Microwave Oven and Brand Image Essay

Operations Strategy at Galanz- One Page Summary Background Galanz is the world leader in selling microwave ovens with 60% of the domestic market and 44. 5% of the international market in 2003. The company was founded in 1978 by Liang Qingde. Its headquarters are located in Shunde, China. In 1991 it bought the blueprints and production lines of Toshiba’s microwave ovens and made its first microwave in 1992. In 1995 Galanz replaced Shell electric as the leading microwave manufacturer in China. The next year Galanz started a six year price war and Toshiba and Panasonic had limited the magnetron supply. In 1997 the company started developing its own magnetron and finally in 2003 the company finally received some recognition in the overseas market. Internal Analysis A strength to Galanz is its position in the domestic market. It is the largest company with a large customer base and a well known brand. It has developed its supply chain which is vertically integrated and this is also a key strength. As the company grew the importance of innovation and developing its own R&D became more and more apparent and this is a strength. Weaknesses to Galanz are its low brand awareness in the international markets and poor management structure which is highly centralized. The company also overlooks data records and codes of practice which is a large weakness because it shows poor management and commitment to ethics. The final weakness would be its conflict between the R&D department and production departments. Since this can slow down production and innovation. Galanz uses a low cost strategy but also tries to incorporate product innovation. External Analysis Now that Galanz creates most of its own parts (about 90%) for its microwaves it has great opportunity in increasing its R&D and producing highly innovative products. It also has opportunity to improve on its brand image in the international market and gain more market share. A threat to Galanz is the possible lawsuits from governments because of its highly aggressive low price war. Another threat is Galanz becoming too focused on OEM and having to compete with strategic partners and potentially losing orders. Galanz is positive in the bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and threat of new entrants parts of the five forces model. It is a very large company with large demand and it can influence the decisions and prices of its suppliers easily. The barriers to entry are high since the suppliers of the megnetrons are limiting the amount produced. Although there are a few substitutes for microwaves, they are not threatening because to other product can do what a microwave does. The intensity of the competition is very high and this is Galanz only negative factor. Summary of key SWOTs, key success factors, and key risk factors Galanz’s strengths would include its size and its vertically integrated value chain. Its recognition of the growing concern to stress the importance of R&D and product innovation is also key. Galanz weaknesses are its low brand awareness, centralized management structure, the internal conflict between departments, and ignoring the codes of practice. Opportunities of the company are to continue to increase its R&D departments and improve its brand image internationally. Threats include possible lawsuits from governments and too much focus on OEM part of its business. The STEP factors of the industry show that Galanz is doing well in the technological and economic parts but is weak in the social and political side. The company must focus on its low cost strategy and continue to develop its value chain internationally. It will be risky for Galanz to enter markets where its brand is not well known. It is also risky for the company to start focusing too much on innovation since this may lead it away from its original successful low cost strategy. Challenge Statement or Question How can Galanz adapt its competitive strategy and its mass production system to meet the needs of the industry and the demands of the customers, and establish a well known brand image while continuing to hold a large market share and bringing value to its stakeholders?