Operation Management Operations Strategy at Galanz

TABLE OF CONTENTS

Page

1.0 Case Summary 1

2.0 Operations Objectives 3

3.0 Competitive and Operations Strategies 12

4.0 OEM and ODM businesses 14

5.0 Future Aspects 17

6.0 References 22

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Operation Management Operations Strategy at Galanz

OPERATIONS STRATEGY AT GALANZ

1.0 Case Overview

Galanz is a Chinese company founded in 1978 by Liang Quingde, its headquarters is located in
Shunde Guandong and initially started with few number of workers producing feather product
and rely on foreign exchange in exporting its product. Several factors including high competition
and market changes, restriction of trading tariffs, institutional environmental changes as well as
natural disaster influenced the firm to shift its activity to electrical market.

There were also other factors that played a major role in making Liang shift to microwave ovens
production. First, although there were foreign competitors in the market, they do not know much
about the environmental changes in Chinese market. Second, microwave price was high and
unaffordable for the Chinese consumers. Third, rapid economic development in China opened up
potential growth opportunities in this segment. Forth, changes in Chinese lifestyle and rising
affordability. Fifth, ease of manufacturing microwave oven that as it was invented in the 50s.
When Liang junior became major shareholder of Galanz he entered the microwave market
successfully because he knew the Chinese market better than the competitors, so he took the
initiative and started producing Galanz microwave by buying the blueprint of the microwave
from Toshiba for USD 300,000 and finding group of engineers from Shanghai which helped him
to start Galanz microwave manufacturer.

Galanz rapidly grew through its strategies and tactics starting from the stage of original
equipment manufacturing (OEM) to original design manufacturing (ODM) and subsequently
ventured into original brand manufacturing (OBM). Galanz utilized the resources well thus it
gained the advantage to compete with lower price. Innovation and research and development
played a major role in second and third stages of the companys expansion.

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Operation Management Operations Strategy at Galanz

2.0 Question 1: Rank the importance of Galanzs operations objectives of cost, quality,
flexibility, delivery, service and innovations. How did the importance change over
the years?

Introduction
According to J. Heizer and B. Render (2011), understanding a firm competitive advantage
provides opportunity to grow. There are three (3) competitive advantages discuss by J. Heizer
and B. Render (2011) as following:

Differentiation : Distinguishing the offerings of the organisations in a way that the

customer perceives as adding value
Low : Achieving maximum value as perceived by customers
cost leadership
Response : A set of values related to rapid, flexible, and reliable performances

J. Heizer and B. Render (2011), has also defined the market to four (4) operations management
product cycle as following:

The concept of competitive advantage is similar with Galanzs operations objectives concept
because Galanz used their various operations objective to seize opportunity and to continue to

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Operation Management Operations Strategy at Galanz

grow the business. The importance of their operations objectives at various stages of business
cycles was according to their business objectives and priorities, competitive advantage, business
environment, customers needs and opportunity available that they could seize.

In the early years, the common operations objectives for most of the companies including Galanz
would be cost competitiveness and pricing war. Cost competitiveness i.e. cost leadership;
operations objective was the main factors that made Galanz the market leader and wipe-out their
competitors during the early years. This strategy was fruitful because they continued to enjoy the
increasing market share in the Chinese domestic market and overseas over the time period.

Subsequently, Galanz expanded their business through various Original Equipment

Manufacturing (OEM) agreements with customers and suppliers, Original Brand
Manufacturing (OBM) and Original Design Manufacturing (ODM), thus, making them
flexible in their business strategies.

Product and process reliability are critical as delivery and proper forecasting was important due
to their massive expansions of customer base at various locations, which includes overseas
market and to fulfill OEM obligations; and quality became increasingly important when Galanz
venture and penetrate the overseas market.

Due the shortages of the main component of the microwave oven i.e. magnetron, Galanz
transform to ODM as well. The supply crisis has made them to develop their own magnetron and
venture actively into Research & Development (R&D). After seeing much success in their R&D,
Galanz decided to enhance their R&D capabilities and product innovation to remain
competitive. Their product innovation was not only restricted to microwave functionality but
venturing into other products as well.

