GINO SA:DISTRIBUTION CHANNEL MANAGEMENT

What Are Burners ?

Burners are electromechanicallycontrolled appliances that providecontrolled flame for combustionapplications such as boilers and

furnaces.

PARTS OF BURNERS

BODY

Electric circuit, FanDumper, Valve,

Pump and Control Box

HEAD

Heat Proof CarbonSteel Tubes With

Nozzles

MARKETS FOR BURNERS

World Market For Burners(in thousands of units)

BACKGROUND

GINO SA

It is a burner manufacturingCompany headquartered in

Paris, France founded in1931

GINO’SCOMPETETIVE EDGES

IN-HOUSE PRODUCTION CAPABILITY

WELL ESTABLISHED CHANNEL NETWORK

INTERNATIONAL EXPOSURE

BURNER MARKET SEGMENTATION

DOMESTIC BOILERS AND HEATERS

INDUSTRIALBOILERS

Gino Worldwide Production(in thousands of units)

Burner Market In China

PERIOD BEFORE 1990(As coal was a major source of energy, coal-combustion

boilers were used which did not have burners. )

PERIOD BETWEEN 1990-1995(Oil combustion boilers started

replacing coal combustion boilers)

PERIOD BETWEEN 1995-1998(Increase in Diversification and

Competition in Chinese burner market)

POST-1999

• The commercial range became the mainstream market.

• Growth in demand for industrial burners at 20 percent per year

CUSTOMER BUYING PROCESS

Gino’s Distribution Network In China

ORGANIZATIONAL STRUCTURE

GINO’S DISTRIBUTORS

WAYIP TRADING CO.(GUANGZHOU,SOUTH CHINA)

FUNG’S CO.(SHANGHAI)

Jinghua Mechanical Engineering Co.(BEIJING)

DISTRIBUTORS’ FUNCTIONS

CREDIT

STOCK

SALES AND SERVICE

LEVELS OF PRICING

TRANSFER PRICE(Price in dollars that Gino quoted to the

Distributors.)

BASE PRICE(Total acquisition cost to the distributorsfor full ownership and ready to sell stock of the burner )

PUBLIC PRICE(160% of the base price for all models in local currency.)

CONTRACT PRICE(Actual transaction price reached by a distributor

in transaction with a customer.)

EMERGING ISSUES

CHANGE IN

In order to deliver on its commitmenton corporate strategy in 1998, GINO CHINA was assigned the following goals for the next three years:

Problems Due ToFollowing Distributor Behavior

DEMAND FOR BETTER TERMS

STOLEN SALES

RELUCTANCE TO STOCK INDUSTRIAL BURNERS

CURRENT PROBLEM

FEIMA was a leading boiler factory in north china.It approached Gino for OEM(Original Equipment Manufacturer) treatment for more discount on burners. In return, it promised Gino of buying 50% and 100% of its commercial (and industrial) and domestic burners respectively from Gino .

Zhou liked Feima’s idea of OEM treatment because:

Jinghua opposed because:

Zhou had to consider the Following aspects before arriving at the decision:

Zhou took out the distribution channelbetween Gino and its distributorsand made it clear that Gino hadthe right to develop OEM business in a distributor’s territory without its consent.

CREATED BY SHUBHAM GANGILIIT(BHU), VARANASI DURING ANINTERNSHIP BY PROF. SAMEER

MATHUR, IIM LUCKNOW

DISCLAIMER