If I were to ask all the people I know the same question – what is the most painful household object to stand on accidentally? – I guarantee parents and children would all have the same answer: a LEGO brick.
Despite the pain these little plastic blocks have brought to millions of feet worldwide, there’s no doubt in my mind that LEGO is one of the most successful toys ever invented. I spent countless hours building all sorts of weird and wonderful things as a kid, and I have passed down my bricks to my children.
Given the massive success of LEGO, you might be wondering how The LEGO Group has managed to build a toy empire that endures from one generation to the next and will probably continue to grow indefinitely. In this LEGO competitors analysis, that’s what I’m going to find out.
Analysts predict the global toys market will grow from $141.08 billion in 2021 to $230.64 billion by 2028 at a compound annual growth rate (CAGR) of 7.3%. Those are big numbers for sure, but making an impact in this market is by no means straightforward; there are millions of toys out there already and plenty of successful companies taking up a sizable market share.
For existing companies, the real challenge is maintaining dominance in a market that is constantly changing direction and influenced by the latest trends, like a child’s wandering attention.
The Bottom Line Up Front
If you ask me, LEGO is one of the most ingenious inventions in the toy world; it’s universally appealing, educational, and can accommodate various themes.
Although the toy industry changes rapidly, and The LEGO Group faces stiff competition from rival firms, it has managed to maintain its immense success by expanding its product portfolio and branching into the entertainment sector.
List of LEGO’s Main Competitors
- Spin Master
- Bandai Namco
LEGO Business Strategy
The LEGO Group (TLG) is a toy production company established in 1932 and headquartered in Billund, Denmark. It is a family business originally founded by Ole Kirk Kristiansen; today, his grandson, Kjeld Kirk Kristiansen, runs the company.
LEGO’s mission statement is “inspire and develop the children of tomorrow.” The name LEGO comes from two Danish words: leg godt, meaning “play well.” Consequently, the company’s business strategy focuses on providing affordable, educational and fun toys using a production revenue model.
Competition in the toy market is stiff, but The LEGO Group overtook Mattel (the maker of Hotwheels and Barbie dolls) in 2015 to become the industry leader, with sales amounting to $2.1 billion.
While TLG is famous for making interlocking plastic bricks called LEGO, the company offers so much more than this. It has a whole range of other toys and ten Legoland theme parks in places as far ranging as Malaysia, the US, Dubai, and Germany.
After so much success, it’s hardly surprising that the Toy Retailer Association has named LEGO Toy of the Century twice. It is available in more than 120 countries, and more than 400 million people worldwide have played with LEGO at some stage. To add context, retailers sell 7 LEGO sets worldwide each second.
Despite being the manufacturer of one of the world’s most popular children’s toys, TLG’s financials haven’t always been sound and secure. In 2003, the company faced a budget deficit of roughly $220 million, and almost one thousand employees lost their jobs due to budget cuts. 2004 saw a net loss of approximately $263,855.
Things didn’t start to improve until 2011, when sales grew by 11%, and profit for the fiscal year increased from $661 million to $776 million. What was the thing that sparked this renewed growth? Ninjago, a popular new brand launched by TLG in January 2011.
Ultimately, this demonstrates the importance of product innovation in the children’s toy market. Creating a popular product like LEGO isn’t enough; you must keep expanding your portfolio to keep the attention of children (and their parents’ money) coming your way.
The strong growth of 2011 continued well into 2015, with double-digit growth in all geographical regions thanks to solid product innovation on LEGO Elves, Ninjago, and LEGO Creator.
TLG hit another rough patch in 2017 due to increased competition from traditional toy companies like Hasbro and tech companies like Microsoft and Sony. That year, the company announced plans to cut 1,400 jobs following reduced profit and revenue – the first decrease in 13 years.
Fast forward to 2021, and TLG seems to be back on track, with revenue jumping by an impressive 27% to about $8.06 billion. This growth is partly due to the pandemic, which resulted in many consumers gravitating toward LEGO building sets for entertainment during strict national lockdowns.
LEGO Competitors Analysis
LEGO competes against other successful toy companies like Fisher Price and Hasbro.
Hasbro, Inc. is a multinational conglomerate holding company based in Pawtucket, Rhode Island. It was founded in 1923 and owns the products and trademarks of Parker Brothers, Kenners, and Milton Bradley, among others.
