Channel Conflict

Topics: Marketing, Apple Inc., Pricing Pages: 7 (1906 words) Published: October 28, 2012
Conflict, Cooperation and Competition

Channel conflict is generated when one channel member’s actions prevent another channel member from achieving its goal. On the other hand, channel coordination occurs when channel members are brought together to advance the goal of the channel, as opposed to their own potentially incompatible goals. There are three pertinent issues to be examined here: Types of Conflict and Competition, Causes of Channel Conflict and How to Manage Channel Conflicts. Case 1: Apple Inc Channel Conflict

In 2003, an Apple reseller, Tom Santos, filed a lawsuit against Apple Computers Inc. . The court case alleged Apple of showing undue preference to its own Apple retail and online stores. The lawsuit claimed that Apple Computers was neglecting Apple reseller stores while shipping new goods. Many believed the suit was a result of Apple’s deteriorating relationship with some of its dealers Apple was also accused for adopting unethical business practices. The legal battle criticized Apple’s intention to divert sales to its own stores. Dealers claimed that Apple used discriminatory pricing to undercut dealers, selling products below cost in order to get customers away from independent stores. Many other resellers joined the legal proceedings. Till June 2005, the plaintiffs awaited the allotting of a trial date at the Superior Court of the county of Santa Clara, California. Over the years Apple has succeeded not because of its first-to-market strategy but because it has been able to reach customers with clever products, clever marketing, and smart distribution. Apple though claims that its intent with its retail stores program is to make the market bigger, rather limit its existing channel. As part of its strategy, apple continued to open more retail stores and currently operates hundreads of stores around the world. Types of Conflict

* Vertical Channel Conflict: Different levels within the same channel. E.g. Petrol pumps, beverage bottlers, HUL * Horizontal channel Conflict: between members at the same level within the channel. E.g. Under cutting, domain of operation * Multi-Channel Conflict: manufacturer has established two or more channels selling to the same market. E.g. Escott tractors, e-commerce.

Causes of Conflict
* Goal Incompatibility: When the goals of one channel member very often are not compatible with the goals of another channel member. With the use of resellers, this becomes even more apparent. Even though the use of resellers is much cheaper and offers the business greater flexibility in comparison to a business-owned sales force, coordinating relationships with the resellers is a challenge, as they are independent businesses with multiple suppliers and product lines. Both the reseller and the supplier want to maximise their profits. However, their ideas of how this should be accomplished differ. For the reseller it could mean charging customers more, while at the same time holding down expenses. The supplier, on the other hand, wants to see the reseller do almost exactly the reverse. Accordingly, conflict issues might include whether prices and service are being maintained at “reasonable” levels

* Unclear Roles & Rights: also known as domain conflicts, these often occur when one channel member perceives that the other is not taking proper care of its responsibilities within its domain. This can mean doing the job in the wrong way, not doing the job at all, or ‘trying to do another channel member’s job’ assert that the four critical elements of a channel domain are the population to be served, the territory to be covered, the functions or tasks to be performed and the technology employed. Conflict issues might include who has the right to represent a particular product within a given territory. That is, when manufacturers use several marketing channels simultaneously, channels sometimes find themselves competing to reach the same set of customers. This might...
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