An Application for Smart Toys: Exploring the Toy Industry Opportunities

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Executive Summary

The toy industry might seem secondary to other areas of business, yet further analysis of the specified segment of the global market will show that the toy industry is, in fact, very lucrative. With the recent developments in the digital market, namely, the creation of multiple applications for customers to engage in interactive use of purchased products, the adoption of similar techniques in the toy industry seems to be a sensible step to take. Although the idea is not new, and several global companies have already implemented the specified framework, the introduction of interactive apps for customers to use after buying a toy is expected to address the current marketing problem and improve the dialogue between the company and its target audiences.

The project in question is expected to maximize the extent of customer satisfaction from the product since it will provide a way of reciprocating the feedback received from customers and including it in the development of new projects. Thus, recurrent errors that divert buyers from the toys produced by the organization will be eliminated, whereas the elements that may interest new customers and upgrade the quality of the products will be incorporated into the newly developed goods.

Therefore, the main selling point of the new application will be the opportunity for building a connection between the organization and the customer. In addition, the learning options that the specified application will offer should become an important part of the marketing process, making the significance and relevance of the service even higher.

This paper will address the process of developing, marketing, and selling the feature mentioned above. Namely, the strategies for introducing the product to the market, the means of improving its cost efficiency, and the tools for maintaining product quality will be developed. This paper will start with a description of the business and the market into which it will be planted. Afterward, the marketing approach will be designed in order to ensure that the target audiences will be immediately attracted to the proposed product and the associated service.

The specified section will be followed by an approximation of the budget that the project will require and an approach toward human resources management (HRM). Finally, the paper will end with a conclusion and recommendations for implementing the proposed marketing strategy.

The Business

Vision & Mission Statements

The current vision of the organization can be summarized as the focus on creating the brand that will be associated with a particular set of qualities and becoming the family brand that will allow children and their parents to bond. In fact, the range of qualities that the organization expects the public to associate with its brand name and products is quite vast. According to the organization’s mission statement, it includes creativity, imagination, enthusiasm, quality, and caring, to name just a few (LEGO, 2020).

The specified qualities are believed to constitute the essence of the company’s brand image. In turn, the mission of the firm, which implies solidifying families and bringing them together through games and other parent-child interactions, seems to be in line with the existing educational standards for early learners. Therefore, the company’s mission and vision are fully in line with the needs of its target audience.

Description of Business

The business has been flourishing over the past decade, with the company having received multiple opportunities for expanding its brand and advertising it to a broader audience. The business is targeted at providing entertainment for children, as well as for adults driven by nostalgia. The unique collectibles are also an important part of the LEGO product range that adds the element of luxury to the brand.


While the company offers a plethora of different products aimed at children of various ages, an online application that will allow for interactive games with LEGO’s target demographic is the main product to be discussed in this project. It would be a mistake to assume that LEGO has not attempted to venture into the digital environment and capture the attention of its target audience with mobile apps related to its products. For instance, the

Target Market / Customer Profile

The target audience whose needs the company caters includes primarily children and teenagers. Specifically, the age range of 10-14 is considered to be the target group of the organization. The customers typically belong to middle-class families; in addition, it is worth keeping in mind that the buyers’ choices are restricted by the decisions made by their parents. Therefore, LEGO also needs to place emphasis on the educational and developmental aspects of its product.

Business Location

The company is currently located in Billund, Denmark. However, its American headquarters are in Enfield, CT. Given the fact that the organization is going to try expanding into the digital context of the American market first, it will be reasonable to pick the American economic context as the main business location.

Business Model

The current business model that the company analyzed in this paper follows can be described as franchising. Due to the focus on the expansion into the broader global context and embracing every possible opportunity from movies to products with the company’s brand name on it, LEGO has been exploring the options related to franchising quite profoundly since recently. However, the current business model, while being very prolific, lacks insight into the digital part of the market, which is why the current project is aimed at examining the specified economic context.

Goals – Objectives – Strategies

The goal of the project in question is to establish the organization as the leading toy manufacturer in the industry and transform it into a visionary that defines the future developments and trends within the industry. The emphasis on communication with customers and the opportunities for providing educational experiences is the main strategy to be used by the company to promote the product.

Company Performance (Financial and Strategic)

The strategic performance of the organization has also been quite satisfactory over the past few years. Currently, it is based on the idea of expanding the franchise and collaborating with other partners.