Hasbro operates in over 40 locations globally, including Asia, Canada, Europe, Australia, and Latin America. In addition to its headquarters in Rhode Island, the company has other sites in the US, including Miami, Los Angeles, and Washington.
The toys Hasbro manufactures are recognizable worldwide; not all are solely for children. Monopoly, for example, is a great family board game. Other famous Hasbro toy brands include Transformers, Nerf, and My Little Pony.
You can split the company’s business model into three segments: Hasbro gaming brands, emerging brands, and franchise and partner brands. The company’s original and most successful revenue model is that of toy production, but Hasbro has expanded its brand and product portfolio considerably over the years.
Today, it even has TV shows to promote its products, such as Family Game Night, a joint venture with Warner Bros on the Discovery Channel network.
In the 21st century, the issue of gender stereotyping is at the fore, and Hasbro has faced criticism for some of its products that enforce gender roles. In 2012, for example, an Irish girl wrote to Hasbro to express concern over the lack of female characters in the popular game Guess Who, and this letter picked up significant media attention.
Nevertheless, controversy hasn’t hindered Hasbro’s impressive growth. In 2021, net revenues increased 17% to over $6.4 billion. The most significant growth came from the digital gaming segment, which was up 42%.
Hasbro – valued at $11 billion – announced a new corporate strategy in 2022 that will focus on less, but ultimately bigger, opportunities.
One of these opportunities is the growing entertainment and digital division, which Hasbro has already begun to take advantage of through a strategic partnership with Kilburn Live, a live content and event company helping to build up the Nerf blaster brand with an entertainment touring event.
Mattel, Inc. is a multinational entertainment and toy manufacturing company headquartered in El Segundo, California. It was founded in 1945, has a presence in over 35 countries, and sells its products in over 150 countries. After The LEGO Group, Mattel is the world’s largest toy manufacturer based on revenue.
In 2020, two of Mattel’s most valuable brands, Barbie and Hot Wheels, gained recognition from the NPD Group as the top global toy property and the best-selling global toy of the year.
Like Hasbro, Mattel sees the media and entertainment sector as crucial for future growth. In 1970, the company joined forces with producer Robert B. Radnitz to form a film production company, Radnitz/Mattel Productions. Following this, Mattel launched a television syndication unit in 1986.
Mattel’s Barbie films are one of its most successful media ventures; the first movie came out in 2004, and a new live-action movie featuring Margot Robbie and Ryan Gosling is in the works for 2023.
For Mattel, this movie is part of an attempt to get back on track following falling sales. More and more kids are moving away from physical toys toward computer games and the big screen. In 2013, Mattel’s revenue was $6.5 billion; in 2021, it was $5.458 billion. This downward spiral has been going on for some time.
No doubt societal changes have impacted Mattel’s sales – Barbie has been criticized heavily over the years for promoting an unrealistic body image for young girls. In 2022, the body-positive movement has more followers than ever before.
Nevertheless, Mattel’s executives are hopeful for the future. After all, Barbie is still a trendy brand despite all the criticism.
In 2022, the company announced a new strategy for continued growth, which focuses on expanding into other segments like digital gaming, filmmaking, and apparel. Mattel is certainly on firmer footing now, thanks to a 20% jump in sales in the second quarter compared to 2020, and whether that growth will continue remains to be seen.
Spin Master is a Canadian multinational entertainment and toy company founded in 1994 and headquartered in Toronto, Ontario. Notable Spin Master brands include Etch A Sketch, Bakugan, Meccano, and Rubiks Cube. Since the early 2000s, the company has gained more than 90 “toy of the year” nominations, with 28 wins.
Like many of its rivals, Spin Master’s success comes from its extensive portfolio; it produces toys and games and has several successful media franchises, such as PAW Patrol and Bakugan Battle Brawlers.
Toys created by Spin Master are sold in over 100 global markets, and its entertainment properties are viewed in over 190 countries. The company’s business strategy places a strong emphasis on innovation, as well as mergers and acquisitions.
In 2021, for example, Spin Master launched a $100 million corporate venture fund to accelerate the pace of innovation within the toys, entertainment, and digital games industry.
One of the first investments Spin Master made using this fund was in Swedish mobile game development company Nordlight. It hopes to use this investment to monetize its intellectual property in digital games.
This development is just the latest in a series of investments and acquisitions that have helped Spin Master increase its overall market share. In 2015, the company entered an agreement to acquire Cardinal Industries, a game and puzzle company over 60 years old. This move made Spin Master the second largest games company in the US.
