OPERATIONS STRATEGY AT GALANZ
Dr. Kokin Lam and Professor Xiande Zhao wrote this teaching note as an aid to instructors in the classroom use of the case Operations Strategy at Galanz, No. 9B10D005. This teaching note should not be used in any way that would prejudice the future use of the case.
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Version: (A) 2010-08-05
Starting from humble beginnings as a manufacturer of down feather products owned by Shunde Township, Galanz had transformed itself into a world-class manufacturer of microwave ovens producing about 50 per cent of the global output in 2003.
This case describes the competitive and operational strategies that Galanz used to achieve such meteoric growth. The company started out with a clear competitive strategy based on cost leadership and then designed and implemented an operations system to help achieve lower cost through economies of scale, the transfer of production capacity from developed countries, and full utilization of available production capacity.
Historically, the company had acted as the original equipment manufacturer (OEM) for overseas brand owners and manufactured products according to the design specifications of the brand owners. With a major investment in a collaborative research and development project with universities and research institutes from 1997 to 2000, Galanz mastered the design and manufacturing technology of the magnetron, the core microwave oven component. As its innovation capabilities improved, the company transformed itself from an OEM to an original design manufacturer (ODM). The enhancement in innovation capabilities allowed the company to improve its performance in multiple dimensions such as quality, cost and flexibility.
As the company gained more widespread recognition for its ability to deliver high-quality products at a low cost, some overseas customers started to demand Galanz’s own brand of microwave ovens. Top management started to consider whether the company should further transform itself from an OEM/ODM manufacturer to an original brand manufacturer (OBM) in the overseas market. In making this decision, Galanz had to examine whether its competitive strategy should be changed and how the operations and market strategy had to be adjusted to support the change in competitive strategy. More specifically, Galanz wondered what operations capabilities would be needed to support the OBM business.
This case can be used in the operations strategy module of an operations management course for MBA/EMBA or undergraduate students. It can be effectively used to demonstrate order winners/order qualifiers and how these should be translated into operations priorities (objectives) and distinctive capabilities of the firm. It can also be used to demonstrate how operations strategy supports business strategy and how operations priorities change over time as the market environment changes or the company’s competitive strategy changes.
This case can be used in combination with several popular operations management textbooks such as Chase, Jacobs and Aquilano (2006), Jacob and Chase (2008) and Schroeder (2008).1 For example, the case can be used to demonstrate the operations strategy process proposed by Schroeder (see Exhibit TN-1) and to show how a company has to pay more attention to its global supply chain strategy and...