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Operation Management Operations Strategy at Galanz

We have segregated the evolvement of Galanz business to three (3) main segments as following:

Stage 1& 2 : Introduction & Growth 90s The Start-up & Early Success
Stage 3 : Maturity 2000s- The Drive for Self-Sufficiency and Branding
Stage 4 : Management of Decline Future of the Company

Following describes how the operations objectives importance changed over the years for
Galanz:

Stage 1&2: During the 90s The Start-up & Early Success
The main objective of Galanz when he started the microwave oven business was to deliver a low
cost microwave which can be afforded by most of the Chinese households. During the 90s,
microwave ovens were mostly imported and sold at relatively high prices because it was mainly
catered for high end market. Liang Senior has identified that the microwave oven as a product
with great potential that could ease the house chore of a regular Chinese household.

During the initial implementation stage, Galanz did not have the competitive edge in production
technology because they did not have the microwave oven technology but only over supply of
cheap labour and land. Thus, Liang Senior import equipment and technology from overseas and
purchased the microwave open blue print for USD$300,000 from Toshiba who was then the
market leader for microwave oven. He then found local professional engineers who had the
experience and knowledge in microwave technologies to help him.

From 1996, Galanz adopted a low price strategy by repeatedly implementing series of price
cutting strategies. The objective was to obtain and sustain cost leadership strategy to be the
market leader, increase market share and remove competition. Cost leadership was the most
important operational objective during this period.

During this period as well, Galanz was also able to achieve operational productivities and
economies of scale because they produce microwave oven in a mass volume which catered for
basic household use.

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Operation Management Operations Strategy at Galanz

To further achieve low cost production, Galanz has signed OEM contracts with microwave
customers such as Fillony, French customers and others subsequently with the same business
model concept. The business model was to supply microwave oven at cost and the customers
allow Galanz to use the excess production facility to run their oven microwave oven production
line.

Galanz aggressive pricing strategy has led many competitors withdraw from the market because
it reaches a point where the price offered by Galanz was lower than the Galanz average product
cost per unit.

Second important element of operational objective during this period is to ensure timely
delivery. In 1997, Galanz occupied 47.6% of the domestic market with sales reaching 1.25
million units, which were five times sales in 1996. By the end of 2002, its domestic sales were 4
million units, occupying 70% of the market share. Thus, delivery of products was also another
critical element to ensure the products are always available in the Chinese domestic market.

During this period, Galanz was also having issues with the supply of microwave oven key
component i.e. magnetron. Their suppliers such as General Electric, Toshiba and others, have
reduced the magnetron supplies because Galanz was becoming their main competitor. Thus,
Liang Senior embarked into research and development (R&D) activities to develop their own
magnetron to remain cost competitive and ensure continuous supply.

During this period, other elements such as innovation, quality, flexibility, services and innovation
were not important because the objective was to remain and sustain cost leadership and capture
the market share. Galanz could implement this strategy easily during this period because
microwave open product was new and the imported once was catered for high end market and
expensive.

Innovation was not a priority for this period but it was important as Liang Senior has already
embarked R&D activities especially for the supply of microwave oven key component i.e.

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Operation Management Operations Strategy at Galanz

magnetron. Thus, we rank innovation as the 3rd operational objectives importance during this
period. Product design and development will be critical for future of the Company.

We rank flexibility at 4th as Galanz was embarking in OEM contracts. We rank services and
quality at 5th and 6th, the least importance because during this period, there was no priority and
attention towards services and the products were low quality with less variety.

Stage 3: During the 2000s The Drive for Self-Sufficiency and Branding
As mentioned above, the cost leadership strategy adopted by Galanz has made them market
leader within a short a period of time. However, depending on low cost only could not sustain the
business. During this period, Galanz must ensure products are accurately delivered to the
customers timely and products needs to be at a certain acceptable standard to remain competitive
to avoid being pushed from the market. At this point, Galanz made a decision to become World
Brand from World Factory. In view of the market competitiveness, innovation was also an
important element during this period.

