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Logitech Case - Discussion Question 3

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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?

According to Ricardo's theory of comparative advantage, nations will invest all their resources to produce what they can produce most effectively. They should focus on the product which they can produce most effectively even if they were able to produce a certain product more effectively than other countries. This theory is applied as follows.

Regarding China, it is cost effective to assemble and manufacture there. China is the most populous country, and it is important for the Chinese government to provide work environments for its people to earn their living. So a plant for high-volume manufacturing is a good way of employing many people. Even now there are a lot of semi-literature people in China. This resource can manufacture products which need semi-skilled labour most efficiently because of their low wage. Thus, Logitech uses China to manufacture mice.
While Taiwan, it is giving land in their industrial parks at very nominal rates. Taiwan’s IT industry is also expanding and the quality is high level. So Taiwan had developed a strong supply base for computer parts, it has skillful people. Logitech is taking advantage of the facilities.
As regards California, it is the closest Alameda County city to Silicon Valley. Having an office in California provides opportunities to interact with the other IT companies. For an IT company, Silicon Valley is special place. It also brings them advanced ideas. Due to these, Logitech chooses California as a centre for R&D. Since there are many large corporations in California, their marketing division is also there.
About Switzerland, it is known for precision industry such as watch industry. The right talent is available there for developing the mice. Therefore, Logitech still undertakes primarily software programming is Switzerland.
In Ireland, the design firm is used by Logitech for ergonomics design. The Ergonomics design of Ireland is very famous for their knowledge concerning the characteristics of human beings. These apply to Logitech’s design of systems and devices of all kinds.

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