the production of various goods.

            Nonetheless, implementation of global strategies also threatens the success of Lego Company in China. Hada, Grewal, and Chandrashekaran (2013, p.794) argue that the operation of global strategies can also prove to be costly to multinationals. The lack of proper sensitivity to the local demand might affect the profitability of Lego Company in the Chinese. This situation might happen as a result incurring costs of adapting its products to match the local tastes. However, the company stills maintain the world as a single market hence does not produce LEGO products that are targeted specifically for China. It takes time for multinationals to benefit from the economies of scale after international expansion. For example, most of the local Chinese competitors have access to cheap labor hence produce toys at a lower cost thereby increasing competition.

3.2 Organizational Theories

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