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Conflicts in Channels of Distribution;  Causes and
Remedies

A Case Study on Mobinil

By

Mohamed Antar ElDessouky

Supervi...
The Thesis is displayed at the library of the Regional IT Institute to optimize the added-value
to the reader and to lever...
ACKNOWLEDGEMENT

In this short preface I cannot possibly acknowledge every one by name.  first and foremost
however I am t...
ABSTRACT

I-low to design,  develop,  and maintain effective relationships among channel members in a multi
channel sales ...
TABLE OF CONTENT

Copyright Page . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ......
2.1.2.4 Channel Levels . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ....
3.4.4 Rmarrb / lutmrpliom .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . .  . ....
LIST OF FIGURES

Figure 1.1: Research theoretical framework

Figure 2.1 General Considerations in Channel planning
Figure ...
LIST OF TABLES

Table 2.1: Marketing functions performed in channels of distribution

(‘Ma/ Jamar!  E/ Dtrsarué},  MIM-RJT...
LIST OF ABBREVIATIONS

B2B2C:  Business to Business to customer or consumer
B2B:  Business to Business. 

B2C:  Business t...
CHAPTER 1: INTRODUCTION
1.1 An Overview

'Channel conflict is not a new concept.  It has been frustrating managers in the ...
1.2 PROBLEM DEFINITION

It has become conventional in today's business that firms go to the market via multiple channels; 
...
1.4 THEORETICAL FRAMEWORK
Kotler (2000) identified the causes of channel conflict to be: 

Goal incompatibility,  unclear ru...
0 INDEP VAR 2: Defining clear and distinct channel roles and functional areas

Specifying tasks and roles to be carried out...
1.5 RESEARCH QUESTIONS
1.5.1 Major Research Question: 

(MjRQ) what are the factors that lead to dysfunctional conflict or ...
1.7 THESIS STRUCTURE

The thesis is structured in five chapters,  chapter one is an introduction about the problem
definiti...
CHAPTER 2: LITERATURE REVIEW

Introduction

In this chapter we will be exploring the areas of sales,  supply chain,  distr...
Products and services don’t typically sell themselves.  At a very basic level,  sales happen when the
organization: 

1. M...
2.1.2.2 Efficient Channel: 

'ls the one that delivers the product when and where it is wanted at a minimum total cost. ' ...
While the intermediaries perform different marketing functions to a varying degree see Table 2.1

  
 
 
 
    
 

   
  
...
2.1.2.5 Advantages of Direct Selling. 

In Agrawal and Tsay (2002) study,  they have set forth the following motivations, ...
B.  Establishing objectives and constraints
Channel objectives should be stated in terms of targeted renrire output level ...
2.1.4 Managing Channels of Distributions (Behavioral Perspective)
Once the seller has decided on the type of channel struc...
1. Customer characteristics

a.  Number

b.  Geographic Dispersion

1: Preferred channels and outlets for purchase
:1. Pur...
Intensity of Distribution

1N. rr. Ns1;vE SELECTIVE EXCLUSINE
Distribution Distribution Distribution
T-lnough»-every Throu...
D- Clmime/ flex1'biIi9I (adaptability)

Ability of the manufacturer to adapt to the changing conditions

E. g. Long term ex...
0 Eapefipower
When the manufacturer has special knowledge that the intermediary value.  The manufacturer
should continue to...
0 Innovative distribution channel emerge
0 The distribution channel is not working as planned

0 T/ Je Pm! /I/ rt move:  i...
In VMS 'producer,  vholesaler(s) and retailer(s) act as a mzgfied gate»/ . One channel member,  the

r/ Jarmel captain,  ow...
Wholesalers are usually used by producers to reach large markets and extend geographical

COVCtilgC. 

Wal~Mart. s recent ...
Tbim’:  excess manufacturing capacity can be better utilized with additional outlets when existing
channels are over-suppl...
3 paltenu

Channel conflicts typically assume three patterns: 

' Direct sales force versus dealer or distributor

The mos...
One way to manage conflict is to adopt a mper ordinate goal that all channel members are jointly
seeking e. g. survival,  m...
Improved communication indirectly reduces the level of conflict through trust.  Firms that

have ‘developed strong trust i...
2.2.5 Channel Synergy: 

While observing crw. r-c/ )umte/  tmsionr,  Van Bitgelen,  De jong,  and De Ruyter (2006) and Nes...
* I/ zmiu:  is conceptualized as a characteristic that affects a consumer’s willingness to try out new
self-service techno...
Icgtleiztiul di. rtri/ mtion

The adoption of products as they become more widely available across distribution channels
(...
The thesis focused on Determining Causes of Channel Conflict,  Assessing the Seriousness of
Channel Conflict,  Approaches t...
2.4.2 The Sales Division and Distribution channels

The sales division in Mobinil is a multi-channel system of distributio...
CHAPTER 3: THEORETICAL FRAMEWORK & RESEARCH

DESIGN
3.1 INTRODUCTION

It has become customary nowadays for firms to go to ...
3.4 THEORETICAL FRAMEWORK
The researcher used a combination of factors adopted from the literature by (Kotler,  2000), 
(G...
0 INDEP VAR 3: Channel Power

The degree and type of influence that the channel captain has over other channel members migh...
3.4.5 Research Limitations

v‘ L1: The Findings Are Relevant To Mobinil As A Mobile Phone Operator Working

In Egypt. 
Alt...
I-Iaving incompatible goals is known -in the literature-to be a major source of channel conflict so
this question is aimin...
0 (MRQ 6) Is there is a relationship between the prices of Mobinil products and having

conflict between Mobinil Multi sale...
3.6.4 Data Collection Instrument and Source (Interview Questions)

We will be using three major sources for outlining the ...
CHAPTER 4: DATA ANALYSIS,  FINDINGS AND

DISCUSSION
4.1 DESCRIPTIVE ANALYSIS

Re/ iabi/ it} refers to whether the findings...
During all interviews,  taking notes was the appropriate approach whereby the respondents were
at ease and the answers was...
4.2 QUALITATIVE DATA ANALYSIS

After conducting this research and the subsequent interviews it has been found that the mos...
I Repackaging and re launching the product was also suggested to be healthy for the

product -in general- from the custome...
segments in different channels.  This approach has two benefits 1- better segmenting the
market highlighting and stressing ...
CHAPTER 5: CONCLUSION,  RECOMMENDATIONS, 

AND FURTHER RESEARCH

5.1 CONCLUSION
Although using a Multi channel marketing i...
' One distribution channel versus another

The complementary department contributed to some sort of negative competition ~...
5.2 RECOMMENDATIONS

After drafting this research,  the researcher recommends the following as ways to manage conflict: 

...
5- Follow Up on The Roles Practices And Immediate Response To Channels Feedback. 
There should be a continuous follow up o...
5.3 FUTURE WORK

 Applying Different Theories for examining consumer behavior in multi-channel

environments
The customer ...
Conflicts in channels of distribution; causes & remedies
Conflicts in channels of distribution; causes & remedies
Conflicts in channels of distribution; causes & remedies
Conflicts in channels of distribution; causes & remedies
Conflicts in channels of distribution; causes & remedies
Conflicts in channels of distribution; causes & remedies
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Conflicts in channels of distribution; causes & remedies

