A Study on the Power-Conflict-Decision Structure in the Marketing Channel

YONG GIL, JEONG(Department of Business Administration The Graduate School of Seoul National University)

I. INTRODUCTION

Despite the centrality of distribution channels in marketing. there exist 3 major deficiencies in the current status of distribution channel theory and research. First, analysis of distribution channels have largely focused on micro orientation. Second, channel theory is fragmented into two seemingly disparate disciplinary orientation:an economic approach and a behavioral approach. Indeed, these should be integrate these two approaches. Third, the vast majority of empircal little or no testing of formal hypothesis derived from theory.

A promising framework for addressing these issues is provided by the political economy approach. Basically, the political economy approach views an social system as comprising interacting aets of major economic and sociopolitical forces with affect collective behavior and performance.

For about to decades the phenomena of power and conflict in channels of distribution-core constructs in behavioral approach-have been given rather regular, empirical attention in the marketing literature. But each published article on the subject is suffered earlier mentioned three deficiencies. The purpose of this study is to upgrade conceptual framework of the interfirm power-conflict relationship by introducing an channel decision structure, so that suggest more comprehensive model of interorganizational behavior in the marketing channel.

II. THEORETICAL FOUNDATION

Power is defined as the ability to control the decision variables in th marketing strategy of another firm in a given channel at a defferent level of distribution. Power of a manufacturer(M) over a retailer(R) is a result of R's dependence upon M. R's dependence on M is (1) directly proportional to R's motivational investment in goals mediated by M. (2) inversely proportional to the availability of these goals to R outside of the M-S relation. Another stream of research examining in the marketing channel is related to the French and Raven's bases of power typology. According to this view, the power of the manufacturer over the retailer depends on the bases of power, that is reward power source, coercive power source, legitimate power source, referent source, expert power source. The consequences of power is the intrachannel conflict, satisfaction of the channel member, etc.

Conflict is tension between two or more social entities which arise from incompatibiliy of actual of desired response. channel conflict is a situation in which one channel member perceives another channel member to be engaged in behavior that is preventing of impeding him from achieving his goals. It is, in essence, A's frustration brought about B's interference with A's marketing function. The amount of conflict in the channel is determined by the degree of incompatibility between A's and B's goals, disagreement over the marketing task each is to perform and how these task are to be performed, diffences in the ways A and B percieve reality, and the interdependence between A and B. Channel conflict is associated with the channel performance and the satisfaction of the channel member.

Power is used in marketing channels to coordinate the diverse activities of the functional range. But the improper use of power may cause or exacerate conflict to the point where it becomes dysfunctional to the manufacturer and retailers that comprise the channel. The base of power, therefore, must be used with care. For example, coercive power sources cause increased channel conflict, but noncoercive power sources produce less channel conflict.

Decision structure of the channel organization is a positional construct in the organization reflecting the vertical economic arrangement or transactional form of the channel. Decision structure defines the structure of the distribution of authority or power in decision making. Operating within the framework of the political economy paradigm, an understanding of the internal political economy of channel organization is critical to the interpretation of channel operations and, thus, the behavior of channel constituents. It is the decision structure component defined in this research that is of concern in the present study in that it serves as a relatively straight forward approach for conceptualizing the structural criteria defining decision-making arrangements established within the channel of distribution. For the purpose of my research, I consider the decision structure as having three dimensions, that is (1) formalization, (2) participation, and (3) interaction.

III. HYPOTHESIS

The primary research question to be considered is the role of the channel decision structure on the interfirm power-conflict relationship. In order to statisitical testing, I sugges 9 hypotheses reflecting the interfirm power-conflict-decision structure relationship.

Hypothesis 1:The power of the manufacturer over the retailers has positive association with the power source that the manufacturer holds.

Hypothesis 2:The power of the manufacturer over the retailers has positive association with the dependence of the retailers upon the manufacturer.

Hypothesis 3:The coercive power source have positive association with the channel conflict, but noncorecive power sources have negative association with the channel conflict.

Hypothesis 4:The dependence of the retailers upon the manufacturer has positive association with the channel conflict.

Hypothesis 5:The power source in the marketing channel has some association with channel decision structure.

Hypothesis 6:The dependence of the retailers upon the manufacturer has some association with the channel decision structure.

Hypothesis 7:The decision structure has some association with the power in the marketing channel.

Hypothesis 8:The decision structure has some association with the channel conflict.

Hypothesis 9:The power in the marketing channel has positive association with the channel conflict.

IV. RESEARCH METHODS

The data used in this research were gathered in the retailers of home electronic equipments that situated in Daejeon city and Chungnam province. Of the total number of retailers who received the questionnaire, 229 returned usable questionnaire, yielding a response rate of about 58%.

The power was measured using the retailer's perception of the degree of the manufacturer's authority or control over the retailers' business domain. Items were 9, and responses were derived using a 4 point scale. Coercive power sources were measured using the retailer's perception of the frequency of the control over the decision-making variables by the manufacturer. Items were 9, and responses were derived using a 4-point scale. Noncoercive power sources(referent, information, reward, expert) were measured using the retailer's perception of the level of assistance or cooperation provided by their manufacturer. Items were 16, and responses were derived using a 4-point scale. Retailer's dependence upon the manufacturer was measured through the ratio of scale volume contributed by the specific manufacturer.

Intrachannel conflict was measured using the tetailer's percption of the frequency or dissatisfaction of disagreement between the manufacturer and the retailer. Items used in questionnaire is 11, and responses were derived using a 4-point scale.

Channel decision structure was operationalized as having 3 dimensions, that is, formalization, participation, and interaction. Each dimension was measured by the 4-item descriptive statements that reflects the situation the retailer has confronted.

Initially, all items were checked for face validity by pretesting the instrument with a select sample of 25 managers of home electronec equipments retailers. Item-total correlations were used to further refine the multiple-item scale, and Cronbach's a were calculated to check the internal consitency of multiple items. To assess convergent and discriminant validities, a series of principal component factor analysis with orthogonal rotations was formed on variable measure within each of the construct in the research model.

V. ANALYSIS

In order to statistical testing between the power-conflict-decision structure in the marketing channel, the collected data were analyzed through the Pearson's correlation analysis, multiple regression anslysis, and the canonical correlation analysis. The results were followed. comparative approach to the marketing channel will be executed in the future.

key words : power, confilct, decision structure, power source, dependence, formalization, participation, interaction, political economy.