Lays (Frito lay Pepsi co) Pakistan

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Report on
Vertical & Horizontal
marketing channel
conflicts of Lays
Submitted To:
Sir Hammad Hassan
Submitted By:
Anum Sikandar 200!ag!
"#$
%aina& 'una((ar 200!ag!
"#"
Sa&a )ull 200!ag!
*$"
'uhammad 'a+id Rashid 200!
ag!#,#
*
rd
Semester
Section -./
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0nstitute 1f 2usiness & 'anagement
Sciences
3ni4ersity 15 Agriculture6 5A0SALA2A7
Exordium
Praise the lord because nothing deserves to be praise expect Almighty Allah, the
most Merciful, benevolent and complaisant. All praises for him because he is the
creator of this enigmatic universe and guides us with the Holy Prophet Mohammed
(Peace be upon him) and Holy uran to explore it. !e supplicate that Allah grant
us serenity to accept the things we cannot change, courage to change the things we
can, and wisdom to "now the difference.



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Acknowledgement
#he pro$ect of vertical and hori%ontal channel conflicts is the result of our day and
night efforts which we have made to complete this considerable and informative
pro$ect. &ertainly we have been able to complete this pro$ect with the help of
numerous factors, which played a "ey role in it.

!e deem it with an honor and privilege to record sense of gratitude to the
respected resource person Sir Hammad Hassan for his constructive style of
teaching and maintaining very open and competitive atmosphere within the class.
!e really li"ed our respected resource person for his full command on the sub$ect
and unconventional style of teaching. #his made the sub$ect very comprehensive
and understandable.

!e hereby ta"e this opportunity to than" all those people including our friends and
colleagues who have helped us for the successful completion of this pro$ect.

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!e express our gratitude's towards our parents for their encouraging support,
incandescent sprit and endurance towards the ma"ing of this pro$ect. (n the ends a
special than"s to all members who are directly or indirectly associated with the
pro$ect.
8a&le of 9ontents
Topics Page #
)xecutive *ummary +++++++++++++++++++++ ,-
.eport /b$ective ++++++++++++++++++++++.. 0,
.esearch Methodology ++++++++++++++++++ 0,
1imitations ++++++++++++++++++++++++ 0,
(ntroduction ++++++++++++++++++++++++. 0,
1ay's ++++++++++++++++++++++++. 0,
History +++++++++++++++++++++++. 00
&ompany Perspectives +++++++++++++++++ 00
2ey 3ates ++++++++++++++++++++++ 04
1ay5s Pa"istan+++++++++++++++++++++++. 04
&ompany Profile +++++++++++++++++++. 04
Production ++++++++++++++++++++++ 06
*uppliers ++++++++++++++++++++++.. 06
&ustomers ++++++++++++++++++++++. 06
*logans +++++++++++++++++++++++. 06
7lavors +++++++++++++++++++++++. 08
9ew Arrivals +++++++++++++++++++++ 08
9utritional information +++++++++++++++++ 08
&onspiracy about Pig 7at in lays +++++++++++++. 0:
#he code );60 ++++++++++++++++++++. 0:
1evel and #ype of &ompetition +++++++++++++.. 0:
&ompetitors +++++++++++++++++++++. 0;
&ompetitors Products < Activities ++++++++++++. 0;
Mar"et share++++++++++++++++++++++ 0;
9ature of business +++++++++++++++++++. 0=
2ey /b$ectives of 1ays ++++++++++++++++++++.. 0=
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Mar"eting /b$ective of 1ays Pa"istan +++++++++++++++ 0=
Mar"eting channels ++++++++++++++++++++++. 0-
#he role of mar"eting &hannel ++++++++++++++++++ 0-
&hannel Mar"eting *ystems +++++++++++++++++++ 0>
?ertical Mar"eting system +++++++++++++++++ 0>
Hori%ontal Mar"eting system ++++++++++++++++ 0>
Topics Page #
Multi@channel Mar"eting *ystem ++++++++++++++. 4,
&onflicts, &ooperation, and &ompetition +++++++++++++ . 4,
#ypes of conflicts +++++++++++++++++++++++ 4,
?ertical &hannel &onflicts++++++++++++++++ 4,
Hori%ontal &hannel &onflicts +++++++++++++++ . 4,
Multi@channel &onflicts +++++++++++++++++ +... 4,
&auses of &hannel &onflicts +++++++++++++++++++ 40
Mar"eting (ntermediaries of 1ays Pa"istan +++++++++++++ 40
&onflicts in mar"eting channels of 1ays +++++++++++++ 44
.egion +++++++++++++++++++++++++ 44
3istributors +++++++++++++++++++++++ 44
?ertical conflicts in mar"eting channels of 1ays Pa"istan +++++++++ 44
)xample A 0 +++++++++++++++++++++++++ 44
Adreesia )nterprises +++++++++++++++++++ 46
#he Best 3epartmental *tore ++++++++++++++++ 46
?ertical &onflicts ++++++++++++++++++++. 48
?ery low margin ++++++++++++++++++ 48
1ate delivery ++++++++++++++++++++ 48
9o extra incentives +++++++++++++++++ 48
9o proper action on customer5s complaints ++++++++ 48
*hortage of some flavors +++++++++++++++ 4:
)xample A 4 ++++++++++++++++++++++++ 4:
Murshid C 3rin" +++++++++++++++++++++ 4:
?ertical conflicts +++++++++++++++++++++ 4;
1ate delivery +++++++++++++++++++ 4;
*hortage of some flavors ++++++++++++++ 4;
&ommunication problems +++++++++++++ 4;
&onclusion +++++++++++++++++++++++++ 4=
.ecommendations +++++++++++++++++++++ 4=
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Hori%ontal conflicts in mar"eting channels of 1ays Pa"istan +++++++ 4-
)xample ++++++++++++++++++++++++++ 4-
Adreesia )nterprises ++++++++++++++++++ 4-
Metro ++++++++++++++++++++++++ 4>.
