GINO SA

DISTRIBUTION
CHANNEL
MANAGEMENT
Case Analysis
FRAME OF REFERENCE
Protagonist : David Zhou, marketing manager
for Gino SA (China)

Gino SA : Manufacturer of burners

Feima : Boiler company (OEM)

Jhinghua : Ginos largest distributor

PROBLEM STATEMENT
Feima wants to start dealing with Gino directly
instead of a distributer.

Q: How to resolve the confusion in

the distribution channels?
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

 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
 MARKETS
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

(In thousands of units)

ILLUSTRATION OF
MARKETS
2000

0
Market size Market size
Europe
North America
Asia
Rest of the world
Total Gino sales
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
GINOS COMPETITIVE ADVANTAGES
& DISADVANTAGES IN CHINA
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
BURNER CHANNELS IN CHINA
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
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
GINOS 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
WHAT ARE THE OPTIONS
BEFORE DAVID ZHOU?
1. Accept Fiemas offer and deal with them
directly
2. Accept Fiema as Jinghuas customer with a
new pricing & overall strategy
3. Reject Fiemas offer
CRITERIA FOR DECISION
Revenue

Relationship with Jinghua and other distributors

Industrial Segment Penetration

Long term Implications

ACCEPT FIEMAS OFFER AND
DEAL WITH THEM DIRECTLY
Advantages Disadvantages

Inline with management A possibility of Losing

strategy goals out Jinghua
Penetration into high Tarnishing relation with
growing Industrial other distributors
segment and Longer cycle time
relationship with OEMs Hit on sales in other
Increase in overall sales segments
& profitability Issue of Industrial
Reduce OEMs power Stocking
ACCEPT FIEMA AS JINGHUAS CUSTOMER
WITH A NEW PRICING STRATEGY

Advantages Disadvantages

Achieving long term unit High Investment

sales increase Distributor bargaining
Penetration in Industrial power remains
Segment
Difficult to convince the
New distribution channel
distributor and Fiema
established
Maintain Distributor
relationships
New OEM Accounts
Improved service standards
REJECT FIEMAS OFFER
Advantages Disadvantages

Maintain Healthy Loss of OEM Account

relationship with Opportunity Loss in
distributors terms of incremental
No threat to domestic
sales from Feima
leadership position Will increase distributor
power
Loss of opportunity to
enter in account handling
with OEMs/Industrial
Segment
POSSIBLE CONCLUSION
POTENTIAL SOLUTION
Do not break the channel as the company
can not afford to lose the dealers.
Exception could be negotiated for
industrial segment.
 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
CREATED BY
Aditya Goel, IIT Roorkee,

during an internship by

Prof. Sameer Mathur,

IIM Lucknow.

www.IIMInternship.com