What do these
products have in
common?
Reem Abdellatif, Lili Chen, Catherine Harber
Agenda
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History/ Background of Logitech
Problems and symptoms
Multiple Analysis
○ General Environment Analysis
○ Porters 5 Forces Analysis
○ VRIS Analysis
○ Value Chain Analysis
First Mover and Acquisitions
Recommendations
Discussion
Logitech
● Headquarters in Switzerland
● Started by 2 Stanford graduates
○ Daniel Borel
○ Giacomo Marini
● Computer mouse- gave them
opportunity to GROW!
● Significant growth through acquisitions
Computer Peripherals
■■ Product leadership
■■ Continued innovation
■■ Award-winning industrial design
■■ Strong price performance
http://www.logitech.com/en-us
“Our hard work is paying off; we’ve taken
home more than 50 design award wins in
the past 16 months alone,” said Bracken
Darrell, Logitech president and CEO.
“Logitech strives to be a leading
company in technology, but one with
design at its core. Our goal is to bring
products to market that consumers love.”
Problems
● Changing interactions with electronic devices
○ Standard features
● Evaporating peripherals market
○ All-in-one products emerging
● Recession hit hard
○ Actions to rebuild
Stock price fluctuations
Finance of Logitech
Late 2007- stock price spikes to $40 due to record sales and profits of iPod
peripherals for easier use (speakers, docks, and headphones)
2008/2009 recession hit Logitech hard!
2010, Sales dropped from 2.2B to 2B. [$200 Million dollar loss]
Operating income dropped from $110M to $78M
Net income dropped from $107M to $65M
As a result, reduced its workforce globally by 15%
Logitech’s aim for 5% of sales revenue invested in R&D, 12-14% in marketing,
13-19% sales growth
First Mover Advantages
Technology Leadership
Production learning curve
Patents and copyrights
Strong occupancy of market shares
High buyer Switching Cost
Customer loyalty
Market Share
Risk of First-Mover Strategy
Failure
High failure rate
Large amount of fixed asset
Imitation
Duplicate patented innovations
Below average returns
2009 Market Share Distribution
Products
Market Share
Notes & Suggestions
Mice
40%
Core of the business. Market is diminishing.
Innovate new method of navigation.
Webcams
49%
Webcams are now being integrated into
laptops but the need may arise for desktop
computers. Should focus on these because
they have the most market share.
PC Speakers
34%
Logitech can try to build new products using
speakers. Innovation is a core competency
for them.
Remotes
39%
Remote control can accommodate TV,
Cable boxes, game consoles, smart lights,
and other devices. They can take advantage
of the new Smarthome trend.
Smarthome Remote
Gaming Market
PC gamers willing to pay premium
Mice - $40 to $150
Keyboards - $60 to $180
Headsets and speakers - $60 to $400
Controllers - $25 to $50
Other accessories
Racing wheel
Stick shift
General Environment Analysis
General Environment - Computer Peripherals
Economic - Recent recessions limit disposable income. Low personal savings
rates
Threat
Demographic - 83.1 million millennials. High technology usage
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Political/Legal - Patents allow innovations to remain safe
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Approximately 62% of Americans
have less than $1,000 in their
savings accounts and 21% don’t
even have a savings account,
according to a new survey of
more than 5,000 adults
conducted this month by Google
Consumer Survey.
General Environment - Computer Peripherals
Economic - Recent recessions limit disposable income. Low personal savings
rates
Threat
Demographic - 83.1 million millennials. High technology usage
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Political/Legal - Patents allow innovations to remain safe
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General Environment - Computer Peripherals
Technological - Newer technologies for global communication
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Sociocultural - Technology is becoming “impossible to live without”
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Global - Global markets expanding. Need for communication. Increased internet
usage in China
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Porters 5 Force Analysis
Bargaining power of Buyers
Medium/ High large numbers of customer and no single customer can affect
the price, they have low switching costs but have some brand loyalty
Bargaining power of Suppliers
Low- there are numerous Mechanical parts suppliers internationally.
Threat of potential Entrant
Low/Medium -patents and huge R&A and start up cost limit some new
competition, economies of scale contribute to operational efficiencies.
Differentiation applied in different products but because of fast industry
growth and existing company can easily enter into the market.
Porters 5 Force Analysis
Rivalry between competitors
Moderate - Highly differentiated products. The competitors have products
and resources invested in a wide variety of other industries.
Threat of Substitutes
High- All in one devices
Influence of complementors
High - Firm highly depends on other innovative products invention of
electronic devices and new technology
Porter’s Five Forces Industry Level Analysis
`
Threat of Potential
Entrants
Bargaining
Power of
Suppliers
Medium
Bargaining Power
of Buyers
Rivalry Between Competitors
Identify Competitors and intensity
of Rivalry amongst competitors.
