gina sa distribution channel management
TRANSCRIPT
GINO SA: DISTRIBUTION CHANNEL MANAGEMENT
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Gino Burner Co. was founded in 1931
Headquartered in Paris, France
Wide product line: 50+ models
GINO
In-house production capablity
Well established channel network
International exposure
HANDY TRAITS
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Gino had cost advantage and was known for providing “best value”
Gino was best known for it’s domestic burners
Margins were higher in developing countries
One of the largest manufacturers in the world
SEGMENTOUTPUT
RANGE(kcal/hour)GINO PRODUCTION
-1999MARGINS
DOMESTIC 50,000-300,000 329 <20%
COMMERCIAL 300,000-2,000,000 49 25%
INDUSTRIAL >2,000,000 3 30%
Total 381
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Becket is the market leader in U.S. U.S. market has high entry barrier China is a rising star Gino had cost advantage and was known for providing “best value” The industry does not follow a single standard to classify burners
SEGMENT OUTPUT RANGE(kcal/hour)
OUTPUT RANGE(kcal/hour)
MARGINS
DOMESTIC 50,000-300,000
329 <20%
COMMERCIAL
300,000-2,000,000
49 25%
INDUSTRIAL
>2,000,000 3 30%
Total 381
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES CHINA
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-only 5000 units-5 years to become a threat-small
burners Gino- price leader in domestic range (reference point for competitors) Domestic-14% Commercial-8% Industrial-less than 3% Despite offering 10% to 20% less than Weishaupt low penetration in industrial burners Post 1999: Domestic- price wars ; commercial – mainstream market Industrial burners – growth expected at 20% for next 5 years
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES CHINA
MARKET SEGMENTATION IN CHINA
Domestic Boilers & Water heaters: 310 Major manufacturers; Avg. Price: RMB2,500; Size: RMB194 million
Commercial Boilers & Industrial applications: Avg. Price: RMB9,000; Size: RMB198 million
Industrial Boilers & Water heaters: 60 Major manufacturers; Avg. Price: RMB65,000; Size: RMB221 million; Weishaupt
ESTIMATED SIZES OF RANGES
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES CHINA
BURNER CHANNELS IN CHINA
CUSTOMERS MOSTLY DEPEND UPON DISTRIBUTORS FOR PURCHASING THE PRODUCTS
MOJORITY OF THE PRODUCTS
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES CHINA
Most manufacturers relied completely on distributors
Weishaupt : own sales force and distribution network
OEM’s often tried to bypass distributors
Manufacturer’s refrained from giving quotations
Issues: Services, spares and pricing going to OEM
OEM Customers and End user customers
CUSTOMER BUYING PROCESS
Decisions made independently – 3 step process
Word of mouth, design institutes and frequency
(1)Price (2)Reputation (3)Service (4)Spare (5)Supply
(6)Reliability (7)Technical (8) Personal connections Commercial and technical
Importance of price inverse relationship with capacity
Buys boiler and burner separately to negotiate price
Public tendering – (1)Price (2)References
OEM Customers
End User Customers
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Gino, Beijing, 1995 Market research and campaigns, administration of distribution
channels, technical support and counselling, key account and OEM business development, identifying partners for JV
Gino is an aggressive company with good budget
Field technical training to customers and distributors
Bonus- sales target- RMB8,000 to RMB10,000
Total compensation three times the average
GINO IN CHINA
THE ‘ PEOPLE ‘
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Jean-Guy Picher, Director of Commercial Department
Jean Michael Pierre, Asia Pacific Manager
David Zhou, China marketing manager
Three assistant marketing managers
Peter Wang, Technical manager
Two tech support engineers
GINO’S DISTRIBUTORS
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Three distributors were set up in 1995
Revenue: burners/spares :80/20
Wayip-Gungzhou -100% Gino (HVAC)
Fung-Shanghai-Textile machinery(90% revenue)
Jinghua-Beijing - 50% boilers
DISTRIBUTOR PERFORMANCE STATISTICS
DISTRIBUTOR FUNCTIONS
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Credit Function: line of credit
Stock Function: 10 major models accounted for 80% of sales
Sales & Service Function
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Transfer price(US$):Free on board price in US dollars quoted to distributors
PRICING
Base Price:total acquisition cost to distributorsconversion factor: 12.32
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Public Price(RMB):public customer price released on market named “guidelines for price”
Contact Price(RMB):actual transaction price distributor reach in a transaction with customer
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
Product line + Geographic coverage
Gino in domestic is unshakable
Achieve annual sales of 15,000 units
Industrial burners >200 units
Optimize the channels to cover more area
2 OEM accounts + 2 End user accounts in 2 years
Improve service and spare supply
Build the brand image
THREE YEAR GOALS DISTRIBUTOR BEHAVIOUR
Demand for better terms
Stolen Sales
Reluctance to stock industrial burners
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
FEIMA BOILER CO. LTD.
• Leading boiler factory in China
• Purchased 350 domestic, 50 commercial and 3 industrial burners from Jinghua
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
CURRENT PROBLEM
GINO SAFEIMA BOILER CO. LTD. JINGHUA
Approached Gino for OEM status to obtain better prices
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
WHAT TO DO ?????DAVID
ZHOU
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
ACCEPTANCE would mean ➢ this would combat bargaining
power of distributors
➢ good opportunity to break into well entrenched customer in industrial burners
➢ could increase sales
➢ could develop more OEM business in China
But Jinghua opposed this because…
➢ it believed Gino should not develop distributors’ existing customers as OEM
➢ this would set a bad example and could destroy their confidence in coperating with Gino
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSIS ALTERNATIVES
The best possible solution for Gino is to ask Feima to remain loyal to Jinghua while asking Jinghua to sell burners to Feima at lower prices.
THUS GINO WOULD BE ABLE TO OFFER DISCOUNTS TO FEIMA BY LOWERING THE TRANSFER PRICES TO JINGHUADo not break the channel as the company can not afford to loose the dealers.
Exception could be negotiated for industrial segment.The ultimate aim should be to go for long term benefits.
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSISS ALTERNATIVES
The other ALTERNATE solution is to consider Feima as OEM and provide Jinhua with increased benefits like increasing its territory or the profit margins
• BUT THAT WOULD ENABLE OTHER DISTRIBUTORS ASK FOR SUCH GRANTS AS WELL.
• THAT WOULD DELIVER A PARTIAL BIASED IMAGE OF GINO SA TOWARDS OTHER DISTRIBUTORS
TRUST and REPUTATION with dealers is vital in B2B
Channel power is required to negotiate effectively
Customer says “price” but wants “experience”
Look for long term RELATIONSHIPS not immediate profits
GINO SA CHINA GINO IN CHINA CHALLENGES ANALYSISS ALTERNATIVES
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REFERENCES
Created by Anubhab Mondal,IIT Kharagpur during an internship under Prof. Sameer Mathur ,IIM Lucknow <www.IIMInternship.com>