  1. 1. Conflicts in Channels of Distribution; Causes and Remedies A Case Study on Mobinil By Mohamed Antar ElDessouky Supervised by Prof. Dr. Ammar S. Hamed. This paper was submitted in partial fulfillment of the Requirements for the degree of MASTER OF BUSINESS ADMINISTRATION (MBA) at Mm1stricht School of l/ Ianagement, MSM Maztstricht, The Netherlands Mztastricht School of Management P. O. Box 1203 6201 BE l[:1:lSt_[lCl‘lt The Netherlands October 2008
  2. 2. The Thesis is displayed at the library of the Regional IT Institute to optimize the added-value to the reader and to leverage his/ her knowledge in the subject covered. F or further information about the Theses. their contents, value, grade and overall quality you are advised to contact the Academic Degree Programs Manager, Copyright © Maastricht School of Management and Regional IT Institute, 2008. All rights reserved. No part of this Thesis may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical photocopying, recording or otherwise without the prior permission in written of Maastricht School of Management and / or the Regional IT Institute. ©1 ‘Io/ /amerl E / D!. I'J‘0lIk_}’, i-l. tM-l{lTl»Cuim OnImaIlvPIogram,20()8
  3. 3. ACKNOWLEDGEMENT In this short preface I cannot possibly acknowledge every one by name. first and foremost however I am totally indebted to God, My appreciation and thanks goes to my lovely and supportive family (father, mother, sister, brother, wife and daughter), many thanks to my Research Assistant Mr. Yehia Kamel and my supervisor Professor Dr. Arnmar Hamed who provided a detailed reviews and valuable contributions to my thesis and showed a definite understanding, I also want to acknowledge all my instructors from MSM 8: Regional IT Institute- Egypt. (RITI) who enriched our knowledge and contributed to the accumulated learning that brought this work to life, I would also like to thank Mobinil family for financial, time and information support and a special dedication to all interview respondents for their valuable contributions. ii C‘l’lfl/ }llIII! (/ E / Dr. r.m1t/ (2 J, M n'l ~ Rl T l -Cairo Outrrar/1Pm_grwz/ ,20()8
  4. 4. ABSTRACT I-low to design, develop, and maintain effective relationships among channel members in a multi channel sales organization to achieve sustainable competitive advantage is a very challenging issue. It has become normal for firms to go to market via multiple channels. Yet, few firms understand how to coordinate a multi-channel system. Hence, they end up competing with themselves, creating opportunities for their competitors. (John H. Loudon, 2005) Conflict can be positive in form of healthy competition and can deviate a little to turn to be dysfunctional so the thesis aims to identify what are the factors that may cause channel conflict to be avoided and managed and what are the factors that enhance integration between Mobinil sales channels to be stressed. The thesis is a case study on the Egyptian Company for Mobile Services (ECMS) —Mobinil- (the 1" mobile operator in Egypt) and the researcher conducted semi structured interviews with Mobinil sales channels senior management as the data collection method. The research indicated that minor conflict issues may arise during operation between sales channel, it is expected, but immediate corrective actions are taken in order to eliminate these issues, the major causes of harmony between channels are, defining a clear and distinct roles and functional areas for each channel, having a mature and high degree of communication, having a channel captain (in our case the operator or the service provider-Mobinil-) who have a channel power over all channels and channel members in order to control the price and facilitate communication. It is also noted that the use of different product bundles in different channels is one of the main factors that decrease conflict and enhance cooperation and integration between channels. Keywords Supply chain, distribution channels, marketing channels, channel relationship, channel conflict, channel design, Channel leader or captain, dual & multiple channels, brand equity, brand image, exclusive distribution, selective distribution, excessive distribution, wholesalers, retailers, distributor, franchising, and point of sale. iii ©: 'loba/ m'1/ E/ Dena/1.4:)‘, il IIM -Rl'l‘l-Cain; O/1tm1t'bPm_gram,2ll08 IS
  5. 5. TABLE OF CONTENT Copyright Page . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .i Acknowledgment . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . ii Abstract . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . . List of Figures . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . iv List of Tables . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .v List ofAbbteviations . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . vi CHAPTER 1: INTRODUCTION . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . 1 1.1 An Overview . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . . 1 1.2 Problem Definition . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. 2 1.3 Research Objective . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .2 1.4 Theoretical Framework . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .3 1.4.1 Dependent V ariab/ cs . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . ..3 1 . -1.2 I mlepclrdenl V aria/1/ex . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .3 1.4.3 Morleraling V an}1l7/at . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .4 1.4.4 Rm-uni) / Immzpticms . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .4 1.4.5 Rmarrb ljmilaliam . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..4 1.5 Research Questions . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .5 1.5.1 Major Rmarr/1,Qm'. r!ion . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .5 1.5.2 Minor Rueun‘/1 Question: .. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .5 1.6 Research Methodology . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .5 1.6.1 R: Jmn‘I) Dpe . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . .5 1.6.2 . S'amp/ iII_g . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . .5 1.6.3 Data / lIlrI_/ )'Ji5ll'1t'I/ lad . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . .5 1.7 Thesis Structure . ... ... ... ... . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .6 CHAPTER 2: LITERATURE REVIEW . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..7 2.1 Channels of Distribution . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .7 2.1.1 Di: In'/ mlio/ I. .5}: /:1. and Strpp/ y Clmin . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..7 2.1.2 ll»-lazrkzliug Cbmmc/ J. Trmle (. 'I; ann: l.t or Dislrilmlian Cluume/1 . ... ... ... ... ... ... ... ... ... ... ... ... ... . .8 2.1.2.1 Distribution channels . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..8 2.1.2.2 Efficient Channel . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .9 2.1.2.3 Channel Functions . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..9 @Mo/ ;a»Ie1/ E/ Dmauigg‘, lbuI-RITI-Cldm O/ tlrem‘/1Pm‘grum2()03
  6. 6. 2.1.2.4 Channel Levels . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . .10 2.1.2.5 Advantages of Direct Selling . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .1] 2.1.3 Cbannel Derign Dea'. n'on. r . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..11 2.1.4 Managing C/ Janna/1 ofDi. r!n1mIion. r (Bebaniom/ peripectiw) . ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .13 2.1.4.1 Selection of Distribution Channels . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .13 2.1.4.2 Training Channel Members . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .16 2.1.4.3 Motivating Channel Members . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .16 2.1 .4.4 Evaluating Channel Members . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .17 2.1.4.5 Modifying Channel Arrangements . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..17 2.1.5 Clxmnel Djrlamiu . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .18 2.1.5.1 Vertical Marketing Systems (VMS) . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .1B 2.1.5.2 Horizontal Marketing Systems . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .20 2.1.5.3 Multi-Channel Marketing Systems . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .20 2.2 Channel Conflict . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .21 2.2.1 Tjper qfCorg/ Iir! and Competition . ... ... ... ... ... ... ... ... ... . . . . ... ... ... ... ... ... ... ... ... ... ... ... ..21 2.2.2 Came: q/ 'CI)annel Can/ lie! .. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .22 2.2.3 Managing Can/ Iiel . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .22 2.2.4 C Iuumel Dedrion Man-i. ' . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..24 2.2.5 Channel Sjnergy . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..25 2.2.6 Diflén. -nl T/ Jeorierjbr e. ‘arm‘nin_g mnrunn-r be/ Jznrior in nwllliwlmnnel €IlI’1I'DIlIIl(II/ J‘ . ... ... ... ... ... ... .. . .25 2.2. 7 Clunnel Swilaizing and 4'/ mnnel can/ Iirl . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..26 2.3 Similar Relevant Cases . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..27 2.4 The Case of Mobinil . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .28 2.4.1 Campary Pmji/ e . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . .28 2.4.2 TI): Sn/ er DiI'i. w'on and Dirlfilm/ ion r/ mnnclr . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .29 CHAPTER 3: THEORETICAL FRAMEWORK & RESEARCH DESIGN . ... ... ... .. . .30 3.1 Introduction . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .30 3.2 Problem Statement . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . ... ... ... .. . .30 3.3 Research Objective . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. }0 3.4 Theoretical Framework . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .31 3.4.1 Dcpenzlenl I ': In'u/ I/c. r . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .31 3.4.2 I/ Idepcmlenl 1- ’m1'u/ I/as . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..31 3.4.3 11-latlernlirlg I ’m1‘n/ I/es’ . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .32 1i“: ~1a/ raIne1/ E/ DwnuLj ) , ll 15.1 1 - RIT I -Cairn Oulmu/ /Pm, grum. ’008
  7. 7. 3.4.4 Rmarrb / lutmrpliom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 3.4.5 Rerrarrli ljrni/ alien: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ... ... ... ... ... ... ... . . .33 3.5 Research Questions and Hypotheses . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .33 3.5.1 Major RertuIrl1_Q: /eition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..33 3.5.2 Minor Reremr/1_Que: lian: .. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..33 3.6 Research Methodology . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .35 3.6.1 Rerearrb T)pe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..35 3.6.2 San/ p/ing Met/ tad: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..35 3.6.3 Data / Ina. /yri: Met/ zodi . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . .35 3.6.4 Data C 0// erlion lnrtn/ men! and Satin‘: ln! enriew. r_Qne. rIian. r . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..36 CHAPTER 4: DATA ANALYSIS, FINDINGS AND DISCUSSION . ... ... ... ... ... ... ... ..37 4.1 Descriptive Analysis . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. . .37 4.2 Qualitative Data Analysis . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..39 4.3 Discussion and Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 CHAPTER 5: CONCLUSION, RECOMMENDATIONS 8: FURTHER RESEARCH. . .42 5.1 Conclusion . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. -42 5.2 Recommendations . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..44 5.3 Future Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . REFERENCES . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .47 APPENDIX A: INTERVIEW QUESTIONS . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .49 APPENDIX B: GLOSSARY . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... . . .5! BIOGRAPHY . ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ..52 E, ’ Mn/ Junml E/ De: .ron. €)'. illnll-RITI -Cain; OI/ trrm'/ .tPm‘grmn2()()S’
  8. 8. LIST OF FIGURES Figure 1.1: Research theoretical framework Figure 2.1 General Considerations in Channel planning Figure 2.2 Intensity of Distribution Figure 2.3 Channel decision Matrix Figure 3.1: Research theoretical framework 1'' . -Ia/ Jwrml E / De. r.raIr»€), MIM-R1 TI -Cam; Outmlr/ )I’m_grum,2008 2,-
  9. 9. LIST OF TABLES Table 2.1: Marketing functions performed in channels of distribution (‘Ma/ Jamar! E/ Dtrsarué}, MIM-RJTI-Cuim Outrrm‘/ ;Pm‘gram.2()0S
  10. 10. LIST OF ABBREVIATIONS B2B2C: Business to Business to customer or consumer B2B: Business to Business. B2C: Business to consumer or customer. VARS: Value Added Resellers. 9M0/Ia»/ ell EfDe. t.ra1rk; y. IWIIW -KIT I -Caim Outmu-/ ';Pm‘gram,2003 vi
