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Distribution Channel Conflict Management: A Brazilian Experience

Article  in  Benchmarking An International Journal · January 2012

DOI: 10.1108/14635771211218335

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Gabriel Sperandio Milan ERIC CHARLES HENRI DORION

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BIJ SPECIAL ISSUE PAPER

19,1
Distribution channel conflict
management: a Brazilian
32
experience
Gabriel Sperandio Milan, Eric Dorion and
José Alberto da Rosa Matos
University of Caxias do Sul, Caxias do Sul, Brazil

Abstract
Purpose – The purpose of this paper is to identify the mechanisms adopted by the distribution channel
of a leading Brazilian truck manufacturing company, which generates various conflicts that have a
negative impact on the performance of the channel operations, with a focus on the conflict causes. The
study aims to expand the domain of distribution channel conflict management as a benchmark activity
by exploring the potential sources of conflict occurring in a major Brazilian distribution channel.
Design/methodology/approach – The research method is exploratory, using a case study from a
major company of the automotive sector of Serra Gaúcha, Brazil. The distribution processes are
analyzed in a real and specific context, implemented by means of individual, in-depth interviews, with
the application of a basic script of questions.
Findings – The findings indicate the existence of seven potential sources of conflict and 23 conflicting
issues, considered relevant and of negative impact on the distribution channel performance of the
manufacturing company.
Research limitations/implications – The sample cannot be considered as representative but it is,
to a certain point, reliable because it refers to one entity only.
Practical implications – The results of this research can serve as indicators for managers of a
company to invest time and the necessary resources for the maintenance and consolidation of the
relationships with its dealerships.
Originality/value – The present work shows its originality through the study of consumers’
preference for determined products and services as a conflict management basis for Brazilian national
distribution channels’ stakeholders. In this context, a distribution channel conflict case study may
constitute an important empirical source of data for a benchmark strategy.
Keywords Brazil, Manufacturing industries, Automotive industry, Brazilian manufacturing,
Distribution channels and markets, Distribution management, Conflict management,
Organizational performance, Benchmark strategy
Paper type Research paper

Benchmarking: An International
Journal
Vol. 19 No. 1, 2012
pp. 32-51
q Emerald Group Publishing Limited
1463-5771
DOI 10.1108/14635771211218335
1. Introduction
The aspects and the trends that influence consumers’ preference for determined
products and services have an impact on the issues related to distribution channel
management (Frazier, 1999), which are also called marketing or distribution channels.
Those channels are interdependent organizational networks involving the necessary
activities to dispose of products and/or services, from the manufacturer up to the proper
consumer (El-Ansary and Stern, 1972; Stern et al., 1996; Rosenbloom, 2003; AMA, 2007).
It is important to mention that a distribution activity is one of the four main strategic
decision areas of a company and, in relation to its marketing composition; it includes the Distribution
decision areas of product/service, price and communication. channel conflict
After the composition of a distribution channel, changes are generally more difficult
to be implemented than other strategic decisions, such as the alterations in prices and the management
modernization of lines of products and/or services (Stern and Sturdivant, 1987; Kotler
and Armstrong, 2007). Such difficulties elapse from the proper nature of a
distribution channel, where the integration of various independent companies creates 33
a network of relationships (personal and inter-organizational), with rights and
obligations that cannot arbitrarily be modified, based on rigorous legal and contractual
control.
Although a distribution channel is initially formed by economic interests, it is not
restricted to this dimension only, since any competition does not only occur between the
organizations. It may also occur between the channel systems (Rosenberg and Stern,
1970) and incorporate the inter-organizational social aspects from where may appear
any compartmental conflict dimension, which must be duly managed not to provoke
negative effects on the global performance of the channel (Rosenbloom, 1973, 2003;
Singh, 2006).
As an external resource, distribution channels are constituted of significant
corporate commitment from each participating company. They are considered as
important as the internal resources, which pre-suppose lasting long term relations that
take years to consolidate (Corey, 1991). Those channels involve behavioural systems
between firms that must operate in an integrated way, creating synergy in search of
efficiency and competitiveness (Rosenberg and Stern, 1971).
For international manufacturers, each case may constitute an important benchmark
process, due to its rich endogenous data which is not usually perceivable from
standard research procedures.

2. Conceptual background
2.1 Performance of a distribution channel
The American Marketing Association (AMA) establishes channel performance by
result evaluation, which may be done through various dimensions. First, the dimension
of effectiveness based on how well a channel responds to the necessities and desires of
its customers. Second, the dimension of efficiency, referring to how well a company
minimizes its costs related to the functions and the execution of the channel. Third,
the dimension of productivity, which is mainly based on the internal rate of return
(IRR) of the channel but not only including the financial aspects; and finally, the
dimension of profitability, which refers to the economic performance of the channel
(AMA, 2007).
Although, the performance of distribution channels tends to be evaluated under
financial aspects (Gaski, 1984; Singh, 2006), there is an increasing argumentation in the
literature in favor of the complementary use of non-financial measures. Brashear et al.
(2007) reviewed the main approaches of performance evaluation from the literature and
suggest a typology of evaluation models, based on financial and non-financial
measures. They group them in five categories: strategic, client-buyer,
operational, relational and financial. Table I shows this classification and presents
that the main studies of the area have evaluated performance mainly through economic
measures.
BIJ
Categories Evaluation dimensions
19,1
Strategy Adaptation of each dealership, contribution to growth, strategic performance and
competitive advantage
Client- Customers’ satisfaction, sales performance, perceived satisfaction, customers’ retention
buyer and net profits
34 Operational Allocation and delivery of vehicles, payback of guarantees, relative performance of the
dealerships, supply management, ability of the dealerships, efficiency, relative rate of
error, assistance between the companies, rate of prescribed deliveries, conformity of the
dealerships, quality of the advice of the representatives of the manufacturer and
percentage of acceptance
Relational Cooperation of the representatives of the manufacturer, coordination, loyalty of the
dealerships, satisfaction and commitment
Financial Generation of demand from the manufacturer, performance in sales, sales objectives,
Table I. sales contribution, lost sales, sales growth rate, net sales, total margin, costs of sales and
Typology of evaluation services, commissions, profit contribution, return on investments, costs of supply,
and measurement of economic performance, performance in profit, effectiveness, end of period supply
performance in
distribution channels Source: Adapted from Brashear et al. (2007)

