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    © All Rights Reserved
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    18 views34 pages

    Managing Channel Member Behaviour

    Uploaded by

    Satinder Singh

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 34
    16 Managing Channel Member Bahaviour eee Objectives To understand channel eltonships ‘To understand the theory of channel conta! {To understand tne concept of power a channel of dstibuton 1 To undesstand the various sources of channel power + To understand the conceot of inuence setesy {To undersand the concept of channel confit * To understand the concep of confict elution proces in chan management ee INTRODUCTION (Channel design is he starting point for channel management but the actual task of channel ‘anagerent is much more complex than designing the cutomer-oriented channel. The ‘ask of channel management sarts withthe channel desig. In its essence, channel manage. ‘ment inolvesmainaining mutually proabl relationships withthe members ofthe channel 10 that the actives of the channel are performed smoothly by the interlinked ents om 2 sustainable manner (Channel management in ts day-to-day manifestations would not be lite to just logistics ‘management or activity planning, Infact, the major part of the channel management Seti involves the management of the channel constituents in drecing ther behaviour ‘towards the effective and efiient achievement ofthe overall ohjecives of the channel A logitice network however perfect bets design, cannot completly achieve is potential unless the constituent members workin tandem and donot indulge in opportuni ativtes that may bring them short-term profit br hur the interes ofthe channel in he long ram ‘To ive simple example, assume that company inereass the discounts o distributors 0 2 > > > » ha ica be raerred wo the retailers, but ate sewers that dhe dicount ate not being transferred and instead the esta profits are being pocketed by the disibutry. In thie seenatio the dstrbutors wil gain inthe shorter but in the long-term the competitors are giving a beter deal o de retaers, dhe company’s macket sare wil suf, ulmately leaving the diseibetors with mu reduced quantum of sales, Further, the wu of the manufacturer inthe dstrbutae would have sen severely eroded it this Leu, Ling Future avenues fo cooperation, Preventing such opportunistic behaviour an puling ogether de channel member's thatthe ukimate goal of eustomer satisfaction is achiered isnot an ery ask, Thisisbecaust the orientations andthe mexivations Of he channel menbers vary and might no always tally with dose of the manufacturer. ‘Also, the channel members wil always have a propensity to seek autonomy in major before this ppcic cate. This arrangement is 2 deterrent agent placing orders of small uanties at well s ordering indiscriminately which can put pressure on the inventory Position as well as the production process. However, to enforce this the manufactures needs to have suficent clout in the market. Thus, the controling member unas poses some thority ove the members whose actions ate controled. Autoriy snd poor ae interrelated concepts which will he discussed separately ‘Authoriy exis only when a spit of compliance exis. According to Barnard (1950) {he source of authority originates with the interests of those wha are to be controled ‘Authority i based dirs on the wlingnes to comply to those to whom orders ae given ‘his takes ws othe ceneep of what sual called a "sone of inference” Accocing to Barnard, there exis zone of indiference in each individual within which orders ioe “SC Ceoeoocecocoooocoen a + and Ostibation Management acceptable withou: conscious questioning of dei authorny Farts, the zane of inliference wil be wider or narrower depending upon the degree to which the inlucement exceed the burdens and sacrifices, which determine dhe inidual's adhesion to te organzason, Ts ‘means that ifthe perceived inducements of adherence are very narow oF 0tsguicant {he zone of indife-ence wil also be narow: That authority is propersonal te ability to Jmpart inducements. Buckln (1973) extended Barnard’s the theory of authority ond Proponed a unique diary of chanel contro. The tieory is concepualed i Pure led and 163 | povot | Anton a ree Figure 162 Theory of channel convo! In Figure 16.2 the vertical ans represent the profs obtined by the channel member fom doing business with the channel principal. The horizontal ais denotes the athority lor contol ofthe chansel principal where authriyinereate from lettoright Thisauthority ‘gradually increases a the channel member is increasingly forced to operate based on te rection ofthe channel principal. It can be imagined atthe number of decisions of the channel member being totally influenced by the decisions ofthe channel principal At the (one exeme it could ben, where the channel principal does not have anyinuence ver the decisions of the channel member and then slowly at we proceed towards the right ‘more and more decisions ike pricing, inventory management, avestnent decison, staffing , come under the drecons of the channel principal. The other extreme it when the Channel priori versal integrates 20 that the chatin! mienber just an extension OF the channel principals organization. The two functions employed in the model ae the ey-ofl function and tie tolerance fancon. The payoff fanation expresses the change in the profits ofthe individual member asthe channel member subjects self more and more to the authority of the channel principal. As the fgute indicate, the payaff function cecoecooecoceeoeone o ©eeoce ‘Managing Channel Member Beheviour 563 Channel members prot + Pension ++ Auboriy> ‘cone Figure 16.3. The role of persuasion, authority, and coercion in channel contol Degins ats particular height which sinicaiv of the profits earned by she channel member ih leas channs contol As th authority orconzol ove the channel member inceases the payoff forthe channel member shows a delining rend. Thisis because ashe chenat Psincpal subjects he channel member under is conta, the decion wi be inceaingy {afluenced by the goals ofthe channel principal andles-on the goals ofthe channel member For example, i the manufacturer contol the ventory decisions of the ditbutor come pletely the channel member may be asked to stock more which wil lead to greater reich ‘on the working capital front for the manufacturer while it wil be detcimental for the isbutor as its working eaptl outiay wil be higher ‘The tolerance fiction, on the other hand, reflec the perception of the burden and ‘serie by the channel member by increasingly subjecting itself tothe control of the

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