Managing Conflict

FMS
 Channel Conflict

Definition

Channel conflict arises when the behavior of a channel

member is in opposition to its channel counterpart. It is
opponent centered and direct, in which the goal or object
sought is controlled by the counterpart.
 CONFLICT
• Conflict implies incompatibility at some level
• Conflict often exists at such a low level that
channel members do not fully sense it
• Latent conflict is the norm in marketing
channels
• Interests of channel members collide as all
parties pursue their separate goals, strive to
retain their autonomy and compete for limited
resources
 CHANNEL CONFLICT
• If each player could ignore the others,
latent conflict would be nil
• Companies linked as a channel are
fundamentally interdependent
• All members need each other to meet the
end user’s service output demands
economically
 CHANNEL CONFLICT
• Organizations face more conflicts than they
can deal with given the time and capacities
available
• To cope, organizations focus attention on
immediate issues
• They fail to factor in latent conflict when they
develop new channel initiatives and are
surprised to meet active opposition to their
suggestions for improvement
 Measuring Conflict
• Counting up the issues
• Importance
• Frequency of disagreement
• Intensity of dispute
• Conflict = sigma (importance x frequency x intensity)
• Conflict formula has been shown in the field to do a good
job of overall sense of frustration in a channel relationship
• It allows diagnostician to be specific
• Pinpoints exactly where and why the parties are in
opposition
 MEASURING CONFLICT
• Combatants are frequently unable to
disentangle sources of friction
• In high conflictual channels personalities
involved become polarized
• Inflamed relationships lead people to double
count issues, to overlook issues on which
they agree, exaggerate the importance,
intensity and frequency of their differences
 FUNCTIONAL CONFLICT
• Common when channel members recognize each other’s
contribution and realize each party’s success depends on
others
• Communicate more frequently and effectively
• Establish outlets for expressing their grievances
• Critically review their past actions
• Devise and implement a more equitable split of system
resources
• Develop a more balance distribution power in their relationship
• Develop standardized ways to deal with future conflict and
keep it within bounds
 FUNCTIONAL CONFLICT
• Functional conflict is a natural outcome of close
cooperation between channel members
• Working together to coordinate tightly inevitably
generates disputes but when channel members
are committed these disputes raise performance
and do not damage trust
• Often when channel members are not in
opposition their relationship not one of peace
and harmony – it is of indifference
 How high levels of Conflict erode
Channel Relationship
Conflict Economic Satisfaction
Level of tension, frustration, Of focal firm : positive affective
-
disagreement in relationship response to financial rewards
experience by focal firm eerived from relationship or
- economic gratification
-
Non-economic Satisfaction
Trust of focal firm : positive affective
Focal firms’ belief in counterparts response to psychologocal
-
honesty and benevolence aspects of relationship or
+ gratfication from non-financial
sector
Commitment
Focal firm’s desire to continue relationship
& to sacrifice to build & maintain it
 Sources of Conflict

• Competing goals

• Differing perceptions of reality

• Clashes over domains

• Intrachannel competition
• Multiple channels
 COMPETING GOALS
• Each channel member has as a set of goals and
objectives that are very different from the other
channel members
• Agency theory underscores how competing goals
create conflict in any principal-agent relationship
regardless of the personalities and players
involved
• Channel members personalize their conflicts and
believe change of partner or personnel will solve
their problem
 COMPETING GOALS
financial goals
• Suppliers viewpoint • Resellers viewpoint
• Maximize own profit • Maximize own profits
by higher prices to by higher own level
reseller, shifting margin, lower
expenses to reseller, expense, faster
higher reseller inventory turnover,
inventory, lower higher allowances
allowances to reseller from manufacturers
 COMPETING GOALS
desired target accounts
• Suppliers viewpoint • Resellers viewpoint

