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Assignment on

Sales and distribution management (Channels conflict)

Submitted to Prof. Joy Joy N

Submitted by Naresh (11130)

Case facts of Paint Company:


There is a XYZ paint company which has an excellent distribution system. It has 4 manufacturing units and have more than 2800 stocks keeping units (SKUs) supported by 6 regional distributors, caters to 55 depots.

Each depot has a branch manager and several sales people cater to 14500 distributors and 2500 retailers and 5000 customers in the cities. The company follows multi plant distribution system and it indicates that all the depots are supported by all the plants depending on the stock keeping units availability in the plant warehouse.

Questions 1: Possible areas of channel conflicts?


Ans: Three possible areas of channel conflict, which are given below:
1- Direct contact of wholesaler as well as retailer with the final customer: The conflicts can

occur when depots directly serve both the retailers as well as the wholesalers. This led to differential pricing by the wholesalers and retailers. As the wholesalers get the benefit of more discounts and more margins due to bulk buying, they will be able to offer lower prices to their consumers. This led to conflict among the retailers because by this way they will lose their customers to the wholesalers.
2- Direct contact of Wholesaler as well as retailer with the company depot: the conflict can

occur when salespersons of the company depot cater to both the retailers and the wholesalers. But the company maintains the same list of price for both of them. This minimizes the difference in prices for the retailers and the wholesalers. However, some benefit is given in the form of discounts to the wholesalers as compare to retailers and sometimes that can create conflict if the wholesalers sell at the lower prices.
3- Multi-Point contact with Institutional Buyers: Sales force directly contacted the institutional

buyers: Although the salespeople of the company directly met the institutional buyers, it did not lead to a loss of revenue to the dealers located in the region. The paints company had taken due care that no supply to consumers was made directly from their branches or depots. All the deliveries were routed through dealers located in the region. The sequence of targeting of architects and large institutional buyers was done. Thus, by maintaining a single sale point to the consumer the company avoided conflict

Question 2: Accenture framework of the decision matrix:


The Accenture framework for managing channel conflict based on the market power and channel value-added could be used Channel value is a measure of how much worth the channel adds to the customer. Companies use the channel conflict strategy matrix to analyze

the forces and opportunities for change in their industries vis--vis each existing channel, and to quickly identify optimal change strategies.

Channel Control customers

Forward integrated The company should establish own exclusive outlet Create innovative offering that regular channel cannot duplicate

Co- operate
Seek to compromise Cooperate to enhance total value creation Look to sell new products through new channel

Market Supplier control Compete Use direct selling model Power customers

Lead

Define appropriate strategy for Shift volume to new channel the channel through promotions Ensure that channel achieve its objective

Insignificant Channel value added

Significant

Conclusion:
Conflict is a natural phenomenon, which cannot be eliminated but it can be reduce to a certain extent. In channel management, it is an inevitable as many individuals, are involved and they are interdependent. The conflicts can be reduced and managed better to reduce the friction in the channel management. Channel power is frequently used as a conflict management tool. Power sources are usually effective when wielded by channel leaders. Channel leaders can use referent, expert, legitimate, coercive and reward power to minimize channel conflicts. Creative and effective channel leadership result in channel members moving towards shared goals. If this ideal situation is achieved, distribution channels will be in a better position to satisfy the demands of target customers and maximize profits of individual channel members.