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Channel Dynamics 249


challenge is not to eliminate conflict but to manage it better. There are several mech-
anisms for effective conflict management:^19


➤ Adoption of superordinate goals.Channel members come to an agreement on the
fundamental goal they are jointly seeking, whether it is survival, market share, high
quality, or customer satisfaction. They usually do this when the channel faces an
outside threat, such as a more efficient competing channel, an adverse piece of
legislation, or a shift in consumer desires.
➤ Exchange persons between channel levels.General Motors executives might work for a
short time in some dealerships, and some dealers might work in GM’s dealer policy
department, as a way of helping participants appreciate each other’s viewpoint.
➤ Cooptation.Cooptation is an effort by one organization to win the support of the
leaders of another organization by including them in advisory councils, boards of
directors, trade associations, and the like. As long as the initiating organization treats
the leaders seriously and listens to their opinions, cooptation can reduce conflict.
➤ Diplomacy, mediation, arbitration for chronic or acute conflict. Diplomacytakes place when
each side sends a person or group to meet with its counterpart to resolve the
conflict.Mediationmeans having a skilled, neutral third party reconcile the two
parties’ interests. Arbitrationoccurs when the two parties agree to present their
arguments to an arbitrator and accept the arbitration decision.

Legal and Ethical Issues in Channel Relations


For the most part, companies are legally free to develop whatever channel arrange-
ments suit them. In fact, the law seeks to prevent companies from using exclusionary
tactics that might keep competitors from using a channel. Here we briefly consider the
legality of certain practices, including exclusive dealing, exclusive territories, tying
agreements, and dealers’ rights.


➤ Exclusive dealing.A strategy in which the seller allows only certain outlets to carry its
products is called exclusive distribution,and when the seller requires that these
dealers not handle competitors’ products, this is called exclusive dealing.Both parties
benefit from exclusive arrangements: The seller obtains more loyal and dependable
outlets, and the dealers obtain a steady source of supply of special products and
stronger seller support. Exclusive arrangements are legal as long as (1) they do not
substantially lessen competition or tend to create a monopoly, and (2) both parties
have voluntarily entered into the agreement.
➤ Exclusive territories.Exclusive dealing often includes exclusive territorial agreements.
The producer may agree not to sell to other dealers in a given area, or the dealer
may agree to sell only in its own territory. The first practice increases dealer
enthusiasm and commitment and is perfectly legal—a seller has no legal obligation
to sell through more outlets than it wishes. The second practice, whereby the
producer tries to keep a dealer from selling outside its territory, is a major legal issue.
➤ Tying agreements.The producer of a strong brand sometimes sells it to dealers only if
they will take some or all of the rest of the line. This practice is called full-line forcing.
Such tying agreements are not necessarily illegal, but they do violate U.S. law if they
tend to lessen competition substantially.
➤ Dealers’ rights.Producers are free to select their dealers, but their right to terminate
dealers is somewhat restricted. In general, sellers can drop dealers “for cause.” But
they cannot drop dealers if, for example, the dealers refuse to cooperate in a
doubtful legal arrangement, such as exclusive dealing or tying agreements.
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