Lego Company has been around the market for quite a while thus the new entrants havent greatly affected the organization. There is a weak influence of potential entrants to Lego. This implies that it'll be difficult for new entrants to get Lego's clients unless they offer progressive strategies that can foil the company's position. Also, Lego's services are peculiar in conditions of their appearance. This suggests that new entrants have to have hefty investments in creating products and services with the same caliber as Lego's products to be able to contend with Lego. Furthermore, the company has a good brand identity. This implies that the new entrants can make use excellent strategies that will give them an instantaneous brand identity to gain Lego's customers. Finally, there are really high entrants of new entrants in this toy industry. You can find minimal barriers that keep several firms from entering the toy industry. It is because that all that's needed is to allow them to enter into the industry is new ideas and new technology. The video gaming industry shows a rapid growth rate in US (Back again to Lego, 2011). Furthermore, Lego has heavily invested in research and development costs. This can act as a barrier to entry and restrict the number of new entrants.
Competitive rivalry
Rivalry is Lego's strongest force in the five forces of Porter. Lego has low concerns on its major competitors. This is because there are limited competitors in their industry. Therefore, the company's opponents can't create numerous problems to Lego since it has already acquired a great percentage of the buying public. Furthermore, there are low switching costs in the toy industry. As a result, consumers think it is easy to with construction toys than playing with model vehicles. This indicates that there are several rivals that compete for the consumers' attention to buy their products hence the competitive force amidst rivals are sturdy (Back again to Lego, 2011).
The toy industry is oligopolistic in nature with hardly any companies in China. However, Lego Company has been around existence for at least 75 years. This suggests that the business has been able to attain a very strong customer loyalty via retention of clients. Finally, the amount of rivalry is relatively intense for the Lego Company. The business has occupied a brawny position in the toy industry for construction of toys with few rivals. That is why Lego has the chance to compete in border market basically for children's entertainment. In 2004, the business started including large incumbents from electronic sectors like Nintendo and Sega. Finally, Lego's amount of rivalry has helped the business to look for the creation of its values via head to head competition. This means that that internal rivalry is high in Lego Company (Wittur, 2010).
Substitutes
Substitutes have given a higher influence to Lego Company. It is because substitutes can easily make a business to reduce its clients. Lego has tried to ensure that substitutes have given them much problem. For example, they may have proved that they use standard technology to produce quality and attractive services than the substitutes. Substitutes to games and toys include hobbies, sports, school and extracurricular activities. For example, many students are encouraged to achieve highest degrees of academics. Also, they should excel in extra-curricular activities that include sports, art and music. This is very burly porter's force in the competitive environment. It is because most parents would prefer their children to learn than using games and toys. In addition, the children's daily activities improve the negative force's magnitude. As a result, this becomes a threat in the games and toys industry in China. It is essential to note that China's current economical crisis has greatly reduced this threat because of the customers' purchasing power. Finally, the threats of substitutes pose Lego Company's profitability depending on its relative price to performance rations of various services. That is why this force has been influenced by switching costs (Thompson 2001).
Bargaining power of buyers
The bargaining power of buyers has highly influenced Lego and other relevant educational toy companies. This suggests how toy industry has tried its better to create first-rate relationship with its esteemed customers. Lego has tried to keep reasonable charges for their services. This has definitely expanded the company's customer base. Also, Lego has several promotions that produce their customers to obtain second thoughts to purchase products from others. For instance, when the market dictates in lowering prices in toy industry, Lego tries to know whether the market's decision is reasonable for his or her clients (Spencer, 2008). The business argues that the top part of earning decisions in regard to the prices of the products relies on the recommendations of the customers. This is why Lego's bargaining power of its buyers is steadily increasing. Furthermore, Lego's bargaining power of buyers also influences the business's profits in the industry. However, reducing of prices will increase the company's quality services and products. Therefore that the customers of Lego Company will play a significant role in the pricing of the products. Therefore, Lego creates sufficient opportunities for his or her esteemed clients in the right prices for their products. As a result, Lego eventually ends up creating a wide customer base in toy industry in China (Wittur 2010).
Bargaining power of Suppliers
The bargaining power of sellers has highly influenced Lego Company. Lego has made sure that their suppliers have very high bargaining power. It includes achieved this via assisting the suppliers to demonstrate their significance in the toy industry. Furthermore, Lego has ensured that the prices suppliers ask for materials portray the same value as the similar materials' quality. This can help Lego to ensure that it generally does not waste its budgets. Lego has also made sure that it is aware of its partnership using their services partners (Kornberger 2011). For instance, it includes ensured that it has followed area of the agreement with the partners. It is because any adverse violation in the partnership agreement that occurs incurs potential risks to Lego and every other educational toy companies in China and across the globe. Finally, bargaining power of suppliers is average in the company. The company has based its products upon the standardized inputs like chemicals and plastics. Lego's move to non-traditional areas associated with games increase the power of suppliers because of the licenses by means of intellectual property. Also, Lego Company has sustained its ability to charge their clients with different prices. This is always in line with various values in the worthiness that the company creates for each and every of the buyers. In addition, the Lego Company has tried to wthhold the bargaining power of suppliers through its high power of brands (Spencer, 2008).
