Logitech: Finding Success through Innovation and Acquisition

Logitech, headquartered in Romanel-Sur-Morges, Switzerland, was the worlds leading provider of computer peripherals in 2010. Personal computer peripherals were input and interface devices used for navigation, internet communications, digital music, home entertainment control, gaming, and wireless devices. Between 1998 and 2006, Logitech made many significant acquisitions to expand its product portfolio. It acquired companies such as Connectix for its line of webcams, Labtec for its audio business presence, Intrigue Technologies for its Harmony remote controls, and Slim Devices for its music systems. These acquisitions were accomplished strategically to help Logitech position itself in all aspects of the personal peripherals world. Logitech also continued to innovate and grow its core business: cordless mice and keyboards. Logitech then expanded its Bluetooth technology to many other products in the digital world, including cordless gaming controllers and a personal digital pen.

Competitors As a specialized company, Logitech is exclusively in the industry of personal peripherals, which it sells to retailers and major computer manufacturers. The demand of such an industry often depends strongly on the economic stability and income of its consumers and the profitability of its business customers. This is because technology products like the ones offered by Logitech are often expensive. Individuals and companies are reluctant to buy them unless they have the income to do so. Logitech has three major competitors: Creative Technology Ltd., Microsoft Corporation, and Royal Philips Electronics N.V.

Creative Technology Ltd. is one of the worldwide leaders in digital entertainment products for the personal computer (PC) and the Internet. The Creative Technology product line includes MP3 players, portable media centres, multimedia speakers and headphones, digital and web cameras, graphics solutions, revolutionary music keyboards, and PC peripherals. Creative had a net profit margin of 29.58% in FY 2009 and 32.82% in the first quarter of 2010.

Microsoft Corporation provides software/hardware products and solutions worldwide. Microsoft has since expanded into mice, keyboards, video consoles, customer relationship management applications, server and storage software, and digital music players. In FY 2009, Microsoft Corporation had annual sales of $58.4 billion and a net income of $14.5 billion.

Royal Philips Electronics is a Netherlands-based company that focuses on improving peoples lives through innovation. Philips is a well-diversified company with products such as consumer electronics, televisions, VCRs, DVD players, fax machines, light bulbs, electric shavers and other personal care appliances, medical systems, and silicon systems solutions. With this diversified portfolio of products, Royal Philips had FY 2009 revenues of $30.76 billion and a gross profit of $11.59 billion (Yahoo! Inc., 2010).

Logitech is the only company of this group exclusively focused on personal peripheral products. In contrast, all of its competitors have products and resources invested in a wide variety of other industries.

Trends Logitech implemented a strategy of innovation mixed with strategic acquisitions to enhance its products with the technologies and software of other companies to create the most advanced, innovative, and collaborative experience for theircustomers. As Logitech has always been at the forefront of mouse and keyboard technology, it has also been a leader in video conferencing technology since the early stages of its mountable computer camera development. Instead of following market trends, Logitech has often created them. From 1998 to 2004, Logitech made many important strategic acquisitions to enhance future portfolios and expand the depth of its peripheral product lines. Its first acquisition was the video camera division, QuickCam PC, of Connectix Corporation and the second successful acquisition was the 2001 purchase of Labtec, Inc., an audio peripheral maker. Logitech used these two acquisitions to expand its multi-business unit corporation into a diverse and specialized company appealing to many technology users. Finally, with its acquisition of Paradial AS, Logitech combined its peripheral products with the software, video effects, and security features. This allowed Logitech to deliver a complete and intuitive HD video conferencing experience for companies of any size.

Operations Logitech made two primary operations decisions that allowed it to increase its competitiveness significantly. First, Logitech consolidated manufacturing, which was once widely dispersed throughout China. This helped the company maintain lower prices on its products, increasing its competitiveness. In addition to its China manufacturing facilities, Logitech established a second centre for R&D in Cork, Ireland a prime location for innovation in the technology and IT sectors. Second, Logitech also knew the industry was changing rapidly and that it would no longer be able to compete simply by manufacturing computer mice. Logitech thus made a strategic operational decision to expand its product line beyond the mouse and introduced a variety of products, including a handheld scanner, Fotoman (a digital camera), Audioman (a speaker/microphone), and Wingman (the first gaming peripheral). The Changing Landscape Ahead In 2010, Logitech faced a significant challenge: How 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, cameras 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. As a consequence, Logitech could someday see its peripherals market disintegrate completely. Logitech must decide whether to invest more in video conferencing and television all-in-one remote controls and/or focus on developing partnerships with computer and telecom manufacturers and mobile carriers such as ATT, Verizon, T Mobile, and Sprint. Once again, the computer industry is changing, and Logitech will have to formulate new diversification strategies to ensure its long-term survival.

Question 2: Justify TWO (2) strategy recommendations that may be appropriate for Logitech to prepare the company for impending technological and environmental transformations that could threaten the companys future.