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    INSTITUTE OF MANAGEMENT STUDIES, DEVI AHILYA UNIVERSITYINSTITUTE OF MANAGEMENT STUDIES, DEVI AHILYA UNIVERSITYINDORE (MP)INDORE (MP)

    A PROJECT REPORT ONA PROJECT REPORT ON

    Understanding the Distribution Structure, Channel Conflicts andUnderstanding the Distribution Structure, Channel Conflicts and

    Conflict Management Strategies at ASIAN PAINTS in INDOREConflict Management Strategies at ASIAN PAINTS in INDORE

    For The Partial Fulfillment for Degree of

    Masters in Business Administration (Marketing Management)

    Under GuidanceUnder GuidanceAcademic GuideAcademic Guide IndustrialIndustrialGuideGuideDr. N.K.TotlaDr. N.K.Totla

    Mr. Manish ShrivastavMr. Manish ShrivastavSr. LecturerSr. Lecturer Regional ManagerRegional ManagerInstitute of management StudiesInstitute of management Studies (Indore)(Indore)Devi Ahilya UniversityDevi Ahilya University Asian PaintsAsian Paints

    Completed ByCompleted ByDarpan BhattDarpan Bhatt

    MBAMBA (Marketing Management)

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    2009-11

    CERTIFICATE

    This is to certify that the research paper Understanding the Distribution

    Structure, Channel Conflicts and Conflict Management Strategies at ASIAN

    PAINTS is being submitted by DARPAN BHATT MBA M.M. as major

    Research Project at Institute of Management Studies. The work is satisfactory.

    Dr. N.K.TOTALA

    Reader, IMS, DAVV, Indore

    Research Guide

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    ACKNOWLEDGEMENT

    I express my heartiest gratitude to Dr. Jayant Sonwalkar, Director -

    IMS, who gave me privileged opportunity to do the project work and

    guided me with his valuable suggestions, which helped to give my

    project a final touch.

    I am highly indebted to my project guide, Mr N.K.TOTALA, who

    constantly helped and directed me to carry out my project efficiently. I

    thank his for all informal discussions, constructive criticism and for

    valuable suggestion in completing the project work in spite of his busy

    schedule. His added encouragement and consideration in intervals of

    time helped me in the successful completion of the project.

    I am also thankful to all other project trainees for their valuable

    suggestions, support and co-operation at every stage of project

    development.

    DARPAN BHATT

    MBA (M.M.)

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    DECLARATION

    I hereby declare that the project titled Understanding the Distribution

    Structure, Channel Conflicts and Conflict Management Strategies

    at ASIAN PAINTS is a genuine work done by me and the information

    collected is authentic to the best of my knowledge. I take full

    responsibility for the originality of my work and declare that it is not

    pirated in any manner which is deemed illegal by law. My guide is fully

    exempted from any such responsibility as mentioned above.

    DARPAN BHATT

    MBA (M.M.) SEC B

    ROLL NO-43433

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    TABLE OF CONTENT

    INTRODUCTION 6

    Company Profile 10

    Distribution Network of Asian Paints 21

    Causes of Channel Conflict 24

    Description of Channel Partners 29

    Channel Conflict 40

    RESEARCH METHODOLOGY 42

    ANALYSIS AND INTERPRETATION 44

    Asian Paints WSS Survey: Indore 44

    Asian Paints Retail Survey 48

    Observation 50

    SUGGESTION AND RECOMMENDATION 51

    Recommendations 51

    Conclusion 53

    REFERENCES 54

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    Marketing Channel Conflict

    Introduction:

    Channel conflict is a state of opposition, or disorder, among the

    organization comprising a marketing channel. If the two parties recognize

    that they are mutually dependent, a healthy relationship can persist. If the

    two parties perceive that they are mutually independent, a healthy

    relationship can also exist. Problems arise when one entity perceives that

    they are more dependent on the other than vice versa. As conflict can have

    an unfavorable effect on channel member performance, channel managers

    must make conscious efforts to detect and resolve it. So we can say thatChannel conflict occurs when one member of a channel views its upstream

    or downstream partner as an opponent. The key is interdependency.

    Discussion:

    It is very important to recognize the true level of conflict that an

    organization faces in a channel relationship. The best way is to gather four

    kinds of information. Those are describing below.

    Step 1:

    Counting up the issue- A channel manager needs to consider all the major

    issues that can create or might be causes of beginning a conflict. For

    example for a car dealer, one study uncovers 15 issues of relevance to

    dealers in their relationship with their manufacturer, including inventories,

    delivery of cars, the size of the dealers stuff, promotion etc.

    Step-2:

    Importance- A channel manager needs to identify the importance of each of

    the issues that has been counted for. This could be done judgmentally or byasking dealers directly. For example they may indicate on a scale of zero to

    ten to recognize that how important each issue is to the dealerships

    profitability.

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    Step-3:

    Frequency of Disagreement- It involves assuming or finding out how often

    the issues are prone to disagreement and why. For example dealer may be

    asked to recall discussion with the manufacturer over the issue.

    Step-4:

    Intensity of Dispute- a channel manager needs to identify the intensity of

    dispute in regard to an issue within the channel members. For example, how

    strongly a dealer is disagreeing about a typical issue.

    These four kinds of information should be combined to form an index of

    manifest conflict for each issue. Conflict 1 = N Importance i X Frequency i

    X Intensity i

    Adding their products over all the N issues forms an index of conflict.These estimates can be compared across dealers to see where the most

    serious conflict occurs and why.

    There is three other points which we have to be considered. Thos are

    1. The difference of opinion rarely occur(low frequency)

    2. The issue is petty(low importance)

    3. The two parties are not very far apart on the issue(low intensity)

    If any of these elements is low, the issue is not a genuine source of

    conflict.

    There are three kind of conflict. Those are

    a. Goal Conflict: conflict that stems from differences between channel

    members goals and objectives.

    b. Domain Conflict: conflict that arises due to the disagreement over thedomain of action and responsibility.

    c. Perceptual Conflict: a conflict that arises due to the perceptual

    difference in regard to the market place.

    Channel conflict is often thought of as dysfunctional and, therefore, it is

    unwanted. Conflict can, however, be healthy and desirable in certain

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    situations. Conflict can serve to keep channel members from becoming too

    inactive or lacking in creativity. This same conflict can also motivate

    members to adapt, grow, and seize new opportunities. From the

    manufacturers perspective, multi-channel distribution strategies can be

    beneficial in a number of ways. Firstly, it does allow the manufacturer to gain

    much-needed insight into end-consumers needs and shopping patterns.

    Secondly, manufacturers with broad product lines can benefit because it is

    unlikely that a single channel type will be optimal for all products. Finally,

    manufacturers with a multi-channel distribution strategy can focus more on

    precisely targeting markets and improving their overall competitiveness.

    Manufacturers and their channel partners must deepen their relationships

    and cooperation. These new types of relationships may take one of three

    forms (Matta, Mehta 2001):

    RelationshipForm

    Customers Intangibles Financial

    Implications

    Manufacturer

    Support

    Retailer ownsthe

    customer

    relationship

    Manufacturer

    providessupport

    and collateral

    Retailer

    provides

    assortment and

    service;promotes

    the brand

    Retailerkeeps the

    margin and

    reducescosts

    withmanufacturer

    merchandising

    andmarketing

    help

    Collaboration Manufacturerand

    retailer share

    aggregate

    customer data

    Manufacturerand

    retailer work

    together on

    merchandising

    Manufacturer and

    retailershare

    performanc

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    and marketing

    plans

    e based

    revenue

    Seamlessness Manufacturerand

    retailer jointly

    manage and

    market to

    customers

    Manufacturer

    retailer buildone

    brandexperience

    through new

    brand or

    partnership

    Manufacture

    r and

    retailer split

    revenues

    It is not surprising that minimizing channel conflict is at the center of

    many companies Internet strategies. Proper analysis and appropriate

    strategies can go far toward managing the degree that conflict channel

    members must overcome.

