Operation Strategy at Galanz

By : Piyush Kateja
Roll No. : EPGP-13D-073
Sec:D, EPGP-13th Batch
 Evolution of Company
1978 1992 1994 1999
Founded by Liang Renamed as
Senior, former deputy Guangdong Galanz Liang Senior bought Down Feather
chairman of Industrial Enterprises Group all the shares from product factory was
and transportation office Co. Ltd. & Produced government and shut and full focus
of Shunde Industry, its 1st Microwave became majority of Galanz into
trading in down feather
oven stake holder in Business of
product. Garment
industry facing Galanz Enterprises Microwave Ovens
downturn due to quota Group Co. Ltd.
limitation and declining 1993
marginal Profit The first batch of
10,000 Microwave
were produced
 Why only Microwave Oven ?
 No Domestic Production
 High prices of imported products
 Unaffordable to most Chinese People
 Growth rates in China and consequently increase in purchasing power
 Changing life styles with increased emphasis on electronic convenience goods
 Challenge was to provide these goods at affordable price
 Microwave Oven market was very nascent in 1980s
 Lesser competition i.e. Toshiba, LG and Whirlpool, only 3 key players
 Stable and mature technology, further improvements made by Japanese in terms of
magnetron tube and power supply improved its utility and functionality
 There would be huge demand if provided at affordable prices
 Galanz Growth Timelines and Important
Moves
1991
1991 1993 1995
1995 1996
1993 1996
Bought
Bought Produced Replaced
Replaced Received
Produced Received
blueprints
blueprints Shell
Shell
first
first first
first OEM
OEM
&& Electric
Electric as
as
batch
batch ofof the
order
order &&
production
production the leading
leading
line
10000
10000 manufactur started
started
line from
from manufactur
Toshiba ovens
ovens er
er in
in China
China Export
Export
Toshiba

2000
2000 2004
2004
1997
1997 1998
1998 Started
Started
Develope
Develope
Started
Started Built
Built first
first outsourci
outsourci
1999
1999 dd Own
Own
developin
developin largest
largest ng
ng
Setup
Setup Magnetro
Magnetro
gg of
of Own
Own Microwa
Microwa Magnetr
Magnetr
R&D
R&D unit
unit nn and
and
Magnetro
Magnetro ve
ve Oven
Oven on
on
OEM
OEM ,,
nn facility
facility productio
productio
ODM
ODM
nn
 Galanz Tactics & Business Strategy towards
Organization goal of “High volume & Low Cost”
FREE PRODUCTION LINE PRICE WAR
• Escalate its Production capacity by • To fully dominate the domestic oven
acquisition & partnerships market
• Attracted production lines of ovens and • Aggressive pricing strategy
components for free • To make ovens affordable for the
• Obtain technology, training and right to use average Chinese consumer
excess capacity • Price was set based on average cost of
• Cost leadership, Increased production to producing fraction of the actual
achieve economies of scale production volume

R&D unit in China & US and

ODM in Overseas invested 3% of revenue;
Own brand for & OBM in operated 3 shifts 365 days (full
domestic market Domestic utilization)

OBM in domestic
OEM for Overseas
Market
& Overseas
 Dilemma & Issues

High volume Improving brand Trade off between loss Highly centralised
production awareness to enter of OEM customer & management system to
taking hit on into foreign market Increasing OBM sales handle large scale
quality production

Increased demand for Magnetron Excess

customised product, demand inventory, poor Synchronising
reducing production exceeded sales forecasting production and
capacity production & production R&D
capacity planning Department
 Other Challenges
 How to prioritize among OEM, OBM and ODM
markets?
 How to improve brand recognition in foreign
markets?
 Whether to continue resorting to price wars for
expansion or build a quality image?
 Raise prices or risk facing anti-dumping and anti-
monopoly laws
 Set up own sales and service networks in target
markets or through strategic partners.
 Solution & Recommendations
 Reduce Discounts- Move towards competing on features as price wars would be difficult with high
product variety

 Recover the increased R&D expenditure, Continue major investments in innovation in

technology and production

 Use strategic partners in foreign markets- Cost is lower than own sales mechanism

 Brand awareness can be achieved through online promotion

 Align manufacturing capabilities towards handling higher variety- Microwave market is maturing,
features will help in differentiation

 OEM Sales bring major part of revenue, No immediate change in cost leadership strategy

 Enable quicker decision making, less centralized organizational structure

 Better sales & forecasting and production planning methods, Refrain from push mode
 Solution & Recommendations
 Continue diversification of business to OBM, OEM and ODM
 Improve product quality before entering overseas market
 Recognize differences in business models, and develop new capabilities. Develop
customized production/assembly in developed markets and for developed markets.
 Invest resources to enhance its customer service capability and develop strong Public
relation, legal and global marketing functions.
 Invest on brand management to develop itself as an international brand.
 Develop strong service networks and distribution channel
 Implement efficient production planning systems by maintaining inventory level regarding
to demand forecasting
 Form a Joint Venture or Merge and acquire a globally recognized brand in order to
establish its own brand
 What if Environment change “Catastrophic
Effects”
 Catastrophic events like earthquake, tsunami etc. hamper the outsourced
production and can delay the order fulfilment and may destroy brand
image, such situation can be avoided using in-house production. In the long
run, it will help in making Galanz self reliant and reduce its dependability
on external manufacturers.

 Any change in GST implication in foreign countries can impact the

outsourced production cost as well as consumer requirement/ sales; Proper
sales forecast and eye on economic condition of foreign country helps to
minimize future sells/ profit shocks.
THANK
YOU