Harvard Case - Dayang Group: From OEM to Global Customization
"Dayang Group: From OEM to Global Customization" Harvard business case study is written by Yu Shan, Jiahui Zhou, Shuang Liu, Chuang Zhang. It deals with the challenges in the field of Strategy. The case study is 19 page(s) long and it was first published on : Jun 28, 2023
At Fern Fort University, we recommend Dayang Group pursue a multi-pronged strategy focused on global customization and disruptive innovation to achieve sustainable growth and establish a strong competitive advantage in the global manufacturing landscape. This strategy will involve leveraging Dayang's existing strengths in manufacturing and technology, while simultaneously embracing new technologies and business models to meet evolving customer needs and market dynamics.
2. Background
Dayang Group, a Chinese manufacturing company, has successfully transitioned from an Original Equipment Manufacturer (OEM) to a provider of customized solutions. The company has achieved significant growth through its focus on quality, efficiency, and cost-effectiveness. However, Dayang faces increasing competition from both domestic and international players, and needs to find new avenues for growth and differentiation.
The case study highlights the challenges Dayang faces in navigating the evolving global manufacturing landscape. The company needs to adapt to changing customer demands, embrace technological advancements, and expand its global reach to maintain its competitive edge.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong manufacturing capabilities and expertise
- Cost-effective operations
- Strong relationships with key suppliers
- Growing brand recognition in emerging markets
- Adaptable and innovative culture
Weaknesses:
- Limited brand recognition in developed markets
- Dependence on a few key customers
- Lack of robust R&D capabilities
- Limited experience in developing innovative products
- Potential vulnerability to market fluctuations
Opportunities:
- Growing demand for customized solutions
- Emerging markets offer significant growth potential
- Advancements in technology and automation
- Partnerships with leading technology companies
- Expanding into new product categories
Threats:
- Increasing competition from both domestic and international players
- Rising labor costs and raw material prices
- Fluctuating currency exchange rates
- Potential trade barriers and protectionist policies
- Technological disruption and obsolescence
Porter's Five Forces Analysis:
- Threat of New Entrants: Moderate - Barriers to entry are relatively low, but strong brand recognition and economies of scale offer some protection.
- Bargaining Power of Buyers: High - Customers have numerous options and can easily switch suppliers.
- Bargaining Power of Suppliers: Moderate - Dayang relies on a few key suppliers, but can leverage its scale to negotiate favorable terms.
- Threat of Substitute Products: High - Technological advancements and changing consumer preferences create opportunities for substitutes.
- Competitive Rivalry: High - Intense competition exists within the manufacturing sector, both domestically and internationally.
Value Chain Analysis:
Dayang's value chain consists of:
- Inbound Logistics: Sourcing raw materials and components
- Operations: Manufacturing and assembly
- Outbound Logistics: Distribution and delivery
- Marketing and Sales: Promoting and selling products
- Customer Service: Providing support and after-sales services
Business Model Innovation:
Dayang needs to explore new business models to cater to evolving customer needs and market dynamics. This can include:
- Subscription-based models: Offer access to customized solutions on a recurring basis.
- Platform-based models: Create an online platform connecting customers with manufacturers and suppliers.
- Data-driven models: Leverage data analytics to personalize products and services.
Corporate Governance:
Dayang needs to strengthen its corporate governance practices to ensure transparency, accountability, and ethical conduct. This includes:
- Independent board of directors: Ensure diverse perspectives and effective oversight.
- Clear corporate governance policies: Define ethical standards and decision-making processes.
- Transparency and disclosure: Provide regular updates to stakeholders on financial performance and corporate activities.
Mergers and Acquisitions:
Dayang can consider strategic acquisitions to expand its product portfolio, enter new markets, or acquire critical technologies.
4. Recommendations
1. Global Customization Strategy:
- Develop a comprehensive global customization strategy: This strategy should focus on understanding customer needs, developing flexible manufacturing processes, and leveraging technology to personalize products and services.
- Invest in R&D and innovation: Dayang needs to invest in research and development to develop new products, improve existing processes, and stay ahead of technological advancements.
- Expand into new product categories: Dayang can leverage its manufacturing expertise to expand into new product categories that align with its core competencies and market opportunities.
2. Disruptive Innovation Strategy:
- Embrace emerging technologies: Dayang should explore and adopt new technologies such as Artificial Intelligence (AI), Internet of Things (IoT), and 3D printing to enhance its manufacturing processes, develop innovative products, and improve customer experience.
- Develop a digital transformation strategy: This strategy should focus on leveraging technology to streamline operations, improve communication, and enhance customer engagement.
- Partner with leading technology companies: Collaborating with tech giants can provide access to cutting-edge technologies, expertise, and new markets.
3. Strategic Alliances and Partnerships:
- Form strategic alliances with key players: Dayang can partner with companies in related industries to expand its reach, access new markets, and share resources.
