Galanz Case
Describe the nature of operations management at Galanz by identifying the purpose and products of the organization and the important operations decisions (using the four decision types outlined in Schroeder).
Galanz’s entry into China’s microwave oven market was opportunistic. In 1991 the Chinese economy was rising to a point that families had expendable income and the versatility of microwaves was identified, however, prices were higher than what most could afford. Seeing the opportunity, company strategy started out as a product imitator and sought to bring products to market at a reduced price. As such, cost became the key tenant with operations management at the company. In the early stages of development, Galanz had no advantage in product design or manufacturing, what they did have was labor, land and the ability to run an assembly plant 3 shifts for 365 days per year. These critical advantages would allow the company to offer units at the reduced price required to gain market share.
However, Galanz had neither the design nor manufacturing expertise required to sustain further price reductions and capacity increases. To address this, arrangements were made with customers for Galanz to provide low cost products in exchange for design and manufacturing technology. Additionally, similar arrangements were also made with component providers where production was taken over by Galanz in exchange for them being able to retain surplus capacity.
The competitive advantage Galanz used to enter the market isn’t easy to discern. They had no proprietary knowledge or quality advantage to rely on and capacity was still building which leaves inventory. The argument could be made that the business strategy of being a low cost manufacturer created demand and in turn, Galanz had appropriately priced inventory available to satisfy demand, which was then the competitive advantage. In later years, investments in R&D