SWOT (Analysis of Strengths, Weaknesses, Opportunities, Threats)

  • Presence of multiple organizations of varying sizes, scopes, and focus;
  • A huge number of retail access points for buyers to use when purchasing a product;
  • Massive potential for developing new types of toys and games for children of different age groups;
  • A massive number of factories can offer production services for a comparatively low price.
  • High levels of dependency on product development cycle;
  • Low levels of interest toward new and innovative toys among children and parents alike;
  • Consistent investment in product development and the resulting expenses despite the lack of enthusiasm toward new toys among customers;
  • Dependence on selling seasons and the disproportionate drop in sales mid-season.
  • Collaboration with other companies in different industries to expand brands into franchises;
  • A global increase in demand for toys;
  • Chances to cater to the demands of new markets;
  • Opportunities for expansion and the exploration of the said new markets;
  • Options for reducing costs by considering moving the production part of the supply chain to India, Vietnam, and similar countries
  • The recent yet tremendous decrease in production processes due to the outbreak of the coronavirus and the halt put on production (“Educational toy market 2019,” 2019);
  • Overly strong reliance on plastic as a toy component and the resulting backlash from the proponents of environmentalism;
  • Excessive reliance on China as the world’s largest toy manufacturing hub;
  • The failure to foster the emergence of companies with unique competitive advantages that allow for the development of the industry.

As the SWOT analysis above shows, the presence of strong competitors is the primary obstacle that the company will have to face when attempting at capturing its success in the industry. The toy market has been dominated by the firms that have branched out into different industries by creating franchises of some of their best-known products. In addition, the present market is strongly driven by the 80ies and 90ies nostalgia, as the recent collaborations between companies in the toy and film industries have shown (Petersen, Kidd, & Pearce, 2017). Therefore, it is critical for the organization to retain its platform in the toy industry, at the same time capturing the new market with the help of digital tools. Herein the importance of apps lies as the means of expanding the current influence of the organization and attracting younger generations.

Core Competencies and Competitive Advantage

The main competitive advantage of the organization is its brand name and the immense extent of brand recognition. LEGO products have been known across the globe and have been inanely popular, which means that the organization has a tremendous competitive advantage. In addition, the company’s core competencies include technological and marketing prowess.

Industry/Market Analysis

Economic characteristics

When considering the key economic characteristics of the target market, one should mention changes in the demographics as well. Namely, the fact that families tend to have fewer children implies that the number of customers is shrinking. Therefore, companies have to embrace wider audiences in order to retain their profits. In addition, the current financial concerns suggest that the toy industry may be in a crisis soon. Finally, the fact that some of the major players within the industry, including Mattel and Toys’R’Us, have left the playing field, implies that the extent of competition is going to drop.

key success factors

When considering the realm of the toy industry as the potential field for attaining business success, one will have to admit that the specified setting is quite fluctuating. For instance, the recent propensity toward inclusivity seems to have made a very important change in the toy industry, suggesting that companies should deviate from the idea of gender-based marketing (Petersen et al., 2017).

As a result, an array of toys that can be marketed to both boys and girls have flooded the global market, in general, and the U.S. toy industry, in particular (Khajeheian, 2018). While the stereotypical dolls and action figures still exist as products that are marketed to girls and boys separately, the general trend toward inclusivity seems to be evident. Understanding the nature of the specified trends and using them to shape the corporate brand to appeal to the target demographic is one of the main success factors for the organization in question.

Moreover, the focus on the digitalization of products and the creation of interactive toys has been evident. Understanding the role of digitalized content and products is another essential success factor for organizations working in the toy industry alongside corporate giants such as NAMCO BANDAI and Hasbro.

Trends and opportunities

One of the main trends observed in the toy industry lately is the propensity toward interactivity and digitalization. The specified tendency may seem to leave very few development options for the company in question since its products have been known for being mostly for physical playing. However, the described trend still holds an important opportunity for the organization since it will spur the development of an application for communicating with customers and improving their experience. Namely, the application will introduce learning opportunities for children along with LEGO-based online games.

It is also important to consider the recent trend of freemium games being promoted as mobile apps. However, it is critical for LEGO to uphold its reputation as a company that cares about its users and their experience especially strongly, which is why the freemium framework will have to incorporate the elements of a clear learning experience instead of the traditional incremental game without a distinctive end purpose. Thus, the company will position itself as a unique service that caters specifically to its users’ needs.

6 forces analysis (Porters)

Porter’s 6 Forces.
Figure 1. Porter’s 6 Forces.

Competitor Analysis

Since the toy industry has been well-established and integrated organically into the global market for quite a while, the company has a plethora of competitors in the target environment. Because of the recent publicity and the subsequent stupendous rise in interest toward its products, Namco Bandai has been the doubtless leader in the industry for several years (Gilliard, Hoffman, & Baalbaki, 2019). Furthermore, the market is filled with products by companies such as Hasbro and a lesser-known JAKKS (Gilliard et al., 2019). Therefore, for the organization to retain its competitiveness in the global toy market, at the same time increasing its competitive advantage and capturing the attention of new audiences with the help of innovative apps, it will need a well-thought-out strategy.

