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1.Channel Power
2. Channel Conflict

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Channel relationships
 Perceptions of extended organizational power
 Dependence
 Control
 Trust
 Commitment
 Co-operation

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Power….. In Marketing Channel

As per Miller & Butler’s view…
• …..Power refers to a person’s ability to control
the behavior of others.

As per Etzione’s view…

– …..As the capacity to overcome part or all the
resistance to change in the face of opposition.

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Channel Power….

• The Channel
Power refers to the
ability of any one
channel member to
alter or modify the
behavior of other
members in the
distribution channel,
due to its relatively
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Components of channel offering OR Channel
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Positioning

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Use of Power Bases
• Channel system has a set of players:
– Not equally motivated to implement the ideal channel design
– Whose expectations from the system differ

• Use of the 5 power bases brings diverse

channel partners in line for effective
implementation
– 5 power bases are: reward, coercion, legitimate, expert and
referent (French & Raven)
– Two more power bases in the Indian context are support and
competition
– Channel members are dependent on each other. The power
equations between them keep them working together.
– Extent of dependence defines the power base which is appropriate.

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French & Raven

“Power” of Motivation
• Reward – incentives for good performance
• Coercion – threat of punishment for non-
performance
• Referent – benefit of sheer association with a strong
company
• Legitimate – arising out of a contract
• Expert – specialized knowledge
• Support – additional benefits for better performers
only
• Competition – created between channel partners
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1. Reward Power: The manufacturer provides

several additional benefits to the intermediaries,
with the intention to motivate them to perform
certain activities as required. This power is very
useful since it brings in the maximum efforts from
each channel partner, but this may sometimes be
negative as the channel partners may always
seek for the benefits in case, they are required to
do some other activity.

2. Coercive Power: The manufacturer threatens to

terminate the relationship with other channel
partners or withdraw the resources deployed with
them. With this power, the manufacturer can
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dominate the others and keep them under his
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3. Legitimate Power: Here the manufacturer

reminds the channel partner to carry out their
activities in accordance with the contract they
have entered into at the time they became
the channel partners. The manufacturer may
find it convenient to keep a check on the
channel partners in terms of their signed
agreement, but the partners may feel
humiliated for the continuous reminder for
their code of conduct.
4. Referent Power: The manufacturer should
develop its image in such a way, that the
intermediaries must feel proud to be
associated with it. The manufacturer with the
influential image can get varied options with
regard to the channel partners. But if the
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5. Expert power: The manufacturer has the

expertise that he transfers to the channel
partners, and once they acquire it, the power of
expertise reduces. Thus, the manufacturer
should focus on creating the new expertise,
thereby keeping the channel partners updated
with the day to day operations. The
manufacturer uses this power to retain the
interest among the channel partners to work,
but the intermediaries may not feel to learn any
new things apart from what they have learned

• Thus, the manufacturer is the one who provides

the goods and services to be sold via
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Channel Co-ordination
• Channel system is well co-ordinated if each member
understands his role correctly and performs it to help the
system achieve its customer service objectives.

• In a co-ordinated channel:
– Interests of all channel members are protected
– Actions of all are in line with overall objectives
– Flows are streamlined to achieve desired customer service
objectives

• Channel co-ordination is an on-going effort

Conflict….
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Channel Conflict
• Situation of discord or disagreement between
partners in the same channel system – has
negative connotations and is driven more by
feelings than facts
• Conflict is part of any social system – getting
disparate entities to work together as in a
channel system is also one such social unit
• If any member feels that another is working in
a manner as to affect him, conflict results

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Channel Conflicts
• Conflict is generated when actions of any
channel member come in the way of the
system achieving its objectives
• Three broad categories of channel conflict
are:
– Goal conflict – understanding of objectives by various channel
members is different
– Domain conflict – understand responsibilities and authority
differently
– Perception conflict – reading of the market place is different
and proposed actions vary

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Conflicts Result
From…
• Each channel member wanting to pursue
his own goals
• Each wants to retain his independence
• There are limited resources which all of
them want to utilise in achieving their
goals
• Features of conflicts:
– Initially latent and does not affect the working
– Is not normally possible to detect till it becomes disruptive
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Emergence of Conflict…
In case of Channels and Marketing
Decisions……….
• A push strategy uses the manufacturer’s
sales force, trade promotion money, and
other means to induce intermediaries to
carry, promote, and sell the product to end
users.
• A pull strategy uses advertising,
promotion, and other forms of
communication to persuade consumers to
demand the product from intermediaries.
• Like the auto dealers perceive the
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Cause of conflict…
• 07 categories…
– Role Incongruities …….like in case of
franchisees and franchisor
– Resource Scarcities…..like allocation of
retailers between manufacturer (house accounts)
and wholesalers or Franchisee site selection
– Perceptual Differences….Like use of POP
(Point-of-purchase) display
– Expectation based Differences…Like repair
facility & AMCs
– Decision Domain Disagreements…Like
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decision on Pricing
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• McDonald's is warning customers against eating at 169 restaurants in India

operated by franchisee Connaught Plaza Restaurants (CPRL).

• The fast-food chain said there are "serious compliance risks" concerning the safety
and quality of the food.

• McDonald's has been locked in a bitter battle with CPRL for years.

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Types of Conflicts
1. Latent Conflict:
– Some amount of discord exists but does not affect the
working or delivery of customer service objectives.
– Disagreement could be on roles, expectations,
perceptions, communication.

2. Perceived Conflict:
– Discords become noticeable – channel partners are aware
of the opposition.
– Channel members take the situation in their stride and go
about their normal business
– No cause for worry but the opposition has to be recognized
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Types of Conflicts
3. Felt Conflict:
– Reaching the stage of worry, concern and alarm. Also known
as ‘affective’ conflict.
– Parties are trying to outsmart each other.
– Causes could be economical or personal
– Needs to be managed effectively and not allowed to escalate.

