OM Group Assignment Galanz

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Case: Operations strategy

Operation Management: Assignment I

"Operations Strategy Galanz"

Course Facilitator

Submitted By Group V

OM Group Assignment Galanz

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Case: Operations strategy

Summary of Findings
It is undisputable that one of Galanz strength is the ability to produce goods with a substantially lower cost. What causes Galanz to outperform other Chinese manufacturers is its initial method of internationalization. The choice of employing OE method was pro!en to be a crucial success factor. "y using OE # Galanz went into the global mar$et ine%pensi!ely by a!oiding the costs associated with promoting its brand and establishing a distribution networ$. It also enabled the company to use the OE partners manufacturing e&uipment to produce its own branded products to be sold in the domestic mar$et. These ad!antages are the $ey reason why Galanz was able to surpass other Chinese manufacturers. There are $ey summary of findings of case' Opportunity sizing (domestic) and stable technology Cost arbitrage (labor and assets) Transfer of production lines and *+ operating time ,doption of penetration pricing strategies le!eraging economies of scale ,ctualization of -./ in!estments Collaboration with large retailers# as 01 art and Wal1 art /e!elopment of o!erseas -./ facilities

Background Information:
Galanz is a Chinese company founded in 2345 by 6iang 7uingde# its head&uarters is located in 8hunde Guandong and initially started with few number of wor$ers producing feather product and rely on foreign e%change in e%porting its product. 8e!eral factors including high competition and mar$et changes# restriction of trading tariffs# institutional en!ironmental changes as well as natural disaster influenced the firm to shift its acti!ity to electrical mar$et. There were also other factors that played a ma9or role in ma$ing 6iang shift to microwa!e o!ens production. :irst# although there were foreign competitors in the mar$et# they do not $now much about the en!ironmental changes in Chinese mar$et. 8econd# microwa!e price was high and unaffordable for the Chinese consumers. Third# rapid economic de!elopment in China opened up potential growth opportunities in this segment. :orth# changes in Chinese lifestyle and rising affordability. :ifth# ease of manufacturing microwa!e o!en that as it was in!ented in the ;<s. When 6iang 9unior became ma9or shareholder of Galanz he entered the microwa!e mar$et successfully because he $new the Chinese mar$et better than the competitors# so he too$ the
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OM Group Assignment Galanz

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Case: Operations strategy

initiati!e and started producing Galanz microwa!e by buying the blueprint of the microwa!e from Toshiba for =8/ ><<#<<< and finding group of engineers from 8hanghai which helped him to start Galanz microwa!e manufacturer. Galanz rapidly grew through its strategies and tactics starting from the stage of original e&uipment manufacturing (OE ) to original design manufacturing (O/ ) and subse&uently !entured into original brand manufacturing (O" ). Galanz utilized the resources well thus it gained the ad!antage to compete with lower price. Inno!ation and research and de!elopment played a ma9or role in second and third stages of the companys e%pansion.

Problem Statement
a9or problem Galanzs faced to implement its low cost strategies are as following. 6ow brand awareness in o!erseas mar$ets ,ntitrust (,nti1monopoly) 6awsuits ?rioritization of business models Conflict of interest of O" and OE businesses (8ales . 8er!ice networ$s)

Centralized decision ma$ing body and compliance go!ernance Customization production capabilities and capacity challenges for magnetron production Inefficient production planning

Case Analysis
The company has its history dated bac$ to 234<s# where the company was founded in 2345 by 6iang @hao%ians father# 6iang 7ingde (6iang 8enior). 6iang 8enior has done a lot for bringing the company where we see it now. Ae was a !isionary# a businessman who has identified the potential for the company to be on top in national mar$et. Bot only that# he e!en en!isions the company to do best among the rest in foreign mar$ets as well. ,nd this family legacy has continued by 6iang @hao%ian (6iang Cunior).

