Internal Channel Conflict notes-

CONFLICT OCCURS WHEN PARTIES DISAGREE OVER SUBSTANTIVE ISSUES OR WHEN

EMOTIONAL ANTAGONISM CREATES FRICTION BETWEEN PARTIES. CONFLICT THAT IS

DETRIMENTAL MUST BE REDUCED OR ELIMINATED.

Internet channel conflict is a conflict that occurs when Internet and traditional bricks-and mortar
channels destructively compete against each other when selling to the same market

Intermediaries that fear the negative effects of disintermediation may fight back against
manufacturers. Because the intensity and frequency of channel conflicts continue to increase,
channel conflict Management is an urgent issue in the e-business era.

Stage I. Identifying an Organization’s Internet Channel Conflict Management Environment

A company must identify its channel conflict management environment.

This environment can be measured by adopting and modifying version II of Rahim

Organizational Conflict

Inventory (ROCI-II), a successfully applied instrument designed to identify an individual’s or an

organization’s conflict management style.

The scheme was revised to fit the Internet channel conflict domain, and named the Internet
channel conflict measurement (ICCM) instrument.

After all top managers responsible for Internet channel decisions answer the ICCM questions,
each organization can identify its predominant Internet channel conflict management style
through averaging all scores and performing basic statistical calculations.

If two or three styles are found to have similarly high scores, a focus group study may be used
to select which is most appropriate.

Stage II. Searching for Other Success Cases

The next step is to get more detailed information based on the experiences of other companies

It is important to examine existing success stories in Internet channel conflict management

“Success” means Internet channel conflict has been fully or partially resolved by applying a
specific conflict management strategy

Such stories may be found in e-business magazines, the news media, and some practitioner
oriented journals, as well as on Web sites
After analyzing the cases, five channel conflict management strategies were identified:

Intermediary support strategy, differentiation strategy, conflict avoidance strategy, channel

absorption strategy, and compromising strategy.

Intermediary Support Strategy

Intermediary support strategy is used by manufacturers with low concern for self but high
concern for intermediaries.

In this situation, manufacturers adopt a passive Internet channel strategy, and use their Web
sites to support existing intermediaries.

For example, a manufacturer may develop e-business infrastructure for its intermediaries,
advertise product information instead of product sales, and give e-customers the location of the
nearest local intermediaries.

Differentiation strategy

Differentiation strategy is used in situations in which manufacturers have high concern both for
self and their intermediaries.

Such manufacturers seek ways to differentiate themselves from their intermediaries. To do this,
they utilize strategies such as market and product differentiation to minimize the cannibalization
of existing channels

Using the market differentiation strategy involves separating customers into groups, and
addressing each group using different channels.

Conflict Avoidance strategy

Conflict avoidance strategy is used by manufacturers with low concern for self and others.

Such manufacturers engage in online selling directly, while simultaneously attempting to

alleviate intermediaries’ concerns.

These manufacturers are successful in “sneaking” into direct Internet channel sales, but only by
making some sacrifices.

Channel Absorption strategy

Channel absorption strategy, which is the reverse of the intermediary support strategy, is used
by manufacturers with a high concern for themselves and a low concern for intermediaries.

Such manufacturers adopt an aggressive strategy and push intermediaries to accept their
decisions. In some cases, manufacturers sever relationships with previous intermediaries and
sell their products exclusively on the Internet.

In other cases, they aggressively merge their previous intermediaries into their company to
remove the channel conflict.

Compromising strategy

Compromising strategy dimension involves use of a give-and-take strategy; that is,

manufacturers launch online sales, but also pursue mutual benefits through sharing market and
consumer information, and sharing the benefits generated by direct sales with intermediaries.

Two types of compromising strategies exist: information sharing-strategy and profit sharing
strategy

The information-sharing strategy involves sharing information collected through online sales
between manufacturers and intermediaries Manufacturers that employ the profit-sharing
strategy share profits derived from online sales with intermediaries.

Stage III. Considering Other Channel Factors

Before making their final choice of channel conflict management strategy, managers should pay
special attention to other channel-related factors such as channel power, dependency,
environment, and product characteristics.

Channel power, the ability to control the decision variables of the marketing strategies of
channel members at different distribution levels, is the most frequently recognized causative
factor of channel conflicts

When a manufacturer holds a powerful channel position, it may have more concern for self, and
may therefore choose more self-oriented Internet channel conflict management strategies, such
as the differentiation strategy and the channel absorption strategy

Channel dependency has three components: the relative size of a business’s contribution to
profits; the commitment of one channel member to another member in terms of the relative
importance of the latter’s marketing policies; and the difficulty in effort and cost faced by a
channel member in attempting to replace another member as a supply source or as a customer.