During this period, Galanz business has grew so much that they were already having production
planning issues. Production planning is crucial because Galanz has been strengthening its sales
network in all parts of the world including China during the recent years. During this period,
Galanz were developing a full range of low to high end products with more complicated
configurations, thus the Company needs to be able to forecast accurately to produce the right
products timely. Galanz was also actively involved in OEM and Original Brand Manufacturing
(OBM) business which requires different perspective of production planning. Thus, delivery
will be the most important operations strategy during this period as accuracy of the forecast and
responsiveness plays key roles in companys business. In addition, they have also expanded their
business to the overseas market and have acquired strategic partnership with multinational
companies such as K-Mart and Wall-Mart for OEM deals.

During the early years, Galanz was known as producing low quality products. Galanz realized
that to continue to sustain long in the business, be a reputable company and penetrate into the
overseas market, they must produce products branded products and good quality. If not, they will

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Operation Management Operations Strategy at Galanz

be gobbled by the larger multinational companies. Thus, they continued their effort to increase
quality and also integrate its supply chain by manufacturing more of its components. Eventually,
Galanz stayed on top in the domestic microwave oven markets and its quality earned acclaim
among international players. During this period also, Galanz began to offer Galanz branded
microwave oven to K-Mart and Wall Mart stores. In our view, during this period quality is
equally as important as delivery during this period. Thus, delivery and quality is ranked 1st during
this period. Galanz also wanted to be World Brand during this time.

During this period, Galanz has ventured into various products such as OEM, OBM and ODM
that made them flexible. During this period, they have also expanded their business to the
overseas market and have acquired strategic partnership with multinational companies such as K-
Mart and Wall-Mart for OEM deals. OBM and OEM product versions were sold in the US,
European, South America and African market. Ability to be flexible is the 3 rd most important
operations objective.

Galanz realize that they just cannot penetrate into overseas business and manage the Chinese
domestic market using the old fashion. Galanz thus has opened 52 sales offices across China and
branches were set up in major exporting countries to synchronise business all over the countries
and ensure proper after-sales support. As Galanz continue to launch their business in overseas
market, after sales service support become crucial and Galanz continue to put more priority in
this area. They emphasize on customer service capabilities to ensure the customer services staff
are appropriately trained in various aspects such as repair, handling complaints, warranty claims
and others. Thus, Services have also become the 4th most important operations strategy.

Cost, became the 5th important operations objective. Cost during this this period was not as
important as the other because they have already captured their market share and what is
important to Galanz was to ensure continuous sustainability.

During this period also, Galanz realize that importance of R&D activities set up R&D
microwave oven in overseas to improvise and showcase Galanz branded microwave oven.
Innovation was slowly picking up during this period and became apparent during the later

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Operation Management Operations Strategy at Galanz

period of the year. During this period, innovation was also becoming an important factor of
Galanz operations objective. During this period, Galanz capability of producing microwave oven
at low cost, combined with enhanced R&D ability, has resulted in Galanz gaining more than 50%
of the market share ovens in 2007. Galanz has successfully competed with major players such as
Panasonic, Toshiba and LG. Even though, innovation is a critical component of the operations
objective but it is ranked last because the innovation developed rapidly during later stage of
period.

Stage 4: Future of the Company

For the future of the Company, Liang realized that he had to address strategic issues to continue
to be the market leader. Some of the issues include how Galanz should align the combination of
OEM, OBM and ODM business segmentation, should he continue to be pervasive with low-cost
strategy, should be focus R&D, focus on production and marketing and many more. His decision
and action plan established to manage these issues is critical and he must assess the long term
impact to the Company as well.

In our view and based on Galanz development, during this period, innovation is the most
important operations objective for the future. As discuss above, by 2007, Galanz has gained more
than 50% of the market share ovens due to enhanced R&D ability. Galanz has successfully
competed with major players such as Panasonic, Toshiba and LG.

The R&D activities have been evolving during the 90s and 2000s even though; only that
priorities were not given during the respective periods. In 1995, Galanz established the Research
Insttute of Household Electrical Appliances in the Chinese headquarters and in 1997 established
the Galanz American Research Center in the United States. Since 1997, Galanz had collaborated
with South China of University of Technology, the Chinese Academy of Science and Guangdong
to develop its own magnetrons. Subsequently, the team has continually enhanced the R&D
capabilities, new product innovations and new technologies; such as, improved existing power
supply specifications, express cooking, intelligent LCD menu and many more. Looking at the
success innovation activities, investment in R&D represented more than 3% of annual revenue.