2.2 Conflicts in distribution channels and their possible sources

Conflicts are inherent, inevitable and are widely spread out in channel systems due to
the constant interaction and interdependence of its stakeholders in a search for mutual
objectives (Stern et al., 1973; Gaski, 1984; Singh, 2006; Koza and Dant, 2006, 2007).
Many times and to a certain degree, they are beneficial for the reinforcement and the
upgrade of joint business actions (Coughlan et al., 2006). In another perspective,
conflicts are defined as a situation that occurs when a channel stakeholder has the
perception that the actions of another one show a committed behavior in preventing or
not allowing the accomplishment of its proper goals or the effective performance of its
standards of behavior (Etgar, 1979; Stern et al., 1996; Hunt, 1995; Rosenbloom, 2003).
Conflicts can have a positive, negative or neutral effect on the efficiency of a channel
(Rosenbloom, 2003; Coughlan et al., 2006). On one hand, a highly conflicting channel
can portray an active and engaged channel with functional conflicts, which must be
managed accordingly. On the other hand, an indifferent and very passive channel can,
in reality, be hiding great differences in motivations and intentions (Coughlan et al.,
2006). Therefore, an efficient conflict management process in distribution channels is a
key factor that contributes to the success of a long term relationship between the
stakeholders (Koza and Dant, 2006).
In fact, a channel’s stakeholders must fulfill three basic stages to deal with channel
conflicts:
(1) to detect them;
(2) to evaluate their effect; and
(3) to solve them;

which does not necessarily mean a radical conflict elimination but an effort to maintain
the channel’s efficiency. In some cases, companies may have to increase the level of
conflict in the proper channel (Rosenbloom, 2003), due to the fact that in a strategic
management approach, intrinsic relationships within the channel may generate
sustainable competitive advantages in relation to its competitors, generating Distribution
performance improvements and mutual benefits.
Inter-channels conflicts can be grouped, in essence, in seven possible causes,
channel conflict
which are: management
(1) role incongruence;
(2) lack of resources;
35
(3) differences in perception;
(4) differences in expectation;
(5) disagreement in the decision process;
(6) incompatibility of objectives; and
(7) difficulties of communication (Rosenbloom, 2003).

The incongruence of roles refers to the inadequate performance of the aspects defining
how should be the stakeholders behavior in a channel. If a member does not act as
prescribed by the determined functions and expectations of the channel, or in the case
where there would not be a clear definition of the roles or of the understanding on how it
should be defined, a situation of conflict may arise. Various authors recognize that the
incongruence of roles is one of the main causes of intra-channel conflict (Pondy, 1967;
Stern and Heskett in Rosenberg and Stern, 1970; Etgar, 1979; Neves, 1999; Rosenbloom,
2003; Kotler and Armstrong, 2007; Kotler and Keller, 2009). For them, the lack of
resources or the competition itself refers to any discord that may occur between the
members of a channel, in reference to the allocation of the necessary resources to achieve
its goal. The term “resource” does not restrict itself only to financial matters, but it refers
to any internal resources of the proper channel. Such situation happens when demands
for resources from the channel exceed its availability (Pondy, 1967; Etgar, 1979; Neves,
1999; Rosenbloom, 2003).
Referring to the stakeholder’s view on performance, the differences in reality
perception refer to the interpretation of the stimulus from the environment. Such
stimulus can be perceived in various ways by the channel stakeholders. First,
dealerships tend to see the competition only in a local perspective, giving little
importance to the markets where they do not operate. Second, manufacturers tend to see
the competition under a more broaden perspective, considering the macro-implications
of the competition and demand (Etgar, 1979). Various authors perceive perception
differences as an intra-channel potential source of conflicts (Rosenberg and Stern, 1971;
Etgar, 1979; Neves, 1999; Rosenbloom, 2003; Coughlan et al., 2006; Kotler and Keller,
2009). Furthermore, expectation differences refer to the expectative that the members
have about their behaviour and the attitudes of other members of the channel,
considering that they take decisions and base their actions on their proper expectations.
A conflict can appear in a case where an expected behavior does not occur (Etgar, 1979;
Neves, 1999; Rosenbloom, 2003). In this context, discordance relates to the areas of
performance and decision that the members of a channel consider, explicitly or
implicitly, to be of its own reach. In other terms, it is a dispute between autonomy and
control, where from one side, a member tries to acquire control, and of the other side,
where another member fights for its autonomy and independence (Pondy, 1967;
Rosenberg and Stern, 1971; Etgar, 1979; Rosenbloom, 2003; Coughlan et al., 2006).
The incompatibility of objectives and goals is based on the individual objectives
BIJ of the participants of a channel which are divergent, incompatible, competing or
19,1 mutually exculpatory between them, considering that the organizations base their
decision process on those criteria. It is demonstrated in the literature, from a point of
view of intra-channel conflict, that when the parties are forced to cooperate, they do not
achieve consensus or and will pursue different objectives and goals (Pondy, 1967;
Rosenberg and Stern, 1970, 1971; Etgar, 1979; Brown and Day, 1981; Neves, 1999;
36 Rosenbloom, 2003; Coughlan et al., 2006; Kotler and Armstrong, 2007).
One other aspect studied by Rosenbloom (2003) refers to communication difficulties.
As communication is considered as the vehicle for inter-channel interactions (Mohr and
Nevin, 1990), such process inefficacy can create confusion, incorrect disagreements
and frustration. Any positional differences can reflect in losses of communication and
differences of availability, method and capacity of processing the information. Those
situations may appear from a constant exchange of information between the members of
a channel, considering that information exchange remain essential in a decision-making
process and also influences the behavior of the members of the channel (Rosenberg and
Stern, 1970; Etgar, 1979; Neves, 1999; Rosenbloom, 2003).
In addition, other sources of intra-channel conflict have been identified from the
literature. Rosenberg and Stern (1970, 1971) and Brown and Day (1981) refer to a positive
correlation between the conflict and the dissatisfaction of a member of a channel with
the performance of another member. The level of satisfaction of an intermediate
stakeholder of a distribution channel varies with the level of existing conflict, concluding
that without a conflict incidence, the satisfaction level is low; with a level of natural
conflict, the satisfaction level is higher than from its absence; and also that when a
conflict level is perceivable and obvious, the satisfaction level diminishes significantly
(Schul and Babakus, 1988; Dant and Schul, 1992; Gaski, 1984).
It is important to mention that channel conflict tends to appear when it
involves disputes on subjects, considered important for its members, such as the
maintenance of levels of supply, discounts in sales, sales for proper or exclusive store of
the manufacturer, policies of representation and pricing (Stern et al., 1973), and when a
distributor may represent other major competitors of the supplier (Webster, 1976).