Stage IV. Making a Final Strategic Choice

At this stage, managers should make their final choice of Internet channel conflict management
strategy through the consideration of their channel conflict management environment and other
channel factors.

After considering their organizational resource capabilities, and the costs and benefits of
multiple channel conflict management strategies, companies can select and combine multiple
strategies for a unique competitive advantage.

Recent trends in Channel Distribution -

1) Customer Self Service

2) Strategic Sourcing

3) Fee-based Services

4) Logistics and Fulfillment

5) Technology Spending

Channel Evaluation to be done on the basis of 3 things -

1) Efficiency

2) Effectiveness

3) Adaptability

Channel Types -

1. Master Distributor

2. Value Added Resellers

3. Manufacturing Reps

4. Brokers

The Case of HiteVision:

The issues in this case are related to Horizontal, Vertical, and Multi Channel Conflicts.

Causes of conflicts are due to -

1) Goal Incompatibility

2) Domain conflict and territorial disputes

3) Varying perceptions of reality.

The need of the hour for HiteVision was to resolve the conflict with a single brand when they
went to the commercial IFPD business.

They resolved it through PERSUASION (INVITED MEETINGS & INFORMATION SHARING)

and also by POLITICS (MEDIATION AND ARBITRATION).

The other methods are PROBLEM SOLVING (through meetings and joint planning) and
Bargaining (doing a Trade-off). Horizontal Conflict between distributors of the educator segment
and the commercial segment was due to domain dissensus.

Vertical conflict between HiteVision and commercial distributors was due to goal incompatibility.

The conflict between Lamoro and HiteVision plus e-commerce was due to different perceptions
of reality.

Each had different expectations.

Rest of the cases (All important concepts taught) - Call if there is any issue.

1) Tamul Plates -
We have to look at the levels, density, variety as well as novelty of the channels.

Sir taught about the segmental analysis (Studying about different segments) plus we also need
to

note down Channel characteristics and level of impact of each channel + Look at the maturity of

the industry. Population Ecology Theory.

1. Levels of Distribution Channels: This concept revolves around the number of

intermediaries between the manufacturer and the final consumer. It can range from
direct distribution (no intermediaries) to indirect distribution (multiple intermediaries),
impacting factors like control and pricing.
2. Density of Distribution Channels: This refers to the extent of market coverage
within a specific geographic area. It involves decisions about intensive distribution
 (wide coverage), selective distribution (focused outlets), and exclusive distribution
(limited high-quality outlets).
3. Variety of Distribution Channels: This concept pertains to the diverse assortment
of distribution channels a company employs to reach its target market. By selecting
channels that align with the product and target audience, a company can cater to
different consumer preferences and behaviors.
4. Novelty of Distribution Channels: Novelty concerns the innovation and
uniqueness of distribution channels. Companies that embrace emerging or
unconventional channels can gain a competitive edge by tapping into new markets or
adapting to evolving consumer trends.

​ Identifying Market Segments: Companies divide their target market into distinct
segments based on factors such as demographics, psychographics, geographic location,
behavior, and purchasing power.
​ Understanding Segment Preferences: For each identified segment, companies gather
data to understand their preferences, buying behaviors, and channel preferences. This
includes assessing whether a segment prefers online shopping, brick-and-mortar stores,
direct sales, or other channels.
​ Customizing Distribution Channels: Once the preferences of different segments are
understood, companies can tailor their distribution channels to match those preferences.
For example, if a segment prefers online shopping, the company would focus on
e-commerce platforms and digital marketing efforts to reach that segment effectively.
​ Allocating Resources: Companies allocate resources based on the potential and
importance of each segment. Segments with higher potential may receive more
investment in terms of distribution channels, marketing campaigns, and customer
service.
​ Optimizing Reach and Convenience: Segmental analysis helps companies ensure that
their products are available where customers expect them to be. This optimization of
distribution channels enhances convenience for customers, increasing the likelihood of
sales.
​ Enhancing Customer Experience: By catering to the specific needs and preferences of
different segments, companies can create a more personalized and relevant customer
experience, leading to higher customer satisfaction and loyalty.
​ Iterative Process: Segmental analysis is not a one-time effort. As market dynamics
change and consumer behaviors evolve, companies need to continuously monitor and
analyze segments to ensure their distribution strategies remain effective.
2) Schiit Audio - Vertical Compression ; Composite channels ; Trade-off Analysis; Horizontal

Diversity ; Functional Decomposition; The concept of Market Fragmentation and Growth Rate,

Threshold legitimacy

Vertical compression in channel management refers to reducing the number of intermediaries

between a manufacturer and the end consumer. It can happen through forward integration
(manufacturer sells directly to consumers) or backward integration (manufacturer takes control
of supply sources). This strategy offers benefits like better control, cost efficiency, and direct
customer interaction. Challenges include investment, expertise gaps, conflicts with
intermediaries, and logistical concerns. Careful consideration is required before implementing
vertical compression due to its impact on distribution, branding, and costs.

