Gino sa

GINO SADistribution Channel Management

GINO SA : Introduction

• Company : Gino Burner Co.• Manufacture : Burner and spare• Establish : 1931• Headquarter : Paris, France

Product Line : Domestic Range : Commercial Range : Industrial Range

Burner

• Provide controlled flame• 2 main components : Head and Body• Application : Boiler and Furnace

Gino Markets

• EUROPE was single largest burner in the world followed by US

1991

Gino Markets

• There are different ways to partition the burner market, but Gino used OUTPUT CAPACITY as its Partition segmentation variable .

Segment Boiler Capacity

Domestic < 0.5 ton

Commercial o.5 to 2 ton

Industrial > 2 ton

Gino SA : Background

Manufactured

50 + Models of burner

Competitive Edge

1. In-house

production

2. Well establish

network

3. International

Exposure

381,000 Burner :1999

. Largest

manufacturer

and

Exporter

Of burner in the

world

Gino Beijing Office

• Set up : 1995• Function : Market research and campaigns, Administration distribution channel, Technical supports and Counselling, Key account & OEM business development, Identifying Partners for JV

• Director of commercial : J.G. Pitcher• China marketing manger : David zhou• Asia Pacific manger : J.M. Pierre

Burner Market in CHINAPrior to 1990

• China: rich resource of coal• Cheap but low in efficiency and high in emission of pollutant• Mostly Coal-combustion boilers were used

1990-1995

• Govt. emphasis on Pollution control• Coal-combustion boilers began to replaced by oil-combustion boiler• Major manufacturer in china :Weishaupt , Baltur & Ridello , Elco ,Quenod ,Corona

Burner Market in CHINA1995 - 1998

• Several new application for burner emerge• Gino domestic market : Price leader• Gino Commercial market : Market share increase from 0 % to 8 %• Gino Industrial Market : Tough competition with dominant giant “Weishaupt”

Post 1999

• Domestic range : Price competition• Commercial range : Mainstream market• Industrial range : Growth of 20 % per year at least the next 5 years

Customer Buying process

Burner Manufacturer

Distributors Dealers OEM

End user

• Most manufacturer relied solely on distributors for sales.• WEISHAUPT was the only manufacturer that had its own Direct sales force and Distributor channel• OEM = Original Equipment Manufacturer

Customer Buying process :CHINA

Market segmentation#1Domestic Boiler

#2Commercial Boiler

#3Industrial boiler

Avg Vol Per year(Units)

250 22,000 3,400

Avg Price per Unit(RMB)

2,500 9,000 65,000

Market size(RMB)

194 million 198 million 221 million

** Renminbi (RMB) is currency of china.

GINO’s Distribution Network in China

Wayip Trading Co.

Fung’s Co.

Jinghua Mech eng Co.

#1

#2

#3


• Distributors carried only Gino Burner and spares• Revenue Ratio for Burner and spares is 80:20

• WAYIP – 100 % Gino burner business• FUNG’s – Textile : main product line• JINGHUA – apart from burner business , also made sold boilers.

• Each of 3 distributors assigned rights to provinces and signed a contract stating that selling Burner in other distributor’s territory was strictly prohibited.


Distributor’s Function

3

CREDIT

SALESSTOCK

Credit

• Open Pro-forma invoice to confirm placed order• Distributor then opened a letter of Credit through its bank (Opening bank )to Gino’s Bank

STOCK• Predict order• Typical order cycle : 40-45 days for Domestic and commercial burner , 60 days for Industrial burner

SALES

• Customer interface function• Some distributor use second-tier dealer for sale role while most of it ,is done by Sales Forces

# 4 Price Level

Transfer Price

(US Dollars)

Base Price

(RMB)

Public list price

(RMB)

Transaction Price

(RMB)

eXample

• Burner Transfer price : US $100• Base price :RMB 1,232 (factor of 12.32)• Public list price :RMB 1,972 (+60% on B.P.)• Transaction price :RMB 1,578 (20 % Disc P.L.P)

#3 Year Goal

• Develop a min 2 OEM accounts and 2 end user key accounts• Optimize the Distribution channels• Achieve annual sale of 200+ units burner• Achieve annual Combined sales volume of 15,000 units• Improve service and spares supply• Build Brand Image

Distributor Behavior

Demand for Better

Terms

Stolen

Sales

Reluctant to

Stock

Industrial

Burners

J.M.Pierre ….

So the CASE STUDY aims…

To Resolve confusion in Distribution channelarises Due to …

..Feima is going to get permission to buy burner directly from Gino rather than from Jinghua

Feima Boiler Co. Ltd

1999

• 350 sets of Domestic burner , 50 sets of commercial burner and 3 sets of Industrial Burner were purchased from Jinghua by Feima

• Jinghua allowed Feima avg 25% discount off the Public List Price.

• Feima approach Gino for OEM treatment to get at least 10 % greater discount from Gino.

Zhou Liked Feima’s Porposal of OEM

WHY ?

But…

Because…

• To combat the increasing Bargain- ing Power of distributers.

• Break into well-enterched customers (Weishaupt) in industrial burner .

• No increase in purchase of Gino burners untill OEM status - Feima.

• No OEM business yet in china so it would increase OEM business in other territories.

But Jinghua opposed it…

Reason …

• “Gino should not develop distributors’ existing customers as OEM accounts”

• This Practice may lead to low confidence in co-operating with Gino.

Before final Decision ....Zhou looked at several aspect

Aspects …

• Response from other 2 distributors• Message – how competitors look at it• Attitude of Gino’s corporate management• Feima’s response• Any other solution

So There is 2 hypothesis Solution of this Dilemma

#1 Feima - OEM

ADVANTAGES

1.A New initiative of OEM Business in china for 1st time

2. Feima promise of purchasing at least 50% of its commercial and industrial burners and all its domestic burner from Gino

DIS-ADVANTAGES

1. Relationship with Distributors would be hampered down

3. 3 year goal set could also be achieved.

#2 Feima – Not OEM

1. Industrial sales would be increased

ADVANTAGES

2.Good relationship with Distributers and Dealers

DIS-ADVANTAGES

1. China would lost opportunity of OEM Business in other territory

2. Competitors may use this idea to enhance their own Market

Rahul kumarIITG

This slides were created by Rahul kumar , as a part of an Internship done under the guidance of Prof. Sameer Mathur

Marketing

Gino sa