An assignment on

Distribution Channel and conflicts of Coca-Cola business operation in Bangladesh.

Submitted to
Dr. Mohammad Baktiar Rana
Course Instructor



Submitted by
A.R.M. Mozaffar Hossain
ID:823 Batch: 20
BBA Program



Date of Submission
23
rd
September,2013


Institute of Business Administration
Jahangirnagar University
Savar, Dhaka-1342

Introduction
Channel conflict occurs when manufacturers (brands) dis-intermediate their channel partners, such as
distributors, retailers, dealers, and sales representatives, by selling their products directly to consumers
through general marketing methods and/or over the Internet.
According to Forrester Research and Gartner from 2007, despite the rapid growth of online commerce, an
estimated 90 percent of manufacturers did not sell their products online. Of these, 66 percent identified
channel conflict as their single biggest issue. However, results from a survey show that click-and-mortar
businesses have an 80% greater chance of sustaining a business model during a three-year period than
those operating just in one of the two channels.
Channel conflict can also occur when there has been over production. This results in a surplus of
products. Newer versions of products, changes in trends, insolvency of wholesalers and retailers and the
distribution of damaged goods also affect channel conflict.
Coca-Cola
Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines throughout the
world. It is produced by The Coca-Cola Company of Atlanta, Georgia, and is often referred to simply
as Coke (a registered trademark of The Coca-Cola Company in the United States since March 27, 1944).
Originally intended as a patent medicine when it was invented in the late 19th century by John
Pemberton, Coca-Cola was bought out by businessman Asa Griggs Candler, whose marketing tactics led
Coke to its dominance of the world soft-drink market throughout the 20th century.
The company produces concentrate, which is then sold to licensed Coca-Cola bottlers throughout the
world. The bottlers, who hold territorially exclusive contracts with the company, produce finished product
in cans and bottles from the concentrate in combination with filtered water and sweeteners. The bottlers
then sell, distribute and merchandise Coca-Cola to retail stores and vending machines. The Coca-Cola
Company also sells concentrate for soda fountains to major restaurants and food service distributors.
The Coca-Cola Company has, on occasion, introduced other cola drinks under the Coke brand name. The
most common of these is Diet Coke, with others including Caffeine-Free Coca-Cola, Diet Coke Caffeine-
Free, Coca-Cola Cherry, Coca-Cola Zero, Coca-Cola Vanilla, and special versions with lemon, lime or
coffee.
Based on Interbrand's best global brand 2011, Coca-Cola was the world's most valuable brand.
Bangladesh with a huge population, serves as a profitable market for Coca-Cola. Coca-Cola entered
Bangladesh in 1965 through an agreement with Tabani Beverage. Currently, Abdul Monem and Pran
Group bottle Coca-Cola's drinks in the country. The newly built facility in Tongi is expected to be
operational from September, 2013. The facility is expected to produce around 222m bottles annually,
worth BDT9bn (US$109.8m) per year.
In this document, the distribution of channels and the conflicts that arise while operating within the
territory of Bangladesh is discussed.

Coca-Colas Distribution System
The first thing to realize is that Coca-Cola is a sort of franchised operation. Most people refer to Cola-
Cola as if it were a single entity and it is not. You have the people in Atlanta who take care of the brand
and overall marketing, product development and so on, but then each country has its own bottler, or more
likely, bottlers. To make its products available at the right places at the right time in the market, the sales
department of the company pays major attention on controlling the channels of distribution. Single type
of markets channel is maintained by the company right from its pioneering stage. The nature of the
channel is as follows:-
Company
Distributors
Dealers
Different Outlet Owners
Consumers.
At first the soft drinks supplied to the distributors directly. Retailers or owners of any outlet cannot take
the delivery from company. They have to take the products from their respective or nearest distributor.





The diagram above shows the simplest distribution strategy adopted by coca-cola company in
Bangladesh. Though the practical scenario maybe little complex and may have different sub-stages, but
the way merchandises of Coca-Cola are distributed imitates to this model.









This is another way of showing how the Coca-Cola products are distributed and made available to even
remote place consumers.

Distribution of Coca-Cola
Here there are four systems of distribution channels.
1. ManufacturerConsumer
2. ManufacturerRetailer..Consumer
3. ManufacturerWholesaler.RetailerConsumer
4. Manufacture.WholesalerJobberRetailer..Consumer




Conflicts
In business management, the term "channel conflict" refers to a problem, or conflict, in the flow of sales,
or sales channel, that hinders a product or service from effectively reaching the end consumer. This
condition can occur when a manufacturer or service provider tries to reach consumers without the help of
third-party retailers, dealers, suppliers, and promoters. The goal of this method would be to save the costs
associated with suppliers and retailers, but the real benefits can be varied depending on whether or not a
channel conflict arises from this approach.
Horizontal Channel Conflict
In this type of channel conflict, a manufacturer not using third-party retailers faces a struggle
between two of its own sales divisions, such as its online and offline departments. Usually one
division starts to cut into the sales and profit of the other division, devaluing the latter. Horizontal
channel conflicts occur between two departments on the same level of importance.
Vertical Channel Conflict
Vertical channel conflict arises when manufacturer tries to sell on their own while still
maintaining working relationships with third-party retailers and distributors. This leads to
competition for sales where retailers and distributors often get lower profits for selling the same
product or service as the manufacturer is selling. Since it is primarily the retailers and distributors
role to build awareness of the product, this can lead to an overall decrease in sales. This situation
is called a vertical channel conflict because it affects two different levels of business, third-party
sales and bottom-line sales.
Multilevel Channel Conflict
Multilevel channel conflicts arise when a manufacturer creates competition between its own sales
and promotion arms, while also having business relationships with third-party retailers and
distributors. The reason for this approach may be to aggressively and more quickly expand its
sales and promotion network, but it can create both internal and external discord between the
various divisions and third-parties.

RESOLVING CHANNEL CONFLICTS
Conflict is a natural phenomenon, which cannot be eliminated. In channel
management, it is an inevitable as many individuals, institutions are involved and
they are interdependent. Certain conflicts are constructive too.
The conflicts can be reduced and managed better to reduce the friction in the channel
management. Various techniques can be used to resolve the conflicts. It is important
to find out the root cause behind the conflict so that appropriate technique can be
used to resolve the conflicts and lasting effect is possible.
Adoption of Super ordinate goals The channel members come to an agreement on
the 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 better
understanding. It can reduce the misunderstanding and conflicts can be reduced
substantially through this communication. Each will grow to appreciate the others
point of view and carry more understanding when returning to their position.
Co-Opt It is an effort by one organization to win the support of the leaders of
another organization by including them in advisory councils, board of directors so
that they feel that their opinions are being heard. Co-operation can reduce conflict
provided both the parties compromise some or the other issues in order to win the
support of the other side.
Diplomacy Diplomacy takes place when each side sends a person or a group to
meet with their counterpart from the other side to resolve the conflict. It makes sense
to assign diplomats to work more or less continuously with each other to avoid the
conflicts.