An assignment on Distribution Channel and conflicts of Coca-Cola business operation in Bangladesh.

Submitted to Dr. Mohammad Baktiar Rana Course Instructor

Submitted by A.R.M. Mozaffar Hossain ID:823 Batch: 20 BBA Program

Date of Submission 23rd September,2013

Institute of Business Administration Jahangirnagar University Savar, Dhaka-1342

Introduction
Channel conflict occurs when manufacturers (brands) dis-intermediate their channel partners, such as distributors, retailers, dealers, and sales representatives, by selling their products directly to consumers through general marketing methods and/or over the Internet. According to Forrester Research and Gartner from 2007, despite the rapid growth of online commerce, an estimated 90 percent of manufacturers did not sell their products online. Of these, 66 percent identified channel conflict as their single biggest issue. However, results from a survey show that click-and-mortar businesses have an 80% greater chance of sustaining a business model during a three-year period than those operating just in one of the two channels. Channel conflict can also occur when there has been over production. This results in a surplus of products. Newer versions of products, changes in trends, insolvency of wholesalers and retailers and the distribution of damaged goods also affect channel conflict.

Coca-Cola
Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines throughout the world. It is produced by The Coca-Cola Company of Atlanta, Georgia, and is often referred to simply as Coke (a registered trademark of The Coca-Cola Company in the United States since March 27, 1944). Originally intended as a patent medicine when it was invented in the late 19th century by John Pemberton, Coca-Cola was bought out by businessman Asa Griggs Candler, whose marketing tactics led Coke to its dominance of the world soft-drink market throughout the 20th century. The company produces concentrate, which is then sold to licensed Coca-Cola bottlers throughout the world. The bottlers, who hold territorially exclusive contracts with the company, produce finished product in cans and bottles from the concentrate in combination with filtered water and sweeteners. The bottlers then sell, distribute and merchandise Coca-Cola to retail stores and vending machines. The Coca-Cola Company also sells concentrate for soda fountains to major restaurants and food service distributors. The Coca-Cola Company has, on occasion, introduced other cola drinks under the Coke brand name. The most common of these is Diet Coke, with others including Caffeine-Free Coca-Cola, Diet Coke CaffeineFree, Coca-Cola Cherry, Coca-Cola Zero, Coca-Cola Vanilla, and special versions with lemon, lime or coffee. Based on Interbrand's best global brand 2011, Coca-Cola was the world's most valuable brand.

Bangladesh with a huge population, serves as a profitable market for Coca-Cola. Coca-Cola entered Bangladesh in 1965 through an agreement with Tabani Beverage. Currently, Abdul Monem and Pran Group bottle Coca-Cola's drinks in the country. The newly built facility in Tongi is expected to be operational from September, 2013. The facility is expected to produce around 222m bottles annually, worth BDT9bn (US$109.8m) per year. In this document, the distribution of channels and the conflicts that arise while operating within the territory of Bangladesh is discussed.

Coca-Colas Distribution System The first thing to realize is that Coca-Cola is a sort of franchised operation. Most people refer to ColaCola as if it were a single entity and it is not. You have the people in Atlanta who take care of the brand and overall marketing, product development and so on, but then each country has its own bottler, or more likely, bottlers. To make its products available at the right places at the right time in the market, the sales department of the company pays major attention on controlling the channels of distribution. Single type of markets channel is maintained by the company right from its pioneering stage. The nature of the channel is as follows: Company Distributors Dealers Different Outlet Owners Consumers.

At first the soft drinks supplied to the distributors directly. Retailers or owners of any outlet cannot take the delivery from company. They have to take the products from their respective or nearest distributor.

The diagram above shows the simplest distribution strategy adopted by coca-cola company in Bangladesh. Though the practical scenario maybe little complex and may have different sub-stages, but the way merchandises of Coca-Cola are distributed imitates to this model.

This is another way of showing how the Coca-Cola products are distributed and made available to even remote place consumers.

Distribution of Coca-Cola Here there are four systems of distribution channels. 1. ManufacturerConsumer 2. ManufacturerRetailer..Consumer 3. ManufacturerWholesaler.RetailerConsumer 4. Manufacture.WholesalerJobberRetailer..Consumer

Conflicts
In business management, the term "channel conflict" refers to a problem, or conflict, in the flow of sales, or sales channel, that hinders a product or service from effectively reaching the end consumer. This condition can occur when a manufacturer or service provider tries to reach consumers without the help of third-party retailers, dealers, suppliers, and promoters. The goal of this method would be to save the costs associated with suppliers and retailers, but the real benefits can be varied depending on whether or not a channel conflict arises from this approach.

Horizontal Channel Conflict

In this type of channel conflict, a manufacturer not using third-party retailers faces a struggle between two of its own sales divisions, such as its online and offline departments. Usually one division starts to cut into the sales and profit of the other division, devaluing the latter. Horizontal channel conflicts occur between two departments on the same level of importance.

Vertical Channel Conflict

Vertical channel conflict arises when manufacturer tries to sell on their own while still maintaining working relationships with third-party retailers and distributors. This leads to competition for sales where retailers and distributors often get lower profits for selling the same product or service as the manufacturer is selling. Since it is primarily the retailers and distributors role to build awareness of the product, this can lead to an overall decrease in sales. This situation is called a vertical channel conflict because it affects two different levels of business, third-party sales and bottom-line sales.

Multilevel Channel Conflict

Multilevel channel conflicts arise when a manufacturer creates competition between its own sales and promotion arms, while also having business relationships with third-party retailers and distributors. The reason for this approach may be to aggressively and more quickly expand its sales and promotion network, but it can create both internal and external discord between the various divisions and third-parties.

RESOLVING CHANNEL CONFLICTS Conflict is a natural phenomenon, which cannot be eliminated. In channel management, it is an inevitable as many individuals, institutions are involved and they are interdependent. Certain conflicts are constructive too.

The conflicts can be reduced and managed better to reduce the friction in the channel management. Various techniques can be used to resolve the conflicts. It is important to find out the root cause behind the conflict so that appropriate technique can be used to resolve the conflicts and lasting effect is possible.

Adoption of Super ordinate goals The channel members come to an agreement on the fundamental goal they are jointly seeking, whether it is survival, market share, high quality or customer satisfaction.

Exchange of persons between two or more channel levels This helps in better understanding. It can reduce the misunderstanding and conflicts can be reduced substantially through this communication. Each will grow to appreciate the others point of view and carry more understanding when returning to their position.

Co-Opt It is an effort by one organization to win the support of the leaders of another organization by including them in advisory councils, board of directors so that they feel that their opinions are being heard. Co-operation can reduce conflict provided both the parties compromise some or the other issues in order to win the support of the other side.

Diplomacy Diplomacy takes place when each side sends a person or a group to meet with their counterpart from the other side to resolve the conflict. It makes sense to assign diplomats to work more or less continuously with each other to avoid the conflicts.