Answer 2) Basically Channel design refers to those decisions which involve development of

new marketing Channels where none has existed before or there is some modification to the
existed one. In our case the company XYZ beverages is starting a new line of product which
is immunity booster therefore in this case we will make a new distribution channel for the
new product. Since the company has already a distribution channel therefore rather start from
scratch we will reengineer it and add new channel to existing one.

And distribution means making product available to the customers therefore distribution
decision making is to take decisions properly so that the distribution of product can be done
perfectly.

In a channel design the members get involved are producers, manufactures, retailers and
wholesalers but in this case we only look upon the decision taken from producers side and
also known as look down the channel.

There are five phases or steps in decision process-

A) Recognizing need for channel design decision

This is the first step in decision making for distribution channel, in which we look into
what is the need behind this. So in our case we are starting a new product line which
is an Immunity booster drink and this is the reason behind the decision making. We
have to make a distribution channel for this product.

B) Analysing customer needs

After getting the idea why we need a new or modification in the existing channel next
we look into analysing needs of customers. We must understand the service output
level desired by the customers. In which we look into the
 Lot size- The number of units a channel permits to any customer to purchase
on an occasion. For ex- if the person is buying drink online he/she can buy
maximum 10 at a time at some sites.
 Product variety- There are different set of product variety is provided by the
producers making all of them available at the marketing channel is also one of
the decision making process.
 Service backup- The add-on service provide by the channel.
C) Setting and Coordination Distribution Objectives
 Channel Manager needs to perform some important task such as checking the
objectives of previous product how they performed them state the new
objective explicitly. Finally check whether the objectives match with firm’s
general objectives or not.
 Next objective will be to reduce the total channel cost by arranging functional
task properly.
 In this case some product are perishable which means their life is short so the
company should focus more on direct selling than wholesaling. Especially in
covid-19 time period the company should focus more on direct or online
selling rather go through agents and facilitators.
 All legal regulations and restrictions should also keep in mind.

D) Evaluating the major channel alternatives

The channel manager must consider different alternative ways of allocating
distribution objectives to achieve their assigned distribution tasks. Moreover, the
channel manager usually chooses more than one channel structure in order to reach
the target markets efficiently and effectively.
 The number level can differentiate from one company to another in the
company xyz we will be having at most two levels. Our main focus will be to
keep the level at one which is direct selling. No need to involve intermediaries
our focus is to provide goods to customers at minimal cost.
 When we talk about the number of intermediaries then there are basically three
types of intermediaries which are Exclusive (min number of outlets or very
limited), Selective (available at selected locations) and third one is Intensive
(highly available)
Our main focus will be on Intensive Distribution, because XYZ Beverages is a
known and established brand in India therefore, the number of outlets
available will be more.
And, with the new line of product the selling will be easier if there is more
number of stores available.
  Variety of stores also matters in this case, therefore the number of stores at
which our product will be available will be high from simple mom and pop
stores to well defined mall.
 There will be online selling. We have an online site at which all types of
drinks we provide would be available. And our main task is to sell more on
online, because it is direct selling and easy for customers and this came under
novelty.

E) Evaluating the variables affecting Channel structure

There are many reasons out there which can affect the channel structure, and the
channel manager should look into this to avoid such problems in future such as-
 Market Variables- Look into the outlets distance from customers house, its
location, what type of product the outlet have, what kind of customer visit the
outlet.
If we have a deal with outlet where in a day two-three people visit Then we
tend to be our loss.
 Product Variable-Our product is light weight but perishable. So, we need to
find outlets and malls where the selling is done fast. And agents need to tell
this information to different merchants so that they know how to sell the
product to customers.
 Intermediary Available- We need to look into how much cost one
intermediary having. If the cost of using an intermediary is too high for service
they perform, then the channel structure is likely to minimize the intermediary.

As, the company belongs to an FMCG sector, therefore the distribution channel is
more on intensive side, but the company is looking more into online selling. Because
the product line is new therefore it needs promotion. And this can be done more on
online selling. Besides this there is two level systems the agents promote our product
and facilitator facilitate the product to the merchants or retailers then they finally sell
them in their stores. Our company focus more on direct selling. It is a professionally
planned and managed channel system. Since our product is new and can lead the
market trend therefore promotion of the product should be done properly to generate
the higher leads then only this distribution channel would be successful.
Channel Conflict- Channel conflict occur when a manufacturer (brand) interrupts its sales
partners (such as dealers, retailers, resellers, and sales representatives) through common
marketing methods and/or selling products directly to consumers on through the Internet.

Types of Channel Conflict-

1. Vertical Channel Conflict- This type of conflict occurs at different level of channels
such as between manufacturer and retailer, or between manufacturer and wholesaler.
2. Horizontal Channel Conflict- This type of conflict occurs within different members
at the same levels of the same channel.
For ex- Conflict between car dealers.
3. Multi-Channel Conflict- This type of conflict occur when the manufacturer has
established two or more channels which compete to each other in the same selling
market.
For ex- A company selling through speciality stores and through dealerships This will
set up different prices in the same market.

Cause of Channel Conflict-

 Role Ambiguity- The unsafe operation of agents in a multi-channel system may

destroy sales channels and cause conflicts between agents.
 Incompatible Roles- If producers and intermediaries pursue different goals and
objectives, and both parties work in different directions to achieve their goals, it will
lead to channel conflicts.
 Marketing or strategic Mis-alignment- There are times when the partners of the two
channels promote the manufacturer's products in different ways, creating two different
images of the same product in the minds of consumers, thus generating contradictory
views on the brand.
 Difference in Market Perception-Manufacturers' understanding of potential markets
and the penetration of specific regions may differ from that of intermediaries, which
may lead to conflicts and mediators’ interest in winning this particular market.
 Change Resistant- If the channel manager plans to change the sales channel, the
middleman may or may not accept the change. This may cause non-cooperation.
  Improper geographic or Demographic distribution-If the consumer base of the
sales area is narrow and the sales manager allows multiple business partners, they will
soon lose interest due to low profits and limited sales.

Recommendation for Channel Conflicts-

 Mediation, Arbitration and Diplomacy

To resolve a dispute, the manufacturer can adopt the strategy of intervention where a
third person intervenes to create harmony. The other option is arbitration, where an
arbitrator listens to the argument of the parties involved in a conflict and declares a
decision. Or, the parties can resort to diplomacy where the representatives of both the
parties conversate and find a solution.
 Co-optation
The manufacturer should hire an expert who has already gained experience in
managing the channel conflicts in other organizations, as a member of the grievance
redressal committee or board of directors, for addressing such conflicts.
 Dealer Councils and Trade Associations
To handle the horizontal or vertical conflicts, the manufacturer forms a dealer council
where the dealers can unanimously put up their problems and grievances in front of
the channel leader. To bring in unity among the channel partners or intermediaries,
they can be added as members in trade association which safeguards their interest.
 Superior Goals
Establishing a supreme goal of the organization and aligning it with the individual
goals or objectives of the channel partners, may reduce the channel conflicts.
 Regular Communication
The channel leader should take regular feedback from the channel partners through
formal and informal meetings to know about market trends and dynamics. Also, the
channel partner’s issues and conflicts can be addressed through frequent interactions.
 Legal Procedure
When the conflict is critical and uncontrollable by the channel leader, the aggrieved
party can seek legal action, by filing a lawsuit against the accused party.
 Fair Pricing
Most of the channel conflicts are a result of the price war, and therefore, these can be
resolved by ensuring that products are equally priced in all the territories and a fair
margin is provided to the channel partners.