marketing channels conflicts power
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Chapters 6 & 7:
Behavioral Processes in
Marketing Channels
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Major Topics
Challenges of Managing ChannelsMarketing Channels as a Social System
- A Conceptual Framework
Major Building Blocks of the Framework*
Economic Structure
Economic Process
Political Structure
Political Process
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Challenges in exercising power and
achieving control in marketing channels
Loose alignment between channelmembers
Central direction is lacking
Single ownership is often missing:
intensity
Formal authority is absent Reward and penalty system is not
precise
Central planning is rare.
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Marketing Channel as Social System
4
Social System
Generated by any process of
interaction on sociocultural level
Between two or more actors Actor is individual or collectivity
Individuals or collectivities
Interacting within marketing channel
=Interorganizational
Social
System
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Our Conceptual Framework:Political Economy Framework
Four Elements ofPolitical EconomyFramework*1. Economic Structure2. Economic Process
3. Political Structure
4. Political Process
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1. Economic Structure
- What We Learned = Channel Structure
- Ex1) Vertical Marketing System
- Ex2) Market-Clan-Hierarchy Trichotomy
- Roles and Expectations
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Roles in Marketing Channels
A set of prescriptions defining what the behavior
of a position member should be
Roles change over time.
Straying far from a role may cause conflict.
Roles help describe & compare the expectedbehavior of channel members and provides insight
into the constraints under which they operate.
Role Stress: Role Ambiguity and Role Conflict
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Roles in Marketing Channels
What role does the channel manager expect a particular
channel member to play in the channel? What role is this member expected to play by his or her
peers?
Do the managers expectations for this member conflict
with those of the members peers?
What role does this member expect the manager to
play?
Questions to help the channel manager
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2. Economic Process
- Three Dimensions of Decision Making1) Formalization
2) Centralization
3) Participation
- Three Elements of Economic
Exchange1) Resource Exchange
2) Information Sharing
3) Collaboration
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3. Political Structure
- Power-Dependence between Firms*1) Motivational Investment in the Partner
2) Replaceability of the Partner
- Strength of Ties1) Intensity: Past Resource Commitment2) Intimacy: Information Disclosure
3) Reciprocity: Mutually Agreed Conditions
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4Power in the Marketing Channel
The ability of a particular channel
member to control or influence the
behavior of another channel member
Keys to understanding Power: Power Bases
Use of Power Bases
cf) Control
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Bases of Power for Channel Control*
Reward Power
Coercive Power
Legitimate Power
Referent Power
Expert Power
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Using Power in the Marketing Channel
1. Identify available power basesBases are a function of size of:
producer or manufacturer
organization of channel
particular set of circumstances
2. Select and use appropriate
power bases to better or
worsen channel relationships
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As Level of
Investment in:Coercion
Reward
Legitimacy
Expertise
Reference
Competitive
Levels of:Coercion
RewardLegitimacy
Expertise
Reference
As Offering to B:Coercion Reward
Legitimacy Expertise
Reference
DEPENDENCE
OF B ON A
POWER OF
A OVER B
FIGURE 8.1: THE NATURE AND SOURCES OF
CHANNEL POWER
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Countermeasures for balancing
power asymmetry* Develop alternative sources
Organize a coalition with other firms Walk out of the relationship!
Raise the other partys dependence
on you
McGraw-Hill Companies, Inc. 2002
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4. Political Process
- Communication & Use of Power
- Control = Achieved Influence
- Conflict
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Interfirm Communication
- Four Dimensions of Communication
1) Content*
2) Frequency
3) Modality
4) Directionality- Influence Strategies**
Behavioral Process in Marketing Channels IV:
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Behavioral Process in Marketing Channels IV:
Using Power to Exert Influence
Influence Strategy
Promise
Threat
Legalistic
Request
Information
exchange
Recommendation
Power Bases
Reward
Coercion Legitimacy
Referent, Reward
Expertise, Reward
Expertise, Reward
McGraw-Hill Companies, Inc. 2002
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Communication Processes
Behavioral Problems in
Channel Communications
1.