    A number of ways to resolve disputes are effective. Institutionalized

    mechanisms comprises of channel conflict management strategies that is

    mainly designed to resolve conflict at its early stage including information

    intensive mechanisms, third party mechanisms, building relational norms. Of

    course it can also be resolved via Economic Incentive the most commonlyadapted conflict resolution strategy is to manage conflict by way of

    economic incentive i.e. financial incentive.

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    Channel Conflict through new age distribution

    channels (E- business)

    Historical Perceptions and Management Implications

    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 1980s. Only recently, with the emergence of

    the Internet as a new and dynamic distribution channel, has this topic been

    more of a focal point in boardroom discussions. A recent survey of 50

    manufacturers revealed that 66 percent believed that channel conflict wasthe biggest issue they faced in their online sales strategy (Hogan, Webb

    2002). Channel conflicts in the e-commerce age are intensified by the unique

    channel characteristics of the Internet (Matta, Mehta 2001).

    Origins of Channel Conflict

    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 reducecosts. 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 suppliers 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. Manufacturers have historically

    been tentative in their approaches to electronic commerce, primarily out offear of direct competition with and potential damage to existing sales

    channels, (Matta, Mehta 2001). The only thing that manufacturers fear more

    than alienating resellers is having no e-commerce plan at all. As a result,

    businesses are forging ahead with e-commerce strategies regardless of the

    consequences (Bachelor, Gilbert 2000). It is pretty easy to understand why.

    According to reports from e-commerce pioneers, using the Internet in a

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    business-to-business application to provide information to customers and

    process orders can cut down errors and save time and money, as well as

    increase productivity among the sales staff (Kalin 1998). Many feel that it is

    ultimately the lure of greater profits that create the desire to sell direct to

    consumers. However, with that increased profit potential, comes the

    increased risk of losing reseller relationships (Bartholomew 2000). The

    expanding role of the Internet has created opportunities for easy and

    extensive access to customers. Additionally, the economics of materials

    delivery has been revolutionized by the logistical networks of third-party

    shippers such as FedEx and UPS (Agrawal, Tsay 2002). The type and

    magnitude of channel conflict in the ecommerce marketplace depends on

    the nature of the industry and the individual company. Companies that dont

    own or closely control their offline distribution channels risk damaging

    sometimes decades-old relationships and revenue streams. However,

    companies that control their own channels risk cannibalizing revenues withonline stores, (Matta, Mehta 2001). In their 2002 study, Agrawal and Tsay

    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 manufacturers

    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,

    (5) More flexibility to experiment with product attributes,

    (6) Closer contact with customers, and

    (7) Protection from crises faced by resellers.

    The desire for power may be the most direct cause of channel conflict.

    According to Coupey (2001), a hallmark of power is that it relies heavily on

    perception. In other words, any channel member may alter their behavior to

    the extent of the power that they perceive the other party to hold.

    Negotiations among manufacturers, distributors, and retailers are often

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    about the power struggle. The influence that a manufacturer holds over its

    channel depends on how prominent its products are in the channels

    business (Kaneshige 2001). A well-known, large-scale manufacturer with a

    diversified channel strategy, such as Microsoft, may have more perceived

    power because they drive so much business. On other occasions, however, it

    may be the distributors who have more influence, which is often the case

    with manufacturers of niche products like tools and component parts. At the

    retail level, there are giants like Wal-Mart and The Home Depot, which often

    have the last word over many manufacturers. They believe that once their

    suppliers sell online, they become competitors (Bartholomew 2000). The

    Home Depot even sent a letter to more than 1000 of its suppliers in May

    1999, which influenced suppliers such as Rubbermaid to stop selling online

    (Agrawal, Tsay 2002) (Bartholomew 2000). One can see how these

    negotiations might become somewhat complicated. The Internet, however,

    has mostly given rise to more powerful consumers. These shoppers knowwhat they want, when and where they want it, and they are more than

    willing to circumvent retailers to get it (Matta, Mehta 2001). The Internet has

    created a new set of expectations for the consumer that must now be met,

    regardless of what channels are employed. A redefined customer experience,

    where the shops are never closed, prices are transparent, and

    personalization is emerging is fast becoming the standard. Companies with

    no physical storefronts and lower overhead are claiming market share from

    established businesses. The technology itself allows all business processes to

    function more quickly than ever before. There is also the growing potential

    for mass customization of merchandise. Existing channels may struggle to

    meet these new expectations or risk being replaced (Matta, Mehta 2001).

    While any channel member may own perceived power, manufacturers are

    usually the ones who are faced with the most decisions that can create, or

    curb, channel conflict.

    Identifying Channel Conflict

    One thing that managers must face is that conflict will always exist to somedegree. To eliminate it totally would diminish business opportunities. In other

    words, in order for a company to grow their business, there must be some

    conflict. The key is recognizing when it becomes counterproductive. An

    obvious sign that your company has taken a misstep is when sales staff and

    business partners begin leaving. Another less identifiable sign is when the

    customer actually becomes aware of the conflict. The bottom line for a

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    company is how to manage the customer relationships with its production

    strategies, (McDonald 1999). According to panelists at a 2002 vendor

    channel roundtable, just by defining the competitive playing field and some

    rules for channel participation, suppliers can minimize sales conflicts with

    their channel partners (Burke 2002). Consider the Gibson Guitar Company. In

    1997, they learned about channel conflict the hard way by offering their

    guitars for sale on their website at 10 percent below list price. Dealers

    became irate, and the company ended the online sales effort after only a

    month. They listened hard to the complaints from their network of dealers

    and decided to compromise. Now, instead of selling guitars online, they only

    offer strings and other accessories. They have also added their parts catalog

    to the web site to sell items that were previously available only to dealers

    and repair shops, which is an excellent way to meet those customers needs.

    Walter Carter, the web site manager for Gibson, felt that their biggest

    mistake was failing to inform the dealers that they were planning to sell theirguitars online (Kalin 1998).

    Best Practices for Minimizing and Managing Channel

    ConflictChannel conflict is often thought of as dysfunctional and, therefore,

    unwanted. Conflict can, however, be healthy and desirable in certain

    situations. Conflict can serve to keep channel members from becoming too

    passive or lacking in creativity. This same conflict can also motivate

    members to adapt, grow, and seize new opportunities. From the

    manufacturers perspective, multi-channel distribution strategies can be

    beneficial in a number of ways. First, it does allow the manufacturer to gain

    much-needed insight into end-consumers needs and shopping patterns.

    Second, manufacturers with broad product lines can benefit because it isunlikely that a single channel type will be optimal for all products. Third,

    excess manufacturing capacity can be better utilized with additional outlets

    when existing channels are over-supplied. Finally, manufacturers with a

    multi-channel distribution strategy can focus more on precisely targeting

    markets and improving their overall competitiveness (Webb 2002).

