Lecture #8: Channel Conflict Distribution channel membersthe manufacturer, the wholesaler (or industrial distributor), the retailer,

and the customer are interdependent and their relationships are a key to the successful operation of the channel. Conflict is virtually inevitable throughout the marketing channel. Most researchers agree that this condition is necessary for the functional interdependence between channel members . Between the channel members, a dynamic field of conflicting and cooperating objectives exists; if the conflicting objectives outweigh the cooperating ones, the effectiveness of the channel will be reduced . Long-term viability requires a high degree of cooperation between members of a channel. All channels are based upon the recognition by individual channel members that they can benefit from joining channel systems and operating in a team; at the same time, the possibility of intrachannel rivalry in a marketing channel is all prevalent . Marketing channels are particularly prone to experience conflicts because of the constant interaction among manufacturers, wholesalers and retailers, and their interdependence. Channel members can therefore, identify and estimate the impact of the behavior of their trade partners on their own marketing strategies and associate successes or failures with the activities of particular channel members. The designation of the distribution channel as a system has a number of implications: (1) each member of a distribution channel is dependent upon the behavior of other channel members, (2) a behavior change at any point in the channel causes change throughout the channel, and (3) the whole channel must operate effectively if the desires of any one member are to be realized. This dependency relationship represents the root of conflict in the channels of distribution. TYPES OF CONFLICT A conflict exists whenever incompatible activities occur. Conflict can be viewed as a process of changechanges in the task environment and/or in the relationships between the element of the environment Conflict has been defined as, "tension between two or more social entities (individuals, groups, or larger organizations) which arises from incompatibility of actual or desired responses".

Conflict can also exist at different levels (e.g interpersonal, intraorganizational) within or between organizations. Interpersonal Conflict When the actions of two or more persons are incompatible, interpersonal conflict results. Thus an action which is incompatible with another action prevents, obstructs, interferes with, injures or in some way makes the second action less likely or less effective. Interpersonal conflict may arise from differences in information or belief. It may reflect differences in interests, desires or values between the parties involved. It may occur as a result of a scarcity of resources such as money, time, space or position. Or it may reflect a rivalry in which one person tries to outdo or undo another . Organizational Conflict Conflict can exist within an organization and is best defined as a dynamic process underlying a wide variety of organizational behaviors. Organizational conflict can arise due to the degree of differentiation in the organization i.e., the number of administratively distinct but functionally interdependent subunit. Accordingly, division of labor has been identified as one of the major sources of conflict. Conflict will increase with the degree of differentiation in an organization. The level of specialization, levels of authority, and the organizational complexity are few of the factors related to organizational conflict. Specialization has the effect of accentuating differences among employees and delineating group boundaries. It is expected that organizational tension and conflict will increase with the number of levels of authority in an organization. The differences of interest between functionally differentiated groups may be largely responsible for organizational conflict. It was hypothesized that organizational tension and conflict will be positively associated with organizational complexity.

CHANNEL CONFLICT

CONFLICT IN CHANNELS OF DISTRIBUTION Conflict exists in a channel when a component (channel member) perceives the behavior of another to be impeding in the attainment of its goals or the effective performance of its instrumental behavioral patterns. Marketing channel are particularly prone to encounter conflict because of the constant interaction among suppliers and retailers. Channel members can therefore identify and estimate the impact of the behavior of their trade partners on their own marketing strategies and associate successes or failures with the activities of particular channel members. Thus, rivalry is expected to be more explicit in marketing channels. Interpersonal conflict may exist between the members of a channel (e.g., manufacturer and retailer). Any component of the marketing mix may cause interpersonal conflict. Conflict may also occur between the manufacturer and the retailer because of the desire of both to eliminate the wholesaler.

POWER, LEADERSHIP AND CONFLICT The nature and sources of power possessed by a channel entity and the leadership style used by a channel leader may affect the presence and level of conflict within the channel. Power Power has been defined in the marketing channels literature as the ability of one channel member to influence decision variables of another channel member . Power can be referred to as, "the ability to evoke change in another's behavior". Empirical work in the area of marketing channels, has consistently assumed power to be the causative factor with respect to conflict. Exercised coercive power will increase intra channel conflict and exercised non coercive power will increase inter channel conflict. Coercive and non coercive power can be defined as follows: "Coercive power of O/P stems from the expectation on the part of P that he will be punished by O if he fails to confirm to the influence attempt. Non coercive power is based on the belief by one actor (P) that actor (O) has the