Differences in goals
between
manufacturers &
their retailers
2.
Differences in
the kinds oflanguage they use
to convey
information
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Communication Processes (contd)
Behavioral Problems in
Channel Communications
3.
Perceptual
differences
among
members
4.
Secretive
behavior
5.
Inadequate
frequency
of
communication
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FIGURE 7-2: NATURAL SOURCES OF CONFLICT:
INHERENT DIFFRENCES IN VIEWPOINTS OF SUPPLIERS
AND RESELLERS
Supplier Viewpoint Reseller Viewpoint Expression of Clash
FinancialFinancial GoalsGoals Max imize own prof it by Max imize o wn profit by Supplier: You d ontput enoug h effort
- Highe r pr ices to reselle r - Highe r own-leve l ma rgins behind mybr and . Your pr ices ar e too
- Higher sales by reseller (lower prices from our supplier high.
and higher prices to our Reseller: You d ontsupport me enough.
customer) With your wholesale prices, we cant make
- Highe r r eselle r expense s - Lower expense s ( less support) money.
- Higher reseller inventory - Faster inventory turnover
(lower reseller stocks)
- Lower allowances to - Higher allowances
reseller from manufacturers
Focus on: Focus on:
DesiredDesired TargetTarget - Multiple seg ments - Segment corresponding Supplier: We need more coverage and
AccountsAccounts to resellers po sitioning more effort. Ourreseller doesnt do enough
(e.g. discounter) for us.
- Multiple markets - Our markets only Reseller: You d ontrespect our marketing
- Many accounts - Selected accounts strategy. We need to make money too.
(raise volume and share) (those that are prof itable
to serve)
Desired ProductDesired Product - Concentrate on our - Achieve economies of Supplier: You carry too many lines. You
And AccountsAnd Accounts produ ct category and scope over produ ct categor ies dont giveus enoug h attention. Youre
PolicyPolicy our brand disloyal.
- Carry ou r full lin e - Serv e cu stomers b y offering Reseller: Our customers come first. If we
(a variation for every brand assortment satisfy our customers, you will benefit.
conceivable need, p lu s our - Do not carry inferior or By the way, shouldnt you consider pruning
efforts to exp and o ur line slo w-mov in g items yo ur prod uct line?
ou tsid e ou r tr ad itional (ev ery supplier has so me of
strenghts) these)
*Based on Magrath and Hardy (1989 )
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Managing Channel Conflict
Detectingconflict
Appraising the
effect of
conflict
Resolvingconflict
Managing
Conflict
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Conflict Resolution Strategies
1. Information-intensive mechanisms:DAC, Personnel exchange
2. Third-party mechanisms: mediation
and arbitration
3. Building Relational norms: flexibility,
solidarity
McGraw-Hill Companies, Inc. 2002
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CONFLICT RESOLUTION STYLES
AccommodationCollaboration
or
Problem solving
Compromise
Competition
or
Aggression
Avoidance
Low Assertiveness
High Cooperativeness
Cooperativeness:
concern for the
other partys
outcomes
Low Cooperativeness
Assertiveness:Concern for ones
own outcomes
High Assertiveness
Based on Thomas (1976)
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Key Qualitative Outcomes
Trust
Satisfaction
Commitment
McGraw-Hill Companies, Inc. 2002
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CONFLICT
Level of tension, frustration,
disagreement in relationship
experienced by focal firm
ECONOMIC SATISFACTION
of focal firm: positive affective
response to financialrewards
derived from relationship or
economic gratification
NON-ECONOMIC
SATISFACTION
of focal firm: positive affective
response to psycho-social aspects of
relationship, or gratification from
non-financial sector
TRUST
Focal Firms belief in
counterparts honesty and
benevolence
_
_
_
_
COMMITMENT
Focal Firms desire to continue
relationship and to sacrifice
to build and maintain it
+
G S (1999)
FIGURE 9.1: HOW HIGH LEVELS OF CONFLICT ERODE
CHANNEL RELATIONSHIPS
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