Gino SA Case Analysis Group 4 Ekta Gulechha

Gino SA Case Analysis Group 4 Ekta Gulechha Akriti Rai Saurabh Malhan Siddharth Jain Vishal Balani Satvinder Shresth

Gino’s Competitive Advantages & Disadvantages in China Competitive Advantages Competitive Disadvantages • Global Presence & Good Brand Image • In-house production facility thus lower margins • Cost advantage in domestic & commercial burners • Industrial burner segment becoming price conscious • Strong Channel Network • Strong employee base • Excessive reliance on few distributors & lack of replacements • Distributors reluctance to stock industrial burners leading to poor market presence in this segment • Stronghold of other foreign players in industrial burner category

Barriers to Gino’s aggressive penetrating into the industrial burner market in China • Loss of opportunity due to distributors’ reluctance to stock industrial burners • Weishaupt – market leader in industrial burners • Lack of a direct/specialized sales force which could provide better after sales service as distributors focused more on price differentiation rather than service

Q 2 How serious is the control issue that Gino perceives it has with its distributors? Why does it have this problem? At this stage of its development in China, should Gino be trying to take more control of its distributors, or should the relationship be a more cooperative one? • 95% sales in China through distributors • Functions of distributor: Excessive dependency – Credit Function – Stock Function – Sales & service function • High coercive power – Especially in domestic segments with increasing volume • Influencing power – Difficult to build sales force quickly and effectively

Gino should have a cooperative relationship with the distributors – One of their significant strategic goals to optimize distribution channels and develop more distributors – Necessary to increase sales across segments • Domestic(14%), Commercial(8%), Industrial (<3%) – Scarcity of Efficient distributors – Maintain the Brand value – Cost management

Gino’s long-term strategy Formulate key account policy for future clients • Purchase of large number of units qualifies for direct customers • For existing OEM accounts go through Distributor OEM model Set ‘margin’ targets for distributors • Expanding industrial segment • Gross margin in industrial segment was 35% (commercial – 25% and domestic less than 20%) Decrease cost of stocking industrial burners • Discontinue slow moving models • Incentivize distributors – multiple product line volume discounts & incentives for stocking industrial burners

Gino’s long-term strategy Set up its own warehouse • Restrict it to key end users and OEM accounts • Backup for distributor stocks Eventually develop & expand own sales force for industrial burners Build stronger relationship with distributors • Provide incentives • Mutual respect • Better credit terms

Should David Zhou proceed with selling direct to Feima or not? What should be the criteria for the decision? What else should Gino be doing in the short term? Options for David Zhou 1. Accept Fiema’s offer and deal with them directly 2. Reject Fiema’s offer and let Jinghua deal with Fiema Criteria for decision • Revenue • Relationship with Jinghua and other distributors • Industrial Segment Penetration/Future Business

Option 1 Pros • Inline with management strategy goals • Penetration into high growing Industrial segment and relationship with OEMs • Increase in overall sales & profitability • Reduce OEM’s power Cons • A possibility of bad relationships with Jinghua • Lack of support for future projects from distributors

Option 2 Pros • Maintain Healthy relationship with distributors • No threat to domestic leadership position Cons • Going against company strategy • Opportunity Loss in terms of incremental sales from Feima • Will increase distributor power • Loss of opportunity to enter in account handling with OEMs

Decision To go with Option 1 Plan of action

Lessons Learnt No Control and Monitoring over undercutting, discounts on List price, after sales service, technical support, stocking , inventory control, CRM. Don’t keep all eggs in one basket Direct Customer Feedback on timely intervals should be taken Gino didn’t employ Own Sales force, Distributors which could have been easier for phased implementation Customer Care was controlled by Jinghua instead of Gino No marketing support in form of price & commercial promotion

Lessons Learnt A Strategy should have been implemented for developing customers in industrial boilers segment where Gino was already suffering Interval for Prices revision should be shortened to half yearly Aligning present Distribution activities with Gino China’s Goals Distributors should be on contract basis for limited period of time Guidelines should be issued on Ethical Behaviour Gino China should play a bigger and pro-active role