LogisticsPPS8

Topic 5

Topic 5

The Behavioural Processes in Distribution Channels and

Channel Conflict

The Behavioural Processes in Distribution Channels and

Channel Conflict

Distribution channels as part of a social system

Channel power Channel conflict Channel communication

Channel powersources

RewardPower

CoercivePower

LegitimatePower

ReferentPower

ExpertPower

Reward Power

• Financial incentive to next channel member

• Ability to be franchisee i.e. @ McD

Coercive Power

• “I kill you!” – Achmat the Dead Terrorist

• Punishing the next channel member if fails to respond as it should

• Coercive POWER sits with the big boys

Shoprite/ Checkers

Pick n Pay

Woolies

Spar

Legitimate Power

• Adhere to formal agreement• May be problems between

independent organisations (i.e. M ask R not to discount …)

• Higher legal recourse/ tighter in franchise channel

Referent Power

Channel member sees other as having same objectives and part of same reference group

Expert Power

= knowledge/ perceived knowledge one channel member has & influence power to change behaviour of other members

Exercising power – the influencing strategies

• Promise strategy – if you do what I say I will reward you

• Threat strategy – if you don’t do what I say I will punish you

• Legalistic strategy – do what we wish as we have contractually agreed to it …

Exercising power – the influencing strategies

• Request strategy – we ask: sweet, short and sharp with no indication of what may happen

• Info exchange strategy – “This is how you could make your business more profitable …” now draw your own conclusions …

• Recommendation strategy – “This is how you could make your business more profitable …” & conclusions

Using power to exert influence in the distribution channel

Reward

Promise

Threat

Legalistic

Request

Info exchange

Recommendation

Expertise, reward

Expertise, reward

Referent, reward, coercion

Legitimacy

Coercion

Using power to exert influence in the distribution channel

RewardPromise

Threat

Legalistic

Request

Info exchange

Recommendation Expertise, reward

Expertise, reward

Referent, reward, coercion

Legitimacy

Coercion

CHANNEL CONFLICT

CHANNEL CONFLICT

“ … a situation in which one member of a distribution channel perceives another member as an adversary engaged in behaviour designed to injure, thwart/ block/ hinder from doing something, or gain scarce resources at the expense of the original member”

Causes of channel conflict

2-3 causes each

Conflict resolution

Two main reasons for conflict:

• Use of power • Attempt to gain more power

Decision framework for evaluating channel conflict

Importance of threatened channel in terms of current or potential volume of

profitability

Prospect

of

destructive

conflict

Act to avert conflict

Look for opportunities to reassure threatened channel and allow to leverage power

Allow threatened channel to decline

Do nothing

The four methods to solve channel conflict

• Problem-solving• Persuasion• Negotiation• Politics

Problem-solving

Persuasion

Negotiation

Politics

• Coalitions• Mediation and arbitration• Lobbying and judicial appeal

COMMUNICATION IN THE DISTRIBUTION COMMUNICATION IN THE DISTRIBUTION CHANNELCHANNEL

Communication

• Perceptual differences (does “soon” mean within 24 hours?)

• Secretive behaviour• Infrequent communication

case study

Page 136 … and answer questions on page 137