Essay On Global Enterprise

Answer all the  Questions

 

1. 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?

 

 

2. 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?

 

3. To what extent can Porter's diamond help explain the choice of Taiwan as a major manufacturing site for Logitech?

 

 

4. Why do you think China is now a favoured location for so much high-technology manufacturing activity? 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?

 

 

According to the theory of comparative advantage it can be identified that if one individual or one group is much more efficient in terms of production for a certain economic factor then the other then economically it is much better for each of the group to specialize in the production process of that particular factor and didn't read the product between each other. Comparative advantage is beneficial for Nations in order to involve themselves in the trade even when there is presence of absolute advantage for the nation in terms of producing all the goods that are available (Xie 2019). Under this context it can clearly be identified that investing in a major portion of the associated advantage that is associated with the company is the most viable and profitable option. By following the theory it can be identified that the most cost effective manufacturing process for Logistic was to be conducted in China. There is presence of large population along with semi literate people in China that live in different semi-urban areas. It is very much important for the Chinese government to ensure the fact that optimum revenue is provided to the people so that they can earn and leave their livelihood. Logitech has taken up this opportunity by employing the Chinese people for mass manufacturing of the products. Since there is presence of wide number of semi literate human resources in China logitech was capable of manufacturing the products that are required Semi skilled labour in an efficient way. In terms of Taiwan it can be stated that a lot of investment has been implemented by the government of Taiwan in creating the different industrial Park. The government is giving land in the associated industrial parks at a much nominal rate which creates the opportunity of other companies to acquire the local computer industry effectively. There is also presence of well qualified people that is present in Taiwan and the local computer Industry that is associated with liver is also expanding at a faster date. The main goal of Taiwan behind the implementation of these processes include becoming a major player in the component manufacturing of electronics (Brondino 2021). Logitech is utilizing the facilities developed that are present in Taiwan and is using it to their advantage. In terms of California it can be stated that the position of California is statistical in terms of its distance from the Silicon Valley. Having an office in the California provides the company with an opportunity to interact easily with other companies. It also provide Logistic with an optimum insight on the various emerging Technologies. The advantages that are associated with the location provides Logistic with an opportunity to build up a Centre for research and development in California. For example it can be stated that California houses a lot of large Corporation that makes perfect sense for conducting business and also implement the marketing operations in California by Logitech. Switzerland is known as a Precision industry and the optimum amount of talent is available in Switzerland for the development of new software associated with the mice of the company. With the presence of optimum talent in the market and the presence of technological advancement Logitech is capable of bringing about innovation in the different components that are associated with the company. Logitech is utilizing Switzerland as the core area for the development of the primary software that are associated with the company (Gray 2019). In terms of Ireland it can be stated that the design firm that is present in Ireland is utilize by the company for the implementation of ergonomics design. Ireland provides Logitech with an opportunity to actively promote the discovery as well as exchange of the different knowledge that associated with the characteristics of the human beings that are quite applicable to the design of the various systems as well as devices that are presented by the company. 

 

The employees in Fremont and Switzerland and the employees at the Chinese factory have very different roles than each other in the company. The 4000 employees that are present in the Chinese factories are provided $75 per month and they build up the hardware of the company. The final product of the company is much more valuable then the price paid by the company which is one of the major driver of the revenue of the company. The workers in the Chinese factory are much more dispensable as well as replaceable then dose of the employees that work on the headquarters of the company as well as the research and development sectors (Adamchick and Perez 2020). In the study it clearly identified that lot of struggle has been implemented by Logitech in order to gain an optimum competitive advantage in the highly competitive industry of Electronics. Moving the manufacturing of the products to Asia was highly beneficial for the company in terms of decreasing the overall cost that is associated with it but most of the success of the company can be associated with the research and development area of the company that resulted in innovation of Technology. The research and development sector of Logitech always received most of the proportion of the profit margin of the company which ultimately lead to the success of the company. Superior design of the product as well as the optimum quality of the products helped the company in getting contract from both apple and IBM. Another point of view that can be identified in this context includes for example it can be identified that for each of the mouse that is been sold by Logitech $8 is made by it. It can be assumed that three dollar of this total amount is spent on research and development as well as software programming of the company. The total earnings for each employee in writing the code of the software will be around .45 cents. The value added to each employee in the China will be around .075 cents. Following this assumption and example it can be identified that the research and development is much more value added service for Logitech as compared to the manufacturing plant that is present in China.

 

Free trade is highly beneficial for companies in terms of providing them with a competitive advantage in the international market (Adamchick and Perez 2020). For example Logistic was capable of taking the advantage of the free trade in order to become a leading company in the international market by the help of taking advantage of the lower-cost manpower that is present in China. Without the availability of free trade it would not have been possible for Logitech to manufacture its mice in China rather with the lack of free trade the company would have been forced to manufacture the mice in the United States at a much higher cost as compared to that of China. Since the company was capable of utilizing free trade to move the production process to Asia at a much lower cost it was capable of saving up the money and utilized in the research and development segment in order to drive the technological innovation in order to become a much more powerful international Company. Free trade is one of the key drivers behind the overall success that has been achieved by Logitech over the years (Bhagwati 2021). 