Hori%ontal conflicts +++++++++++++++++++ 6,
Topics Page #
3ifference in profit margin ++++++++++++++ 6,
3ifference in number of wholesalers and retailers ++++ 6,
&ommunication preferences ++++++++++++ 6,
3ifference in payment methods +++++++++++++ 6,
*pecial offers ++++++++++++++++++ 6,
&onclusion +++++++++++++++++++++++++ 60
.ecommendations ++++++++++++++++++++++ 60
.eferences +++++++++++++++++++++++++ 64
Appendixes +++++++++++++++++++++++++ 66
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Executive Summary
1ays is the brand name for a number of potato chip varieties as well as the name of the
company that founded the chip brand in0>6-.1ay's chips are mar"eted as a division of
7rito@1ay, a company owned by Pepsi&o (nc.since0>;:./ther brands in the 7rito@1ay
group include 7ritos, 3oritos, .uffles, &heetos and 2ur"urre.
#he scope of this study is to discuss the mar"eting channels of lays Pa"istan and to find
out any conflict between these channels. #he conflict can be vertical (with in a channel)
and hori%ontal (outside the channel).
&ompany has started its production at its 9ew Plant at .aiwind road 1ahore on 14th
August, 200. #hat improves the performance of the company. #he time period of
importing the product is eliminated. .aw material can be available in local mar"et, so it
would reduce the budget for raw material. (n Pa"istan lays is being manufactured in these
flavorsD BarbeEue, *alted, 7rench cheese, Magic Masala, 2etchup tango, *alt and
vinegar. *ome new arrivals are F!avy laysG &ream and /nion and *alt and Blac"
pepper.
1ays &lassic Potato chips are coo"ed in 0,,H pure sunflower oil (originally
hydrogenated oil until Ianuary 0st, 4,,=). A one ounce serving has 0:, calories, >, of
which are from fat, 0, grams of fat, and 0 gram of saturated fat. #hey have many flavors
in the ba"ed lays as well. Ba"ed lays are produced in cheddar, barbecue, and original.
1ays has faced a conspiracy about pig fats but they resolve the issue by giving proves. the
Iamia Ashrafia, Pa"istan has made sure that 1ays produced by Pepsi Pa"istan should use
the );60 from Halal source.
1ays mar"eting ob$ective are very clear. &ompany wants to maximi%e its mar"et share.
#he attraction towards the product is very important and without this phenomena
company can5t fulfill its target. *trong distribution channel is the foremost element Profit
maximi%ation is always prior magnitudes for every company for that purpose they reduce
the cost of production to enhance the turnover of the company. 1ays mar"eting channel is
very strong. 3istribution channels do not stand still. 9ew wholesaling and retailing
institution emerge, and new channel systems evolve. #hese new systems are as followD
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?ertical Mar"eting *ystem, Hori%ontal Mar"eting *ystem, and Multi@channel Mar"eting
*ystem. All these system can face some conflicts too because of goals incompatibility,
unclear roles and right, difference in perception, dependence on the Manufacturer.
?ertical &hannel &onflicts means conflicts between different levels within the same
channel. Hori%ontal &hannel &onflicts involves conflict between members at the same
level with in the channel. (t can between two wholesalers or in between two retailers.
Multi@channel &onflicts exist when the producer has established two or more channels
that sell to the same mar"et.
!e design a list of Euestions to collect the whole data from the distributors, wholesalers
and retailers. !e select 0 or 4 ma$or distributors, wholesalers and retailers of lays in
7aisalabad and personally visit their premises to find out any conflict between them. An
Adreesia enterprise is being selected as distributor, Murshid C drin"s as wholesaler, #he
Best departmental store as retailer for the vertical channel conflicts. Adreesia enterprises
and metro had been selected as another ma$or wholesaler for the hori%ontal channel
conflicts. !e find out that vertically channels are facing the problem of shortage of some
lays products and less profit margin. And hori%ontally they are facing the preferences
problem.
