Enterprise “to be dying” because of Distribution Channel Conflicts

Distribution channel conflicts are a potential issue that causes businesses to fall into difficult circumstances. This is considered a factor from internal problems of the distribution system. Understanding this conflicts is essential to build a strong distribution systems. So, where distribution channel conflicts come from, how many types and how to prevent them. Let’s learn about this issue with HQsoft.

Cause of Conflicts

Distribution channel conflicts not only appear in large enterprises, but also in small businesses operating under the distribution model, conflicts can occur.

Distribution channel conflicts can be understood as all disputes and disagreements between two or more partners in the system. In which, one partner plays a decisive role, has more benefits than the other partner. This affects the target, profit, and market share of the other partner in the system or among the same level partners in the distribution system.

Distribution channel conflicts can be understood as all disputes and disagreements between two or more partners in the system. In which, one partner plays a decisive role, has more benefits than the other partner. This affects the target, profit, and market share of the other partner in the system or among the same level partners in the distribution system.

In fact, although operating in the same distribution system, each partner has different goals. Differences in perception of problems that arise during operations are considered to be the cause of distribution channel conflicts.

In each distributor, the difference in: regional sales, territory sales, technology, … These are potential factors that enterprises need to keep when building a distribution system. If not handled wisely, it is easy to create conflicts. Because these are indicators that show the role of the partner in the cooperation process. If the difference is too big, they will find themselves not playing an important role. They are not the object of enterprise is interested in investment and development. From there, there will be certain disagreements in the cooperation between the two sides.

A distribution channel conflict occurs where the roles of the channel members are disturbed. At the same time, scarcity of resources and inadequate division are also factors that contribute to conflict. In the system, each partner plays a different role in ensuring the operation process. The disruption of the role is incompatible with the partner’s potential and interests will not guarantee efficiency in the process.

In practice, distribution channel conflicts are not necessarily all negative. There are still conflicts that must exist to promote the system. However, only a few enterprises can control to create the driving force for growth. For the most part, conflicts do signal the system is having problems. Requires enterprises to resolve this conflict to ensure stability and development.

Types of conflicts exist in distribution channels

In the distribution operation model, there exist 3 types of distribution channel conflicts that are both agents for partners to develop, and also a cause of crisis for enterprise if they are not detected and resolved.

1.     Horizontal Conflicts

Horizontal distribution channel conflict is a type of conflict between intermediate partners of the same level in the system. For example, between people dealing in the same goods as: between distributors, between retail stores …

The cause of horizontal conflict often comes from unfair price competition. It can be understood that the selling price policy between two partners on the same side is not the same. In order to attract new customers to achieve higher profits in business. This will cause a conflict between the partners to each other. At the same time, creating conflict in the business.

For long-term, customers will lose confidence in the market prices at different price shops. This is also the reason that many distributors and retailers stop cooperating with suppliers to find new suppliers with better protection policies.

2.     Vertical Conflicts

Vertical distribution channel conflict is a type of conflict that occurs between members at different levels in the system. Typically, the manufacturer breaks down the commodity supply chain to the system. This is a conflict between the distributor and the manufacturer. When the manufacturer no longer uses a distributor to consume the product. Will disrupt the supply chain of the distribution system.

Essentially, the producer will directly run the business again. Instead, it is necessary to rely on the business capabilities of the distribution system to sell products. This, seriously affects the business of the distributor. When their roles in the supply chain can be eliminated, interests and interests may be affected.

3.     Multi-channel Conflicts

Multichannel collisions are conflicts that occur between two or more channels in a system. Based on product lines and products, enterprises choose many different distribution channels: direct, indirect or modern distribution channels.

However, many enterprises proceed to build an integrated channel system. In order to fully exploit, find development forces and market gaps. This will be good if the enterprises can balance the development of channels. Otherwise, distribution channel conflicts between channels will occur during operation.

These conflicts often arise from uneven pricing, discount, product, … policies between channels. Make the distributor not interested in this cooperation with enterprises to develop the business. Hence, leading to distribution channel conflicts. With multichannel conflicts it will seriously affect the development and sustainability of the system.

Preventive Methods

To prevent distribution channel conflicts you need to follow a certain procedure. This process consists of 3 steps and is quite simple: detect the conflict, find the cause and resolve it.

Accordingly, some methods you can take to prevent conflicts are:

• In the process of selecting cooperative partners, it is necessary to come up with a common standard so that the partners can get along well in a win – win relationship.
• Determine channel development strategy to make appropriate resource allocation policy.
• Recognize and reward fair contributions between different partners. To create confidence in the development policy of the business.
• Quickly raise problems when you see signs of irresponsibility in achieving common goals.
• Always find out about your partner’s wishes and their possible options.
• Information should be communicated early and clearly and accurately to all partners.
• Requires partners to exchange information early with the business.
• Using uniform pricing policy to create fair competition between partners in the same system.

DMS solutions are currently an effective tool for businesses to manage their distribution systems. Through it, enterprises can easily manage price policies, well manage inventories to promptly supply goods, care policies and criteria suitable for each partner. Specific data aggregated from real activities. This will help businesses have an overview to prevent the causes of distribution channel conflicts taking place.

Distribution channel conflicts are the intrinsic cause of the system’s crisis. This stems from many different reasons: perceptions, roles, goals of partners, … that create different types of conflict. To grow the business must follow up, learn partners to detect conflicts. Provide solutions to solve the problem. Avoid the case of putting the business into the word development to “to be dying” in the market.