  11. 11. CHAPTER 1: INTRODUCTION 1.1 An Overview 'Channel conflict is not a new concept. It has been frustrating managers in the business world for many years. It has always accompanied the development of new marketing channels, such as the introduction of factory outlet and discount stores in the 19805 (Marta 6: Mehta 2001)’ (Driver & Evans, 2004). ‘Channel conflict emerges as the market evolves and business strategies change. “The primary motivations for supplier firms establishing multi~channel arrangements are the desire to increase market share and to reduce costs. Firms are attempting to reconstruct the supply chain and make it more efficient, a process that will disrupt traditional channels, resulting in conflict both internally among the supplier’s channel managers and externally with distribution partners. ” More often than not, objectives among channels cannot be achieved concurrently. If one channel is succeeding, it is likely at the expense of another (Hogan, Webb 2002). This is the norm in multi» channel business strategies. A diverse channel strategy is necessary, however, for survival in the marketplace. ’ Ibid The research aims to validate what may be considered causes of conflict between distribution channels in the Egyptian Company for Mobile Services (Mobinil) and if exists how it can be managed. The research revealed that Minor conflict may exist between Sales channels in any organization as it is the nature of life "having different view points" but improved communication is the key word for better harmony between channels, however conflict may become dangerous to the organization if the conflict issues were not dealt with immediately in a proper way, hence communication is very important between channels and B2B2C (i. e. to the end user) if the brand image and identity is to be sustained. Synergy between channels is the role of the operator as a channel captain by setting clear channel strategy that provides better market segmentation and makes the coverage role of each channel as a su lementa ' or com lementa ‘ to each other. PP 1') P 1’) It is also the channels leader role to define the level of competition between channels and the rules for this competition and corrective actions if needed. ‘C . -I 0/. -:1/rm! E / Dr. r.rumi_: )', 4'l. rM - RIT[~( .1u'mO/ tlrruc‘/ Al’m‘gr¢m/ .2008 1
  12. 12. 1.2 PROBLEM DEFINITION It has become conventional in today's business that firms go to the market via multiple channels; however the introduction of new channels comes at the expense of conflict. And few firms understand how to coordinate these between these channels in order not to end up competing with each other and leaving place for the competitors to take part of their market share. The main problem of this research is the lack of knowledge in identifying what are the factors that may cause channel conflict to be avoided and what are the factors that enhance integration between Mobinil sales channels to focus on. 1.3 RESEARCH OBJECTIVE The purpose of this research is to Analyze the role of Mobinil Multi-channel system of sales distribution and hov to achieve a strategic advantage by enhancing harmony between sales channels and efficiently and effectively transmitting Mobinil products and services to the point of service whether B2B or BZC. I0 (I21 la/ umml E/ De: :oIr. l;y, xlI. ri'I -RI 'l '1 -CairvOu/ mu’/ ;Pm_grum, .?008
  13. 13. 1.4 THEORETICAL FRAMEWORK Kotler (2000) identified the causes of channel conflict to be: Goal incompatibility, unclear ruler and rights, difference in perception (i. e. mmrmmimiiart), product pricing decisions. Gensler, Dekimpeb, Skierac, (2004), indicated that it is the role of the channel captain with his rbamw/ power to design the channels assign different functional areas and to have a great role in directing channel switching behavior, hence leading to more harmony. The use of djfllvrrztpmdml uerriom is considered as a one factor to manage conflict or a remedy to conflict and induces channel harmony (Goldkuhl, 2005) These causes are adopted and adapted as in the following framework: - Goal compatibility - Defining clear and distinct channel roles and functional areas - Channel power - Degree of communication - Use of different Product versions. 0 Channels harmony or conflict Figure 1.1: Research Theoretical Framework 1.4.1 Dependent Variables 0 DEP "'. ~R 1: Channels conflict or harmony The degree of conflict of interest or collaboration between different channels. 1.4.2 Independent Variables I INDEP VAR 1: Goal compatibility Compatible and non contradictory channel goals set with an eye on the overall company strategy and interest. L M 0/111/)! !!’ E / Drrraméy, 1l'I. It"[ - RITIV CuimO/ I/mu‘/1Pmgrwz/2008 3
  14. 14. 0 INDEP VAR 2: Defining clear and distinct channel roles and functional areas Specifying tasks and roles to be carried out by each channel and assigning a specific market segment for each channel to function within. 0 INDEP VAR 3: Channel power The degree and type of influence that the channel captain has over other channel members. 0 INDEP VAR 4: Degree of communication The frequency of sharing useful Information in a timely manner between channels and within the same channel. 0 INDEP VAR 5: Use of different product versions The use of different products or product bundles with different channels. 1.4.3 Moderating Variables 0 MOD VAR 1: Price. The price of the products or services set by each channel to the end customer. 1.4.4 Research Assumptions 0 A1: A relationship exists between the variables 0 A2: When studying the relationship between any tvo variables, other factors relationships are held constant 0 A3: The Decision on selecting and designing the sales channels is out of the research SCOPC. 1.4.5 Research Limitations 0 L1: The findings are relevant to Mobini. l as a mobile phone operator working in Egypt. 0 L2: The research is limited to the producer side management perspective. I L3: The research is limited to the variables mentioned in the theoretical framework. it Mo/ mmezl EIDmrml: ), Mn'l-RITIACuim0I/ /mu‘bPm_gruw,2003 4
  15. 15. 1.5 RESEARCH QUESTIONS 1.5.1 Major Research Question: (MjRQ) what are the factors that lead to dysfunctional conflict or harmony between Mobinil sales channels? 1.5.2 Minor Research Questions: (MRQ1) Is there a relationship between having compatible goals between mobinil sales channels and having Channels conflict or harmony? (MRQ2) Is there is a relationship between Defining channel roles and functional areas and having Channels conflict or harmony? C (MRQ3) Is there is a relationship between channel power and having Channels conflict or harmony? (MRQ 4) Is there is a relationship between the degree of communication between Mobinil Sales Channels and having Channels conflict or harmony? (MRQ 5) Is there is a relationship between using differing product versions for different channels and having Channels conflict or harmony? C (MRQ 6) Is there is a relationship between the prices of Mobinil products and having Channels conflict or harmony? 1.6 RESEARCH METHODOLOGY 1.6.1 Research Type 0 Paradigm: Qualitative 0 Purpose: Descriptive / analytical 0 Outcomes: Applied 0 Logic: Deductive 0 Process: Qualitative 1.6.2 Sampling The interviews were conducted with 7 managers representing the whole population of Mobinil Sales Channels Senior Management. 1.1: ©MaI. mmcr/ E/ Demmlzy, 1W. f1l'l-R] Tl -Cam: OII! reurbPrqgraIn,2008
  16. 16. 1.7 THESIS STRUCTURE The thesis is structured in five chapters, chapter one is an introduction about the problem definition, the objective of the research, the theoretical framework, the research questions and the methodology, While chapter two is for the literature review, chapter three is about the theoretical framework and the methodology where the development of data collection instruments occur, chapter four is assigned for the data collection and analysis and findings and the last chapter -chapter five- is where the conclusion, recommendations and suggested future work are made. C il'l0/mIm'(/ E/ Dmank}, Mnll ~RITI-CuirnOIrtm1d1Pm_grmu.2008 6
  17. 17. CHAPTER 2: LITERATURE REVIEW Introduction In this chapter we will be exploring the areas of sales, supply chain, distribution, marketing channels, channel functions, levels and types and how to design, select, train, motivate channels then channel conflict, co operation and competition, the conflict types, causes of conflict and hov to manage it is also researched. Closing the chapter with the global and local case that we will use. 2.1 CHANNELS OF DISTRIBUTION 2.1.1 Distribution, Sales, and Supply Chain C Direct Sales Bottom line success in business hinges on sales execution. Salespeople are the primary source of revenue and the major link to customers. With this dual role, the sales force will need to be developed and supported. Companies should make sure to keep them updated on company and industry information. Help them see customer satisfaction as a key goal. The salespeople are the ones who are building the brand and contributing to its visibility. (Kauffman, 2006) C‘ Distribution ‘The word di. rrn‘lm! z'on may conjure up images of trucks loaded with boxes, but distribution is as much a sales and marketing issue as it is a delivery issue. We can define distribution as the method companies use to deliver products or services to their target market and channel as the means by which products or services are distributed, but these definitions hide an important truth. ’ Ibid. N Distribution Channel and Sales The distribution channels are not only a means to ship goods or deliver services; they may also provide additional opportunities to sell the products. l©ll‘f0/Jtlllltd E/ Daria! /it)’. MIM -RITI-Cu1mO1IIrrzufiPm, grum.2008 7
  18. 18. Products and services don’t typically sell themselves. At a very basic level, sales happen when the organization: 1. Make an effort to get a customer’s attention. 2. Help customer to see the value of the product or service. 3. Make the customer feels comfortable that the seller can be trusted. 4. Make it easy for the customer to pay. 5. Ensure that the customer has a way to receive the goods or services. All five of these activities are essential, and all involve skill and effort. Employees can do all these things, but to grow beyond the current capacity organization will need additional help, where as, distribution channels can play an essential role in that context. (Kauffman, 2006) <' Distribution Channels and Supply Chain ‘In addition to a supply chain, manufacturers and retailers participate in another give-and-take relationship known as a distribution channel or mar. éeli/ lg 0/Jwmel. A distribution channel is similar to, but different than, a supply chain. The distribution channel is where the “deals” are made to buy and sell products. Sales, negotiations, and ordering are done by these companies, or departments within companies. Then the supply chain kicks in, to do the “physical" work of manufacturing, transporting, and storing the goods; and facilitating the sales with services like consumer research, extending credit, and providing other services related to making the products attractive to customers and encouraging their ultimate sale. ‘ (I-lugos 8: Thomas, 2005:32) 2.1.2 Marketing Channels, Trade Channels or Distribution Channels: Marketing, trade or distribution channels are three terms used synonymously to express the same meaning. (Kotler, 2000) 2.1.2.1 Distribution Channels: is the combination of institutions (intermediaries) through which a seller markets products to the ultimate consumer. (Peter & Donnelly, 2004) Producers use marketing intermediaries because the intermediary performs functions more efficiently than the producer, because of their contacts, experience, specialization and scale of operations. (Kotler, 2000) (Peter & Donnelly, 2004) C Molmmul E / D:r1aml; y. ll’lIll'l-RI '1'! -CuimOt: Irem‘/1Pm_qram.2008 8
  19. 19. 2.1.2.2 Efficient Channel: 'ls the one that delivers the product when and where it is wanted at a minimum total cost. ' (Peter & Donnelly, 2004: 145) The marketing channel decisions is a peg; critical dealriwl as it affects all other marketing decisions such as pricing and advertising, it also involve a relatively long term commitments to other firms. (Kotler, 2000) A distribution system is a key external resource but ranks in importance with key internal resources such as manufacturing or personnel as it represents a significant corporate commitment to large number of independent companies and to the markets they serve and represents as well the policies and practices that will shape this long term relationship. Hollander S. , 1960 — (Kotler, 2000) 2.1.2.3 Channel Functions: A manufacturer selling a physical product and services often does more than one channel function e. g. function as a C Sale: rbamzel telephone or intemet vs Dc/ inegi cbalmel express mail it Senwire r/ mmu-I repair (Kotler, 2000) (ill/ lo/ Jalned E/ Dmorné), M. r.''I-R1TI-CuirvOu! Itutfil’m_gram,2008 9