#his study has enhanced our practical "nowledge and clears the concepts. #he time span
for this report is very low. #he channel members were not very cooperative at start. /ur
recourses were limited so we had to focus on0 product and on few channel members with
in a small region.

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!eport "#$ective%
Mar"eting channels of lays Pa"istan
#he hori%ontal and vertical conflicts in mar"eting channels
!esearch &ethodo'ogy%
!e design a list of Euestions to collect the whole data from the distributors, wholesalers
and retailers. !e select 0 or 4 ma$or distributors, wholesalers and retailers of lays in
7aisalabad and personally visit their premises to find out any conflict between them.
(Appendix A 0)
(imitations%
#ime duration for the report is very low.
.esources are very limited that is why we can ta"e a very small region under
study.
#he channel members li"e Adreesia enterprises and others are not very
cooperative at the start.
.etailers were hesitating while discussing the conflicts and were ta"ing it as threat
with their relationship with distributor.
)ntroduction%
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(ay*s%
(t is the brand name for a number of potato chip varieties as well as the name of the
company that founded the chip brand in0>6-.1ay's chips are mar"eted as a division of
7rito@1ay, a company owned by Pepsi&o (nc.since0>;:./ther brands in the 7rito@1ay
group include 7ritos, 3oritos, .uffles, &heetos and .old Cold pret%els.
History%
9ative American chef Ceorge &rum invented potato chips in0-:6 while wor"ing in a
9ew Jor" hotel. #he snac" food became popular during the0>4,sfollowing the
mechanical potato peeler. As distribution increased, a number of small companies began
manufacturing and selling the product. (n 0>64 salesman Herman !. 1ay opened a snac"
food operation in 9ashville, #ennessee and, in 0>6-K he purchased the Atlanta, Ceorgia
potato chip manufacturer LBarrett 7ood &ompany,L renaming it LH.!. 1ay < &ompany.L
1ay criss@crossed the southern Mnited *tates selling the product from the trun" of his car.
(n0>84, 1ay introduced the first continuous potato processor, resulting in the first large@
scale production of the product. #he business shortened its name to Lthe 1ay's &ompanyL
in 0>88 and became the first snac" food manufacturer to purchase television
commercials, with Bert 1ahr as a celebrity spo"esman. His signature line, Lso crisp you
can hear the freshness,L became the chips' first slogan along with Lde@1ay@siousNL As the
popular commercials aired duringthe0>:,s,1ay's went national in its mar"eting and was
soon supplying product throughout the Mnited *tates.(n0>;0, the 7rito &ompany founded
by )lmer 3oolin and 1ay's merged to form 7rito@1ay (nc., a snac" food giant with
combined sales of over O04= million annually, the largest of any manufacturer. *hortly
thereafter, 1ays introduced its best@"nown slogan Fbetcha you can't eat $ust one.L *ales of
the chips became international, with mar"eting assisted by a number of celebrity
endorsers.(n0>;:, 7rito@1ay merged with the Pepsi &ola &ompany to form Pepsico, (nc.
and a barbecue version of the chips appeared on grocery shelves. A new formulation of
chip was introduced in0>>0that was crisper and "ept fresher longer. *hortly thereafter,
the company introduced the L!avy 1aysL products to grocer shelves. (n the mid to
late0>>,s, 1ay's modified its barbecue chips formula and rebranded it as L2.&. Master
piece, Fnamed after a popular sauce, and introduced a lower calorie ba"ed version and a
variety that was completely fat@free (1ay's !/! chips containing the fat substitute
olestra).(n the4,,,s,"ettle coo"ed brands appeared as did a processed version called
1ay's *tax that was intended to compete with Pringles, and the company began
introducing a variety of additional flavor variations. 7rito@1ay products presently control
::H of the Mnited *tates salty foods mar"etplace.
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+ompany Perspectives%
/ur Mission *tatementD #o be the world's favorite snac" and always within arm's reach.
,ey -ates%
1./2D )lmer 3oolin founds the 7rito &ompany in *an Antonio, #exas, and begins
ma"ing 7ritos corn chips.
1./0D Herman !. 1ay buys Atlanta potato chip ma"er, changes name to H.!. 1ay <
&ompany, (nc., the following year.
1.44D H.!. 1ay begins mar"eting potato chips under the 1ay's name.
1.40D 7rito &ompany introduces &hee@tos snac"s.
1.10D 7rito &ompany acEuires the rights to .uffles brand potato chips.
1.1D #he 7rito &ompany and H.!. 1ay < &ompany are merged to form 7rito@1ay, (nc.
1.1D 7rito@1ay, (nc. and the Pepsi@&ola &ompany merge to form Pepsi&o, (nc., with
7rito@1ay becoming a division of the new company.
1.2D 3oritos tortilla chips ma"e their national debut.
1.20D 7rito Bandito advertising campaign is abandoned following complaints from
Mexican American organi%ations.
1.01D &ompany introduces #ostitos tortilla chips.
1..1D *unchips multigrain snac"s are introduced.
1..2D &ompany acEuires the &rac"er Iac" brand.