4. Manifest Conflict:
– Reflects open antagonistic behaviour of channel partners.
Confrontation results.
– Initiatives taken are openly opposed affecting the
performance of the channel system.
– May require outside intervention to resolve
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Channel Conflict: The various stages

Attitudinal
sources Cognitive/
Manifest Conflict
of conflict Affective (Felt)
conflict conflict outcomes

Structural
Conflict
sources of
resolution
conflict

Causes of Conflicts
• Attitudinal Causes: Those causes which are associated with disagreements about channel
roles, expectations, perceptions and channel communications, hence very tough to detect.
• Structural causes: These are i) divergence in goals, ii) drives for autonomy and iii) fights
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Channel Conflict Types

Type of conflict Briefly explained

Producers and channel partners selling to the

Hybrid channels
same customers

Between channel partners at the same level.

Horizontal
Distributors straying into each other’s territory.

Between channel partners at two different levels.

Vertical A C&FA despatches goods not ordered by the
distributor in order to make up a truck load.

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Effects of Channel Conflict… Channel Efficiency

• Channel Efficiency… is the degree to which the total investment in
the various inputs necessary to achieve a given distribution objective
can be optimized in terms of outputs.

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Effects of Channel Conflict

Negative Effect: Reduced Efficiency

As the level of conflict increases,

Channel efficiency declines

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Effects of Channel Conflict

No Effect: Efficiency Remains Constant

Exists in channels characterized by

high level of dependency among
members

Channel efficiency is not affected

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Effects of Channel Conflict

Positive Effect: Efficiency Increased

Conflict might be impetus for either

or both members to reappraise their
policies

Channel efficiency increases

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General Curve of Conflict & Channel Efficiency

Conceptual model by Journal of Marketing (73),Bert Rosenbloom, Published by AMA

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Resolving Conflicts

A 4 Stage Process

Understanding nature and intensity

Tracing the source of the conflict

Understand the impact of the conflict

Strategy and plan of action for resolution

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Conflict Resolution
Styles
Avoidance Styles are a combination
of assertiveness and
Aggression co-operation.

Accommodation

Compromise

Collaboration

Least effort and Maximum effort and

results Best results

Kenneth W Thomas

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Avoidance

• Used by weak channel members.

• Problem is postponed or discussion
avoided.
• Relationships are not of much
importance.
• As there is no serious effort on getting
anything done, conflict is avoided.
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Aggression
• Also known as a competitive or selfish
style.
• It means being concerned about one’s
own goals without any thought for the
others.
• The dominating channel partner (may
be the principal) dictates terms to the
others. Long term could be detrimental
to the system.
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Accommodation
• A situation of complete surrender.
• One party helps the other achieve its
goals without being worried about its
own goals.
• Emphasis is on full co-operation and
flexibility in approach. May generate
matching feelings in the receiver.
• If not handled properly, can result in
exploitation
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Compromise

• Obviously both sides have to give up

something to meet mid way.
• Can only work with small and not so
serious conflicts.
• Used often in the earlier two stages.

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Collaboration
• Also known as a problem solving approach
• Tries to maximize the benefit to both
parties while solving the dispute.
• Most ideal style of conflict resolution – a
win-win approach
• Requires a lot of time and effort to
succeed.
• Sensitive information may have to be
shared
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Conflict management methods at different Chapter - 10

stages of conflict
Institutional approaches
Joint membership of associations
Latent conflict Exchange of executives
Cooptation
Dealer councils
Third party mechanisms
Mediation
Felt conflict arbitration
Arbitration is a legal technique for the resolution of disputes
outside the courts, wherein the parties to a dispute refer it to
one or more persons (the "arbitrators", "arbiters" or "arbitral
tribunal"), by whose decision (the "award") they agree to be
bound

Manifest conflict Negotiation

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Conflict management methods at different Chapter - 10

stages of conflict

HIGH Accommodative Collaborative/problem

solving

Concern Compromise
for the
others
interest
Competitive
LOW Avoidance
/aggressive
LOW Concern for HIGH
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own interest
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Discussion Question #2
Bill Schwartz, the owner of
Newvalue Supply, a medium-sized
wholesaler of plumbing supplies, was
furious. He had just gotten off the phone
with the sales manager of Jefferson
Industries, the manufacturer of a very
profitable line of high-quality faucets that
Newvalue had been selling for several
years. “That SOB is now going
to start selling the big home center
accounts directly,” fumed Bill Schwartz to
his son Paul. “We’ve worked real hard to
establish this line and then, when it finally
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Chapter - 10

Discussion Question #3
Amoco, one of the nation’s largest
oil companies, has been forcing a number
of its independent service stations to
convert from full-service stations offering
repair service to convenience stores or
“gas only” stations. Thus the highly
profitable repair part of the business will
no longer be available to those station
owners forced to convert. The franchised
independent dealers have little choice but
to give in to Amoco because the oil
company typically owns the station’s land
and buildings and offers leases of only
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Chapter - 10

Discussion Question #6
In the summer of 2009, Walmart, the world’s
largest retailer, left no doubt about its enormous power
in the marketing channel. Walmart announced to all
manufacturers whose products it sells that they must
adhere to Walmart’s new “green” environmental
initiative. The manufacturers must estimate and
disclose the environmental costs of producing their
products and then allow Walmart to use that
information to develop a “green” rating system that will
be disclosed to consumers on product labels. The cost
of the “green” program will be borne entirely by the
100,000 Walmart suppliers. Although the program will
take a number of years to fully implement, some parts
of it may be in place by as early as mid-2011. Suppliers
will ©not
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