Galanz

Operation StrategyCase Analysis

About GalanzFounded in 1978 by Liang Senior, as an enterprise dealing in down feather products

Obtained export quota in 1992 in China which was restricted. Thereby obtaining export volume by more than RMB 23 million

The management decided to diversify due to projected weak future. Produced first Microwave oven in 1992

By 1995, Galanz captured 25.1 percent of domestic microwave oven market

•.

Past Growth Strategy

Strategies

Escalated Production capabilities

Transformation OEM->ODM

Enhanced R & D

Price War

Escalated Production Capabilities • Increased production lines through free production line transfer• Gained the right to use its excess capacity of production line for its own products• Component suppliers were encouraged to set up manufacturing facilities at Galanz

Price War• Adoption of penetration pricing leveraging economies of scale• Expansion of production capacity to exceed market demand• Aggressive pricing strategy lead many industry players like LG & Panasonic to withdraw from the

market.

Transformation from OEM to ODM• Shortage of Magnetron because of retrenchment of its suppliers• Designed & developed its own magnetron• Galanz magnetron subsidiary started mass production

Enhanced R&D capability & production innovation• Two R&D units were setup in 1995 & 1997• Investment in R&D was more than 3% of annual revenue• Redesigning products with focus on new features & technologies•

•.

Present Challenges

Recent challenges

Antitrust (anti monopoly) lawsuit

Prioritization of business models

Low brand awareness in foreign

market

Inefficient production planning

Conflict of interest of OBM & OEM

business

Outdated Organizational

Structure

Low Brand Awareness in Foreign market • Foreign market not familiar with the brand Galanz• Partnership with MNC’s like Wal-Mart & K-Mart were confined to OEM deals only• Globalization causing fierce competition of branded products

Conflict of interest of OBM & OEM business• Setup sales & service business either on its own or through its channel partner• This could lead to becoming competitor to its OEM customer

Antitrust (Anti monopoly) lawsuit• The company is accused of monopolizing the market by dumping its product

Inefficient Production Planning• Strived to producing more than demand• Sales forecasting & production planning capabilities were nil

Outdated Organizational Structure• Highly centralized decision making• Information flow was slow & difficult

Future Objectives

Future Competitive Strategy

ODM

OBMOEM

Combined Strategy

OBM

ODM

Conflict of Businesses

Value Chain Activities

R&D

Production Manufacturing

Effective Sharing of Value Chain Activities

Synchronizing Production

Prototype production & testing

Proper Production Scheduling

Better Communication

Better Allocation of Resources

•.

Conclusion

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