Toys and games are Spin Master’s bread and butter, but the company’s entertainment franchises are becoming increasingly important. Like Mattel, it has branched into feature-length films, such as the PAW Patrol movie that was announced in 2020 in association with Nickelodeon Movies and Paramount Pictures. The movie came out in 2021; it grossed $142 million worldwide.
In 2021, Spin Master made a revenue of $620.5 million, an increase of 26.5% compared to the year before.
Bandai Namco Holdings Inc., known as the Bandai Namco Group or simply Bandai Namco, is a holding company specializing in toys, video games, and arcade games. It was founded in 2005 when two separate companies, Bandai and Namco, merged. Its headquarters are in Tokyo, Japan.
The company is best known for its videogame franchises, which include the world-famous Pac-Man game. For context, the corporation is worth about $510 billion, and a large portion comes solely from Pac-Man.
Bandai Namco is already one of Japan’s biggest gaming companies, but it has its sights set on world domination. With a branch already established in America – Bandai Namco Holdings USA, headquartered in Irving, California – the company now wants to crack the West.
In 2009, Bandai Namco completed its takeover of Atari’s distribution network, beginning to establish itself as a European presence. Following this, it set out a strategy in 2018 to ensure that 50% of its game catalogue comes from the West.
This growth business strategy focuses on building a portfolio of attractive games. Bandai Namco’s first breakthrough in this respect was with the hit Little Nightmares, which picked up numerous accolades at the Gamescom Awards, including Best Line-Up.
Overall, Bandai Namco Holdings operates in six key product areas known as Content Units: network entertainment (video games), toys and hobby, real entertainment (amusement parks), IP creation (new intellectual properties), visual and music production, and affiliated business.
In 2022, Bandai Namco unveiled a new IP axis strategy with three goals: to connect with fans, enhance IP value, and boost sales outside Japan. This strategy essentially amounts to an IP metaverse, which the company will spend roughly $130 million on implementing.
Bandai Namco revealed a 15.5% revenue increase for FY21, ending the year with $5.4 billion and an increased operating profit of $799 million.
LEGO SWOT Analysis
This SWOT analysis explores LEGO’s strengths, weaknesses, opportunities, and threats.
- Global presence in over 120 countries
- Excellent e-commerce sales; one in three toys are purchased online
- The LEGO Ideas platform promotes a sense of community and reinforces brand loyalty among consumers
- Products often incorporate educational features, making them appealing to parents and teachers
- Strong global brand recognition
- LEGO bricks have an enduring appeal and can be passed from one generation to the next
- Investment in sustainability initiatives makes the company more popular with modern consumers
- Licensing deals with big franchises like Harry Potter and The Hobbit are extremely lucrative
- Counterfeit LEGO sets are being sold across the world, according to reports from fans
- LEGO sets are expensive compared to some alternatives
- Lack of investment in video games compared to some other companies
- Brand portfolio is limited compared to some other firms like Hasbro
- There is a lot of brand switching in the toy industry
- LEGO could diversify into new segments and increase its product portfolio
- The video game industry is booming so there is much potential for LEGO to tap into its popularity
- Bigger drive for sustainable products and business practices
- More focus on educational activities and toys
- Counterfeit products
- Cheaper alternatives
- LEGO is made from plastic, so it has a significant environmental impact when thrown away; some governments may seek to regulate the mass production of plastic products in the future
LEGO Competitors Analysis FAQs
Question: What type of company is LEGO?
Answer: The LEGO Group is a Danish toy company that uses a production revenue model, selling toys around the world.
Question: Is LEGO Group listed?
Answer: TLG is a privately held company, so you can’t find its stock listed on any exchange.
Question: Which is the biggest toy company in the world?
Answer: Based on revenue, LEGO is the biggest toy company, with a total of $8.06 billion in 2021.
Question: How did the global pandemic affect the toy industry?
Answer: Parents had to spend more time at home with their children, so unsurprisingly, toy sales surged by 16% in 2020.
It hasn’t always been plain sailing for The LEGO Group. Focusing on one essential product can bring lots of success, but it’s also risky, especially when competitors emphasize rapid innovation.
TLG has pulled through challenging times and consolidated its position as the world’s largest toy company by reinventing itself over the past decade. The company’s ability to create new TV shows and movies and nurture lucrative partnerships has undoubtedly been key to its success.