Operations strategy-at-galanz-case-analysis-vineet vinod munghate

1. Operations Strategy at Galanz
Case Analysis

2. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Case Snapshot
Objectives for Future
 Future competitive strategy for the combination of OEM, OBM and ODM businesses
 Conflict of interests for OBM and OEM (especially in overseas market)
 Effective sharing of value chain activities (such as R&D, Production, Manufacturing)
 Effective resource allocation for competitive advantage
 Vertical relationship to adopt for magnetron production
Past Growth Strategy
 Opportunity sizing (domestic) and stable technology
 Cost arbitrage (labor and assets)
 Transfer of production lines and ~4X operating time
 Adoption of penetration pricing strategies leveraging
economies of scale
 Actualization of R&D investments
 Collaboration with large retailers, such as K-Mart and Wal-
Mart
 Development of overseas R&D facilities
Recent Challenges
 Low brand awareness in overseas markets
 Antitrust (Anti-monopoly) Lawsuits
 Prioritization of business models
 Conflict of interest of OBM and OEM businesses (Sales &
Service networks)
 Centralized decision making body and compliance
governance
 Customization production capabilities and capacity
challenges for magnetron production
 Inefficient production planning
2

3. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Case Analysis Tools
Concepts Applied
 Resource-based-theory
 Value Chain Theory
 Strategic Transformation
 Corporate Strategy
 Versus Business Strategy
 Dimensions: Products / Services, Value
Chain, Geography
 Diversification
 Related Ratio
 Levels: Related, Unrelated, Single
Dominant
 Types: Horizontal, Vertical
 Strategies
 Degree of Diversification
 Penetration Pricing
Qualitative Data
 Business model (including Organizational
Structure)
 Operating Process
 Company History
 Price Cutting Strategy
 Observations (Product, etc.)
Quantitative Data
 Sales and Market Share
 Global revenue and profit
 Pricing Strategy

4. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Issue Analysis
4
Issues of Chinese OEMs during
Strategic Transformation
Relevance in the case of Galanz
Neglecting R&D
No. Galanz has built strong R&D capability and evolved
as a strong ODM
Lack of Core Competency
Partial. Galanz lacks B2C marketing, efficient
production planning and customized production
capabilities.
Passive Position
No. Galanz offers efficient production lines to its clients,
and utilizes the same lines for its own production.
Neglecting international demands and trans-cultural
obstruction to brand identification
Relevant. Lack of efficient customized production capability
and lack of strong international B2C sales.
Challenges in gaining trust of international consumers
due to poor reputation of Chinese products
Relevant. In spite of R&D centre in the US, OBM business
suffers from this fact evidently.
Lacking strategic awareness of brand management
Relevant. Not much investment has been made towards
brand management. Also lacks effecting PR management.
Excessive Competition & Product Homogeneousness
Partial. Although technology is stable, competition is
moderate due to Galanz’s cost effective production and
penetration pricing strategies.

5. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Diversification and the “Related Ratio”
Levels and Diversification Strategies
 Galanz has moderate to high levels of diversification
 Because <70% of revenues are from dominant businesses *
 The business model is also related constrained
 Because all businesses share activities in the value chain *
 Related Diversification Strategies **
 Demands and/or cost linkages between lines of business
 Sharing value chain activities and transferring core competencies
* Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th Edition, 2004)
** Source: Corey C. Phelps, HEC Paris

6. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Diversification and Performance
Source: Palich, Cardinal, Miller, ‘Curvilinearity in the diversification – Performance Linkage’, Strategic Management Journal, 2000
6

7. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Recommendations
7
 Continue diversification of business to OBM, OEM and ODM
 Recognize differences in business models, and develop new capabilities
 Develop customized production/assembly in developed markets and for developed markets
 Develop strong PR, legal and marketing functions
 Dilute the effects of origin of manufacturing
 Invest on brand management to develop itself as an international brand
 Develop strong service networks
 Continue major investments in innovation in technology and production
 Implement efficient production planning systems
IN THE NEXT SECTION WE DISCUSS HOW TO DEVELOP CORE COMPETENCIES FOR
GALANZ’S BUSINESS MODEL AND CONTINUE PURSUIT OF DIVERSIFICATION

8. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Horizontal Diversification
Identifying Cross-business shared resources
Inbound
Logistics /
Purchasing
R&D and
Technology
Production
Outbound
Logistics /
Distribution
Sales &
Marketing
Service
OBM
OEM
ODM
Value Chain Activities
Combine to gain
more leverage
with suppliers
Centralized R&D,
share technology,
transfer technical
skills
Leverage
economies of
scale
Maintain single
network for OEM
& ODM. Gain
leverage from
suppliers
Develop single
team for OEM &
ODM
Train OEM and
ODM clients /
train 3rd party
service teams
(Indirect
Involvement)
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th Edition, 2004)
8

9. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Horizontal Diversification
Transfer and Share of Core Competencies
Inbound
Logistics /
Purchasing
R&D and
Technology
Production
Outbound
Logistics /
Distribution
Sales &
Marketing
Service
OBM
OEM
ODM
Value Chain Activities
 OEM manages Purchasing, Inbound Logistics and Production
 ODM manages centralized R&D capabilities
 OBM manages distribution, B2C sales & marketing and service
 OEM & ODM jointly manages outbound logistics, B2B sales & marketing
 Centralized team to manage service networks for OBM and provide training to ODM & OEM clients
9

10. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Horizontal Diversification
Benefits & Challenges
 Cost based Synergies
 Demand based Synergies
 Intangible interrelationships will be
exploited among Galanz's business
divisions
 Transfer of those activities only
providing for competitive advantage
 Transfer skills & expertise among
similar value
 Activities at Galanz are sufficiently similar
 The transfer of will provide significant sources
of advantage for receiving business units at
Galanz
Source: Corey C. Phelps, HEC Paris
 Diversification alone will not produce
superior performance. Management
skills in capturing benefits of
interrelationships are key success
factor
 The key levers are
 Strong sense of corporate identity and mission
 Allocation of management attention
 Efficient allocation of capital and shared
resources to the three business units
 Incentive system to reward greater than
business unit performance
Source: Bernd Venohr, Berlin School of Economics

11. Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De
Vertical Diversification of Production
Commitment
Formalization
High
Profitability
Low
Growth
Low Profitability
High Growth
 Based on the profitability and growth prospects of the product / component, vertical
diversification options will be considered.
 Also, stability of technology will influence vertical diversification decisions. The higher stable
the technology, the lower the commitment of the decision maker.
Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th Edition, 2004)