GINO SA: Distribution Channel Management

GINO SA:Distribution Channel ManagementAnkitApoorvaGoyamHeenaIshaanKishore

Problem StatementGoal: Gino China wanted to develop OEM accounts and increase share of Industrial segmentOpportunity: Fiema Boiler, which was being catered by Ginos distributor, approached Gino for OEM status & increase in their purchase from GinoIssue: Conflict with its critical channel partners and possibility of loss of businessThus, Gino China had to manage conflict with channel partners, keeping in view the strategy they were following

Context

Alternative 1: Feima as Ginos OEM account

Upfront investment in warehouse: Cost for one year= 0.56 million RMBHandling increased volumesInventory capacity beneficial for future OEM accounts

Increase in revenue will be of 7 million RMB from OEM account, 60 million RMB in total revenue (after 35% discount to Feima)

20% increase in industrial segment

Have edge of abundant resources & technical expertise Alternative 1: Feima as Ginos OEM accountProsIncrease in sales 24% increase in Industrial segment sales6% increase in overall sales volume

Positive impact on 3 year goal planCloser to target sales of 15000, addition of at least 760 unitsGap of only 30 from target sales volume of 200 in Industrial segment

Strategically beneficialCritical reference account for development of more OEM accountsStock availability for additional Industrial demandAlignment with strategical focus on increasing Industrial market share

Controlling the increasing bargaining power of distributors

Alternative 1: Feima as Ginos OEM accountConsPossibility of retaliation

Additional investments in warehouse & inventoryLoss of 40% sales volume Loss of confidence from FUNGs and Wayip

Managing services and spare parts for OEMs

Alternative 2: FEIMA continues to be Jinghua's Customer

PROSReinforce distributor confidence in GinoAvert possible repercussionsCONSCorporate goals are not met - significant loss in business (50 units)Industrial segment would remain under-developedFurther inclination of power towards distributorsRecommendation: Alternative 1Addressing possible conflicts & implications

ContextPowerRecommendationsImplicationsAmong the global leaders Referent Power with GinoFUNGs is increasing emphasis on boiler market & might not retaliateHigh focus of corporate strategy on ChinaContract wise, Gino is not getting indulged in illegal business Legitimate Power with GinoAlthough theoretical, Gino can communicate to distributors to honour contractHave highly competent technical forceExpert Power not being utilised Should provide assistance in after-sales-serviceManaging conflict with JinghuaReduction in revenue for Jinghua of about 17%

Jinghua should continue to serve spares to FeimaDue to increased sales, revenue from spares will increaseProjected reduction in revenue to be 10%

Further, allocation of more territory to Jinghua as they are best performing distributor

Jinghua can not move to Weishaupt, as with Weishaupt demand is greater than production

Thank You

If FEIMA continues to be Jinghua's CustomerRangeVolumeTransferIn dollarBasePublicContractMargin%Profit MarginDomestic350250030137115937385920%259759Commercial509000108413359213741389325%166987Industrial36500078319648215437110034130%86833Total Profits513580If FEIMA is made an OEMRangeVolumeTransferIn dollarBasePublicContractMargin%Profit MarginDomestic1055250030137115937385920%814307Commercial829000108413359213741389325%284814Industrial356500078319648215437110034130%1053582Total Profits2152704Investment for Warehouse and Inventory for the 1st Year560000Profit Increased by210%