4. Who creates more value for Logitech, the 650 people it employees
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?
Answer: 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.
5. Why do you think the company decided to shift its corporate
headquarters from Switzerland to Fremont?
Answer: 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.
6. To what extent can Porter's diamond help explain the choice of
Taiwan as a major manufacturing site for Logitech?
Answer: 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.
7. Why do you think China is now a favored location for so much high
technology manufacturing Activity?
Answer: 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.
8. 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?
Answer: 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.