2.3 Conflict effects in channel efficiency

The evaluation of the effect of conflicts in distribution channels still tends to occur in a
conceptual level for organizations’ managers (Rosenbloom, 2003). Although, it is
encountered a reasonable quantity of studies on channel conflict and its relation with
efficiency and their real impact on organizations has received little attention (Singh,
2006). In a channel perspective, conflicts can have dysfunctional effect and be fatal
(Rosenberg and Stern, 1970; Pondy, 1967), especially when their members do not
recognize their common objectives or create a closed coercive system (Assael, 1969).
For example, the incompatibility of objectives and goals and the dispute for resources
can lead the stakeholders to engage in behaviors focused on the others, causing
confusion and frustration with the final consumers (Webb and Hogan, 2002).
Although conflicts may have destructive consequences, its complete absence
would be dysfunctional, or else, a sensible or “adjusted” level of conflict that can be
considered functional (Rosenberg and Stern, 1970; Stern et al., 1973; Singh, 2006;
Kotler and Armstrong, 2007). Consequently, the literature recognizes that any excess or
absence of conflicts can obstruct the effectiveness of a channel (Dommermuth, 1976)
and its effect can be either functional or dysfunctional (Lusch, 1976a, b; Anderson and Distribution
Narus, 1990; Brown and Day, 1981; Hunt, 1995). Functional conflicts occur when their channel conflict
consequences give origin to long term benefits for the stakeholders of the channel;
generating new solutions and resolving divergences in a friendly manner or stimulating management
creativity and innovation (Anderson and Narus, 1990; Morgan and Hunt, 1994;
Hunt, 1995). Then, the consequences of a conflict will determine if it is being beneficial,
or not, for its members (Rosenberg and Stern, 1970). 37
In that sense, Frazier (1999) affirms that a raise in conflict levels can lead to
an increment in channel performance. Rosenberg and Stern (1971) point out that a
functional conflict can produce a sense of unity in a channel, while Rosenbloom (1973)
comments that it even can impact on the re-evaluation of the effective channel policies.