1..0D !owN line of low@fatPno@fat chips debuts.
(ay3s Pa4istan
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+ompany Pro5i'e%
Plot no 806,
*under industrial )state,
.aiwind .oad, 1ahore
Production%
&ompany was importing F2M.2M.)G from &hina and 1ays chips from F*audi ArabG
through its supplier F*audi *nac" 7oodG. &ompany has started its production at its 9ew
Plant at .aiwind road 1ahore on 14th August, 200. #hat improves the performance of
the company. #he time period of importing the product is eliminated. .aw material can
be available in local mar"et, so it would reduce the budget for raw material. #he time
span right from the production to distribution will sEuee%e and efficiency will be
enhanced.
Supp'iers
&ompany was importing 1ays chips from F*audi ArabG from 0st Iune 4,,: through its
supplier F*audi *nac" 7oodG and has a strong bond with them but now 1AJ5* &H(P5* is
produced in Pa"istan
+ustomers
#he strategic focus of a business or a mar"eting plan of lay5s &ompany is that they are
targeting Jouth, Cirls and housewives (opinion leaders).#he company needs to study five
types of customers li"e consumers, business, resellers, international and government. But
in the case of lay5s only consumers are exist.
S'ogans%
#hat's another reason to smileN 1ay's Potato &hips (4,,=)
7ood for the fun of itN (4,,=)
1ay's, get your smile onN (4,,;@)
1ay's. !ant someQ
Betcha can't eat $ust one (0>;,s@present)
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1ays "a ma%aa lo(1ay's Pa"istan)meaning@Have fun with 1ay's
Jou can't eat $ust one....1agi betN (1ay's (ndia)
Har programme "a main food (1ay's (ndia)meaning@ #he main food for every
programmme
9o one can eat $ust one (1ay's (ndia)
6'avors%
)xcept for barbecue@flavor potato chips, which were introduced no later than 0>:-, up
until the last 4, years, the only flavor of potato chips had been the conventional one.
3espite an explosion of new flavors, the unadorned original is still the selection of -0Hof
consumers. (n the Pa"istan, 1ay's offers a number of flavor combinations, in addition to
the classic chips. 7lavored products in the traditional fried varieties include
BarbeEue
*alted
7rench cheese
Magic Masala
2etchup tango
*alt and ?inegar
7e8 Arriva's%
!avy 1ays
*alt and Blac" pepper
&ream and /nion
9Appendix # 2:
7utritiona' in5ormation
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(0 Bag of 1ays Ba"ed &hips)
As a snac" food, the 1ay's brands contain very few vitamins and minerals in any variety.
At ten percent of the daily reEuirement per serving, vitamin & is the highest. *alt content
is particularly high, with a serving containing as much as 6-, mg of salt. A one ounce
(4-gram) serving of 1ay's regular potato chips has 06,caloriesandcontains ten grams of
fat, with three grams of saturated fat. 2ettle coo"ed brands have seven to eight grams of
fat and one gram of saturated fat but are 08, calories. 1ays 9atural has nine grams of fat,
two grams of saturated fat and 0:, calories. *tax typically contain ten grams of fat, 4.:
grams saturated fat and are 0;, calories per serving. !avy 1ays are identical to the
regular brand except for a half@gram less of saturated fat in some combinations. #he
various brands do not contain any #ran5s fats. #he ba"ed variety feature 0.: grams of fat
per one ounce serving, and have no saturated fat. )ach serving has 00, to 04, calories.
1ay's 1ight servings are =: calories per ounce and have no fat.
1ays &lassic Potato chips are coo"ed in 0,,H pure sunflower oil (originally
hydrogenated oil until Ianuary 0st, 4,,=). A one ounce serving has 0:, calories, >, of
which are from fat, 0, grams of fat, and 0 gram of saturated fat. #hey have many flavors
in the ba"ed lays as well. Ba"ed lays are produced in cheddar, barbecue, and original.
+onspiracy a#out Pig 6at in 'ays
.esearch by 3r Am$ad 2han (Medical .esearch (nstitute, Mnited *tates) has proved that
many products of multinational firms have P(C 7A#* in them as ingredients. !ord P(C
7A# is replaced by )@&odes because they decided to start a coding language, so that only
their 3epartments of 7ood Administration should "now what they are using, and the
common man is left lur"ing in the dar".
The code E/1
9ow, company was facing a severe drought of money because ma$or portion of their
income comes from selling their goods to Muslim &ountries, and these earn B(11(/9*
/7 3/11A.* of Profit from their exports to the MM*1(M !/.13. *o this conspiracy
should have to resolve.
);60 can be generated in 6 different waysD
(t can be obtained from sardines (fish).
(t can be made from brewer yeast extract which is a by@product of beer ma"ing
process.
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(t can be extracted from pig meat.
(f method A0 is used then it is Halal. (f method A4 is used then it is not Haram but it is
better to avoid it. However if method A6 is used then most certainly it is Haram.
*/, the Iamia Ashrafia, Pa"istan has made sure that 1ays produced by Pepsi Pa"istan
should use the );60 from Halal source.
