The Logistic

Name | Dilip Raj Bhatta | Global Business Environment | Roll No | 10108 | | Assignment No. 1 | Case :LOGITECH |

a) To what extend can Porter’s diamond help explain the choice of Taiwan as a major manufacturing site for Logitech?
Answer: Porter’s theory of national competitive advantage suggests that the pattern of trade is influenced by four attributes of a nation: (a) factor endowments, (b) domestic demand conditions, (c) relating and supporting industries, and (d) firm strategy, structure, and rivalry. Porter speaks of these four attributes as constituting the diamond. He argues that firms are most likely to succeed in industries or industry segments where the diamond is most favorable. These four attributes can be applied in the case of Taiwan, which becomes a manufacture site for Logitech’s electronic goods. (a) Factor endowments - Taiwan offered a well-developed supply base for parts, suitable infrastructure and qualified people for the manufacture of electronic goods. (b) Domestic demand conditions – Taiwan local computer industry market is rapidly expanding, so there is huge demand of mice in this country. Also, there is huge demand of electronic products from all other counties. (c) Relating and supporting industries - Taiwan offered a well developed supply base for parts, i.e. it has a well-developed supply base for parts. Also, it has rapidly expanding local computer industry. These factors represent the presence of suppliers or related industries. (d) Firm strategy, structure, and rivalry – Logitech strategy is to produce at high volume and low cost with offering a better designed product. Choosing Taiwan has advantages of low cost, well-developed suppliers, qualified people, etc. Also, the tough competitions among the local manufactures help the firm to gain efficiency.
Here, the government role in providing suitable space at subsidized rate in its science-based industrial park to encourage foreign companies to invest is also important.
In this way, these four attributes are favorable to Logitech in choosing Taiwan as a major manufacturing site.

b) 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?
Answer: The theory of comparative advantages suggest that it makes sense for a country to specialize in producing those goods that it can produce most efficiently, while buying goods that it can produce relatively less efficiently from other countries- even when there is absolute advantage for them to produce all the goods. It also suggests that unrestricted free trade brings about increased world production and stimulates economic growth, which creates dynamic gains from trade.
Logitech has configured its global value chain to produce its goods at high volume with lower production costs while maintaining the value of those assets that lead to differentiation, which is aligned with this theory. Specifically, this theory is applied in the flowing ways to configure its global operations.
China and Taiwan for manufacturing
Taiwan is offering well-developed supply base for parts, qualified people, and a rapidly expanding local computer industry. Government of Taiwan is providing suitable place for manufacturing at a subsidized rate. All these facilities provided by Taiwan help Logitech to manufactured large volumes of products at low cost.

China is providing cheap and hard working labors. This helps Logitech to increase its production capacity and go for mass production by utilizing the human resources more efficiently.

Basic R&D in California and Switzerland
California is the hub for technological innovation because of Silicon Valley, which is situated there. The corporate headquarter office in California provides top management to know more about the new innovation and trends in the market. By doing R&D and analyzing the information they obtained from this perfect business environment, Logitech can formulate its marketing and operations strategy more accurately. Experts needed for designing new products, formulating policies, etc. can be easily found in this business environment.

Also, in Switzerland, the talented human resources for developing softwares, analyzing business trends and formulating policies are available. So Logitech undertakes basic R&D work in Switzerland.

Design products in Ireland
Ireland has high number of young and skilled people. These young skilled minds are very much important in innovative design. So Logitech select Ireland for products design.