Galanz china

OPERATIONS STRATEGIES

Competitive Strategy

At the early stage of development, Galanz was in the OEM business with products characterized by large production volume and low variety. Considering the expertise of international players like Panasonic and Toshiba, Galanz doesn't have a competitive advantage in terms of technology.

Thus, to gain leverage in the domestic market, they employed a cost leadership strategy to capture the Chinese microwave market, by providing low priced high quality microwave ovens with on-time delivery. This also means that Galanz operations have to be highly efficient.

The second tactic was to repeatedly launch a price war to fully dominate the domestic microwave oven market. Price-cutting mechanism relied on setting the average unit cost of production along its growth curve. Thie aggressive pricing strategy led many industry players to withdraw from the market.

To achieve its competitive strategy, Galanz adopted a few operation strategies:

1. Full Resource Utilization

Operation strategies adopted include having employees in production line to work 3 shifts daily, 24 hours per day, every day of the year. This way, EOS can be gained by having low labour cost and large number of available labour.

1. Vertical Integration

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.

1. Free production line transfers

Galanz also conjured up mutually beneficial deals with its clients/foreign OEM partners to achieve rapid expansion of production capacity by arranging for production line transfers, process and quality enhancements. The same tactic was applied to attract component suppliers to set up component facilities in Galanz.

Repeatedly implementing cycles of price-cutting and production capacity expansion, Galanz is able to enjoy tremendous EOS for low cost production; the company pushes its sales team to work hard so that the market could absorb the additional inventory.

Dominated the domestic market through this strategy which was attractive to cost sensitive Chinese market. However, due to the risks involved in launching a Chinese product in the international market, Galanz entered the overseas market as an OEM supplier.

When Galanz started its OBM business, its competitive strategy changed to differentiation, which also means that the company has to make products characterized by low production volume but high variety. In that sense, Galanz had to be flexible, service-oriented and innovative.

Collaborations with large retailers such as K-mart and Wal-mart facilitated the successful entry of Galanz in the international market. Low cost, high production was maintained through cheap labour and large ability. Popularity rose in overseas market due to its consistent efforts in maintaining low cost and high supply. 

Started off its OBM venture by introducing Galanz branded microwaves to its existing OEM customers. Galanz further pushed its efforts in gaining worldwide recognition by investing in a dedicated R&D facility to match international competitors. The supply was matched with the demand through outsourcing of magnetron manufacture, and subsequently, with development of independent magnetrons. 

Thus, after the superlative domestic success, Galanz focused on building a world brand by maintaining its low cost, abundant supply and stressed on essential aspects such as customer relation management and after sales support.

These operations strategy provides the blueprint for operational decision-making. Operations strategy and decisions must support competitive strategy and be consistent with other functional strategies in order for Galanz to be successful. An effective operations strategy can add value by allowing the exploitation of market positioning.