This presentation is based on the Gino SA Distribution Channel Management case study. A possible solution to the case is given here.

1. GINO SA
DISTRIBUTION
CHANNEL
MANAGEMENT
Case Analysis

2. FRAME OF REFERENCE
Protagonist : David Zhou, marketing manager
for Gino SA (China)
Gino SA : Manufacturer of burners
Feima : Boiler company (OEM)
Jhinghua : Gino’s largest distributor

3. PROBLEM STATEMENT
Q: How to resolve the confusion in
the distribution channels?
Feima wants to start dealing with Gino directly
instead of a distributer.

4. COMPANY BACKGROUND
Gino Burner Co. was founded in 1931
Headquartered in Paris, France
Wide product line: 50+ models
Gino was known for providing ‘best value’

5. PRODUCT: BURNERS
Electromechanical device which provides a controlled
flame
For combustion applications such as Boilers and
furnaces
Two major parts; the body & the head
No single method of classification. Gino classified
based on capacity of the boilers the burners were fit with

6. MARKETS
(In thousands of units)
Europe was the single largest burner market in the
world, followed by the United States. However the
market is growing rapidly in Asia, the Middle East and
parts of Africa due to saturation of markets in Europe
and US. China was a rising star in emerging markets.
World Market For Burners 1999

7. Market size
0
2000 Europe
NorthAmerica
Asia
Restoftheworld
Total
Market size
Gino sales
ILLUSTRATION OF
MARKETS

9. BURNER MARKET IN CHINA
Before 1990:
 China rich in coal-low efficiency and polluting-coal combustion boilers and
hence no burners
1990-1995:
 Emphasis on pollution control, replaced with oil combustion boilers
 Weishaupt (Germany), Baltur & Ridello (Italy), Elco (Germany), Quenod
(France), Corona (Japan)
1995-1998:
 New applications for burners & demand for commercial range began to
increase
 Price became an issue-Local manufacturers
Post 1999:
 Domestic- price wars ; commercial & mainstream market
 Industrial burners; growth expected at 20% for next 5 years

10. Competitive
Advantages
• Global Presence & Good
Brand Image
• In-house production facility
thus lower margins
• Cost advantage in domestic
& commercial burners
• Industrial burner segment
becoming price conscious
• Strong Channel Network
• Strong employee base
Competitive
Disadvantages
• Excessive reliance on few
distributors & lack of
replacements
• Distributors reluctance to
stock industrial burners
leading to poor market
presence in this segment
• Not effectively controlling
infringements like poaching,
incorrect forecasting, higher
discount rates etc
GINO’S COMPETITIVE ADVANTAGES &
DISADVANTAGES IN CHINA

11. BURNER CHANNELS IN CHINA

12. At this stage should Gino be trying to take more
control of its distributors, or should the relationship
be a more co-operative one?
95% sales in China through distributors
Functions of distributor: Excessive dependency
•Credit Function
•Stock Function
•Sales & service function
High coercive power
•Especially in domestic segments with increasing volume
Influencing power
•Difficult to build sales force quickly and effectively

13. Hence we can conclude that Gino
should have a cooperative
relationship with the distributors
One of their significant strategic goals to optimize
distribution channels and develop more distributors
Necessary to increase sales across segments
•Domestic(14%), Commercial(8%), Industrial (<3%)
Scarcity of Efficient distributors
Maintain the Brand value
Cost management

14. GINO’S LONG-TERM STRATEGY
Formulate key account policy for future clients
Purchase of large number of units qualifies for direct customers
 For existing OEM accounts go through Distributor OEM model
Set ‘margin’ targets for distributors
Expanding industrial segment
Gross margin in industrial segment was 35% (commercial – 25%
and domestic less than 20%)
Set up its own warehouse
Restrict it to key end users and OEM accounts
Backup for distributor stocks

15. WHAT ARE THE OPTIONS
BEFORE DAVID ZHOU?
1. Accept Fiema’s offer and deal with them
directly
2. Accept Fiema as Jinghua’s customer with a
new pricing & overall strategy
3. Reject Fiema’s offer

16. CRITERIA FOR DECISION
Revenue
Relationship with Jinghua and other distributors
Industrial Segment Penetration
Long term Implications

17. Advantages
 Inline with management
strategy goals
 Penetration into high
growing Industrial
segment and relationship
with OEMs
 Increase in overall sales
& profitability
 Reduce OEM’s power
Disadvantages
 A possibility of Losing
out Jinghua
 Tarnishing relation with
other distributors
 Longer cycle time
 Hit on sales in other
segments
 Issue of Industrial
Stocking
ACCEPT FIEMA’S OFFER AND
DEAL WITH THEM DIRECTLY

18. ACCEPT FIEMA AS JINGHUA’S CUSTOMER
WITH A NEW PRICING STRATEGY
Advantages
 Achieving long term unit
sales increase
 Penetration in Industrial
Segment
 New distribution channel
established
 Maintain Distributor
relationships
 New OEM Accounts
 Improved service standards
Disadvantages
 High Investment
 Distributor bargaining
power remains
 Difficult to convince the
distributor and Fiema

19. Advantages
 Maintain Healthy
relationship with
distributors
 No threat to domestic
leadership position
Disadvantages
 Loss of OEM Account
 Opportunity Loss in
terms of incremental sales
from Feima
 Will increase distributor
power
 Loss of opportunity to
enter in account handling
with OEMs/Industrial
Segment
REJECT FIEMA’S OFFER

20. POSSIBLE CONCLUSION

21. POTENTIAL SOLUTION
Do not break the channel as the company
can not afford to lose the dealers.
Exception could be negotiated for
industrial segment.

22. CREDITS
http://www.fontsquirrel.com/
 https://images.google.com/
 https://evernote.com/skitch/
 http://www.colourlovers.com/
 https://hbr.org/product/gino-sa-distribution.../an/902A13-PDF-ENG
 https://www.scribd.com/doc/151734906/Gino-SA-case-study
 https://groups.google.com/d/topic/distributiongrp/MmRke_xIdxI

24. CREATED BY
Aditya Goel, IIT Roorkee,
during an internship by
Prof. Sameer Mathur,
IIM Lucknow.
www.IIMInternship.com