Logistics PPS8 Topic 5

The Behavioural Processes in Distribution Channels and Channel Conflict

Distribution channels as part of a social system Channel powerChannel conflictChannel communication

Channel power sources Reward Power Coercive Power Legitimate Power Referent Power Expert Power

Reward Power Financial incentive to next channel member Ability to be franchisee McD

Coercive Power “I kill you!” – Achmat the Dead Terrorist Punishing the next channel member if fails to respond as it should Coercive POWER sits with the big boys Shoprite/ Checkers Pick n Pay Woolies Spar

Legitimate Power Adhere to formal agreement May be problems between independent organisations (i.e. M ask R not to discount …) Higher legal recourse/ tighter in franchise channel

Referent Power Channel member sees other as having same objectives and part of same reference group

Expert Power = knowledge/ perceived knowledge one channel member has & influence power to change behaviour of other members

Exercising power – the influencing strategies Promise strategy – if you do what I say I will reward you Threat strategy – if you don’t do what I say I will punish you Legalistic strategy – do what we wish as we have contractually agreed to it …

Exercising power – the influencing strategies Request strategy – we ask: sweet, short and sharp with no indication of what may happen Info exchange strategy – “This is how you could make your business more profitable …” now draw your own conclusions … Recommendation strategy – “This is how you could make your business more profitable …” & conclusions

Using power to exert influence in the distribution channel Reward Promise Threat Legalistic Request Info exchange Recommendation Expertise, reward Referent, reward, coercion Legitimacy Coercion

Using power to exert influence in the distribution channel RewardPromise Threat Legalistic Request Info exchange RecommendationExpertise, reward Referent, reward, coercion Legitimacy Coercion

CHANNEL CONFLICT

“ … a situation in which one member of a distribution channel perceives another member as an adversary engaged in behaviour designed to injure, thwart/ block/ hinder from doing something, or gain scarce resources at the expense of the original member”

Causes of channel conflict 2-3 causes each

Conflict resolution

Two main reasons for conflict: Use of power Attempt to gain more power

Decision framework for evaluating channel conflict Importance of threatened channel in terms of current or potential volume of profitability Prospect of destructive conflict Act to avert conflict Look for opportunities to reassure threatened channel and allow to leverage power Allow threatened channel to decline Do nothing

The four methods to solve channel conflict Problem-solving Persuasion Negotiation Politics

Problem-solving

Persuasion

Negotiation

Politics Coalitions Mediation and arbitration Lobbying and judicial appeal

COMMUNICATION IN THE DISTRIBUTION CHANNEL

Communication Perceptual differences (does “soon” mean within 24 hours?) Secretive behaviour Infrequent communication

case study Page 136 … and answer questions on page 137