2.4 Conflict resolution in distribution channels

Instead of eliminating a conflict in a context of distribution channels, the best would be
to understand its process which could be managed to increase the unity and the
effectiveness of the channel as a whole. Such management implies a close coordination
between the members of the channel (Rosenberg and Stern, 1970) and requires the
ability to understand and to control the process of conflict resolution (Koza and Dant,
2006). Therefore, companies must consider in which aspects they must be stiffer, or
flexible, in their decision process, considering that both positions have its inherent cost
and implication.
For Deutsch, in Frazier and Rody (1991), an open sharing informative context would
allow each party to better perceive what the conflict issues are, and to have a more
understandable and detailed look at the problem; defining and evaluating it more
precisely. In that sense, Etgar (1979) affirms that conflict resolution mechanisms, based
on the elimination of perception bias and communication inconsistencies, are most
important because they can reduce problems’ causes, level and intensity before spending
more resources to resolve structural differences between the members of the channel.
In an organizational context, the implementation of communication programs aim at
the supply of additional and clearer information for the stakeholders of the channel, such
as role expectations, objectives and future projections; which can substantially reduce
channel conflicts, considering that the differences can arise from a lack of or a bad
communication and differences in their capacity to process information. This can
generate divergence in the expectations of the members’ roles and their perceptions
(Etgar, 1979). However, if the real positions of each party should be opposed, an opening
in the communication process would consequently exacerbate the existing conflict
(Pondy, 1967). Schul and Babakus (1988) detach that the development and the
implementation of participative decision programs for the leader and member
organizations of the channel can reduce conflict possibilities; can increase the acceptance
of its policies and programs, cooperation and commitment between the parties in
relation to the objectives of the system.
In general terms, there are two conflict resolution method basic categories. The first
one consists in institutionalized mechanisms, representing systematically implemented
policies for channel leaders. The second one consists in underlying activities that appear
in the absence of institutionalized mechanisms (Dant and Schul, 1992). Coughlan et al.
(2006) also detach two ways from which the organizations can face channel conflicts.
Either with institutionalized mechanisms, which treat channel conflict in its initial period;
BIJ or before the proper conflict appear, by giving distribution advice, staff interchange
19,1 programs and intensive information mechanisms; or also through the implementation of
behavior standards that cannot simply be created by anyone, considering that they must
include flexibility, exchange of information and solidarity.
Furthermore, March and Simon, in Dant and Schul (1992), claim that organizational
reactions for conflict resolution occur by means of four specific behavior processes:
38 problem resolution, persuasion, negotiation and policies definition.
In a problem resolution process, the parties which share a common objective involve
themselves in a high risk integrated process to identify solutions that may satisfy both. The
focus resides in an open information collection and trade of goals and priorities, tolerance,
behavior and search of new alternatives. In a persuasion process, each party tries to modify
the perspective or the decision criteria of the other party in relation to a specific subject. The
intention is to reduce the differences between the secondary objectives stipulated by the
common goals. It differs from a problem resolution approach of the existence of previous
persuasive intentions, even though both parties have a coordinated orientation, but less
pronounced, and that can still include zero-added orientation behavior.
In a negotiation process, there are no expected objectives and common goals.
Disagreements on objectives and goals are clearly recognized. Such behavior generally
includes low risk, high inflexibility, no concession, threats, promises and games; even
though, this includes a call for justice and shared values. As in the persuasion strategy, it
differs clearly from the other because of its zero-added orientation. Finally, in regard to
policy definition, there is an assumption of disagreement on the objectives and goals and a
zero-added orientation, even though every party shows a low level of negotiation behavioral
aptitudes. In this approach, the parties extend the negotiation enclosure to third parties. This
strategy presents signals of weakness from the parties in reaching an acceptable solution
through interpersonal scheme. Thus, the search for arbitration or mediation demonstrates
non-integrated and low risk behavior (Rubin and Webb in Dant and Schul, 1992).
In a different approach, when evaluating the effectiveness of two conflict
management processes in distribution channels, Stern et al. (1973) have concluded that
between the introduction of a main objective and staff exchange program, the last one
would have a stronger effect. A main objective relates to the introduction of a common
intention, much desired by the members involved in the dispute, demanding
participation and equitable contribution between the parties.
Chopra and Meindl (2001) believe that existing conflict management must enhance
communication and the overcoming of the differences between the parties, creating more
confidence between them. A formal specification of the roles and directives would help to
establish confidence since it would facilitate the exchange of information. In a long term
period, it would help to transform the relations based on restrictions (contracts) and to
transform them into relations based on processes, where the interactions throughout time
fortify confidence and cooperation, and where conflicts are more easily managed. The
realization of frequent and periodic meetings between the parties facilitates
communication, the reach for high level solutions, propitiating involvement and
questioning before major a conflict occur. In a more practical perspective, the model of food
distribution planning proposed by Neves (1999) possibly can be adapted to other contexts.
According to the author, the most adequate forms of conflict management include:
.
sensitive training, where are enhanced the most potential areas of conflict;
.
task division, by means of relation marketing practical;
 .
joint establishment of objectives and goals, where all the members of the channel Distribution
are involved; channel conflict
.
implantation of the channel committee, where periodic meetings for problem management
questioning and decisions monitoring; and
.
conciliation, through the intervention of an ombudsman.

As a possible alternative, the presence of an ombudsman has shown of great utility in a 39

conflict resolution process.
In Brazil, the retail group Pão de Açúcar is a pioneer in such use. Acting with
independence and authority to resolve the conflicting matters, the ombudsman acts as a
facilitator in an approximation process between the parties and for the creation of an
organizational culture focused on quality, watching over the rights and the expectations
of the customers (in this case the distributors).

2.5 Case study as a benchmark strategy

The activity of benchmark is widely being used to understand better what is
happening in the productive and business markets. The main objective of such activity
is to obtain a better reading on a specific business situation, either for competitive or
strategic reasons. Such activity may be realized on a regional, national or international
scale. Xerox Corporation is one of the pioneers to practice benchmark activities
among American companies. Robert Camp, the logistics engineer who initiated
Xerox’s benchmarking program and who is generally regarded as the pioneer of the
benchmarking practice, offers a clear definition, “Benchmarking is the search for
industry best practices that lead to superior performance” (Camp, 1989). It is a
management tool that integer research systematic processes relating to operation
procedures, innovation and best practices enhances business strategies oriented toward
better performance (Bogan and Callahan, 2001). Steudler and Williamson (2001) base
their thoughts on a World Bank Report which presents some principles that lead to
organizational performance, such as:
.
clear objectives;
.
clear strategy;
.
monitoring indicators; and
.
results evaluation.

