Operations Strategy at

Galanz
Case Analysis

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

Recent Challenges

Opportunity sizing (domestic) and stable

technology

Low brand awareness in overseas markets

Cost arbitrage (labor and assets)

Prioritization of business models

Transfer of production lines and ~4X operating

time

Conflict of interest of OBM and OEM businesses

(Sales & Service networks)

Adoption of penetration pricing strategies

leveraging economies of scale

Centralized decision making body and

compliance governance

Actualization of R&D investments

Customization production capabilities and

capacity challenges for magnetron production

Collaboration with large retailers, such as KMart and Wal-Mart

Development of overseas R&D facilities

Antitrust (Anti-monopoly) Lawsuits

Inefficient production planning

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

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

Penetration Pricing

Case Analysis: Operations Strategy at Galanz

Created by Sagar Neel De

Issue Analysis
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 transcultural 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 Galanzs cost
effective production and penetration pricing
strategies.

Case Analysis: Operations Strategy at Galanz

Created by Sagar Neel De

Diversifi cation and the Related Ratio

Levels and Diversifi cation 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* Source:
Diversification
Strategies
** Applications (5
Robert M. Grant, Contemporary Strategy
Analysis: Concepts, Techniques,

Edition, 20
** Source: Corey C. Phelps, HEC P
th

Demands and/or cost linkages between

lines
ofOperations
business
Case
Analysis:
Strategy at Galanz

Created by Sagar Neel De

Diversifi cation and Performance

Source: Palich, Cardinal, Miller, Curvilinearity in the diversification Performance Linkage, Strategic
Management Journal, 2000
Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De

Recommendations

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

7

Case Analysis: Operations Strategy at Galanz

Created by Sagar Neel De

Horizontal Diversifi cation

Identifying Cross-business shared resources
Value Chain Activities
Inbound
R&D
Outbound
Production
Sales
Service
and
& Marketing
Logistics
Technology
Logistics
/ Purchasing
/ Distribution

ODM
OEM
OBM

Combine
Centralized
Leverage
Maintain
Develop
Train
OEM
single
to
single
economies
and
gain
R&D,
ODM
team
network
more
share
clients
for
ofleverage
scale
technology,
OEM
for/ OEM
train
& ODM
with
&3ODM.
transfer
suppliers
Gain
technical
leverageskills
from suppliers

Source: Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (5th Edition, 20

Case Analysis: Operations Strategy at Galanz

Created by Sagar Neel De

Horizontal Diversifi cation

Transfer and Share of Core Competencies
Value Chain Activities
Inbound
R&D
Outbound
Production
Sales
Service
and
& Marketing
Logistics
Technology
Logistics
/ Purchasing
/ Distribution

ODM
OEM
OBM

OEM
OEM manages
manages Purchasing,
Purchasing, Inbound
Inbound Logistics
Logistics and
and Production
Production
ODM
ODM manages
manages centralized
centralized R&D
R&D capabilities
capabilities

OBM
OBM manages
manages distribution,
distribution, B2C
B2C sales
sales &
& marketing
marketing and
and service
service
OEM
OEM &
& ODM
ODM jointly
jointly manages
manages outbound
outbound logistics,
logistics, B2B
B2B sales
sales &
& marketing
marketing

Centralized
Centralized team
team to
to manage
manage service
service networks
networks for
for OBM
OBM and
and provide
provide
training
to
ODM
&
OEM
clients
training to ODM & OEM clients
9

Case Analysis: Operations Strategy at Galanz

Created by Sagar Neel De

Horizontal Diversifi cation

Benefi ts & 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

Case Analysis: Operations Strategy at Galanz

Created by Sagar Neel De

Vertical Diversifi cation of Production

Commitmen
t

High Profitability
Low Growth

Formalizatio
n

ty
ili th
b w
t a ro
fi
ro h G
P
h Hig
ig
H

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)
Case Analysis: Operations Strategy at Galanz
Created by Sagar Neel De