Guangdong Galanz Group Co., Ltd. Case study

Attila Németh 22/01/2014 1

CONTENT• About Galanz• Perfect competition – imperfect competition (Other aspect of

the case) – Galanz choices

• My theory– Argument

• New strategy of Galanz– Corporate level– Business level– Functional level

• Better performance - summary• Reference

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Galanz …• is a home appliance manufacturer – product range:

microwave oven, air conditioner, other kitchen products• is big, but “young” company, increases rapidly and wants

to become „The world’s plant to global brand” to raises profit

• runs on three type of businesses - OEM, ODM (international market), OBM (mostly domestic market)

• operates in stabile economical and political environment• main advantage is low cost manufacturing – economy of

scale and economy of scope

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Theory of the perfect and imperfect competition and Galanz

“The theory of supply and demand usually assumes that markets are perfectly competitive. This implies that there are many buyers and sellers in the market and none of them have the capacity to significantly influence prices of goods and services. In many real-life transactions, the assumption fails because some individual buyers or sellers have the ability to influence prices. Many markets are characterized by some degree of imperfect competition. A monopoly exists when a single large supplier can dictate the market price, because buyers have no alternative suppliers. ”

 Braeutigam, Ronald (2010). Microeconomics (4th ed.). Wiley.

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Galanz choices

So, there are two ways which Galanz can follow in this aspect:One, if Galanz pursues to be monopoly player in long term with their aggressive “price cut” strategy → I think there is very little chance in global market.Two, if the company needs to consider the perfect competition theory as other companies do, and applies new strategy and competes → Galanz wants to be a global player, so the company is needed a new strategy and has to follow the second way, in my opinion.

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MY THEORY

The cost of the labor will higher when the standard of living will increase in China, and always will be another producer who can manufacture the products cheaper, so Galanz one of the main advantage the low cost productivities will weaken, and the position of their OEM business also would become vulnerable. Therefore it is a need to create new advantages what Galanz will be able to use in competition on international market.

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MY THEORY

Monopoly, what the company reached with low cost-low price strategy, is on domestic market sustainable, but it does not work in global, because of political and law reason. Therefore it is a need to create new corporate and business strategy which based on a global brand and increases customers’ loyalty. On functional level, Galanz needs to improve the resources management. These would be the key factors the company going to be more successful on global market and gain more profit.

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Argument• The degree of growth is not assured with the present

strategy• Markets and the habits of the customers are changing• High demand of low volume and high variety of

products, and Galanz is not well prepared for this situation

• The level of dependency as an OEM partner is high• The competitors put pressure on Galanz as a supplier

(OEM), because Galanz’s original brand competes on the same market.

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Argument• Galanz has weak brand image. • Galanz needs to became a global brand to increase the

profit.• Galanz has to choose new strategy makes small scale

production of customized products.• Handling of customers complaints is a weak point of

Galanz.• Company had to invest in enhancing customer service

capabilities.

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New strategy of Galanz

• Vision and mission – „The world’s plant to global brand” • http://galanz.com/pages/cate.aspx?catid=16|207

• Corporate level of strategy– growth– multi focused– moderate related linked diversification strategy

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New strategy of Galanz• Business level of strategy

– focused differentiation strategy in Galanz own brand business– cost leadership strategy in the OEM, ODM businesses – After a while, the strategy of Galanz own brand business would be

integrated : cost leadership and differentiation on broad target (5-10 years)

• Functional level of strategy– Marketing strategy– R&D strategy– Financial strategy– HRM strategy– Information strategy

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New strategy of Galanz

Corporate culture(Vision, mission)

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Corporate-Level Strategy of Galanz

Criticalweaknesses

Criticalenvironmental

threats

Valuablestrengths

Abundantenvironmentalopportunities

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Growth strategy - argument • Cheap labor cost and land • Significant financial resources• Significant achievement and high degree cooperation in R&D• Low but certain profit and low risk to invest • High productivity - Utilized labor resources and production facilities • Highest volume of sales in both the domestic and global markets • Leader of microwave oven industry• Key leaders group of Galanz is determined to move forward• Market has significant developing potential • Profitability for Galanz brand markets is relatively high and the

customers habits are changing• Openness for technological development on the product and customer

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Business level strategy

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Focuses of business level strategy

Cost•Initial Cost (purchase cost)

•Operating Cost (electricity)

•Maintenance Cost (service)

Quality•Performance (primary characteristics; e.g. quick heating)

•Features (secondary characteristics; e.g., digital display)

•Reliability (frequency that repair is needed)

•Conformance (to pre-specified standards)

•Durability (time until replacement is needed)

•Serviceability (speed, courtesy, competence)

•Aesthetics (look, feel, smell)

•Perceived Quality (brand image; e.g., Galanz has not this)

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•Product Flexibility (features, innovation, and ability to customize)

•Volume Flexibility (response to unanticipated demand)

•Process Flexibility (adapt process to provide a variety of products)

Flexibility

Focuses of business level strategyDelivery

•Accuracy/Completeness (correct items in correct quantities)

•Dependability (on-time delivery)

•Availability (in-stock)

•Speed (lead time; i.e., elapsed time from placement of order until its receipt)

•Information Availability (use Internet for real-time order status)

•Quality after Shipment (breakage)

•Ease of Ordering (ability to order over Internet)

•Shipment Flexibility (ability to expedite a shipment)

•Ease of Return

•Customer Support

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OEM business unit emphasize: Cost, Delivery

OBM business unit emphasize: Quality, Flexibility

Functional level strategy

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Functional level strategy Marketing strategy (sales, pricing, distribution)– Product development for existing markets

• OEM, ODM (B2B market) and for new market for own brand

– market development • for OBM business - B2C market

– Push strategy OEM, ODM • special offers • discounts

– Pull strategy OBM• Customer advertising• Branding• Costumer loyalty

– Price, Promotion, Product, Place of marketing19

Functional level strategy R&D strategy•Product innovation and process improvement– Technological leader strategy - high expenditure – focus on

only a few areas - OBM differentiation– Strategic Technological alliances and technological follower

OEM low costHuman Resource Management strategy– Hire high skilled employees and because the company wants

to be international, need to recruit managers from the target markets

– Trainings mainly on marketing and services– People can be an important competitive advantage

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Functional level strategy Financial strategy– The liquidity and credit strategy (government support) is

important because Galanz needs to invest to improve OBM business

– Balance the operational cost and investment and maintain the financial system – priority strategy on capital allocation

– Precise planning and forecasting is crucial for the success because the company follows growth strategy with diversification and differentiation on business level.

Information management strategy– Regarding to the implementation of the new strategy must

use automated information flow. Communication among the organization levels must be quick and understandable.

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Goals of operational strategy

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Galanz is capable to better performance• New corporate strategy• More independency for the company, and new competitive

advantages – new special product• Improve B2C business –Market research and development of

service• New business strategy for B2C Galanz brand and sustain OEM-

ODM business• Differentiation strategy for Galanz brand business and keep low cost

wide range strategy for OEM business• New functional strategy - reallocation of the resources and focus on

Galanz brand business• More focus on planning, marketing and human resource• Improve the corporate culture, the control system and the flow of

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REFERENCES

• The Build or Buy Considerations, International Journal of Chinese Culture and Management 2008/4 419 - 420.

• Johnson, Scholes: Exploring corporate strategy • http://galanz.gmc.globalmarket.com/• FETSCHERIN Marc - Marc Sardy: Chinese Brands•  Braeutigam, Ronald (2010). Microeconomics (4th ed.). Wiley• http://galanz.com/

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Thank you for your attention!

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