Gino Case Analysis
Current situation and Challenges The biggest challenge for Gino China right now is whether to take over Feima’s OEM business from its biggest distributor Jinghua or not. On one hand, Feima’s business is apparently attractive to Gino in terms of size and potential, and more importantly, is align with Gino’s OEM channel development strategy. However, on the other hand, Gino don’t want to take risk of losing Jinghua, which account for 40% of its total revenue. Theoretically speaking, take Feima is the choice, but in reality, Gino have to take other factors into consideration.
How to deal with Feima’s OEM business It is obvious that by taking Feima, Jinghua will be offended. The worst result to Gino will be losing North China’s market which is not acceptable. Even worse, the other two distributors, FUNG and Wayip, who are worrying about their OEM business might align with Jinghua by then and lose their confidence in co-operating with Gino. More than that, our competitors may leverage on this issue and spread wording across the whole burner distribution channel in China. It would potentially destroy Gino’s reputation among China’s burner distributors.
Last but not least, Jinghua would definitely put this issue in public during the global distributors’ meeting and such action is not acceptable by David’s manager. Taking so many negative impacts into consideration, it’s not a wise decision to directly take Feima’s business from Jinghua. To save face for both side and reach a win-win result in the end, we have to figure out the key –meet Feima’s expectation- to solve this problem which is give more discount on Gino burners. At first glance, it is not possible to reach that target through Jinghua.
As by giving benefit to Feima, Gino have to bear the lost by itself. However, we have to keep in mind that we can grow the pie together to reach a win-win result instead of stick to a win-lose situation. To Feima’s case, Gino should negotiate with Jinghua from three aspects. First of all, Gino will not let Feima by pass Jinghua directly as the company highly values its distributors. However, since Feima is one of the most important OEM client, Gino also don’t want to disappoint them which means Jinghua should offer a higher discount to Feima to meet their expectation.
In return, Gino will split the cost with Jinghua. Next, as Gino allows Jinghua to provide higher discount to end customers, it would be a good opportunity for Jinghua to grow its sales revenue, especially in industrial segment. Jinghua should rise its annually sales target which would also help cover profit margin decrease. In the end, although Gino won’t take Feima’s business, the company will develop its own OEM channel in next few years. To balance the relationship between distributors and own benefits, Gino will only approach those OEMs which haven’t handled by any of its distributor.
It would not be a big issue to negotiate with Feima as long as Gino can promise to provide higher discount. Apart from that, Feima would be benefit from in-time service provided by Jinghua as before. Channel Strategy for Next Three Years To achieve next three years’ expending goal, Gino should take several strategies in China market. As Gino allows distributors to provide higher discount to key accounts, the company should renew sales agreement with current distributors – sales incentive discount would only available when sales increase target been reached.
Gino would gain sales revenue increase significantly through the new policy, especially in industry burner segment. In terms of distribution channel, Gino could recruit some small distributors to cover the edge regions where hard to get enough service from current distributors. Apart from that, Gino should also take the opportunities to expend its distribution channel in China. As business grows, Gino can develop new distributors to cover the blank territories, such as western China.
According to develop own OEM accounts, Gino have to stick to its agreement with current distributors which means only focus on new OEM accounts. It won’t be a big challenge since burner business in China is growing rapidly. As long as Gino can keep both distributors and end customers happy, it’s brand name would be spread across the country rapidly through “WOM” effect. Conclusion To approach a win-win solution among Jinghua, Feima and Gino, Gino should not only take short-term benefit into consideration.
Instead, balance the relationship between distributors and key accounts, say, OEM customers, would be more important to Gino in terms of business development and long-term strategy implementation. In conclusion, we say that Gino should not directly take Feima’s business from Jinghua. To meet interests from both sides, Gino can make an agreement with Jinghua that Feima can get the discount from Jinghua while Jinghua can split the margin cost with Gino. In return, Jinghua should increase its sales to recover the margin for both.