Identify competitors

As explained above, most of the competitors that the organization needs to face currently include the companies that produce a wide variety of child products, toys being one of them. The main competitors are currently NAMCO BANDAI, Hasbro, JAKKS, and, most importantly, the Walt Disney Company. While the latter might seem like an alien element in the specified list, it is important to remember that Walt Disney relies heavily on franchising of its products, which is why it sells a huge variety of toys with copyrighted images and other components of its huge brand image (Zabeen & Chowdhury, 2017).

Therefore, while NAMCO BANDAI has admittedly been at the top of the world’s toy market for years and needs to be accounted for as a powerful competitive force, Walt Disney is equally as dangerous a threat to the organization’s success in the global toy market.

What your company does to maintain its market share

Although the organization in question saw a significant decline last year, it seems to be getting back on track, which means that innovative strategies have to be deployed as soon as possible to keep the organization competitive. So far, to keep its market share, the company has been attempting at reviving its brand and seeking opportunities for expanding into the digital market.

In addition, LEGO has been seeking ways to expand into larger franchises and exploring the opportunities to market its products to a wider demographic by cooperating with other companies and providing its customers with new products. For instance, the LEGO movies created by Warner Bros. Studios represent an unprecedented example of two competing organizations collaborating to create a unique product (Roos & Victor, 2018). Therefore, LEGO should be credited for seeking new ways to expand, which affects its market share to a considerable degree.

In addition, the general improvement of the competitive advantage over other companies in the toy industry is one of the primary methods that LEGO uses to increase its market share. The organization has been quite successful in keeping one step ahead of its competitors and creating unique products. Despite the presence of several copycats, LEGO has been maintaining the brand integrity and product quality that has been allowing it to retain its market share.


Marketing Goals – Objectives – Strategies

The essential marketing goal that the organization will pursue in the course of the project is to attract the attention of new audiences while cementing the influence that it has on its devoted customers. In addition, rebranding the company’s products as more interactive and incorporating the elements of custom branding. By using the marketing strategies such as Internet marketing, paid advertising, and social media advertisements, the company will be able to disseminate information about the oncoming innovation comparatively fast.

Customer Analysis

The current customer base of LEGO represents a gold mine for the company since it includes not only children but also adults, whose brand loyalty is fuelled significantly by nostalgia. Since LEGO has a very distinctive nostalgic value for an entire generation of adults, including both Gen X and millennials, it can cater to the specified target groups successfully, at the same time attracting new audiences, namely, iGen, with its innovative products.

However, it is important to differentiate between two distinctive categories when it comes to targeting children as one of the essential parts of LEGO’s customer base. Namely, one should keep in mind that, while children are the end-users, for whom the product is designed, their parents are the ones that play the role of buyers in the market transactions. Therefore, LEGO has to meet the very difficult task of appealing to both children and their parents as a children’s toy. Thus, the product needs to have two brand images, one representing an attraction for children, with the focus on fun and games, and the other one for adults, with the emphasis on safety and development of children (Einwächter & Simon, 2017).

In addition, the company needs to cater to the needs of their teenage customers, as well as the representatives of the Gen Y group. The enthusiasm of the specified population is mostly defined by nostalgia, which is why LEGO has to maintain the recognizability of its brand and connect to the specified demographics. With the focus on digitalization, the specified connection may be jeopardized, yet LEGO will be able to address the needs of the specified group of its customers as well if the company retains the ability to incorporate the elements of its brand identity, at the same time keeping it evolving.

Marketing Mix (4 Ps)

Currently, LEGO can boast a unique brand image owing to its well-crafted and elaborate marketing mix. Although the notion of the marketing mix has been stretched over time to incorporate seven elements, four key components need to be considered in order to dissect the astonishing success of LEGO. Looking at the Product part of the mix, one will realize that the company has branched out into a range of areas, diversifying its product to the maximum capacity.

Currently, the company is famous not only for the eponymous building blocks toy, but also for several video games launched under its brand, an incredibly successful movie franchise, and a series of books and magazines associated with the LEGO brand (Isa & Liem, 2020). Therefore, the product of the company is highly diversified. It is important to continue the specified trend by creating a variety of applications that will include online games, interactive elements, quizzes, and other activities that will keep all types of target audiences invested. The development of incremental games that LEGO customers can play using the company’s apps should be a particularly important focus of attention.

In turn, the pricing strategy of the company might seem slightly questionable given the fact that the organization is willing to expand and attract the attention of wider audiences. Currently, the company clearly targets 10-14-year-old children from upper-class families, given the prices set for most LEGO products. The high prices set for each product can be justified by the fact that the organization strives to gain and retain the attention of upper-class citizens, yet the specified strategy leaves out a large and very important portion of the population. Therefore, it will be reasonable to introduce cheaper prices for online applications, following the currently accepted formula of the freemium model (Williams, 2019). Thus, LEGO will gain traction among a wider range of audiences.