    According to a 2000 study performed by Forrester Research, 75 percent of

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    online consumers are likely to visit a manufacturers web site when

    researching a product to buy. Forty-two percent of those consumers visit the

    manufacturers web site after deciding what to buy, but not where to buy.

    Online consumers are empowered with information and are not hesitant to

    move on to a competitors product offering if they do not find the information

    and options they are looking for. Manufacturers and their channel partners

    must deepen their relationships and cooperationwhen the manufacture

    chooses not to compete directlyto service and satisfy empowered

    consumers by sharing.

    These new types of relationships may take one of three forms (Matta, Mehta

    2001):

    It is not surprising that minimizing channel conflict is at the center of many

    companies Internet strategies. Proper analysis and appropriate strategiescan go far toward managing the degree that conflict channel members must

    overcome. But the question remains: how does a company decide when they

    should compete directly with their retailers online?

    Channel Decision Matrix

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    Developed by Accenture 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

    Market Power is defined as a function of where power resideswith the

    supplier or with the channel and that Channel Value is a measure of how

    much worth the channel adds for the customer, beyond what the

    manufacturer provides.

    Once a company performs the exercise that determines Market Power and

    Channel Value for each channel, they can then use the Matrix as a

    framework for strategic thinking. This strategic look at each channel can

    (1) point out the safest and most effective combination of the Matrix and (2)

    show where to fight and where to mediate and/or avoid channel conflicts

    (Bendix, et. al. n.d.). Competing directly with the channel is advisable when

    the Market Power resides with the suppliers and the channel adds little or no

    distinct value to the sales proposition. Through the use of technology, theairlines have been able to lower the cost of commissions to travel agents

    significantly by investing in electronic ticketing and Internet travel sites.

    Forward integrating with the channel is best when Market Power rests with

    the traditional distribution channel even though the channel adds little or no

    value to the transaction. Suppliers should consider invading the channel in

    order to increase its capacity for value creation. This can often be

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    accomplished by creating an innovative offering that the regular channel

    cannot duplicate; without the ability to duplicate an offering, channel conflict

    may be forestalled for the foreseeable future. Suppliers must take the lead of

    their distribution channels when the value is high but Market Power is low.

    This situation is often caused by channel fragmentation and must be

    overcome by a strong leader so that the channel achieves its aims. When the

    traditional channels Market Power and value to the channel are high, a

    situation exists that has the highest potential for hostility and conflict.

    Members of the channel often see themselves as equal to their suppliers and

    demand that those same suppliers take full advantage of every opportunity

    to cooperate with the channel to maximize the total value created. This may

    be done by creating a new customer segment that does not conflict with the

    traditional channels or by limiting the number of products sold online

    (Bendix, et. al. n.d.)

    Propositions for Minimizing Channel Conflict

    Kevin Webb (2002), in his paper on Managing Channels of Distribution in the

    Age of Electronic Commerce, proposes several ways that manufacturers can

    minimize channel conflict. Once the decision has been made to sell direct to

    consumers online, lower levels of channel conflict will be experienced:

    1. by not pricing products on their web site below the resale price of their

    partners.

    2. by diverting fulfillment of orders places on their web site to their partners.

    3. by promoting partners on their web site.

    4. by encouraging partners to advertise on their web site.

    5. By limiting the offering on their web site to a subset of their products.

    6. By using a unique brand name for products offered on their web site.

    7. The earlier the products offered on their web site are in the demand

    lifecycle.

    8. The more effectively they communicate their overall distribution strategy.

    9. The more effectively they coordinate their overall distribution strategy.

    10. The more they make use of super ordinate (over-reaching) goals.

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    These methods for minimizing channel conflict are, at best, idealistic and, at

    worst, impossible to implement given the pressure that companies are under

    to create e-business strategies that have a positive return on investment.

    The fact cannot be denied, however, that these propositions would have the

    desired effect of minimizing channel conflict between manufacturers and

    their partners. The shrewd manufacturer will make use of the propositions

    that make the most sense for their given business situation.

    Asian Paints is India's largest paint company and ranked among the top ten

    Decorative coatings companies in the world with a turnover of INR 66.80

    billion. Asian Paints along with its subsidiaries have operations in 17

    countries across the world with 23 paint manufacturing facilities, servicing

    consumers in 65 countries through Berger International, SCIB Paints Egypt,Asian Paints, Apco Coatings and Taubmans.

    Vision

    Asian Paints aims to become one of the top five Decorative coatings

    companies world-wide by leveraging its expertise in the higher growth

    emerging markets. Simultaneously, the company intends to build long term

    value in the Industrial coatings business through alliances with established

    global partners.

    Group Subsidiaries

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    Apco Coatings is a subsidiary of Asian Paints in the South Pacific islands.Asian Paints operates in Australia, Fiji, Tonga, Solomon Islands and Vanuatuunder the brand name of Apco Coatings.

    Asian Paints Industrial Coatings Limited has been set up to cater to thepowder coatings market which is one of the fastest growing segments in theindustrial coatings market.

    Few companies can claim of a history of consistent growth for over two and ahalf centuries, a presence in over 35 countries and an impact on the lives ofover a billion people. Berger does that with elan. Ever since it was founded inEngland in 1760 by Lewis Berger, who perfected a new process for makingPrussian blue the color of most military uniforms then, Berger has neverlooked back.

    Over the years Berger expanded its operations across oceans, to covernumerous geographies. In 1994, Berger units were brought under the singleumbrella of the holding company 'Berger International Limited (BIL)' withheadquarters in Singapore, which was also listed on the Singapore stockexchange. In November 2002, BIL became a part of the Asian Paints Group.Today, the name of Berger is synonymous with quality and innovation. BILhas presence across three regions viz. Middle East, Caribbean and SouthEast Asia. In the Caribbean region, Berger is a household name. Andconsidering that the company celebrated 50 successful years in the regionrecently, this is not surprising.

    Incidentally, Berger Paints Jamaica Limited, which is listed on the Jamaicanstock exchange, is amongst the top ten companies in the country in terms ofmarket capitalization. In the Middle East too Berger is a well-respectedbrand. It is the largest paint company in Bahrain. Using its state-of-the-artmanufacturing facilities there, and in United Arab Emirates, it exports tocountries in the Commonwealth of Independent States, Gulf Cooperation

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    Council and Africa. In South East Asia Berger enjoys a fine reputation and hasoperations in Singapore and Thailand.

    Founded in 1979, SCIB Paints today is a reputed name and ranks amongstthe top five paint companies in Egypt. SCIB Paints became a part of theAsian Paints group in August 2002

    Asian PPG Industries Limited, a joint venture between Asian Paints (India)Limited and PPG Industries, Inc. USA with 50:50 equity sharing wasestablished in March 1997 with the objective of providing solutions to thepaint requirements of Indian Automobile manufacturers. The joint venturebrought together two leading companies with strengths in technology,manufacturing and customer insight.

    Taubmans Paints Fiji, the fourth largest paint company in Fiji, became a partof the Asian Paints family in September 2003. Taubmans Paints is thedominant player in the project sales segment in the country and is a leaderin the neighboring Samoa Islands. It has two manufacturing facilities, one inSuva (Fiji) and the other in Samoa.

    Supply Chain

    Asian Paints has harnessed the powers of state-of-the-art supply chain

    system using cutting edge technology to integrate all its plants, regionaldistribution centers, outside processing centers and branches in India. All the

    company's paints plants in India, two chemical plants, 18 processing centers,

    350 raw material and intermediate goods suppliers, 140 packing material

    vendors, 6 regional distribution centers, 72 depots are integrated.

