Created by ROHAN GUPTA, IIT (BHU) Varanasi, during an internship by Prof. SAMEER MATHUR, IIM Lucknowwww.iiminternship.com

1. RohanGupta
IIT(BHU) Varanasi
GINO SA:
C A S E

2. Background
Information

3. Burners
Burners are electromechanically controlled appliances that provided “controlled flame” for combustion
applications such as boilers and furnaces.

4. BurnerMarket
• Europe is the single largest burner market in the world.
• But the market has now become saturated.
• In emerging markets such as Asia, the Middle East and
parts of Africa, however, the market is growing rapidly.

5. BurnerApplication
Burners are used-
• In household for hot water in shower and dish wash.
• As industrial boilers that generated steam or hot water for
heating buildings.
• In chillers, industrial furnaces and ovens, ceramic kilns, car
painting booths and other incineration appliances.

6. Market
In
CHINA

7. BurnerMarket
Before 1990:
 China rich in coal-low efficiency and polluting-coal combustion boilers and
hence no burners
1990-1995:
 Emphasis on pollution control, replaced with oil combustion boilers
 Weishaupt (Germany), Baltur & Ridello (Italy), Elco (Germany), Quenod
(France), Corona (Japan)
1995-1998:
 Price became an issue-Local manufacturers-only 5000 units-5 years to become
a threat-small burners
 Domestic-14% Commercial-8% Industrial-less than 3%
 Despite offering 10% to 20% less than Weishaupt low penetration in industrial
burners
Post1999:
 Domestic- price wars ; commercial – mainstream market
 Industrial burners – growth expected at 20% for next 5 years

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

9. Distribution
Channel

12. GINO BurnerCo.
 Gino Burner Co., founded in 1931, manufacturer of burners,
headquartered in Paris, France.
 In-house production capability, a well-established channel network and
international exposure.
 Manufacture over 50 models of burners.
 Known for its domestic Burners.
 Largest burner manufacturers and exporters in the world.
Table 2: Gino Worldwide Production in 1999 (in thousands of units)
Range Output Range (kcal/hour) Gino Production in 1999
Domestic 50,000-300,000 329
Commercial 300,000-2,000,000 49
Industrial >2,000,000 3
Total 381
SEGMENT
OUTPUT
RANGE(kcal/hour)
GINO
PRODUCTION -
1999 (thousand
units)
MARGINS
DOMESTIC 50,000-300,000 329 20%
COMMERCIAL 300,000-2,000,000 49 25%
INDUSTRIAL >2,000,000 3 30%
Total 381

13. Gino Competitive Advantage

14. 10-20% Lower Price than
competitor

15. G I N O
in
China

16. Company
Goals

17. Goals for next three years
• Achieve annual combined sales volume (for all type of
burners) of 15,000 units
• Achieve annual sales of industrial burners of over 200 units
• Optimize the distribution channels.
• Develop a minimum of two OEM accounts and two end
user key accounts within two years.
• Improve service and spare supply
• Build the brand image

18. Gino Distribution Network in
China

19.  Three Distributors
 Wayip Trading Co., based in the south China city Guangzhou;
100% Gino burners
 Fung’s Co., based in the central coastal city Shanghai ,
90%revenue from textile industry
 Jinghua Mechanical Engineering Company, in the northern
city, Beijing; Largest distributor with 40% revenue of total.
Gino Distribution Network
Table 4: Distributors’ Performance Statistics In numbers of units sold
— 1999
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

20. Distributors’ Functions

21. Credit Function
Payment is made by the
distributor’s bank as soon as the
goods are Shipped

22. Stock Function

23. Sales and Customer Service

24. • Transfer price
• Base Price
• Public Price
• Contract Price
B.P=1.484*8.32 TP
P.B=1.6*B.P
C.P=0.8*P.B
1$=8.32RMB
Pricing
Transfer price Base Price Publiic Price Contract Price
100$ 1232RMB 1978RMB 1578RMB

25. Profits from Distributors
Type Transfer Price Base price Jinghua Fung Wayip
Domestic 2500 3710 16153340 11408250 12829180
Commercial 9000 13356 11699856 5783148 7586208
Industrial 65000 96460 3569020 4630080 5015920
Total 31422216(40%) 21821478 30061388
Revenue from Distributors
Type Margin Jinghua Fung Wayip
Domestic 20% 3230668 2281650 2565836
Commercial 25% 2924964 1445787 1896552
Industrial 30% 1070706 1389024 1504776
Values IN RMB

26. Protagonists
of
the
CASE

27. David Zhou, Gino China
Marketing
Manager
Jean Michel Pierre, Asia Pacific
area Manager
Fiema Boiler Company
Henry Gond, Jinghua’s General
Manager

28. Current
Situation

29. Current Situation
 Gino rely completely on distributors for
sales.
 Gino want to increase its industrial burner
market.
 Weishaupt own sales force and distribution
network.
 OEM are trying to bypass distributors.
 Issues with disributor.

