Channel Conflict And Governance Under Economic Globalization

With the emergence of economic globalization and integration, there is a trend of homogenization of products, prices, promotions and services. The focus of enterprises is no longer to produce better products, but to improve the distribution channels to reduce costs and achieve benefits.

As a result, the competition in the marketing channel of enterprises is becoming more and more intense. There are more and more patterns.

However, no matter how well the channel is designed and managed, competition and conflict between channels always exist objectively.

For this reason, the author categorized the current channel conflicts, discussed the causes of the conflicts, and put forward some constructive countermeasures to promote their healthy and sustainable development.

First, the motivation analysis of channel conflict.

Generally speaking, channel conflict can be divided into three types: vertical channel conflict, multi-channel conflict and horizontal channel conflict.

Vertical channel conflict refers to the conflict between different channel members in the same channel.

Multi channel conflict is a conflict between a manufacturer who has established two or more than two channels to sell his products to the same market.

Horizontal channel conflict refers to the conflict between channel members at the same level in the channel.

There are always some conflicts in the design and management of channels. The most fundamental reason is that the interests of independent business entities can never be consistent.

The author believes that there are fundamental reasons and direct causes for channel conflict.

(1) the root cause of channel conflict

1, the objectives of the two sides are inconsistent.

If suppliers want to sell at a high price and tend to cash pactions, buyers should pay low prices and demand preferential commercial credit.

One of the main reasons for the contradiction is that the production enterprises have different goals with the middlemen, and the production enterprises want to occupy a larger market and gain more sales growth and profits. But most retailers, especially small retailers, want to maintain a comfortable position in the local market, that is, when sales and profits reach a satisfactory level, they are satisfied with the comfortable life. The manufacturer wants the middlemen to sell their products only, but the middlemen do not care about which brand to sell if they have a sale. The manufacturers want the middleman to give the discount to the buyer, while the middleman would rather leave the discount to himself. The production enterprise wants the middleman to advertise its brand, and the middleman wants the production enterprise to bear the advertising cost.

At the same time, every member of the channel wants his stock to be less, and the other side keeps more stock.

2, the tasks and rights of channel members are not clear.

For example, some companies supply large customers by their own sales teams, and at the same time lead to many conflicts.

Conflicts may also arise from market perception differences among channel members.

For example, manufacturers predict future economic prospects, and their authorized dealers are also trying to sell to big customers.

The ambiguity and confusion of tasks and rights such as regional boundary and sales credit will lead to many conflicts.

Conflicts may also arise from market perception differences among channel members.

For example, production companies predict good economic prospects in the near future and require higher inventory levels of dealers. Dealers may think that the economic outlook is not optimistic, and they do not want to keep more inventory.

3, middlemen rely heavily on production enterprises.

For example, the interests and development prospects of the exclusive dealers of automobile manufacturers are directly affected by the product design and pricing decisions of manufacturers, which is also a hidden danger of conflict.

All of these may make the relationship between channel members less strained due to lack of communication.

(two) direct causes of channel conflict

1, price reasons

The spread of wholesale prices at all levels is often the cause of channel conflict.

Manufacturers often complain that the sales price of distributors is too high or too low, thereby affecting the image and location of their products, while distributors complain that their discount is too low and not profitable.

2. Inventory level

Manufacturers and distributors want to keep their inventory level at the lowest level for their own economic benefits.

And the low inventory level will lead to distributors unable to provide products to users in time, causing sales losses and even turning users to competitors.

At the same time, the low inventory level of distributors often leads to high inventory level of manufacturers, thereby affecting the economic efficiency of manufacturers.

In addition, excessive inventory will lead to obsolete risks.

Therefore, inventory level is also easy to generate channel conflict.

3. Reasons for big customers

The continuous contradiction between manufacturers and distributors is the direct purchase and sale relationship between manufacturers and end-users. These direct users are usually large users. They are "manufacturers prefer to directly trade and leave the remaining market areas to customers of channel intermediaries (usually because they have large purchases or special service requirements)".

Because the 80 / 20 rule of market demand for industrial products is very obvious, distributors worry that their big customers will directly threaten manufacturers to buy them.

4, compete for each other's funds

The manufacturer wants the distributor to pay first and then deliver the goods (such as Baosteel), while the distributor hopes to deliver the goods first and then pay later.

Especially in the case of uncertain market demand, distributors want to use consignment and other means, that is, after goods are sold, they will be paid again.

This way increased the capital occupation of manufacturers and increased their financial expenses.

5. Technical consultation and service

Distributors can not provide good technical advice and services, and are often used by manufacturers as an important reason for direct sales.

For some users, even some products with relatively fixed technical standards still need technical advice to select products that are most suitable for the performance of their products to meet the needs of the production process.

6, distributors manage competitors' products.

Manufacturers obviously do not want his distributors to run the same product line of competing enterprises simultaneously.

Especially in the current industrial market, the loyalty of users to brand is not high. The second product line will bring greater competition pressure to manufacturers.

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