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Operations Strategy at Galanz
The case study is about operations Strategy at Galanz
Students are to write about this case.
Read and analyze the case and apply the critical thought process as practiced during the in-class exercises. The case must be evaluated from an operations perspective.
Provide a high-level executive summary of the situation from a long term, strategic perspective. In this summary, also include comments as to how well the daily operations align with the company’s strategy. As in the business world, perfect information is not available. Only the facts as written in the case study are available for your analysis.
Develop an action plan and explain in detail the support for this plan, using operations as a basis for your decision. Note: there is no single correct answer for this part of the assignment. Building a strong operational business case from an operations perspective will earn maximum points for this element of the assignment.
Next, answer the questions at the end of the case. Your responses must be clear and concise in relation to concepts from the textbook and class discussions. Direct citations to sections of the text and possible direct pages are required.
It is anticipated that total responses will require approximately ten to twelve pages of typed text. A title page is required. Twelve-point font either Time New Roman or Calibri is required in M/S Word, double spaced with one inch or equivalent metric margins top, bottom and sides of pages.
Assignment scoring:
Content directly relates to concepts from class and the textbook. 20 points
The analysis reflects critical thinking and supports a business case 20 points
Operations based business case recommendation 20 points
Satisfying the format requirements for structure and length 20 points
Total points 80
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Case study – Operations strategy at Galanz
Guangdong Galanz Enterprises Group Co. Ltd., whose headquarters is in Shunde in Guangdong province of the South of China, began as Guizhou Down Product Factory. The company was founded in 1978 by Liang Qingde as a township enterprise that produced down feather products for export. Owing to increasingly rapid infrastructural changes, government restrictions, and increased business risks, Liang senior decided to halt the operations of the company and conduct market research on a new venture.
His research indicated that microwave ovens were a viable product to manufacture in China. Major factors behind this decision included the increasing growth of the Chinese economy, the stability of the product, and the low initial demand for the product and competition level in the market (Ng, Li, Zhao, Xu, & Lei, 2010, pp. 2 – 4).
Liang Qingde decided to take on the challenges of the microwave oven business head on and began the planning for the production in the early 1990s. Such challenges included finding suitable technical expertise, the purchase of expensive machinery from overseas, and the adoption of foreign technology that required a huge investment. Galanz commenced production in 1992, and by 1995, they were selling 250,000 ovens, taking 25.1% of the domestic market and the position of the leading Chinese manufacturer of microwave ovens (Ng, Li, Zhao, Xu, & Lei, 2010, pp. 4, 13).
In the beginning, the company suffered from the lack of any form of competitive edge. However, owing to the foresight and strategic thinking of the founder, the firm made due with the absence of a competitive edge by making use of the available resources: cheap labor and land. These resources allowed Galanz to produce their products cheaply and, therefore, sell them at a lower price in the market.
Considering the low income in China, as well as the projected economic growth, the low pricing approach endeared a large consumer group that was interested in obtaining convenient equipment, but who were still budget conscious (Ng, Li, Zhao, Xu, & Lei, 2010, pp. 3, 4). Galanz, using this strategy, ensured the increase of demand over the years, which surged to about 25 million in 2003.
The growing demand for microwave ovens led to the need for Galanz to change tact. For example, with the annual demand of 25 million microwaves in China, the company was unable to keep up with the capacity owing to the production limitation of a key component known as a magnetron, which was only 16 million annually.
As such, Liang Qingde decided to outsource its production to meet the current and long-term needs of the enterprise (Ng, Li, Zhao, Xu, & Lei, 2010, p. 4). Such strategies involved the decision to shift operational organization for the benefit of the firm. In this case, the firm adopted two tactics to aid with the long run strategy to continue growth and profitability.
In its chosen strategy of a low cost production approach, Galanz opted to use two tactics; Transfer of the production lines through OEM agreements, and launching of a price war in the markets. In a long-term view, Galanz collaborated with several firms within the supply chain to increase production capacity and reduce costs through OEM agreements. Such other partners included customers such as Fillony and suppliers in Japan and Europe.
The nature of such agreements extended to a number of competitors such as Toshiba, Whirlpool, GE, and Sanyo (Ng, Li, Zhao, Xu, & Lei, 2010, pp. 4 – 5). Such agreements involved the use of excess capacity of such firms and the low cost methods of Galanz to create a winning combination for all parties involved.
A second approach involved the launch of price wars in the microwaves market. After the successful use of low cost production, Galanz followed through with a price reduction strategy across the market, the goal of which was to gain a larger market share. This approach involved repeated price cuts in a bid to reduce the market share of their competitors. Galanz used an improvement model where they based the price of the microwave ovens on the unitary production costs as plotted on a growth curve (Ng, Li, Zhao, Xu, & Lei, 2010, pp. 5 – 6).
The expansion of production capacity allowed for additional cost savings and therefore added economies of scale. At the end of the price cutting strategy, the firm had managed to oust several competitors and solidify their position as the dominant players in the Chinese microwave oven market.
After the success of Galanz in its two approaches used in conquering the Chinese market, the firm looked to other strategies to grow. These included the adoption of a new pricing strategy, transformation of the operational and manufacturing approach, and a shift in the organizational structure. Galanz chose to use a new strategy based on the market acceptance of the products.
For the manufacturing and operational approach, the firm chose to shift from EOM to ODM. Such a move involved the production of magnetron in-house, increasing investment in R&D, and vertical integration of the supply chain to enhance self-sufficiency (Ng, Li, Zhao, Xu, & Lei, 2010, pp. 6 – 8)….
Operations Strategy at Galanz
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