  20. 20. While the intermediaries perform different marketing functions to a varying degree see Table 2.1 Description The classifying of a product by examining its quality. It is often done with a Program of grade labeling, though individual firms can grade their ovn products by a Private s stem if the wish, for exam le, ood, better, best. A marketing function that adds time and place utility to the product by moving it from where it is made to where it is purchased and used, it includes all intermediate steps in the rocess. Taking on business risks involved in transporting and owning products. Table 2.1: Marketing Functions Performed in Channels of Distribution Purchasing products from sellers for use or for resale. The personal or impersonal process whereby the salesperson ascertains, activates, and satisfies the needs of the buyer to the mutual continuous benefit of both bu er and seller Sorting A function performed by intermediaries to bridge the discrepancy between the assortment of goods and services generated by the producer and the assortment demanded by the customer. This function includes four distinct processes: sorting out, accumulation, allocation, and assortin Sorting out A sorting process that breaks down a heterogeneous supply into Searate stocks that are relative] homoeneous. Accumulation A sorting process that brings similar stocks from a number of sources together into a 1 er horn eneous su l . Allocation A sorting process that consist of breaking a homogeneous supply down into smaller and smaller lots. Asserting A sorting process that consists of building an assortment of products for use in association with each other The process of bringing goods from various places together in one place. Providing credit or funds to facilitate a transaction. Maintaining inventories and protecting products to provide better customer Service. Transportation Marketing Collecting information concerning such things as market conditions, expected sales, research consumer trends, and com etitive forces. Source: Peter & Donnelly, 2004. 2.1.2.4 Channel Levels The producer and the final customer is a part of every channel, but the number of intermediaries determines the length of the channel, for example: .4 {cm / m-/ vlmmzel (I/1'/2'1‘! // mr. é¢-/ iug or 1/imct clmmle/ ) Consists of a manufacturer selling directly to the final customer like door to door sales, manufacturer owned stores or internet selling Om’/1110 or time / em’/ .1’ l. ’/JtIIlIlt'/ J‘ (I mlimv‘ C/ .'2m1/It-/ .r) ; re channels with one, two or three intermediaries (e. g. wholesalers or retailers) lbid ©M0/Jzwml E/ Detrurulgy. 1'l. |'l'l -RI TI -CaimOIIImu'/1Pmgra/ rI.2008 '0
  21. 21. 2.1.2.5 Advantages of Direct Selling. In Agrawal and Tsay (2002) study, they have set forth the following motivations, which have led many manufacturing firms to start selling direct: (1) Resellers do not usually carry the entire line of a manufacturer’s products. (2) Direct control of pricing and distribution can lead to higher profit margins. (3) Resellers can use their power to extract various concessions from the manufacturers. (4) Manufacturers can provide a broader product selection in a better ambiance with higher service in direct outlets. (S) More flexibility to experiment with product attributes. (6) Closer contact with customers. (7) Protection from crises faced by resellers. (Driver & Evans, 2004: 3) 2.1.3 Channel Design Decisions *Ka1/er on /2/arkeli/ lg 'channels should be chosen according to their efficiency, controllability and adaptability' (Kotler, 2000) ~ Two major difficuldes may be faced: 'Deciding on the best channel and zconvincing the available intermediaries to carry the firm product or service. — The channel system evolves in response to opportunities and conditions. To design a channel system (our 51¢: need to be taken: A. Analyzing customer needs (customer desired service output level) Channels produce five service outputs: 0 Lot Jig: number of units the channel permits a typical customer to purchase on one occasion 0 ll7ui! i/lg time the average time customers of that channel vait to receive the good or service 0 Spulial colwenie/ n'c the degree to which the marketing channel makes it easy for customers to purchase the product (e. g. number of dealers) I Pmzl/ n1 mriegy assortment breadth provided by the marketing channel. 0 . fenIic‘e / mrkl/ /9 add on services provided by the channel In designing a marketing channel it should be noted that providing a greater service output means increased channel cost and accordingly higher prices for the customers. 1 Ma/ umml 1:’/ Dmo/ /»€j. y, A'I. rM-RITI-Cui7'aO1IIm: dIPmgra/ rt,2008 l I
  22. 22. B. Establishing objectives and constraints Channel objectives should be stated in terms of targeted renrire output level and the mar/ éet: e_gme;1t it serves and accordingly the best channel to be used with each segment Channel objectives also vary with the pmdt/ cl characteristic: e. g. non standardized products may need to be sold directly by company sales representatives. Channel design must take into account the . S'tm/ {gr/1: and wed/ élierres of each type of iulenimliariei; it is influenced also by the mmpelilorflr c/1a/ melr and affected by the legal reg! //aliom and mtriclimu. C. Identifying major channel alternatives 0 Tjpe: of available it; /emzediank: Conventional channels like Company sales force, wholesalers or retailers or unconventional channels or innovative ones are sometimes used because of difficulty or cost of working with the dominant or conventional channel and the firm will encounter —during the initial move- less competition e. g. door to door sales used by Avon. 0 Number of i/ Ilemlediankr needed Whether Intensive, Selective, Exclusive distribution, Affected by market coverage and degree of control required. 0 Reipor/ Jibi/ I/fer of earl) ¢‘l1amze/ mm/ Jer The producer must determine the rights and responsibilities of each participating channel member and each member should be treated respectfully and given the opportunity to be profitable. The main elements in the "trade relations mix" are price policies, conditions of sales (payment terms and guarantees), territorial rights and services to be performed by each party (e. g. promotions and record keeping systems) D. Evaluating major alternatives On the basis of economics (sales and cost- i. e. efficiency), control and adaptability (flexibility) [bid t". 'la/ /zwltd EID: IroI1k)-, Mm! vIUTI-CuiroO1/tmu'/ )Pn{gra/ rI,2008 '2
  23. 23. 2.1.4 Managing Channels of Distributions (Behavioral Perspective) Once the seller has decided on the type of channel structure and members the entire coalition should operate as a total system or a social system where each member irttemctr with the other and each member play; :1 ml: towards the other and each Ira: certain eapectatiorrt from the other. (Peter & Donnelly, 2004) 'Manufacturers with the highest market shares face the most difficult and complex channel management tasks’ (The Richmark Group: 3) 2.1.4.1 Selection of Distribution Channels May at first appear overwhelming, but channels of distribution developed over years and became somewhat traditional, i. e. producer may find that he is limited to this type of channels in this industry, however this doesn't meant that traditional channels is not always the most efficient but it means that it is widely accepted as a highly efficient channel in this industry. (Peter 8: Donnelly, 2004) Although it is sometimes difficult to recruit intermediaries (companies differ in their ability to attract qualified intermediaries) the producer should consider some characteristics that distinguish between intermediaries like number of years in business, other products carried if any, growth and profit records, solvency, cooperativeness and reputation. (Kotler, 2000) ll-"’l)ile relerting a cbarmel qfrlrlrtribtrtiarr t/ rem arr: §ix basic considerations: C‘ Customer characteristics. " Product characteristics. lntermediary characteristics. Competitor's characteristics. r"~ Company characteristics. = ” Environmental characteristics. (Peter 8: Donnelly, 2004) See figure 2.1 for details of these characteristics Q Molrarrrcrl E lDeI. t0rr. l:y, Mal l-RITl-CuimOrr/ rraifiPmgrurrr,2008 I 3
  24. 24. 1. Customer characteristics a. Number b. Geographic Dispersion 1: Preferred channels and outlets for purchase :1. Purchasing patterns e. Use of new channels (e. g., online purchasing) 2. Product characteristics a. Unit value b. Perishability r. Bulkiness d. Degree of standardization 9. Installation and maintenance services required 3. Intermediary characteristics :1. Availability 12. Willingness to accept product or product line r. Geographic market served :1! Marketing functions performed e. Potential for conflict f Potential for long-term relationship 3. Competitive products sold b. Financial condition 1'. Other strengths and veaknesses 4. Competitor characteristics :1. Number /2. Relative size and market share 1‘. Distribution channels and strategy 11. Financial conditions and estimated marketing budget 2. Size of product mix and product lines f Overall marketing strategy employed 3. Other strengths and weaknesses 5. Company characteristics :1. Relative size and market share I). Financial condition and marketing budget r. Size of product mix and product lines at Marketing strategy employed e. Marketing objectives f Past channel experience 3. Marketing functions willing to perform /1. Other strengths and weaknesses 6. Environmental characteristics 4. Economic conditions b. Legal Regulations and restrictions 1'. Political issues :1. Global and domestic cultural differences and changes e. Technological changes f Other opportunities and threats Figure 2.1 General Considerations in Channel Planning Source: Peter & Donnell , 2004. Four specific considerations: / i- Dimi/ Jtrlio/ I co/ Ierqge rvqlzimi . lIIIeIl. ‘i! !€. ' the manufacturer attempts to gain exposure to the market through as many wholesalers and retailers as possible usually this policy is used with "convenience goods" . l'eler/ ivr. the manufacturer limits the use of intermediaries to the ones believed to be the best available in a geographical area Ext‘/ I/J‘1'/ Ia. ‘ the manufacturer severely limits the distribution and exclusive rights are given to intermediaries within a specified territory ©Ma/ )ar1m/ E/ Dmzm/ L’y, M all -R1 TI -C aimOItII1m'/ )Pm_gru/22,2 008 ll
  25. 25. Intensity of Distribution 1N. rr. Ns1;vE SELECTIVE EXCLUSINE Distribution Distribution Distribution T-lnough»-every Through multiple, Through: -s'i. 'ng‘le Reasonable But not all, Wholesaling ‘(Dutleizinm Reasonable Middleman Market Outlets in :1 And] or reta'il'er~ Market In a market Figure 2.2 Intensity of Distribution Source: Blotnicky, 2001. B- Degree qfmntml deriml The more control over the product required by the manufacturer the more direct the channel should be. C — Total dislrilzltliolt curt (cfliaiellgr) Developed out of the concept of 915121111 I/ mg! which suggests that a channel of distribution should be viewed as a total system composed of interdependent subsystems, and the objective of the system (channel) manager should be to optimize the total system performance. In terms of distribution costs it is generally assumed that the total system should be designed to minimize costs, —other things being equal major xii: //7’/ Jr/ /in/1voxlrto be mi/ Ii/ ;1z': ;erl am: Transportation -Order processing -lost business (Opportunity cost of being unable to meet customer demand) «Inventory carrying costs (storage space—taxes«cost of invested capital-insurance-obsolescence) -packaging —Materials handling l'. 'Ia/ named E / Drrra/ I13), zl I. r1‘l-R177-CaimOIIIm1rbPmgrum,2(}08 '5
  26. 26. D- Clmime/ flex1'biIi9I (adaptability) Ability of the manufacturer to adapt to the changing conditions E. g. Long term exclusive dealership severely limits the manufactures ability to adapt to change in the customer shopping habits (malls vs. retailers in different geographical areas) Ibid Other important consideration Level of customer service required by the manufacturer or producer. 2.1.4.2 Training Channel Members Companies need to plan and implement careful training programs for their intermediaries because they will be viewed as the company by the customers. (Philip Kotler, 2000) 2.1.4.3 Motivating Channel Members Stimulating channel members to top performance must start with understanding their needs and wants to construct a channel offering that is tailored to provide superior value to the intermediaries. Some programs include: training programs, market research programs and other capability building programs that improve intermediary's performance. Producers my in managing distributors according to type of power: I Coera)/ e power When the manufacturer threatens to withdraw a resource or terminate the contract if the intermediary fail to cooperate. Used with highly dependent intermediaries but has the disadvantage that intermediaries may organize countervailing power. I Rculurr/ power When the manufacturer offers extra benefit to the intermediary for performing :1 specific act or function Has a disadvantage that the intermediary is expecting the reward each time he performs a certain task. 0 I_. ¢;gi/ in/ z/te power Occurs when manufacturer request a specific action (warranted under the contract) from the intermediary and it works when the intermediary view the manufacturer as a legitimate leader. ©Mo/ Janml E/ Dmoméy, Mull -RI TI »Cu/ mO11trrmfiPm‘gruI/ /.2008 l 6
