This document discusses Gino SA, a burner manufacturer, and its operations and distribution channels in China. It provides statistics on Gino's worldwide and China-specific sales and production in 1999. It also describes the burner market in China, Gino's distributors and customers in China, challenges faced, and strategies for the future. Key points are that Gino enlisted 3 distributors in China who sold over 12,000 burners total in 1999, but developing OEM customers directly could undermine distributors while boosting sales. The best solution may be negotiating lower prices for important customers like Feima Boiler through distributors to avoid upsetting the distribution relationship.

1. GINO SA: Distribution channel
management

2. BURNERS:
➢Body
electric
circuit
damper fan
valve
pump
control box
➢Head

3. Three types of burners manufactured…
★ Domestic
★ Commercial
★ Industrial

4. AREA MARKET
SIZE
GINO
SALES
Europe 574 276
North America 433 45
Asia 291 36
Rest of World 250 24
Total 1,548 381
Table 1: World Market for Burners 1999
(in thousands of units)

5. GINO SA
Founded
in 1931
Headquarter in
Paris, France
Over 50
models of
burners
In house
production
capability
well established
channel
network
International
exposure

6. Range Output
range(kcal/hou
r)
Gio production
in 1999
Domestic 50,000-300,000 329
Commercial 300,000-2,000,000 49
Industrial >2,000,000 3
Total 381
Table 2: Gino Worldwide Production in 1999
(in thousand of units)

7. GINO Beijing Office
Set up in 1995
Functions
➢ Marketing research and
campaigns
➢ administration of distribution
channels
➢ technical support and
counseling
➢ key account and OEM
business development

8. David Zhou- China
Marketing manager
Supervised 3
assistant
marketing
managers
Reported to Jean-Michelle
Pierre- Asia’s specific
manager

9. The Burner Market in China
Prior to
1990
➢ relied to coal
➢ boilers were
coal-combustion
with no burners
1990-1995
➢ emphasis on pollution
control
➢ oil-combustion burners
➢ world’s major
manufacturers enter
China

10. Continued…
1995-1998
➢ applications of burners
increased
➢ Chinese local factories
too began to manufacture
➢ Gino gained in domestic
market
Post 1999
➢ growth in domestic was
modest at best
➢ commercial range
became mainstream
➢ demand for industrial
was estimated to grow

11. Customer buying processM
A
N
U
F
A
C
T
U
R
E
R
Distributor 1
Distributor 2
-
-
-
Distributor n
second-tier value
added dealers
OEM customers
direct to end
users
Distributor 3

12. Why manufacturers refrained from direct
sales…
losing a distributor
will make it difficult
to achieve annual
sales target
difficulty in providing
service and spare
parts
how to price their
products

13. Who are OEM customers…
boiler factories or car
painting booth makers
where burners are core
components
They try to bypass
distributors to buy directly
from producers

14. What is OEM’s buying process…
Believe
in “word
of
mouth”
pay
“intelligence”
visit to other
OEM
approach
design
institutes
contact existing
customers, see
frequency of a
certain brand of
burner
use criteria of
price, reputation,
service, spare,
supply it would
focus on one or
two brand

15. Market Segmentation
➢Domestic boilers and water heaters
➢Commercial boilers and other industrial
applications
➢Industrial boilers

16. Domestic Boilers and Water Heaters
Volume of
these factories
ranged from 50
units to 1,500
units per
annum
avg. 250 units
Avg. price
RMB2,500 per
unit
market size
RMB194 million

17. Commercial boilers and other Industrial
applications
Volume 22,000
units
avg. price of
RMB9,000
Market size
RMB198 million

18. Industrial boilers
60
manufacturers
produced 3,400
ang. price
RMB65,000
Market size
RMB221 million

19. Range Market Size
Domestic 79,900
Commercial 20,080
Industrial 2,920
Total 102,900
Table 3: Estimated sizes of Ranges
in Number of Units Sold

20. Gino enlisted 3 distributors…
➢ Wayip Trading Co. in Guangzhou
➢ FUNG’s Co. in Shanghai
➢ Jinghua Mechanical Company in Beijing

21. Distributors
carried only
Gino burners
and spares
Revenue split
between
burners and
spares- 80/20
Jinghua made
and sold boilers
but profit was
lower than
burners
FUNG had
textile
machinery
Wayip’s 100%
business was
Gino burners

22. Jinghua FUNG’s Wayip TOTAL
Domestic 4,354 3,075 3,458 10,887
Commercial 876 433 568 1,877
Industrial 37 48 52 137
Total 5,267 3,556 4,078 12,901
Table 4: Distributor’s Performance
Statistics in numbers of units sold-1999

23. Distributors’ Functions
Credit functions:
Distributor has to open
a letter of credit
Stock functions:
Distributors are required
to make 3 month order
forecast to Gino
Sales and service function:
Distributors are required to
perform after sales service

24. Pricing
Transfer price(US$):
Free on board price in
US dollars quoted to
distributors
Base Price:
total acquisition cost to
distributors
conversion factor: 12.32

25. 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

26. Assigned to Gino China for
next 3 years…
➢ annual combined sales volume of 15,000 units
➢ annual sales of industrial burners of over 200 units
➢ developing more distributors to cover area not covered
➢ providing more marketing and technical support to distributors
➢ develop a minimum of two OEM accounts
➢ improve service and spare supply
➢ build brand image

27. Distributor Behaviour
Demand for
Better
terms
Stolen
Sales
Reluctance to
stock
industrial
burner

28. Feima Boiler Co. Ltd.
Leading boiler
factory in China
Purchased 350
domestic, 50 commercial
and 3 industrial burners
from Jinghua
Approached Gino for
OEM status to obtain
better prices

29. Zhou liked to give Feima OEM
status because…
➢ 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

30. 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

31. Decision should be made considering several
aspects…
Response from
other two
distributors
message that
will be sent to
competitors
Attitude of
Gino’s
corporate
management
Jinghua
accounts for
40% of
Gino’s China
revenue

32. 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.
The other solution is to
consider Feima as OEM and
provide Jinhua with increased
benefits like increasing its
territory or the profit margins

33. Created by:
Saumya Gupta
NIT Surat
Intern under Prof. Sameer Mathur, IIM Lucknow.
www.IIMinternship.com