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    The supply chain runs through a wide spectrum of functions right from

    materials planning to procurement to primary distribution. It has played a

    pivotal role in improving operational efficiencies and creating agile

    procurement, production and delivery systems. It has also enhanced the

    flexibility of operations, lowered output time and reduced delivery costs,

    while improving customer-servicing levels and profitability.

    The Supply Chain Management is backed by IT efforts that help the company

    in demand forecasting, deriving optimal plant, depot and SKU combinations,

    streamlining vendor relationships, reducing procurement costs and

    scheduling production processes for individual factories.

    Functions of Channel Members

    Types of ChannelFour Channels through which marketers can reach customers

    Channel 1 Channel 2 Channel 3Channel 4

    Manufacturer Manufacturer ManufacturerManufacturer

    Agent

    WholesalerWholesaler

    Retailer Retailer Retailer

    Customer Customer Customer Customer

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    What is understood by direct Vs. Indirect Channel

    The direct-sales channel will grow at the rate of 100 per cent since the base

    is small. Direct sales channel in 3 ways: InfoTech, telecom and financial

    services industries

    Creating their own sales force

    Selling through someone elses sales force.

    And using direct sales dealers

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    DISTRIBUTION STRUCTURE OF ASIAN PAINTS

    (Madhya Pradesh ONLY)

    FORMAL STRUCTURE

    INFORMAL STRUCTURE

    Note: Wholesalers are not a part of the formal structure of Asian paints

    distribution network. They make bulk purchases from the distributors directly

    thereby leveraging on the margins.

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    The indirect channel is, by default and by necessity, the primary channel for

    most Indian companies. It is, probably, the most cost-effective way of

    reaching a large country with over 3,700 towns and close to 6 lakh villages.

    This is set to emerge as the fastest-growing channel of this millennium. Thebest part of a franchise arrangement is that the company offering the

    product or service does not have to invest in real estate. Besides, the

    franchisee often takes care of the local promotional expenditure. This

    symbiotic relationship is a win-win situation for the company and the

    franchisee and will be the basis of successful channel strategies in this

    millennium. Although on-line revenues in India will not be significant for

    sometime to come, all companies should maintain a selling-presence on the

    Net. The likes of ITC, HLL, Indian Oil, and Amul have to combine to create

    innovative channels of distribution. Logistics management provides a

    powerful means of enhancing customer value. Why is it so important to

    optimize the supply chain? Inefficiencies in the supply chain lead to higher

    inventories at all points. This adds costs related to wastage, blocked funds,

    and the risk of holding obsolete products. Today, the need is for long-term

    relationships, where both manufacturer and supplier can look for mutually

    beneficial solutions. Most investments in design and technology in this

    industry give returns only over a long period of time, sometimes as long as

    the lifecycle of the product.

    OWNERSHIP TRANSFER

    Stocks manufactured at the factories and co-packers reach the C&f through

    mother Godowns. The stocks stored at C&f is the property of Asian paints.

    Encashment of stocks are done through Invoicing to Cash Distributors C&f as

    per the guidelines given to them. They also receive and store support

    materials like give aways, stickers and complementary items etc.

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    To answer this question, it is of relevance to define, who belongs to a

    marketing channel. From the semi-products are delivered from varies

    suppliers to the manufacturer, who then finalize the product and send it

    through the normal way, next to the wholesaler. This is the first step of a

    marketing Channel. The wholesaler sells the product to a brighter group of

    retailers, which is the second step and these members sell the product to

    customers. Also possible is, that the wholesaler in a first step sells the

    product to a Jobber, who add new value, service or a package-bundle to

    the products and sells these to the customer.

    Along with the rising use of Internet this Marketing Channel is added with

    new shorter ways to the end-user. At the same time these new opportunitieslet conflicts in the Channel Canal rise.

    The normal goods-flow works as follows:

    Manufacturer wholesaler retailer End-userOne new upcoming good-flow also can work as follows:

    Manufacturer End-user This removal of Channel members is called Disintermediation.

    Disintermediation appears upon the industry in different impacts. Most

    affected is the industry of computer hard- and software, travel agencies,

    bookstores and music-stores, stock purchasing see e-trades. Not affected are

    industries and goods like furniture production, grocery and or also pet-

    supplying. Conflicts further can occur cause of reasons like role incongruities

    between the partners (which is described above), resource scarcities (which

    actually appears for the reason of rare raw-metals), perceptual difference

    (e.g. lack of information about new products), and expectation difference

    and or decision domain disagreements. A factor for conflicts can also be the

    goal incapability (e.g. the manufacturers aim is not to get the highest marginpossible) and last but not least the communication difficulties between

    channel members to each other or to the end-user.

    Different causes for channel conflict can be distinguished as:

    Causes of Channels Conflicts

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    Goal incompatibility Though channel members share the common

    goal of maximising their joint effectiveness, each is a separate legal

    entity.

    Each has its own employees, owners and interest groups who help

    shape goals and strategies, some of which may not be totallycompatible with those of other channel members.

    This incompatibility may be the underlying cause of stress, ultimately

    creating conflict.

    Position, Role and Domain In congruency Changes in

    specification of position or poorly defined roles may cause conflict.

    Incompatibility develops within channel arrangements as roles and

    methods of operation change.

    Conflict also arises when there is lack of agreement concerning

    appropriate domain of members.

    Communication Breakdown Often is the reason for channel

    conflict. Could occur in 2 ways:

    1) When a firm fails to exchange vital information with other

    channel members.

    2) Through noise and distortion

    Different Perceptions of Reality Conflict occurs when different

    channel members differ in methods of achieving mutual goals or have

    different solutions to a mutual problem.

    Even when they have a strong desire to cooperate, conflict can result

    from different perceptions of the facts.

    Ideological Differences Are similar to those resulting from

    differences in perceived roles and expected behaviours. Can result

    from big-business and small-business perceptions of the appropriaterole of management.

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    sellers like pefa.com, reverse auctions like freemarkets.com, B2C operators

    like Amazon.com, C2B auctions like by Priceline.com or C2C sellings by

    Ebay.com. Manufacturers face a huge band bride of different possibilities and

    channel choices to sell product for a specific customers clientele. Each

    member has a different range of channel cost-structure which leads to

    conflicts as more members take part to sell the same product selling. This is

    supposed to be the most complicated case where a lot of varies conflicts

    occur and where the roots and reasons are hard to figure out.

    Is a bigger amount of Sellers healthy?

    Each member of a Channel Canal fears new upcoming members selling the

    same product for a cheaper price. To say it in other words: With new and

    more Channel members a channel competition appears, which dumps the

    price of the product and so is an advantage for the end user. It forces

    channel members to be innovative and to serve the best service coming

    along with the best price and quality to the costumer. Members, who cant

    compete, have higher costs and a longer structure will automatically

    disappear. A higher productivity in the channel is the result. Therefore it is

    an objective to manage the channel conflicts on a certain status, that it

    wont escalate to a destructive level, but lead to a competition situation.

    Destructivity may occur, when members cut the service to a zero-point or

    wont give any shelf space for products in showrooms. This leads in the end

    to less product sellings and a less awarded and positioned brand on the

    market place. To avoid this, a well organized communication conducted by

    the manufacturer may prevent the worst case.

