Channel Conflict

A channel conflict may be defined as “A situation in which one channel member perceives another channel member (s) to be engaged in behavior that prevents it from achieving its goals”. Conflict is opposition, disagreement or discard among the organizations engaged in the distribution network.

Conflicts can be classified as Vertical conflict  Horizontal conflict  Inter type conflict  Multi Channel conflict  .

and mainly due to the poor communication. . If they fail to conform each others expectations.Vertical conflicts   Vertical conflicts occur due to the differences in goals and objectives. retailers and manufacturers expect wholesalers to provide coordination functional services. In turn. Wholesalers expect manufacturers to maintain the product quality and production schedules and expect retailers to market the products effectively. misunderstandings. channel conflict results.

manufacturers may bypass intermediaries and sell directly to consumers and thus they compete with the intermediaries. manufacturers permit too many intermediaries in a designated area that can restrict. reduce sales opportunities for individual dealer and ultimately shrink their profits.Some common reasons for vertical conflict are ( Producer specific)   Dual distribution i.e. i. . Over saturation.e.

i. i. . manufacturers develop and use innovative channels that create threat to established channel participants. manufacturers offer different services and margins to the different channels members even at same level or favor some members.  Partial treatment. New channels.e.e.

  No or inadequate sales support and training to intermediaries from the manufacturers. non cooperation and rude behavior with the channel members. Irregular communication. .

repairing services. Delays in delivering the products or sometimes dispatching the products without confirmed order. Refusal to replace or take back the goods damaged in transit. Non co-operation in replacement of faulty goods. .   Stipulation of ordering in advance. high stock holding and dumping the stock at the intermediaries. and installations.

Margins / commissions are not sufficient and there is no periodic revision of commission and other terms .  No co-operative advertisements. No or inadequate credit offered to the intermediaries. Manufacturers do not share any expenses of advertisements.

. Intermediaries encourage customers to switch to private labels / competitive products.Conflicts due to the Intermediaries Actions    Intermediaries promote and sell more private labels than promoting the manufacturer’s brands. Intermediaries carry competing lines and give more showroom space.

Intermediaries fail to get the expected / promised efforts. . Intermediaries fail to collect payment from market in stipulated time.   No support in the manufacturer’s promotional efforts.

. No appropriate and timely market feedback and report to the manufacturers.   Intermediaries deliberately cut the prices to harm the manufacturers. Intermediaries refuse to service and install manufacturer’s products.

These conflicts can offer some positive benefits to the consumers. i.e. two or more franchisees etc.Horizontal conflicts  Horizontal conflicts are the conflicts between the channel members at the same level. . two or more retailers. Competition or a price war between two dealers or retailers can be in favor of the consumers.

. Aggressive advertising and pricing by one dealer can affect business of other dealers.Reasons behind horizontal conflicts   Price-off by one dealer / retailer can attract more customers of other retailers.

.Reasons behind horizontal conflicts    Extra service offered by one dealer / retailer can attract customers of others. Unethical practices or malpractices of one dealer or retailer can affect other and spoil the brand image. Crossing the assigned territory and selling in other dealers / retailers / franchises area.

. This concept is called as “Scrambled Merchandising” where the retailers keep the merchandise lines that are outside their normal product range. also sell vegetables and fruits and thus compete with small retailers selling these products. Large retailers often offer a large variety and thus they compete with small but specialized retailers. the Intermediaries dealing in a particular product starts trading outside their normal product range. now the supermarkets such as Spencer’s etc. For example.Inter Type conflict  Inter type conflict occurs when.

e. .Multi-channel Conflict   Multi-channel conflict occurs when the manufacturer uses a dual distribution strategy. i. This act can affect the business of other channels selling manufacturer’s brands. the manufacturer uses two or more channel arrangements to reach to the same market. Manufacturers can sell directly through their exclusive showroom or outlets.

.Multi-channel Conflict  Manufacturers can bypass the wholesalers and sell directly to the large retailers. which is possible due to a volume purchase. Conflict becomes more intense in this case as the large retailers can enjoy more customers and so the profit due to offering more variety and still economical prices.

it is a inevitable as many individuals. In channel management. 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. .Resolving Channel Conflicts   Conflict is a natural phenomenon. 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. Certain conflicts are constructive too. which cannot be eliminated. institutions are involved and they are interdependent.

Channel power is the ability of one channel member to influence another member’s marketing decisions and goal achievement. Channel leader is able to reduce conflicts because he possesses the channel power. Manufacturers. Channel power can increase conflict and reduce cooperation if one channel member uses coercion to influence others. It enables the leader to influence overall channel performance. The channel leader controls resources on which other members depend.Some techniques are as follows  Channel leadership – Many channel conflicts can be resolved through the effective channel leadership. producers like IBM. For example. wholesalers or even retailers can become the channel leaders. . Ford can act as channel leaders because of their economic power.

. It can reduce the misunderstanding and conflicts can be reduced substantially through this communication. whether it is survival. Exchange of persons between two or more channel levels – This helps in better understanding. high quality or customer satisfaction. market share. Each will grow to appreciate the others point of view and carry more understanding when returning to their position.  Adoption of Super ordinate goals – The channel members come to an agreement on the fundamental goal they are jointly seeking.

Cooptetion can reduce conflict provided both the parties compromise some or the other issues in order to win the support of the other side. board of directors so that they feel that their opinions are being heard. 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. .

It makes sense to assign diplomats to work more or less continuously with each other to avoid the conflicts. . Diplomacy – Diplomacy takes pace when each side sends a person or a group to meet with their counterpart from the other side to resolve the conflict.  Joint membership in and between trade associations – Such associations bring all participants under one roof for more exposure to the public and to improve relations with each other by understanding their problems.

the two parties agree to present their arguments to a third party and accept arbitration decisions. both the parties may have to resort to third parties. Third-Party Mechanisms – When conflict is chronic. which are not involved or not the part of the existing channel.  Arbitration – In this method. . and the above mentioned techniques are ineffective.

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