The world economy



The world economy has been changed in fundamental shift from national economies which were more self-contained and isolated to more integrated and interdependent (Hill, 2007). This phenomenon result in a popular issue raised- Globalization. Usually, it contains several facets, but in this report we try to only focus on the change of globalization of production, discussing related issues of shifting R&D and manufacturing parts within production chain. The reason is in this globalization trend, more and more electrical product or IT corporations set up R&D and manufacturing in certain countries such as Taiwan, which were low-cost but providing high quality. Logitech is the one of famous and typical example in this trend.

This report will discuss the related issues of managing global R&D and manufacturing operations and the reasons why Taiwan became attractive within this globalization trend through the case of Logitech.

Effect from globalization

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In this section, I will try to discuss the impacts from globalization to corporate management and some topic about how to manage global R&D and manufacturing divisions. In this part, the theories and research results are the major contents.

The change of management from globalization

Globalization result in rapid and huge change in global business environment and market, therefore corporate need to adjust corporate structure and strategies. Not only plan a broad scheme, but also need to provide the specific details of coordinating worldwide in supply chain such as marketing, sourcing, R&D, manufacturing and logistic (Jones, 2002; Ng and Li, 2003).

Operational shifts are unavoidable within the changes. According to Anthony and Steve, four main shifts are required including decreasing the cost structure, increasing innovation, leveraging information assets, and becoming more agile (2007).

Managing global R&D and manufacturing divisions

Two major strategies corporation will adopt in global R&D and manufacturing are dispersed co-operation and continuous centralization (Anders and Jon, 2008). Centralization is more traditionally operated strategy in multinational companies, but was be challenge by dispersed co-operation in lock of knowledge sources and adopting local demands issues (Doz and Hamel, 1998). Therefore, an increasing number of dispersed strategy adopted in last two decades. However, dispersed team also be observed that lower performance due to communicate and collaborate issues (McDonough et al. , 2001). To solve this difficult predicament, Tidd et al. suggested that the R&D or manufacturing activities should be located in establish divisions supporting the existing business, in local laboratory supporting the new business and in close location to foreign production supporting foreign market (2001).

In practical implementation of management, the research from Surajit et al. , listing several approaches: Achieving Strategic Alignment, Resolving People Issues, Manage hiring and retention, Build accountability and trust, Improve communications, Appreciate cultural differences, Establish governance rules, and Measure and manage performance rigorously (2009). More detail of these approaches will be explained in final report.

Location of global R&D and manufacturing divisions

Porter's Diamond theory explains that national competitive advantage can be attributed in following factors - Factor endowment, Demand condition, Firm Strategy, and Related and Supporting Industries plus two additional variables (1990). This theory can help us to analyze what location will be more attractive when global corporation want to set up its global R&D and manufacturing divisions. And this theory will be discussed in the case of Logitech.

Case Study

In this section, I will try to analyze the case of Logitech in three main issues for understanding the real globalization of a company. First and second issues are the change of corporate structure and how Logitech perform its global management. And next last is why Logitech chose Taiwan to set up R&D and manufacturing center in mid-1980.


Logitech, one of the world's famous of global computer accessories and peripherals producers. In 2009, Logitech's Mice estimate counts 40.1% of the worldwide retail value share, and 49.4% in webcams market (Logitech annual report, 2009). The company was started at 1981 in Apples, Switzerland. It has focused of innovation to create its high brand recognition and high margin of products. Logitech started to become globalization in late 1980s. In 1986, Logitech Far East LTD was created in Hsinchu, Taiwan to be a manufacturing center and it becomes Logitech's worldwide operations center today. And in 1989, the headquarters had moved from Switzerland to USA (North California - Silicon Valley) due to more supporting companies and was closer to major market (Logitech 25th Timeline, 2006).

Corporate structure

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Facing lager and complex corporate structure, Logitech adjusted organizational change in 1990. “Office of the President” was to be created to formalize the lead position and report relationship at Group level. It direct dominated all worldwide functions of the geographical areas. In the other hand, Logitech adopted the policy of local management taking the responsibility of profit or loss (Jolly et al. , 1992). It can help in maintaining performance in each division.

Global management

Link inside corporation will be an important issue in global corporation. This section will describe what methods Logitech adopted, including the electronic mail system, overall direction at two levels, cross-functional and inter-site team, and operational strategy (Jolly et al. , 1992).

Manufacturing in Taiwan

There are three factors related to Porter's Diamond theory resulting in Taiwan to be Logitech's R&D and manufacturing center. Each factors will be discussed more detail in final assignment.

   Factor endowment
In this issue, three key points will be discussed:
Manufacturing ability - analyze the value of Taiwan IT output compare
to others.
Infrastructure - describe what attractive infrastructure in Taiwan.
Human resource - analyze the higher education resource compare to others.

   Related and Supporting Industries
How Taiwan's IT industry supply chain creates the competitive advantage will
be described in this section.

   Government Policy
Development and education policy in Taiwan will be discussed separately in this

Development - Grants, Low-interest loans and Subsidies

Education - Technical education and Public research institutions