Furthermore, the European Benchmarking Co-operation (EBC) (2010), considers that a

benchmarking strategy aims at improving business processes, a search of processes that
never ends. Benchmarking is not a single action, but a continuous, cyclical process.
Saunders et al. (2007) believe that benchmarking practices enhanced for quality
improvement within a networking environment is a recent phenomenon. However,
Simatupang and Sridharan (2002) had mentioned, through their literature review, that in
a benchmarking activity case involving supply chain schemes, little attention was being
paid about the design of a benchmarking scheme based on network collaboration, where
the joint activities of the chain members enable the network to be more responsive
to customers’ demands. One of the reasons is the lack of reliable method and
performance measurement system (Choy et al., 2007). Despite the clear indications on
the efficiency of such practice, single companies cases show a lack of efficient tools,
BIJ using endogenous methods, usually unstructured, to compare their business practices
19,1 with other competitors (Bjorklund, 2010).
Consequently, considering that benchmarking practices do measure company’s
products and processes, comparing them with successful firms’ indicators (Choy et al.,
2007), it is relevant to consider that a case study is an efficient way to do a benchmark
activity. In this context, a distribution channel conflict case study constitutes an
40 important empirical source of data for a benchmark strategy, not only for its business
value, but also for its exploratory relevance. The study of a national Brazilian case
constitutes key data for the positioning of an international manufacturer, taking into
consideration the importance of the national reality into an international perspective.
3. Method
The research is about an assembly plant of the automotive sector, which acts in various
segments of the metal-mechanic industry, with dealerships located over all the Brazilian
national territory. The distribution channel in study can be classified as a vertical
system of contractual distribution, where the manufacturer is the leader of the channel
and, the coordination and the integration between partners occur by the adhesion of each
dealership with a contract (Kotler and Armstrong, 2007; Kotler and Keller, 2009).
In relation to its structure, the channel has three levels:
(1) the manufacturer and leader of the channel;
(2) the intermediate, which are the dealerships and who compose the network of
dealers; and
(3) the final consumers.

In relation to its intensity, the channel can be considered as an exclusive distribution

process, with various dealerships in each Brazilian State. Although it deals with a
generalization scheme, each dealership has a specific and differentiated posture, which
is relevant in this context of analysis. It is worth mentioning that the distribution
network of automotive vehicles in Brazil is strongly regulated by laws, contracts and
conventions[1], demonstrating that this type of products can only be distributed by
means of commercial concession.
The main objective of this research is to identify the actions or mechanisms that
could be adopted by the leader company of the distribution channel in study, to
manage conflicts that impact negatively on its performance, with a focus on its causes.
In this context, were established three specific research objectives:
(1) to detect the main themes on existing conflicts between the channel partners;
(2) to evaluate the relevance and the effect of those conflicts on the performance of
the channel; and
(3) to consider actions or mechanisms capable of managing such conflicts.

As an attempt to anticipate the possible outcomes of the study (Denzin and Lincoln,
2005; Malhotra, 2006), it was presumed the following assumptions:
.
A1: it is possible that conflicts exist, latently or manifestly, in the distribution
channel in study;
.
A2: it is supposed that the channel in study presents insatisfaction between its
stakeholders as a potential source of conflict;
 .
A3: it is supposed that the conflicts in the channel in study have a negative Distribution
impact on its performance; and channel conflict
.
A4: it is considered that viable conflict management actions or mechanisms, if management
implemented, will lead to an upgrade in channel efficiency.

The present work has opted for a qualitative approach, which characterizes itself
as an exploratory study, using in-depth interview techniques (Denzin and Lincoln, 2005; 41
Flick, 2008), by means of a case study. In this context, Gummesson (2006) defends that a
qualitative approach is superior to a quantitative approach in the way to access the
non-linear aspects of phenomena, accepting their complexity, context and the effect of
behavioral characteristics of the participants through a holistic vision. Consequently, this
approach is considered adequate for the study of the relationship management between
the manufacturers and its dealerships in a context of distribution channels (Bonoma,
1985; Eisenhardt, 1989). In total, eight people were interviewed, four participants from the
dealerships and four participants from the manufacturing company. The participants
were chosen by criterion of judgment or intentional (Gaski and Ray, 2004). The selection
criteria for the participants of the manufacturer were:
.
to act in departments that interact constantly with the dealerships;
.
to have a constant relationship with the dealerships;
.
to have knowledge of possible existing disagreements in the channel;
.
to personally know most of the executives of the dealerships;
.
to have a broaden knowledge of the distribution functions in study;
.
to be in an executive position that conferred the representation of the interests of
the manufacturer and of the dealerships;
.
to have at least three years of permanency at the manufacturer; and
.
to have personal characteristics that enhance a tendency to speak out about the
channel’s problem.

In relation to the selection of the participants from the dealerships, three participants
were from the dealerships and one from the trademark class type association. The
selection criteria were:
.
the market where the dealership is has to be significant, meaning that the
participant have to be in one of the ten most important places in Brazil in terms
of sales volume;
.
the dealership must have been a member of the channel for at least five years;
.
the dealerships have to occupy different sales positions, based on the A/B/C sales
curve (invoicing volume) for the year 2008;
.
the participants should have either occupied a key position and have knowledge
of the channels activities and problems;
. the participants should occupy an executive position at the dealership and have a
decision authority on the issues of disagreement with the manufacturer; and
.
the participants should have personal characteristics that enhance a tendency to
speak out about the channel’s problem.
BIJ 4. Analysis and results
19,1 In this research, were realized in-depth individual interviews followed by
content analysis techniques, as proposed by Bardin (2004) and Flick (2008), giving
exhaustiveness, representation, homogeneity and relevancy in the research process. The
conflicts brought to evidence, from both the manufacturing company and the
dealerships were identified in 23 concepts of conflict, linked to their potential source, as
42 introduced in Table II.
In the perspective of the participants pertaining to the manufacturer, the main
conflicts within the network of dealerships are about:
. the achievement of the sales objectives for the trucks, in the sense that the
dealership network is not committed to reach those goals;
. the marketing strategy, in the sense of passing this responsibility to the dealerships
network, considering that the manufacturer acts strongly with cooperative and
regional strategies and, considering it acts in specific market niches; it would not be
compatible to have a massive and general marketing strategy;
.
the acquisition of equipment and tools to allow an adequate technical and
assistance service, considering that the dealerships network do not want to
invest in such equipments;
.
the supply of trucks at the dealerships, even though the manufacturer recognizes
the inherent difficulties related to the high costs of stocks;
.
the training of the mechanics, in the sense that the manufacturer believes that the
level of quality of the mechanics in the dealerships is low;
.
the proper installations of the dealerships, in the aspect of their adequacy,
presentation and identification as representatives of the Brazilian manufacturing
trademark;

