Global Manufacturing Enterprise Business Development

Part 1. Case Study Competitive Review

Enhance your academic journey with New Assignment Help's specialized assignment writing services in the UK.

a) Income statement and performance analysis of Logitech

i) Income statement of Logitech

Income statement of Logitech

	2022	2021
“Sales/Revenue	5,035	4,849
Sales Growth	3.83%	65.15%
Cost of Goods Sold (COGS) incl. D&A	3,060	2,710
COGS excluding D&A	2,951	2,634
Depreciation & Amortization Expense	109	76
Depreciation	81	47
Amortization of Intangibles	28	29
COGS Growth	12.91%	46.90%
Gross Income	1,975	2,139
Gross Income Growth	-7.68%	95.99%

Gross Profit Margin	39.23%	-
SG&A Expense	1,266	1,074
Research & Development	187	209
Other SG&A	1,079	865
SGA Growth	17.90%	35.18%
EBIT	709	1,066
Unusual Expense	6	6

Non Operating Income/Expense	8	-2

Non-Operating Interest Income	1	2
Pretax Income	713	1,060
Pretax Income Growth	-32.77%	231.24%

Pretax Margin	14.15%	-
Income Tax	121	185

Income Tax - Current Domestic	55	112
Income Tax - Current Foreign	41	42
Income Tax - Deferred Domestic	27	29

Income Tax - Deferred Foreign	-2	3

Consolidated Net Income	592	875
Net Income	592	875
Net Income Growth	-32.30%	97.09%

Net Margin	11.76%	-
Net Income After Extraordinaries	592	875
Net Income Available to Common	592	875
EPS (Basic)	3.47	5.19
EPS (Basic) Growth	-33.05%	95.12%

Basic Shares Outstanding	167	169
EPS (Diluted)	3.47	5.09
EPS (Diluted) Growth	-31.76%	94.34%

Diluted Shares Outstanding	170	172
EBITDA	818	1,142
EBITDA Growth	-28.35%	208.54%

EBITDA Margin	16.25%	-
EBIT	709	1,066”

Logitech’s operating profitability is measured by its “gross profit margin, SG&A expense, and EBIT”. These three metrics are used to evaluate Logitech’s operating performance in key markets and gauge its ability to generate profits from its core operations.

Logitech’s “gross profit margin” 39.23% in 2022 indicating that the company achieved higher gross profits. This increase can be attributed to the company’s strategies to increase its prices and reduce the costs of its products. Furthermore, Logitech’s “SG&A expenses” decreased in the same period, from 1,266 in 2022 to 1,279 in 2021. This increase can be attributed to the company’s aggressive marketing strategies, which led to an increase in sales in key markets (Brooks and Oikonomou, 2018). Finally, Logitech’s EBIT decreased from 709 in 2022 to 1,066 in 2021. This increase can be attributed to the company’s efforts to increase its efficiency and reduce its costs by making use of automation and other technological advances. Logitech’s operating performance in key markets is also affected by external factors such as the global economic conditions, competition from other technology companies, and changes in consumer pReferences. For example, the company’s sales in key markets may be negatively affected by the global economic recession or inflation that reduces consumer spending power. Moreover, Logitech’s sales in key markets may be adversely affected by the emergence of new competitors that offer better products at lower prices. Furthermore, the company’s sales in key markets may be affected by the changes in consumer preferences, such as the shift from wired to wireless technology. Overall, Logitech’s operating performance in key markets is affected by both internal and external factors. The company’s strategies to increase its prices and reduce its costs, as well as its aggressive marketing strategies, have enabled it to achieve higher gross profits and sales in key markets (Cockcroft and Russell, 2018). However, its performance is also affected by external factors such as the global economic conditions, competition, and changes in consumer preferences. As such, Logitech needs to continuously monitor these factors in order to remain competitive and profitable in key markets.

Enhance your academic journey with New Assignment Help's specialized services in the UK.

ii) Profit margin ratio analysation of Logitech

Ratio calculation

“Gross Profit margin ratio
GPM	(Revenue - COGS) / Revenue
2022	(5035 - 3060)/5035	0.39225
2021	(4849- 2710)/4849	0.44112”

Net profit margin ratio
“NPM	(Net income/sales) *100
2022	(592/5035)*100	11.7577
2021	(875/4849)*100	18.045”

“Operating profit margin ratio
	EBIT / Sales
2022	709/5035	0.14081
2021	1066/4849	0.21984”

Logitech has had quite a competitive performance in the last two years, based on the “gross profit margin (GPM) and net profit margin (NPM) ratios”.

In 2022, their GPM was 0.39225422 and their NPM was 11.75769613. This indicates that Logitech was able to maintain a high “gross profit margin”, despite the fact that the “net profit margin” was lower than the previous year. In 2021, their GPM was 0.441121881 and their NPM was 18.04495772, indicating that they had a higher “net profit margin”.

Logitech's “operating profit margin (OPM)” also shows their competitive performance over the last two years. In 2022, their OPM was 0.1408143 and in 2021, it was 0.219839142. This suggests that Logitech was able to maintain a higher “operating profit margin” in 2021, compared to the previous year (Costa et al. 2022).

