The Little Black Book of Strategic Planning for Distributors

by Brent R. Grover

Strategic Shift: Logitech’s Move Toward Mobility

Electronics manufacturer Logitech announced plans to overhaul its strategic plan after announcing an operating loss of $180 million and a year-over-year sales decline of 14 percent for its fiscal third quarter.

“These results are unacceptable, and we are taking decisive action as an outcome of my strategic review,” said Bracken P. Darrell, Logitech president and CEO. Darrell, who assumed his current role January 1, says he wants Logitech to leverage the powerful growth of tablets and smartphones by developing more mobility-related products.

“Our goal with PC-platform products is to maximize profitability, while investing selectively in growing categories,” Darrel says. “We have also identified a number of product categories that no longer fit with our current strategic direction.” Logitech plans to divest its remote controls and digital video security categories and discontinue its speaker docks and console gaming peripherals by the end of the year, Darrel says.

Logitech’s decision to sacrifice less profitable product lines in favor of those with greater potential demonstrates a willingness to make radical strategic changes that some companies lack. Author Brent Grover says in The Little Black Book of Strategic Planning for Distributors that many companies continue to invest in their largest revenue segments without regard to growth potential or profitability. Brent says distributors must always prioritize some segments above others, since time and resources aren’t unlimited.

“The strong temptation of distributors to target everything must be resisted,” he says. This means making difficult decisions about which product categories to grow, maintain (invest enough to maintain market share), harvest (keep without investing additional dollars), or discontinue.

The decision, like Logitech’s, to move into a totally new line is especially difficult because of the necessary long-term commitment of time and capital. Brent says it can also be a “zero sum game” trying to sell a new line through the existing sales force, since new products will take sales time and energy away from established ones.

While the decision to add or subtract product lines can be a difficult one, Brent says the underlying determination is simple: “The new products must be more profitable, and have more growth potential, than those they will displace.”

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