causes of channel conflicts
Causes of Channel Conflicts
Channel conflict is sometimes a destructive management issue. Caused by several factors
Goal incompatibility: the channel partners have incompatible or misaligned goals, for example the manufacturer perceives his goals to be a market share and profit maximization in the long run, the wholesalers perceive their goals to be sales maximization and in turn profit maximization. The latter even prefer to work at higher margins and short term profitability. This makes the wholesaler accuses the manufacturer of squeezing his margins. This is typically what’s happening with all large manufacturers and their channel members today. For example, Charcutier Aoun in Lebanon may have incompatible goals with wholesalers and even manufacturers. Charcutier Aoun wants big discounts and very low prices in order to increase sales and therefore, profit margin and producer of Gillette may want to have a brand image and big market share without decreasing the price in the short-run and therefore, increase profit margin in the long-run.
Unclear roles and rights: If the channel members have unclear role than there will be arise conflict. For example, producer, wholesalers and retailers role in distribution channel should be clear. But one channel member doesn't play his role or interferes on others role than there will be conflict.
For example, BMW manufacturer may have such conflict if one of its distributors started directly selling to the retailers bypassing large wholesalers in the territory. The wholesalers can in return affect BMW sales by pushing the competitors’ products.
Another example, if Apple plans to open a shop by itself at the same place where he/she are selling the products through retailers than conflicts will be created between producer and retailer. Differences in perception: There may be perceptual difference among the channel members involved in the distribution channel. Differences in perception cause conflict. For
Channel conflict is sometimes a destructive management issue. Caused by several factors
Goal incompatibility: the channel partners have incompatible or misaligned goals, for example the manufacturer perceives his goals to be a market share and profit maximization in the long run, the wholesalers perceive their goals to be sales maximization and in turn profit maximization. The latter even prefer to work at higher margins and short term profitability. This makes the wholesaler accuses the manufacturer of squeezing his margins. This is typically what’s happening with all large manufacturers and their channel members today. For example, Charcutier Aoun in Lebanon may have incompatible goals with wholesalers and even manufacturers. Charcutier Aoun wants big discounts and very low prices in order to increase sales and therefore, profit margin and producer of Gillette may want to have a brand image and big market share without decreasing the price in the short-run and therefore, increase profit margin in the long-run.
Unclear roles and rights: If the channel members have unclear role than there will be arise conflict. For example, producer, wholesalers and retailers role in distribution channel should be clear. But one channel member doesn't play his role or interferes on others role than there will be conflict.
For example, BMW manufacturer may have such conflict if one of its distributors started directly selling to the retailers bypassing large wholesalers in the territory. The wholesalers can in return affect BMW sales by pushing the competitors’ products.
Another example, if Apple plans to open a shop by itself at the same place where he/she are selling the products through retailers than conflicts will be created between producer and retailer. Differences in perception: There may be perceptual difference among the channel members involved in the distribution channel. Differences in perception cause conflict. For