Group 3

 Gino Burner Co., founded in 1931, was a manufacturer of burners, headquarted in Paris, France.
 It had a wide burner product line, covering the domestic, commercial and industrial ranges.
 In each segment, there were many models with varied outputs; in total Gino manufactured over
50 nmodels of burners.
The company was best known for its domestic burners.
• Electromechanical device which
provides a controlled flame
• For combustion applications such
as Boilers and furnaces
• Two major parts; the body & the
head
• No single method of
classification.
• Gino classified based on capacity
of the boilers the burners were
fit with
 Markets
Europe was the single largest burner
market in the world, followed by the United
States. However the market is growing
rapidly in Asia, the Middle East and parts
of Africa due to saturation of markets in
Europe and US. China was a rising star in
emerging markets.

World Market for Burners 1999

(in thousands of units)
ILLUSTRATION OF
MARKETS
The burner market in china
GINO’S COMPETITIVE ADVANTAGES &
DISADVANTAGES IN CHINA
GINO’S DISTrIbuTION NETwOrk IN
CHINA
DISTRIBUTORS FUNCTION
• 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
 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%)

Set up its own warehouse

• Restrict it to key end users and OEM accounts
• Backup for distributor stocks
CURRENT PROBLEM

• 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 all
its domestic burners from Gino.
 WHAT ARE THE OPTIONS BEFORE
DAVID ZHOU?

 Accept Fiema’s offer and deal with them directly

 Accept Fiema as Jinghua’s customer with a new pricing & overall strategy
 Reject Fiema’s offer

CRITERIA FOR DECISION

 Revenue
 Relationship with Jinghua and other distributors
 Industrial Segment Penetration
 Long term Implications
ACCEPT FIEMA’S OFFEr AND DEAL
WITH THEM DIRECTLY
ACCEPT FIEMA AS JINGHuA’S CuSTOMEr
WITH A NEW PRICING STRATEGY
rEJECT FIEMA’S OFFEr
Do not break the channel as the company can not afford to lose the
dealers. Exception could be negotiated for industrial segment.
• Trust and reputation with dealers is vital in B2B.
• Channel power is required to negotiate effectively
• Customer says price but wants experience
• Look fo long term relationships not immediate profits.