CASE STUDY

G A B R I E L G . P R A N A N D A , AK B A R TAU FAN I , O L G A S E B O N E
F R I D AY, 2 7 M A R C H 2 0 1 5

LOGITECH

LOGITECH
Founded in 1982. Apples, Switzerland.
Two Italians, Giacomo Marini and Pierluigi Zappacosta and one Switzerland Daniel
Borel
The traditional preference of start-ups to target niche market
Differentiated their products by delivering great values and continuously
producing high quality and innovative products at a lower price.
Founder of infrared tracking rather than tracking ball. Famous for wireless mice
and keyboards.
High brand recognition and strong retail presence.

CONT.
Headquartered in California.
Design is produced in Ireland.
Manufactured in Asia since late 1980s. Started factory in Taiwan.
Logitech was trying to win over two of the most prestigious OEM costomers, Apple
Computer and IBM, who bought their mice from Alps, Japanese firm that supplied
Microsoft.

1. IS LOGITECH A BORN GLOBAL FIRM?

New venture/born global firms?
International companies that seek to derive significant blablabla from the use of
resources and the sale of outputs in blablabla of inception
The founders had a global vision from the start.
Logitech follows the modern preference of start-ups the business.
Five years of development, Logitech has international operation in three countries.
Including Switzerland, the U.S. and Taiwan had become main Logitechs
operations.
Conducted research and development and manufacturing in those countries.

2 . HOW TRADE LOWERS THE COSTS OF MAKING

LOGITECH COMPUTER PERIPHERALS, AND INCREASES
THE DIVERSITY OF PRODUCTS AVAILABLE TO
CONSUMERS?
Emphasize a lot of innovation. Invested a lot in R&D.
Outsourcing = main strategy.
Logitechs expansion into Asian manufacturing begin in the late 1980s, begin with
Taiwan. To attract customers from their major competitor, Apple, Logitech not only
needed the capacity to produce at high volume and low cost; it also had to offer a
better-designed product. Logitech decided to enter Taiwan as their manufacturing
country. Cost labor in Taiwan remains low compared to any other countries in Asia.
In addition, Taiwan offered a well-developed supply base for parts, qualified labors,
and a rapidly expanding local computer industry. Moreover, by the late 1990s,
Logitech needed more production capacity and chose China to produce their
goods. A wide variety of the companys retail products are now made there. For
instance, Logitechs biggest sellers, a wireless infrared mouse called Wanda.
Wanda itself is assembled in Suzhou, China, in a factory belongs to Logitech.

3.A. EXPLAIN THE WAYS IN WHICH LOGITECH HAS CONFIGURED ITS GLOBAL
OPERATIONS?

Comparative advantage theory

Is beneficial for nations to involve in trade even when there is absolute advantage for them to produce
all the goods. This way nations will invest their major resources to produce what they can produce
with advantage.

3.B. Why does the company manufacture in China & Taiwan?

China -manufactures mice for logitech
Cost effective
Semi-literate
Semi-skilled labors
Taiwan
Qualified people
Has a strong supply for computer parts

3.C. WHY DOES THE COMPANY

UNDERTAKE BASIC R&D IN CALIFORNIA
AND SWITZERLAND?
California
Opportunities to interact with other companies
Emerging technologies

Switzerland
Talented people
Software development

3.D. Why does the company design its products in Ireland, and
coordinate marketing and operations from California?
Ireland
Ergonomics designs

4. WHY THE COMPANY DECIDED TO

SHIFT ITS CORPORATE HEADQUARTERS
FROM SWITZERLAND TO CALIFORNIA?
Fremont helps logitech to stay close to its customers
Technological innovations

NATIONAL COMPETITIVE ADVANTAGE: PORTERS

DIAMOND

In 1990, Michael porter of the Harvard Business School published the

results of an intensive research effort that attempted to determine why
sine nations succeed and others fail in international competition.
Looked at 100 industries in 10 nations.
Porters work was driven by a belief that existing theories of international
trade only part of the story. It
He developed those theories to complete the answer of why other some
countries is better without just using the previous theories.
Porter tries to solve this puzzle by theorizing that four broad attributes of
nation shape the environment in which local firms compete, and that
these attributes promote or impede the creation of competitive
advantage.

FOUR ATTRIBUTES OF A
NATION
Factor endowments-a nations position in factor of production
Demand condition-the nature of home demand for the industrys
product or service
Relating and supporting industries- the presence or absence of
supplier industries and related industries that are internationally
competitive
Firm strategy, structure, and rivalry-the condition governing how
companies are created, organized and managed, and the nature of
domestic rivalry.

TO WHAT EXTENT CAN PORTERS DIAMOND

HELP TO EXPLAIN THE CHOICE OF TAIWAN AS A
MAJOR MANUFACTURING SITE FOR LOGITECH?
In a factor production, demand condition, related and supporting
industries, and the rivalry

WHY TAIWAN?
Factor endowments- Taiwan offered lower cost( labour cost only 7% of
the cost of Logitechs mouse), qualified people
Demand condition-to win over the most prestigious customer, Logitech
has to lower their production cost while produce at high volume where
the Taiwan is qualified for that.
Related and supporting industries-Taiwan provided space in its sciencebased industrial park. Logitech wanted to win contract with Apple and
IMB by produce at high volume and low cost, the solution is
manufacture in Taiwan. Well-developed supply base for parts.
Firm strategy, structure, and rivalry-The competition against Alps has
brought Logitech to attract costumer more by offer better-designed
product.

WHY DO YOU THINK CHINA IS NOW A

FAVOURED LOCATION FOR SO MUCH HIGHTECHNOLOGY MANUFACTURING ACTIVITY?
lower cost of production
Theory of comparative advantage, compare to other nation, china
can cut production cost for higher profit
brings production closer to Asian and European markets
getting access to increasingly competitive and sophisticated
Chinese research, science and technology, both in personnel and
technologies.
it is estimated that a company that manufactures in China can cut
costs by between 30 and 80 percent depending on the labour
intensity of the product

HOW WILL CHINAS INCREASING

INVOLVEMENT IN GLOBAL TRADE HELP
THAT COUNTRY?
Trade can make everyone better off
Employment
Money inflow from another country
Incentive for local company to grow
China not only overtook the United States in 2011 to become the
worlds largest producer of manufactured goods but also used its
huge manufacturing engine to boost living standards by doubling
the countrys GDP per capita over the last decade

HOW WILL IT HELP THE WORLDS

DEVELOPED ECONOMIES?
Other nation will learn from china of how they benefit many
companies, how their production cost can be lower than others.
The implementation of theory of absolute advantage and
competitive advantage can help world to determine which they are
good at.

WHAT POTENTIAL PROBLEMS ARE

ASSOCIATED WITH MOVING WORK TO
CHINA?
The outflow of the money will partially went to china
The restriction or government regulation may different
Nationalist sentiments
Language and cultural differences - it can be hard to get messages
across.
Energy shortages and other operational problems.
Increased management overheads - for example communication
difficulties, the need for stringent quality controls and the need to
redesign operation