OM Group Assignment Galanz

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Case: Operations strategy

If we loo$ at the success of the company# se!eral factors ha!e contributed apart from the strong decision1ma$ing and far1sighted nature of the company founders (both father and son). , successful strategy re&uires determining the firms critical success factors and core competencies. The main $ey success strategy for Galanz is its cost strategy. 6ow labor cost and low land cost are its core competencies that de!eloped a competiti!e ad!antage. The resource and capabilities should be allocated to strengthen its strengths and opportunities and at the same time address its wea$ness and threats. One of the wea$nesses of Galanz has been the unpopular product branding. ,n aggressi!e branding and ad!ertisement wor$ need to be carried out before Galanz could capture global mar$et. This will help Galanz to pursuit in international dimension. "ased on the case study# Galanz has used DEertical IntegrationF strategy in its supply chain management. This is where Galanz !ertically integrate its supplychain by manufacturing about 3<G of its components. "ut# due to capacity constraint# Galanz has outsourced part of the production of Galanzs designed and branded magnetrons to a Capanese manufacturer. In order to ensure continuity and willingness in supplies# Galanz can adopt 9oint !enture strategy with its suppliers so that it has a good relationship with the suppliers. Galanz should focus on the &uality of the product by continuously monitoring and controlling the outsourced !endor. Training and support must be pro!ided to the !endor to ensure the sufficient understanding about the product. Galanz should ensure that outsourcing does not increase the cost and affect its status as lot cost leader. Galanz can focus more on its operations and core competencies by introducing new products and ser!ices. In!esting in research and de!elopment for new inno!ations will be helpful. Galanz could increase its business by being introducing creati!ity in the mar$et. Galanz is speeding its step toward a global brand and a world class enterprise. 8ome of the factors to Galanz promising progress are' the political and social system then when 6iang senior started the business and his contacts with high go!ernment officials of his nearby pro!inces in china

OM Group Assignment Galanz

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Case: Operations strategy

the opportunity 6iang senior seen for electronic mar$et esp. microwa!e o!en mar$et in china the strategy 6iang senior adapted during the early startup when producing microwa!e has many obstacles and challenges regarding technology and technical e%pertise the reap of early success by the company and its founders because of the strategy they adapted of mass1production technology and cheap labor and land the decision of transfer of production line through OE ,greement where Galanz produced microwa!e o!ens for :illony# its :rench customer# opened the door for foreign e%posure of e&uipment manufacturing the cost1leadership strategy that the company has adapted since its inception to be domestic mar$et leader and dominate the microwa!e o!en mar$et the transformation from OE to O/ rate for the company to proper further is a stri$ing success that has triggered the success1

the de!elopment of own magnetron (core component) due to increasing demand for microwa!es in domestic and international customers enhanced -./ capability and production inno!ation along with the dri!e for self1 sufficiency centralized organization structure and hierarchy and e!er e%panding manufacturing system and efficient production planning added the credibility and per!asi!eness to the company wor$ing effecti!e mar$eting channels and customer relationship management

Detailed Recommendations and Conclusion

"ased on abo!e analysis below are some recommendations to o!ercome current challenges faced by Galanz and de!elop strategy to continue its future business growth. In!est on brand management to de!elop itself as an international brand. /e!elop strong ser!ice networ$s and distribution channel Continue ma9or in!estments in inno!ation in technology and production

OM Group Assignment Galanz

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Case: Operations strategy

Implement efficient production planning systems by maintaining in!entory le!el regarding to demand forecasting :orm a Coint Eenture or its own brand erge and ac&uire a globally recognized brand in order to establish

Galanz should de!elop its O" business in the international mar$et because of the competition among the BCs i.e. increasing demand for the branded products. Bot only this# Galanzs products were !ery cheaper but with good &uality. The goods were e%ported# the end consumer e!en li$ed the product due to its &uality but they had no idea about its brand name# so# to e%plore the users about its brand# Galanz should de!elop its O" business. We thin$ the company may not grow if it is continues OE and O/ business because OE products were replaced by O" products because of brand consciousness in the users. O/ would not be useful to de!elop due to short product life cycle. The company should focus on cost leadership and enter in the international mar$et i.e. follow the strategy same as of Toyota. Toyota entered into the =8 mar$et by focusing on the cost leadership. 6ater on when it established its mar$et then it introduced the premium products. /e!elop customized productionHassembly in de!eloped mar$ets and for de!eloped mar$ets. Continue ma9or in!estments in inno!ation in technology and production In!est resources in customer resources planning. Implement efficient production planning systems by maintaining in!entory le!el regarding to demand forecasting Impro!e product &uality before entering o!erseas mar$et -ecognize differences in business models# and de!elop new capabilities. /e!elop customized productionHassembly in de!eloped mar$ets and for de!eloped mar$ets. In!est resources to enhance its customer ser!ice capability and de!elop strong ?ublic relation# legal and global mar$eting functions. /ilute the effects of origin of manufacturing

:rom the case we found that the success of Galanz lied in few ma9or factors. They followed a through total cost leading strategyI Dthe costF consciousness is reflected in e!ery implementation. It carries out a correlati!e di!ersification strategy on the precondition that it had gained absolute competiti!e ad!antages in the original field. Aowe!er# the main disad!antage of Galanzs

OM Group Assignment Galanz

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Case: Operations strategy

strategy is the lac$ of clear brand strategy# although Galanz has already obtained a huge success in microwa!e o!en mar$et# but there is no !alue description and plan for its brand.

OM Group Assignment Galanz

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Case: Operations strategy

Reference
2. Aeizer# C and -ender# " (J<22)# Operations Inc. ' Bew Cersey J. http'HHwww.galanz.comH

anagement# 2< th Edition# ?earson Education