Case Study on Galanz Company Co.Ltd

The name of the company is Guizhou Down Product Company but then the name of the company was changes to Galanz Company Co.Ltd. This company was founded in 1978 by the owner Liang Zhaoxian’s father, named Liang Qingde. This company is located in China.

The Main product if the company is the microwave. The company sell microwaves in the local market of the China. The idea of selling and manufacturing the microwaves in the China is due to the reason that before the manufacturing of microwaves in the China the microwaves are imported from other countries of the world and were sold at high prices in the China market, the prices of the microwaves were unaffordable for the people of the China. Then the Liang Senior observed this change in China and the market and made this conclusion that the rise in the economy of the China would stimulate the purchasing power as well as the demand of the people is increasing in context if he modern and more advance commodities for the households. With the advancement of the technology, people want more ease in their life and are attracted towards these highly technological products and the commodities. The Liang observed the high prices of Microwave in the market and then he plan to manufacture the microwaves in the china, as to provide the facilities and the commodities to the common people and the local citizens of the China in the lowest prices. Iiang taken this as a business opportunity and started to produce the microwaves and sell in them in lowest prices possible in the China market.

He also served that in the era of the 1980’s, the microwaves oven and their selling was properly in its fancy in the market of the China these days, though the competition in the market and the demand size was very low at that time. The few competitors that were competing in the, market that time were the Whirlpool, LG and the Toshiba. And these brands have no plan to expand their products in the market because they have no idea of the market as they are the international brands and they don’t have nay knowledge regarding then local market o the China as well as the demands of the people. Then Liang observed the technology side of the microwaves as well and he observed that if he invest in the technology of the microwaves then it is not a risk because the microwave technology has been stable since the 1950’s when the America has first introduced the microwaves.  So, it is a good idea to produce the microwaves and sell them in the market of the China.

Success of Galanz Company Co.Ltd:

But before started to manufacture the microwaves in the China, Liang was worried because there was lack of the technological resources and lack of the skilled people to operate in the industries and assist in the manufacturing of the microwave ovens. After sometime Ling Senior understood this that he had to import the parts and the equipments for the manufacturing of the microwaves from the other countries. Later on he purchased the production blueprinted the microwave production in the 1990’s from the Toshiba company in the USD$300,000. Then later on to assist in the manufacturing of the products and the Liang Senior stared to find the professional and the expert persons to operate in the manufacturing industry of the microwaves. He started to look for the engineers. Then later on he became successful in finding the group of the engineers form the Shangia, who have the experience in the microwave development. The Galanz Company first produced the microwave in the year 1992 and after the production of the first microwave the company was named Guangdong Galanz Enterprise Group Co.Ltd. The first batch of the microwaves that was produced in the hear 1993 was around also most 10,000 microwaves. After the production of the microwaves comes the turn of the selling and in the year 1995, Galanz sold around 25,000 microwaves in the local market of the China. And this telling percentage has taken the company to a leading point and the company become one of the famous domestic oven manufacturer.

Then slowly and steadily the demand of the microwaves of the Galanz Company increased day by day and the manufacturing of the microwaves reached up to the 25 million. But in the manufacturing of the microwaves a part is utilize called the magnetron is necessary and the Galanz had to import it from the other countries. But then the Galanz stared to utilize the magnetrons in a larger amount and the magnetrons market in the China take it as a threat and started to decrease the supply of the magnetrons to the Galanz Company, so his was a worrying position or the Galanz. The Galanz was OEM the Original Equipment Manufacturing Company but after on Galanz transformed itself to the OBM, the Original Brand Manufacturing.  Because due to all these challenges and decreased supply of the magnetrons form the other industries, the Galanz started to manufacture the magnetrons in their own organization. But later on Galanz made an outsourcing commitment with the Japanese manufacturing company to supply the magnetrons and he has solved the problem that he was facing. Galanz has also faced the Price war challenge during the year of the 2000 and 2003. As the Galanz company started to cut the prices of the microwaves in order to achieve a sustainable position in the market and to become one of the leading and the most successful company in the production of the microwaves. The Galanz has used get low cost strategies to compete in the market and to raise its demand in the market, o attract more people and to define the relationship between the customers and the Galanz company and to meet the requirements of the customers. Galanz Company was very enthusiastic about the company progress and its position in the local and the government market because the Galanz has achieved this position after a long struggle and due to the good will and the efforts of the Iiang Senior. Liang Senior has established the company in a proper way to compete in the market with the other competitors. The strategy of the company was very effective as the company has taken a good decision to produce the microwaves on local level to sell it in the market of the China with low prices as considered to other international companies in the market. Moreover, he has also identified the potential of the market and the needs of the customers and has used the low price strategy to attract the customers and to give the customers an ideal product to use. He has provided the customer with best product and the customers have utilized the products in the best possible way and has taken the company to an international Level.

