Case Study Report

on

Logitech

Submitted by
(Shalini Chaudhary 11900075 A01)
Section Q1947
Submitted to
Prashant Chauhan

LOVELY PROFESSIONAL UNIVERSITY

PUNJAB
(March, 2019)
Logitech

Introduction

Logitech produces personal computer peripherals such as mice, keyboards, web cams,
speakers, and remotes. They were the first company to make infrared tracking mice, instead
of a tracking ball, and the first to release wireless keyboards and mice. The success of
Logitech is based on developing the most innovative computer peripherals which can be
produced at a high-volume and low cost.

Logitech was founded in Switzerland in 1981.The Company‘s operational headquarters are

in Fremont, California through its U.S. subsidiary, with regional headquarters in Romanel,
Switzerland and Hsinchu, Taiwan through local subsidiaries. In addition, Logitech has
manufacturing operations in China, with distribution facilities in the United States, Europe
and Asia.
Introduction To The Case

This case study is how Logitech globalized successfully as a producer of computer peripheral
devices. Company generates annual sales of over $3.32 billion. It was the first company to
introduce a mouse that used infrared tracking. It was the first to introduce wireless mice and
keyboard. Logitech is differentiated from competitors by its continuing innovation. Logitech
still undertakes basic R&D work in Switzerland, where it has several hundred employees.
Most of the corporate functions are run out of offices in Fremont, California outsourced
ergonomic design to Ireland. In the late 1980s when it opened a factory in Taiwan, Logitech
was trying to win two of the most prestigious OEM customers (APPLE & IBM). Logitech
offer a better-designed product with low cost. But cost was a factor in the decision. The
solution: manufacture in Taiwan. Taiwan offered qualified people and well-developed supply
base for parts. Logitech signed the lease to sizing up. Shortly afterward, Logitech won the
OEM contract with apple. In Taiwan; the plant’s total capacity increased to 10 million mice
per year. By the late 1990s, Logitech needed more production capacity. This is Era to turned
toward China. A wireless infrared mouse “Wanda” one of the Logitech's biggest seller, is
assembled in China. Logitech owned factory, the factory employees 4000 people. Logitech
takes $8, which is used to fund R&D. Distributer and retailer take $15 goes to the supplies
that make Wanda’s parts .Logitech in not alone in exploiting in China to manufacture
products. Intel now produces some 50million chips a year in china.
Problem identification
Logitech’s manufacturing facility was in US, the cost of production was high. In a world
without trade American consumers would have to pay more for Logitech products as it would
be more expensive to manufacture locally with high interest rates , scarce and expensive raw
materials ,and most of all high labour cost .
Solution

Theory of comparative advantage

Theory of comparative advantage states that if one country is better at producing one good
and another country is better at producing a different good then they should trade.
Comparative advantage, as proposed by Ricardo, suggests that it is beneficial for nations to
involve in trade even when there is absolute advantage for them to produce all the goods. So
nations will invest a major portion of their resources to produce what they can produce with
advantage.
This theory is being applied to the case in the following way:
Both China and Taiwan offers low direct costs in manufacturing due to availability people at
lower cost. Also overhead cost is low in these countries. Having manufacturing plants in
China and Taiwan therefore is vital despite the cost of production is a little percentage of the
Logitech‘s returns.
China:
It is cost effective to manufacture in China. China has a large population of semi-literate
people who live in semi-urban areas. It is important for the Chinese government to provide
avenues for its people to earn their livelihood. M ass manufacturing is a good way of
employing many people. Since there is abundance of semi-literate human resources in China
it can manufacture products which need semi-skilled labor most efficiently. Thus Logitech
uses China to manufacture mice.
Taiwan:
Taiwan‘s local computer industry is expanding having made all efforts with an objective of
becoming a major player in the electronics component manufacturing. However they don‘t
have much bargaining power since they do not have direct customers because Taiwanese
factory was only out producing U.S. facility. Logitech is taking advantage of such facilities
that are already being developed.
California and Switzerland :
These countries have inherent advantages for R&D works because these locations are close
to high technology enterprises. The office in California will gives an opportunity to interact
with other companies due to Silicon Valley. It also makes sense to have the marketing and
operations are being coordinated in California since the main market of Logitech is USA.
And Fremont in California, is a corporate city having a high intensity of high tech American
companies makes it as the most efficient place to do overall coordination.
Ireland
The design firm in Ireland is used by Logitech for ergonomics design. The Ergonomics
Society of Ireland is very active in promoting the discovery and exchange of knowledge
concerning the characteristics of human beings that are applicable to the design of systems
and devices of all kinds.

Free Trade
This problem was solved because of Free Trade. Free trade is beneficial because, it is the free
trade which is allowing Logitech to take advantage of the low cost manpower available in
China. If free trade was not existed, Logitech would be forced to manufacture it's mice in
U.S. at a much higher cost. Without international trade, manufacturing and production is
limited and dependent only on local demand .Excess production could mean the ruin of a
company . While with international trade , new markets are opened and can be explored ,
there is unlimited demand . Production is increased as the surplus from local consumption is
exported. This concept is valid with regard to Research and Developments and design too.
The global trade facilitated Logitech to choose what is more advantageous to them.

Shifted its corporate headquaters from Switzerland to Fremont

The company decided to shift its corporate headquarters from Switzerland to Fremont to be
close to American high-technology enterprises also based in Fremont. It helps Logitech to
stay close to its customers. It can respond to the demands of the customers more promptly.
Fremont is also the place where a lot of technological innovations are happening. Logitech
being in the high-tech industry, continuous innovation is a key success factor for its business.
This helps Logitech‘s order winning criteria of continuous innovation thus according to the
case it introduced 91 new products in 2003. Fremont is also an important in terms of
managerial talent. With this strategy, marketing finance and logistics operations can be easily
done as related and supporting industries are within the area. All these reasons make it
convenient for Logitech to move to Fremont.
Conclusion