In 2015, Lego, the Danish toy manufacturer famous for its plastic brick toys, ventured into China’s vast toy market. Despite encountering various difficulties and obstacles, the company persevered and achieved remarkable success.
In this blog post, we will explore Lego’s approach to entering the Chinese market and their strategies for overcoming cultural differences, intellectual property issues, and competing with local brands. By examining Lego’s case study in China, we can gain useful insights into effective marketing strategies that any toy brand can use when expanding into new markets. So let’s dive in!
KPI and Results focused. We are the most visible Marketing Agency for China. Not because of huge spending but because of our SMART Strategies. Let us help you with: E-Commerce, Search Engine Optimization, Advertising, Weibo, WeChat, WeChat Store & PR.
Brief Background On Lego
Ole Kirk Christiansen founded the company in 1932, producing wooden toys in a small workshop. Despite facing financial difficulties in the early 2000s that led to bankruptcy, CEO Vig Knudstorp’s leadership implemented a successful turnaround strategy, leading to Lego’s impressive recovery.
Lego divested non-core businesses and focused on their expertise, providing engaging building block experiences for their audience. This strategy made Lego synonymous with creativity and learning for kids worldwide.
Lego’s Entry Into China
Lego entered the Chinese market in 1993 through a joint venture, but only established a separate entity, Lego China, in 2016 to oversee and expand its operations in the country.
Initial Approach And Business Model
Lego implemented a unique and well-thought-out business model upon entering the Chinese market.
One key element of this approach was partnering with local retail giants such as Tencent and Alibaba, enabling them to expand rapidly while leveraging existing e-commerce infrastructure.
This move helped secure more favorable pricing due to lower import taxes on their products, which is a challenge that many foreign toy brands face when entering China’s competitive landscape.
Market Positioning Strategy In China
The key to their success was investing in creating an appealing and unique brand experience for consumers. They opened numerous flagship stores in major cities and expanded to cities with potential growth.
Additionally, Lego targeted educational institutions by incorporating their products into classrooms, establishing themselves as both a learning tool and an entertaining toy for children.
Collaborating with Tencent allowed them to target a valuable demographic of about 200 million children in China through digital platforms such as games and online applications.
Lego’s Challenges In China
Lego faced numerous challenges in China, from navigating cultural differences to dealing with intellectual property issues and competing with local brands.
Overcoming Cultural Differences
To achieve success in a new cultural environment, it is crucial to understand and appreciate cultural differences.
Lego accomplished this by conducting extensive research on local customs, preferences, and social norms, and partnering with local organizations to gain insight into the market’s nuances while building brand awareness.
Additionally, being flexible when adapting to new cultural environments is essential. For example, using Chinese celebrities as brand ambassadors instead of global ones can increase credibility and trust among local consumers.
Intellectual Property Issues
Lego faced challenges related to intellectual property (IP) when entering the Chinese market due to copyright infringement issues from local competitors.
However, the company has navigated these issues successfully through legal action against infringing parties, resulting in a recent ruling in favor of Lego against Bela.
This victory could lead to greater profits for Lego and encourage other foreign IP holders to enforce their rights in China.
Overall, it is clear that understanding how best to protect intellectual property is essential for any toy brand hoping to succeed in China’s competitive marketplace.
Competing With Local Brands
Lego faced tough competition from local brands like Sembo Block in the highly competitive Chinese toy market. These brands offered similar but cheaper products, making it challenging for foreign brands to enter the market.
Lego had to differentiate its products by emphasizing their unique features and quality.
Successful Strategies For Lego In China
Lego’s successful strategies in China include localization of products and marketing, partnering with local companies for collaborations, building a solid e-commerce strategy, and establishing Lego education centers.
Localization Of Products And Marketing
One of the key takeaways from Lego’s success in China is the importance of localization. Here are some strategies that worked for Lego:
- Understanding local culture: Lego studied the local culture and preferences to customize its products and meet the needs of consumers.