• Multiple segments • Segment

corresponding to
resellers position
• Our markets only
• Multiple markets
• Selected accounts
• Many accounts
(profitable to serve)
 COMPETING GOALS
desired product and accounts
policy
• Concentrate on our • Achieve economies of
product category and scale over product
our brand categories
• Carry our full line • Serve customers by
offering brand
assortment
• Do not carry slow
moving items
 DIFFERING PERCEPTIONS
OF REALITY
• Channel members are often confident that they
know the facts
• When perceptions are compared it is difficult to
believe that they are members of the same
channel
• Differences on such basic issues
-attributes of product/service
-the applications it serves and for which segments
-competition
 DIFFERING PERCEPTIONS
• Given such basic divergences of ideas
about the situation it is not surprising that
channel members also disagree on more
subjective laden subjects such as the
value added by each channel member and
how each side behaves
• Channel members have inaccurate
expectations of what the other will do
 DIFFERING PERCEPTIONS
• These expectations lead them to choose
suboptimal strategies which heighten
conflict
• Since channel members operate at
different level of the chain and are
exposed to very different information and
influences giving them different pieces of
overall picture
 DIFFERING PERCEPTIONS
• Seldom do channel members cooperate fully
enough to assemble the entire picture from
separate pieces
• When they do share information that they
uncover are dramatic
• Lack of communication exacerbates conflict
due to different perceptions
• Frequent, timely and relevant communication
assists in aligning perceptions
CLASHES OVER DOMAINS
 Grey Markets

Grey marketing is the sale of authorized

branded product through unauthorised channels
 Grey Markets
Suppliers to unauthorised outlets :

• Authorised distributors and dealers in other markets

• Professional arbitragers
– Import-export houses
– Individuals, professional traders living near borders

• The supplier itself

 Fueling Conflict

• Conflict begets more conflicts

• Threats
 Resolving Conflict

• Information intensive mechanism

• Third party mechanism

• Building relational norms

 CONFLICT RESOLUTION
STRATEGIES
• Negotiation involves discussions aimed at
resolving conflict
• People doubt their negotiation skills and
hence fear negotiations
• Negotiation is a fact of life in marketing
channels
• Effective negotiation techniques are useful,
first and foremost for self defence and for
improving one’s own position
 CONFLICT RESOLUTION
STRATEGIES
• Evaluating desired relationship outcome
- Negotiations should be influenced by
relationship outcome the organization
desires after the the negotiation process is
over
- Type of negotiation strategy adopted will
directly affect the relationsship they
currently share or hope to develop
 CONFLICT RESOLUTION
STRATEGIES
• One way to evaluate relationship is to look at
relative power
• Relative power of each member is roughly
equivalent to that member’s dependence on
the other
• Decisions to compete, retreat, accommodate,
or collaborate when conflict arises are in
large part based on the understanding of the
existing relative power relationships
 CHOOSING NEGOTIATION
STRATEGY
• Predatory Negotiation
- Channel members who use predatory negotiation
generally consider as weak the idea of
relationship sustaining bargain sessions featuring
information sharing, give and take, open
communication, and an attitude of cultivating the
common good
- They view that the economic pie as fixed, which
means that any gains must be taken from
another channel member
 CHOOSING NEGOTIATION
STRATEGY
• Name of game in predatory negotiation is
hardball
• Object is to persuade the other channel
member that they need what you have,
you are only marginally interested in their
offer
• Nature of the solution arrived eventually
through hardball depends on
 NEGOTIATION STRATEGY
• Who concedes slowest
• Who exaggerates the value of its concession
the most while understanding the other’s
allowances
• Argues most forcefully
• The most aggressive hardballers – usually
those possessing substantial channel power –
often make inflexible demands, while
threatening to retaliate if demands not met
 NEGOTIATION STRATEGY
• Symbiotic Negotiations
-features attempts to create mutual value
through trade offs and bargaining
-symbiotic negotiators believe that conflict
resolution is best achieved by being
cooperative, imaginative, and persistent in the
pursuit of mutual gains
-negotiators stress value of sharing information
and open lines of communication
 SYMBIOTIC NEGOTIATIONS
• Win win strategy wherein both the parties
emerge victorious from conflict
• Joint gains are achieved through a win win
orientation by avoiding behavior that coyld
worsen the relationship while actively
seeking behavior that encourages
seeking mutually beneficial solutions
 SYMBIOTIC NEGOTIATIONS
• Channel negotiations can be based on
substance when each channel member
-separates the people from the problem
-focuses on needs rather than positions
-develop options for mutual gain
-uses only objective criteria