Gino Sa(Gino):

Distribution Channel
Management

Harvard Case Study Analysis

Quiz: Gino Sa, Distribution Channel
Management Case
What was the market size of the burners in Asia in 1999(in
thousands of units)?
How many burners did the company produce in 1999?
What was the average price of domestic boilers in 1999?
How many units of industrial burners did the company sold in 1999
in China?
In converting Transfer Price to Base Price, what was the conversion
factor?
What was the annual goal of Gino towards industrial burner after
1999?
How to make the distributors happy and do business with Feima
simultaneously?
How to achieve companies annual goal?
Quiz: Gino Sa, Distribution Channel
Management Case
What was the market size of the burners in Asia in 1999(in
thousands of units)?291
How many burners did the company produce in 1999?381,000
What was the average price of domestic boilers in 1999?RMB2,500
How many units of industrial burners did the company sold in 1999
in China?137
In converting Transfer Price to Base Price, what was the conversion
factor?12.32
What was the annual goal of Gino towards industrial burner after
1999?200
How to make the distributors happy and do business with Feima
simultaneously?
How to achieve companies annual goal?
What is Gino SA?

Who is David Zhou?

 Who are the characters?
David Zhou
China Marketing Manager of Gino SA

Jean-Michel Pierre
Asia Pacific Area Manager of Gino SA

Henry Gong
General Manager of Jinghua (a distributor of
Gino SA)
What is the present situation?
 Situation Analysis
Gino SA, a leading burner manufacturer and exporter
in the world, is expanding its business in China.

Feima, an OEM, is asking Gino directly supply boilers

at 10% more discount than what is being provided by
the distributor.

Jinghua is warning Gino SA of directly engaging

with Feima.
Why study this case?
 Objectives of this case:

Devise a strategy to do business with Feima.

Solve the problems faced by Distributors.
Evaluate a plan to expand Ginos market in
China.
We will focus on three inter-
related issues.
 Three issues.

Arriving at one solution for doing business

with Feima.
Maintaining good relations with
distributors.
Considering the option of a warehouse.
Arriving at one solution for doing
business with Feima.
 Feima, a leading boiler factory in Northern
China makes a proposal

Feimas boiler production in 1999(in number of sets)

In 1999, Feima purchased 350 sets of domestic

burners, 50 sets of commercial burner and 3 sets of
industrial burner from Jinghua at 25 % discount.
 Proposal

Now it wants to directly purchase the

products from Gino SA and asks for 35%
discount.

In return, it promised to purchase at least 50

% of its commercial and industrial burners and
all of its domestic burners from Gino.
So whats the problem?
But the distributor Jinghua says that
Gino should not develop its existing
customers as OEM accounts.
Insights from the data available with
David Zhou
Analysis of data when Jinghua was doing
business with Feima
Analysis of data if Gino directly supplies
products to Feima
So, with this deal Gino is going to get a lot:

Company will reach towards its goal of

developing two OEM accounts.
Developing OEM business was one way
to combat the increasing power of the
distributors.
It was a very good opportunity to break
into Weishaupts customers.
So, with this deal Gino is going to get a lot:

Jinghuawas not likely to increase its sales

to Feima under the current status quo,
but because of the deal companys profit
rose.
Success with Feima would make it easier
for Gino to develop OEM business in
other distributors territories.
Now, how to convince Jhingau?
Show them the distribution contract
where it is written that the principal can
develop OEM business in distributors
categories.
Tell them the need to enter industrial
burner market.
It was not possible for Jinghua to increase
sales with Feima on its own.
Hope that the distributor will be
convinced

If not, then what?

Give them other lucrative offers to remain
in association with Gino.
Maintaining good relations with
distributors.
Evaluation of Distributors profits at
current prices
 Solution to the problem

It is better to raise the profit margins

of before they lose confidence with
Gino SA.
 The contract price is increased by 5% to help
the distributors in running service appointments
and marketing
So now the distributors are getting more
profits and will be satisfied.

If Jinghua was not satisfied at

companys first step, now hell be
satisfied.
Considering the option of a warehouse.
The company has following goals to
meet in next three years:

Achieve annual combined sales volume of

15000 units.
Achieve annual sales of industrial burners
of over 200 units.
Improve service and spare supply.
The company has following goals to
meet in next three years:
Develop a minimum of two OEM
accounts and two end user key accounts
within two years.
Maintain a supply of industrial burners as
the distributors are finding it hard to keep
their stocks.
Keeping all things in mind, it is
essential for the company to open a
warehouse.
 Warehouse expenses

Cost

Setup cost $200,000

Operation $360,000

Capacity $5,000,000

Total Cost $5,560,000

With the establishment of warehouse,
following problems will be solved:
The company can now maintain a good
stock of industrial boilers, so that the loss
like 50 boiler deals would not happen in
future.
The company will move a step towards its
annual goal.
Having all the issues solved, company
can move towards a bright future.