LEGO is one of the most successful companies in Europe and the world in general. The company is ranked third in the toy industry. The company prides itself as one of the best managed family empires with presence in various corners in the world. LEGO has undergone various challenges in the recent past leading to multiple changes in the company and the management in order to revamp it to the current situation. This paper looks at the company’s most critical strategic issue that it needs to confront. The paper will also draw on the foundations of LEGO’s competitive advantage and how it can leverage this advantage to respond to the critical issue identified.