  27. 27. 0 Eapefipower When the manufacturer has special knowledge that the intermediary value. The manufacturer should continue to develop new expertise so that the intermediary will want to continue operating. 0 Rejfire/ It power When the manufacturer is so highly respected that the intermediaries are proud to be associated. The main challenge for producers is gaining intermediaries cooperation and usually manufacturers or producers uses positive rather than negative motivators like, higher margins, s ecial deals coo erative advertisin allowances dis la allowances and sales contests. P 2 P 8 v P Y The manufacturers may introduce a compensation plan for adhering to policies such as inventory levels or technical advice and services. The most advanced form of cooperation between manufacturer and distributors is: Dirlribz/ fio/1/)m_gram/ uilgg: building a planned, professionally managed vertical marketing system that meets the needs of both the manufacturer and the distributors. In this case the company establishes a department called 1/is‘/ rilmior n’/ :1/ion: p/ zlmli/ lg where they jointly plan merchandising, inventory, sales training, advertising and promotion. An example company with excellent distributor relations planning is P&G. (Kotler, 2000) 2.1.4.4 Evaluating Channel Members Producers need to periodically evaluate intermediary's performance against standards, issues such as sales quota, customer delivery time, and treatment of damaged and lost goods cooperation in promotional and training programs Underperformers need to be counseled, retrained, rcemotivated or terminated. (Kotler, 2000) 2.1.4.5 Modifying Channel Arrangements Producers need to periodically n-vim: um! mar/ ‘i[}V its channel arrangements When: 0 The market expands I New competitors arise 0 Consumer buying patterns change I ‘: U0/JtlIllr! / E/ Dmaulzy. MIM-R. lTl-CamiOIIrrta¢‘bPrqgra/ n,2008 '7
  28. 28. 0 Innovative distribution channel emerge 0 The distribution channel is not working as planned 0 T/ Je Pm! /I/ rt move: into a later . rta_ge in (/2: prod: /rt / {ff git/ e As there is no marketing channel will remain effective over the whole product life cycle; consider the following stages in the product life cycle: / it Intmduclog rlage: New products tend to enter the market via specialist channels that spot trends and attract early adopters. /1! Rapid gmwt/1 rtage: Higher volume channels that offer services are needed / it matmit} stage: Lower cost channels (mass merchandisers) / ll Decline stage Even lower cost channels (mail«order houses) (Kotler, 2000) 2.1.5 Channel Dynamics Relationship Marketing in Channels For many years in theory and practice, marketing was adopting a mmjJetiti1»e view of the channels of distribution, since each channel member has different goals and strategies, so the major focus was on the concepts of channel power, basis of power and channel conflict consequences of conflict and conflict resolution But in recent years a new view of channels was adopted specially due to the success of the Japanese companies in the 1980s this view was called Relzrtirms/ Jip I/ Ianéetiitg where much could be gained by developing long term m/ zmzit/ Izentr and / mr7Img/ among channel members. (Peter & Donnelly, 2004) 2.1.5.1 Vertical Marketing Systems (VMS) ‘Are channels in which members are more dependent on one another and develop a long term working relationship in order to improve the efficiency and effectiveness of the system‘ (Peter 8:. Donnelly, 2004) C M 0/Iumerl E / Derramé y, 1'l: M -R1TI~CuirvOI/ IrrmfiFm_grum,2008 '8
  29. 29. In VMS 'producer, vholesaler(s) and retailer(s) act as a mzgfied gate»/ . One channel member, the r/ Jarmel captain, owns the others or franchise them or he has so much power that they will all cooperate‘. (Kotler, 2000:505) VMS arose as a result of strong channel members’ attempts to control channel behavior and eliminate the conflict that results when independent channel members pursue their own objectives. Major types of vertical marketing systems: A- Adm! /Iistered gyrtcmr: Similar to conventional channels but there is a higher degree of inter organizational planning and management, the dependence in these systems results form the existence of a strong (size and power) ebmmel leader or a elmzmel captain. Any level of channel member can be the leader of this SYSIICITI. B- Contract/ ml .9I. rtem. r "value uzlzling partnerrlzxjbs": Independent production and distribution companies enter into a formal contract to perform a specific function. Three major types 0 Retail cooperative oIgaIIz'. ';atiom' Independent retailers unite and agree to pool the purchase and the managerial resources to improve their competitive positions I ll7/mleraler ipomoml oolzr/1Ia. gr¢'/ min A wholesaler contracts with a number of retailers and perform channel functions for them 0 FI'tlII¢‘l)l. |‘lt{gPWgI't1IttJ‘ (most common) A parent company (franchisor) and independent firm (franchisee) enter into a contractual relationship to set up and operate a business in a particular way. C - Corporate Jyrte/ :15: When manufacturer purchase a wholesaler or retailer _/ ommrzl (toward the customer) or when wholesalers or retailers purchase channel member above them / Iztrkziuzzrzl (away from the customer) 2'/ ztegrotirm, Uxerl to: 0 Compete more effectively with other marketing systems. 0 Obtain economies ofscale. I increase channel cooperation and avoid conflict. (Peter & Donnelly, 2004) 5M0/Jwzml E/ Dt: .roIr. l': y, MIM —R. ITI-CairoOIIrnus/ rI’mgram,20f)«S’ '9
  30. 30. Wholesalers are usually used by producers to reach large markets and extend geographical COVCtilgC. Wal~Mart. s recent announcement to stop selling its data to markebresearch companies (such as . r. C.Nielsen) and to give emphasis to sharing its data with channel partners (CBS. MarketWatch. com, May 12, 2001) demonstrates ll): rlralqgir value qfpai/ It-qf-Ia/ e itfommtion (Smit, Bruggen and Wierenga, 2002). As manufacturers and retailers deepen their collaborative efforts, they will maximize every customer touch point. The impact of coordinated, customer-centric activities will lead to: ' Improved planning ° Increased customer satisfaction ° Competitive differentiation (Zrike, Allen, Hamel, Sommer 8: Flemming,2001) 2.1.5.2 Horizontal Marketing Systems: ‘Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity’; they might work with each other on a temporary or permanent basis or create a joint venture co. This requires sharing of confidential information such as marketing information, inventory levels, sales history, and price changes. (Kotler, 2000:S07) 2.1.5.3 Multi-Channel Marketing Systems: A single firm uses two or more marketing channels to reach one or more customer segments Companies use this system for / /Jrea main / Iv/ njili: 0 Increased market coverage 0 Lower channel cost 0 More customized selling (Kotler, 2000) Multi—channel distribution strategies can be beneficial in a number of ways. Fim. - it does allow the manufacturer to gain much-needed insight into end-consume-r’s needs and shopping pattems. 5'L'c‘om/ .' manufacturers with “broad product lines can benefit because it is unlikely that a single channel type will be optimal for all products. ” ‘QMalrwmrl E/ Dmamf_: ;', l'l. rM-R1TI-CaimOI/ Im1wPm_gram,2()08 20
  31. 31. Tbim’: excess manufacturing capacity can be better utilized with additional outlets when existing channels are over-supplied. Fina/ _/y: manufacturers with a multi-channel distribution strategy can focus more on precisely targeting markets and Improving their overall competitiveness (Webb 2002) and (Driver 8: Evans. , 2004) The introduction of new channels comes at a price; which is in! ma'm-irtg to/ flirt and caritm/ pmb/ mu. Companies should use different channels for selling to different size customers. E. g. direct sales force to corporate customers and distributors to sell to retail customers. In this way the company can serve more customers at an appropriate cost for each Conflict usually arises over who has the account ownership e. g. territory based sales representatives may want credits for all sales in their territories regardless of the marketing channel used. 2.2 CHANNEL CONFLICT Conflict, Cooperation and Competition No matter how well channels are designed and managed there will be some conflict, simply because interests of independent business entities don’t always coincide. 2.2.1 Types of Conflict and Competition 3 I .7 TI): /iteraft/ rt rzggerir I/ me: was of ¢'o1y7z'¢'/ V ertiml r/ ):ume/ miylicl Conflict between different levels within the same channel E. g. conflict between producers and dealers on the price. I-I ar1': ;ar1tz1/ cliwmel to/ Iflirl Conflict between members at the same level within the channel E. g. franchising too many stores too close to one another, decreasing profits of each individual store. M1// Ii clxamzel m/ ylicl Two or more channels sell to the same market and conflict gets more intense when members of one channel get a lover price (base on larger volume) (Kotler, 2000) ©MnI. -amezl E / Derratrly-, ll l. rz'l-RITl-CuimOutrwwPmgram,2()()8 2‘
  32. 32. 3 paltenu Channel conflicts typically assume three patterns: ' Direct sales force versus dealer or distributor The most frequent type of complaint ' One distribution channel versus another E. g. value-added dealers versus mail order firms ° Intra-channel competition Too many authorized and unauthorized dealers or distributors saturating the region. (T he Richmark Group) 2.2.2 Causes of Channel Conflict Some causes of channels conflict are easy to resolve than others. Major causes of conflict: 0 Goal imowpatibi/ it} market penetration and low price vs. high prices and high margins. 0 Um‘/ ear role: and ngg/2!: IBM selling PCs to corporate customers through company sales force and through it's licensed dealers. 0 Dtjfkre/ Ire in pent. -prion short term economic outlook and its effect on the inventory level (optimism of the producer vs. pessimism of distributor). 0 Degree of ii/ tenzzezlim-fer’ dept/ Ida/ we on /1): /I/ wnfacil/ rer if the intermediaries (especially exclusives) business is highly dependent on that of the manufacturer, the product and pricing decisions may create conflicts. 0 Conflicts also can develop or grow when direct sales forces and/ or alternate L‘/ }tlllIIL'/ I arr U/ Ii/ /fomzer/ , or / m'. riIgfomIed. (Kotler, 2000) 2.2.3 Managing Conflict Some channel conflict can be constructive leading to more dynamic adaptation to the changing environment, but too much is dysfunctional, so the challenge is not to eliminate conflict but rather to manage it. ‘One idea found useful in various disciplines is that the conflict parties are goals seeking entities. This notion implies that the goals pursued by the parties may be one of the chief determinants of the prevailing level of conflict (Pondy 1967). The treatment of channel members as goals seeking entities is also consistent with Revc and Stern's (1979)' (Eliashberg and Michie, 1984) (. ‘Mo/ Jrwlcd E / Dena: /X2)’, I'lJ‘ll’f V RI'1'I~Cuimoul/ ru4'bPm‘gram,2()0S -- '7’)
  33. 33. One way to manage conflict is to adopt a mper ordinate goal that all channel members are jointly seeking e. g. survival, market share, high quality, customer satisfaction. Usually this policy is used when the channel faces an outside threat e. g. more efficient competing channel or shift in consumer desires or adverse legislation. (Kotler, 2000) 0 Ex: /Jalzging perm/1.r belw-ml two or man c/ )amIr/ /£1!! !/. I'. ' so that they appreciate each other points of view. 0 U! !! of zlzfiknml pmdmt verriam ‘Multiple products or versions gives management the opportunity to target different market segments through different channels (Bucklin et al. , 1997; King, 1999; Smith et al. , 1999; Coughlan et al. , 2001; Ancarani, 2002; Kung et al. , 2002; Webb, 2002)' 0 When conflict is chronic or acute, parties may resort to: Dip/ omagr: each side sends a person or a group to meet with each counterpart to resolve the conflict MerIialiarI. ' resorting to neutral third party who is skilled in conciliating the two parties' interests. / lrbirra/ ion: two parties agree to present their arguments to one or more arbitrators and accept the arbitration decision. I/ Ifommliou I/ Juli/ lg in marketing channels: 'an arrangement between channel members to share marketing information with the intention to strengthen the others performance and thereby the performance of the channel as a whole‘ (Srnit, Bruggen and Wierenga, 2002). 0 ’l1Ijbm/ ution i‘[)an'1Ig as a means of communication leads to less conflict, more trust, satisfaction, and commitment' Ibid. 'C/1a/ me/ c'aII1/1// /Ilia: /1'0/1 is the formal as well as informal sharing of meaningfiil and timely information between firms. (Anderson and Narus, 1990)‘ [bid 'Qualitatively good communication exists when the relationship is characterized by open communications and sharing of information (Anderson and Weitz, 1992), which occurs frequently, bi-directionally, formal, and non—coercive (Mohr and Nevin, l990)' lbid. 'Better communication and information sharing contribute to i/ /1/>mIIcd rlmlzitel 0/>eruIiom', 3'11/123/21¢‘/ in}: mm’ wwlrzlilzzzetzl (e. g. Mohr, Fisher and Nevin, 1996) ' lbid. I‘ 1l'f0/)()IIIt(/ E/ D:. r.rouK'. y. ilrln-I— lU'l'I-CuimOuIrramPmgmm,2008 23
