Introduction: Logitech was founded in 1981 in Apples, Switzerland and is run by Guerrino De Luca, Chairman of the Board, and Gerald P. Quindlen, President and Chief Executive Officer. The offices are in Fremont, California, Romanel-sur-Morges, Switzerland, Hong Kong, China, Suzhou, China, Hsinchu, Taiwan, and Tokyo, Japan. Logitech products are distributed in more than 100 countries worldwide through retail channels or via strategic partnerships with top-tier PC manufacturers. Logitech has sales offices in major cities in North America, Europe, and Asia Pacific. Logitech is listed on the Nasdaq Global Select Market under the symbol LOGI and on the SIX Swiss Exchange under the symbol LOGN. Logitech has four subsidiaries: (1) LifeSize, (2) WiLife, (3) Slim Devices, and (4) 3D Connexion.
In a world without trade, what would happen to the costs that American consumers would have to pay for Logitech’s products?
In a world without trade, the costs that American consumers would have to pay would be very high. The product that the case study gives for an example, Wanda, retails for $40, of which only $3 is the production cost from China. This $3 cost would rise immensely if production was in the United States because the American economy demands high wages.
Explain how trade lowers the costs of making computer peripherals such as mice and keyboards.
It is amazing to think that trade helps to lower the costs of a product. As we saw in the previous question, if the United States were to build a product entirely domestically, the retail price would not be feasible to most consumers. With trading in place it allows for economies of scale. The technology can be developed in one country, the ergonomics in another country, the production in another country, and the assembly in yet another country. The shipping costs are much less than it would be to perform these tasks in one country. This is called absolute advantage, where someone is great at one thing. With this in mind you will get a product that has the best resources available at the lowest cost, which is comparative advantage. Finally, specialization is where everyone is doing what they do best and pulling their resources together to make one incredible product.
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?
Logitech is very brilliant when it comes to comparative advantage. It does basic R&D work in Switzerland with 200 employees, its headquarters are in Fremont, California with 450 employees as well as some R&D, the ergonomic designs are developed in Ireland, and the products are manufactured in Taiwan and China. The comparative advantage is that it is the most cost effective to break up the business in many different countries that specialize in a certain job.
Who creates more value for Logitech, the 650 people it employs in Fremont and Switzerland, or the 4,000 employees at its Chinese factory? What are the implications of this observation for the argument that free trade is beneficial?
The 650 employees in Fremont, California and Switzerland create more value for Logitech. It is where all of the R&D and designs are developed. The 4,000 employees of China add $3 to the Wanda product, which is almost nothing in comparison to the remaining $37. Free trade is beneficial because labor costs can be brought way down.
Why do you think the company decided to shift its corporate headquarters from Switzerland to Fremont?
America specializes in R&D. The headquarters were moved because of the company’s global marketing, finance, and logistics operations. That is what Americans do best.
To what extent can Porter’s diamond help explain the choice of Taiwan as a major manufacturing site for Logitech?
There are four parts to Porter’s diamond: (1) factor of endowments, which is a nation’s position in factors of production such as skilled labor or the infrastructure necessary to compete in a given industry; (2) demand conditions, which is the nature of home demand for the industry’s product or service; (3) relating and supporting industries, which is the presence or absence of supplier industries and related industries that are internationally competitive; (4) firm strategy, structure, and rivalry, which are the conditions governing how companies are created, organized, and managed and the nature of domestic rivalry. Taiwan’s factor of endowments was that it had a science-based Industrial Park in Hsinchu. The demand conditions were that the Taiwanese were already trained to deal with technology. The relating and supporting industries were that Taiwan was the best as building technology as the lowest cost. The firm strategy, structure, and rivalry were that Taiwan had no domestic rivalry; they provided the lowest cost.
Why do you think China is now a favored location for so much high technology manufacturing activity? How will China’s increasing involvement in global trade help that country? How will it help the world’s developed economies? What potential problems are associated with moving work to China?
Chinese laborers are some of the cheapest in the world. Even though the workers are not treated very well, they are starting to rise up and demand more wages. The increase in foreign trade for China has helped to increase their economy. The world’s developed economies will benefit because of the globalization of production. The potential problems are that Americans are losing jobs to foreign markets.
What is Logitech doing today?
If You Can Think It, You Can Watch It: Logitech Delivers Google TV to Living Rooms Across the U.S.
Logitech Revue with Google TV, Logitech Controllers, Logitech TV Cam, Logitech Vid HD Video Calling Service Put You In Control of the Google TV Experience
FREMONT, Calif., Oct 06, 2010 (BUSINESS WIRE) — Consumers today have access to an enormous amount of content, delivered by a range of sources and increasingly complex devices. To bring this content together through a single interface on the best screen in the house – the TV screen – Logitech (SIX: LOGN) (NASDAQ: LOGI) has worked with Google on a line of products designed to create the best Google TV experience for the millions of U.S. households with an HDMI-ready TV. Google TV brings traditional TV programming together with the entire Internet, with the ability to search across them both.
Logitech today unveiled Logitech Revue(TM) with Google TV(TM), a compact, plug-and-play companion box with its Logitech(R) Keyboard Controller, which together provide seamless control over the Google TV experience and home-entertainment devices. The company’s portfolio of products for Google TV also includes the Logitech(R) TV Cam and Vid(TM) HD service for HD video calling from the comfort of one’s sofa. In addition, Logitech is offering the Logitech(R) Mini Controller for Logitech Revue as well as other applications designed for the Google TV platform.
“Just as we have done with the PC and with home entertainment systems, our role with Google TV is to give people the ability to control and interact with their content and devices with unprecedented ease,” said Gerald P. Quindlen, Logitech president and chief executive officer. “With our line of products for Google TV, Logitech will help redefine the user experience in the digital living room.”
“Logitech Revue with Google TV makes it easy for people to use just one controller to find and enjoy content from a variety of sources – programs from TV providers; the entire Web, including Flash-based games; music, photos and videos from their personal library; and a growing selection of apps,” said Ashish Arora, vice president and general manager of Logitech’s digital home products group. “Logitech not only delivers the Google TV experience for any HDMI-ready TV, but we build on it with exceptional interface devices, control of living room components through Logitech Harmony(R) Link and enhanced experiences such as video calling in the living room.”
“Google TV combines the power of search, a full Web browser, and Android apps with the TV experience you know and love,” said Mario Queiroz, vice president of product management for Google. “We’re proud to be working with Logitech to launch the very first set of Google TV devices, helping you and me easily access great Web and TV content, all on the same HD screen.”
“Smart TV delivers a truly integrated experience, with broadcast and the Internet united on one screen,” said Wilfred Martis, general manager, Retail CE, Intel Digital Home Group. “The Logitech Revue brings Google TV to existing televisions, and also offers video calling to provide a new dimension to home entertainment. The smart TV experience requires advanced processing performance, as well as outstanding audio/visual capabilities, and we’re proud that Logitech selected the Intel(R) Atom(TM) processor CE4100 to power this revolutionary product.”
Logitech Revue with Google TV – Access to Endless Entertainment Choices
With a broadband Internet connection available, connecting the Logitech Revue to your home entertainment system is easy. Use the included HDMI cable to connect the Logitech Revue to the port on your HDTV, and then connect another HDMI cable between the Logitech Revue and your cable or satellite provider box with HDMI out. Then plug in the system to power up your Logitech Revue and follow the directions on the TV screen to complete the brief software setup. In minutes, the content available on your TV will expand beyond the day’s programming to include virtually limitless Web content, as well as a host of preloaded Google TV and Logitech applications.
Once set up, you can use the included Logitech Keyboard Controller to navigate and interact with the new