ability to mediate rewards for him. Basically, in order for O to have power, P must perceive that O has the ability to mediate rewards and that O will deliver the reward if P cooperates." Leadership Channel leadership behavior includes activities performed by a distribution channel member to influence the marketing policies and strategies of other channel members for the purpose of controlling various aspects of channel operations. Depending on the nature of the marketing channel and the product, the manufacturer, the wholesaler or the retailer can assume the role of channel leader. The level of intra channel conflict may, however, depend in part on how the channel leader utilizes power resources; it may depend on the style of leadership. Style of leadership focuses on actual leader behavior, what the leader does and how it is done. Leadership styles can be broadly classified into three typesparticipative, supportive and directive. A participative leader consults with subordinates, and considers their suggestions before making a decision. Supportive leadership considers subordinates' needs, displays concern for subordinates' well-being and creates a friendly and pleasant task environment. A directive leader organizes and defines the task environment, assigns the necessary functions to be performed, establishes communication networks and evaluates work group performance. The higher the level of participative or supportive leadership exhibited by a channel leader, the lower the level of intrachannel conflict. They also hypothesized that the higher the level of directive leadership exhibited by the channel leader, lower the level of intrachannel conflict. CAUSES OF CONFLICT A few of the causes that can give rise to conflict in marketing channels are roles, perceptions, expectations, and communication. Roles The behavior of individual channel members must be integrated with the needs of the entire channel system to achieve performance of the marketing

task. Because roles are a means of integration and coordination, role deviance is likely to be a major cause of channel conflict. Perceptions Perception is the process by which an individual selects and interprets environmental stimuli. Decision makers within distribution channels are likely to have unique perceptions of reality based upon predispositions, attitudes, or values which, in turn, are determined by their roles, personality attributes, and the numerous environmental conditions facing them. Thus difference in perception of the same situation by channel members is likely to produce conflict. ExpectationsDifferences in information availability, in information processing capacities, and in experience may often generate different expectations among channel members regarding potential states of nature. Differences in expectations may cause conflict among channel members. Communication Communication, like roles, is a means of coordinating the behavior of system components. Ineffective communication leads to uncoordinated behavior which is likely to precipitate conflict. CONSEQUENCES OF CHANNEL CONFLICT Conflict produces change. It precipitates behavior which disrupts the stability of the system. A conflict clearly has destructive consequences if the participants in it are dissatisfied with the outcomes and members feel they have lost as a result of the conflict. Similarly, a conflict can have productive consequences if the participants are all satisfied with their outcomes and feel that they have gained as a result of the conflict. Thus, satisfaction or dissatisfaction on the part of the channel members involved in the conflict is a measure of whether the conflict is constructive or destructive. Channel member satisfaction is related to how the channel member actually perceives the conflict situation. For example, the manufacturer's viewpoint may be very different from the retailer's viewpoint. Satisfaction is therefore a key construct to long-run channel viability. Coercive power sources (punishments) would tend to increase conflict and reduce satisfaction on the part of the channel members subject to them,

while noncoercive sources (rewards) would tend to reduce conflict and increase satisfaction on the part of the channel members subject to them. Conflict may also contribute to creating more effective and efficient channel systems. The emergence of vertically integrated chains in independent retailers' task environments have caused these retailers to seek larger functional discounts in order to be able to reduce prices in line with chain prices. Suppliers have, generally, been unwilling or unable to respond to these retailers' needs for a greater discount, thus producing a conflict situation. The resolution has been, in some cases, the purposive banding together of retailers into retailer cooperatives, thus creating new, more potent distribution systems than the ones to which they previously belonged. CONFLICT AND PERFORMANCE Performance is a variable subject to quantitative specification. Although different measures of performance have been employed they tend to utilize objective or observable indices that represent in some way, financial success or factors related to it. Performance usually reflects the viewpoint of the power holder. If the end result is favorable to the manufacturer, then the conflict situation can be said to have a positive effect on the performance of the marketing channel. For example, the formation of retailer cooperatives as a result of channel conflict created more potent distribution systems, which resulted in better performance. CONCLUSIONS Conflict usually produces behavior in response to its inherent frustration. The type of channel conflict prevailing in a distributive system and its causes have to be analyzed before the conflict can be effectively resolved. By reducing or eliminating the actual cause of the conflict, the level and intensity of intrachannel conflicts can be reduced substantially before resources are spent on resolving structural differences among channel members. The concept of conflict describes situations where the desires of specific components within a give channel system are not sufficiently integrated. Marketing researchers have focused primarily on developing conceptual frameworks describing intrachannel conflicts. Intrachannel conflicts can be constructive or destructive. Depending on the nature and type of conflict,

intrachannel conflicts can be resolved by explicit channel strategies designed to eliminate differences in perceptions and knowledge. * * *