Conflict themes under the angle of Encountered possible Conflict themes under the angle
the manufacturer conflict sources of the dealerships

Fulfillments of the vehicle sales Role incongruousness Manufacturer’s propaganda and

goals
Dealerships’ propaganda
Dealerships vehicles in stock
Mechanics’ qualification
Installations: identification and
adequation
Dealerships’ parts in stock
Dealerships’ other businesses
Support to consortia
New segments: lack of support and
investment
Equipments and tools
Table II.
Channel main conflicts
encountered Source: Elaborated by the authors based on research data
Goals incompatibility or promotion
impediment Manufacturer’s vehicles in stock
Lack of resources Manufacturer’s guarantee
Disagreement on decision Intolerance of manufacturer’s
domain accounts receivable
Difficulties in the Price of parts
communication process Price of vehicles
Differences in perception Manufacturer’s after-sales service
Manufacturer’s training
Vehicles market positioning
New products development
Dealerships identification
Manufacturer’s direct contacts
with clients
Focus on market niche
 .
the supply of parts in the dealerships, being considered low or inadequate in its Distribution
variety; channel conflict
. other activities in the dealership that deviate the focus from the full distribution management
of the trucks;
.
lack of support of the dealership in their participation in the Manufacturing
financing Company; and
43
.
the lack of support and investment from the dealerships in new product
segments.

On the other hand, in the perspective of the participants pertaining to the dealerships,
the main conflicts within the network of dealerships are about:
.
the sale prices of the vehicles fixed by the manufacturer, considering that the
price of the trucks should be lesser than the current one, in virtue of the
trademark perception differences in the market;
.
the lack of marketing strategies and promotions from the manufacturer,
considering that the manufacturer, contrary to the competition, did not develop
objectives that regard to the promotion of its products for the market, and nor
does internal promotions for the network to achieve its corporate goals; and
.
the manufacturer’s warranties, referring to the payment of services given to
customers in their guarantee policy, which is below the average amount paid by
the competitors.

