Getting Multi-Channel Distribution Right

CHAPTER 5The Sources and Indicators of Power in the Channel

5.1 INTRODUCTION

Marketing plans which are conceived only in terms of money, goods, and their physical movement are doomed to fail. A marketing plan must be executed through sales organizations, distribution channels, and other organized behavior systems which can only be understood as power structures.

—Wroe Alderson

As we explained in Chapter 3, channel conflict is inevitable as suppliers and their resellers act in their own self-interest. Usually, these independent parties have no formal authority over one another, but they do have a strong incentive to try to find cooperative, mutually beneficial solutions. When managers seek to resolve or manage channel conflict, they must appreciate not only the different perspectives of the channel members, but also their different power positions. Indeed, it may be the appearance of conflict that first causes them to assess their relative power in the relationship. But what constitutes power in channel relationships?

Many academics view channel power through the lenses of social psychology and organizational theory, focusing on resource dependence and the so-called bases of power, distinguishing between exercised and unexercised power, and examining the consequences for different facets of the health of the channel. Economists who specialize in industrial organization and antitrust are often concerned with the extent of a firm's market power over competitors, the manifestation ...