Logitech's Products - Costs of Making Computer Peripherals - Marketing Assignment Help

Assignment Task :

Closing Case
Best known as one of the world's largest producers of computer mice, Logitech is in many ways the epitome of the modern global corporation. Founded in 1981 in Apples, Switzerland, by two Italians and a Swiss, the company now generates annual sales of more than $1 billion, most from products such as mice, keyboards, and low-cost video cameras that cost under $100. Logitech made its name as a technological innovator in the highly competitive business of personal computer peripherals. Among
other things, it was the first company to introduce a mouse that used infrared tracking, rather than a tracking ball, and the first to introduce wireless mice and keyboards. Logitech is differentiated from competitors by its continuing innovation-in 2003 it introduced 91 new products-its high brand recognition, and its strong retail presence. Less obvious to consumers, but equally important, has been the way the company has configured its global value chain to lower production costs while maintaining the value of those assets that lead to differentiation.
Logitech still undertakes basic R&D work (primarily software programming) in Switzerland where it has 200 employees. The company is still legally Swiss, but the corporate headquarters are in Fremont,
R&D work (again, primarily software programming) ISalso carried out 10 Fremont. Most significantly, though, Fremont is the headquarters for the company's global marketing, finance, and logistics operations.
The ergonomic design of Logitech's products-their look and feel-is done in Ireland by an outside design firm. Most of Logitech's products are manufactured in Asia.

By the late 1990s, Logitech needed more production capacity. This time it turned to China. A wide variety of the company's retail products are now made there. Take one of Logitech's biggest sellers, a wireless infrared mouse called Wanda. The mouse itself is assembled in Suzhou, China, in a factory that
Logitech owns. The factory employs 4,000 people, mostly young women such as Wang Van, an 18-year- old employee from the impoverished rural province of Anhui. She is paid $75 a month to sit all day at a conveyer belt plugging three tiny bits of metal into circuit boards. She does this about 2,000 times each day. The mouse Wang Van helps assemble sells to American consumers for about $40. Of this, Logitech takes about $8, which is used to fund R&b, marketing, and corporate overhead. What remains of the $8 after that is the profit attributable to Logitech's shareholders. Distributors and retailers around the world take a further $15. Another $14 goes to the suppliers who make Wand a's parts. For example, a Motorola plant in Malaysia makes the mouse's chips and another American company, Agilent Technologies, supplies
the optical sensors from a plant in the Philippines ..That leaves just $3 for the Chinese factory, which is used to cover wages, power, transport, and other overhead costs.
Logitech is not alone in exploiting China to manufacture products. According to China's Ministry ofCommerce, foreign companies account for three-quarters of China's high-tech exports. China's top 10 exporters include American companies with Chinese operations, such as Motorola and Seagate Technologies, a maker of disk drives for computers. Intel now produces some 50 million chips a year in China, the majority of which end up in computers and other goods that are exported to other parts of
Asia or back to the United States. Yet InteJ's plant in Shanghai doesn't really make chips; it tests and assembles chips from silicon wafers made in Intel plants abroad, mostly in the United States. China adds less than') percent of the value. The U.S. operations of Intel generate the bulk of the value and profits.

Case Discussion Questions
I. In a world without trade, what would American consumers have to pay for mark?
2. Explain how trade lowers the costs of making computer peripherals such a mice and keyboards.
3. 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 and Taiwan, undertake basic R&D in California and Switzerland. design products in Ireland, and coordinate marketing and operations from California?
4. Who creates more value for Logitech, the 650 people it employs in Fremont and Switzerland or the -1-,000 employees at its Chinese factory? What are the implications of this observation for the argument that free trade i beneficial?
5. Why do you think the company decided to shift its corporate headquarters from Switzerland to Fremont?
6. To what extent can Porter's diamond help explain the choice of Taiwan as a major manufacturing site for Logitech?
 

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