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Operation Management Operations Strategy at Galanz

Innovation will continue to be the most important operations objective moving forward because
of Galanz intention to be able to compete in various markets, match competitors products and
achievement that they have gained due to innovation. Having a good pricing strategy is not good
enough if the product does not meet customers needs in this new area and was not able to
compete with other products that also provide similar functions or benefits to the customers.
Ability to innovate is crucial for greater success in the dynamic global market place.

The 2nd operational objective is flexible. During the 2000s, Galanz has flexible business which
includes OEM, OBM and ODM. However, to remain relevant, Galanz must be able to adapt and
response to the market timely. Flexibility has also been demonstrated via the changes made to
their management structure to accommodate their evolving business structure and strategy.
After innovation and flexibility, quality will be the 3rd most important operations objective
because of Galanz reputation in the market. Galanz over the years has established themselves
from low quality manufacturer to high end quality manufacturer with the products being sold at
renowned markets in the overseas market.

The 4th and 5th operations objective would be delivery and services. The delivery and services
must be accurate, timely and convenient for customers to request for assistance should there be
any issues with the products. Delivery will always be more important the services because
customers will not buy your product if your delivery system is poor, and thereafter, customers
support services will not exist. Delivery and services ranked 4th and 5th because Galanz has
reached some stability and competitive advantage during the 2000s.

Final operations objective are focus towards cost / pricing. During the early years, cost
leadership was critical, however, over the years, innovation and quality has become more
important because of Galanz reputation in the market. In addition, Galanz over the years has
dominated the market share in the Chinese domestic market and overseas market as discuss
above during the 90s and 2000s, thus cost and pricing may not be the most critical priority.
Galanz has been increasing their focus to enhance their products and improved quality, delivery
and services. In addition, innovation and improvement to the supply chain management would
benefit cost leadership strategy.

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Operation Management Operations Strategy at Galanz

Summary of the Operations Objective Importance

Following table rank the importance of Galanzs operations objectives at various stages.

Based on the above table, Galanzs operations objective started from being a Cost
Leadership (Stage 1) to Response (Stage 2) to Differentiation (Stage 3).

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Operation Management Operations Strategy at Galanz

3.0 Question 2: What are Galanzs competitive and operations strategies, and how does
its operations strategy support its competitive strategy?

Galanz ventured into a business where the competition is tough. Galanz not only compete among
the local products but also with international products such as LG, Panasonic and Samsung.
Thus, Galanz has to focus on a competitive strategy to remain relevant in its market.

In China, the products are often imported and costly for its people. It is from here that Galanz
came up with a business plan to venture into producing local microwave oven and sell it at
affordable price. Galanz has focus on high volume and low variety strategy by producing a
similar blueprint of microwave oven made affordable to its customers in China. Galanz uses the
market advantage in understanding the market. In business, it is vital to be able to learn about the
market and the opportunity. By understanding the market, Galanz was able to offer better
products hence, better growth opportunities and to remain relevant in its market.

Furthermore, Galanz has also has successfully penetrate its market by having its own technology
and able to reduce the total cost of manufacturing. Implementing its strategic international
alliance, Galanz has integrated its production equipment and technology as an advantage that
enabled the company to be the major player in the market. Its strategic advantage in creating a
niche in the market as well as having cost leadership has set Galanz at the top of its market.

This has been proved during 1996 where Galanz had implemented a low-price strategy in the
production capacity expansion. It has also enhanced its sales volume by cutting its price and
reducing its operation cost. Furthermore, the company is known for making low price high
margin production. The manufacturing and labor cost has lower cost than average. Galanz
applied supply- chain strategy whereby the company obtains partnering relationship with
international supplier and provide cheaper production offered by Galanz.

This mechanism implemented by Galanz in their success story is using vertical integration in
purchasing. Vertical integration refers to the ability to produce goods previously purchased or
actually buying a supplier or a distributor. Many of their western counterparts began to outsource
the production to them due to low price and also high volume production. Efficiency plays
important role when Galanz expanded its production capacity and maximize its operation hours

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Operation Management Operations Strategy at Galanz

to 24hours a day,365 days a year hence, it boost Galanz production capacity and improve its
production scale.