    Manufacturers normally seek to expand the number of members and

    distribution points where they sell their products while each retailer hopes to

    be the only one who sells a special product. However, having too many

    channel chase too few consumers results in channel dropping the level of

    support to the brand. This can have a deleterious impact on sales as well as

    brand image. On the other hand changing customer preferences through

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    different channels can modify industry structures. All in all a delicate balance

    must be maintained between moving too quickly and unleashing destructive

    channel conflict versus clinging too long to declining distribution networks.

    Is Channel Conflict a good thing?

    The most endangered victims of a channel conflict may be the distributors

    group. They are faced with the challenge to show that they add more value

    to the product and therefore give a reason to buy the product not directly

    through the new e-market shops. The biggest channel is to turn a channel

    conflict into channel harmony, where a synergy out of the conflict arises. For

    instance a physical store might take the advantage on having at the same

    moment an online store and vice versa. If Manufacturers sell their product in

    a vertical manner direct to the customers, retailers should try the same and

    can in this manner provide less high costs for the end user. The members

    have to establish a creative way to supply the products through an efficiency

    and profitability channel for the end user. The linear and traditional model is

    added by some new channels which have to be well integrated. Finally is to

    be said, that channel conflicts are always leading to competition and

    therefore to a better service, a better end-user price and last but not least to

    new products, better quality and new brands which then will be sold in the

    beginning by again a few retailers.

    Four types of effects

    For better understandings and to conclude the discussion about channel

    conflicts, see the bellowed four diagrams. The first diagram shows a negative

    effect, where more conflicts leads to decreasing channel efficiency. In this

    case the manufacturer should try to lead and optimize his distribution

    channels for a better outcome.

    In the second diagram shows that a higher conflict level has no effect on the

    channel efficiency. The third diagram shows an interesting case, where a

    conflict in the first step leads to a higher efficiency, but reaching a special

    point of escalation it leads to a decreased efficiency. Last but not least more

    conflicts can also result to more efficiency, as it is good to always justify the

    own existence on the market by becoming better in service and quality.

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    DESCRIPTION OF CHANNEL PARTNERS

    I. C&F Agent

    These agents have infrastructural and transportation facilities and are the

    responsible for the transfer of goods. No sale takes place at this level. These

    C&F agents get monthly emoluments from the company for their service.

    II. WSS

    The company appoints various wholesale stockiest who are a very important

    link between the C&f Agents and the retailers. The number of this stockiest is

    not fixed and varies according to the sales potential and geographic size of

    the region.

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    Primary sale takes place at the Wholesale stockiest. Hence their selection,

    motivation and evaluation become very important to the company.

    TYPES OF WSS

    The company has divided the WSS on the basis of their sales value and sales

    potential. The various categories of WSS are

    1. CLASS A : These stockiest are the ones who have a sales potential

    above

    Rs 10, 00000 per month.

    2. CLASS B: These stockiest have the sales potential between Rs 5,

    00000 and

    Rs10, 00000 per month.

    3 . CLASS C: These stockiest have a sales potential of less than Rs

    5, 00000

    III. RETAILER

    The WSS sell the goods to the retailers who in turn sell it to the end

    consumers. The retailers are classified in terms of their dales potential in the

    following manner-

    Class A- Greater than Rs 30,000 pm

    Class B- Between Rs 30,000-10,000 pm

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    Class C Between Rs 10,000-5,000

    Class D- Below Rs 5,000

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    SALES STRUCTURE: ASIAN PAINTS INDUSTRIES

    NATIONAL SALES HEAD

    REGIONAL SALES

    MANAGER

    AREA SALES

    MANAGER

    TERRITORY SALES

    INCHARGE

    [6 RSMs divided zone

    wise]

    [One ASM per eight

    territories]

    [One TSI per WSS]

    COMPANY LEVEL

    DISTRIBUTOR LEVEL

    Interim Sales

    Representatives

    Interim Sales

    Representatives

    Interim Sales

    Representatives

    Interim Sales

    Representatives

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    ASIAN PAINTS Industries Ltd. is internally divided into four broad product

    usage based divisions. They are:

    1. Ancillaries

    2. Automotives

    3. Decorative paints

    4. Industrial

    These divisions are looked after by their independent National Sales Heads

    responsible for their respective divisions. Below these heads, their entire

    division is divided into zones headed by the Regional Sales Managers who

    are next in the sales hierarchy.

    In our concerned division, i.e. Decorative paints; the entire country is divided

    into 6 zones headed by respective RSMs. Next in line are the Area Sales

    Managers who report directly to the RSMs. FE division has an ASM per eight

    territories. Under them are the Territory Sales In charge who act as an

    interface between the company, distributors and retailers. Every WSS has

    one TSI looking after their order and requirements. To supplement the TSI

    and ensuring closer monitoring of the retailers needs and payments, the

    distributors themselves recruit sales representatives called Interim Sales

    Representatives ( ISRs). One distributor normally has 2-3 ISRs depending onthe expanse and value of his territory.

    SELECTION OF WSS

    Criteria are:-

    1) Capital Investment :

    This is dependent not only on the present required turnovers but also on

    the estimated future capital investments that will be required by the

    distributor (based on companys growth plans in the area). Amounts

    required vary from area to area and markets to markets.

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    2) Relevant Experience

    It is imperative that the distributor has had some prior experience as a

    channel member in the FMCG sector so that no training is required to be

    imparted to him on aspects of the business. The distributor should not be

    dealing in competitors products and should be able to function as a

    dedicated channel for ASIAN PAINTS. Also, he should have at least 2-3 years

    of experience as a distributor in the market. But most importantly the

    business should not be totally driven by his staff rather has complete self

    involvement of the WSS.

    3) Infrastructure : The basic infrastructural requirements for a WSS are:

    a) Two rooms measuring at least (10*10) sq. feet each.

    b) Delivery vehicles preferably 3 wheelers

    c) Sales executives called Interim Sales Representatives or ISRs.

    d) Storage GodownHowever, there are no set guidelines for the above criteria with the same

    being variable with market condition and turnover expected of a WSS. Every

    new WSS furnishes the Company with basic information in a format specified

    by the Company called a WSS Appointment Form (Annexure) which had

    details about his shop registration number, type of delivery vehicle,

    computer configuration etc.

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    INCENTIVES TO THE WSS

    1) Margin

    MARGIN LAYOUT

    C&F to WSS

    WSS A buys the product at 108.93 from the C&F agent.

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    WSS B buys the product at 108.65 from the C&F agent

    WSS C buys the product at 107.82 from the C&F agent

    WSS TO RETAILER

    WSS A sells to retailers at 112.30,with cash discount of 2%.The billing

    is done at 114.60.Hence the WSS gets a margin of 3%.

    WSS B sells to retailers at 112.30.60, with a cash discount of 2%.Thebilling is done at 114.60. Hence the WSS gets a margin of 3.25%.

    WSS C sells to the retailers at 112.30, with a cash discount of 2%.The

    billing is done at 114.60. Hence the WSS gets a margin of 4%.

    AT THE RETAILER

    The retailer is given 2%cash discount by the WSS, which is common to

    all the retailers. This 2%cash discount is divided into two parts-

    a. Cash Discount 1% on bill.

    b. Discount of 1% if the money is delivered within 20 days.(the credit

    period)

    The MRP is 127 and the actual selling price varies across retailers.

    *All the above margins are in Rs.