- Develop strong relationships with customers: Building long-term relationships with key customers can ensure repeat business and provide valuable feedback for product development.
4. Market Segmentation and Targeting:
- Identify key market segments: Dayang should focus on specific market segments with high growth potential and a strong demand for customized solutions.
- Develop tailored marketing strategies: Each market segment requires a unique marketing approach to effectively communicate value propositions and reach target audiences.
5. Brand Building and Differentiation:
- Invest in brand building: Dayang needs to build a strong brand identity and reputation to differentiate itself from competitors and attract new customers.
- Develop a unique value proposition: Dayang should focus on offering a unique value proposition that sets it apart from competitors and resonates with its target audience.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Dayang's strengths, weaknesses, opportunities, and threats. They are also consistent with the company's mission to provide high-quality, customized solutions to its customers. The recommendations consider the following:
- Core competencies: Leverage existing manufacturing capabilities and expertise to develop innovative solutions.
- External customers: Meet evolving customer needs by offering customized products and services.
- Internal clients: Empower employees with the necessary tools and resources to support the new strategy.
- Competitors: Stay ahead of the competition by embracing disruptive innovation and developing a strong brand identity.
- Attractiveness: The recommendations are expected to drive growth, improve profitability, and enhance shareholder value.
6. Conclusion
Dayang Group has a strong foundation for growth and success. By embracing a multi-pronged strategy focused on global customization and disruptive innovation, the company can establish a strong competitive advantage in the global manufacturing landscape. This strategy will involve leveraging existing strengths, embracing new technologies, and building strategic partnerships to meet evolving customer needs and market dynamics.
7. Discussion
Alternatives not selected:
- Focusing solely on cost leadership: While cost leadership can be effective in certain markets, it is not a sustainable strategy in the long term, as it can lead to price wars and erode profitability.
- Ignoring technological advancements: Failing to embrace new technologies can lead to obsolescence and loss of competitiveness.
- Maintaining the status quo: Continuing with the current business model will not be sufficient to achieve sustainable growth in a rapidly evolving market.
Risks and key assumptions:
- Technological disruption: The rapid pace of technological change poses a significant risk to Dayang's strategy.
- Market fluctuations: Economic downturns or changes in consumer preferences can impact demand for Dayang's products.
- Competition: The intensity of competition in the manufacturing sector could erode Dayang's market share.
Options Grid:
| Option | Advantages | Disadvantages |
|---|---|---|
| Global Customization Strategy | Increased customer satisfaction, higher margins, stronger brand differentiation | Requires significant investment in R&D and technology |
| Disruptive Innovation Strategy | Creates new market opportunities, enhances competitiveness, positions Dayang as a leader | Requires a significant shift in organizational culture and mindset |
| Strategic Alliances and Partnerships | Access to new markets, resources, and expertise | Requires careful selection of partners and effective management of relationships |
| Market Segmentation and Targeting | Focus on specific market segments with high growth potential | Requires a deep understanding of customer needs and preferences |
| Brand Building and Differentiation | Creates a strong brand identity, attracts new customers, enhances loyalty | Requires significant investment in marketing and communication |
8. Next Steps
- Develop a detailed strategic plan: Outline specific objectives, strategies, and action plans for each recommendation.
- Allocate resources: Secure the necessary funding and resources to implement the strategy.
- Build a strong team: Assemble a team with the skills and experience to execute the strategy.
- Monitor progress and adjust as needed: Regularly track progress, identify challenges, and make necessary adjustments to the strategy.
By taking these steps, Dayang Group can successfully navigate the challenges and opportunities of the global manufacturing landscape and achieve sustainable growth and success.
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Case Description
Established in 1979, Dayang Group Ltd. (Dayang), has become the world's preeminent made-to-measure garment manufacturing enterprise. It was among the first Chinese manufacturers to integrate into the global value chain using an original equipment manufacturing (OEM) model. What began as a small workshop with just 85 rural women has blossomed into a top-tier international apparel enterprise boasting assets of RMB 4.3 billion. As of 2019, Dayang's yearly integrated garment production capability reached 11 million pieces/suits, with suit exports hitting 6 million pieces/suits, consistently leading the national charts for several years. Its annual production capacity for customized attire stood at 1.3 million pieces/suits. With over 1,000 global collaboration custom storefronts, Dayang has established a global marketing network spanning four continents and more than thirty countries. Centered on Dayang's Chairwoman, Li Guilian, this case delves into the debate between OEM and own brand manufacturing (OBM) as well as between "mass production" and "mass customization." It retraces Dayang's journey from OEM to achieving global customization on the international stage. Furthermore, the case highlights Dayang's intricate decisions and balancing acts between "domestic focus" and "international reach" amidst the dual challenges posed by the unexpected COVID-19 pandemic and the ongoing China-U.S. trade tensions.
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