Given the focus on the digital market, the place part of the 4P model needs to be set within the digital market. In addition, the company will need to update its current supply chain. Given the recent developments in the global economy, using China as an essential part of LEGO’s supply chain seems no longer a reasonable investment, which is why it would be a sensible choice to consider India or a similar country as the possible supply of raw materials and the production part of the framework.

Finally, the promotion of the new product will have to be performed by using the available digital tools. The focus on social media is the most legitimate way of spreading the word about the company’s offers and the opportunities that it provides to its customers should be used as the basic marketing tool. Specifically, it will be critical to ensure that social media us used to build awareness about the company, its brand, and the new services that it provides. It is believed that the promotion process will require a total of $500,000 so that the essential information could be made available to all those interested, yet the organization would not overpay for the corresponding services.


Financial Goals – Objectives – Strategies

Currently, it is important for the company to ensure that the project described above is financed properly and that the required steps are taken in order to implement it. Namely, the introduction of the application needed to revive the business and attract the attention of new customers to the company will be needed. The specified goal will suggest that the company should implement a cost-efficient strategy for managing its budget.

Another goal that the organization will have to pursue includes attracting new investors, who could support the company in its pursuit of better quality and more daring projects. Therefore, it will be necessary to spend a substantial amount of money on the promotion campaign that will sour the interest toward the firm and its produces among general audiences, as well as potential investors.

Changes in the current financial framework will require reducing some of the costs that the organization has been spending. Therefore, the present supply chain will be reorganized to avoid extra expenses on the processes linked to logistics and especially transportation. The described objective will be met by bringing the suppliers of the company physically closer to its location. Thus, a vast number of costs associated with transportation will be avoided. In addition, the firm will have to revisit its pricing approach. By shifting the pricing standards toward more affordable ones for middle-class families, the organization will be able to target a broader range of customers. As a result, an increase in revenue is expected.

Cost of Introducing the New Product or Service

The development of the application described above will require financial support, which is why it is important to calculate the possible expenses that it will take. Currently, it is estimated that the project will have to be supported by at least $1,000,000 so that it could meet the quality standards that the organization upholds. Since the current price per share equals roughly $2.28, the break-even point for the project will equal $2.50. In turn, the ROI for the project will be set at 4% so that the company could have the challenge to meet in the context of the new project.

Human Resource Management


The recruitment process will have to incorporate the elements of outsourcing so that the company could engage in knowledge sharing and explore the possibilities that it opens. The use of social media and innovative tools such as the applicant tracking system will help recruit the experts that the company needs to implement the project.


The training process will involve the promotion of communication-based and technological skills among staff members so that they could gather the information needed to construct the perfect applications for encouraging interactions with the target audiences. Specifically, the employees will require the development of additional analytical skills and the ability to engage in a multicultural conversation. Thus, the company will be able to reach out to an array of new target audiences.

Performance Appraisal

The assessment of employees’ performance will be carried out bi-monthly so that the company could keep track of all the changes happening within it. Specifically, the general performance appraisal will be utilized to encourage communication between employees and managers. Thus, the key factors affecting the staff’s performance will be identified and used in the further HRM strategy to improve the employees’ performance.

Compensation and Benefits

In order to ensure that staff members meet the set quality standards and qualification criteria fully, it is required to introduce a system of incentives for them as a motivating element. Moreover, all staff members will have to be provided with equal opportunities and benefits. For this reason, the benefits package will include variable pay, medical insurance, parental leave, holidays, sick leave, and other nuances that will allow employees to receive decent payment for their performance. Financial incentives for improved performance and training courses for staff members will become a particularly important part of the benefits package.


Although the toy industry is often overlooked by general audiences, it is a very lucrative business that has huge potential, especially with the advent of digital innovations. By creating an application that will allow buyers to familiarize themselves with the company’s products and be able to participate in the buying process, one will create the path for the company to evolve within the target market.

The current propensity toward digitalization needs to be embraced by the organization in order to keep up the pace with the rest of the firms in the industry. Moreover, it will be necessary to attract the attention of new customers, as well as retain the old ones. The described goals can be met by introducing the element of interactivity into the process of using the company’s products. Thus, buyers will receive the experience that will reinforce their loyalty to the organization.

The necessity to transition to the context of the digital market and offer buyers digital toys along with traditional LEGO products should also be regarded as an important objective that the company needs to pursue. Despite the fact that the company’s products have been strongly associated with playing with physical objects, namely, building blocks, for most of the firm’s history, it is important to branch out into new environments and explore new horizons. Therefore, the organization should consider introducing different applications into its set of products, including both the ones that are supplementary to the traditional goods and the ones that stand completely on their own.


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