The revelation of those subjects of conflict confirms that it is possible for conflicts to
exist, latently or manifestly, in a distribution channel, ratifying a widely accepted
theoretical proposal that conflict is inherent to the relationships existing in the
distribution channels (Pondy, 1967; Rosenberg and Stern, 1970, 1971; Stern et al., 1973;
Etgar, 1979; Gaski, 1984; Skinner et al., 1992; Rosenbloom, 2003; Coughlan et al., 2006;
Singh, 2006; Koza and Dant, 2006, 2007; Kotler and Armstrong, 2007; Kotler and Keller,
2009).
The interdependence between the partners of the channel becomes obvious. It is not
possible to determine with precision until what point a conflict source is a cause of
disagreements and from what point it is caused by another source of conflict. Also, it is
possible to understand that one determined source of intra-channel conflict is, at the
same time, its proper cause and consequence.
In fact, up to what point the incongruence of roles is a cause of conflict, or is a
consequence of the differences of the participants’ perception of the reality, or else,
is a consequence of decision domain disagreements? In response, a conflict can be caused
by incongruence of roles, which can be originated by other source(s) of conflict,
such as the difficulty in the communication process and so on. The use of the typology
developed by Brashear et al. (2007) on performance evaluation of distribution channels
helps to identify the perceptions of the participants to possible conflicts, which affect
channel performance. The results show that conflict matters have a negative impact on
the performance of the channel, on its trademark image, on customers’ satisfaction, on
the assistance between the companies, on the business ability of the dealerships, on the
channel stakeholders satisfaction, on the coordination, on the volume of sales, on the
economic performance and on the demand generation of the manufacturer.
BIJ It is observed that the use of diverse approaches of evaluation on channel
19,1 performance is not, by itself, absolute. It occurs that the same dimension of performance,
subject to conflict, can be classified in more than one performance categories, as
proposed by Brashear et al. (2007). They can be classified in other dimensions such as the
operational one, where it involves guarantees refund request processes. Also, they can
be classified as relational, where it may affect coordination, loyalty, satisfaction and
44 commitment. Moreover, they can be classified as strategic, where the organizational
positioning established for service differentiation can have an impact on customer’s
satisfaction and retention.
The conceptual model proposed by Rosenbloom (1973) and extended by Singh (2006)
indicates that channel conflicts can have three types of effect on efficiency: negative, null
or positive. The performance of the channel can be evaluated in function of distinct
dimensions, including effectiveness, efficiency, productivity and profitability of the
channel (AMA, 2007) and strategic categories, such as client-buyer, operational, relation
and economic (Brashear et al., 2007). Consequently, the effects of a conflict are not the
same in all the dimensions of a channel performance at the same time. It is possible that
the effects of a conflict on channel efficiency are different depending on the dimension or
category of performance that is being evaluated.
In reference to the confirmation state of the assumptions of research, it was
previously recognized that all four assumptions were confirmed. This way, the first
assumption (A1) suggests that it is probable that conflicts exist, latent or active, within
the distribution channel. This assumption was confirmed that there are conflicts
between the manufacturer and the dealerships for the distribution of trucks on
the national market. The analysis and the interpretation of the empirical evidences have
disclosed the existence of twenty three conflict issues, including ten from the perspective
of the manufacturer and 13 under the angle of the dealerships, ratifying then the widely
accepted theoretical proposal that conflicts are inherent to the relationships within
distribution channels (Pondy, 1967; Rosenberg and Stern, 1970, 1971; Stern et al., 1973;
Etgar, 1979; Gaski, 1984; Skinner et al., 1992; Rosenbloom, 2003; Coughlan et al., 2006;
Koza and Dant, 2006, 2007; Singh, 2006; Kotler and Keller, 2009).
The second assumption (A2) admits that there is insatisfaction between the partners
of the channel, which is generated by conflicts. An important theoretical consideration
about the sources of conflict in distribution channel is widely recognized in the
literature about marketing channels. It is perceived that certain interdependence exists
between them. In fact, it cannot be determined with precision until what point a conflict
source is the cause of those disagreements and up to what point those disagreements
are caused by (an)other source(s) of conflict. Also, it is possible that one determined
conflict source is, at the same time, the consequence of an inter-channel conflict.
Finally, conflicts can to be caused by role incongruence, which can be originated from
perception differences, or from any other communication matters, such as the difficulty
in the communication processes and so on.
The third assumption (A3) considers that distribution channel conflicts may have a
negative impact on distribution channel performance. Although not all conflict matters
were identified, nor studied, this assumption also was confirmed. Generally, all the
participants agree that the conflicts elements between the distribution channel members
have a negative impact on the channel’s performance. It is important to mention that
performance evaluation tools for distribution channels have still not been studied in
detail (Singh, 2006) and there are increasing theoretical and empirical affirmations about Distribution
the use of non-financial performance indicators to complement the financial measures of channel conflict
performance (Brashear et al., 2007). However, such classification is valid when it allows
an anticipated analysis of how the channel is pretended to be evaluated, either in theory management
or in practice. Moreover, this classification allows raising questions referring to possible
effects on channel performance. The conceptual model of Rosenbloom (1973), which was
extended by Singh (2006), indicates that channel conflicts can have three types of effect 45
on the proper efficiency of the channel: negative, null or positive. Already
the performance of the channel is an evaluation of its result, considering that it can be
evaluated through performance dimensions, such as: the effectiveness, the efficiency, the
productivity and the profitability of the channel (AMA, 2007) and the strategic
categories, of the client-buyer, operational, of relationship and economic
(Brashear et al., 2007).
The fourth and last assumption (A4) suggests that there are viable actions or
mechanisms that can be used to manage conflicts, leading to enhance the efficiency of
the channel. The confirmation of this assumption is the essence of the response to the
research problem. It is considered that this assumption was also confirmed, in
concordance with what is argued in the next section, the managerial implications.

5. Managerial implications
Considering that the manufacturer acts in a highly competitive market, whose
national competition includes the greatest players world-wide and, considering that the
distribution of its products and services can only be made by means of its truck
dealerships network, the conflict management in such network assumes a vital
importance for the maintenance and the raise in competitiveness of the channel as a whole.
Although the results coming from this research cannot be generalized, they can serve
as indicators for the managers of a company to invest time and the necessary resources
for the maintenance and the consolidation of the relationships with its dealerships,
acting in a conflict management perspective that includes the manufacturer and the
dealerships, to finally impact more directly on the performance of the company.
It is important to mention that the literature about distribution channels does not
yet offer enough significant principles, directives and empirical evidences to guide the
decision makers in an attempt to manage distribution channel conflicts, being limited
at suggesting some approaches and recommendations. Today, the evaluation of
channel conflicts in the organizations still occurs at a subjective level of channel control
(Rosenbloom, 2003).
The conflict management proposals explored in this study are based on the generic
models of the literature and do not distinguish their use in a specific and determined
conflict. In that sense, the approach proposed in this research prioritizes the performance
of channel conflict management from its sources. This study identified the existence of a
specific Trademark Agreement, which has the responsibility to determine
and communicate the functions, rights and obligations of the stakeholders of the
channel. However, it also disclosed the existence of a certain obsolescence and
recognition that many roles and definitions of this agreement are not being fulfilled, by
both parties. Possibly, the dynamics of the market may have imposed important
changes in the relations, which were not yet transferred to the agreements; generating a
hiatus, which could to be filled by the perceptions and the interpretations of the parties.
BIJ 5.1 Joint establishment of objectives and goals
19,1 As for the sales objectives and goals of the dealerships, they must be established
together with more precision and clearly displaying the market information and the
techniques used for their achievement.
The creation of a systemic of attribution of goals, clear and transparent, which
discloses important information on the individual market of each dealership, and
46 allows to analyze its viability, as well as what are the conditions and necessary actions
to make it reachable and fundamental for the maintenance of commitment.

5.2 Stock financing adoption programs

Stock financing adoption programs represent the most difficult source of potential
conflicts to be managed, considering that it involves investments, generally expressive.
In this context, the adoption of a capitalization network plan, where an invoicing
percentage is reserved to the constitution of a fund destined for the acquisition of a
supply of vehicles for the dealerships and, the establishment of a partnership with a
banking institution for the management of a recurrent credit for supply are practical
examples of the most common strategies of the automotive segment.

