Conflict in Distribution

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Conflict in Distribution

• Distribution Channel Strategy
• L. P. Bucklin
• Spring 2000

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Channel Conflict

• Conflict occurs when a channel member perceives
  another member as unfairly or unreasonably
  blocking the formers ability to achieve its
  independent goals
• Conflict is direct, personal, opponent-centered
• The presence of persistent conflict
• May lead to neglect of responsibilities and
  departure
• Result in loss of coordination and performance

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Roots of Conflict

• Conflict is likely to be minimal in open (market
  based) channels
• Dependence is typically limited
• Exit is often easy
• Resources specialized to the relationship are
  small
• Potential for conflict increases
• As systems approach vertical integration and are
  unilaterally managed
• Exit barriers become greater

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Sources of Conflict

• Changes in system power balance, environment
• Unexpected changes in system policies, norms
• Dependence not offset by perceived reward
• Failure to achieve agreement on channel model
• The level and fairness of profit distribution
• The use of dual or multiple distribution channels
• The extensive use of coercion to achieve control
• The inability to achieve adequate profit return

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Conflict Management Techniques

• Institutionalized methods
• Use of third parties
• Contract management
• Control over management style
• Effective incentive management
• System component evaluation

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Institutionalized Methods

• Building joint governmental bodies
• Dealer councils for discussions, presentation of
  new programs
• Dealer associations, company or industry based
• Joint decision making bodies for marketing
  decisions, e.g.,
• advertising,
• product line determination
• Creating an internal appeals processes

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Use of Third Parties

• Professional mediators
• Arbitration panels
• Courts
• Political entity behavior controls
• Franchise regulations on information to provide
  to franchisees
• Auto legislation limiting the termination of
  dealers

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Contract Management

• Rolling contracts
• Signing a new contract before the expiration of
  the old
• Contract length
• Providing a contract of sufficient length to
  permit the channel member to recoup investment
• Use of mutual hostages, large sunk costs
• Clear expectations for partner performance
• Explicit conditions for termination

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Management Style

• Top management contact across system members
• Expectations management through
• Goal setting and achievement evaluation
• Eliminating key relationship ambiguities
• Building trust and fairness
• Consistency in dealings
• Recognized concern of other member well being
• Encourage dependent parties to voice concerns
• Shared data and its use

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Incentive Management

• Deployment of tested business models
• Limiting channel member overlap
• Intra-channel territorial boundaries
• Inter-channel market overlap
• Careful location selections
• Reduction of decision discretion
• Constraint in use forced promotional shipments
• Pricing to ensure system profitability

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System Component Evaluation

• Customer satisfaction measures by resellers
• Careful channel member selection, training
• Performance evaluation sharing, discussion
• Reseller satisfaction measurement
• Prevention of free riding through consistent
  contract enforcement and performance evaluation