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ManagingConflicttoIncreaseChannelCoordination Chapter7 1 Contents ASSESSINGTHEDEGREEANDNATUREOFCHANNELCONFLICTTHECONSEQUENCESOFCONFLICTMAJORSOURCESOFCONFLICTINMARKETINGCHANNELSCLASHOFMARKETDOMAINSFUELINGCONFLICTCONFLICTRESOLUTIONSSTRATEGIES HOWDRIVECONFLICTANDSHAPECHANNELPERFORMANCE 2 Review What sthechannelpower Channelpoweristheabilitytoalteranotherorganization sbehavior It satool neithergoodnorbadThepowerofAisequaltothedependenceofB WhenisthedependenceofBonAhigh BderivesgreatutilityfromdealingwithAandcannotfindthatutilityeasilyinoneofA scompetitors RealalternativestoAarefewwhentherearefewcompetitorsorwhenBfacesveryhighswitchingcostsifitleavesA 3 Review Whichsourcesdopowercomefrom RewardCoerciveExpertLegitimateReferent 4 Review Whichcountermeasurescanthedependentpartytake Diversifying buildinginalternativessuppliesofthechannelmember sservices FormingacoalitiontobringpressureonthepowerfulmemberExitingthebusiness 5 Review Canimbalancerelationshipsnotfunctionquitewell Imbalancerelationshipsareverycommonandcanfunctionquitewell Thekeyisrestraintonthepartofthestrongerparty 6 Review Howtoframeaninfluenceattempt Firstly considerwhethertheinfluenceattemptispresentedasapositiveoranegative Secondly considerwhethertheinfluenceattemptispresentedascontingentframingornoncontingentframing Intheshortterm anegativeframing whatonewilllose oracontingentframing ifyoudothis thenyougetthat isusuallyinferiortoapostiveornoncontingentframing Inthelongrun performanceoutcomessubstantiallyoverridetheseeffects 7 Review Translatingpower alatentability intoinfluenceinvolvescommunications Inchannels therearesixcommonwaystocommunicate Pleasepointoutwhichmethodswecanuseinpractice Promises legalisms andthreatsarethreefairlyobtrusivewaysoftranslatingpower Inwesterncultures theyoftenprovokeresentmentandconflict Ofthesethreeobtrusivemethods thestrategyofmakingpromises offeringrewardsfordesiredbehavior isquiteeffective onthewhole andisastapleofstrong long termrelationships Threeothercommoninfluencestrategiesaremakingrequestsfornostatedreason exchanginginformation failingtodrawaconclusionwhilediscussingtheotherparty sbusiness andmakingrecommendations theexplicitfromofexchanginginformation Theireffectivenessisheightenedbytheirunobtrusivenature 8 LearningObjectives DistinguishcircumstanceswhereconflictisnotnegativeandisneutralorevenpositiveUnderstandhowtodiagnoseconflictintermsofissues frequency intensity andimportanceTracethenegativeeffectsofhighconflictonchannelperformanceSketchtheinherentsourcesofconflictinchannelrelationships 9 LearningObjectives Separateconflictintothreemaincauses goals perceptions anddomainsUnderstandwhymultiplechannelshavebecomethenormanddescribewaystoaddresstheconflicttheycreateUnderstandwhymanysuppliersactuallylikegraymarketsTracethespiralofcoercionandreciprocationForecasttheimpactofadestructiveactandsuggesthowtoreduceit 10 LearningObjectives DescribetheworkingsofinstitutionalizedmechanismsmanagementcanusetodampenconflictanddistinguishbetweenthosethatmanagementcandecreeandthosethatariseinarelationshipCategorizeconflictresolutionstylesanddescribetheireffectonhowwellachannelfunctions Sketchtheeffectofeconomicincentivesonconflict 11 THEDEGREEANDNATUREOFCHANNELCONFLICT Thischapterexamineshowtorecognizethemanyformsofconflict includinglatentconflict perceivedconflict functionalconflict andoverconflict Thischapterpresentsmethodstohelpathirdpartydiscernthetruenatureandlevelofconflictinachannelrelationship 12 Thischapteralsocoversthesequestions Whataretheeffectsofconflict longandshortterm onthefunctioningofthechannel itscoordination itsultimateperformance anditsfuture Howdoesconflictariseandhowcanitbemanaged Whatarethebeststrategiesforcontainingdestructive excessiveconflict andredirectingtheantagoniststoachievehigherlevelsofchannelcoordinationandperformance 13 Whatischannelconflict Indistributionchannel conflictisnotnegative butmoreneutral Ratherthankeepingchannelmembersapartanddamagingtheirrelationship someconflictactuallystrengthensandimprovesachannel Channelconflictmeans Behaviorbyachannelmemberthatisinoppositiontoitschannelcounterpart Itisopponentcenteredanddirect inwhichthegoalorobjectsoughtiscontrolledbythecounterpart 14 Incontrast