9Appendix # /:
(eve' and Type o5 +ompetition%
#heir competition strategies are based on the competitor5s strategy. #hey don5t follow the
price war competitive strategy. #hey follow the standard of product and Euality in
competition. #heir competition type is oligopoly.
+ompetitors%
/ne can5t imagine about a business without competition. 1ays has also some competitors.
Ma$or threats to 1ays are
Pringles
2olson
Colden
#ripple )m (which has almost8:H of the mar"et share).
But as Euality of the product play an important role that is not up to the standard by the
competitors. *o, 1ays is outstanding in all ways to the competitors li"e Euality, Euantity,
price and variety of the products etc.
+ompetitors Products ; Activities%
7ollowing &ompetitor5s products are being sold in the mar"et but their product
availability is not that good. #he only reason for their presence is the &redit facility and
high margins.
9iralla
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*mith
Bunny
*herry
*adiE 3ry 7ruit
PA&) (.ancher)
Colden
Pa" 7ood (Maxo)
&ar4et share%
1ays R 8:H
2olson R 0:H
Colden R -H
*mit R :H
#ripple )m R 0:H
/thers R 04H
7ature o5 #usiness%
*nac"s are of two typesD
Potato &hipsD 1ays
)xtrudedD F2M.2M.)G lies in the extruded item which comes under 7M&C
Products (fast moving consumer goods).
,ey "#$ectives o5 (ays%
1i"e every business the primary ob$ective of 1AJ5* &ompany is to be flourishing and
earn more profits. But it5s possible only when the company understand the environment
of the mar"et, whereD
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0. 3ifferent types of customer in this region who consider low price but still want for
high Euality.
4. &urrently wea" competition for a multinational company regarding Euality with price.
6. A handsome share of the mar"et is still vacant.
8. &ompany5s own profit orientation by producing in bul" Euantity and reducing cost.
:. *trong distribution channels are helpful to distribute and sale Euic"ly and can generate
high turn over. #herefore they pursue following ob$ectivesD
Produce high Euality product at reasonable low price.
7acilitate as maximum share of mar"et as they can.
&ustomer satisfaction is the top priority.
AcEuire the strong distribution channel so the product is made available on the
shelf.
&ar4eting "#$ective o5 (ays Pa4istan%
&ompany is having very clear perception about the target mar"et which is explained as
followsD
1. &ompany wants to capture as many share of the mar"et so that the company
maximi%e its mar"et share.
2. &ustomer attraction towards the product is very important and without this
phenomena company can5t fulfill its targets.
3. *trong distribution channel is the foremost element and is reEuired more when the
need increases, so the company should also focus on them and will give then
certain benefits as well as the retailers.
4. Profit maximi%ation is always prior magnitudes for every company for that
purpose they reduce the cost of production to enhance the turnover of the
company.
&ar4eting channe's
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Most producers do not sell their goods directly to the final usersK between them stands a
set of intermediaries performing a variety of functions. #hese intermediaries constitute a
Mar"eting &hannel.
7ormally, Mar"eting &hannel is sets of independent organi%ation involved in the process
of mar"eting a product or service available for use or consumption. #hey are the set of
pathways a product or service follow after production, culminating in purchase and use
by the final end user.
*ome intermediaries@ such as wholesalers and retailers@ buy, ta"e title to, and resell the
merchandiseK they are called merchants. /thers@ bro"ers, manufacturer's representatives,
and sales agents@ search for customers and may negotiate on the producer's behalf but do
not ta"e title to the goodsK they are called agents. *till others@ transportation companies,
independent warehouse, ban"s, and advertising agencies@ assist in the distribution process
but neither ta"es title to goods nor negotiates purchases or salesK they are called
facilitators.
The ro'e o5 mar4eting +hanne'
Producers have the several advantages by using the intermediariesD
Many producers lac" the financial resources to carry out direct mar"eting.
Producer who do establish their own channels can often a greater return by
increasing investment in their main business.
(ntermediaries share the ris" factor.
Cather information about potential and customer, competitors, and other actors
and forces in the mar"eting environment.
3evelop and disseminate persuasive communications to stimulate purchasing.
.each agreements on price and other terms so that transfer of ownership can be
affected.
AcEuire the funds to finance inventories at different levels in the mar"eting
channel.
(n some cases direct mar"eting simply is not feasible
Provide the successive shortage and movement of physical products.
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Provide for buyers payment of their bills through ban"s and other financial
institutions.
/versee actual transfer of ownership from one organi%ation or person to another.
+hanne' &ar4eting Systems%
3istribution channels do not stand still. 9ew wholesaling and retailing institution emerge,
and new channel systems evolve. #hese new systems are as followD
?ertical Mar"eting *ystem
Hori%ontal Mar"eting *ystem
Multi@channel Mar"eting *ystem
<ertica' &ar4eting system%
A conventional mar"eting channel comprises an independent producer, wholesaler, and
retailer. )ach is a separate business see"ing to maximi%e its own profits, even if this goal
reduces profit for the system as a whole. 9/ channel member has complete or substantial
control over other member.