  34. 34. Improved communication indirectly reduces the level of conflict through trust. Firms that have ‘developed strong trust in their partners are more likely to work out disagreements with these partners (Anderson and Narus, 1990, p. 45)‘ (Smit, Bruggen and Wierenga, 2002). ‘Through its impact on trust, information sharing indirectly affects commitment. (Morgan and Hunt, 1994)‘ Ibid. 2.2.4 Channel Decision Matrix ‘Developed by Acccnture Consulting, the Channel Conflict Strategy Matrix analyzes the “Forces and opportunities for change” in a given industry and identifies “optimal change Strategies” that a company may use to minimize channel conflict. When using the Matrix, it is important to understand that A/1ar. (’. et Power is defined as “a function of where power resides—— with the supplier or with the channel” and that Clmmzel Value is “a measure of how much worth the channel adds for the customer, beyond what the manufacturer provides”'. (Driver & Evans. , 2004) Fonlvard Integrate Cooperate EEESEE 0 Identify new value proposition 0 Look for win-win, grow the pie & customers 0 Act fast/ independently 0 Seek compromise g 0 Fill gaps in channel coverage I Look to sell new products o through new channels n. H u x 5 Compete Lead 2 | ' . . Eggggjj Create Internet—enabled direct 0 Define appropriate approaches customers link to customers for the channel 0 Shift volume to new channel 0 Make initial investment through promotions Insignificant Significant Channel Value Added Figure 2.3 Channel Decision Matrix Source: E vans, 2004. . C Mo/ mmezl E / I Dem: /1.4:}. .l'l: :'l - RI Tl -Cu/ 'mOI/ /mI¢'l; Pm gran1,2()()8 3'"
  35. 35. 2.2.5 Channel Synergy: While observing crw. r-c/ )umte/ tmsionr, Van Bitgelen, De jong, and De Ruyter (2006) and Neslin et al. (2006) conclude that the majority of studies have applied a myopic perspective on innovative service channels, not considering the impact of traditional channels on the evaluation and use of these innovative options. Yet, a number of studies exist that consider channel itzteractiom. The majority of these studies propose c/ mime! .guIergie. r. Channels are regarded as complementary; that is, sadsfaction with one channel enhances a customer’s intention to use another channel (Balasubramanian, Raghunathan, and Mahajan 2005; Strebel, Erdem, and Swait 2004; Verhoef, Neslin, and Vroomen 2007; Wallace, Giese, and Johnson 2004) and (Falk, Schepers, Hammerschmidt & Bauer, 2007:1413). ‘The majority of studies that do take into account interaction effects between different channels suggest synergetic relationships between alternative channels of the same provider. Wallace, Giese, and Johnson (2004) state that satisfaction with one channel drives customer patronage, enhancing customers’ intentions to use alternative channels operating side by side’ Ibid 'Montoya-Weiss, Voss, and Greval (2003) show that positive evaluations of the old channel can inhibit the use of the innovative channel. Therefore, the first step for predicting the usage of new channels and for creating complementary relations between channel formats should be to exp/ one I/1e r/ river: oft: /rIomer. t’ m’zrIizr: ¢-pa/ mlliorar aft: /tmmlitr 4‘/ Illlrllt/ J’ (Van Birgelen, De Jong, and De Ruyter 2ooo)' Ibid 2.2.6 Different Theories for Examining Consumer Behavior in Multi-Channel Environments: Three theories are used in the literature to examine the consumer behavior in a multi channel environment: * . S'm/ m.QIro Bin: ‘Individuals might have a tendency to prefer the situation or decision already in place, irrespective of whether the alternative has a higher ut. ility' 'Status quo bias has been indicated as being both “robust and important” for analyzing consumer behavior (Kahncman, Knetsch, and Thaler 1991: 205)' (Falk, Schepers, Hatnmerschrnidt 8: Bauer, 20072145). @. !al1ur/ ml E/ Dmanky, .l. r.'l-R1TI-CuimO/ tlmuI; l’wgru/ n,2{)08 25
  36. 36. * I/ zmiu: is conceptualized as a characteristic that affects a consumer’s willingness to try out new self-service technologies. * Swiltbitlg cart I/ Jeogy. Switching costs are “the one- time costs that customers associate with the process of switching from one provider to another” (Burnham, Frels, and Mahajan 2003: 110)‘ Ibid 2.2.7 Channel Switching and Channel Conflict Reasons for channel switching behavior among a company’s different direct channels are attributed to 0 Customers’ intrinsic loyalty to a particular channel and 0 The channel's ability to attract potential switchers. How successful a new channel becomes, is dependent on the ability of management to steer channel choice into the desired Direction. A One-shot analysis is not sufficient, see (Steenkamp & Dekimpe, 1997); (Moore & Winer, 1987) and (Gensler, Dekimpeb & Skierac, 2004) 'Not all product categories are equally suited to be sold over a particular channel (e. g., Inman, Shankar, & Ferraro, 2002), (Morrison & Roberts, ‘l 998); (Liang & Huang 1998); (Ward, 2001) and to build channel loyalty. Therefore, it is important for a company offering multiple product categories to know which categories are better suited to be sold over a particular channel and whether specific categories tend to be more affected by rbmmel twin"/ Jin, g' (Gensler, Dekimpeb 8: Skierac, 2004) Another important question to consider is whether channel preferences change over time. Also some customer segments may be more easily induced to switch channels than others, specifically; light users may be more likely to attribute their channel choice to Extemal causes than to an internal cause such as their intrinsic preference for that channel, see (Lim, Currim, & Andrews, 2003) for a similar argumentation in the context of brand Loyalty. It is important for targeting purposes to know whether there are indeed such differences between light and heavy users. Ibid ‘a1-lo/ .um/ e(/ E/ Dwai/ ;(: :y, MIA1-RITI-CuimOIrIn'ud: Prv‘gru/2/.20()S 26
  37. 37. Icgtleiztiul di. rtri/ mtion The adoption of products as they become more widely available across distribution channels (Lehmann & Weinberg, 2000) Many products start in limited distribution and then at some point become widely available (usually lower in price) through mass merchants What! would the new! reqimxtial zlirtribl/ liar: t/ Jan/ rel be opened (how long after the product introduction should the firm waits to introduce the product into a second channel? ) is a very important question to be answered. (Lehmann & Weinberg, 2000) ‘Increased clmimel sbzfr among the different direct channels a company owns is not necessarily detrimental, and may be better labeled as channel . r/Ib. rlim/ io/1, which has a less negative connotation than rbmmcl rarzrtiba/ iqatioil. Indeed, channel conflict is less likely to occur, as the redistribution of revenues or profits becomes an intra— rather than an inter- organizational issue, which is easier to solve through appropriate incentive schemes (see Anderson C. , Stern, & El—Ansary, 2001: 257); Anderson, Lodish, & Weitz, 1987)’ (Gensler, Dekimpeb & Skierac, 2004) 'The fundamentals of channel design—identifying customers, creating value propositions, and determining how to deliver goods and services to the marketplace—are not changed by new technologies. But new teclmologies do change and complicate choices: which customer segments to serve, what bundles of products and services to offer them, and how to communicate with customers and deliver value' (Bendix, Goodman and Nuncs, 2001). 'We have found most companies hesitate to move into the Uncertain, hostile environment of elm/ I/In/ c'[mI1_ge for fear of Conflict with their existing channels' Ibid 2.3 SIMILAR RELEVANT CASES We will be using the licentiatc thesis of Lena Goldkuhl named "Multiple Marketing Channel Conflict With a Focus on the Internet" -a case study on Ducati and Scandinavian Airlines. Conducted at Lulea University of Technology, Sweden, Department of Business Administration and Social Science, Division of Industrial Marketing and e—Commerce August 2005- As a reference research, it aims at exploring and describing managers’ perspectives on conflict in multiple marketing channels, with a focus on the Internet. ©1‘lo/ Iullled E/ Dmn/1&2}, 1II1l'l— RJTI-CuimO1/lmuirI’rvgram,2008 27
  38. 38. The thesis focused on Determining Causes of Channel Conflict, Assessing the Seriousness of Channel Conflict, Approaches to Minimize Channel Conflict This thesis indicated that Even though the respondents described some channel conflict, it must be noted that the management of both companies emphasized that they have a very good Working relationship with their resellers, although on rare occurrence they have Encountered problems. The thesis indicated also that when assessing whether a channel conflict has positive or negative implications for a company, it seems that one important factor to look at is its impact on the company’s brand. 2.4 THE CASE OF MOBINIL In that research we will be focusing on Mobinil as a case study. 2.4.1 Company Profile: About Mobinil www. mobiniI. com The Egyptian Company for Mobile Services (Mobinil). Since inception in May 1998, Mobinil has strivcd to maintain its position as the leading Mobile service operator in Egypt. Honoring the trust of more than 18 million customers, Mobinil is committed to maintaining its position as the leading Mobile service provider in Egypt, providing the best quality service for its customers, the best working environment for its employees, top value for its shareholders, and proudly contributing to the development of the community. Shareholders Orange and Otascom Telecom Holding are international leaders in the realm of telecommunication. Mobinil has benefited from years of experience in an international context to become the largest wireless service provider in the Middle »East. Over the past ten years, Mobinil has delivered on its promise to millions of customers, whose confidence in the reliability of its services has reinforced this solid leadership position. This confidence was reaffirmed in a recent nationwide survey by the Nadonal Telecommunications Regulatory Authority [NTRA], where Mobinil customers reported over 97°n satisfaction rate in the products, services, and customer service levels offered ©A '10/Izllilfd E / Dtxra/ hey, A 'l. rAl - RI Tl -Cain: OIIIIWIL‘/ J Prqg rum,2()08 38
  39. 39. 2.4.2 The Sales Division and Distribution channels The sales division in Mobinil is a multi-channel system of distribution including: Direct selling: F National sales (company sales outlets) F Corporate sales (company sales representatives). Indirect Selling: F Distribution (wholesalers Distributors-super dealers, and retailers Exclusive and non exclusive POS) '7 Corporate sales (Value Added Resellers VARS) <' Franchising L‘ Complementary or Nontraditional (direct and indirect) sales: - Mobinil kiosks and booths in ‘universities & clubs’ - Mobinil Vans — Door 2 door — Add 8: win — Alliances The purpose of this research is to Analyze the role of Mobinil Multi-channel system of sales and how to achieve :1 strategic advantage by enhancing harmony between sales channels and searching for reasons of conflicts when exists between these channels and possible remedies. "F . ‘Io/ mum! E/ l)er. tn/ t.('_: )', M. n'l- RJTI-Cum: OII! r:aMPrvgrum,2008 29
  40. 40. CHAPTER 3: THEORETICAL FRAMEWORK & RESEARCH DESIGN 3.1 INTRODUCTION It has become customary nowadays for firms to go to market via multiple channels. Yet, it is not easy to coordinate a multi-channel system. Namely Channel conflict may evolve harming the channels and the organizations as a whole. The thesis focused on defining constructive and dysfunctional conflict, determining Causes of Channel Conflict, assessing the Seriousness of Channel Conflict, Approaches to Minimize and manage Channel Conflict taking Mobinil as a case study and referring to the licentiate thesis of Lena Goldkuhl "Multiple Marketing Channel Conflict With a Focus on the Internet" As a world wide example. 3.2 PROBLEM STATEMENT Although using a Multi channel marketing is so important and widely used nowadays but it has its price namely "conflict", and though some conflict may be constructive if well managed, it becomes dysfunctional and hannful to the sales channels and the organization as a whole if not dealt with properly. 3.3 RESEARCH OBJECTIVE The purpose of this thesis is to define channel conflict, determine whether there is a conflict between Mobinil channels of distribution or not and if yes, is it functional or not, how serious is it, and how to manage it and highlighting the importance of this issue on the channel of distribution and the organization as a whole. '~ 'l’l0/lllllltd E/ Dmalnéy, M. rM-R17"I-CzI1rnOuImufiP/ v‘gram.20()8 30
