1. LEGO (www.lego.com) is a family-owned Danish company, known for its plastic brick educational toys with revenues of €3.4 billion in 2018. Although an established leader of traditional building-block sets in Europe, its growth was limited. In 1999, it decided to expand overseas and enlarge its range of toy sets by getting licenses for themes from popular movies. The emergence of familiar characters through animated and adventure films had a strong impact on the young audience, which also constitutes LEGO’s user base. Catering to the evolving entertainment preferences of its traditional customer base has enabled the company to maintain a high degree of loyalty among its fans. LEGO has achieved 85% market share of the interlocking brick toys worldwide. Since the adoption of contractual licensing, the company has strengthened its brand and increased its overall sales, surpassing the traditional leaders of the toy sector, Mattel and Hasbro. In 2014 its sales in China soared by 50% year-on-year. In 2016 a factory in Jiaxing, China opened, which employs more than 1,200 people, and is expected to produce between 70 and 80 percent of all LEGO products sold in Asia. LEGO uses a dual licensing Strategy: inbound (e.g. Walt Disney licenses) and outbound. The former has stimulated the design of a large range of new sets. The latter, with the best-selling LEGO Movie, has generated a new stream of revenue in theatres: €963 million in the first twelve months after its release. It is now being licensed-out to other toy manufacturers. LEGO’s brand awareness and user trust are transmitted from generation to generation within families, thus securing continuing growth of the customer base. With 62 billion blocks sold  in 2014 alone, it is estimated that on average, each inhabitant of the globe possesses 102 LEGO bricks! LEGO toy sets have what it takes to be truly global products. Being intuitive for children, they transcend the linguistic barrier and facilitate inter-cultural communication.

a. How does LEGO generate royalties by using contractual entry strategies?
b. What are the advantages of licensing as described in the case?
c. What risk(s) does LEGO face from licensing its trademarks, toy patents, and the LEGO Movie?