A vertical mar"eting system by contrast, comprises the producer, wholesalers, and
retailers acting as a unified system. /ne channel member, the channel captain, owns the
others or franchises them or has so much power that they all cooperate. #he channel
captain can be the producer, wholesaler, or the retailer.
Hori=onta' &ar4eting system%
Another channel development is the hori%ontal mar"eting system, in which two or more
unrelated companies put together resources or programs to exploit an emerging
mar"eting opportunity.
&u'ti>channe' &ar4eting System%
/nce , many companies sold to a single mar"et through a single channel. #oday, with the
proliferation of consumer segments and channel possibilities, more companies have
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adopted multi@channel mar"eting. Multi@channel mar"eting occurs when a single firm
uses two or more mar"eting channels to reach one or more customer segments.
+on5'icts, +ooperation, and +ompetition%
9o matter how well channels are designed and managed, there will be some conflicts. (f
for no other reason than that the interests of independent business entities do not always
coincide.
&hannel conflict is generated when one channel member's actions prevent the channel
from achieving its goal. &hannel coordination occurs when channel members are brought
together to advance the goals of the channel, as opposed to their own potentially
incompatible goals.
Types o5 con5'icts%
?ertical &hannel &onflicts
Hori%ontal &hannel &onflicts
Multi@channel &onflicts
<ertica' +hanne' +on5'icts%
?ertical &hannel &onflicts means conflicts between different levels within the same
channel. (t can be between Producer and wholesaler or it can be between wholesaler and
retailer etc.
Hori=onta' +hanne' +on5'icts%
Hori%ontal &hannel &onflicts involves conflict between members at the same level within
the channel. (t can between two wholesalers or in between two retailers.
&u'ti>channe' +on5'icts%
Multi@channel &onflicts exist when the producer has established two or more channels
that sell to the same mar"et. Multi@channel conflicts are li"ely to be especially intense
when the members of one channel get a lower price or wor" with a low margin.
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+auses o5 +hanne' +on5'icts%
(t is important to identify the causes of &hannel conflict. *ome are easy to resolve, others
are not. *o some common causes are as belowD
Coals incompatibility
Mnclear roles and right
3ifference in perception
3ependence on the Manufacturer
&ar4eting )ntermediaries "5 (ays Pa4istan%
#o execute an assortment of necessary functions to get the product to the final customers
lay5s has one ma$or distributor, *hahba% brothers in Pa"istan. *hahba% brothers having
maximum of their targets and maximum margins which is 08 H are their ma$or
distributors they are covering area of Culberg, 3efence, &ant, *adar, #a$ Bagh, #a$ Pura
and Ialo etc. /rder placement to Main 3epot which is situated at Culberg ((, Pepsi office
is wee"ly based and within 8- hours supplies arrives from Main 3epot to 3istributors
3epot from where they distribute them to different retailers. 3istributors are covering =,
to 0,, shops daily to fulfill their target in the end of the month period. 7or distribution
available vehicles are vans, *u%u"i and shah%ors (only for *hahba% Brothers).
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22
+on5'icts in mar4eting channe's o5 (ays
!egion%
7aisalabad
-istri#utors%
; distributors
<ertica' con5'icts in mar4eting channe's o5 (ays Pa4istan
Examp'e # 1%
&onflicts between distributor and retailer
-istri#utorD Adreesia )nterprises
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23
&ivil lines, 7aisalabad
!etai'erD #he Best *tore
Iail road, 7aisalabad
Adreesia Enterprises%
!e ta"e into study Adresseia enterprises in 7aisalabad. #hey are one of the biggest
distributors of lays Pa"istan. #hey directly purchased from manufacturer. #hey purchased
in bul" almost 8 containers wee"ly and paid in advance. #he company provides the
transportation facility. After receiving from manufacturer, they distribute lays to lots of
big stores and wholesalers in - ba%ars of 7aisalabad, *argodha road, Mansorabad.
Adreesia )nterprises has fixed wholesalers. #heir biggest wholesaler is in Ihang ba%ar
7aisalabad and #he Best 3epartmental *tore on Iail road is one of the biggest retailers in
7aisalabad.
#ransportation cost is bear by the Adressia enterpises and while delivering all the
damages is bear by company. All the expiry products and sales returns send bac" to the
company.
&argin%
#hey received ;H profit margin from the manufacturer and distribute at 8 H margin to
some wholesalers and provide some extra incentives to those wholesaler on high sales.
they distribute on very low profit margin to their retailers.
(Appendix A 8)
The ?est -epartmenta' Store%
(t is one of their retailers. All the big stores purchase directly from distributor without any
wholesaler. #he Beat store ta"es delivery of lays from Adreesia 4 times in a wee". #hey
replaced all the expired products with fresh products. #hey paid in cash on the time of
delivery. #ransportation cost is bear by the distributor.
&argin%
Adreesia enterprises give almost 0H profit margin on sale of lays to #he Best store.
