gino sa distribution channel management

GINO SA: DISTRIBUTION CHANNEL MANAGEMENT

WHAT IS

GINO SA ?

GINO SA- It is one of the largest burner manufacturer and exporters in the world and enjoys up to 14% market share with its product mix.

FEIMA- Leading boiler factory in Northern China, typical of the twenty largest OEM’S in China.

JINGHUA- Largest distributor of Gino in China and accounted 40% of Gino’s China revenue.

IMPORTANT PEOPLE —

DAVID ZHOU- China marketing manager of Gino SA.

JEAN-MICHEL PIERRE- Asia pacific area manager of Gino SA

HENRY GONG- Jinghua’s general manager

WHAT IS the current

problem ?

PROBLEM —

Feima is the existing customer of Gino’s distributor, Jhingua.

Feima is approaching Gino for OEM treatment.

Zhou has to decide whether he wants Feima’s OEM business or not.

WHAT can be the

advantages ?

ADVANTAGES —

WHY Zhou wants Feima’s OEM business ? Developing OEM business was one way to combat increasing power of

distributors.

Principal manufacturer

Distributors

ADVANTAGES —

WHY Zhou wants Feima’s OEM business ?

Principal manufacturer

Distributors

Developing OEM business was one way to combat increasing power of

distributors.

ADVANTAGES —

WHY Zhou wants Feima’s OEM business ?

Developing OEM business was one way to combat increasing power of distributors

Good opportunity to break into a well-entrenched customer in industrial burners, & receive a good reference account, as well.

ADVANTAGES —

WHY Zhou wants Feima’s OEM business ?

Developing OEM business was one way to combat increasing power of distributors

Good opportunity to break into a well-entrenched customer in industrial burners, & receive a good reference account, as well.

Feima had told Zhou that it would not increase purchase of Gino burners

unless it received OEM status.

ADVANTAGES —

WHY Zhou wants Feima’s OEM business ?

Developing OEM business was one way to combat increasing power of distributors

Good opportunity to break into a well-entrenched customer in industrial burners, & receive a good reference account, as well.

Feima had told Zhou that it would not increase purchase of Gino burners unless it received OEM status.

Success with Feima would make it easier for Gino to develop OEM business in other distributor’s territories.

disadvantages ?

DISADVANTAGES —

WHY Jhingua was adamantly opposed ?

Jhingua strongly believed that Gino should not develop distributor’s existing customers as OEM accounts.

DISADVANTAGES —

WHY Jhingua was adamantly opposed ?

Jhingua strongly believed that Gino should not develop distributor’s existing customers as OEM accounts.

The practice would set a very bad example, which could destroy their confidence in co-operating with Gino.

WHAT IS THE

DECISION ?

Zhou took out the distribution contract between Gino and its

distributors. It made clear in black and white that “the principal has the right to develop OEM business in the territory of a designated distributor without getting consent from the distributor.”

DECISION —

WHAT IS at stake in this

DECISION ?

•RISK of loosing JINGHUA, which was accounting for 40% of

GINO’S CHINA REVENUE.

• Was Achieving CONTROL over the DISTRIBUTORS the best

objective?

THIS SHOWS THAT, 95% OF THE PRODUCTION OF THE MANUFACTURERS GO TO THE DISTRIBUTORS AND ONLY 2% GOES DIRECTLY TO THE OEMs.(out of which Feima makes 11% in total)

HERE WE CAN SEE THAT GREATER REVENUES CAN COME FROM DISTRIBUTORS FOR GINO.

WHAT are THE possible

alternatives ?

1st ALTERNATIVE —

Accept Feima as Jinghua’s customer

ADVANTAGES

1. Gino can lower the profit margin for Jinghua and can offer additional discounts for Feima.

2. Moreover a service fee can be added in additional to the contract price for

others hence increasing the distributor’s revenue lost due to excessive contract discounts.

DISADVANTAGES

1. Loss of potential OEM.

2nd ALTERNATIVE —

Develop Feima as OEM

ADVANTAGES

1. Increased unit sales through Feima.2. Will lead to establishment of new OEM channels.3. Building up of a stronger brand image.4. An increase in purchase of the products.

DISADVANTAGES

1. Fear in distribution channels may lead to poaching further may result in exits.

2. Disappointment from the side of Jinghua.

3rd ALTERNATIVE —

Reject Feima’s business

ADVANTAGES

1. Relationship with distributors remain unaffected and may strengthen.

2. Search of new OEM and end user accounts.

DISADVANTAGES

1. Important OEM lost.2. Sales lost.

3.Distributor’s powers increase.

Hence can be noted —(RECOMMENDATION)

In the first alternative (accept Feima as Jinghua’s customer) is the most strategic fit for this case.

•It will help Gino strengthen its bonds with its distributors and mainly Jhingua which counts for its highest revenue.

•It is bound to motivate existing channels to build new OEMs and end channel users with GINO’s sales force and investment.

•Since most of its revenue comes from distributors (specially Jhingua), it can’t afford loosing its them.

•Moreover, its not right to loose contacts with Feima (as in 3rd alternative), hence it can be in touch with it through its distributors providing discounts etc.. as per the need.

"These slides were created by NANDINI GUPTA, AKGEC Ghaziabad

as part of an internship done under the

guidance of PROF. SAMEER MATHUR (www.IIMInternship.com)"