Logitech
Section- HONORS
Group 4
Reem Abdellatif
Lily Chen
Catherine Harber
Word Count: 1549
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1. Briefly summarize the problem(s).
Logitech has to find new ways to compete as more peripherals became standard equipment
designed into new mobile technologies. When competition arises, Logitech has to act
strategically in order not to be removed from being the top leader in its industry. Their main
competition is from Microsoft, Creative Technology Ltd, and Royal Philips Electronics. These
competitors are fierce and they all have a strong hold on the market. Another problem is the “all
in one” products offered by smartphone companies and the PC industry. When a speaker
system, etc. is already included in a product, Logitech’s products will not be needed.
“The way people interacted with their devices had begun to change. The iPhone and iPad used
touch screen technology with built-in accelerometers, eliminating the need for mice and
Trackpads. Additionally, camera and higher quality speakers had become standard equipment
built into the iPhone, iPad, and Windows laptop computers; Apple had introduced the “magic
pad” to replace the mouse altogether. The need for consumers to buy add-on peripherals was
slowly evaporating, as more peripherals became standard equipment designed into new mobile
technologies.”1
“In terms of mobile web and smartphone application trends, Logitech has three options: (1)
develop closed partnerships with specific platforms (iPhone or Blackberry); (2) produce apps for
each platform; or (3) produce “platform-neutral” apps by using the mobile web.”2 After the
economic recession, Logitech was heavily affected and needed to maintain certain margins.
They reduced their global workforce by 15% as a result of their financial insecurity. Their
operating margin drastically fell and they didn’t issue dividends so they could focus on R&D to
get back up.
2. Describe the company’s resources, capabilities, and core competencies. Does Logitech
have any weaknesses that can impact its ability to compete in the future?
Logitech is extremely proactive when it comes to innovation, and combined with strategic
acquisitions to enhance its product in order to create the most advanced, innovative and
collaborative experience for customers.They offer quality personal computing, at an affordable
price through using automated manufacturing facilities in China, and expand its product line and
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Strategic Management- Concepts and Cases.
Strategic Management- Concepts and Cases
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introduced a variety of products. They also carry a good reputation by developing innovative
products and focusing on consumer’s experience which has helped keep customers loyal.
Whenever a new threat enters the market, they can easily make acquisitions due to their strong
financing. But in the eyes of the consumer and the industry, this could look like Logitech is
trying to monopolize the market. Another stronghold which might come off as a weakness is the
flooding of resources and finances into R&D. This is a strong suit because innovation is a core
competency which helps Logitech develop new technologies but at the same time, they are
putting most of their resources in it and may not explore other avenues that can lead to profits.
Through looking at the company’s financial position, Logitech fails to meet its financial
performance targets. In late 2007, Logitech was booming, with a soaring stock price of $40 due
to record sales and profits of iPod peripherals for easier use. Once the recession hit, they lost
$200 million in sales and had to take drastic measures to make up for it. It reveals one of the
weakness which Logitech is highly dependant on economic stability and income of its customers.
This is because technology products like the ones offered by logitech are often expensive and
individuals and companies are reluctant to buy unless they have extra income to do so. While
Logitech aims for 5% of sales revenue, they were way below that and in the negatives. The
reasons behind it were not only company is recovering from recession difficult, but also its
product have become standard fare on most personal computing devices. Because of heavy
dependence on older technologies being fatal for Logitech, in 2015 the company forward looking
statement, it announced their intent to exit the OEM business and to reorganize to focus on
consumer trends and Cloud-based offering. That also explained why Logitech have been
expanding the categories of products and entering new markets such as the market for mobile
speakers. However, by doing so, Logitech are confronting new competitors that have greater
financial, technical, sales, marketing and resources all together. All the financial weaknesses
Logitech have faced can be turned around by continuously investing resources in research and
development, make significant improvements and take a strategic approach to improve
company’s financial position.
Through the VRIS framework, we have analyzed two outstanding sustainable competitive
advantages for Logitech. The first is innovation and the other is the brand recognition Logitech
has spent years building.
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3. What are the trends and conditions in the external environment that will have a dominant
influence on the firm’s strategic actions? In what ways (if any) should Logitech change
its strategic direction?
The demand on the Logitech product depends strongly on the economic stability and
income of its consumers as well as the profitability of its business customers. The recent
recession has caused a decrease in disposable income and personal savings rates are very low.
According to a recent survey “62% of Americans have less than $1,000 in their savings accounts
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and 21% don’t even have a
savings account.”3 This can
have a major impact on
Logitech’s strategic actions
as consumers may not be
looking to spend what little
money they do have on
peripheral products. There
has been an increasing trend
in the global market and its
reliance on technology.
