Channel Conflict Iims

8/2/2019 Channel Conflict Iims

1/24

CHANNEL CONFLICT


2/24

Channel Conflict

A channel conflict may be defined as A

situation in which one channel memberperceives another channel member (s) to be

engaged in behavior that prevents it fromachieving its goals.

Conflict is opposition, disagreement or

discard among the organizations engaged inthe distribution network.


3/24

Conflicts can be classified as

Vertical conflict

Horizontal conflict

Inter type conflict

Multi Channel conflict


4/24

Vertical conflicts

Vertical conflicts occur due to the differences ingoals and objectives, misunderstandings, andmainly due to the poor communication.

Wholesalers expect manufacturers to maintain theproduct quality and production schedules andexpect retailers to market the products effectively. Inturn, retailers and manufacturers expect wholesalers

to provide coordination functional services. If theyfail to conform each others expectations, channelconflict results.


5/24

Some common reasons for vertical

conflict are ( Producer specific)

Dual distribution i.e. manufacturers maybypass intermediaries and sell directly toconsumers and thus they compete with the

intermediaries. Over saturation, i.e. manufacturers permit too

many intermediaries in a designated areathat can restrict, reduce sales opportunities

for individual dealer and ultimately shrinktheir profits.


6/24

Partial treatment, i.e. manufacturers offerdifferent services and margins to the differentchannels members even at same level or

favor some members. New channels, i.e. manufacturers develop

and use innovative channels that create

threat to established channel participants.


7/24

No or inadequate sales support andtraining to intermediaries from the

manufacturers.

Irregular communication, non co-operation and rude behavior with the

channel members.


8/24

Stipulation of ordering in advance, high stockholding and dumping the stock at theintermediaries.

Delays in delivering the products orsometimes dispatching the products withoutconfirmed order.

Refusal to replace or take back the goods

damaged in transit. Non co-operation inreplacement of faulty goods, repairingservices, and installations.


9/24

No co-operative advertisements.Manufacturers do not share any expenses ofadvertisements.

No or inadequate credit offered to theintermediaries. Margins / commissions arenot sufficient and there is no periodic revision

of commission and other terms


10/24

Conflicts due to the Intermediaries

Actions

Intermediaries promote and sell moreprivate labels than promoting themanufacturers brands.

Intermediaries encourage customers toswitch to private labels / competitiveproducts.

Intermediaries carry competing lines andgive more showroom space.


11/24

No support in the manufacturers

promotional efforts.

Intermediaries fail to get the expected /promised efforts.

Intermediaries fail to collect payment

from market in stipulated time.


12/24

Intermediaries deliberately cut theprices to harm the manufacturers.

Intermediaries refuse to service andinstall manufacturers products.

No appropriate and timely market

feedback and report to themanufacturers.


13/24

Horizontal conflicts

Horizontal conflicts are the conflicts betweenthe channel members at the same level, i.e.two or more retailers, two or more

franchisees etc. These conflicts can offersome positive benefits to the consumers.Competition or a price war between two

dealers or retailers can be in favor of theconsumers.


14/24

Reasons behind horizontal conflicts

Price-off by one dealer / retailer canattract more customers of other

retailers.

Aggressive advertising and pricing byone dealer can affect business of other

dealers.


15/24

Reasons behind horizontal conflicts

Extra service offered by one dealer / retailercan attract customers of others.

Crossing the assigned territory and selling in

other dealers / retailers / franchises area.

Unethical practices or malpractices of onedealer or retailer can affect other and spoil

the brand image.


16/24

Inter Type conflict Inter type conflict occurs when, the

Intermediaries dealing in a particular productstarts trading outside their normal productrange. For example, now the supermarketssuch as Spencers etc. also sell vegetables

and fruits and thus compete with smallretailers selling these products. Largeretailers often offer a large variety and thusthey compete with small but specializedretailers. This concept is called asScrambled Merchandising where theretailers keep the merchandise lines that areoutside their normal product range.


17/24

Multi-channel Conflict

Multi-channel conflict occurs when themanufacturer uses a dual distributionstrategy, i.e. the manufacturer uses two or

more channel arrangements to reach to thesame market.

Manufacturers can sell directly through theirexclusive showroom or outlets. This act can

affect the business of other channels sellingmanufacturers brands.


18/24

Multi-channel Conflict

Manufacturers can bypass the wholesalersand sell directly to the large retailers. Conflictbecomes more intense in this case as the

large retailers can enjoy more customers andso the profit due to offering more variety andstill economical prices, which is possible dueto a volume purchase.


19/24

Resolving Channel Conflicts

Conflict is a natural phenomenon, which cannotbe eliminated. In channel management, it is ainevitable as many individuals, institutions areinvolved and they are interdependent. Certainconflicts are constructive too.

The conflicts can be reduced and managed betterto reduce the friction in the channel management.Various techniques can be used to resolve theconflicts. It is important to find out the root cause

behind the conflict so that appropriate techniquecan be used to resolve the conflicts and lastingeffect is possible.


20/24

Some techniques are as follows

Channel leadership Many channel conflicts can beresolved through the effective channel leadership. Channelleader is able to reduce conflicts because he possesses thechannel power. Channel power is the ability of one channelmember to influence another members marketing decisionsand goal achievement. It enables the leader to influenceoverall channel performance. The channel leader controlsresources on which other members depend. Channel powercan increase conflict and reduce cooperation if one channelmember uses coercion to influence others. Manufacturers,

wholesalers or even retailers can become the channelleaders. For example, producers like IBM, Ford can act aschannel leaders because of their economic power.


21/24

Adoption of Super ordinate goals Thechannel members come to an agreement onthe fundamental goal they are jointly seeking,whether it is survival, market share, high quality

or customer satisfaction. Exchange of persons between two or more

channel levels This helps in betterunderstanding. It can reduce the

misunderstanding and conflicts can be reducedsubstantially through this communication. Eachwill grow to appreciate the others point of viewand carry more understanding when returning

to their position.


22/24

Co-Opt It is an effort by one organization towin the support of the leaders of anotherorganization by including them in advisory

councils, board of directors so that they feelthat their opinions are being heard. Co-optetion can reduce conflict provided both theparties compromise some or the other issuesin order to win the support of the other side.


23/24

Joint membership in and between tradeassociations Such associations bring allparticipants under one roof for more exposure to

the public and to improve relations with each otherby understanding their problems.

Diplomacy Diplomacy takes pace when eachside sends a person or a group to meet with their

counterpart from the other side to resolve theconflict. It makes sense to assign diplomats towork more or less continuously with each other toavoid the conflicts.


24/24

Third-Party Mechanisms When conflict ischronic, and the above mentioned techniquesare ineffective, both the parties may have to

resort to third parties, which are not involvedor not the part of the existing channel.

Arbitration In this method, the two parties

agree to present their arguments to a thirdparty and accept arbitration decisions.

Documents

Channel Conflict Iims