Strategic Marketing: Planning and Control, Third Edition

Political pressures also build up in the DMU because individuals look for
different attributes from a particular product. This is partly based on the
operational needs of their department. Individuals also pursue their own
self-interest and are motivated by the formal rewards available to them.
Individuals in different areas of the company may be given incentives in
different ways. Buyers may be evaluated and/or given incentives to save
the organisation money. Production managers may be given quality and
output targets. This can lead to strange effects. Bonoma (1982) talks of an
organisation that reduced its list price to well under its competitors, but
gave only small discounts off this list price. All the competitors charged
higher prices but gave larger discounts. Even though the company had
lower prices organisations favoured the competitors. The main reason for
this turned out to be that the buyers were evaluated and given incentives
based on the price concessions they were able to obtain during negoti-
ations rather than on the end price paid.
Figure 4.17 shows how each unit may have its own set of rewards.
These disparate incentives can also lead to conflict within the DMU.
Buyers may feel they cannot save money because the production engin-
eers are setting technical specifications on a product that are too high.
Alternatively production engineers may not be able to reach their output
targets because the buyer has bought a cheaper product from a supplier
who has less dependable delivery times.

Segmentation 75

of finance

department

of production

function

of accounting

function

by others in

the company

of legal

function

of engineering

function

of marketing

function

of purchasing

function

by finance

personnel

by production

personnel

by accounting

personnel

by others in

the company

by legal

personnel

by engineering

personnel

by marketing

personnel

by purchasing

personnel

Figure 4.17
Rewards/incentives as a source of conflict in organisational DMUs (Source: Adapted from
Morris, 1988)