Anyone who has read Michael Porter's book Competitive Strategy knows three famous competitive strategies: total cost leading strategy, differentiation strategy and specialization strategy.
In my opinion, Galanz is one of the most standard and successful practitioners in applying Porter's competitive strategy theory in China enterprises and even global enterprises.
Galanz has fully implemented the first of Porter's three competitive strategies-the total cost leadership strategy, and beat all competitors to become the first in the world in just five years.
Obviously, Galanz's price reduction is not a strategy, but a tactical action or strategy under the strategy of achieving total cost leadership.
Galanz's price reduction is not for price war, but to continuously ensure the realization of the total cost leading strategy, that is, reducing prices → expanding scale → reducing costs → reducing prices again → expanding scale again → until monopoly.
When the production scale of Galanz microwave ovens was 800,000 units, the price of 600,000 units was taken as the pricing basis, and the price was greatly reduced in the market. Enterprises with production capacity below 600,000 units will lose money. Galanz won the market by this price strategy and quickly expanded its scale. Every time it reaches a higher level, it continuously reduces its cost and selling price, which translates into a competitive advantage in price and gains a larger market share. We can clearly understand Galanz's competitive strategy from the operation mode of Galanz's total cost leadership strategy, and Galanz has applied Porter's competitive strategy, especially the total cost leadership strategy, to the extreme.
Therefore, the domestic business and media circles should "clear the name" for Galanz, and replace those slightly bloody labels with "master of competitive strategy" and "master of total cost leading strategy". So far, we have interpreted the first part of Galanz's competitive strategy. This is a successful practice for Galanz to learn from Porter's competitive strategy theory and the experience of many successful enterprises, and the most valuable thing Galanz has created is its strategic competition and cooperation model.
Second, Galanz's competition and cooperation model Chang Shengjun is good at learning war in war. Galanz is one of the most successful enterprises in China that are good at learning from competition.
From 65438 to 0998, Galanz ranked first in the world. Tsinghua University regarded Galanz as a model of China's enterprise competitive strategy and listed it as a typical case of MBA teaching. Galanz did not stop at the success of the total cost leadership strategy, nor was it satisfied with defeating all competitors in the domestic market and starting to fully implement the internationalization strategy.
However, Galanz policymakers are well aware that they are faced with powerful multinational companies and unpredictable international markets, and they have no strength to compete with them to reduce prices.
As a result, Galanz's decision-makers adopted an unconventional innovation strategy: strategic cooperation with three multinational companies in Europe, America and Japan, the top three microwave oven manufacturers in the world at that time, and low-cost expansion by using international resources. This creates an international business competition model, which can be called "Galanz competition model".
The so-called "Galanz competition and cooperation model" means that Galanz first formed a strategic alliance with three multinational companies in Europe, America and Japan based on the dynamic comparative advantage of low-cost human resources, and moved all its microwave oven manufacturing factories to Galanz Industrial Zone without spending money, and cooperated to produce key accessories of microwave ovens according to the agreement of complementary advantages and mutual benefit.
This cooperation model has attracted more than 200 microwave oven manufacturers or operators around the world to establish this strategic alliance with Galanz. Galanz not only obtained advanced equipment and technology for free, but also turned its competitors into strategic partners.
. The specific process of "Galanz Competition-Cooperation Model": In the mid-1990s, South Korean household electrical appliance enterprises, mainly LG, sprang up by virtue of their cost advantages, drastically reduced their prices in the microwave oven international market, seized market share, and suppressed the market price to the cost line of European, American and Japanese enterprises, which was almost unprofitable and got into trouble. Galanz people have an insight into and accurately analyzed the competitive strategic situation in the international microwave oven market, and made a decisive move-"Europe, America and Japan", that is, forming a strategic alliance with three multinational companies in Europe, America and Japan.
It is reported that Galanz first approached the famous Japanese company S Company to discuss cooperation, but it was rejected. Instead, I negotiated cooperation with French company T in Europe and succeeded in one fell swoop. Galanz people's cooperative negotiation is full of creative wisdom. Galanz made full use of its low-cost advantage to start negotiations with French company T on the production cost platform of microwave ovens.
The negotiation starts with the specific cooperative production of microwave oven parts and their prices. Take the transformer, the main component of microwave oven, as an example. Galanz has been importing from French company T and Japanese company S, with import prices of $30 and $23 respectively.
Galanz persuaded French company T in this way: your factory production line starts less than 6 hours a day, and the working day is only four or five days a week, less than 30 hours a week. But our Galanz production line has three shifts 24 hours a day, which is almost equal to your week, and the production efficiency varies greatly. And our labor cost is not only 20 times lower than yours. Therefore, our production cost is much lower than yours. If the two sides cooperate, complement each other's advantages and form a strategic alliance, you will move the production line equipment to Galanz factory and let us produce. The supply to you is only $8, which is less than 1/3 of your current cost price.
This method and way are too tempting. Only one transformer can reduce the cost by 2/3, reaching more than $65,438+00, and with other components, the overall production cost of microwave ovens can be reduced by a large amount. French company T weighed the advantages and disadvantages and signed a cooperation contract. In this way, Galanz moved all the advanced microwave oven production line equipment of French T company to Galanz factory without spending money. In this way, Galanz successfully negotiated with American H Company and formed a strategic alliance in this way. When the microwave ovens of two multinational companies in Europe and America gain price advantages in the international market and the sales prospects are promising, the Japanese company S can't sit still and talks about cooperation alliance with Galanz.
The conditions for Galanz to settle in Japanese company S are more favorable, and the cooperative supply price of transformers is $6. Three multinational companies in Europe, America and Japan formed a strategic alliance with Galanz, and moved all their microwave oven manufacturing production line equipment to Galanz Industrial Zone, from cooperative production of parts to OEM production of the whole machine. Strategic alliance enables both sides to complement each other's advantages and achieve mutual benefit and win-win in the international market.
Therefore, this win-win cooperation has attracted more than 200 multinational companies to form strategic alliances with Galanz. Galanz has integrated the production, manufacturing, R&D and links of key parts of microwave ovens on a large scale. The scale of production and market is constantly expanding, the degree of specialization and intensification and productivity are constantly improving, and the production cost is also greatly reduced. For example, the actual cost of the transformer is only $4, and even the cooperative supply price has a high profit.
Galanz cooperation mode is a market competition mode created by China enterprises in contemporary shopping malls. From the perspective of competition theory, it is a kind of competition mode, which can be called "Galanz competition mode". This proves that Galanz not only relies on the "price war", but also uses the "Galanz competition and cooperation model" brilliantly, creating the performance of "the first microwave oven manufacturing in the world".