Operation Management Case Study

Topics: Acupuncture, Traditional Chinese medicine, Massage Pages: 6 (2038 words) Published: December 8, 2012
Case 1: Daikin China (word count 983)

Daikin? Maybe you are not familiar with this brand. It doesn’t matter. When Daikin entered China market in 1990, many Chinese consumers always asked same questions, “What is Daikin?”, “Where does Daikin come from?”, “What products does Daikin operate?”, or “Is it a Korea brand?”. But now, Daikin becomes the No.2 air-conditioning manufacturer in the world which is only fall behind Carrier, the US air-conditioning giant who was the inventor of air-conditioning and in China market, Daikin becomes the No.1 air-conditioning manufacturer. In 2011, Daikin achieved US$ 3 billion sales revenue which occupied 16.6% market share in China. The total sales revenue is more than 3 times as Carrier China, 2 times as York China, and 4 times as Trane China. (Note: Carrier, York and Trane are 3 US air-conditioning giants who occupied more than 40% share in the world in 2000.) Daikin achieved 25% net profit which is highest in China market in which the average net profit is only 3%. Daikin developed more than 5,000 distributors and dealers in 31 provinces and more than 500 cities in China. Daikin created a new market, central room air-conditioning market. Daikin sells commercial inverter air-conditionings to high tier residential apartments and villas. The central room air-conditioning concept now becomes one of the symbols for Chinese luxury houses. Daikin was a small company originating in Japan Osaka. How can Daikin continuously be growing so rapidly in the past 20 years? How can Daikin defeat so many air-conditioning giants in China market? Are there any relationship between Daikin’s operations functions and the competitive success?

First, Daikin has very clear operations strategy.
Daikin’s operations strategy is “A full range to meet customer needs”. Daikin believes that ‘It all starts with the customers1’. To make the operations strategy achievable, Daikin built enough operations capabilities to meet different customers’ requests but competitors find difficult to imitate2. Daikin not only defines end-users but also all other stakeholders as the customers. To achieve the operations strategy, Daikin established pre-sales service team to fulfill the designing and layout work for all kinds of customers including the HVAC (Heating Ventilation Air Conditioning) designers (See Figure1), consultant companies, general contractors, end-customers, dealers, and so on. Daikin built the in-sales service team. This team is usually said sales team. But this sales team’s job is not only sales, but also resolve the matters for end-users and all stakeholders about any question on the air-conditionings. All of the in-sales engineers must have HVAC technical background. Daikin calls this team as ‘smart sales’ team. Daikin also founded after-sales service team. Different from usually said after service concept, this team not only offers normal after sales services, but also supplies special customized services such as how to use central room air-conditionings, how to avoid the condensation in the humid seasons, how to reduce the power consumption and so on. All of the employees are trained well to be focused on the company’s operations strategy. Figure 1:

Second, Daikin fully charts the processes using the theories of the 4 Vs3. China air-conditioning market is a very rapidly growing and potential market in both room air-conditioning and central & commercial air-conditioning. But in 1990, the room air-conditioning market was occupied by low tier, low price local manufacturers. The central & commercial air-conditionings market was monopolized by 3 US giants, Carrier, York and Trane. But since 1990, new rich hierarchy appeared. This new hierarchy wanted to get more comfortable, out of the ordinary and luxurious air-conditionings to make them outstanding from others. At that time, Daikin acutely grasped this new trend. Daikin started to offer customized inverter air-conditionings which are totally different...
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