OPERATIONS STRATEGY AT GALANZ

Operations and Service Management

SUBMITTED BY:
AJAY POKHREL
ALINA DANGOL
AMITANANDA NEUPANE
AMRIT PANDIT

ACE INSTTITUE OF MANAGEMENT

1. Rank the importance if Galanzs operations objective of cost, quality, flexibility, delivery,
service and innovations. How has the importance changed over the years?
Priority of galanzs operations objective
COST
To capture the market of china and the international market galanz focused on the cost
leadership strategy. Galanz more focused on the cost of production is decreased and compete
with the international brands Toshiba, panasonic, sanyo, and whirlpool in the microwave oven. In
the Chinese market microwave oven offer at high price. Microwave oven were all imported and
sold at relatively high prices that made them unaffordable. Recognized that chinas
modernization process was changing the living style and habit of the Chinese people. If it could
produce and sell them at an affordable prices this could be an excellent opportunities.so the
galanz decided to offer at low price to capture the market To reduce the cost following methods
is adopted by the galanz:

It implement the cycle of price cutting and process capacity expansion.

It escalate its production capacity through a free production line transfer.
Galanz provide the necessary training to the staffs and operate to increase the productivity
without the wastage and tears.
Galanze deliberately expanded its production capacity of microwave oven to exceed the
markets demand. Due to the large number of production it enjoyed the economics of scales.
Due to the mass production of the magnetron and core component of galanz microwave oven
it is able to reduce the cost of production.
Due to the availability of cheap labour in the Chinese market it is able to reduce the cost of
production.

INNOVATION
Galanz investment on innovation , research and development is about 3% of the annual revenue.
In 1995 galanz established the research institute of household electrical appliances. Through the
research and development and learning and importing the most advanced technology from
oversees partners allowed the company to reduce the cost and provide the differentiation
features in the product. Due to the innovation the material detection testing program had to
improve to minimize product irregularity and reduce the rapid wear and tear in the large scale of
production. galanz carried on product innovations by focusing on developing new features and
new technologies. As a result it changed cavity matching design, improved its power supply
added new features such as steaming grilling boiling and stewing.through the innovation it is
able to strive to localize design to suit each target market.

QUALITY
Quality is the main features of any product. To make the brand and costumer loyal any product
should have the distinct features. To enhance the quality galanz started to vertically integrate its
supply chain by manufacturing more of components by own self. Due to the production of
components it enhances the quality on the product. Due to the mastering magnetrons technology
galanz carried an product innovation by focusing on developing new features and new
technology. It changed cavity making design, improved its power supply,acceesed new features
such as steaming,grilling,boiling and stewing which enhance the quality.
DELIVERY
Galanz delivers its product and services in the Chinese market only at the initial period. By 2003
galanz started its primary export to the international markets by making the strategy partnership
with international companies such as K-mart, Wal-Mart. Galanz more focused on the
establishment of brand. Galanz made the decision to transfer itself from being the world
factory to world band. Then it becomes the dominant player in the world market. To deliver
the product more efficiently and effectively it established the 52 sales office in the across china
and many branches were set up in major exporting countries.
SERVICE
Galanzs existing sales infrastructure and the expertise were however not substantial enough to
reach the product in the market. Where as its competitors had already adopted global marketing
strategies and provide after sales services.
Costumers supports including after sales services, product repair and maintenance. Provision of
product safety knowledge. Handling a costumers complaints and returns and warranty claims
required significant work in galanz parts. The company had to invest resources to enhance the
after sales services to make the loyal customer and brand.
After capturing the markets through the cost leadership strategy. Galanzs more focused on the
research and development. To enhance the product quality through a differentiation in a product
and to make the brand in the Chinese and international market. It adopts the different strategy to
enhance the quality of the product in the low cost. It develops the market in the international
markets. It delivers the product by establishing the different sales store in the different city and
country. To maintain the long term relationship with costumer it makes the investment on after
sales services.

2. What are Galanzs competitive and operations Strategy and how does the operations
strategy support the competitive strategy?

