gino sa
TRANSCRIPT
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GINO SADistribution Channel Management
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GINO SA : Introduction
• Company : Gino Burner Co.• Manufacture : Burner and spare• Establish : 1931• Headquarter : Paris, France
Product Line : Domestic Range : Commercial Range : Industrial Range
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Burner
• Provide controlled flame• 2 main components : Head and Body• Application : Boiler and Furnace
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Gino Markets
• EUROPE was single largest burner in the world followed by US
1991
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Gino Markets
• There are different ways to partition the burner market, but Gino used OUTPUT CAPACITY as its Partition segmentation variable .
Segment Boiler Capacity
Domestic < 0.5 ton
Commercial o.5 to 2 ton
Industrial > 2 ton
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Gino SA : Background
Manufactured
50 + Models of burner
Competitive Edge
1. In-house
production
2. Well establish
network
3. International
Exposure
381,000 Burner :1999
. Largest
manufacturer
and
Exporter
Of burner in the
world
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Gino Beijing Office
• Set up : 1995• Function : Market research and campaigns, Administration distribution channel, Technical supports and Counselling, Key account & OEM business development, Identifying Partners for JV
• Director of commercial : J.G. Pitcher• China marketing manger : David zhou• Asia Pacific manger : J.M. Pierre
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Burner Market in CHINAPrior to 1990
• China: rich resource of coal• Cheap but low in efficiency and high in emission of pollutant• Mostly Coal-combustion boilers were used
1990-1995
• Govt. emphasis on Pollution control• Coal-combustion boilers began to replaced by oil-combustion boiler• Major manufacturer in china :Weishaupt , Baltur & Ridello , Elco ,Quenod ,Corona
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Burner Market in CHINA1995 - 1998
• Several new application for burner emerge• Gino domestic market : Price leader• Gino Commercial market : Market share increase from 0 % to 8 %• Gino Industrial Market : Tough competition with dominant giant “Weishaupt”
Post 1999
• Domestic range : Price competition• Commercial range : Mainstream market• Industrial range : Growth of 20 % per year at least the next 5 years
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Customer Buying process
Burner Manufacturer
Distributors Dealers OEM
End user
• Most manufacturer relied solely on distributors for sales.• WEISHAUPT was the only manufacturer that had its own Direct sales force and Distributor channel• OEM = Original Equipment Manufacturer
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Customer Buying process :CHINA
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Market segmentation#1Domestic Boiler
#2Commercial Boiler
#3Industrial boiler
Avg Vol Per year(Units)
250 22,000 3,400
Avg Price per Unit(RMB)
2,500 9,000 65,000
Market size(RMB)
194 million 198 million 221 million
** Renminbi (RMB) is currency of china.
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GINO’s Distribution Network in China
Wayip Trading Co.
Fung’s Co.
Jinghua Mech eng Co.
#1
#2
#3
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GINO’s Distribution Network in China
• Distributors carried only Gino Burner and spares• Revenue Ratio for Burner and spares is 80:20
• WAYIP – 100 % Gino burner business• FUNG’s – Textile : main product line• JINGHUA – apart from burner business , also made sold boilers.
• Each of 3 distributors assigned rights to provinces and signed a contract stating that selling Burner in other distributor’s territory was strictly prohibited.
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GINO’s Distribution Network in China
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Distributor’s Function
3
CREDIT
SALESSTOCK
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Credit
• Open Pro-forma invoice to confirm placed order• Distributor then opened a letter of Credit through its bank (Opening bank )to Gino’s Bank
STOCK• Predict order• Typical order cycle : 40-45 days for Domestic and commercial burner , 60 days for Industrial burner
SALES
• Customer interface function• Some distributor use second-tier dealer for sale role while most of it ,is done by Sales Forces
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# 4 Price Level
Transfer Price
(US Dollars)
Base Price
(RMB)
Public list price
(RMB)
Transaction Price
(RMB)
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eXample
• Burner Transfer price : US $100• Base price :RMB 1,232 (factor of 12.32)• Public list price :RMB 1,972 (+60% on B.P.)• Transaction price :RMB 1,578 (20 % Disc P.L.P)
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#3 Year Goal
• Develop a min 2 OEM accounts and 2 end user key accounts• Optimize the Distribution channels• Achieve annual sale of 200+ units burner• Achieve annual Combined sales volume of 15,000 units• Improve service and spares supply• Build Brand Image
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Distributor Behavior
Demand for Better
Terms
Stolen
Sales
Reluctant to
Stock
Industrial
Burners
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J.M.Pierre ….
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So the CASE STUDY aims…
To Resolve confusion in Distribution channelarises Due to …
..Feima is going to get permission to buy burner directly from Gino rather than from Jinghua
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Feima Boiler Co. Ltd
1999
• 350 sets of Domestic burner , 50 sets of commercial burner and 3 sets of Industrial Burner were purchased from Jinghua by Feima
• Jinghua allowed Feima avg 25% discount off the Public List Price.
• Feima approach Gino for OEM treatment to get at least 10 % greater discount from Gino.
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Zhou Liked Feima’s Porposal of OEM
WHY ?
But…
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Because…
• To combat the increasing Bargain- ing Power of distributers.
• Break into well-enterched customers (Weishaupt) in industrial burner .
• No increase in purchase of Gino burners untill OEM status - Feima.
• No OEM business yet in china so it would increase OEM business in other territories.
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But Jinghua opposed it…
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Reason …
• “Gino should not develop distributors’ existing customers as OEM accounts”
• This Practice may lead to low confidence in co-operating with Gino.
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Before final Decision ....Zhou looked at several aspect
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Aspects …
• Response from other 2 distributors• Message – how competitors look at it• Attitude of Gino’s corporate management• Feima’s response• Any other solution
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So There is 2 hypothesis Solution of this Dilemma
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#1 Feima - OEM
ADVANTAGES
1.A New initiative of OEM Business in china for 1st time
2. Feima promise of purchasing at least 50% of its commercial and industrial burners and all its domestic burner from Gino
DIS-ADVANTAGES
1. Relationship with Distributors would be hampered down
3. 3 year goal set could also be achieved.
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#2 Feima – Not OEM
1. Industrial sales would be increased
ADVANTAGES
2.Good relationship with Distributers and Dealers
DIS-ADVANTAGES
1. China would lost opportunity of OEM Business in other territory
2. Competitors may use this idea to enhance their own Market
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Rahul kumarIITG
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This slides were created by Rahul kumar , as a part of an Internship done under the guidance of Prof. Sameer Mathur