Operations Strategy at

Galanz

Case Background
Galanz
is
manufacturer
of
microwave
ovens
headquartered at Shunde, Guangdong province, China
It transformed itself from being manufacturer of down
feather products to microwave oven manufacturer in the
1990s
Galanz followed a low cost pricing strategy and push
model to increase market share both in China and
overseas market. It had 76% domestic market share and
40% overseas share by 2002
It operated as OBM in the Chinese market and as a
combination of OEM and ODM in overseas market

Galanz transformation
Phase

Key events

Operations strategy

Start up
(19921995)

Purchased microwave oven

production blueprint from Toshiba at
USD 300K

Import/license key technologies from

foreign companies, Learn best practices
and technology from foreign partners

First batch of 10,000 oven produced

in 1993
Sold 250,000 ovens in 1995 and
captured 25% of domestic market
share
1996

Early success in domestic market,

received first OEM order and started
export sales

Low cost strategy, price cutting and

production capacity expansion, start Price
war

19972003

Rapid growth with 76% domestic

market share by 2000 and 40%
overseas share by 2002,
Transformation from OEM to ODM

Low cost and operational efficiency ,

Overcome supply shortage by investing in
R&D, push towards technology selfsufficiency

Development and production of own

magnetron, push towards OBM in
overseas market

Strategic relationships with MNCs to sell

Galanz branded ovens overseas

Key issues for Analysis

Going forward what is the best Operations Strategy for
Galanz?
Continue with OEM and ODM and keep away from OBM
Combine OEM, ODM, and OBM
Only OBM.

SWOT Analysis for Galanz

Strengths
- Large market share both in domestic
and international market
- Large mass production capacity
- Own R& D facility
- Developed own magnetron
- 90% Vertically integrated
- Closely located suppliers

Opportunities
-Build brand and improve
margins
-Sustain relationship with existing
OEM/OBM customers.
-Move to international markets

Weakness
-Nascent marketing, sales & service
infrastructure
-Demand forecasting & production planning
almost non-existent
-Inflexible production lines.
-R&D issues causing delay in new launches
-Working with large number of suppliers for
very small share of outsourcing
-Poor brand awareness
-Narrow margins, 4.75%.
Threats
- Other low cost player can poach its domestic
market
- Other brand players may launch products
with support from other Chinese low cost
players
- Other international brands may poach market
share, as focus shift to international market

Comparison of OEM/ODM vs OBM

OEM/ODM

OBM

Production

Y / Not Necessary

Design

Y / Not Necessary

Advertising

Brand Management

Marketing

Service

N (Provided by brand
owners)

Y (Responsible for
services)

Production Planning

Make to order, stock out

and overstocking not a
problem, large batch
and low variety

Make to forecast,
responsible for stock
outs and over stocking,
small batch and large
variety
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PLC in various market for Ovens

Growth rate

Developed
market

Introduction

Emerging
markets

Growth
Maturity
Decline

Analysis of alternate
course of actions available
to Galanz

Stick to OEM and ODM and No to OBM

Pros
Fully utilizing current
capacity
Compete using existing
capabilities in design and
manufacturing
No new investment is
needed

Cons
Have a secondary role only
by working for other brand
owners
What to do if cost
advantage disappears?

Combine OEM, ODM and OBM

Pros
Fully utilizing current
capacity
Doing more high valued
activities
Potential new market
opportunities

Cons
Competing with existing
OEM customers
Need different capabilities
for OBM business such as
small batch and high variety
production
How to build brand and
provide services?
Need fresh investment
Potential shortage of
capacity, components, raw
materials etc.
10

Only OBM
Pros
Doing more high valued
activities
Potential new market
opportunities

Cons
Competing with existing
customers
Need different capabilities
for OBM business such as
small batch and high variety
production
How to build brand and
provide services?
Need fresh investment
Potential shortage of
capacity, components, raw
materials etc.
11

Recommendations?

12