  41. 41. 3.4 THEORETICAL FRAMEWORK The researcher used a combination of factors adopted from the literature by (Kotler, 2000), (Gensler, Dekimpeb & Skierac, 2004) and (Goldkuhl, 2005) in identifying the factors affecting channels conflict or harmony using Mobinil as a case study. Mobinil is a mobile market leader in the Egyptian market of Orascom Telecom that has international experience in the field of telecom and this was reflected on the complexity and structure of its Multi channel sales system which will be a lucrative field for studying the phenomena of functional and dysfunctional conflict. - Goal compatibility - Defining clear and distinct channel roles and functional areas * Channel power - Degree of communication - Use of different Product versions. ' Channels harmony or conflict Figure 3.1: Research Theoretical Framework 3.4.1 Dependent Variables 0 DEP VAR (Y): Channels harmony or conflict. The existence of functional or dysfunctional conflict within the same channel and between different channels in Mobinil multi channel system. 3.4.2 Independent Variables 0 INDEP VAR 1: Goal compatibility Having different and incompatible goals within the same channel might increase the level of dysfunctional con flict. 0 INDEP VAR 2: Defining clear and distinct channel roles and functional areas Assigning specific tasks and roles to be carried out by each channel and assigning a specific market segment for each channel to function within might decrease the level of dysfunctional conflict ii‘ Ma/ James’ E/ Dmnmizr. Il’fJ‘l’l - RITI-Cz1imOI/ ImubI’mgrur/1,2008 3 l
  42. 42. 0 INDEP VAR 3: Channel Power The degree and type of influence that the channel captain has over other channel members might decrease the level of dysfunctional conflict and enhance cooperation. 0 INDEP VAR 4: Degree of Communication The frequency of sharing useful Information in a timely manner might decrease the level of dysfunctional conflict. 0 INDEP VAR 5: Use of Different Product Versions The use of different products or product bundles with different channels might decrease the level of dysfunctional conflict between channels. 3.4.3 Moderating Variables I MOD VAR 1: Price. Different price given by Mobinil to different channel member (based on volume), and different price set by different channels to the end customer «for the same product- may cause dysfunctional conflict 3.4.4 Research Assumptions 0 A1: A Relationship Exists Between The Variables From the literature review and previous case studies it was found that there is a reladonship between the research variables and we are conducting this research to know the direction, degree and extent of the effects between these variables in the case of Mobinil sales channels. 0 A2: When Studying The Relationship Between Any Two Variables, Other Factors Relationships Are Held Constant Because each variable affects the degree of channel conflict with a varying degree, and In order to know the effect of each variable separately, other factors are assumed to be constant. 0 A3: The Decision On Selecting And Designing The Sales Channels Is Out Of The Research Scope Proper selection and design of the sales channels plays a role in reducing the conflict between channels, however the research didn't tackle this issue. ©Mo/ mmerl E/ Dwamij, Mall - R] T I -CaimOr/ Imu'/ rPmgrur/ /,2008 32
  43. 43. 3.4.5 Research Limitations v‘ L1: The Findings Are Relevant To Mobinil As A Mobile Phone Operator Working In Egypt. Although from the literature review some channel conflict factors are similar in different industries in different countries around the globe, our findings are a result of a case study for Mobinil as a mobile phone operator in the Egyptian market that is not guaranteed -and not tested- to be applicable every where. L2: The Research Is Limited To The Producer Side Management Perspective. Although studying other channel members —e. g. distributors— than the producer, manufacturer or service provider might be useful, but due to time constraints only the management perspective of the service provider will be tested as they are the ones who determine the channel structure to be used. L3: The Research Is Limited To The Variables Mentioned In The Theoretical Framework. They may be other variables affects channel conflict or harmony and not included in this framework due to the limited time frame available for the study. 3.5 RESEARCH QUESTIONS AND HYPOTHESES 3.5.] Major Research Question C (MjRQ) what are the factors that may result in dysfunctional conflict between Mobinil sales channels? This question is the most important one and the reason for this research and it is about determining all the relevant factors that may cause dysfunctional conflict between Mobinil multi- channels of distribution in order to manage these factors if they exist. 3.5.2 Minor Research Questions 6 (MRQ 1) is there is a relationship between having incompatible goals between different parties within the same sales channel and having conflict between these channel? if Mn/ izmml E/ l): .r. tom€= .y, M Ill '1 -RI TI -CairnOu1rrm11Pm_grw/1,2()()8 33
  44. 44. I-Iaving incompatible goals is known -in the literature-to be a major source of channel conflict so this question is aiming to determine if there are incompatible goals within the same channel of distribution -in Mobinil- or not and if exist does they cause channel conflict and to what extent and how it could be managed. 0 (MRQ 2) Is there is a relationship between Defining a clear and distinct channel roles and functional areas and having conflict between Mobinil Multi sales chatmel‘? Having a clear and distinct role and a well defined target market and market segment is expected -through the researcher personal work experience- to decrease the level of channel conflict and enhance integration between Multi-Channels and the purpose of this question is to determine whether this relation holds or not and to what extent in order to work on enhancing it. I (MRQ 3) Is there is a relationship between channel power and having conflict within Mobinil Multi sales channel? Having a channel captain who has much power to influence others in the channel is expected to reduce a channel conflict that is why this relationship needs to be investigated. 0 (MRQ 4) Is there is a relationship between the degree of communication in Mobinil Sales Channels and having conflict between Mobinil Multi sales channel? Being informed about the objectives of the channel, its role, target market and sharing of timely useful information is expected to decrease the level of conflicts between channels and we need to determine if this relation really holds or not, and if yes to what extent it is needed to share this info. 0 (MRQ 5) Is there is a relationship between using differing product versions for different channels and having conflict between Mobinil Multi sales channel? Using different product versions for different sales channels aught to reduce conflict between these channels and the purpose of this question is to identify if this strategy is effective in reducing conflict -ifexist— or not. ©Mo/ Jzmml E/ Dmom€_)-. A UM v R] TI-Ctlf/ U()1!/ I?£lt'[7Pr"U‘gI'dI)l,2008 3 i
  45. 45. 0 (MRQ 6) Is there is a relationship between the prices of Mobinil products and having conflict between Mobinil Multi sales channel? Price is considered one of the major causes of conflict between channels and the question is to figure if the price really causes conflict in Mobinil sales channels or not and to what extent and how it can be adjusted to minimize such a conflict. 3.6 RESEARCH METHODOLOGY 3.6.1 Research Type 0 The Purpose of this research is: descriptive] analytical. h is used to describe the channel conflict while explanatory or analytical annel conflict and relationships between variables Where De. rm'pIiue researc research is to identify the related patterns to ch causing it. 0 Outcome: Applied Outcomes are expected to be applied where the Findings and recommendations will be submitted to Mobinil in order to consider its relevance 0 Logic: Deductive The deductive work aims to develop a structure and apply it to the case in hand moving from the general to specific. 0 Process: Qualitative In qualitative research data are arrived at by descriptions not by statistical data, due to the nature of the research which is to asses the channel management perspective about channel harmony and conflict. 3.6.2 Sampling Methods Non probability judgmental sampling will be used due to the researcher acquaintances within Mobinil channels of distribution. 3.6.3 Data Analysis Methods In this qualitative process for studying conflict in distribution channels taking Mobinil as a Case study we will use semi structured interviews as our data collection method. S’ ll Ia/ .-umed E/ Demmky, M. r.'I » R! T I - (.2:imOnImu‘/ rPm‘grum,2008
  46. 46. 3.6.4 Data Collection Instrument and Source (Interview Questions) We will be using three major sources for outlining the interview questions: -6 The major causes of conflict, detennined from the literature review. The perceived major causes of conflict, determined from the researcher own business experience. it Some questions adopted from the interview questions of the licentiate thesis of Lena Goldkuhl. Ibid A complete set of the interview questions is included in appendix A C‘Mo/ Jumrd E/ Dmol/ ky. r-! rM-RIT1-CuimOIImudil’mgram.2008 36
  47. 47. CHAPTER 4: DATA ANALYSIS, FINDINGS AND DISCUSSION 4.1 DESCRIPTIVE ANALYSIS Re/ iabi/ it} refers to whether the findings and conclusions would be the same if another researcher conducted the same case study all over again (Yin, 2003). Reliability is also about minimizing errors and biases (Ibid. ). (Goldkuhl, 2005) This research was discussed and evaluated by colleagues at RITI and the distribution Department - Mobinil. In addition, throughout the research process, Professor Amrnar, supervisor of the researcher, was revising chapters and the interview guide. The interview guide also was tested -on 22"” of july 2008 After noon - in reality with Mr. Mostafa Mohamed Baher ElNahal Super Dealers Manager—Mobinil distribudon Department, who enriched this research by his views and his interview resulted in consolidating some interview questions, six other separate interviews with key informants and channels senior managers were conducted which was a way to ensure accurate and consistent evidence. The respondents have been, and still deeply involved in the development of the company’s distribution strategy. The respondents are: 0 Guillaume Vangaver, Vice President Commercial, Morning 04"‘ September, 2008. 0 Tarek Rizkalla, Director Sales, Morning 31" August, 2008. 0 Sherif Ezzat, Senior Manager Distribution, Sales. After noon 10"‘ of August, 2008 I Mahmoud Abd ElMotaleb, Senior Manager National Sales (Mobinil shops or outlets) morning 10"‘ of August, 2008. 0 Wessam Raggaie Youssef Nagib Ahmed, Senior Manager Corporate Sales morning 4"‘ of August, 2008. I Mona Soliman, Senior Manager Complementary and non traditional Sales Morning 1“ September 2008. 0 l-lisliam Mohamed Abo El Fetouh, Regional Sales Franchising Manager afternoon 10"‘ of August, 2008 The interview guide was developed as a base, and questions were formulated as open—ended questions leaving ground for further questions for relevant issues that may arise during the interview. ©Mo/ Iu/ Iml E / Derromé y, l‘l. t1l’l — R1TI-Ca! mO1Ilm1MPm_gmm,2()08 37
  48. 48. During all interviews, taking notes was the appropriate approach whereby the respondents were at ease and the answers was very spontaneous and sincere also feedback and follow up questions vere asked after some questions in order to elaborate more on some issues or suggestions not asked in the interview questions. The main issue of this research is to determine whether the following factors lead to more or less conflict between Mobinil multiple sales channels: 0 Having compatible goals between different parties within the same sales channel. 0 Defining a clear and distinct channel roles and functional areas. 0 Channel power. I Degree of communication in Mobinil Sales Channels. 0 Using differing product versions for different channels. 0 Prices of Mobinil products. This research has included the whole population of Mobinil sales channels (all sales channels’ Senior Management), so the results are ~to great extent- of reasonable reliability, it includes the resellers side implicitly by the views of management of their departments in Mobinil*. "Worth mentioning that the reseller in Mobinil has a responsible Mobinil employee and a whole team functioning in their interest and Mobinil interest. Comment on [be I‘L'. !'II/ /J‘ The research indicated that compatible goals are set between Mobinil different sales channels and accordingly a channel harmony is to a clear extent exists, Mobinil (the service provider) has a great channel power and accordingly it sets the channel roles and functional areas leading to less conflict when the channel accurately executes the assigned job and role, high and mature degree of communication is very vital to minimize any sort of conflict between channels, use of different product versions or product bundles in different channels is expected to lessen the conflict when exists because of marketing identical products in different channels, having and maintaining unified price till the product reaches the end customer is a prominent factor in decreasing the level of conflict between channels. Qlllalmmerl E/ Dwomlz), .w'l. nI - RITI-CuirvOutmu£rl’m_qram,20()8 38