(Appendix A 8)
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<ertica' +on5'icts%
?ery low margin
1ate delivery
9o extra incentives
9o proper action on customer5s complaints
*hortage of some flavors
1. <ery 'o8 margin%
#he best store ($ail road) claim that Adreesia enterprises give very low rate of margin
which is less then 0 H on sales of 0 pac"et of lays 8-g. #he loss of 0 pac"et from a carton
will consider as the loss of whole carton.
2@ (ate de'ivery%
#he best store recently faced the problem of late delivery of lays F*A1# < B1A&2
P)PP).G.
/@ 7o extra incentives%
Adreesia enterprises told us that they provide extra incentives on high sales of lays but
#he Best 3epartmental store claim that they never give extra benefit on high sale.
4@ 7o proper action on customer comp'aints%
Many customers complained about the change in taste of lays and the Best *tore had
conveyed complain to the Adreesia )nterprises but they never ta"e any proper action.
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25
1@ Shortage o5 some 5'avors%
#here is a shortage of lays FMA*A1AG and FBarbeEueG 8-g pac"s in the best till )id.
Examp'e 2%
&onflicts between distributor and wholesalerD
-istri#utorD Adreesia )nterprises
&ivil lines, 7aisalabad
Aho'esa'erD Murshid C 3rin"s
Ihang Ba%ar, 7aisalabad
&urshid B -rin4%
Murshid C 3rin" in Ihang ba%ar is one of the wholesalers of Adreesia. Adreesia's agent delivers
the order of 4:, cartons daily or according to the reEuirements. #ransportation charges are bear
by Adreesia. #heir retailers are not fixed. Many B class shops, street shops and Pan *hops
purchased from them on daily basis. #he expired and damage products are returned bac" to the
distributor. #hey paid in cash on time of delivery.
&argin%
6 H of sale.
(Appendix A :)
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26
<ertica' con5'icts%
1ate delivery
*hortage of some flavors
&ommunication problems
1@ (ate de'ivery%
Murshid g drin"s (the wholesaler) has faced the problem of late delivery of lays from
thier distributer Adreesia )nterprises.
2@ Shortage o5 some 5'avors%
Murshid C 3rin" is facing the shortage problem of 1ays FMA*A1A MC(&G. #he have
to purchase it from FM)#./G 1ahore. And after adding transportation charges the cost
per carton goes high.
/@ +ommunication pro#'em%
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27
(n time of shortage the Adreesia )nterprises ignores Murshid C 3rin"s phone calls. S
+onc'usion%
FMA*A1A MAC(&G lays is specially manufactured for Asian countries. (t has a great
consumption level in 7aisalabad. Adreesia enterprises which is one of the biggest
distributors of 1ays in 7aisalabad is facing the problem of shortage of product. #hat5s
why its wholesalers and retailers are facing that problem too. #he 4
nd
main cause of
conflict is fewer profit margins. Adreesia )nterprises is not giving reasonable profit
margin. #hey are "eeping more margins and offering less. #here wholesalers and retailers
are Euiet satisfied with there delivery system and dealing manners.
!ecommendations%
1. Adreesia )nterprises should purchase more, so that they can distribute more.
2. #hey should purchase more MA*A1A lays from the manufacturer then other
flavors and resolve the shortage problem.
6. #hey should communicate the problems with retailers and distributors, instead of
avoiding them.
4. 9umber of transports should be increased to resolve the late delivery problem.
:. Adreesia )nterprises should increase the profit margin up to some extent.
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;. *ome incentives should be given to wholesalers and retailers on high sales.
Hori=onta' con5'icts in mar4eting channe's o5 (ays Pa4istan
Examp'e% &onflict between distributor and ma$or wholesaler
-istri#utorD Adreesia )nterprises
&ivil lines, 7aisalabad
&a$or 8ho'esa'erD Metro
*argodha road, 7aisalabad
!e ta"e FMetroG and FAdreesia enterprisesG into hori%ontal conflicts because they both
have direct lin" with manufacturer and purchase lays in almost same Euantity. #here is
very less difference in rate of margin which is offered to them by the lays Pa"istan.
Adreesia Enterprises%
!e ta"e into study Adresseia enterprises in 7aisalabad. #hey are one of the biggest
distributors of lays Pa"istan. #hey directly purchased from manufacturer. #hey purchased
in bul" almost 8 containers wee"ly and paid in advance. #he company provides the
transportation facility. After receiving from manufacturer, they distribute lays to lots of
big stores and wholesalers in - ba%ars of 7aisalabad, *argodha road, Mansorabad.
Adreesia )nterprises has fixed wholesalers. #heir biggest wholesaler is in Ihang ba%ar
7aisalabad and #he Best 3epartmental *tore on Iail road is one of the biggest retailers in
7aisalabad.
Page
29
#ransportation cost is bear by the Adressia enterpises and while delivering all the
damages is bear by company. All the expiry products and sales returns send bac" to the
company.
&argin%
#hey received ;H profit margin from the manufacturer.
