CONFLICT AND CHANNEL COMPETITION In Marketing Channels

Management

1. CHANNEL COMPETITION WHAT IS CHANNEL COMPETITION?

F R O M T H E P R O D U C E R ’ S O R M A N U FA C T U R E R ’ S S TA N D P O I N T, A N U N D E R S TA N D I N G O F C O M P E T I T I V E S T R U C T U R E A N D T H E C H A N G E S TA K I N G P L A C E I N T H AT S T R U C T U R E A R E C R U C I A L F O R S U C C E S S F U L C H A N N E L D E S I G N A N D

M A N A G E M E N T. I N D E S I G N I N G T H E M A R K E T I N G C H A N N E L , T H E C H A N N E L M A N A G E R N E E D S T O D E T E R M I N E W H I C H K I N D S O F D I S T R I B U T O R S A N D / O R D E A L E R S C A N P R O V I D E T H E M O S T E F F I C I E N T A N D E F F E C T I V E D I S T R I B U T I O N O F T H E F I R M ’ S

P R O D U C T S . B U T G I V E N T H AT T H E C O M P E T I T I V E S T R U C T U R E O F D I S T R I B U T O R S A N D D E A L E R S C H A N G E S , S O M E T I M E S R A P I D LY. C O N V E N T I O N A L I D E A S A B O U T T H E K I N D S O F D E A L E R S O R D I S T R I B U T O R S T H AT S H O U L D S E L L PA R T I C U L A R

P R O D U C T S C A N Q U I C K LY B E C O M E O B S O L E T E .

TYPES OF COMPETITION 1. Horizontal competition 2. Intertype competition 3. Vertical competition 4. Channel system competition

HORIZONTALcompetition between firms of the same type; for example, an automobile manufacturer versus another automobile manufacturer, a plumbing supply wholesaler versus another plumbing supply wholesaler, or one supermarket versus another. This is the most visible and frequently discussed form of competition. In economic theory, much of the treatment of competition deals with this horizontal type, although it is usually referred to simply as competition, and often the firms involved are producers or manufacturers rather than wholesalers or retailers.

INTERTYPEThis is competition between different types of firms at the same channel level; for example, the off-price store versus the department store or the merchant wholesaler versus agents and brokers.

EXAMPLE: TM VS THE TUCKSHOP OWNERTM TUCKSHOP

VERTICALRefers to competition between channel members at different levels in the channel, such as retailer versus wholesaler, wholesaler versus manufacturer, or manufacturer versus retailer.

EXAMPLE: MOHAMED MUSSA VS PICK N PAYPick n Pay Mohamed Mussa

CHANNEL SYSTEMRefers to complete channels competing with other complete channels. In order for channels to compete as complete units, they must be organized, cohesive organizations.

CLASSIFICATIONSCorporateContractualAdministered

Corporate channels, production and marketing facilities are owned by the same company; Firestone Tire & Rubber Company and Sherwin-Williams Company (paints) are examples.

Contractual channel, independent channel members—producers or manufacturers, wholesalers, and retailers—are linked by a formal contractual agreement. Wholesaler- sponsored voluntary chains, retailer cooperatives, and franchise systems are the three major forms of contractual marketing systems.

Administered channel systems result from strong domination by one of the channel members (frequently a manufacturer) over the other members. This dominant position is a function of the leverage that the dominant channel member can achieve based on a monopoly of supply, special expertise, strong consumer acceptance of its products, or other factors.

2. CHANNEL CONFLICT

BUT WHAT HAPPENS IN CHANNEL CONFLICT?•Channel conflict can also occur when there has been over production. This results in a surplus of products in the market place.

• Channel conflict occurs when manufacturers (brands) disinter mediate their channel partners, such as distributors, retailers, dealers, and sales representatives, by selling their products direct to consumers through general marketing methods and/or over the internet through e-Commerce.

• Newer versions of products, changes in trends, insolvency of wholesalers and retailers and the distribution of damaged goods also affect channel conflict. In this connection, a company's stock clearance strategy is of importance

TYPES OF CHANNEL CONFLICTVERTICALHORIZONTALMULTI CHANNEL

Types of Channel Conflict

VERTICAL COMPETITION

HORIZONTAL CONFLICT

MULTI CHANNEL CONFLICT

Example:-Online Store Like e-bay

Example:-Exclusive Company Outlet

CAUSES OF CHANNEL CONFLICTGoal IncompatibilityUnclear Roles and RightsDifferences in PercerptionIntermediaries` dependency on Manufactures

HOW TO MANAGE CONFLICT Adoption of Super ordinate Goals Exchange Of Employees Co-Optation Diplomacy By:- Mediation Negotiation

Legal Route

DILUTION & CANNIBALIZATION:-Marketers must be careful not to dilute their brands through inappropriate channels.Exclusive dealings often includes exclusive territorial agreements.Such practices increase dealer confidence & enthusiasm. Moreover it is perfectly legal.Some major brands adopt the policy of “Full-Line Forcing”.Although such tying agreements are not illegal, but somehow they lower the quality of the competition.

PRESENTATION DONE BY: KEITH KACHIKIRA