Question:
1) Rank the importance of Galanz’s operations objective of cost, quality, flexibility,
delivery, service and innovations. How has the importance changed over years?
2) What are Galanz’s competitive and operations strategy and how does the
operations strategy support its competitive strategy?
3) Should Galanz develop its OBM business in International Market? Should Galanz
continue its OEM and ODM business?
4) What should Mr. Liang do to lead his company to greater success? Should it
change its overall cost leadership strategy? How should the company change the
priorities and utilize resources and capabilities to gain competitive advantage in
market place?
Case Overview
Galanz Enterprise Group Co. Ltd (Galanz) is a Chinese company found in 1978 by Liang
Quingde, headquarter located in Shunde Guandong which was initially started with few
number of workers producing feather product and rely on foreign exchange in exporting its
product. The company has been turned into a world-class manufacturer of microwave oven
and produces about 50 percent of world production in 2003. This case describes the
competitive and operational strategies, Galanz, used to achieve such rapid growth. The
company began with a clear competitive strategy based on cost leadership. They developed
and implemented a system of operations, to help to reduce costs through economies of
scale, the transmission capacity of the developed countries and make full use of available
capacities. The Several factors including high competition and market changes, restriction
of trading tariffs, institutional environmental changes as well as natural disaster influenced
the firm to shift its activity to electrical market.
There were also other factors that played a major role in making Liang shift to microwave
ovens production. First, although there were foreign competitors in the market, they do not
know much about the environmental changes in Chinese market. Second, microwave price
was high and unaffordable for the Chinese consumers. Third, rapid economic development
in China opened up potential growth opportunities in this segment. Forth, changes in
Chinese lifestyle and rising affordability. Fifth, ease of manufacturing microwave oven
that as it was invented in the 50s. When Liang Senior became major shareholder of
Galanz, he entered the microwave market successfully because he knew the Chinese
market better than the competitors, so he took the initiative and started producing Galanz
microwave by buying the blueprint of the microwave from Toshiba for USD 300,000 and
finding group of engineers from Shanghai which helped him to start Galanz microwave
manufacturer.
Galanz rapidly grew through its strategies and tactics starting from the stage of original
equipment manufacturing (OEM) to original design manufacturing (ODM) and
subsequently ventured into original brand manufacturing (OBM). Galanz utilized the
resources well thus it gained the advantage to compete with lower price. Innovation and
R&D played a major role in second and third stages of the company’s growth and
expansion.
Question no.1:
Rank the importance of Galanz’s operations objective of cost, quality, flexibility,
delivery, service and innovations. How has the importance changed over years?
Galanz used their various operations objective to seize opportunity and grow
exponentially. In the early years, the common operations objectives for most of the
companies including Galanz would be cost leadership i.e. this operations objective was
the main factor that made Galanz the market leader and wipe-out their competitors during
the early years. This strategy was fruitful because they continued to enjoy the increasing
market share in the Chinese domestic market and overseas over the time period.
Galanz expanded their business with flexible strategy i.e through various Original
Equipment Manufacturing (OEM) agreements with customers and suppliers, Original
Brand Manufacturing (OBM) and Original Design Manufacturing (ODM). Product and
process reliability are critical as delivery and proper forecasting was important because of
their massive expansions of customer base at various locations including overseas market
and to fulfill OEM obligations and quality became increasingly important when Galanz
venture and penetrate the overseas market.
Due the shortages of the main component of the microwave oven i.e. magnetron, Galanz
transform to ODM as well. The supply crisis has made them to develop their own
magnetron and venture actively into Research & Development (R&D). After seeing much
success in their R&D, Galanz decided to enhance their R&D capabilities and product
innovation to remain competitive. Their product innovation was not only restricted to
microwave functionality but venturing into other products as well.
Following describes how the operations objectives importance changed over the years
for Galanz:
Stage 1&2: During the 90s – The Start-up & Early Success
The main objective of Galanz when he started the microwave oven business was to deliver
a low cost microwave which can be afforded by most of the Chinese households.Galanz
did not have the competitive edge in production technology because they did not have the
microwave oven technology but only over supply of cheap labor and land.
From 1996, Galanz adopted a low price strategy by repeatedly implementing series of
price cutting strategies. The objective was to obtain and sustain cost leadership strategy to
be the market leader, increase market share and remove competition.
To further achieve low cost production, Galanz has signed OEM contract and free
production line transfer and was also able to use the excess production facility to run their
oven microwave oven production line.
Second important element of operational objective during this period is to ensure timely
delivery. In 1997, Galanz occupied 47.6% of the domestic market with sales reaching 1.25
million units, which were five times sales in 1996. By the end of 2002, its domestic sales