Besides operation strategies that have been part of Galanz success story, its management
specifically under the leadership of Liang Senior and Liang Senior, both have been very
particular in its vision and also concern on strategic relationship with its allies and suppliers. In
the globalization age, Galanz have envisaged potential market within China and also outside its
country. As a result, Galanz has become the dominant player in its industry. It has successfully
transformed its direction to become as known brand next to its competitors such as LG,
Panasonic and Samsung.

Galanz has designed and developed its own magnetrons and switch its business directions from
Made in China to Created in China. This is part of innovation that Galanz being proud of.
Innovation lead to being different in the industry and with the innovation, Galanz has advanced
its business globally. The company has increased andenhance its internal R&D structure to
facilitate new product design and development. With its new technology structure, Galanz has
focus on producing new features and technologies in their products.

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Operation Management
4.0 Question 3: Should Galanz develop its OBM business in the International market.
Should Galanz continue its OEM and ODM businesses?
Comparison of OEM & ODM v. OBM business
OEM & ODM
Development Based on manufacturing rules and
product specification provided by
the client
Design ODM design is provided by client
internal R&D team. The design is
patented. The Intellectual
Property is the clients
competitive advantage. OEM is
also based on the clients
specifications.
Marketing The OEM and ODM client
conduct their on sales forecasting,
cost control and production
planning. Branding is done by
their own marketing department.
Clients formulate marketing
strategies based their target
market. ODM and OEM
producer does not engage in
marketing and brand promotion
Distribution Clients have an established
distribution network in which the
products are distributed through
their own chain or through value-
added distributors.
Customer Service Clients have their own after sales
support centres.
Operations Strategy at Galanz
OBM
Based on own products
technical and design
specifications. Specifications are
done by the R&D department.
R&D capacity is vital.
Design is solely based on
internal R&D team or
sometimes acquired from
another player. Target market
and scope is assessed before
design is conducted.
Galanz will need to create own
brand to market the product.
Galanz also has to develop sales
forecasting and production
planning capability to ensure
that supply and demand are
matched. The company will
need to strengthen its brand
image and awareness to position
and compete against other
players. Substantial capital will
need to be pumped in initially to
capture the market and woo
customers.
Distribution will be based on
Galanzs own distribution
network or through partnerships
with other player.
Galanz will need to establish its
own cost efficient sales network
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Operation Management Operations Strategy at Galanz

or outsourced this function.

After sales service is crucial to
promote brand loyalty.

Production OEM and ODM producer will
produce product on a large scale
basis for a few clients depending
on its capacity. OEM and ODM
clients reduce manufacturing
costs due to low cost environment
(low labour cost) of the producer
and also the economies of scale
achieved by this producers.
Production planning and sales
forecasting is done internally.
Products need to have a
distinctive element to
differentiate from the rest of the
products in the market hence
products are highly varied with
different specifications.

Expand its OBM business.

Galanz should develop and expand its OBM business in the international market as returns
higher profit margins. The OBM business could also act as a way to diversify its product
offerings. Diversification is important to manage risks and exploit opportunities.

Risks that are associated with the OBM business are:

Difficulties in forecasting demand and supply

High variety designs and models with lower volume production runs
High overheads
Risks of being labeled as a competitor to existing OEM and ODM customers

Galanz has transformed into the largest microwave manufacturer in the world, with strong
commitment to R&D, expertise in manufacturing, logistics and quality control, and brand
recognition in the international market. These strengths had turned into Galanzs competitive
advantage to further help grow and develop the OBM market. Increased investments in
innovation and branding could help overcome the risks associated with the OBM business and
ensure the competitive advantage is fortified.

Through innovation, efficiency and profitability could be gradually increased. The company
should also ensure that the ratio of OBM to OEM/ODM business is constantly in check to make
sure that both businesses exists in harmony and without cannibalizing the current OEM and
ODM customers

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Operation Management Operations Strategy at Galanz

Continue developing its OEM and ODM business as well.

Galanz should continue the OEM/ODM business as the company has gained vast experience and
increased efficiency in this segment. The OEM/ODM business also provides an attractive low
risk environment for the company. Galanz do not need to manage supply and demand forecasting
as it is done by the customers. Galanzs advantage of being able to provide low cost overheads
will continue to position the company to be an industry leader in this high volume and low
variety segment.

