OPERATIONS STRATEGY AT GALANZ

Operations Management

SUBMITTED BY:
ANUJ PANDEY
ASHISH AGRAWAL
DIWASH KASAJU
JASMINE
ACESHRESTHA
INSTTITUE OF MANAGEMENT

1. Rank the importance if Galanzs operations objective of cost,

quality, flexibility, delivery, service and innovations. How has the
importance changed over the years?

The order winners and order qualifiers for the business in the early stages of
was the same price/cost. This competitive characteristic is what caused the
customers to choose the companies good and services over those of our
competitors along with making Galanz a viable competitor
In the initial years Galanz concentrated OEM and then shifted towards ODM
and OBM
The focus has changed from Cost to service and towards innovation
We believed that by delivering and attracting the masses with new time
saving ways of cooking then this technology would become indispensable
within the household. After purchasing the technology blue print from
Toshiba, sales have exponentially grew production ever since. High volume
production was the key then to keep the cost low for a stock standard, basic
low quality microwave.
Over the years our objectives needed to change as we faced tough
situations. Some of our competitors limited supply of parts which pushed the
business towards innovation, to build its own components and meet the
demand. While our core objective still remained to be cost driven, delivering
low price to the customer and keeping its own expenses down to capture the
market share. In order to improve quality and keep the cost down, we
invested more than 3% of the company revenue in R&D and continued to
manufacture 90% of the microwave components in house using technology
that we had developed ourselves. The polar diagram below shows the
importance of each performance objective to the Galanz operation as this
has changed over the years.

Stages of Galanz Price Wars

199 40%
Sales increased 650,000 Units

Market Share increased

6
199

discount
29-40%

Total

sales

to 35%
reached Domestic market share

7
199

discount
30%

2,000,000 units
Annual
production

was 47.6%
output Market share increased

8
200

discount
40%

reached 4,000,000 units

to 60%
Annual sales reached 10,000,000 Domestic market share

0
200

discount
30%

units
reached 76%
Annual sales reached 13,000,000 International

annual

market

2
discount
units.
share was 40%
2. What are Galanzs competitive and operations Strategy and how
does the operations strategy support the competitive strategy?
Operations Strategy: (OEM/ODM/OBM)
Identification of potential product.
Blueprint purchased from world leader (Toshiba) in microwave oven
equipment and Technology producer in early 1990s.
Factory set up with professional engineers with ample knowledge of

this technology.
Advantage of abundant supply of cheap labours and land.
Cost leadership strategy to increase the market share.
Strategic alliance with other big appliance companies and its suppliers.
Full utilization of resources.
Shift toward product oriented process.
Increase its production scale and reduce production cost.
Tactics of price war to dominate to competitors in domestic market.
Focus on enhancing the distribution of product.
Existing products improvement and design & development of new

product.
Strategic partnerships with multinational companies.
Galanzs went into global market using OEM business.
Enabled the company to use its own manufacturing equipments.
Galanzs exceeded other Chinese and International manufacturers
Competitive Strategy:
The operations strategies adopted by Galanz helped them support the
competitive strategies compared to local suppliers. Once the blue print was
purchased from Toshiba Galanz was able to manufacture goods from the
same technology in the market at lower prices due to location and labor
advantage.
Looking at this technology and mass production unit other international
manufacturers were attracted to outsource such components to Galanz
which was able to optimize production capacity and reduce cost.
Because Galanz was operating at such low cost in economies of scale it was
able to capture the local market very easily.
Soon Galanz was forced in innovations (ODM) which again proved to be an
advantage in the market.

3. Should Galanz develop its OBM business in International Market?

Should Galanz continue its OEM and ODM business?
OBM in International Market
the OBM business returns higher profit margins and therefore should be continued
and developed in the international market. There are associated risks that have
been identified in doing this such as:
Potential issues with forecasting
A wider range of models with lower volume production runs
High overheads
Risk of being seen to compete with OEM customers
Being the largest microwave manufacturer in the world, with strong
commitment to R&D, expertise in manufacturing, logistics and quality
control, and increased brand recognition in the overseas market Galanz has
gained the competitive advantages for OBM export business. Galanzs need
continue to increase investments in innovation and branding in order to
sustain the competitive advantage in the global markets and ensure that
incremental gains are made to ensure profitability
Galanz continues to gain market share in the International market (from 35% in
2001to 44.5% in 2003) but this growth has also brought on a greater degree of
risk due to the increased complexity created by an increased product line and the
need to provide a more complete after-sales service to OBM customers in order to
protect its brand.
Galanz will need to invest heavily into marketing and creating an effective
internal sales forecasting system in order to protect its risk of carrying too much
inventory. While we recommend investing in forecasting and market research
systems we also recommend outsourcing the after-sales service. We recommend
that the board investigate possible alliances (co-opetition) with other OBMs in
order to provide the necessary level of customer care.

OEM/ODM
The OEM/ODM business should be continued due to its operations strengths of
low cost in overheads, the provision of forecasts from customers which enables
risk to be managed properly, high volume and low variance and due to the fact
Galanz being a current industry leader.
In todays viciously competitive world of OEM, major OEM customers might seek
lower costs elsewhere if production was to be stopped or may withdraw from
microwave oven and focus on other goods.
However, it is significant that Galanz combines both OEM/ODM and OBM exports.
Electronics is scale-intensive industry, OEM/ODM businesses are crucial to fully
utilize Galanzs production capacity. In addition, ODM creates our own intellectual
property which we are proactively patenting on an international level.
Established relationships with major OEM brands who are seeking the economies
of scale and the growing ODM market will enable us to consolidate our OEM/ODM
business while pursuing the OBM potential in the emerging international markets.

4. What should Mr.Lian 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?
To lead the business to a greater success, Mr. Liang and the board of
directors for Galanz, must concentrate on renewed strategic focus towards
innovation and increase its investment and resources into to create a leading

ODM in the world market.

In the current competitive market, the directors should give priority to
focusing on developing the ODM and OEM sectors of their business especially
since the OEM business has been its core and major revenue generating
business so far. The continued production of innovative products while
making incremental gains will ensure profitability and the innovation focus
will creative further business opportunities through a varied product offering.
Investment should also be made in researching and developing production
facilities with the capability to take on more diverse and innovative
production lines but still have a lean production strategy and keep inventory

to a minimum.
Whist focusing on their ODM and OEM sectors, they could continue to look
for solutions for some problems they have encountered in their pursuance to
be an OBM company i.e. delays in new product development process due to
failure to arrange prototype production and testing, the need to provide
competitive level of customer service to a wider market with variant needs,

desires and expectations and others.

It would be advised that Galanz form a co-petition alliance (in established
markets) with local providers of after-sales and customer service support in
more sophisticated markets where consumers are looking for low cost with a
good service behind it. Galanzs OBM business has potential risk and could
impact on other areas of the business if it damages its brand through poor
customer service and after-sales support especially if looking to make
headway into America and potential markets like India.

Thank you