5.3 Establishment of a representative committee of the channel

It is necessary to adopt strategies involving networks of discussion on issues such as
market positioning and in investment decisions. A closer involvement of the
participants of the channel is suggested, where the focus should be on relationship, team
work, and real openness on communication. Initially, this performance strategy shows a
problem resolution approach through the share of common objectives in an integrated
process. However, many conflict matters may be resolved through a negotiation process.
For example, a channel committee representative could periodically regroup
representatives of the manufacturer and the dealerships, aiming to discuss and resolve
current channel problems. The management of the sources of conflicts, with the
adoption of such strategy could have and positive impact on the solution of the themes
of conflict linked to any disagreement about the decision domain.

5.4 Establishment of a distributors committee for product development

In reference to product development, the study shows that the dealerships have
expressed complaints that the manufacturer does not invite them to do research and
development (R&D) as a joint process and, frequently have to resolve product problems
with clients. In this context, the idea of establishing a channel committee, involving the
dealerships in the decision taking on new products would increase the acceptance
of the policies and the programs of the company, increasing cooperation and
commitment in relation to the established objectives and goals, as suggested for Schul
and Babakus (1988).
With the adoption of such mechanism, different from the use of a conflict resolution
policy strategy and involving the participation of external participants, the mediation
would be promoted internally, with the proper leader of the channel, without reducing
any mutual relationship confidence. The adoption of this mechanism, as well as the
establishment of a representative committee of the channel would possibly lead to an
effective management of the divergences found in the after-sales process of the
manufacturer and of the dealerships.
6. Conclusions Distribution
The subject of distribution channels is very particular and specific. Even though were channel conflict
presented constructs from the literature about channels, and considering that many of
the findings are consonants with the theoretical references, the conclusions do not allow management
any generalization. Furthermore, it was not possible to verify the effects of conflict
management proposals on the performance of a distribution channel through time.
For the distribution of trucks in Brazil, the creation of rules, impositions, rights and 47
obligations are mainly made through national legislation, leaving the conventions of
trademark and the internal rules to the proper distribution channel management
processes and strategies. Understanding that a trademark agreement does not represent
a formal and complete agreement between the manufacturer and the dealerships in a
channel distribution channel, the manufacturer still has to manage the business
relationships between all parties to guarantee an expected behavior. In this case, all
parties have demonstrated some dissatisfaction, but still believe that the relationship is
beneficial and therefore they remain as a channel stakeholder, considering and
understanding that the details specified in their convention are not easily resolvable in
practice.
The results show that the manufacturer does not make a general use of legal suit;
which constitute a coercive strategy in function to persuade the partners of the channel
for the use of a specific strategy. On one end, it corroborates with the recognition of the
dealerships participants who recognize the rights of the manufacturer to establish sales
quotas, general standards, the organization and the levels of services of the channel
structure for the dealerships and to request its fulfillment. On the other end, however, it
shows a lack of follow-up and monitoring from the manufacturer to achieve the
prescribed sales objectives and standards.
It is important to mention there are a few cases of distribution channel which show
an integer management strategy, more specifically based on mutual perceptions. The
existing studies are elaborated either under a manufacturer’s perspective or from the
view of the other actors of the distribution channel; but none include all parties of a
distribution channel. Furthermore, the subject, given its complex and controversial
nature, is more susceptible to be studied in a qualitative perspective, as suggests
Gummesson (2001). In that sense, the use of a qualitative methodology showed an
adequate strategy, with a more in-depth perspective, reaching the perception of all
stakeholders of the channel.
In regard to its limitations, one aspect refers to the sample that was selected in
function of the inherent interests of the researcher, and therefore, it cannot be considered
as representative. In reference to the data collection process with the dealerships
representatives, more specifically on their perceptions about the manufacturer, it was to
a certain point, reliable because it referred to one and only entity. However, the interview
process with the manufacturer about the dealerships had practically no single focus,
creating bias that had an impact on the internal validity of the research process,
considering that the proper distribution channel, composed of various dealerships, does
not constitute one concrete entity. In this context, it must be recognized the difficulty of
getting answers that make justice to a collective character. Another important limitation
of the study refers to a possible inertia of the participants to participate, considering the
requests of confidentiality, which has created a distance of the participants in the
research itself.
BIJ Furthermore, the evaluation of the effects and the relevance of the conflicts themes
19,1 encountered in the channel have been carried through on the basis of the main
perception of the participants. The results demonstrate that was not clearly or directly
established a relation between the potential sources of conflict, the conflict themes and
their impacts in the performance of the channel. Consequently, new studies could
establish a focus on the search of existing associations between the potential sources of
48 conflict and the evidenced issues of conflict; establishing what are the sources that are
at the origin of the conflict issues and the magnitude of their impact. The adoption of a
quantitative approach, with the use of causal relation models, could be an interesting
method option. In the same sense, it could be established a relation between the
identified conflict themes and its effects on the channel efficiency.
Finally, it is necessary to advance in the construction of models with a focus on
inter-channel conflict resolution. That is why future exploratory research works in
different levels of the supply chain, or in different countries of the world, where the
business activity is clearly intense and focused, would contribute to validate and to
understand the necessity of doing case study as a benchmark strategy in a systematic
way. The existing theory findings are still general and with few practical applicability.
This way, the creation of more models destined to the intra-channel conflict resolution,
in the most diverse contexts, could serve as a base for the construction of a practical
guide to assist the managers in such research process.

Note
1. For more details, consult: Brazilian Law 6.729/79 altered by Brazilian Law 8.132/90.

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Corresponding author
Eric Dorion can be contacted at: edorion@ucs.br

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