competitionis Behaviorinwhichachannelmemberisworkingforagoalorobjectcontrolledbyathirdparty suchascustomers regulatorsorcompetitors Competingpartiesstruggleagainstobstaclesintheirenvironment Conflictingpartiesstruggleagainsteachother 15 Conflict Conflictimpliesanincompatibilityatsomelevel LatentconflictExistatsuchalowlevelthatchannelmembersdonotfullysenseit Thisconflictisduetoconditionsthatsettheinterestsofthepartiesatodds Whenallpartiespursuetheirseparategoals strivetoretaintheirautonomy andcompeteforlimitedresources theinterestofchannelmemberscollide 16 PerceivedconflictPerceivedconflictoccurswhenachannelmembersensesthatoppositionofsomesortexists oppositionofviewpoints ofperceptions ofsentiments ofinterests orofintentions Ifindividualmembersdonotexperienceaffectiveconflict theywouldnotdescribetheirdealingsasconflictual eventhoughtheyopposeeachother Ifindividualmembersexperiencedetrimentalemotions tension anxiety anger frustration hostility theydescribetheirchannelasconflictual 17 ManifestconflictOften emotionsofoutrageandunfairnessreachapointthatmanagersrefuseeconomicallysensiblechoiceandhurttheirownorganizationsinordertopunishtheirchannelcounterparties Ifnotmanaged feltconflictcanescalatequicklyintomanifestconflict Betweentwoorganizations manifestconflictusuallyappearsasblockingeachother sinitiativesandwithdrawingsupport Intheworstcases onesidetirestosabotagetheotherortakerevenge 18 MeasuringConflict Howshouldtheobservergoaboutdiagnosingthetruelevelofconflictthatanorganizationfacesinachannelrelationship Thebestwayistogatherfourkindsofinformation Steps CountinguptheissuesImportanceFrequencyofdisagreementIntensityofdispute 19 Example Anassessmentofhowmuchconflictautomobiledealsexperienceintheirrelationshipwithcarmanufacturer Step1 countinguptheissuesWhatarethemajorissuesofrelevanceoftwopartiesintheirrelationshipchannelrelationships Forcardealers thereareinventories allocationanddeliveryofcars thesizeofthedealer sstaff advertising allowancesforpreparationofthecar andreimbursementforwarrantywork 20 Step2 ImportanceHowimportantiseachissuetothedealer Thiscouldbedonejudgmentallyorcouldbedonebyaskingdealersdirectly Forexample letdealersindicatehowimportanteachissueistothedealership sprofitabilityonascaleof0toten veryunimportanttoveryimportant Howimportantisinventorytothedealership sprofitability Veryunimportant 0 1 2 3 4 5 6 7 8 9 10 veryimportant 21 Step3 FrequencyofDisagreementHowoftendothetwopartiesdisagreeovereachparticularissue ThiscouldbedonejudgmentallyorbycollectingdataForexample dealersmaybeaskedtorecalldiscussionwiththemanufacturerovertheissueduringthelastyearandtoindicateonascaleof0toten nevertoalways howfrequentlythosediscussionsinvolveddisagreement Duringthelastyear howfrequentlydidthediscussionwiththemanufactureroverinventoryinvolvedisagreement never 0 1 2 3 4 5 6 7 8 9 10 always 22 Step4 IntensityofDisputeHowintenselydothetwopartiesdifferoneachparticularissueOrhowfarapartarethetwopartiesintheirpositionsThiscouldbedonejudgmentallyorbycollectingdata Forexample dealersmayindicateonascaleofzerototen notveryintensetoveryintense howstronglytheydisagreeduringatypicaldiscussionoftheissue Howstronglydodealersdisagreeduringatypicaldiscussionofinventory Notveryintense 0 1 2 3 4 5 6 7 8 9 10 veryintense 23 Indexofmanifestconflict Theseestimatescanbecomparedacrossdealerstoseewherethemostseriousconflictoccursandwhy 24 Thereisnorealargumentoveranyissueif Theissueispetty lowimportance Thedifferentofopinionrarelyoccurs lowfrequency Thetwopartiesarenotveryfarapartontheissue lowintensity Ifanyoftheseelementsislow theissueisnotagenuinesourceofconflict Forexample ifanallowanceforpreppingacarisaminorissue itisofnorealimportthatdisagreementsoveritareintenseoffrequent 25 THECONSEQUENCEOFCONFLICT Conflictisusuallythoughttobedysfunctional tohurtarelationship scoordinationandperformance Butthereareoccasionswhenoppositionactuallymakesarelationshipbetter FunctionalconflictOccurswhenchannelmembersrecognizeeachother scontributionandunderstandthateachparty ssuccessdependsontheother 26 Functional useful conflict sleadsto CommunicatemorefrequentlyandeffectivelyEstablishoutletsforexpressingtheirgrievancesCriticallyreviewtheirpastactionsDeviseandimplementamoreequitablesplitofsystemresourcesDevelopamorebalanceddistributionofpowerintheirrelationshipDevelopstandardizedwaystodealwithfutureconflictandkeepitwithinbounds 