&etro%
Metro is a well "nown wholesaler brand of Pa"istan. #hey purchase everything in bul"
and sale it at wholesale rate on Euantity demanded by the customer. #heir customer can
be a user, a retailer or even a wholesaler. #hey order lays according to mar"et demand.
*o, metro does not face the shortage and expiry problem in lays. #hey purchase directly
from manufacturer without any intermediary. #hey use credit bases of accounting. #hey
have a very strong computeri%ed system for managing the inventory. An /P1 or /rder
Purposal 1ist per day is generated which is used to estimate the average sale. Metro does
not need to deliver the goods to buyer li"e other distributers of lays.
&argin%
#hey have competitively higher margin than distributors.
(Appendix A ;)
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30

Hori=onta' con5'icts%
3ifference in profit marginD
3ifference in number of wholesalers and retailersD
&ommunication preferences
3ifference in payment methods
*pecial offers
1@ -i55erence in pro5it margin%
Adreesia enterprises claim that Metro5s profit margin is relatively higher then them.
!hereas metro said that they receive less margin then the distributors.
2@ -i55erence in num#er o5 8ho'esa'ers and retai'ers%
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31
Adreesia enterprises have fixed number of wholesalers and retailers. But the number of
metro5s customer can be more or less every month. #hat5s why they can change the
Euantity of order.
3. +ommunication pre5erences%
Adreesia enterprises claim that manufacture communicate with metro more affectively
then them.
4@ -i55erence in payment methods%
Metro can ma"e credit payments but Adreesia ma"e cash payments.
1@ Specia' o55ers%
As manufacture deliver 0
st
to distributors and then to the metro, all the new offers has
introduced by the distributor. And buyer purchased from them if their offer is better then
any one else.
+onc'usion%
Metro is a well "nown brand as compared to Adresia enterprises, that5s why it is easy for
the manufacturer to deal with them. Metro has much trained staff and latest technologies
which ma"e it really easy for manufacturer to deal with them. Adreesia has a fixed share
of 7aisalabad mar"et because their number of wholesalers is fixed. But metro5s share is
not fixed. (t may be less or more.
!ecommendations%
Adreesia enterprises should coordinate their problems with the manufacture more
properly.
Adreesia enterprises should give more profit margin to their buyers then metro.
Page
32
Metro and Adreesia enterprises should not ta"e each other as their competitors
because they have very different mar"et.
Page
33
References:
http://www.google.com.pk/search?
hl=en!=logo"o#"agr$c%lt%re"%n$&ers$t'"#a$sala(a)rl*
http://www.google.com.pk/$mgres?!=logo"o#"la's"pak$stanhl
http://www.google.com.pk/$mgres?!=la's"an)"peps$"pak$stan
http://www.scr$().com/)oc/25521847/+a's,-ak$stan,.esearch,-ro/ect/
http://www.scr$().com/)oc/14254508/pro/ect,report,on,la's,potato,
ch$ps/ http://www.mesmart'.com/2009/04/02/wh',p$g,#at,$s,not,
ment$one),(%t,co)es,are,pr$nte)l/
http://halal$st.wor)press.com/2008/05/12/wh',p$g,#at,$s,not,
ment$one),(%t,co)es,are,pr$nte)/
http://ala$wah.wor)press.com/2009/03/06/p$g,#at,$n,pak$stan$,ch$ps/
0p$cs la's1
http://www.pak#actor.com/la's,ch$ps,e631,an),p$g,#at,m'ster',
sol&e).html/
0cert$#$cate1
http://www.peps$co.com/2ompan'/3%r,4$stor'.html/
5ansoor 6hal$)7 3perar$on 5anager7 589.3
5. .ahell7 :cco%ntant7 :)rees$a 8nterpr$ses
5. ;sman7 9he <est =epartmental >tore
5. ?a)eem7 5%rsh$). @ =r$nks
Page
34
Appendi; < :
Cuestionnaire%
0. How much Euantity of L1aysL you purchasedQ
4. 3id you go directly to the manufacturer for purchasing or some agent do this wor"Q
6. if your product get expire or any harm does due to unfavorable climate then who will be
responsible for the lossQ
8. How much margin do you getQ
:. !hat is your mode of transportationQ
;. 3o you deliver the order to retailer by yourselfQ
=. How much retailer do you haveQ
-. 3o you get delivery of order on timeQ
>. 3o payments get clear on timeQ
0,. !hat is your biggest retailerQ
00. !hat "ind of problems do you face normallyQ
04. 3o you ever change your agentQ
06. After what time period do you place orderQ
08. 3o your retailers are fixQ
0:. How much warehouses do you haveQ
0;. (n case of natural loss do you have insuranceQ
0=. 3o your margin change according to order or is it fixQ
0-. !hat "ind of clashes do you face normallyQ
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35
0>. 3id ever agent create any noise between you and manufacturerQ
Appendi; < 2
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Appendi; < *
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Appendi; < =:
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Appendi; < #
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Appendi; < >
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