GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

What is Gino SA(Gino) ?

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

What is Gino SA(Gino) ?

Gino Burner Co., founded in 1931.
Manufacturer of Burners.
Headquatered in Paris, France.

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Who is David Zhou ?

China''s Marketing manager of GINO SA.

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

What is the SITUATION ?

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Zhou, has been asked by Tianjan Fiema Boiler

Company for permission to buy burners
directly from Gino rather than
Jingua(Gino's largest distributer in China)

Situation 1/3

Given the size and potential of business,

Zhou entered into the discussions with Feima.
After recieving the concent of Jingua
BUT
Jingua now opposes the deal and
even threatened to reconsider co-op with
GINO
Situation 2/3

Now, Zhou's is in a FIX!

His supervisor says to proceed with the OEM
and to resolve the confusion existing in
Distribution channels

Situation 3/3

Now, what is a Burner ?

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Burner

Burner ?
Electromechanically controlled appliances that
provided controlled flame for combusion
applications such as boilers and furnaces.

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

CHINA : an emerging market,

Hence
Gino officialy set up an office in Beijing in 1995

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

BURNER MARKET IN CHINA WAS on BOOM after

1995 as they were shifting from COAL
Demand for large burners was estimated to
grow 20 percent per year for next 5 years

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

1) DOMESTIC BOILERS AND

WATER HEATERS

SEGMENTATION

2) COMMERCIAL BOILERS AND

OTHERS INDUSTRIAL
APPLICATIONS

3) INDUSTRIAL BOILERS

GINO'S DISTRIBUTION NETWORK IN CHINA

Three distributers

Jinghua

FUNG's

Wayip

Goals for GINO China

READ
4) Develop a min. Of 2 OEM......
and
3)...... More Distributors....
again

FIAMA: A leading boiler factory in NORTH CHINA

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

FIAMA's Boiler production in 1999(in no. Of sets)

Domestic 1055
Commercial 163
Industrial 71

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

FIAMA
in 1999
Company made over 1200 sets of boilers
(all sizes)
Bought from Jinghua 350 sets of Domestic,
50 sets of commercial burners.
Rest from Competitors

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

FIAMA
in 1999

Currently, Jinhua allowed FIAMA 25% (average)

discount of Public list price.

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

FIAMA's PROPOSAL

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

FIAMA's PROPOSAL

DEMANDS :
TO MAKE IT AN OEM.
AT LEAST 10% greater discount than
from JINGUA.

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

FIAMA's PROPOSAL

INCENTIVES:
FIAMA's promise that it purchase at least
50% of it's commercial and industrial
burners and all domestic burners from
GINO

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Recent Problems

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Recent Problems : Distributers Behaviour

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Distributers demand for better terms

Better prices
Lower terms
Price promotion

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Stolen Sales
By increasing percentage discount which was
fixed at 25%

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

RELUCTANCE TO
STOCK INDUSTRIAL BURNERS

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

what To a Do ?

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

what To a Do ?
The decision was dependent on :
Possible Response from Gino's other
Distributers.
The message that his decision will send
to competitors.

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

what To a Do ?
RISK OF LOSING Jinghua
Jingua was accounting for 40% of
Gino's China Revenue.

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

If{ YES TO FEIMA! }

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

If{ NO TO FEIMA! }
+ves
Distributers FAITH Restored
Point (3) ...DISTRIBUTERS...
Maintain it's Position as a leading seller in DOMESTIC
SEGMENT

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

If{ NO TO FEIMA! }
-ves
OEM's are not added
Distribution power increase(It's a threat)

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

If{ YES TO FEIMA! }

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

If{ YES TO FEIMA! }

+ves
Point (4) DEVELOP OEM (GOAl)
Increased Profitability
Distribution's power decrease
Will be a part of INDUSTRIAL SEGMENTATION

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

If{ YES TO FEIMA! }

-ves
DISTRIBUTERS FAITH OVER
Might loose a big share of Domestic Market

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Revennue : Before Deal

Domestic: price : 2500(per piece in RND)
Qty. : 350
Discount: 20%
AMOUNT 700000(in rnd)

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Revennue : Before Deal

Commercial: price : 9000(per piece in RND)
Qty. : 50
Discount: 25%
AMOUNT 337500(in rnd)

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Revennue : Before Deal

Industrial: price : 65000(per piece in RND)
Qty. : 3
Discount: 30%
AMOUNT 136500(in rnd)

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Revennue : After Deal

Domestic: price : 2500(per piece in RND)
Qty. : 1055
Discount: 30%

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Revennue : After Deal

Commercial: price : 9000(per piece in RND)
Qty. :72
Discount: 35%
AMOUNT

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Revennue : After the Deal

Industrial: price : 65000(per piece in RND)
Qty. : 36
Discount: 40%

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

THANKS!

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY

Disclaimer

Created By Hardik Wadhwa, IIT BHU

During an Internship
by prof. Sameer Mathur ,IIM Lucknow
www.iiminternship.com

GINO SA: Distribution Channel Management

Richard Ivey School of Business

CASE STUDY