    RATIONALE OF DIFFERENT MARGINS FOR WSS.

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    The basic logic of giving higher margins to lower class WSS is that as the

    business of the stockiest is lower in terms of value, he may not be able to

    make up for his infrastructural costs which are accrued in storing and

    transportation.

    In case of Class A wss, he is able to generate enough volumes to justify hisinfrastructural costs. Hence even though his margins are lower, he is able to

    generate very high volumes and meet his additional costs.

    2) Certificates

    Certificates of acknowledgement for achieving the targets for a name like

    ASIAN PAINTS are priced by the distributors. They frame them and display

    them in their offices.

    MOTIVATION OF CHANNEL PARTNERS - KABHI GIFT KABHI TRIP OFFER

    The company consistently comes up with schemes for its wholesale stockiest

    and dealers to enable them to enjoy better margins and thus motivate them

    to sell more.

    One such scheme is Kabhi gift Kabhi trip offer for the dealers.

    Duration: April 2010 to Dec. 2010

    Valid on product range: ASIAN PAINTS SH/P + SPEEDX + MARINE

    Open for: Registered dealers of ASIAN PAINTS

    Workability:

    In a nutshell, the offer has qualifying criteria of purchase of 1000 kg during

    the scheme period. The dealers satisfying the criteria get points on this

    purchase which in turn qualifies them for gift / trip slabs.

    Broadly, the whole scheme period is divided into three quarters namely,

    April-June, July-September, and October-December. Every quarter has a pre-specified target in kgs which when achieved by the dealer fetches him 1

    point.

    Also, 5 achievable points are distributed among the following heads:

    Purchase Points

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    On a purchase of 1 kg, the dealers get one pt.

    Exclusive Display Points

    On exclusive display of 1 kg of any of the three products the dealer

    gets 1 pt.

    Pack Specific Points

    This is specific on pack quantities. For eg, packs of 2kg and below,

    between 5kg and 10 kg and above 20 kgs. These pack specific quantities

    fetch him 2pts each.

    Others

    Again gives him 1 pt per kg.

    These points and the target achievement points are added up for all quarters

    and thus the grand total is reached.

    This final point achieved by the dealers makes him fall in one of the gift/ trip

    slab in the gift chart if the points are greater than 3000.

    The gifts range from watches to DVD players, from trips to Goa to even

    Singapore, Patty etc.

    EVALUATION

    Once a distributor is appointed, the company generally does not take away

    business from him, except when the underperformance has been observed

    over long periods. While evaluating his performance, his targets performance

    is studied relative to that of other distributors in the nearby area (because

    growth patterns may by regions). Also, if a WSS is found guilty of Stock

    inflow, he is terminated. If a retailer has not been paying his credit for long

    periods, he is discontinued from the channel.Also, if a WSS is found guilty of

    Stock inflow, he is terminated.

    TRAINING PROGRAMMES

    WHOLESALE STOKIESTS:

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    The WSS prove to a very important channel partner for the

    company as they forward the goods to the retailers and make them aware

    about the same. Hence, product awareness becomes a mandate for this level

    so as to completely understand the product utility and application. Also the

    company has some policies which the small distributors may find difficult to

    understand and thus falter in implementation.

    To avoid the above situation, the company sends distribution managers

    from the head office to brief them about the products and also give them the

    complete system and functioning description. They are also elaborately told

    about the schemes launched by the company because they would be further

    responsible to ensure that retailers are rightly aware of the schemes.

    This training is mostly given to the B and C class WSS.

    RETAILERS :

    The retailers are the most important channel partners as they

    are the direct link between the company channel partners and the end

    consumer. They are also given training in the form of seminars and meets

    organized by the company.

    MECHANICS AND CARPENTERS:

    Though large offices, industries and households buy productsfrom the company but the end users are the mechanics and carpenters

    among other masons. Their recommendation to buy the product is what

    drives the customer to buy the particular brand of adhesive.

    The company arranges meets and knowledge shows for them to make them

    aware of the products and also to know about their requirements and

    necessities.

    FORECASTING AND TARGET SETTING

    Target setting is a result of negotiation between the distributor and the

    company. Mid month targets for the next month are given by the company

    at around 5th -10th of a month. These are set for the RSM, ASMs and TSI in

    the hierarchy and driven down by them.

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    At the month end the distributor can negotiate these targets in the range of

    +/- 10%.However; we see that the ASIAN PAINTS products have much

    seasonal and cyclic variation, due to the very nature of the product and their

    usage. Lot of forecasting is done on the suggestions of the WSS, as they are

    very experienced in these variations.

    SEASONAL VARIATION IN DEMAND

    Though forecasting is done at the ASM level, there is always an estimation

    put forward by the WSS depending on seasonal variations in demand. The

    following graph depicts the demand in various months for different products.

    As shown above, from the month of Jan to March, there is a demand for

    paint related products due to festivals like Id and Holi, when people paint

    their houses. In April, with the start of the financial year, many new schemes

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    are introduced. Generally all the products sell during this period. Products

    like ASIAN PAINTS SH and ASIAN PAINTS SR 900, sell well during these few

    months. As July approaches, sales take a dip. Due to monsoon, there is no

    painting of houses. The month of July experiences a slump in demand.

    From august to November, demand raises again due to festive andmatrimonial season, where people paint their houses, goes for new furniture

    and other renovations.

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    CHANNEL CONFLICTS

    A. UNDERCUTTING

    As in most fast moving goods, ASIAN PAINTS also faces some channel

    conflicts. The problem of undercutting is also present. Although the

    wholesalers are not a formal route to distribution by the company, they are

    very much a part of the distribution structure. The presence of a huge

    wholesale market leads to obvious channel conflicts. In addition to this, the

    various margins given to the different categories of WSS leads to stock

    inflows. The various channel conflicts faced by the company today are-

    WHOLESELLERS

    The wholesalers in this market are a very active link in the distribution of

    ASIAN PAINTS products and area involved in bulk purchase from the WSS.Let

    us take the same price point of 112.30, which the WSS gives to the retailers

    as well as the wholesalers. The wholesaler sells the product to the retailer at

    lesser than 112.30, the price which the WSS offers them. There are primarily

    two reasons for this undercutting-

    I. The wholesaler wants the retailer to buy the other non branded

    products too, at which he charges heavy premium. This more than

    offsets his loss in selling the ASIAN PAINTS product below purchase

    price.

    Eg: A retailer dealing in hardware and paints will have to buy

    other products like Plywood Mica, Nails etc In order to woo the

    retailer, the wholesaler will sell the ASIAN PAINTS SH at Rs111,

    which is lesser than what the retailer would have got from the

    WSS (112.30).in this way he is able to retain him and persuadehim to buy other non branded products. On these non branded

    products, he gains margin of 3 -4%, hence making the deal very

    lucrative for himself.

    II. The wholesaler also avails the benefits of discount in various primary

    schemes meant for volume retailers, as the wholesaler buy in Bulk.The

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    Company offers bulk discount and gold jewelry at various volume

    slabs. By availing these regular schemes, the wholesalers are able to

    make up any losses from selling at lower than cost price. Eg;

    SLAB SCHEME

    >30 Kg 1 Re /Kg off

    >50 Kg 2 g Silver

    >1 Tonne 2 g Gol

    RETAILERS

    At the retailer level also there are variations in price and undercutting. The

    major reasons for undercutting at the retailer level are-

    Many retailers keep the branded products because it increases credibility of

    their shop. They are primary dealing in non branded products like Mica,

    Plywood etc. Hence, they give discounts on the ASIAN PAINTS products and

    woo the consumer to buy other products too. He charges a high premium on

    the non branded product, which more than offsets the discount given on theASIAN PAINTS product.

