Operations Strategy at Galanz: Summary

Group 6
Operations Strategy at Galanz
Summary:
Galanz Enterprises Group Co. Ltd. manufactures microwave ovens and is headquartered at
Guangdong, China. The company became a microwave oven manufacturer when its founder, Liang
Qingde, realized the potential of selling domestic microwave ovens in China, where most microwave
ovens at that time were mostly expensive. From 1993-2003, despite being new to the microwave industry,
dominated by large appliance companies such as Toshiba, Panasonic, and LG, Galanz has managed to
become the largest supplier and manufacturer of microwave ovens because of its competitive and
aggressive operation strategies, even reaching 70% of the market share worldwide. Noticing that the only
advantage of Galanz against larger foreign companies, whom at the conception of Galanz Enterprises
ruled the entire market for microwave ovens, were its cheap labor and land, the company realized that the
only way that they could penetrate the market is by offering low prices to their Chinese customers. Galanz
began making microwaves as an OBM, buying microwave components from other companies, and
distributed only domestically. Foreign companies then took notice on the cheap price of buying
microwave ovens from Galanz instead of producing them; this is when Galanz became predominantly an
OEM; which led to a rapid increase in sales in just a few years. From the increased sales, Galanz managed
to produce their own magnetron (primary component of microwave ovens). Soon, Galanz began making
deals with OEM companies of considering moving their plants to Guangdong China in exchange for
cheap microwave oven components. This then greatly increased the capacity of Galanz, and contributed
largely for their further expansion. Research and Development were then added to the company, thus
paving the way for the company to become an ODM for other companies overseas. Sales and revenues
sky rocketed from this point on; and by engaging in competitive price wars, Galanz was able to gain the
vast majority of the market worldwide.
By 2003, Liang noticed the increased demands of Multinational Companies, such as Wal-mart
and K-mart, for branded products; this is when the company decided to introduce Galanz-branded
microwave ovens. While being the leader in producing microwave ovens in the worldwide market,
Galanz sold predominantly as an OEM, which meant that most consumers internationally do not
recognize Galanz as a brand of its own, and still bought the familiar brands such as Panasonic, Toshiba,
and the like. This expansion to an international OBM led to complications that did not exist before.
Galanz feared that their OBM products might compete with their OEM products, leading to OEM
companies, which was the primary customer and primary source of revenue of Galanz, to go out of the
market. Problems concerning their old operation strategies where also manifesting. From being a
company of only 20 employees from 1993, due to its exponential growth within only a decade, most of
the strategies which were applicable for small scale industries such as; simple management structures and
simple sales forecasting, is not applicable anymore. Their move to OBM requires the company to figure
out better communications between the Production Department and Research & Development
Department, in order to keep up with the diverse and changing demands of the international consumers.
Customer Service capabilities, which Galanz lacks, should also be taken into account in order to become
better at producing OBM products.
Point of view:
Point of view is Liang Zhiaoxian, the vice chairman and CEO of Galanz Enterprises Group Co.
Ltd.
Problem Statement:
As Galanz continues its rapid expansion in the dynamic and diverse global market place, would
the company still be able to maintain its success, despite their outdated operation strategies and growing
concerns in becoming an OBM for international consumers?
Alternative Courses of Action:
 Joint Venture with established appliance companies.

By signing a joint venture agreement with the already established, trusted by the
international market, appliance companies such as Panasonic, Toshiba and LG, this could provide
an easier entry to the global market. This could prove beneficial for Galanz as they could use the
promotion, expertise in customer service, and foreign facilities of the partner company, for their
utility. On the other hand, the partner company would also enjoy an increase in revenue by the
added product of Galanz microwave ovens. Difficulties could arise whether if the appliance
companies would consider a joint venture with Galanz or just consider the venture as a threat to
their company.
 Stop the further expansion to OBM products.
Pushing Galanz-branded microwave ovens might prove to be more costly, which might
lead to net losses. Rather than becoming an OBM, in an unknown market where there are already
established companies and which might prove to be risky, Galanz should remain as an
OEM/ODM for foreign companies, as this is where the company gains most of their revenues.
They should focus their resources in becoming better developers of microwave ovens and its
components, and just set a higher price to their foreign customers in order to continue the
company’s growth. By doing so, they could avoid any further complications that the move to
OBM brings. The downside of doing so is that Galanz will never be known as an international
brand and will never gain access to untapped sales from countries not distributed upon by their
foreign customers.
 Invest time and money on making an updated operations strategy.
Galanz should invest its resources in an operation strategy where they can find the perfect
balance between OEM, ODM, and OBM. Given the income that the company incurs, investing
time and money for research wouldn’t be much of a problem. Updating outdated plans,
managerial structures, operation strategies, and upgrading plants, facilities, and equipments, to the
current need and specifications required by a growing, globally competitive, company such as
Galanz, could provide the solutions to the problems of rapid expansion and the move to OBM.
The problems arising from this action is uncertainty in the result of the research and the amount
of resources that will be expended on conducting the said research.
Recommendations:
Invest resources for further research to create a more suitable operations strategy for the
continuous expansion of Galanz into the global market. By conducting research, the company could
identify the perfect mix between their OBM and OEM/ODM products, and create a suitable operations
strategy that will lead to a more efficient allocation of resources and consequently, further growth for the
company. The problems of uncertainty in conducting the research could be avoided by hiring professional
companies, analysts, or equipped individuals that are experts in identifying bottlenecks, weaknesses, and
operational/managerial problems of companies, and that could provide solutions for these said problems.
By hiring experts who are efficient with their job, the company could avoid unnecessary expenses of
prolonging the research. After the completion of the newly updated operations strategies, Galanz could
then continue with its growth and further success as one of the biggest appliance company in the world.
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Group 6

Operations Strategy at Galanz

Alternative Courses of Action:

 Joint Venture with established appliance companies.

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