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OPERATIONS STRATEGY AT GALANZ
CASE STUDY
MBA 729

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TABLE OF CONTENTS

I
...


………………………………………………
...


4

Company Background
Case Background

III
...


6

IV
...


7

V
...


8-10

A
...

VII
...

IX
...


Operations/ Manufacturing

C
...


HR

E
...


10-12

………………………………………
...


17-18

………………………………………
...


COMPANY BACKGROUND

Guangdong Galanz Group Co
...
is a Chinese manufacturer of electronic home appliances
which is headquartered in Shunde, Guangdong province
...

The company’s original name was GuizhouDown Product Factory
...
The company continued to be
profitable despite increasing competition and was also one of the best performers in Shunde
...
Also, the profit growth of the company had
become stagnant which made Liang Qingde realized that his business could not go any further
because of its projected weak future
...
After analyzing the
Chinese consumer market for a year, he made the decision to enter the electrical appliance
market with the introduction of microwave oven
...
Then, it became the dominant player in the
world microwave oven market
...


II
...
To make the plan into reality they
started by purchasing the blueprint of the microwave oven production from Toshiba which is
the leading in the microwave oven production
...
Through their strength and low cost strategy, they
were able to maintain their market dominating position in the market
...
Thus, they opt to outsource the
magnetron production
...
Thus, it
helped improve their production with the help of their extensive labor and facilities
...
This forced their competitors to withdraw from the
market
...
As a result,
they made and design their own magnetrons through their collaboration with various
universities and advance technologies
...
Also, they used vertical integration for their supplies so they could produce
most of the components for the microwave oven
...
They decided to go global
...
They were also accused by foreign government due to
dominating some markets because of their low price strategy
...

Therefore, they were having difficulties accommodating the increasing demand of customers
...
Cost arbitrage (of land and
labor) was the chief competitive strategy employed by Galanz to capture the Chinese
microwave market
...
Thus, after the
superlative domestic success, Galanz focused on building a world brand by maintaining its

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low cost, abundant supply and stressed on important aspects such as customer relation
management and after sales support
...
This strategy was supported by an abundance of cheap land and labor
...
The rapidly increasing demand, which rose to almost 25 million units in 2003, for
these low-cost microwaves prompted Galanz to expand its production capabilities
...
Furthermore, deals with customers like Fillony to transfer
entire production lines made sure that the ever growing demand for the ovens was met
successfully
...


III
...
Their annual production
capacity was not able to meet their annual production requirement
...

However, even though the problem is slightly resolved, the following issues concern the
company:

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1
...
How can Galanz make sure that they could provide more efficient production to sustain
the customers’ demands of high variety products so that they could expand or maintain its
success despite of the competition in the domestic and global market?

IV
...


•

The company innovation focused only for one product
...


•

The product of Galanz (microwave oven) is now at its peak and the senior directors and
top executives have predicted that it will soon reach its declining point
...


•

The management structure has been modified and improved
...


AREAS OF CONSIDERATION
A
...
To carry out the said strategy, Galanz relied on two tactics: (1) the
escalation of production capacity through a free production line transfer and (2) the
repeatedly launch of a price war
...
There were 52
sales offices across China and branches were set up in major exporting countries
...


B
...
About 90 percent of the
microwave oven parts were produced by Galanz
...
However, the increasing demand of customized products
had caused a decline in production efficiency
...


C
...
The
company decided to cut prices by 30-40 percent in order to gain market share from its
competitors
...

Accordingly, Galanz’s price-cutting mechanism relied on setting the average unit cost of
production along its growth curve
...
The average cost method is calculated
by dividing the cost of goods in inventory by the total number of items available for sale
...
Human Resource
To further increase its production capacity, Galanz fully utilized its production facilities
and labor resources to the extreme by operating three shifts per day, seven days a week,
and 365 days a year
...
As a result, the company’s employees might experience low level of
productivity, higher degrees of stress, getting burned out from the ongoing and
unrelenting workload, being prone to mistakes and a poor work-life balance
...
Research and Development
Due to the reduction of magnetron supply, the company initiate a major investment in
magnetron R&D
...
This research team had sucesfully launched
Galanz-made magnetrons with an improved mechanical design and also brought
technological breakthroughs in microwave cavity matching and micro switching
...
(3) The company has also alloted more that 3 percent of their annual
revenue for its investment in the Research and Development
...


SWOT ANALYSIS
STRENGHTS

WEAKNESS

•

Low cost products

•

Inefficient Market Structure

•

Efficient R&D

•

Low

brand

recognition

for

international markets

•

OPPORTUNITIES
Development of product line

•

Company expansion

•

THREATS
Accusations from government of
importing countries

•

Conflict of interest for the OEM
clients

•

Inefficiency in production
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STRENGTHS
•

The company provides low cost products – this instance made the company dominate its
domestic market
...


•

Research and Development – the company’s R&D has been strongly built that helped the
company to have its competitive advantage over its competitors
...


WEAKNESSES
•

Inefficient market structure – the information flow and communication were slow and
unclear and thus, resulted to strategies being difficult to implement
...
Without further studies and modification of the management
structure, it becomes weaker up to the point that it may cause the company to foreclose
...


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OPPORTUNITIES
•

Development of product line – because the company is known for its microwave ovens,
the company can increase its product line into electrical appliance market
...


THREATS
•

Galanz was facing accusations from the government of importing countries – one
accusation was that Galanz was trying to monopolize the market by dumping products
that are priced unreasonably low
...


•

The customers of its OEM products might be their competitor – Galanz decided to
provide their OBM products in the international market
...


•

Inefficiency in production – the company implements mass production scheme to achieve
low-cost efficiency, and in the past, most of the products were with less variety
...


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VII
...
Expansion of
machineries
and labor
2
...
Outsourcing
4
...
Conduct
Production
planning

EFFICIENCY
(TIME)

ECONOMY
(COST)

EFFECTIVITY

TOTAL

3

1

4

8

2

4

1

7

3

3

2

8

3

2

2

7

4

3

3

10

1
...
Through addition of
machine and labor, the company may able to improve its mass production as well as meet
the insufficient demand of the needed component
...
Training and Development Programs for Employees
Training presents a prime opportunity to expand the knowledge base of all employees,
but many employers find the development opportunities expensive

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