Composite channels in channel management refer to the use of multiple distribution channels to
reach a target market. These channels can include various intermediaries and methods such as
wholesalers, retailers, e-commerce platforms, direct sales, distributors, and more. Organizations
often employ composite channels to maximize their reach, cater to diverse customer
preferences, and achieve broader market coverage. This strategy allows companies to leverage
the strengths of different channels while mitigating the limitations of individual channels.
Effective management of composite channels requires coordination, clear communication, and a
deep understanding of customer behaviors and market dynamics.

Trade-off analysis in channel management involves evaluating the pros and cons of different
distribution channels to make informed decisions. It considers costs, control, reach, customer
experience, efficiency, and partner capabilities. The goal is to balance these factors to select the
most effective channels for reaching target customers and achieving business goals. This
analysis helps in optimizing the distribution strategy and ensuring consistency across channels.

Horizontal diversity in channel management involves utilizing multiple distribution channels that
operate at the same level within the distribution chain. This approach helps companies reach a
wider audience and reduces dependency on a single channel. It can enhance market coverage
and customer engagement, but requires careful coordination to maintain consistency across
channels.

Functional decomposition in channel management involves breaking down the various functions
and tasks within a distribution channel into smaller, manageable components. This allows for a
clearer understanding of the roles and responsibilities of each entity within the channel. By
breaking down the functions, companies can identify areas of improvement, streamline
processes, and optimize the overall channel performance. It helps in allocating tasks efficiently,
improving coordination, and enhancing the effectiveness of the entire distribution process.
Market fragmentation in channel management refers to the division of a market into smaller and
distinct segments or niches based on specific characteristics, preferences, or needs of
consumers. As markets become more diverse and consumer demands vary, companies often
find it beneficial to tailor their distribution strategies to cater to these specific segments
effectively.

In the context of channel management, market fragmentation requires companies to adapt their
distribution channels to reach these segmented markets efficiently. This might involve creating
specialized channels for different customer groups, selecting appropriate intermediaries, and
developing unique marketing messages for each segment. The goal is to ensure that the
distribution channels align with the preferences and behaviors of the target segments,
enhancing customer satisfaction and overall market performance.

Threshold legitimacy in channel management refers to the minimal level of credibility and
acceptance that a channel member must meet to be considered a legitimate participant in the
distribution network. It ensures that channel partners meet specific criteria, such as financial
stability and adherence to regulations, fostering trust and effective collaboration within the
channel. This concept helps mitigate risks and protect brand reputation by maintaining a
baseline standard of reliability among channel members.

3) Krishna Textiles - Channel Objectives ; The objectives of Wholesaler and retailers should
align.

Value chain analysis. Channel Disintermediation; Forward and Backward Integration; Pipeline

(Krishna) to Platform business

Channel disintermediation involves the removal of intermediaries from a distribution channel,

allowing products to reach consumers directly from manufacturers. This is often driven by
technology and can lead to cost savings and increased control over customer experience.
However, it also presents challenges like handling logistics and disrupting traditional distribution
models. Businesses should carefully weigh the pros and cons before pursuing
disintermediation.

Transitioning from a pipeline to a platform business model in channel management involves

shifting from a linear supply chain to a digital ecosystem. Platforms connect producers,
consumers, and third parties, enabling direct interactions and value exchange. This shift offers
personalized experiences, scalability, and potential network effects. However, it requires
adapting to technology, managing network dynamics, and addressing regulatory concerns. It
signifies a move towards a dynamic interconnected ecosystem that drives innovation and
business growth.
4) Natura -
How to convert multi channel to Ominchannel experience - Have to study how much

each channel is evolved ; Need to do category wise analysis (for increasing frequency of

purchase); Core competencies of each channel to arrive at the perfect channel mix.

5) Y-comet - The differences between LCV and HCV. Possible causes for low conversion rate
of Inquiries. Understanding of Sales process and benchmarking; One cannot design the channel
without understanding the customer segments;

Imp methodology -

1. First we need to understand the market segments and their buying behaviour.

2. Second, decide the channel design and structure.

3. Thirdly, complement it with competition benchmarking.

4. Lastly determine channel requirements for the target segments.