Overall, Logitech has performed well in the last two years. Their “ability to maintain a high gross profit margin” despite the lower “net profit margin” is an effect on their competitive performance. They have also managed to keep their “operating profit margin” above their competitors, suggesting that they have been successful in managing their costs. Logitech has been able to remain competitive in the market, and this has resulted in their financial success.

iii) Recent financials and business situation of Logitech

The financials of Logitech show that they have had consistent growth in the past two years. In 2022, their “sales/revenue” increased by 3.83% from the previous year, while their “cost of goods sold (COGS)” increased by 12.91%. This indicates that their sales are increasing at a faster rate than their costs, resulting in higher gross income. The “gross profit margin” of 39.23% indicates that Logitech is making a profit on their sales. Meanwhile, their “SG&A expense” increased by 17.90%, indicating that they are investing more in their “operations and marketing efforts”. The EBIT of 709 million in 2022 was lower than the 1,066 million in 2021, but this is primarily due to the increase in “SG&A expenses”. The “non-operating interest income” of 1 million in 2022 was also lower than the 2 million in 2021 (Elgazzar et al. 2019). However, “the pretax income” of 713 million in 2022 was still higher than the 1,060 million in 2021. Logitech's net income was 592 million in 2022, which was lower than the 875 million in 2021. This was due to “the higher pretax income, but the higher SG&A expenses” resulted in lower net income margins. Overall, Logitech's financials in the past two years have been strong. They have seen consistent growth in “sales and profits”, and their operations and marketing efforts have been paying off. They have been able to maintain a healthy “gross profit margin” and have been able to increase their pretax income.b) Business opportunity to develop the next generation of ‘Smart Home’ systems

Logitech is a leading provider of “consumer electronic products” and has a diverse product portfolio that includes “computer mouse, keyboards, webcams, gaming headsets, and other accessories”. Their products are used by both consumers and businesses, making them a leader in the tech industry. The emergence of the ‘Smart Home’ market presents a significant growth opportunity for Logitech. The “Smart Home” market is estimated to be worth “$48.8 billion by 2025” and is expected to experience a “Compounded Annual Growth Rate of 10.4%”. This presents Logitech with a chance to capitalize on a growing industry and develop products that will be used in the home automation space.

To capitalize on this opportunity, Logitech should focus on optimizing their business operations to increase profitability and margins (Güleç and Bekta?, 2019). Logitech’s “gross profit margin, operating profit margin, and net profit margin” all decreased from 2021 to 2022. In order to improve their margins and profitability, Logitech should focus on reducing their costs, increasing their pricing, and improving their product mix. This will help them to increase their margins, which will in turn allow them to invest more in product development and marketing.
Logitech should also invest in “research and development” to create innovative products that will be used in the home automation space. This will help them to develop products that are tailored to the needs of customers and that are competitively priced.
Additionally, Logitech should focus on building strong relationships with their suppliers and partners in order to ensure that they are receiving the best quality components and materials at the most competitive prices.
Finally, Logitech should focus on strengthening their brand and marketing efforts in order to ensure that their products are well-known and that they are targeting the right customers. This will help them to drive sales of their products and ensure that they are able to capitalize on the growth of the Smart Home market.

Overall, the emergence of the Smart Home market presents a significant growth opportunity for Logitech. To capitalize on this opportunity, Logitech should focus on optimizing their business operations, investing in “research and development”, building strong relationships with their suppliers, and strengthening their brand and marketing efforts (Hashemkhani Zolfani et al. 2018). By doing so, Logitech will be able to capitalize on the growth of the Smart Home market and increase their profitability.

Part 2. Investment and Project Appraisal

a) NPV valuation

i) Net Present Value (NPV) Calculation:

Year 0: Initial Investment = -£5.4 Million

Year 1: Sales Revenue = 5 x 1507000 = £7,535,000

Profit Margin = 25%

Profit = 7,535,000 x 0.25 = £1,883,750

Year 2: Sales Revenue = 5 x 1507000 = £7,535,000

Profit Margin = 25%

Profit = 7,535,000 x 0.25 = £1,883,750

Year 3: Sales Revenue = 5 x 1507000 = £7,535,000

Profit Margin = 25%

Profit = 7,535,000 x 0.25 = £1,883,750

Year 4: Sales Revenue = 5 x 1507000 = £7,535,000

Profit Margin = 25%

Profit = 7,535,000 x 0.25 = £1,883,750

Year 5: Sales Revenue = 5 x 1507000 = £7,535,000

Profit Margin = 25%

Profit = 7,535,000 x 0.25 = £1,883,750

Net Present Value (NPV) = -£5.4M + £1,883,750 x (1/(1.1) + (1/(1.1)^2) + (1/(1.1)^3) + (1/(1.1)^4) + (1/(1.1)^5))

NPV = -£5.4M + £1,883,750 x (3.79)

NPV = £1739412

The NPV of this project is £1739412 which means that if the firm invests £5.4M in this project, then the firm will make a profit of £1739412 over the 5 years.

ii) Sensitivity Analysis

Sales Erosion of 10%:

Year 0: Initial Investment = -£5.4 Million

Year 1: Sales Revenue = 5 x (1507000 x 0.9) = £6,781,500

Profit Margin = 25%