27 Whenisconflictfunctional Fromthedownstreamchannelmember sviewpoint functionalconflictisanaturaloutcomeofclosecooperationwithasupplier Andwhenchannelmembersarecommitted disputesservetoraiseperformanceintheshorttermanddonotdamagetheleveloftrustintherelationship Thefunctionalconflictisevenmorelikelyifthedownstreamchannelmemberhasconsiderableinfluenceoverthesupplier 28 Arepeacefulchannelsbetterchannels Muchdependsonthereasonwhyconflictislow Often thetwosidesarenotoninagreement Theysimplyarenotindisagreement becausetheydonotcare Thelackofconflictdisguisesalackofengagement Thusconflictisquitelow andsoistheperformanceofthechannel Thesechannelsneedtoincreasetheiractivitylevelsandcommunicationlevels whichwillincreasewelcomedandnotavoidedconflict 29 Sothechannelmembersneedtocareenoughtocommunicate tocooperateandinevitabletodiscovertheirpointsofopposition Butconflictescalateintosubstantialmanifestconflictaccompaniedbytensionandfrustration Ifnotkeepwithinbounds manifestconflictbecomesdamaging andultimatelydestructive AninfluentialchannelmemberisadisputatiousoneDisputatiouschannelmemberiswillingtogiveandtaketopushthechanneltooutperformitscompetition 30 Howintenseconflictdamageschannelperformanceandcoordinate Giventhatsomechannelfrictionismundane shoulditbeacceptedasinevitable dismissedasnormal No becausehighchannelfrictioncreatescosts Thehighlevelsofmanifestconflictaffectanorganization ssatisfactioninamannerthatdamagesthechannel slong termabilitytofunctionasaclosepartnership 31 Howhighlevelsofconflicterodechannelrelationship 32 Whenthechannelmembersenseshighleveloftension frustration anddisagreementinachannelrelationship theirperceivedconflictwillincrease aswillfelt attractive conflictandmanifestconflict blockingbehaviors Thisfiguredoesnotsuggestthatconflictshouldbeminimizedonalloccasions butitdoessuggestthatconflictcarriescosts someofwhichtaketimetomaterialize Therefore conflictshouldbemanaged organizationsshouldchoosetoenteraconflictratherthandiscoveringthattheirinitiativesarenotworththeconsequencesoftheoppositiontheycreated 33 MAJORSOURCESOFCONFLICTINMARKETINGCHANNELS Mostconflictisrootedindifferencesin Channelmembers goalsTheirperceptionsofrealityAndwhattheyconsidertobetheirdomains orareaswheretheyshouldoperatewithautonomy Themostcomplexofthesethreesourcesofconflictisthelastbecauseitisnowordinaryformanufacturerstogotomarketbysomanydifferentroutesthattheirchannelmembersareboundtocompeteforsomeofthesamebusiness 34 Sourceofconflict competinggoals Eachchannelmemberhasasetofgoalsandobjectivesthatareverydifferentfromthoseofotherchannelmembers Thisbuilt indifferenceinwhatfirmsseektoachieveisfundamentaltoallbusiness Agencytheoryunderscorehowcompetinggoalsconflictinanyprincipal agentrelationship Theinherentdifferencesinwhattheyaretryingtoachieveandwhattheyvalueleadsprincipalstodevisewaystomonitorandmotivatetheiragents 35 Example NikeandFootLocker Resellerscarryasupplier slineinordertomaximizetheirownprofits Achievinghighergrossmarginsperunit payingthesupplierlesswhilechargingthecustomermore IncreasingunitsalesDecreasinginventoryHoldingdownexpensesReceivinghigherallowancesfromthemanufacturer 36 ThemanufacturerwishestomaximizeitsownprofitsandprefertoseetheresellerAcceptlowergrossmargins paythesuppliermorewhilechargingthecustomerless Holdmoreinventory avoidstockouts maximizeselection Spendmoretosupporttheproductline Andgetbywithoutallowances Frequentreasonsforconflictinamarketingchannelarelistedbehind 37 Naturalsourcesofconflict inherentdifferenceinviewpointsofsuppliers 38 Sourceofconflict Differingperceptionofreality Agreatdealoftension anxiety andfrustrationinachannelisduenotsomuchtoactualgoalclashesastotheplayer sperceptionsthattheirgoalsdiverge Differingperceptionsofrealityareimportantsourcesofconflictbecausetheyindicatethattherewillbedifferingbasesofactioninresponsetothesamesituation 39 Perceptiondiffermarkedly including Theattributesoftheproduct serviceTheapplicationsitservesandforwhichsegmentsThecompetitionInadditiontothesebasictopics thechannelmemberalsodisagreeaboutmoresubjective judgment lade
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