A Simulation Model for Managing Marketing Multi-Channel Conflict

A Simulation Model for Managing Marketing Multi-Channel Conflict

Hisham M. Abdelsalam (Operations Research and Decision Support Department, Faculty of Computers and Information, Cairo University, Cairo, Egypt) and Ahmed O. El-Tagy (Regional IT Institute, Cairo, Egypt)
Copyright: © 2012 |Pages: 18
DOI: 10.4018/ijsda.2012100103

Abstract

In today’s global competition, companies are obliged to go to market using multiple channels of strategy for various reasons. However, channel conflict is inevitable in multi-channel structures causing sharp decreases in the demand of one or more channels. A system dynamic model was developed to simulate the complex multiple channel structure and factors that affect the demand and channel conflict; aiming to simulate the situation of the supplier decision maker who takes fast decisions in one of the various variables that he controls to achieve maximum profits and minimum channel conflict. The model was validated using real data of a major consumer electronics supplier in Egypt that has traditional distributors and Hypermarkets as two different channels. Various policies of inventory allocations in each channel and different promotion rates were tested in order to achieve the objective of maximizing supplier profit and minimizing channel conflict.
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Literature Review

More and more companies become multi-channel operators (Ganesh, 2004; Coelho et al., 2003). Adopting a multichannel strategy has become a must-be for companies to have different advantages that include: increased reach (Moriarty & Moran, 1990), maximized profits (Montoya-Weiss, Voss, & Grewal, 2003), increased customers' exposure and access to a marketer's offerings (Rangaswamy & Van Bruggen, 2005), increased sales volume (Kumar & Venkatesan, 2005), and increased market presence (Sharma & Mehrotra, 2007). The payoff of such advantages, however, can be highly affected due to the appearance of the so-called ‘channel conflict’ leading to decreased sales. Due to their crucial effect on organizations, issues related to channel management and channel conflict became the topic of a large number of research articles. The majority of these articles, however, followed a qualitative approach in which no robust quantitative model that support decision making was developed and, furthermore, the majority of research related to multichannel strategy has been focusing on the overall strategy (e.g., Myers, Pickersgill, & Van Metre, 2004; Stone, Hobbs, & Khaleeli, 2002; Payne & Frow, 2004). This section sheds the light on some of the cited work related to channel conflict.

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