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Analysis of GLs successful strategies

1. Analysis of GLs overall strategy: specialized strategy. In the growth period, GLtook concentration on one point as the core of its overall strategy. That is to say, ittransferred all its resources of its original business to its new project microwaveoven, retreated from its original business, concentrated all its resources on this newpoint, and carved out a specialized road. To set up an entrance barrier is a key insuch a strategy. GLGroup performances remarkably on this aspect. First of all, itceaselessly develops new products and proprietary technologies on the premise thatthe total cost is not changed or is lowered; second, it launches high quality and lowprice products to enlarge its market share by making use of its advantage in totalcost; thirdly, it begins to develop key components and parts by applying its owntechnology on the above-mentioned basis, and puts them into production to furtherreduce the total cost of manufacture.

Internationalized strategy: Internationalized strategy implies that GL Group has notonly introduced and integrated the advanced production equipment and technologies

from all parts of the world, but has also internationalized its market, its R&D and itstalents. Regarding the market internationalization, GL allocates its resources fromthe perspective of global market and launches its products with its own brand or bymeans of OEM; as for R&D internationalization, GLs Chinese R&D institutionscooperate with those in the USA to develop its proprietary technologies and newproducts. With regard to the internationalization of talents, GL recruits many foreignexperts and management talents to adapt itself to the internationalized operation.

Scale strategy: GL group adopts the strategy of small profits but quick turnover tomaximize its scale and centralize it production. In this way, it could enhance itscompetitive power in markets and reduce its risks. Then, the positive effect of scale

maximization could be used to promote the strategy of small profits but quickturnover. Both of them have promoted the enterprise to develop smoothly. Its nodoubt that it is quite a correct sales strategy for GL.

2. Cost leadership strategy, scale economy strategy and core competitiveness aresummarized by GL into two words scale manufacture. After GL steps into theindustry of microwave oven, it insists on the cost leadership strategy at all times. Thereason why it could reduce its prices so frequently is that its cost is much lower thanits antagonists, and it has a sufficient space for making profits. On one hand, it hasenhanced its production capacity fast and realized the scale economy; on the otherhand, it has increased its sales volume and raised its market share through pricereduction and powerful promotion, and then it has enhanced its strength rapidlywithin a short period accordingly. GL implements the scale strategy with the basisaim at expanding its market rapidly, reducing its operation cost, increasinginvestment in technical development, and enhancing its competitive power in theinternational market by relying on the positive scale effect, so as to make theenterprise to step onto the road of positive development.

GLs scale economy is first of all revealed on the aspect of production scale, andthen on marketing, scientific research and management. Furthermore, GL Group hasalso stepped into and carved out the market of electric cooker and electric fan byrelying on its resources and capacity it has accumulated from the operation ofmicrowave oven.

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Under the direction of cost leadership strategy, GL has defeated many corporationsin price wars. Upon expansion of its scale, it would reduce its price by a largemargin. There are two features in GLs reduction of its price. First of all, it has adefinite aim, e.g. it would locate its ex-factory price below the cost price of theenterprises with a production scale of 0.8million sets when its production scale

reaches 1.25million sets. At that time, GL can still make a profit, but the enterpriseswith a production scale of less than 0.8million sets will lose money upon every setthey produce. In this way, the antagonists of GL will be eliminated gradually. Theother feature is that GL used to reduce its price by a large margin. GL either doesntreduce its price, or reduce it to the level 30% lower than the others.Strictly speaking, GL is a manufacturing enterprise. The greater its manufacturingscale is, the lower its average cost will be. GL reduced its price by about 40% inAugust 1996 and October 1997 respectively. Both of them were resulted from thescale manufacture. However, since 1998, GL has no longer reduced its price bysuch a great margin. The reason for this phenomenon is that the greater the

manufacturing scale is, the more limited the space for cost reduction will be. GLspotential advantage in price reduction has faded away.

Furthermore, GL has made great efforts to reduce its purchase cost, administrationcost, marketing cost and circulation cost ceaselessly. When low labor force cost istaken into consideration, GL has already taken a great advantage in the competitionof composite cost.