Moreover, the company has utilized a position in the international market as well. The daily operations that are carried out by the Galanz Company is that it produce the microwaves on a daily basis and it also produce the magnetrons and has exported its products to the OEM customers and the clients and this has benefited the company strategy. Moreover, the organization strategy is to improve its production by some innovation and some more innovative techniques to maintain its position in the market and to keep track of its customers and their requirements. This strategy of the commonly Galanz has made it successful a across china, because the selling outlets of the Galanz company is spread in allow over the China and its demand has increased due to the best quality products it provide to the customers.

An action plan is necessary for any company to succeed in different parts of the life and to succeed at the local and the global level, because without the action plan how would the company will able to implement its actions in the real world. Action plan means to make a plan that a company or an organization needs to utilize to develop a position in the market and to maintain a position in the local and the international market.

Action Plan of Galanz Company Co.Ltd:

The action plan that should be utilized by the Galanz company is that the company should maintain its low cot strategy because if the company changes its low cost strategy then the company can see the downfall and the company can use it position in the market because the customers prefer products that are cheap and not expensive and they also want good quality products but if the customers are not provided with such facility then their requirements and needs changes and it affects the purchasing power of the company. The development and growth if the OBM market overseas and the other countries, influence the OEM business negatively, because the influence of the OBM overseas is a negative point, as the growth of the OBM in the local market is also necessary Because the company will be more dedicated towards the overseas market and the OEM is also necessary and the focus from the OEM, will be reduced. So the company should develop a proper strategic plan and proper and action plan to maintain it position in the long run in the local and the international market. Galanz should keep the prices low and maintain the OEM and the OBM side by side. Moreover the company should take an advantage of the international market by selling its products and the outsourcing for the overseas market and the organizations. In the daily operations of the company it will helpful for the Galanz to do the outsourcing of the equipments, as it will maintain a positive reaction of the Galanz with the other countries and it will help the Galanz to export its products in the outside market and maintain its position in the outside market as well.

The company also had a great advantage of low land costs, otherwise, it can cost too much for a company to own land for production and other processes. They had cheap labor in China because the human resource shortage is not an issue for China by any means. It helps them to remain ahead of their competitors. This advantage of the low land cost is another factor that should be maintained by the company. The Galanz Company should maintain its productivity of the magnetrons by the outsourcing because with the production of the microwaves, the production of the magnetrons will lead the company to a great position and the company’s demand will increase in the local and the international level. As magnetrons are important in the production of the microwaves, so the production capacity of the magnetrons should be maintained.

It is a fact that the company was sustaining its business with its own brand, as it was having key components as well as production technology, then they changed the strategy for their Chinese market by becoming a business with original equipment manufacturing (OEM). The combination of ODM and OEM to get growth and success in the overseas market. It is evident that their strategy was going great for them as it was producing good results. So, their decision to evolve as OBM from being an OEM business was a successful decision. So Galanz should keep up with this decision. And maintain the outsourcing.

Question/Answers

1. What has contributed to the success of Galanz?

            It is important to understand for every company that they have to take various measures to be successful, and if things are not working in your favor, then they have to come up with a new change of strategy so that things can be on the right path. There are varieties of factors, which have contributed to the success of Galanz because the company was able to identify opportunities at the right time when they faced different challenges. It is important to look at those success factors one by one in detail so that the overall growth and success of Galanz can be analyzed:

• The first major success factor for Galanz is economies of scale. All other factors are somewhat related to it, or they lead to this major and critical factor. Their strategy having economies of scale helped them to get great margins in their production, which also allowed them to get great margins as well as profits in the domestic market.
• There were multiple factors, which played their role in achieving economies of scale. The first reason was the cheap labor costs. It is vital to understand that when labor costs are cheap, then it automatically has a positive effect on costs of production, which means that the company is able to achieve good margins in costs and pricing of the product, and that thing ultimately helps in achieving more revenues and profits. If labor costs for Galanz would have been higher, then the whole game would have changed for them both in domestic and foreign markets.
• The other great news for the company was its ability to establish as a brand, which started to be recognized in the international market as well. It was important for them to capture the global market of the microwave oven so that they could challenge international competitors, and they did so successfully.
• The company also had a great advantage of low land costs, otherwise, it can cost too much for a company to own land for production and other processes. They had cheap labor in China because the human resource shortage is not an issue for China by any means. It helps them to remain ahead of their competitors.
• The other great thing about Chinese labor was that they were available with flexibility. It means that Galanz was able to run 3 shifts working on its full capacity for 24 hours. It is a fact that due to labor routine, various companies have to shut down their factories for a few hours, but it was not the case with Galanz
• Price is one of the key factors for any company, how they price their product for their consumers. Galanz was great in this regard, as they capture the attention and loyalty of consumers with lower prices. This price was way less than their competitors in the market, and basically it was not possible for its competitors to come up with such price, because they could not have achieved those margins, which were achieved by Galanz.
• When companies stopped giving production part named “magnetron”, it was a great challenge for the company to overcome, but they did not shy away from the challenge and started producing their own manufactured magnetron. However, the growth and success were so rapid that Galanz was facing difficulty to produce enough magnetron. But as always, Galanz got itself out of trouble by getting the part through outsourcing from a Japanese firm, which helped them to meet their demands.
• This is how Galanz slowly got its feet in the production technology as well, which meant they were able to use innovation and creativity through their great R&D process to come up with great innovative parts. The original equipment manufacturing (OEM) helped them to stay strong in their production strategy to meet the demands from the domestic and foreign markets
• The other great thing for the company was its ability to capture the attention of the international market, where it started challenging famous international brands such as LG and Toshiba. They were consistent in using the strategy of cost leadership, which really helped them to penetrate into the international market with so much growth and success.
• Then they came up with another change, which helped them to achieve more success. They were working on the OEM model, and they shifted their work to outside markets the overseas, which played a great part in achieving economies of scale.
• Their product-oriented process with their great production technology helped them to gain competitive advantage, and they did so by utilizing its resources to their full capacity. It means that things were going great for them.
• It is important to mention here that when Galanz entered the business of microwave oven, it was not a well-established business, because the technology was new, and very few companies were producing it, and many of them were afraid to take a major step towards production. It was the right time for a company to stand up and invest to lead the market, and Galanz was able to do so. It helped them to become one of the largest and biggest microwave companies in the world.
• One last critical success factor for Galanz was the fact that they did not only captured foreign markets by getting their brand famous and trusted all over the world, but they also used their strengths to get their competitors out of the business of microwave own in the market of China.

