Topics: International trade, Economics, World Trade Organization Pages: 3 (965 words) Published: May 25, 2011

1.In a world without trade, what would happen to the costs that American consumers would have to pay for Logitech’s Products?

World trade refers to buying and selling across national borders. It would be difficult to predict or estimate the prices of the product of one company like Logitech in one market like America.

2.Explain how trade lowers the costs of making computer peripherals such as mice and keyboards.

1. Components are procured from any part of the world where they can be produced and manufactured at the best cost. (Motorola plant in Malaysia makes the mouse's chip; Agilent Technologies supplies optical sensors). 2. The intellectual capital going into any product is created at the place where the right talent is available. (Ergonomics design is done in Ireland, software programming is done in Switzerland and Fremont). 3. The actual assembling/manufacturing is done at the place where is can be done most cost effectively. (Assembling is done in Taiwan and China). 4. The products reach the customers the most efficient way by taking the service s of the most efficient logistics company. (Marketing and operations from Fremont).

3.Use the theory of comparative advantage to explain the way in which Logitech has configured its global operation. 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?

Comparative advantage, as proposed by Ricardo, says that it is beneficial for nations to involve in trade even when there is absolute advantage for them to produce all the goods. So nations will invest a major portion of their resources to produce what they can produce with advantage. This theory is being applied to the case in the following way 4.Who creates more value for Logitech – the 650 people it employs in California and Switzerland, or the 4,000 employees at its Chinese factory? What are the...
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