LEGO Manufacturing creates luxury toys for Chinese children

**LEGO Manufacturing Creates Luxury Toys for Chinese Children** On the top floor of a high-rise office building on Shanghai’s landmark Huaihai Road, Jørgen Vig Knudstorp, global president and CEO of the LEGO Group, sits in an office overlooking this bustling metropolis. Occasionally glancing at the scenery outside the window, his face shows a trace of satisfaction. Just a day earlier, LEGO held a groundbreaking ceremony attended by the Queen of Denmark in a new Chinese factory in Jiaxing, Zhejiang, about 100 kilometers from Shanghai. “Coming here is my dream,” Knudstorp said. This dream isn’t just a fleeting idea for the 46-year-old, who is the only external CEO in the 82-year history of the Danish family business and has led the company for over a decade. Unlike many corporate executives, he wears Harry Potter-style round glasses and sports a thick beard that matches his hair. Strangers might mistake him for a university professor or an IT engineer, not the head of a global toy giant. Yet, he quickly returns to his usual calm and cautious demeanor, emphasizing, “Of course, we know how big the challenge in the Chinese market is. North America and Europe will remain our core markets.” Knudstorp first visited China as a traveler in the 1990s. After becoming CEO in 2004, he began frequenting the country. In 2010, he quietly brought the group’s senior management team to Shanghai, announcing the launch of the “Lego China” program, including production, marketing, and logistics teams. “Look at Shanghai—doesn’t it feel like the next New York? Only when we are here, we won’t miss the opportunity,” he told them. The company then launched a series of market research initiatives. The LEGO brand is well-known in Western countries and is the world’s largest building toy company. Globally, there are about 94 LEGO bricks per person, with Germany having an average of 8 boxes per child in 2013. In 2013, LEGO produced more than 55 billion components worldwide, and there are 915 million building blocks for every six of the same color. Google co-founder Larry Page used LEGO bricks to build a full-featured inkjet printer, and even today, some companies still use LEGO bricks for MENSA-level recruitment tests. In 2013, LEGO generated revenue of 25.4 billion Danish kroner, making it the second-largest toy company globally. Its net profit was over 6.1 billion DKK, with a net profit margin of 24%. While North America experienced a decline and Europe saw almost stagnant growth, LEGO achieved impressive annual revenue and net profit growth of 11% and 9%, respectively. In contrast, rivals Mattel and Hasbro struggled during the global economic crisis. Today, the LEGO Group is owned by the third and fourth generations of the Christensen family: Kjeld Kirk Kristiansen and his three children. In 2014, Kyle ranked 109th on the Forbes Global Rich List with $10.9 billion in assets. However, the LEGO we know today was once in trouble. In 2003, the company was nearly bankrupt. Rapid growth in the 1990s gave way to a sharp decline due to competition and the rise of digital entertainment. At one point, LEGO introduced expensive new production lines, but these efforts failed to reverse its fortunes. By 2003, sales had dropped significantly, and the company faced huge losses. Jørgen Vig Knudstorp, then a young vice president, identified the problem through his research and presented his findings to the board. Despite skepticism, he was given a chance to lead the company back on track. His focus was on returning to the core business, and within a few years, LEGO rebounded, growing in size and profitability. Today, it is the most profitable toy company in the world. While LEGO remains focused on its core products, it continues to explore new opportunities, especially in Asia. China, in particular, represents a significant growth area. However, entering this market comes with challenges, such as cultural differences, distribution issues, and piracy. To address these, LEGO has begun manufacturing locally, aiming to improve supply chains and reduce costs. As LEGO expands into China, it must also adapt to local preferences. While classic themes still dominate sales, the company is exploring ways to integrate regional elements without compromising its brand identity. It also faces competition from digital entertainment, which is increasingly capturing the attention of children. Despite these challenges, LEGO remains committed to its philosophy of quality, innovation, and fun. As Knudstorp emphasizes, the key to success lies in focusing on what they do best and ensuring that their toys bring joy to children around the world. With its strong foundation and strategic vision, LEGO is well-positioned to continue its journey of growth and creativity in the years ahead.

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