2. What are the “Order qualifier” factors? “Order winner’ factors?

            It is important to understand the concept of order winner and order qualifier factors. The term order qualifier means that a product has certain qualities and features, which makes it a product worthy of consideration from customers to buy. On the other hand, order winner factors are the aspects of a product, which differentiates from products of other companies, and makes it a unique one so that customers are willing to buy it. It means that production process of product will be related to order qualifier that if certain product is being produced, then it must have some features, which will make it considerable for customers. And order winner strategy is related to the fact that a product has got its features after the production, which is forcing customers to buy it. Keeping these factors in view, it was important for Galanz to look at these two factors.

            There are various things associated with order qualifier and order winner for Galanz. The microwave oven product at the time of this case study had great order qualifiers, because this technology was getting popular. The first major order qualifier was its cost of production. The cost of production was lower, which means that product would be cheap in pricing. The other order qualifier for Galanz was their great resource utilization and increased capacity. In addition to that quality was one of the biggest order qualifiers, because when they purchased parts from other major suppliers, the parts were of great quality. And even when parts were not given by the suppliers due to competition, they started producing it on their own, and again they were producing quality parts to make quality products. The low uncertainty, as well as the great delivery of the product, was another major order qualifier. On the other hand, when we look at order winners, which forces customers to purchase products from Galanz, the price was the most important order winner for the company. The company priced its product way lower than its major competitors, which means that customers are eager to buy products from Galanz because it was not only cheap in price, but still great in quality and efficiency. The cost of production was the one which helped Galanz to achieve this kind of order winner.

3. Should Galanz have evolved from being an OEM to being an OBM? Is Galanz structured to compete as an OEM? Why or why not?

            It is always important for a company to understand which strategy is coming with fruitful results. So, when a strategy is going good with certain parameters, then it is vital to stick with this strategy so that things can remain on the right track. It is a fact that the company was sustaining its business with its own brand, as it was having key components as well as production technology, then they changed the strategy for their Chinese market by becoming a business with original equipment manufacturing (OEM). The foreign brands were now able to outsource their production process to the company because its costs were extremely lower as compared to the industry. This helped the company to produce more products, and with this practice, they were able to get things going in a great manner. They were able to master production as well as the design of production components such as magnetrons. So, they rightly thought that it is time to become a business with original design manufacturing (ODM). It also helped the company work on the original brand manufacturing (OBM) model. This OBM model was proving extremely successful for them in the Chinese market, whereas they were able to use the combination of ODM and OEM to get growth and success in the overseas market. It is evident that their strategy was going great for them as it was producing good results. So, their decision to evolve as OBM from being an OEM business was a successful decision

4. Should Galanz continue to expand its capacity through outsourcing arrangements? How does the pursuit of outsourcing align with its operations strategy?

             It can be said that it is not viable for Galanz to go for expansion of its capacity with the help of outsourcing arrangements as the company is already doing well in its production capacity with lower costs advantage. This is also allowing them to remain successful in the domestic market, so there is no point to change this successful strategy. As far as operations strategy is concerned, the company has been doing well in this regard, and when they will align outsourcing with their overall operations strategy, it will help them to get more growth by capturing more markets. Their production activities and knowledge can be outsourced so that they can get more depth and perfection in this regard because it is one of the trouble areas for them. When the production process will get smooth and better, it would produce more great results in terms of production as well as the capacity for Galanz.