 

There are four parts to the model of Porter’s diamond that include factors of endowment that is capable of positioning the nation in accordance to the factors associated with production that includes presence of skilled labour and the existing infrastructure that are required for computing in a certain industry, presence of demanding conditions in which the nature of the home demand for the identified products and services of the industry is taken into account, relating the associated supporting industries that are capable of defining the presence as well as absence of the related Industries that are highly competitive in the international market and the strategy of the farm that includes the overall structure and the rivalry along with the different conditions that has been presented by the governing body (Lin, Wang and Sheng 2020). The factor of the endowment in Taiwan is mainly due to the science based industrial Park that is present in Hsinchu. The demand conditions that are associated in this context is to identify that the taiwanese are already properly trained for dealing with the different aspects of Technology. The relative as well as supporting industries that are present in Taiwan are considered to be an optimum body in building up Technologies at a much lower cost. The strategy of the form along with its structure also optimized each other. It must also be identified that there was presence of any domestic rivalry in the market of Taiwan that provided the company with the lowest cost to operate its operations. The main reason behind the decision of the company to conduct its manufacturing process in Taiwan is mainly due to the supply base that is provided by Taiwan for all the associated parts of the products of Logitech, qualified people that are capable of dealing with technological advancements and the Rapid expansion of the computer industry in the local market. The expansion of the local computer industry presented high demand and exclusive condition for the company to put upon pressure in terms of innovating and improving the existing products and services of the company (Lin, Wang and Sheng 2020). These factors combined provided Logitech with a high competitive advantage in the market of Taiwan making it one of the most attractive manufacturing plants for a company. 

 

China is the currently most favourite location in terms of high Technology manufacturing activities since the manufacture of Technology requires use quantities of manual labour. In the present time it can be identified that one of the largest populations in the entire world is that of China. The presence of a huge population provides the company with an opportunity to have access to a wide range of labour in the country. The added bonus in this contest is that the labour is quite cheap in nature which helps companies to operate their operations at a lower price. The increased involvement of China is going to help the country in terms of economic growth as well as prosperity in money. The involvement of China is also going to be highly beneficial for the table of economy by making the products that are much more affordable to the associated common public. The problems that are associated with the moving work to China include a decrease in the employment in different developed countries (Wang and Chanda 2018). Since it can be identified that manual labour is quite cheap in China and there is presence of minimum wage that is present in America many corporations will look forward to improve their operations and manufacturing plants to China which will create a drop in the existing employment rate (Cao et al. 2020). If all the companies will move their operations of the manufacturing plant from their home country to that of China then it is generally going to improve the overall cost of the labour that is correctly associated with the country and it is also going to increase the existing employment rate that is associated with the native country of the company. There is presence of high human resources that includes natural elements in China and there is also presence of optimum infrastructure in terms of transportation, communication and ports. Special zones have been implemented by the company for the promotion of export that insurance optimum demand for all the goods that are associated with a company. There is presence of an optimum workforce that is highly skilled in technical aspects. All the above identified factors are capable of making China the most favoured location in the present time. In terms of political mileage trait can be utilize by the company as a lever for it (Lovely and Huang 2018). With the increase in the number of investment beautiful and advantages associated with the economics of scale is going to be reaped by china. Better living conditions can be provided to the people of China and planned investments and also be initiated by the country.

 

Adamchick, J. and Perez, A.M., 2020. Choosing awareness over fear: Risk analysis and free trade support global food security. Global Food Security, 26, p.100445. 

 

 

Bhagwati, J.N., 2021. Free trade today. In Free Trade Today. Princeton University Press. 

 

 

Brondino, G., 2021. Fragmentation of Production, Comparative Advantage, and the Heckscher-Ohlin Theory. Review of Political Economy, pp.1-20. 

 

 

Cao, D., Tao, H., Wang, Y., Tarhini, A. and Xia, S., 2020. Acceptance of automation manufacturing technology in China: an examination of perceived norm and organizational efficacy. Production Planning & Control, 31(8), pp.660-672. 

 

 

Gray, H.P., 2019. Services and comparative advantage theory. In Services in world economic growth (pp. 85-103). Routledge. 

 

 

Lin, T.C., Wang, K.J. and Sheng, M.L., 2020. To assess smart manufacturing readiness by maturity model: A case study on Taiwan enterprises. International Journal of Computer Integrated Manufacturing, 33(1), pp.102-115. 

 

 

Lovely, M.E. and Huang, Z., 2018. Foreign direct investment in China's high‐technology manufacturing industries. China & World Economy, 26(5), pp.104-126. 

 

 

Wang, T. and Chanda, A., 2018. Manufacturing growth and local employment multipliers in China. Journal of Comparative Economics, 46(2), pp.515-543. 

 

 

Xie, S., 2019. Why comparative advantage is a problematic guide to practical policy. Economic Affairs, 39(2), pp.243-250.