BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 1

Channel Management and Power

Vertical integrationChannel powerChannel conflict

Causes Solutions

BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 2

Vertical Integration

Company structures Sole business unit

(e.g., manufacturing, wholesaling, retailing, services)

Conglomerates Japanese keiretsus

Make or buy? Leverage Expertise Control

Product quality and design

Steady supply

BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 3

Layers of Performance: An Example

RETAILING

WHOLESALING/CHANNEL MOVING

MARKETING

PRODUCT MANUFACTURING

COMPONENT MANUFACTURING

BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 4

Vertical Integration: Costs and Benefits

Costs Opportunity cost of

personnel Difficulty in hiring

appropriate managers Potential over-capacity Labor situation--may

find lower costs inNon-union environmentLower cost area

Benefits Dependability Synergy (?) Brand extensions Control

BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 5

Reasons for Outsourcing

MotivationSpecialization“Survival of the fittest”Economies of scaleMarket coverageIndependence from specific

manufacturer

BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 6

Channel Power: Sources

RewardCoerciveExpert“Legitimate”Referent (“brand

name”)

BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 7

Channel Conflict

Channel members have different objectives--e.g., Brand unit sales vs.

category unit sales Pricing Service output Terms of sale:

price, payment, quantities, returns

BSAD 113 CHANNEL MANAGEMENT AND CONFLICT Lars Perner, Instructor 8

Conflict Resolution Approaches

Information intensive approaches: Sharing of information Expensive(-) Risky (-) May build trust (+)

Third party (mediation)

Establishment of norms (“rules of the game”)

AccommodationConfrontation AvoidanceCompromise