    B. STOCK INFLOW

    Many times, a class B or C WSS of different territory sells his product in the

    area charging lesser price because the company offers him more margins, in

    order to support his infrastructural costs. As explained in sect, the class C

    WSS gets 4% margins by company. Hence in order to increase sales, he at

    times goes to other territories and sells at lower price than the class A WSSavailable there.

    Eg:

    Companyprice

    Selling price(ownarea)

    Selling price (WSS Aarea)

    Selling price(SP)

    Class A WSS 108.93 112.3 112.3 118

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    Class CWSS

    107.82 112.3 110 116

    In this way, two retailers in the same area end up selling at different prices as theproduct bought by one retailer has been supplied by a different WSS of different

    territory.

    RESEARCH METHODOLOGY

    The problem statement:

    Channel Conflict in Brief Multichannel systems are a way of life formanufacturers today. Whether you are managing a mix of direct and indirectchannels or a spectrum of high-support to low-support resellers, the reality isthat channel conflict will be an ongoing issue in your marketplace. As thenumber of internet sites (potentially including your own) that offer yourproduct for sale proliferates, this multi-channel structure becomes morecomplex and the channel conflict potential more pervasive.

    A limited amount of channel conflict is healthy. It indicates that you have

    adequate market coverage. However, once the balance between coverageand conflict is lost, destructive channel conflict can quickly undermine yourchannel strategy, market position and product line profitability.

    Objectives of this study:

    Understanding the Inter Territory Sales Dynamics and Undercutting inIndore and other cities of Madhya Pradesh.

    Identifying whole sellers involved in the process of inter territory sales. Analyze the products and circumstances that significantly contribute to

    undercutting.

    The Methodology:

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    ASIAN PAINTS WSS SURVEY: INDOREName of WSS: M/S Asian Paints Ltd

    TYPE A WSS

    Experience: 3 years

    Asian Paints Ltd is one of the prominent wholesale suppliers in INDORE area.

    Apart from ASIAN PAINTS, he also keeps the products of him following

    companies-

    1. Airtel

    2. Amul

    3. Godrej

    As we can see, none of the other products are competing with ASIAN

    PAINTS products.

    The Infrastructure

    Asian Paints Ltd are Type A was, hence they have a very good infrastructural

    facilities. The facilities available at Asian Paints Ltd are-

    a. A 20 by 10 sqr feet front office with two telephone lines and one

    Fax machine.

    b. An unbranded computer(assembled) with 128Mb RAM and 40 GB

    hard disk, which is as per the requirement of theCompany

    c. A huge godown

    d. 3 -Three wheeler auto- Bajaj Tempos

    e. 2 Hand Rickshaws

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    Sales Staff

    Asian Paints Ltd have one ISR (Interim Sales Representative) , working for

    ASIAN PAINTS products. In addition, Mr Bansal himself along with his younger

    brother work as sales executives.

    Retailers Covered

    Asian Paints Ltd covers around 150 Retailers. The various kinds of

    distributors falling in his area are-

    1. Class A - 10 To 15

    The class A retailers is catered by Mr. Ankur Bansal himself. Around two

    times a Week he visits these retailers and takes their orders.

    2. Class B 35

    Class B WSS is visited by the ISR and Mr. Bansals brothers, again

    3. Class C 100

    The class C retailers are catered by ISR. Around two times a week he visits

    these Retailers and takes their orders.

    Credit Policy

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    The WSS sells the goods at credit to the retailers for a 20 day perioud.The

    retailer has to pay within the limited period or the 1% cash discount which is

    offered by the company, is not given to the retailer. As already explained,

    out of 2%CD (Cash Discount) given to the retailers, 1% is given at the time of

    delivery and 1%if the retailer pays back within 20 days.

    In case the payment is not made in 20 days, an interest n the money @4%is

    charged by the WSS.

    If the retailer does not pay by the end of the month, the remaining goods are

    confiscated by the WSS, as a accompany policy. This, however, has never

    happen at Asian Paints Ltd.

    Lead Period

    The lead periods in providing stocks to the dealers differs from the SKU and

    quantity ordered; some SKUs are delivered correspondingly with taking

    order but some are sent from the warehouses. A higher quantity ordered has

    to be replenished from the warehouse.

    Stock Policy:

    As per the company regulations the distributor is supposed to maintain a

    stock of 3 weeks; the distributor maintains a stock of 3 -3.5 weeks in

    monetary terms it equals to Rs. 30 lakh for the distributor.

    The stock is formalized by the company; the dealer can negotiate on 3-4 end

    days, the stock policy is formed for the month.

    Return Policy

    The company follows a policy of return when the product has not been sold

    for six months, is damaged or has defects. The replenishment is done with

    cash and happens at the end of every six months.

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    Return on Investments

    The company does not give any guarantee to the distributor with regard to

    returns on his investment which is in line with the market credentials of thecompany; the distributor has invested Rs. 3 lakhs as security money and

    around 30 lakhs in the infrastructure.

    Promotion Policy

    The trade promotions are mostly secondary schemes, which are primarily for

    the retailers. These schemes are notified to the WSS around 7 of every

    month and then are passed down to the retailers.

    CHANNEL CONFLICT: STOCK INFLOW

    As already explained, different class of WSS are given different margins on

    the products. The B and C class WSS are given higher margins in order to

    help them meet their infrastructural costs. This difference in margins, at

    times, drives the C class WSS to push their products in the territory of WSS A

    at a lower price. This has happened at the Asian Paints Ltd and there is no

    effective check which can be done to stop this Inflow.

    DUMPING

    Another issue, which the WSS told us, was the case of dumping by the ASM

    under pressures of meeting targets in certain months.

    He said that it is a tacit understanding between the company and him that at

    times he shall keep more stock than required in order to meet the targets ofASM.He says it is a bit of problem, but most of the business is run by

    relation, which cannot be spoilt.

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    ASIAN PAINTS RETAIL SURVEY: INDORE

    RETAILER 1: Anils Hardware

    (UNDERCUTTNG TO PUSH UNBRANDED GOODS)

    This retailer is a hardware store who deals primarily in paints, warnishes and

    plywood. He buys his ASIAN PAINTS products from an authorized WSS in this

    area at the price fixed by the company.

    The sales representative visits him once in a week .The delivery of the

    demand is done the next day only. He prefers WSS rather than the

    wholesaler in his area because he can return the unsold goods to him.

    Whereas the wholesaler gives him at a discount, he will never return the

    goods unsold.

    UNDERCUTTING

    This retailer sales the ASIAN PAINTS SH at below his cost price from the

    WSS.The reason for doing so is that he primarily deals in unbranded goods

    like plywood,mica,paints etc.Hence two main benefits are derived by doing

    undercutting-

    He is able to woo the customer to buy other non branded

    commodities by showing them discount on ASIAN PAINTS products.On these unbranded goods, he heavily charges premium, which

    more than offset his loss in selling ASIAN PAINTS below cost price.

    Presence of a strong brand like ASIAN PAINTS increases his shop

    visibility and credibility.