In the early days, Galanz did not have any competitive edge in production technology but only an
abundant supply of cheap labor and land. Offering a low price was thus only way to compete in the
market. Thus they adopted a low price strategy. Thus they operated in a very low cost strategy which
sure brought millions into the companies. The low cost strategy was basically based on the following
two operational tactics.
Transfer of Production Line through OEM agreement
Galanz escalated its production capacity through a free production line transfer. That is, when galanz
produced microwave ovens for its customer, Fillony, it proposed to supply Fillony with the necessary
quantity of microwave ovens at cost if Fillony agreed to transfer, for free, its entire production line
as well as the assembly technology to Galanz, and to provide the necessary training to Galanzs
operators. Also, Galanz gained the right to use the excess capacity of the production line for its own
products after satisfying Fillonys production quota. They applied this tactic with other alliances as
well. This tactic was also applied to attract component suppliers setting up component production
facilities in Galanz.
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 week.
This was four times more than their western counterparts which allowed the company to increase its
production scale and to reduce production costs to a level that Galanzs competitors could not beat.
Price War
After Galanz proved able to sustain the cost leadership, the second tactic was to repeatedly l aunch
a price war such that it could fully dominate the domestic microwave oven market. This price cutting
mechanism relied on setting the average unit cost of production along its growth curve. That is,
when preproduction volume reached two million units, the price was set based on the average cost of
producing 0.8 million units. The aggressive pricing strategy led many industry players to withdraw
from market. The main objective of the price war was to remove their competition in the market,
destroying their competitors confidence to compete with Galanz.
Besides these 2 major operationgal tactics, Galanz to maintain its competitive status in the market
developed its own magnetrons, and switched its direction from made in china to created in
chaina. Galanz felt that the technical capability established so far, which was based on learning and

importing the most advanced technologies from overseas partners, had equipped the company with
the necessary technical know-how to design and develop its own magnetrons.
Their operational strategy supported its competitive strategy by continuous enhance of r&d activities
in the design and production of magnetrons as well. Galanz began to increase its investment in R&D
in order to enhance its internal R&D structure and facilitate new product design and development.
The technical capability of Galanz, established through both investment in R&D and through
learning and importing the most advanced technologies from overseas partners, allowed company to
reduce costs and provide differentiated features in its products.

Also one of the significant operation strategies was reducing costs and improving quality. Galanz
started to vertically integrate its supply chain by manufacturing more of its components. They
developed the core components on their own while working with the suppliers for non-core
components.
Thus, these are some of the operational strategy adopted by Galanz which would complement and
support their competitive strategy.

3. Should Galanz develop its OBM business in International Market? Should Galanz continue its
OEM and ODM business?

4. What should Mr.Lian do to lead his company to greater success? Should it change its
overall cost leadership strategy? How should the company change the priorities and utilize
resources and capabilities to gain competitive advantage in market place?
To lead the business to a greater success, Mr. Liang and the board of directors for Galanz, must
concentrate on renewed strategic focus towards innovation and increase its investment and
resources into to create a leading ODM in the world market.
In the current competitive market, the directors should give priority to focusing on
developing the ODM and OEM sectors of their business especially since the OEM business
has been its core and major revenue generating business so far. The continued production of
innovative products while making incremental gains will ensure profitability and the
innovation focus will creative further business opportunities through a varied product
offering. Investment should also be made in researching and developing production facilities
with the capability to take on more diverse and innovative production lines but still have a

lean production strategy and keep inventory to a minimum.

Whist focusing on their ODM and OEM sectors, they could continue to look for solutions for
some problems they have encountered in their pursuance to be an OBM company i.e. delays
in new product development process due to failure to arrange prototype production and
testing, the need to provide competitive level of customer service to a wider market with

variant needs, desires and expectations and others.

It would be advised that Galanz form a alliance with local providers of after-sales and
customer service support in more sophisticated markets where consumers are looking for low
cost with a good service behind it. Galanzs OBM business has potential risk and could
impact on other areas of the business if it damages its brand through poor customer service
and after-sales support.