Briefly explain.
Low/Medium
Threat of
Substitutes
High
Medium
Influence of
Complementors
High
Medium/High
Value Chain Analysis
Primary Activities
Inbound Logistics
Consolidated manufacturing location in China and highly reduce the cost
Operation
Established prime location for innovation in the technology and IT sectors to focus on producing
new product line
Outbound Logistics
Expand it product offering and distributed products to over 100 different countries
Differentiated delivery models for high customer satisfaction
Marketing and Sales
Marketing Agreement with large companies, cross promoting
Support Activities
Technological Development
Strong capability in developing new technologies that allow firm to sell innovative products in
acceptable price
Human Resource Management
Form by two Stanford graduate students and retained a strong culture of innovation
Firm Infrastructure
Provide exceptional innovative product at a reasonable price
Company stays on top of and leading consumer trends
VRIS Analysis:
Innovation. Sustainable Competitive Advantage
Valuable
Yes, helps the company explore new opportunities to grow.
Rare
Yes, may not be a strong suit for competitors.
Costly to imitate
Yes, R&D costs are expensive, cannot be copied easily
Non-substitutable
Yes, opposite of differentiation is cost leadership→ change in
strategy isn’t substitutable
Innovation contd.
Brand Building. Sustainable Competitive Advantage
Valuable
Yes, this is what drives their company and sales. Consumers trust
that their quality products at reasonable price are the way to go.
Rare
Yes, Logitech’s brand makes it unique compared to competition.
Costly to imitate
Yes, Brand recognition takes time to grow. Competitors need time
and money to build this.
Non-substitutable
Yes, brands don’t get popular overnight. Brand recognition takes
significant time and resources to build.
Brand Building Contd.
→ Logitech provided consumers cutting-edge innovation while maintaining its
product quality. Logitech maintained its product leadership by combining
continued innovation, award-winning industrial design, and excellent price
performance with core technologies, such as wireless, media-rich
communications, and digital entertainment.
Acquisitions.
● QuickCam PC- Webcam and video conferencing
● Labtec, Inc.- audio peripheral maker
● Intrigue Technologies, Inc.- Logitech became a
leader in advanced remote-control production
● Slim Devices- Manufacturer of music systems.
● Paradial AS.- Logitech was able to combine their
peripheral products with the software, video effects,
and security features from Paradial
**Do you think these acquisitions could have given
The Advantage of Acquisition Strategies
Immediate access to new markets
Enhance future portfolios
Expand peripheral product lines
Ex: QuickCam PC
Less risk from product development and more predictable returns.
Lower costs and risks of new product development
Overcome entry barriers
Increase diversification
The risk of Acquisition Strategies
Unsuccessful Acquisition Create Debt
Over diversification
Overlarge Company
Difficult integration
Emphasizing quantity over quality
Hindering innovation
Restructuring
Recommendations
Expand on global telecommunication
Conferencing and video technology
Develop all-in-one products
Grow manufacturing partnerships
Apollo Computers, HP
Video Conferencing
-
Implementation - Global Telecommunication
Expanding core competency into a different market
Following the trends of consumers
Taking peripherals to another level
Compatible with most conferencing software and programs
Business is now on a global scope- Save time and money!
Implementation - Develop All-in-One Products
Similar to Ikea creating all-in-one TV stand
Moving out of core competency
Quality might not beat competition
Increased expenditure on R&D
Implementation - Grow Manufacturing Partnerships
Apollo Computers, HP
Trade shows
Logitech is a strong brand and can attract partners
Orders are high in quantity
Innovation may be hindered
Logitech in the News
“Logitech teases interest in virtual reality controllers”
No mouse and keyboard in virtual space
Optimize virtual reality experience
$80 billion market by 2025
“Logitech partners with Intel to up the ante on its agnostic
videoconferencing approach”
Previously only produced hardware, not software
Contains:
Logitech's ConferenceCam camera/speaker combination
Discussion Questions
1. Do you buy peripheral accessories? Why or why not?
a. If money was no object, does that change your answer?
2. Which company do you think is the best, in your opinion? HP, Microsoft or
Logitech? Why?
3. Should Logitech focus more on acquisitions to become a larger company or
should the company focus more on innovation to become a small company with
“big” products? Why?
Discussion Questions
4. Are peripherals a slowly dying market? Does Logitech need to make a major
shift in focus to remain relevant?
5. How often do you skype?
Is video conference the savior for Logitech?