By Taro Fujimoto

Executive Impact Aug. 26, 2008 - 11:01AM JST ( 8 )

TOKYO —

What toys did you play with when you were a kid? While video and high-tech toys are popular in Japan today, some parents want their kids to play with more creative and educational products, such as LEGO. The Danish toymaker is one of the most popular brands in Japan.

Marking the 30th anniversary of the launch of its Japan office in Tokyo, LEGO Japan continues to play a unique role in the Japanese toy market, maintain a strong brand identity and product quality.

Managing the company’s business operations in the Japanese market is representative director and vice president Ken Millhouse. A Briton born in Germany, he grew up in the UK and Cyprus. After finishing his BA degree in business studies in London, he became a market researcher.

In 1972, Millhouse joined American household product company Colgate in South Africa. Leaving Colgate-Palmolive in 1983, he started working for Tiger Brand first as marketing & sales director of their Bakery division and then of the Pasta division. In 1993, he became country manager of LEGO South Africa just after the end of the country’s apartheid policy, working there for 10 years. He was head of LEGO South Korea in 2004 before taking up his current position in 2005.

Japan Today reporter Taro Fujimoto visits Millhouse at the company’s office in Taito Ward to hear more about its business and the current situation of the Japanese toy market.

What is the LEGO’s business structure in Japan?

The company has three different areas of business: LEGO play materials, LEGO Education (a separate division) and concept lab (not under my supervision). I control essentially LEGO play material, sales, marketing and distribution in Japan.

What is the history of LEGO Japan?

LEGO Japan celebrates its 30th anniversary this year. But the company actually had started the business 46 years ago through distribution by Bandai Corp. We currently have 51 employees in offices in Tokyo and Osaka as well as a warehouse in Ichikawa, Chiba Prefecture.

What’s LEGO Education?

We have 13 LEGO Education centers in Japan, fostering the learning and creativity skills of children aged between 3 and 10 by using LEGO products. This is a growth opportunity for us. This differentiates us from our competitors.

What is the Japanese toy market like?

The Japanese toy market is the second largest in the world and very tough. However, the company suffers from what we call an “age trap.” The age trap has two meanings. One is that the market is declining due to the aging population. The other is that in Japan children exit educational toys at a younger age than in other countries. There is no question that LEGO can be used by almost any age group in terms of creativity learning and hand-eye coordination. Although our primary target is kids, our secondary target is parents as well as adult LEGO fans.

What are some unique aspects of the Japanese toy market?

There are many unique aspects which kids look for. For example, intellectual properties (IPs) in Japan, such as Anpanman, Ultraman and Power Rangers which are globally recognizable, are completely different from other foreign markets. Although there is good crossover between Japan and other countries in some areas, IPs like Spiderman and Batman are not quite as popular here, unlike other countries.

What’s LEGO’s position in the Japanese market?

It depends on how you define us in the market. In terms of total market, we are very small, unlike Bandai and Takara Tommy. If you take us as a share of the construction and educational toy market, excluding video games, we are predominant. We have around 80% of the construction toy market.

How do you see the competition from video games in the market?

LEGO as a company has globally successful video games in collaboration with the “Star Wars” and “Indiana Jones” series, and we are represented in that universe. There is no question video games have squeezed the traditional market for us. But we have a strong brand and consistent message and position in the market. Therefore, the niche we are in is pretty healthy in terms of educational toys. I don’t think we are impacted as badly as some other toys.

What is LEGO Japan’s branding strategy?

We basically use the same global value of branding: “Inspiring and Developing Builders of Tomorrow.” In terms of power of creativity, we focus on hands-on learning using LEGO blocks. Imagination, creativity and quality of products are important in terms of both the way they are used and we are presented.

Do you have any special marketing strategy in Japan?

In Japan, we noticed that there is a much bigger share of creative building than “play theme” products. For example, the LEGO Bucket is very specific to Japan, and is a very consistent product for us. We are trying to get older consumers to experience LEGO and increase the exit age from educational toys.

How do you advertise your products?

Since our key focus is to target kids, we constantly advertise on the TV Tokyo network which has a lot of animation programs for them. While some companies tie up with programs using their characters rather than conventional spot TV ads, we have a different advertising strategy.

Are there any changes in the market compared with before?

More people in Japan are buying LEGO now, even though the market is declining. I think families and parents are moving toward what we call “trusted choices,” especially in view of the safety problem with made-in-China toys and the squeezing of disposable incomes.

How are sales in Japan?

They’re going well. We had almost double digit growth in 2005-2006 and continue to grow at a more moderate level.

Do many Japanese tourists visit LEGO Land in Denmark?

Some 20,000-30,000 Japanese visit LEGO Land each year. Since we expect 1.5 million visitors a year, that’s quite a significant number. Japanese tourists are very polite and patient, even if they have to queue. Although we have had a lot of talks about it, we don’t currently have any plans to open a LEGO Land in Japan because of the cost of property which is very expensive. But I wish we would have one in the future.

What current issues do you face in the industry?

The biggest is the exchange rate. Now, the euro is too strong against the yen. An oil price increase in 2009 would also be a concern for us. If you look into the future, you have to think of inflation. We are doing our best to minimize that factor. LEGO has a philosophy of trying to keep prices stable.

What are your future prospects?

We cannot keep continuing to grow in the Japanese market. But we will remain strong in our niche. We believe we can grow in this context. We continue to innovate our core business, new themes, IPs and ideas. We will continue to develop robotics, for example. We won’t get into violent TV games but produce one based on IPs, like “Star Wars” and “Indiana Jones.” We will use an online medium to improve the communication with LEGO core fans.

What is your management style?

More coaching than dictatorial. We need to coach, treating people fairly and with respect whilst providing clear goals and objectives.equally.

Is it difficult to work with Japanese employees?

No and yes. I find them very competent, reliable and also very committed to delivering results which I think is fantastic. The biggest issue is language, which is my fault actually. LEGO Japan is not a pure Danish company but a hybrid of both Japanese and Danish perspectives, creating positive synergy.

What’s a typical day for you?

I get up at 5:30 a.m. and sometimes go to the gym. I come to the office between 8:30 and 9:00 a.m. I usually have meetings with staff, business partners and customers as well as phone call sessions with colleagues in Denmark. I go back home around 7:30 p.m. in Yokohama. I sometimes help out at the local club at the YCAC (Yokohama Country and Athletic Club) in Yokohama after work.

How do you spend weekends?

I try to focus on my family. I go to the gym, and spend time with my wife. Since both of my sons have left Japan, I dine out with my wife. I also play golf, watch rugby games and visit YCAC.

Did you play with LEGO when you were small?

Absolutely. I never imagined I would work for LEGO. I didn’t think LEGO was a business. Selling a product which is fun and educational while running a business are kind of a win-win situation, I think.

For further information, visit: http://www.lego.com