Global business environment is ever changing. The OEM/ODM customers will be constantly on
the look-out for other countries where the costs are much cheaper or even totally withdraw from
the microwave oven business and venture into other more profitable businesses. As such, it is
vital for Galanz to be involved in both the OEM/ODM and OBM business to cushion any impact
on changes in the business environment and be increase agility.

The Electric and Electronics is scale-intensive industry, OEM/ODM businesses are crucial to
fully utilize Galanzs existing production capacity. ODM adds value with its patented intellectual
property which can be act as additional competitive advantage against other players in the
market.

Galanz should build upon its advantage of low cost overheads through scale efficiency to solidify
its relationship with its OEM customers. At the same time, the company should continue to grow
its ODM business to stay ahead of the curve and provide additional offering to customers and
also consolidate its OEM/ODM business. The OBM business could provide an additional avenue
to use and enhance its present expertise to tap into potential opportunities in the emerging
markets.

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Operation Management Operations Strategy at Galanz

5.0 Question 4: What should Liang do to lead his company to greater success? Should
the company change its overall cost leadership strategy? How should the company
set priorities and utilize its resources and capabilities to gain competitive advantages
in the marketplace?

In the new era of global operations, collaboration and partnership can help broaden Galanzs
business and drive it to greater success. Galanz needs an even better understanding of differences
in culture and of the way business is handled in different countries. Improved understanding and
customized products can help in meeting cultural needs in foreign markets. Understanding
market requirement can lead to diversification of customer base and smooth the business cycle.
Galanz may use different strategy and product line in different countries by segregating the
developed and developing countries market segment. Based on our research, Galanz has actually
started tackling this issue. A recent check showed that Galanz is supported by global strategic
partners and 1000 overseas distributors. Galanz sells its products to nearly 200 countries and
regions in the world and its sales and service network spreads over the world.

Also, in the emerging and competitive marketplace, Galanz could not depend on a single product
(e.g. microwave oven) business. Galanz need to diversify its product options to gain market
share. Realizing the importance of this, we found out that since early 2000s, Galanz has actually
ventured into producing other product line like air conditioner, household appliances and
relevant industries. In fact, household appliances is the third pillar industry of Galanz after
microwave oven and air conditioners.

Following is Galanzs mission and strategy:-

a) Mission- Self realization. Self is generalized and includes the enterprises, departments,
all processes and individuals.
b) Strategy- Grow stronger, more professional and more diversified rapidly in fields
involved and builds No. 1 enterprise in the world.

We feel that Galanz has a good mission and strategy in place. On top of that, Liang should
introduce an unique strategy in production and global perspective in order to lead his company to

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greater success. Apart from Cost leadership strategy, Differentiation & Response strategy should
also be incorporated to further catapult the company.

Strategic approaches to Galanzs competitive advantage:-

a) Cost leadership

In respect with this, cost leadership strategy remains a good strategy because the savings can be
invested in improved products and retraining of existing workers. A low cost strategy does not
imply low value or low quality. This has been greatly portrayed by Galanz in achieving
outstanding achievement in their business. Looking at the current state of their business, Galanz
can still use this strategy for their OEM & ODM business to cater for the local demand.

b) Differentiation

At the same time, differentiation by focus on R&D and innovation can drive Galanz to greater
heights. For example, Galanz can invent on electricity saving products. New technologies, new
design, new manufacturing processes & commitment to customers can help in Galanzs success.
Galanz, in recent years, has invested over RMB1billion into the R&D in total, and the investment
on technology is always more than 3% of the annual turnover. In 1995 and 1997, Galanz Group
established the Research Institute of Household Electrical Appliance and Galanz American
Research Center in the headquarters of China and in America respectively. Over these years,
Galanz has gained more than 600 R&D achievements, e.g. sphere microwave technology,
microwave enhanced compensation technology, multiplex technologies of microwave leakage
prevention, light-wave technology and so on.

Besides, Galanz can differentiate the company from the competitors by providing a better service
to customers. In regards to this, Galanz has taken a good effort in setting up sales office and
branches where they are doing business. This will help them stay closer and connected with the
customer. Galanz could also adopt internet technology in enhancing their business to virtual
customer. This can help them increase their market share at a global level. At the same time, this
will provide a platform to communicate with customers regarding product enquiry, warranty,
service and so on.