  49. 49. 4.2 QUALITATIVE DATA ANALYSIS After conducting this research and the subsequent interviews it has been found that the most important factors that control the level of conflict, is Mobinil r/ Jaime/ power, as this power that Mobinil as a channel captain has gives a control over many determinants of channel conflict such as: 0 Defining clear and distinct channel roles and functional areas, assigning, monitoring and controlling the price, all of which results in good control of the channel members and accordingly minimal levels of channel conflict. 0 The price: although Mobinil sets identical prices for the same products across all channels, but the channel members or the resellers sometimes charges different -lower- prices to the end customer resulting in some sort of unfair competition, accordingly the price proved to be a very important factor in determining the level of conflict between different channels. 0 Dcyi/ zi/ lg a clear and dis/ im‘tc‘I1wme/ r m/ er azzdfumlioital area: & Gaa/ mm/ mli/ u‘/ i_ty in itself was not a problem, because the channel captain (Mobinil) set this in a proper way, the job responsibilities and roles and compatible goals are there set accurate, but the problem with the implementation because some of the channels are dependant on the resellers who are not Mobinil staff and they are large in terms of numbers accordingly the control over the execution of this policy is not an easy task and requires continuous follow up and feed back. I Dqgrvc ofcalil/21/r/ rim/ i011: is very important for the vhole supply chain both before and after the conflict occurs and it contributes to more harmony and close viewpoints and appreciation of each channel role by the other channels also it is important to take immediate corrective actions because conflict issues should be illuminated once reported. I Ute of : /i_fl2'rr/1/ / Jlvl/ lit‘! m-rsions or pmd/ /rl / mm/ /or 1'/ I r/1;/ ]én-m‘ L‘/ ltlllllt’/ .I‘ was accepted by the majority of the respondent as a sort of lessening the conflict over the same product between channels, as a different product or bundle will be assigned for each channel giving each channel advantage over the other in this particular bundle, leading to improved business focus and customer targeting based on a proper market segmentation. If ‘. --lo/ m/rim’ E/ Dct. ram(: y, . l-I. r.'l A lUTI-CairnO11/mufiPmkgram,2()08 39 T _— —j. — - _~w
  50. 50. I Repackaging and re launching the product was also suggested to be healthy for the product -in general- from the customer perspective. 4.3 DISCUSSION AND FINDINGS 0 From the research and the literature review, we can conclude that yes some times the interests of the resellers may contradict with this of the channel i. e. having I/ ttompalilz/ e goa/ r and this may lead to a channel conflict and the solution is having the channel captain assigning a super ordinate goal that is adopted by the whole channel. 0 The relation between not defining a clear and distinct channel roles and functional areas and having channel conflict holds, and on one hand it is well defined by the channel captain and from the other the control over the resellers is not the same as the control over the company direct sales staff leading to deviation sometimes away from the assigned roles, which is corrected by the frequent follow up and the market feedback. 0 The Clmmtel captain (Mobinil) proved to have a high clzwmel power which influenced many aspects of the channel conflict and provided immediate actions to correct any deviation from the set functions, roles, prices, target market or goals, channel power is also very important in steering the customer channel choice into the desired direction through the well defined channel roles that don't overlap. 0 The r/ qgrre of co/ rm]/ mz'm/ ion between channels and within the channel (i. e. between the channel management side and the reseller's side) proved to be one of the most important issues to reduce conflict if exists and to help preventing conflict before it arise, and it can be dangerous because if there is no good communication there will be no good operation. 0 lnfonzmlio/1 . t/mri/ lg with the resellers is a trade off, but at least :1 minimum degree of information sharing is required, zlgijlén-/ av in ; )m'rp/ io/ / should be bridged by good communication and exchange of persons should be considered and evaluated as a solution to have a close views between different channels. I There is a relation between Il. IiI(g l/ [[]i‘I‘L’Il/ p/ ml/ It‘! llmzzl/ ea‘ in different channels and having less conflict, as the channels finds themselves dealing in a relatively different product — from the customer View point- e. g. having specific bundles for the different market I ‘Ma/ Jawml E/ Dmnltiz; -, 1l‘lI; ll—RlTl ~Ca1mOuIIruz/ /Pmgram,20()8 ‘l0 l
  51. 51. segments in different channels. This approach has two benefits 1- better segmenting the market highlighting and stressing specific products in specific channels 2- pricing different bundles aimed to different segments in different channels without having channel conflict or having customer dissatisfaction for the premium price for premium product bundles, it showed that it is a very successful strategy. -» Price really was found to be a major cause of channel conflict to a great extent, although the product price is issued at a fixed rate from Mobinil, but the channel members usually play with the price in order to sell the quota assigned faster and sometimes to cope with the competing brand market price, accordingly the solution is the continuous market feedback and follow up by channel captain over prices. I‘: Worth mentioning that the interviews revealed that there is another factor that may cause channel conflict, which is the cor;1per1:atian. rc/ mile, as if there is a compensation scheme that is not well structured or perceived not to be fair, this would cause conflict. f"1l'1 alwnml EIDmo/ /1(2)’, M IM - R1 TI -C uimO rrfrrar/ rPmgram, 2008 4 l
  52. 52. CHAPTER 5: CONCLUSION, RECOMMENDATIONS, AND FURTHER RESEARCH 5.1 CONCLUSION Although using a Multi channel marketing in Mobinil is very important especially due to its continuous growth and expansion but the usual result of the multi channel system is "conflict" which may be constructive if well managed, and may becomes dysfunctional and harmful to the sales channels and the organization as a whole If not dealt with properly and the purpose of this research was to define channel conflict, determine whether there is a conflict between Mobinil channels of distribution or not and if yes, is it functional or not, how serious is it, and how to manage it. The Data Analysis Method was a case study on Mobinil as the leading Mobile operator in Egypt, personal interviews was conducted with all sales channels senior and top management. There was a consensus that after having a channel captain who has a high channel power to determine and assign specific role for each channel; Price, compensation and communication comes as the most important factors that trigger or reduce conflict. There are some important issues that are considered a competitive advantage of Mobinil channels: 1- The employees or the human resource, they are well selected and well fit for their positions and they are accessible to the resellers who easily communicate widi them and raise any complaint to solve any conflict that may arise. 2- The distribution scheme is structured to provide more coverage and hence more choices and lower conflict. 3- Non traditional sales channels. The conflict studied has the following patterns: ° Direct sales force versus (controlled sales) dealer or distributor The corporate product is found to be of the least conflict with other channels although negligible internal channel conflict e. g. between the corporate direct sales team and the Value Added Resellers sometimes occur and managed properly C ‘M0/Idrm. 'd E / Dario/11(2) , M. r. l'- RI TI -CuimOI4Irva4bl’m_grurr/ .2008 42
  53. 53. ' One distribution channel versus another The complementary department contributed to some sort of negative competition ~mainly with the distribution- as a new project or channel and due to the subcontracted resellers but is managed through proper market feedback and communication. More harmony or synergy between the National Sales and the Franchising exists due to the supplementary nature of their work and the continuous joint planning. Accordingly the major factors that cause harmony if well done are: Having compatible goals between different parties within the same sales channel. Defining a clear and distinct channel roles and functional areas. Having a channel captain who has a great Channel power. High degree of communication between and within Sales Channels. Using differing product bundles for different channels. Prices. The research and the interview indicated that commission scheme or the reward system may be a major source of conflict if not well designed. C . Wo[IuI/ [rd E/ Drrm/1k}, .>rln‘l~RlTl»CmmOIIfmu‘bPm_grum,2008 43
  54. 54. 5.2 RECOMMENDATIONS After drafting this research, the researcher recommends the following as ways to manage conflict: 1- Use Of Different Product Bundles In Different Channels This solution comes after a good market segmentation to determine which channel will carry which bundle, and is a specific bundle appropriate for this market and to leverage this offer in this channel and fade others to be stressed in other channels; this leads to improved business focus and better integration between sales channels. 2- Advertising For The Resellers On The Company Web Site By assigning a partners comer, where they can advertise their offers after getting the channel approval, this recommendation would come at a negligible cost to Mobinil, lower the advertising cost that the company already spend on advertising the parmers joint offers in the news, put related partners offers to the customer under Mobinil name at no extra cost, this would enhance cooperation between resellers and the channel management, increase harmony and provide a variety of offers to the customer for even supplementary product. 3- Continuously Revising The Compensation Schemes (Reward System), Monitoring and Adjusting Prices. The compensation scheme or the commission given by Mobinil to its business partners or the value added resellers, distributors, Dealers and POS should be regularly revised to ensure that it is fair, reasonable and acceptable by the resellers, and that it is combined with the price offers a reasonable profit margin for the reseller. 4- Exchange Of Persons (or Job Rotation) This recommendation should be studied and evaluated carefully, it is expected to enhance communication and lead to appreciation of each channel view by other channels, some respondents indicated that it is a very good idea, others indicated that it may be done on the staff level not the management level, other respondent pointed out that the exchange of persons may be useful in the case of related or supplementary channels while others indicated that it is not an easy task because these management positions require knowledge and expertise in each channel to take critical channel decisions. ©Ma/ umml E/ Derry/ rky, MIM —RI TI -CairnO11/rem¥1Pmgrzmz,2008 ‘H
  55. 55. 5- Follow Up on The Roles Practices And Immediate Response To Channels Feedback. There should be a continuous follow up on the execution of the previously well defined channel roles and functional areas and an immediate corrective action should be taken in case of any reported deviation. (J . 'Ia/ mmeri E/ Dam/ n(: }*, .'I. n 1- RI TI -C aimO/1II'mz'bI’m_(; rurrI,2008 ’‘ 5
  56. 56. 5.3 FUTURE WORK Applying Different Theories for examining consumer behavior in multi-channel environments The customer side is not tackled in this study, as it requires further in-depth research in a separate COINZEXC. F Exchange of persons as a solution to channel conflict may be further studied to determine whether it is effective in decreasing channel conflict or not. <7 Other variables not included in this research may be developed and validated. A comparative study for other countries or other industries. ©MoIJamrr/ E/ Dmamf}, MIM -R1 77- Cain) Ourrrat/ Ipmgrum, 2008 ‘l 6

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