Causes of Channel Conflicts

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.

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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 example, producers perceive retailer discount adequate and retailers perceive it inadequate or it may be the opposite. For example, Aishti sells many types of luxury brands and makes occasional discounts of 20 to 30 percent yearly. Manufacturers or distributors of certain Brand may not agree to include their deluxe brand in this discount as it is the company strategy.

Intermediaries’ dependence: If the channel member is highly dependent on the manufacturer this may increase conflicts between them. For example, exclusive dealers like Kettaneh are highly affected by the pricing strategy of the manufacturers and even the product itself. If the new VW showed a mechanical defect or low performance, this will directly affect Kettaneh’s sales and profit as it is the only product he sells. Therefore, importance and recurrence of channel conflicts will increase between Manufacturers and dealers.

Finally, Destructive channel conflict can have serious consequences on channel efficiency, channel effectiveness and partners’ profits. Such consequences lead to low partner loyalty to principals. These consequences will lead to a negative impact on customers’ purchasing behaviors and therefore, to each partner’s profit. However, some channel conflict is desirable, provided it is well managed. Managed channel conflict is better defined as channel competition and is not destructive.

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