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    RETAILER 2: Dave Paints

    (UNDERCUTTING BY BUYING FROM WHOLESALER)

    The retailer is a hardware shop, who keeps many ranges of ASIAN PAINTS

    products. Also he keeps a range of hardware products. Rather than buying

    the Class A WSS in his area, he buys from the wholesaler, Agrawal and Sons.

    Since he buys in bulk, the discounts given by the wholesalers gives him large

    margins. The price points which is offered by the WSS and Wholesaler is

    WSS (Asian Paints Ltd): 112.30

    Wholesaler (Agrawal Brothers): 109

    This huge difference forces the retailer to buy from the wholesaler. This

    retailer also buys the non branded products from the same wholesaler. Since

    he buys from the wholesaler at a lower price, he charges lesser to the

    consumer, thus resulting in undercutting.

    RETAILER 3: Nitco Paints Pvt Ltd

    (UNDERCUTTING BECAUSE OF STOCK INFLOW)

    This retailer is a paint shop which keeps a whole range of ASIAN PAINTS

    products. This shop buys from Sharma Traders, a Class C WSS, who

    encroaches in the territory of Asian Paints Ltd (Class A WSS).

    The prices offered by the two WSS are

    Sharma Traders: 110

    Asian Paints Ltd: 112.30

    This type of stock inflow results in the undercutting at the retailer level.

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    OBSERVATIONS

    1. As seen earlier, the wholesalers are a cause of conflict in the distribution

    system. However, the company does not objects to the unwarranted

    existence of wholesalers as they serve as means to improve the distribution

    of companys products and the undercutting done by them helps to push up

    sales in the long run at times.

    An example in this context is that of Decorative paints. The sales of Asian

    paints were disappointing in mid years due to strong competition from MNC

    players and some local brands, in spite of various attempts by the company

    to alter packing, size, prices etc. Then the company offered the wholesalersQPS (Quantity Purchase Schemes) margins (or even T.V.s) on bulk buying by

    them over a period of time.

    They pushed the product into the retail channel and once sold at the

    retailers end, repeat purchases followed. Henceforth the official route set in,

    the distributor could ensure repeat sales by building upon the previous

    successful sales of clairs by the retailer.

    2. The company introduces contests to motivate their channel partners

    regularly.

    In 2010 the company had launched a contest Khulja Sim Sim - Supper

    awards for super achievers similar to Proud to be Asian Paints.

    3. Training of Sales force of Distributors should be taken over by Asian Paints

    to ensure optimal performance.

    4. The company dumps huge stocks of slow moving SKUs to achieve targets,

    but in the long run, it results into dissatisfaction of distributor and losses for

    the company.

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    5. The selection of Distributors is a very crucial decision for the company.

    A lot of time and effort is spent to train them. Also, they are not

    frequently changed.

    RECOMMENDATIONS

    1. APPLYING SPLIT RANGE DISTRIBUTION:

    A split range distribution strategy has been successful in similarcases of large SKU sizes co existence of 2or more main brands where each

    needs separate attention. A case of Perfetti can be taken for understanding

    where split range distribution had been largely successful. In a nutshell,

    Perfetti has three main brands with 10-12 SKUs for each i.e. Alpenlibe,

    Centre Shock and Centre fresh. They applied split on an equal value equal

    volume basis. The same was done at Britannia to provide focus and thus

    increase sales.

    At, ASIAN PAINTS, for FE division we suggest a split among the range of

    adhesives for sticking and those used for binding in paints. Then again, to

    provide almost focus, we suggest that separate WSS for the two unlike the

    same handling the entire range and not being able to concentrate on all

    SKUs.

    Lets say, P1: is the range of Hardware adhesives (for sticking plywoods,

    mica etc)

    Then, P1a, P1b, P1c etc are the different SKUs in hardware.

    Similarly, P2: is the range of Paint Adhesives (binders distemper etc).

    Then, P2a, P2b, P2c etc are the different SKUs in paint adhesives.

    Separate salesman for the splits

    Before split, 3 salesmen, 2 beats each all products

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    Now 3 salesmen, 6 beats each, 1/3rd the products

    (one split group)

    Now, as the WSS for hardware and paints are different, the ISRs under themalso concentrate on separate SKUs. Thus their beat frequency would increase

    as the products range has largely reduced resulting in more focus and higher

    no. of visits to dealers.

    2. CONSUMER PROMOTION SCHEMES:

    The company should start consumer promotion schemes like scratch cards

    etc, which will have gifts like watches, radio etc.This can woo the carpenters,

    painters to buy and recommend ASIAN PAINTS over other brands.

    Area Sales Manager

    (ASM) for P1a, P1b, P2a,

    P2b.

    Distributor for P1a

    and P1b.

    Distributor for P2a

    and P2b.

    Salesman for

    P1a

    Salesman for

    P1b

    Salesman for

    P2a

    Salesman for

    P2b

    APPLYING SPLIT RANGE DISTRIBTION AT PIDILITE

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    3. ASIAN PAINTS SHOPPE:

    Since ASIAN PAINTS has strong brand equity even among children and

    stationary consumers, it can open up shops specifically for selling homeconsumption products. This may not drive sales but will be a right step in

    distribution to do brand building.

    Conclusions

    While retailers and manufacturers cautiously cross from channel conflict

    into the demilitarized zone of channel cooperation, consumers readily move

    between the different camps, sometimes even visiting manufacturers sites

    more than retailer sites. These two camps must do the following if they

    hope to survive in todays business environment:

    (1) Satisfy mutual needs, (2) reduce redundancy, and (3) share costs.

    Why must manufactures and retailers come together and work with each

    other? Coexisting with retailers online, manufacturers will sell less than

    their retail channel partners, However, manufacturers will influence sales

    by affecting both on- and offline retail sales

    Conflict is not only problematic but also it brings opportunities which

    can be evolved into a more dependable efficiency and prominent marketing

    channel system. There are many ways to resolute conflict but strategy which

    is used resolve the conflict is more important. There will be conflict if there is

    more than one member in any system but at the end of the day how we can

    influence the conscious the conflict is what matter.

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    3. Bartholomew, Doug (2000, September). E-Commerce Bullies. Industry Week.Retrieved April 9, 2004, fromwww.findarticles.com/cf_0/m1121/14_249/65197732/print.jhtml.

    4. Coupey, Eloise (2001). Marketing and the Internet: Conceptual Foundations.Prentice Hall, 249.

    5. Hammond, Jan, and Kohler, Kristin. Harvard Business School (2000, September).ECommerceIn the Textile and Apparel Industries. Retrieved January 14, 2004, fromhttp://e-conomy.berkeley.edu/conferences/9-2000/ECconference2000_Papers/Hammond.pdf.

    6. Hogan, John E. and Webb, Kevin L., Hybrid Channel Conflict: Causes and EffectsOn Channel Performance, the Journal of Business & Industrial Marketing. SantaBarbara: 2002. Vol. 17 (5).

    7. Kalin, Sari (1998, February), Conflict Resolution, CIO.com. Retrieved April 5, 2004,From www.cio.com/archive/webbusiness/020198_sales.html .

    8. Kaneshige, Tom (2001, April), Avoiding Channel Conflict, Line 56. Retrieved April 5,2004, from www.line56.com.

    9. Matta, Eskander, and Mehta, Neel. Turning Channel Conflict into ChannelCooperation. CCG.XM. February 2001. Accessed January 14, 2004.www.ccgxm.com/white_paper/channel_conflict.html.

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