Smarthomes are becoming
more popular as consumers move to manage thermostats, blinds, lighting, and music from one
easy remote. Devices need to be able to keep up with the demands of high internet speeds for
good quality and reliability of communication connections. Over the years China’s internet usage
has grown exponentially, therefore opening a new market demand for both personal
and professional use. This has created an opportunity for Logitech as their peripheral products
make it easier to use portable electronic devices. Additionally, as consumers around the globe
become more sensitive to increasing internet speeds and maintaining worldwide communication,
products have been properly tailored toward high speed connections, video communication and
conferencing. However, with technology rapidly progressing, popular items that Logitech made
peripheral items for are incorporating those into their base product. In essence, this has the
potential to eliminate much of the need for Logitech’s products. Due to challenging times in the
economy consumers will be less willing to, for example, purchase a webcam when one already
comes installed on their laptop. Logitech will have to formulate new diversification strategies in
produce unique products and services that meet customer's needs to ensure its long-term
survival. Maintaining their high quality reputation will also help in securing a profitable future.
Due to their strong position on innovation, Logitech should branch out of their core competency
of keyboards and mice and look for the next big accessory. The table below summarizes the key
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http://www.marketwatch.com/story/most-americans-have-less-than-1000-in-savings-2015-10-06
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products of Logitech and the directions that should be considered in order to thrive in changing
times.
Table: Company’s market share position in its key product segments.
Products
Market
Notes and Suggestions
Share
Mice
40%
Market for this product is weakening. Plans should be made to minimize
the strategic importance of this product category. The company should seek
new and novel ways to incorporate navigation capabilities into new
devices.
Webcams
Webcams are now being integrated into laptops but the need may arise for
49%
desktop computers. Should focus on these because they have the most
market share and important for expanding global telecommunication
market.
PC Speakers
Logitech can try to build new products using speakers such as home
34%
Remotes
theater, throughout the home, bluetooth speakers, and shower speakers.
Remote control can accommodate TV, Cable boxes, game consoles, smart
39%
lights, and other devices. They can take advantage of the new Smarthome
trend and expand on the offerings of these products.
4. What are the advantages of Logitech’s first mover and acquisition strategies? What are
the risks?
Logitech has an innovative mindset and as the first mover in the industry, it gains
significant occupancy of a market segment. It possesses technological leadership and has created
a strong brand name for the company. For example, Logitech was the first company to enter the
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wireless technology segment of the market. They took off like a rocket and created a spark that
kept the industry thriving. The risk to be a first mover is because of this, Logitech can often be
seen as the top of mind company when looking for accessory products. If the product fails, other
companies can follow quickly behind with an improved product. Customers might change their
products because they experienced some problems with Logitech’s product first and are more
susceptible to change. However there are many advantages as well. When a company wants to
prove they’re the top leader in innovation, it is a great advantage making the first move. You’re
the first one to get your product in the market and can really be innovative and capture
consumers.
Logitech implemented many important strategic acquisitions which enhance future
portfolios and expand its peripheral product line. An example of successful acquisition was the
video camera division, QuickCam PC, of Connectix, and it allows immediate access to new
wireless cameras and video conferencing division. The successful acquisitions also provide more
predictable returns, and reduced dependence on one product market. The risk of acquisition
might result in a larger organization that hinders innovation. Unsuccessful acquisition also
creating debt and external factors hindering growth and cause for restructuring.
5. Devise recommendations to prepare Logitech for impending technological and
environmental shifts that threaten the company’s future. What steps are necessary to
defend against anticipated competitive behavior from the firm’s key rivals? What are
your recommendations for Logitech to deal with its problem(s)?
Logitech is a growing company and has done its best to keep up with the changing industry.
Some important recommendations we would give to Logitech is to make sure they are always
looking at their competition to keep themselves in check. Logitech has a hold on conferencing
and video technology and that would be a great asset to move into with the changing industry.
People are connecting with others all over the globe and it would be wise for this company to
build its way to make global communication refined and easier. The case suggested that
Logitech form all-in-one products or focus on developing partnerships with computer and
telecom manufacturers, as well as mobile carriers. As stated in the case, Logitech formed
manufacturing relationships with Apollo Computers and HP. It is our recommendation that more
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of these relationships are sought out as it helps to minimize the growing issue of all-in-one
products to Logitech. Orders will be in extremely high quantities, boosting sales, and helping to
grow the company. In addition, Logitech should focus strategies on reducing dependencies on
suppliers including retail sale channel, and seek long term profitable growth. Logitech must
consider the changing environment and think fast before they find themselves behind a new
industry leader.
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