30. Distribution
Related
Issues

31. • Distributor Behaviour
 Demand for Better Terms: Bargaining
For more margin.
 Stolen Sales: Poaching other Gino
Distributor.
 Reluctance to Stock Industrial
Burners: Loss of sales due to shortage of
stock.
• No candidates for new or replacing
distributors.
• No warehouse.

32. Main Problem

33. Feima Boiler Co. Ltd is a leading boiler factory in
northern China, made over 1,200 sets of boilers.
Last year Feima bought from Jinghua 350
domestic burners, 50 commercial burners and 3
industrial burners.
Jinghua gave an average 25 % discount off the
public list price.
Now Feima is approaching Gino for OEM,
expecting
a 10 per cent greater discount and promising to
buy
50 % of its commercial and industrial burners and

34. What Decision David Zhou Should
Take

35. He Should Consider:
1. The possible response from Gino’s other two
distributors.
2.The message that his decision would send to
competitors.
3. The attitude of Gino’s corporate management once
the issue was put forward in April with Picher, the
director of the Commercial Department.
4. Feima’s response.
5. Were there any other solutions that could save face
for both sides?

37. lll
• Lower Price
• Good
Reputation
• Reputable
Employee Base
• Over reliance on
distributors
• No Warehouse
• No workforce for
Sales & Service
• New OEM Buisness
• Control over
Distributor Power
• Increased Profits
• Loss of Jinghua(40%
Revenue)
• Loss of Distributor trust
• Can’t meet Assigned
Goals

39. 1. Develop Feima as OEM
Devlop Fiema as OEM and give 1-2 % extra discount to
Jinghau on its dealing so that jhingua do not suffer loss.
• Pros • Cons
• Profit of about 359% more
than the earlier dealing with
Feima.
• Increased unit sales through
Feima.
• Brand image and potential
end-user channels built.
• New OEM channel
developed.
• Decreasing distributor power
• Disappointed Jinghua.
• Fear in distributor channel
may lead to poaching and
exits.
• Industrial stocking remains a
challenge.
• High marketing investment.
• If Jinghua leave 40% loss of
revenue
• No new distributor available

40. If Fiema is OEM
TYPE UNITS
BASE
PRICE
LIST
PRICE
OEM
PRICE
COST OF
1 UNIT
PROFIT ON 1
UNIT Total
DOMESTIC 1055 3710 5936 3858.4 2938 920.4 971022
COMMERCIAL 81 13356 21369.6 13890.24 10017 3873.24 313732.4
INDUSTRIAL 35 96460 154336 100318.4 68190 32128.4 1124494
Total 2409248
TYPE UNITS
BASE
PRICE LIST PRICE OEM PRICE
MARGIN ON 1
UNIT Profit
DOMESTIC 350 3710 5936 4452 772 270200
COMMERCI
AL 50 13356 21369.6 16027.2 3339 166950
INDUSTRIAL 3 96460 154336 115752 28290 84870
Total 525020
Earlier
Profit increased= 359%
Values IN RMB

41. 2. Accept Fiema as Jinghua’s Customer
• Negoitate with Fiema, that it can buy Industrial
burner directly from Gino at 10% greater
discount and Commercial, domestic burners
from jinghua’s at 5% greater discount, if Fiema
keeps its promise.
• Give 2% discount to Jinghua on its dealing
with Fiema. So that there is no loss to Jinghua.
• Jinghua will be happy as its sales are
increasing and total revenue too.
• Fiema will also be pleased as it is getting a
greater discount.

42. Gino Enjoys good profit even on giving
3% discount to Jinghua
TYPE UNITS
BASE
PRICE LIST PRICE
OEM
PRICE
MARGIN ON
1 UNIT Profit
DOMEST
IC 1055 3710 5936 3858.4 630.7 665388.5
COMME
RCIAL 81 13356 21369.6
13890.
24 2938.32 238003.92
INDUST
RIAL 35 96460 154336
10031
8.4 32128.4 1124494

44. • Pros • Cons
• Increase in unit sales.
• Relationship with
distributors
strengthened.
• Industrial burners
demand increased.
• New OEM.
• Decreasing power of
distributors
• Win Win situation for
both.
• Sales goal are met.
• A little loss in profit
• High Investment

45. 3. Reject Feima’s Offer
• Pros • Cons
• Relationships with
distributors remain
undeterred.
• Increase Trust in
Distributor
• OEM account lost.
• Guaranteed unit sales
lost.
• Distributor power
remains.
• No profit increased
• No sales goal met.

46. Reccomendations
• By weighing the Pro’s & Con’s the second choice is
best.
• If negotiation fails then choice third should be
chosen, since Gino cannot afford to loose its
distribution network
• A warehouse should be built so that stocking
problem is solved.
• For services, Charge 5% extra from customers, so that
distributors are motivated for giving better service.
• Improve the brand image by advertising, organizing
various events etc.

48. Created by ROHAN GUPTA,
IIT (BHU) Varanasi,
during an internship by
Prof. SAMEER MATHUR, IIM
Lucknow
www.iiminternship.com