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Operation Management Operations Strategy at Galanz

c) Response

Galanz should be more flexible in competing in response to the market demand. They have to
provide a more reliable and quick response in terms of product development and delivery. In
respect with this, Galanz is lack in terms of its ability to match changes in a marketplace where
design innovations and volume fluctuates substantially especially in the OBM business. They
have to pay more attention in this aspect if they want to build a sustainable competitive
advantage. At the same time, Galanz should not compromise on the speed in product
development, speed in production and speed in delivering.

Setting priorities and utilizing its resources and capabilities to gain competitive advantages
in the marketplace

Analysis and understanding of both the external and internal factors can help Galanz find the
optimum use of its resources. SWOT analysis can help set priorities and utilize its resources and
capabilities to gain competitive advantages in the marketplace. A SWOT analysis is a formal
review of the internal Strengths and Weakness and the external Opportunity and Threats. With
SWOT analysis, Galanz can position itself, through its strategy, to further develop its competitive
advantage.

Strengths Weakness
Low cost producer Unpopular brand
Limited production capacity
Less response time
Opportunities Threats
Market developments Competitive market
Innovation & technology development Sustaining internal capabilities & low
Global influences
cost player
Innovation in technology & idea

Because no firm does everything exceptionally well, a successful strategy requires determining
the firms critical success factors and core competencies. Key success factors (KSF) are those
activities that are necessary for a firm to achieve its goals. In this case, Galanz KSF is their low
cost strategy. On the other hand, low labor cost and low land cost are the core competencies that

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Operation Management Operations Strategy at Galanz

allow Galanz to develop a competitive advantage. Galanz should allocate its resources and
capability to solidify its strengths and opportunities and at the same time address its weaknesses
and threats.

Strategic Options

It is now time for Galanz to pursuit in international dimension. The best strategy it can use is the
Transnational Strategy where this strategy has high local responsiveness and high cost
advantage. This strategy exploits the economies of scale and learning, as well as pressure for
responsiveness, by recognizing that core competence does not reside in just the home country but
can exist anywhere in the organization. Transnational describes a condition in which material,
people, and ideas cross national boundaries. Through this, Galanz will have the potential to
pursue all three operations strategies (i.e., differentiation, low cost, and response).

In order to explore this opportunity, Galanz must embark upon its weaknesses like unpopular
brand. An aggressive branding and advertisement work need to be carried out before Galanz
could capture global market. At the same time, Galanz must ensure a smooth supply chain
management in the organization. Based on the case study, Galanz has used Vertical Integration
strategy in its supply chain management. This is where Galanz vertically integrate its supply
chain by manufacturing about 90% of its components. But, due to capacity constraint, Galanz
has outsouced part of the production of Galanzs designed and branded magnetrons to a
Japanese manufacturer. In order to ensure continuity in supplies, Galanz can adopt a joint
venture or keiretsu networks with its suppliers.

However, Galanz must continuously monitor and control the outsourced vendor so that there will
be no drop in quality of the product. Also, Galanz must provide support, knowledge and training
to the vendor to ensure the sufficient understanding about the product. Most importantly, Galanz
must ensure that outsourcing does not increase the cost and affect its status as low cost leader.
But, the positive aspect is that Galanz can gain outside expertise (Japan is well-known of its
technology advancement). At the same time, Galanz can focus more on its operations and core
competencies by introducing new products and services. We believe through some of the
proposed strategy, Galanz can achieve greater success persisting to the business concept of

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Operation Management Operations Strategy at Galanz

Greatness originates from creativity and the business tenet of Working hard to move
customers, Galanz is speeding its step towards a global brand and a world-class enterprise.

7.0 References

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Operation Management Operations Strategy at Galanz

1. Heizer, J and Render, B (2011), Operations Management, 10th Edition, Pearson Education
Inc. : New Jersey
2. http://www.referenceforbusiness.com/management/Ob-Or/Order-Winning-and-Order-
Qualifying-Criteria.html#b
3. http://karlknapp.com/resources/wikisummaries/supplychain_mgt/order_winners_qualifier
s.html
4. http://www.galanz.com/
5. http://www.youtube.com/watch?v=eWg3VDofbhY

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