A presentation based on a Harvard Business School Case, Gino SA

1. GINO SA
Distribution Channel
Management
A Harvard Business School Case
by Nived R Nambiar

2. An introduction to
Gino SA

3. Founded in 1931.
HQ: Paris, France.
50+ models of burners.
Known for products of “best value”.
Gino History

4. Set up Beijing office in 1995.
Currency: Renminbi (RMB)
Objectives:
● Marketing Research and Campaigns.
● Administering Distribution Channels.
● Technical Support and Counselling.
● Develop long term cooperation initiatives.
● Key account and OEM business development.
Gino History

5. The Players Involved

6. David Zhou
China Marketing Manager
Gino SA
Jean-Michel Pierre
Asia Pacific Area Manager
Gino

7. Current Situation

8. Burner Production & Market
World Markets
Gino Worldwide Production

9. Market Analysis

10. Burner Market
● Before 1990
○ Coal was major source of energy.
○ 80% boilers used coal powered burners.
● 1990 - 1995
○ More pollution control laws.
○ Coal replaced by oil-combustion boilers.
○ Major burner manufacturers such as Weishaupt
(Germany), Elco(Germany), Baltur & Reillo(Italy) etc..
entered market.

11. Burner Market
● 1995 - 1998
○ Increase in burner applications.
○ More burner manufacturers entered market.
○ Participation from local manufacturers.
● Post 1999
○ Modest growth in domestic range market.
○ Commercial range became mainstream market.
○ Demand for industrial burners was estimated to be 20%
per year.

12. What happened at Gino

13. In the domestic range
Market share rose to 14% from less than 1% in
terms of volume.
In the commercial range market share rose to 8%
from a potential zero.
In the industrial range GINO only claimed a
market share of less than 3%.
Gino SA

14. The customer buying process

15. Market Segmentation

16. Divided into 3 segments
● Domestic Boilers
○ Around 310 manufacturers.
○ Production volume ranged from 50 to 1500 (avg : 250)
○ Avg price RMB 2,500. Market size is RMB 194 million.
● Commercial Boilers
○ Estimated volume is 22,000 units in 1999.
○ Avg price RMB 9,000. Market size is RMB 198 million.
● Industrial Boilers
○ 60 manufacturers produced 3,400 units in 1999.
○ Avg price RMB 65,000. Market size is RMB 220 million.

17. Gino segmented market based on a
range system

18. Gino’s Distribution
Channel

19. Gino enlisted 3 distributers
● Revenue split between burners and spare was
80/20.
● Bonuses on fulfilling yearly budget.
● The distributers:
○ Jinghua (also sold boilers)
○ FUNG’s (textile industry) accounted 90% of
annual turnover.
○ Wayip (sold only GINO burners)

20. Performance Statistics

21. Role of Distributors
● Credit Function
● Stock Function
● Sales and Service Function

22. Burner Pricing

23. There are mainly 4 levels of price
● Transfer Price : Price in US dollars quoted to distributors
by GINO.
● Base Price : Transfer price converted to local currency by
multiplying a conversion factor of 12.32.
● Public Price : “Grossing up” base price by 60% on all
models.
● Contract Price: Price at which product is sold to
consumers after discount.

24. Emerging Issues

25. Strategy change
With GINO beginning to diversify in 1998.
New goals have been set for Gino China.
Annual sales of 15,000 units
Annual sale of industrial burners over 200 units
Develop 2 OEM and 2 end user accounts over 2 years.
Improve service supply.

26. Distributor’s Behaviour
● Demand for better terms.
● Stolen Sales
● Reluctance to buy stock industrial
burners

27. Current Problem

28. Feima Boiler Ltd.
One of the 20 largest OEMs
Production of Feima in 1999

29. What is the
Situation ?

30. Feima approached Gino directly to obtain
better prices
Their request,
10% greater discount from Gino
Their offer,
Purchase of 50% of its commercial & industrial
burners and 100% of its domestic burner from
Gino.

31. At the same time,
Pressure from
Jinghua and other distributors to decline
Feima’s offer!
Jinghua threatened to
“reconsider cooperation with Gino”

32. And
pressure from
David’s supervisor
to accept the proposal from
Feima

33. What
decision
should
David
take ?

34. Things to be considered,
● Response of other distributors
● The message this decision would send to
competitors.
● Feima’s response.
● Response of Gino’s corporate management
● A solution that can save the face of both sides.

35. Up Sides of accepting contract
● Developing OEM business.
● Success with Feima would make to easier to
develop OEM business in other territories.
● Increase sales with Feima and build brand image.

36. Down sides of accepting contract
● May lose support among distributors.
● Can effect relation with Jinghua who accounts
for 40% of Gino’s annual turnover in China.

37. What
are
his
Options
?

38. Options
● Option 1:
Let the distributors supply to Feima directly and give
additional 10% discount to Feima, given they keep their
offer.
● Option 2:
Refuse the offer from Fiema and maintain the current
relations.
● Option 3:
Develop Feima as an OEM. But disappoint the distributors.

39. The best alternative

40. The best alternative would be
Option 1
as it would help,
● Increase unit sales.
● Strengthen distributor relations
● New OEM relations.
● Build brand image.

41. Up sides of Option 1
● Maintains distributor relations and establishes relation with
Feima with new pricing.
● Increased sales with Feima leads to increased annual
turnover.
● Building relation with Feima helps to build brand image and
reach other OEMs.

42. Thank You

43. Disclaimer
Created by Nived R Nambiar, MEC Cochin, during an internship by
Prof. Sameer Mathur, IIM Lucknow.
www.IIMInternship.com