Group: A

02

Logitech: Company Overview

History
Today
Founded by Daniel Borel, Pierluigi Zappacosta and

US$2 Billion Company

Giacomo Marini in 1982 Apples, Switzerland
Nearly 200 Million products sold every year
Founders had a global vision from the start
Distributed in more than 100 countries
Operated in 3 countries within 5 Years
9,000 Employees
Design in Ireland.

Fremont - USA
R&D, Finance, Logistic,
Marketing

Design
EEMEA
Irelan
Europe
d Switzerland
R&D

Asia-Pacific
ChinaProductio

Asia-Pacifi
Taiwan
n
Productio
n

Logitech and International Trade

Switzerlan
d
Research and
Development

Fremont

Ireland

Taiwan

China

Finance,
Marketing
and
Logistics

Product
Designing

Manufacturi
ng

Manufacturi
ng

+
Research
and
Developm
ent

Q1. In a world without trade, what happen to

the costs that American consumers would
have to pay for Logitech's products?

No access to locations where there are cheap labor and

comparative advantage

That means,
aUS
havewithout
to execute
thewhat
entire
Logitech
operation
In
world
trade,
happen
to the
costs that American
irrespective
ofwould
whether
they
are good
or bad in products?
terms of all
consumers
have
to pay
for Logitech's
the operation functionality
Even they manage to do it,
Operational cost will increase dramatically. (US labor is
around 6 times of Chinese labor)
So the bottom line,
Increased cost will reflect in the selling price
American consumers have to pay USD several hundreds
more for all the products. For ex. USD 40 Mice will be
something like USD 350.

Q2. In aComparative
world without
what happen to
advantagetrade,
/
Specialization
the costs
that American consumers would have
to pay for Logitech's products?
Global
Outsourcing

Competitive Advantage

Lowers the cost

Economies of Scale
Maximize Efficiencies

Q3 . Use the theory of COMPARATIVE

ADVANTAGE to explain the way in which
Logitech has configured its global operations.
Why does the company manufacture in China
Design R&D in California
EEMEA
Irelan
and Taiwan, undertake
basic
Switzerland
Europe
d
and
Switzerland,
design
products in Ireland, and
R&D
Fremont - USA
Asia-Pacific
China
R&D,
Finance, Logistic,
coordinate
marketing and operations
from
Asia-Pacifi
Taiwan
Marketing
California?
Productio
Productio
Comparative advantage exists when firm
has ability
n
n
to produce goods and/or services at a lower
opportunity cost than other firms.
China
No.1 rank in the Global Manufacturing Competitiveness
Index for the past decade
Competitiveness Drivers: Cost of labour and
materials, Government investments in manufacturing
and innovation, Local market attractiveness and
Supplier network

Q4.1 Who creates more value for Logitech, the

650 people it employees in Fremont and
Switzerland or the 4000 employees at its
Chinese factory?

Value creation is where there is R & D

Source: Logitech International S.A., (2008).

Therefore, Fremont and Switzerland add more value for Logitech.

China factory benefits them in terms of cheap labour and
scalability.

Q4.2 What are the implications of this

observation for the argument that free trade is
beneficial?

Free trade is what it enabled Logitech to take advantage of the

low cost manpower available in China

Q5. Why do you think the company decided to

shift its corporate headquarters from
Switzerland to Fremont?
Agglomeration effects / Cluster
High density of Intellectual talent,
entrepreneurship and innovation
Location specific advantages

Q6. To what extent can Porter's diamond help

explain the choice of Taiwan as a major
manufacturing site for Logitech??
Factor conditions
Qualified workforce
High standard infrastructure

Demand conditions
High demand for electronic
products
Government Role
Science-based industrial
parks
Land is given at very
subsidize rates in these
parks
Firm Strategy, structure and
Relating and supporting
rivalry
industries
Competition and rivalry
Well-developed Computer/
among local companies
electronic cluster

Q7.1. Why do you think China is now a

favoured location for so much high technology
manufacturing
activity?
Power of
Top Management
Engagement

Management

China Favored
for
Manufacturing

Cheapest labour
rates in the world
(USD 75 month)

Mass Production

Q7.2 How will China's increasing involvement

in global trade help that country?

Increase the standard of living in China

Maintain the GDP growth momentum
Attract more FDIs
Strong position of the balance of payment
Technology transfers
Expanding economies of scale

(Q7.3) How will it help the world's developed

economies?
to lower product costs
supply chain efficiency
China continuous growth

Q7.4 What potential problems are associated

with moving work in China?
Loosing Job opportunities in home courtiers
Competitor could rise form Chinese domestic
company
Low Quality standards
Political changes could disrupt the work which
lead to
Intellectual law violations
Heavy relying on China