1. In its early stages (1992-1999) as a microwave manufacturer
a. What would you consider the order qualifiers for Galanz? (1 point)
Quality is touted to be a pertinent factor for order qualifiers owing to the provision of reliability to the users. The delivery of products is also considered as order qualifier. In tandem Galanz had to offer an affordable price range.
b. What would you consider to be the order winners? (1 point)
Low-cost production capabilities and cost leadership over peer brands is a competitive advantage of Galanz. This ability aided the company to sell microwaves at a lower price than the industry competitors. The company has strategized an affordable product which created a cost leadership thereby allowing the company to gain sales and incremental market share.
c. Identify the distinctive competence of Galanz and if it aligns with its order winners? Identify two Critical Success Factors (CSF) for Galanz in this early stage. (1 point)
Maximum capacity utilization and cost leadership are the distinctive competences of Galanz. While competitive strategy and operational strategy of Galanz are the critical success factors in the early stage as explained below.
The competitive strategy adopted by Galanz was cost leadership that aided garnering increased market share in the local market in an aggressive manner by triggering a price war cycle in the Chinese market.
The operational strategy Galanz has focused on making use of resources by increasing production capability through a free production line transfer, running production 24 hours a day by fully utilized its production facility and labor with proper planning in the ever changing market. A strategic fit operation that has resulted in reduction of manufacturing costs through the operations strategies was the key point. The operations strategy supported with the competitive strategy which has translate in to low product costs, offering the company a high degree of flexibility.
2. Are cost, quality, flexibility, delivery, product variety, and after-sales service the usual operation’s objectives for most companies? For each of the following phases identify which objectives were prioritized by Galanz. Explain your answer.
a. OEM phase (1 point)
When Galanz debuted into microwave ovens market, the first strategy was to maintain low cost over its competitor. This aided in winning over market competition from the start. In the following phase of strategy the product quality attained pertinence to satisfy the customers overseas that required a quality product. The delivery of the products was another critical element to fulfill OEM obligations to their massive expansions pertaining to customer base across globe inclusive of overseas market.
b. ODM phase (1 point)
Due to the shortage of the main component of the microwave oven i.e. magnetron, Galanz had to migrate to ODM phase. This supply chain challenge forced innovation by developing their own magnetron and invest into related research and development. The aim of surviving the market and sustaining cost leadership was critical in this phase. Increasing market share by flexible prioritization was also followed.
c. OBM phase (1 point)
Galanz bloomed as a market leader by using the strategy of Cost leadership. The other pertinent strategies adopted included a well-managed supply chain to deliver the product to the consumer end and the compliance with respect to customer acceptable quality standards pertaining to the products. Hence the quality of product as well as price leadership were equally important for the success of the company. The company also involved itself into OEM and OBM business that was executed by a varied production strategy. Owing to the pertinent roles played by accuracy of the forecast and responsiveness in overall business strategy, the accuracy of delivery was a pertinent operations objective at this stage. The company conceptualized an offering of the branded microwave oven to K-Mart and Wall Mart stores across the country. As Galanz expanded across the globe rightly so sales and after sale services became the dominant business strategy respectively. The company lays stress on ample training being offered to the customer service staff in areas such as repair, handling complaints, warranty claims and the like for adept servicing of the consumers. The company was also researching and developing a number of low to high range based products those have complicated configurations in order to offer additional flexibility to consumers thereby gaining competitive advantage in the market place.
3. What are the operations challenges faced by Galanz as it seeks to balance its OBM business with its OEM/ODM business? (2 points)
Galanz OEM and ODM businesses were permitted for investing predominantly in their production operations without investing in distribution networks as well as customer service. As the business model was as OEM/ODM to major brands, the end consumer marketing as redundant as the sales was under customer’s brand. On the other hand, they could depute their resources focusing on product design and production as these domains held prominence with respect to OEM/ODM customers. A thriving OBM business to co function with existing OEM/ODM would necessarily possess certain operational challenges like:
• The risk of being perceived as competition to OEM customers
• Challenges related to respective sales and forecasting
• Production lines need to be tuned to handle product variation and low volume batches which may contain small batches required high variety.
• Company needed to invest in developing the customer service capabilities
• Required to established new distribution channels and networks
• Low brand awareness relating to overseas markets
4. According to the disruptive innovation theory of Bower and Christensen, would Galanz be considered a disruptor? If yes, what is the disruptive innovation? In your discussion, consider Galanz’s market entry strategy and its progression as a company. (2 points)
As per the disruptive innovation theory Galanz can be considered as such the disruptor. The low-end disruptive strategy that was followed by the company using low-cost Chinese labor, land, maximize capacity utilization through production planning, proper maintained as a part of operation strategy for manufacturing appliances for export also triggered the non-microwave owners pertaining to middle class in China to purchase the product. As the business model garnered market-enabling price points pertaining to domestic Chinese market, it was expanded globally. Galanz debuted from a low-end level, gained an equal status with transnational enterprises in a few years by focusing on the innovation, new product line, R;D and transformed as one of the major participants in global market rubbing shoulders with the giants. After the few years Galanz’s market share in domestic market increased to 76% in 2000 and captured a 40% of the world microwave oven market by 2001.