Gino Sa(Gino):Distribution Channel Management

Harvard Case Study Analysis

Quiz: Gino Sa, Distribution Channel Management Case

What was the market size of the burners in Asia in 1999(in thousands of units)?How many burners did the company produce in 1999?What was the average price of domestic boilers in 1999?How many units of industrial burners did the company sold in 1999 in China?In converting Transfer Price to Base Price, what was the conversion factor?What was the annual goal of Gino towards industrial burner after 1999?How to make the distributors happy and do business with Feima simultaneously?How to achieve companies annual goal?

Quiz: Gino Sa, Distribution Channel Management Case

What was the market size of the burners in Asia in 1999(in thousands of units)?291How many burners did the company produce in 1999?381,000What was the average price of domestic boilers in 1999?RMB2,500How many units of industrial burners did the company sold in 1999 in China?137In converting Transfer Price to Base Price, what was the conversion factor?12.32What was the annual goal of Gino towards industrial burner after 1999?200How to make the distributors happy and do business with Feima simultaneously?How to achieve companies annual goal?

What is Gino SA?

Who is David Zhou?

Who are the characters?

David ZhouChina Marketing Manager of Gino SA

Jean-Michel PierreAsia Pacific Area Manager of Gino SA

Henry GongGeneral Manager of Jinghua (a distributor of Gino SA)

What is the present situation?

Situation Analysis

Feima, an OEM, is asking Gino directly supply boilers at 10% more discount than what is being provided by the distributor.

Jinghua is warning Gino SA of directly engaging with Feima.

Gino SA, a leading burner manufacturer and exporter in the world, is expanding its business in China.

Why study this case?

Objectives of this case:

Devise a strategy to do business with Feima.

Solve the problems faced by Distributors.

Evaluate a plan to expand Gino’s market in China.

We will focus on three inter-related issues.

Three issues.

Arriving at one solution for doing business with Feima.Maintaining good relations with distributors.Considering the option of a warehouse.

Arriving at one solution for doing business with Feima.

Feima, a leading boiler factory in Northern China makes a proposal

Feima’s boiler production in 1999(in number of sets)

In 1999, Feima purchased 350 sets of domestic burners, 50 sets of commercial burner and 3 sets of industrial burner from Jinghua at 25 % discount.

Now it wants to directly purchase the products from Gino SA and asks for 35% discount.

In return, it promised to purchase at least 50 % of its commercial and industrial burners and all of its domestic burners from Gino.

Proposal

So whats the problem?

But the distributor Jinghua says that Gino should not develop its existing

customers as OEM accounts.

Insights from the data available with David Zhou

Analysis of data when Jinghua was doing business with Feima

Analysis of data if Gino directly supplies products to Feima

So, with this deal Gino is going to get a lot:

Company will reach towards its goal of developing two OEM accounts.

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

It was a very good opportunity to break into Weishaupt’s customers.

Jinghua was not likely to increase its sales to Feima under the current status quo, but because of the deal company’s profit rose.

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

So, with this deal Gino is going to get a lot:

Now, how to convince Jhingau?

Show them the distribution contract where it is written that the principal can develop OEM business in distributors’ categories.

Tell them the need to enter industrial burner market.

It was not possible for Jinghua to increase sales with Feima on its own.

Hope that the distributor will be convinced…

If not, then what?

Give them other lucrative offers to remain in association with Gino.

Maintaining good relations with distributors.

Evaluation of Distributors’ profits at current prices

Solution to the problem

It is better to raise the profit margins of before they lose

confidence with Gino SA.

The contract price is increased by 5% to help the distributors in running

service appointments and marketing

So now the distributors are getting more profits and will be satisfied.

If Jinghua was not satisfied at company’s first step, now he’ll be satisfied.

Considering the option of a warehouse.

The company has following goals to meet in next three years:

Achieve annual combined sales volume of 15000 units.

Achieve annual sales of industrial burners of over 200 units.

Improve service and spare supply.

Develop a minimum of two OEM accounts and two end user key accounts within two years.

Maintain a supply of industrial burners as the distributors are finding it hard to keep their stocks.

The company has following goals to meet in next three years:

Keeping all things in mind, it is essential for the company to open a warehouse.

Warehouse expenses

Cost

Setup cost $200,000

Operation $360,000

Capacity $5,000,000

Total Cost $5,560,000

With the establishment of warehouse, following problems will be solved:

The company can now maintain a good stock of industrial boilers, so that the loss like 50 boiler deals would not happen in future.

The company will move a step towards its annual goal.

Having all the issues solved, company can move towards a bright future.