GINO SA : Distribution
Channel Management
Gaurav Singh | 12120
Problem Statement
• David Zhou, China marketing manager of Gino SA had
to decide whether to accept Feima’s OEM (Original
equipment manufacturer) business on stake of not only
loosing its largest distributor Jinghua who
accounted for their 40% of sales in China but also
possibility of resistance from other distributors
Burner Industry Analysis (China)
• Divided in three major Segments
Market
Size (No
of Units)
Market Size
(in RMB)
Influencing Factor
Domestic boilers
and water heater
79,900
194 Million
Price
Commercial
Boilers
20,080
198 Million
Major factors: Technical compatibility,
reliability, price
Minor Factors: Supply of spares, after
sales service
Industrial Boilers
2,920
221 Million
Major factors: Reliability
Minor Factors: Availability of stock, word
of mouth
Company Analysis : SWOT
Strengths
•
•
•
•
•
•
•
Wide burner product line
Strong penetration in Domestic market
In house production capability
Well established channel network
Positioned as best value products
International Exposer
Well trained technical team under supervision
of highly respected technical Manager Peter
Wang
Weakness
Completely dependent on distributors for
sales and post sale services
• Virtually zero presence in Industry
segment where margin is highest
• Very weak hold on distributor as they are
not ready to stock Industry segment
products
• Inaccurate forecasting for Industry
segment products
•
Opportunities
Opportunity to grow in immerging and rapidly
growing Asian market
• High growth in industrial segment in the coming
years approx. 20% annually for next 5 years
•
Threats
Potential to lose on of the major
distributors
• Growing clout of local players
• Saturated European market
• Plans of direct relationship with OEM in
conflict with distributors
•
Importance of Distributors
• Major Task  Credit, Stock and sales/services
• Impossible to achieve annual sales target without them
• Additional cost of inventory and service in case decided
to bypass distributors
• Domestic market has become a commodity so loosing
distributor will badly damage market share
• If distributor get unite, would be difficult to do
bargaining with them in this industry
Distributor’s Concern
• Feima is being approached directly by OEM for the hope
of greater discount
• OEM business will set a bad example and could destroy
their confidence and co-operation with Gino
• Additional issues on pricing and policy creep up
Offer of Feima
• If Gino give Feima OEM status and additional 10%
discount in return Feima promised to purchase at least
50% of its commercials and industrials burners and all
its domestic burners
fromGino’s
Gino.
Current Sales
Sales
Gino’s
(Volume)
(Volume)
Projected
Sales
(Volume)
Domestic
1,055
350
1,055
Commercial
163
50
81
Industrial
71
3
35
 Additional 10% discount is not in company policy and this could
sour their relationship with distributor. Could cascade into other
OEMs asking for similar or more discount.
Possible Alternatives
1. Refuse Feima for direct sales
2. Bypass distributors and sell directly to Feima
3. Sell directly to Feima and give distributor additional
discounts in the other segments
Alternative 1
• Pros:
Strengthened relationship with distributor
• Cons:
Losing potential sales from industrial segment
Will increase distributor’s power, not good in long run and for
sustainable business
Alternative 2
• Pros:
Help to decrease the bargaining power of distributors
Increase the company’s revenues by 6%
Opportunity to get more business in industry segment through reference
It supports company’s long term goal of developing at least two OEM
accounts
• Cons:
Possible loss of sales
Other distributors can also backfire with Jinghua
Alternative 3
• Pros:
Win-win situation for everyone
The additional discounts in the domestic and personal
segments will pacify the distributor
Industrial segment have higher margins so profitability will
increase
• Cons:
Additional
Base
Price In discounts
Public Priceto
RMB
(RMB)
1232
1971.2
Transactioncan hurt Gino
distributor
Price
Price to Feima
1576.96
1379.84
Recommendation
• Gino should sell directly to Feima at the desired
discount while giving Jinghua additional discounts in
domestic and commercial segment
• This will establish Gino in the industrial segments and
OEM accounts
• The distributor will also be pacified and the potential
losses from loss of sales to Feima will be recovered from
extra discounts in the domestic and commercial
segment
THANK YOU