Channel Relations

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.

Channel Conflict
Conflict is not always undesirable. It is needed to have positive effect as loopholes in the existing system can be plugged timely and performance can be maximized.

It can keep other channel members on their toes knowing that a decline in performance might lead to a change in the channel arrangements.

Types of conflict
Each channel member views the conflict, the relationship and the tensions differently. Following are the types of channel conflicts

Latent conflict The channel members may be unaware about the opposition. They do not fully sense the conflict. This is due to the separate or un-conflicting goals.

Perceived conflict The channel members sense that some sort of opposition of perceptions, of interest, or of intensions exists. It is more psychological, i.e. two organizations can perceive that they are in disagreement but their individual members do not consider it as a very serious issue.

Types of conflict
Felt conflicts When channel members not only perceive the opposition or disagreement but also feel it actually they are felt or affective conflicts. This needs to be sorted out at a early stage to avoid further consequences. Manifest Conflict If felt conflicts are not managed in time and properly, they can become manifest or overt conflicts and these conflicts stop the cooperation and understanding between two organizations and block the other from achieving its goals.

Functional Conflict When channel members accept that there is opposition and disagreement but actually, this opposition will improve their relationship, it becomes functional conflict. It is common, obvious and sometimes desirable too due to the interdependence of channel members on each other.

Conflicts can also be classified as

Vertical conflict Horizontal conflict Inter type conflict Multi Channel conflict

Vertical conflicts
Vertical conflicts occur due to the differences in goals and objectives, misunderstandings, and mainly due to the poor communication

Lack of role clarity and over dependence on the manufacturers. For e.g. Today the large retailers dominate the market and dictate the terms. Hence there are often conflicts between these giant retailers and the manufacturers.

Some common reasons for vertical conflict are

Dual distribution i.e. manufacturers may bypass intermediaries and sell directly to consumers and thus they compete with the intermediaries. Over saturation, i.e. manufacturers permit too many intermediaries in a designated area that can restrict, reduce sales opportunities for individual dealer and ultimately shrink their profits. Partial treatment, i.e. manufacturers offer different services and margins to the different channels members even at same level or favor some members. New channels, i.e. manufacturers develop and use innovative channels that create threat to establish channel participants.

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

Reasons behind horizontal conflicts

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

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

Inter Type conflict

Inter type conflict occurs when, the Intermediaries dealing in a particular product starts trading outside their normal product range.

For example, now the supermarkets such as Foodworld 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. This concept is called as Scrambled Merchandising where the retailers keep the merchandise lines that are outside their normal product range.

Multi-channel Conflict
Multi-channel conflict occurs when the manufacturer uses a dual distribution strategy, i.e. the manufacturer uses two or more channel arrangements to reach to the same market. Manufacturers can sell directly through their exclusive showroom or outlets. This act can affect the business of other channels selling manufacturers brands. Manufacturers can bypass the wholesalers and sell directly to the large retailers. 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, which is possible due to a volume purchase.

Resolving Channel Conflicts

Conflict is a natural phenomenon, which cannot be eliminated.

In channel management, it is a 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.

Channel Power
Some channel members need others more than others need them. For example, Wal-Mart has a lot more power, given its large volume purchases, than many of its suppliers.

1.

Reward power involves a channel member being able to positively reinforce anothers performancee.g., Coca Cola may be able to give a price break or pay a fee for additional shelf space.

2.

Expert power includes knowledge. Wal-Mart, for example, because of its heavy investment in information technology, can persuasively argue about likely sales volumes at different price levels.

3. "Legitimate" power involves government or other regulationse.g., auto dealers have a great deal of power over auto makers because only they are allowed to sell to end customers in the continental U.S. under most circumstances.

4. Finally, referent power involves the desire of the other side to be associatedmost manufacturers of upscale merchandise are highly motivated to ensure their availability at Nordstroms.