Businessmodel of Logitech

Customer Segments

Logitech has a mass market business model, with no significant differentiation between customer segments. The company markets its products to anyone needing computer peripherals.

Value Proposition

Logitech offers three primary value propositions: innovation, cost reduction, and brand/status.

The company has demonstrated a strong ability to develop innovative products. This is evidenced by the fact that it has achieved more than 100 industry “firsts” and maintains a portfolio of more than 750 patents. Also, in 2015 four of its products were chosen as Innovation Award honorees at the annual, prestigious Consumer Electronics Show (CES).

The company offers significant cost reduction to one of its key customer groups, academic institutions. Specifically, it maintains “Logitech Academy”, a program through which it grants discounts to university students and staff in the U.S. Recipients can save up to 20% on purchases.

The company has created a strong brand because of its success. This is evidenced by the fact that it has won numerous awards and honors. Forms of recognition include numerous International Design Awards, iF Product Design Awards, Red Dot Awards, and American Technology Awards.

Channels

Logitech’s main channel is its direct sales team, members of whom sell its products to a network of retailers and distributors. Distributors resell the items to retailers, systems integrators, and value-added resellers. Retailers include mass merchandisers, telecommunications and computer stores, and specialty electronics stores.

Specific distributors include Tech Data Corporation, Synnex Corporation, Ingram Micro, D&H Distributing, Beijing Digital China Limited, and Daiwabo. Specific retailers include Wal-Mart, Office Depot, Best Buy, Staples, Target, Metro Group, Carrefour Group, Dixons, Kesa Electricals, and Australia’s Dick Smith Electronics Limited. Logitech also sells its products through online retailers such as Buy.com, Insight Enterprises, Amazon.com, and TigerDirect.com.

Beyond the direct sales channel, Logitech also promotes its products through its website, social media pages, advertising, and attendance at trade shows.

Customer Relationships

Logitech’s customer relationship is primarily of a self-service nature. Customers utilize its products while having limited interaction with employees. The company’s website features numerous resources designed to address any consumer concerns, including product manuals, articles, white papers, answers to frequently asked questions, and access to a newsletter with news and product tips/tricks. That said, there is also a community component in the form of forums where peers can answer questions, and a personal assistance element in the form of phone, e-mail, and chat support.

Key Activities

Logitech’s business model entails designing, developing, and manufacturing its products. The company maintains a hybrid model that involves both in-house manufacturing and third-party contract manufacturing. This arrangement enables it to leverage economies of scale and respond effectively to quickly changing demand. Half of its peripherals are produced at facilities located in Suzhou, China, while the remaining products are made at other locations in Asia.

Key Partners

Logitech operates the Logitech Partner Program through which it teams with manufacturers, resellers, and authorized distributors to sell its products to other parties. Benefits of the program include quarterly rebates, exclusive purchase discounts, and marketing tools and resources. Members also receive early notification of pending new products.

Key Resources

Logitech’s main resource is its engineering team, which seeks out new innovations for it to develop and bring to market. Other key resources include the company’s marketing team, which promotes its brand, and its direct sales team, which acquires new customers.

Cost Structure

Logitech has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of goods sold, a variable cost. Other major drivers are in the areas of sales/marketing, administration, and research and development, all fixed costs.

Revenue Streams

Logitech has one revenue stream, the earnings it generates from the sale of its products. The company indicates that a majority of revenues are obtained through the sale of items in the peripheral category to consumers (as opposed to businesses or other institutions).