INDIVIDUAL ASSIGNMENT

Individual Assignment: Q/A

Individual Assignment: Q/A

Q.1) When is a channel member likely to overestimate its power? When will it underestimate its power?

The globalization has induced extra energy of intensive competition in the current world. This has also led to the high demands of customers as well that demand a speedy delivery of services/products by companies and do not compromise over quality at all.

Customer Power

Customer power is the power of the client that is imposed on the manufacturer to meet the terms and conditions. It is important for the manufacturer to listen to what the customer demands. Customer power is the level of influence or authority over the manufacturers to get the work done as per the requirements.

All the customer seeks is the manufacturer's compliance with the needs and wants specified in the deal. Now it depends on the customer to motivate the manufacturers in doing their work, by either using the reward system or by use of coercive power over them. But they have their consequences as well. The rewards can give good results where as coercive power can leave the customers with bad finished products or even with incomplete products (Sahadev, 2008, pp. 178--195).Customer power can be classified as following:

Non-Mediated: Legitimate power, referent power and expert power.

Mediated: Reward power and coercive power.

Relationship Commitment

Relationship commitment is basically the willingness or the compliance of any party to work for the company and commit to it in financial or personal terms. The research has proposed that relationship commitment can be of two types; Instrumental - This relationship is completely based upon compliance. When two parties are under an agreement and hope to share profits with the influence of one another. Normative- This relationship commitment is completely based on mutual understanding and sharing. It is built on trust.

Relationship between Customer Power and Relationship Commitment

In case of Normative Relationship Commitment, since it is built upon trust, the use of coercive power is not going to work. It is necessary that the customer puts their trust in the channel members and should continuously motivate them for the work they are doing. The customer can use mediated power to motivate these manufacturers.

In case of Instrumental Relationship Commitment, it is based upon profits and the equal shares of both parties in the agreement. The customers can freely use non-mediated powers, since achieving the best outcomes is the motive here to reap greater profits for the benefit of both the parties.

(Zhao and Huo et al., 2008, pp. 368-388)

Bargaining Power of the Channel Member

In a study by Draganska, Michaela from Stanford University, on the relative power of the channel members based on the customers' demands and the collaboration of retailers and manufacturers, highlighted these following points on Bargaining Power, The channel members bargaining power can be determined by: the party's negotiation skills, their patience levels, their commitment to the project and their tolerance level after the negotiations are settled.

The study suggests that the size of the firm, its operating capacity and the positioning strategies of the brands have an ...