This case shares with us about the story of Galanz Enterprises Group Co. Ltd. (Galanz) had transformed itself from a manufacturer of down feather products into a world class manufacturer of microwave ovens producing more than 50 per cent of the global output in 2007. This case describes the competitive and operational strategies that Galanz used to achieve such a meteoric growth. The company started out with a clear competitive strategy based on cost leadership. It designed and implemented operations system to help achieve lower cost through economy of scale, the transfer of production capacity from developed countries and full utilization of the available production capacity.
Case Analysis & Problem solving
1. What were the order winner/order qualifier for Galanz in the microwave oven business during the early stage of its development? When Galanz started its business, the microwave oven business in China was in its infancy and it was less risk to invest in the technology associated with microwave ovens because this technology had been mature and stable for a long time. At the early stage, Galanz did not have any competitive edge in production technology but only an abundant supply of cheap labor and land. Thus the only way to compete the market is to offering a low price. From 1996 to 2002, Galanz adopted a low-price strategy by repeatedly implementing cycles of price cutting and production capacity expansion.
2. Rank the importance of Galanz’s operations objectives of cost, quality, flexibility, delivery, service and innovations. How has the importance changed over the years? At the very beginning, Galanz ranked cost as the most important operations objectives. The rest objectives are ranked equally after the cost. After the early success resulted by the price war and cost leadership, Galanz started emphasizing the importance of innovation and quality. Since 1996, the rapid growth of Galanz endangered the market share of foreign brands such as Toshiba and Panasonic who are also the suppliers of Galanz on magnetrons. To limited the threat from Galanz, Toshiba and Panasonic reduce the supply of magnetrons, which forced Galanz developed and produced its own magnetrons. To reduce the cost and improve the quality, Galanz started to vertically integrate its supply chain by manufacturing more of its components.
3. What is the role technology has played in the success of Galanz. The technology have play very important role in the success of Galanz. The supply crisis of magnetrons motivated Galanz put technical innovation on a more important position. The collaboration with local university and institutes helped Galanz mastered the core technology of magnetron. Continuous invest on innovation and learning the most advanced technologies from overseas partners allowed the company to reduced costs, improve the design of the products and lifted Galanz into the high-end product market.
4. What are the Galanz’s competitive and operations strategies, and how does its operations strategy support its competitive strategy? Galanz’s competitive strategy is cost leadership. To support the competitive strategy of cost leadership, Galanz use below tactics in operations.
1) To effectively expand the production capacity, Galanz escalated the production capacity through a free production line transfer from foreign OEM partners. The same tactic was applied to attract component suppliers setting up component facilities in Galanz. To further increase its production capacity, Galanz fully utilized its production facilities and labor resources to extreme by operating 3 shifts per day, seven days a week and 365 days a year. 2) Repeatedly implementing cycles of price cutting and production capacity expansion. Since Galanz enjoyed tremendous economies of scale for low cost production, the company pushes its sales team to work hard so that the market could absorb the additional inventory. 3) In an additional effort to reduce cost, Galanz started to vertically integrate its supply chain by manufacturing more of its components. About 90% of the microwave oven parts were produced by Galanz.