gino sa case
TRANSCRIPT
GINO SA: DISTRIBUTION CHANNEL MANAGEMENT
GROUP ONE PRESENTATIONDATE: 30/01/2015
TONY RICHARDS C FT151015
DEPANSHOO SHAKHANDA FT153065
VARUN VENUGOPAL FT151002
VENKATESH K G FT151095
VIVEK KHATTAR FT154063
VARUN SINGH FT153111
EXECUTIVE SUMMARY
PROBLEM STATEMENT:
Resolve the confusion in the distribution channels
BACKGROUND INFORMATION:
Protagonist: David Zhou, marketing manager for Gino SAHenry Gong, general manager JinghuaFeima-OEM
• Feima wants to start dealing with Gino directly instead of through a dealer
CONCLUSION:
Do not break the channel as the company can not afford to loose the dealers.Exception could be negotiated for industrial segment.
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
Electromechanical device which provides a controlled flame
Boilers and furnaces
The body, the head
The body consists of electric circuits, dumper, fan, valve, pump and control box. Power cable & oil or natural gas supply
No single method of classification. Gino classified based on capacity of the boilers the burners were fit with (Domestic, Commercial & Industrial)
PRODUCT:BURNERS
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
The industry does not follow a single standard to classify burners
Becket is the market leader in U.S.
U.S. market has high entry barrier
China is a rising star
WORLDWIDE MARKET IN THOUSANDS
Developed markets of Europe and U.S. have become saturated
Highest growth in Asia, Middle East and Africa
Demand was increasing in domestic and commercial
INDUSTRY
SEGMENT BOILER CAPACITY USES
DOMESTIC upto 0.5 ton households/sauna
COMMERCIAL 0.5 to 2 ton offices/shops/restaurants
INDUSTRIAL >2 tonabsorption type chillers/boilers
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
HOFSTEDE’SDIMENSIONS
POWER DISTANCE
INDIVIDUALISM vs
COLLECTIVISM
MASCULINITY vs FEMINITY
UNCERTAINITY AVOIDANCE
LONG vs SHORT TERM
ORIENTATION
INDULGANCE vs RESTRAINT
CHINA 80 20 66 30 87 24
• Renminbi(人民幣 ) is the currency used in China
• Guanxi: Connection and Obligation
• The country is unique and isolationist
• Strong heritage and imperial tradition
• Was an empire for more than 2000 years
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
Before 1990: China rich in coal-low efficiency and polluting-coal combustion boilers and hence no burners
BURNER MARKET IN CHINA
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
1990-1995: Emphasis on pollution control, replaced with oil combustion boilers Weishaupt (Germany), Baltur & Ridello (Italy), Elco (Germany), Quenod (France), Corona (Japan)
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
Gino Burner Co. was founded in 1931
Headquartered in Paris, France
Wide product line: 50+ models
COMPETITIVE ADVANTAGES
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
GINO
In-house production capablity
Well established channel network
International exposure
SEGMENTOUTPUT
RANGE(kcal/hour)
GINO PRODUCTION
-1999MARGINS
DOMESTIC 50,000-300,000 329 <20%
COMMERCIAL300,000-2,000,000
49 25%
INDUSTRIAL >2,000,000 3 30%
Total 381
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
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
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 CHINA PEOPLE INVOLVED
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
BURNER CHANNELS IN CHINA
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
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
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
CUSTOMER BUYING PROCESS OEM Customers
End User Customers
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
Domestic Boilers & Water heaters: 310 Major manufacturers; Avg. Price: RMB2,500; Size: RMB194 million
SEGMENTATION
Commercial Boilers & Industrial applications: Avg. Price: RMB9,000; Size: RMB198 million
Domestic Boilers & Water heaters: 60 Major manufacturers; Avg. Price: RMB65,000; Size: RMB221 million; Weishaupt
ESTIMATED SIZES IN UNITS SOLD
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
DISTRIBUTION NETWORK
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
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
DISTRIBUTOR FUNCTIONS PRICING
Percentage USD RMB
Transfer Price 100
Import Duty 15
Value Added Tax 17
Shipping and Insurance 5
Domestic Transportation 3
Miscellaneous and Handling Fee 2
Transfer Price in USD * 12.32
Base Price 142 1232
60% Grossing up Of Base Price gives the
Public Price or Listed Price 227.2 1972
Contract Price is equal to a discount of 20% to 25% on Public Price
Contract Price 181.81 1578
Gross Profit to the distributor=(Contract Price-Base Price) 39.87 346
Profit % 28
Credit Function: line of credit
Stock Function: 10 major models accounted for 80% of sales
Sales & Service Function
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
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
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
No other dealers available. Weishaupt’s dealers not ready to switch.
No current warehouse of Gino in China. Existing workforce can not provide service.
40% of total sales from Jinghua (Henry Gong)
Do not break the channel as the company can not afford to loose the dealers.Exception could be negotiated for industrial segment.
FEIMA ANALYSIS • Response of Fung and Wayip• Message sent to competitors• Corporate management – Picher• Feima’s Response• Legally Gino allowed to develop OEM
business• Short term profit v/s long term co-operative
relationship• Industrial segment 20% to 30% cheaper -
Gino
RANGE VOLUME CURRENTLY FROM GINO OFFER
DOMESTIC 1055 350 1055
COMMERCIAL 163 50 81
INDUSTRIAL 71 3 35
TOTAL 1289 403 1171
INTRODUCTION CHINA COMPANY ANALYSIS SUGGESTIO
NS LEARNINGS
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
Q&A