- Localizing marketing strategies: Lego changed its marketing approach in China by creating campaigns that were relevant to Chinese culture and events.
- Customizing product offerings: Lego-made products for China that included sets inspired by famous Chinese landmarks and characters from popular TV shows.
- Partnering with local companies: Working with local companies helped Lego gain trust and connect with customers.
- Providing localized customer service: Lego offered customer services that were specific to each location, such as Mandarin-speaking representatives and personalized responses to customer questions, to make sure customers were happy.
Overall, localization was crucial to Lego’s success in China as it allowed them to effectively compete with domestic brands and connect with Chinese consumers.
Partnering With Local Companies For Collaboration
Lego’s success in China was due in part to partnering with local companies, such as Tencent, to tap into their customer base and gain credibility.
The partnership with Tencent also allowed Lego to develop a safe digital play experience for children while leveraging Tencent’s expertise in China’s digital market.
Partnering with local companies can help toy brands overcome cultural barriers in foreign markets, especially in countries like China where cultural values greatly influence consumer behavior. This strategy can provide valuable insight into local customs and help toy brands tailor their marketing messages accordingly, ultimately leading to greater success in the market.
Building A Solid E-commerce Strategy
To succeed in China, having a strong e-commerce strategy is crucial as over 50% of the population is online and 75% of consumers shop online.
Lego partnered with top Chinese e-commerce platforms such as Tmall and JD.com to sell their products directly to customers. They also optimized their website for mobile users to tap into the growing trend of mobile commerce.
Lego leveraged social media platforms like WeChat and Sina Weibo for targeted advertising campaigns, resulting in higher engagement rates among consumers.
Establishing Lego Education Centres
Lego’s successful strategy in China involves the establishment of Lego education centers that offer classroom learning through interactive play, connecting with Chinese parents who value educational toys. The centers have helped build a strong following for Lego in China by tapping into cultural values and priorities beyond retail expansion and marketing strategies alone.
Additionally, hiring a design team with no toy-making expertise was also part of their successful formula for growth in China. This highlights the importance of innovation and thinking creatively outside the box when entering new markets.
Case Analysis: What Worked And What Didn’t For Lego In China?
Analysis Of The Successes And Failures Of Lego’s Approach
The brand experienced both successes and failures in China due to cultural differences, intellectual property issues, and competition from local brands. To overcome these obstacles, Lego localized its products and marketing strategies, partnered with local companies, and established e-commerce channels, and education centers across China.
Lego’s strategies in China were successful, but there were still areas for improvement. While the company had a strong global reputation for quality, some Chinese consumers were concerned about product safety due to incidents with other toy brands in the past.
Overall, the case study highlights the importance of understanding the audience and navigating cultural complexities in a competitive market like toys.
Lessons For Toy Brands
Importance Of Understanding Local Culture
Successful brands understand that being culturally sensitive is important for gaining consumer loyalty.
Lego is an example of a brand that has adapted its marketing strategy in China by creating sets that reflect Chinese history and literature, such as the Forbidden City and Journey to the West series.
Understanding cultural diversity is also important in avoiding mistakes that could harm a brand’s reputation.
To adapt to different cultures, research into consumer behavior, beliefs, values, and customs is necessary to design effective campaigns that resonate with the target audience without causing offense or misunderstanding.
Building Brand Trust And Maintaining A Strong Reputation
Maintaining a strong reputation and building brand trust are crucial for toy brands in the global market. Lego has achieved success by focusing on quality, innovation, and staff training.
Toy brands must ensure that their products are manufactured to high standards and distributed globally consistently, and invest in corporate branding to establish trust with consumers and provide top-quality products.
We can help you! Contact us!
In conclusion, Lego’s journey in China offers valuable insights for any toy brand looking to enter the Chinese market. It highlights the importance of understanding the local culture, building strong partnerships, establishing e-commerce strategies, and navigating Intellectual Property issues.
Don’t hesitate to leave us a comment or contact us, so that we can schedule a call and present you with the best solutions for your brand in China!