Conflict resolution in vertically integrated firms.

Author:Byramjee, Framarz
 
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ABSTRACT

Conflict resolution and vertical integration have separately been dealt with by numerous researchers in business, economics, and marketing. However, thus far, scant attention has been paid to the manner in which conflicts may be dealt with and resolved, if and when they arise, in a firm that has vertical integration. This paper attempts to address the issue of conflict resolution in vertically integrated firms. It focuses on the advantages of vertical integration which drive the firm to resolve conflicts amicably using problem-solving as the most appropriate resolution strategy.

INTRODUCTION

Conflict and conflict resolution has consistently occupied a central role in models of the interorganizational exchange process (Cadotte & Stern, 1979; Frazier, 1983; Robicheaux & El-Ansary, 1975) and is viewed as the primary mechanism for reducing manifest conflict in distribution channels (Assael, 1968; Stern, 1971; Stern & El-Ansary, 1988).

Vertical integration has been an important research topic in organization studies. Practitioners and academicians have widely dealt with this subject. Whether or not to vertically integrate poses a strategic decision for a firm, and hence its pros and cons are weighed rigorously, as it can have pronounced as well as long-term orientation and implications to the enterprise.

Numerous studies have been conducted in the above two areas by eminent scholars in business, economics, and marketing. However, thus far, scant attention has been paid to the manner in which conflicts may be dealt with and resolved, if and when they arise, in a firm that has vertical integration. This paper examines conflict resolution in marketing channels, in particular, within vertically integrated firms. The topic of conflict resolution is important but has not received sufficient attention over the years. Therefore, this paper promises to make an important contribution to the literature on marketing channel management. It focuses on the advantages of vertical integration which drive the firm to resolve conflicts amicably using the appropriate resolution strategy.

LITERATURE REVIEW

Conflict Resolution

Conflict resolution has consistently occupied a central role in models of the interorganizational exchange process (Cadotte & Stern, 1979; Frazier, 1983; Robicheaux & El-Ansary, 1975) and is viewed as the primary mechanism for reducing manifest conflict in distribution channels (Assael, 1968; Stern, 1971a; Stern & El-Ansary, 1988).

Conflict is defined as the process that begins when one party perceives that the other has negatively affected, or is about to negatively affect, something that he or she cares about (Thomas, 1990). There are at least three elemental forms of conflict, based on the types of concerns that are at stake for the parties. Goal conflicts or interest conflicts involve divergent or apparently incompatible ends desired by the parties. Judgment conflicts involve differences over individuals' cognitions regarding empirical or factual issues. Normative conflicts center on a party's evaluation of another party's behavior in terms of expectations of how the other should behave. Collaborative or win-win strategies are more likely to be chosen when each of the parties involved in the conflict episode places a higher valence on equally satisfying concerns of both the self and the other's interest of the group gains over interest of the self. Positive emotions are generated in such win-win situations, as they appear to increase generosity and helpfulness, pushing each party m more cooperative directions (Carnevale & Isen, 1986). Such joint-welfare approaches are of bipartisan types which focus on satisfying the combined concerns of both conflicting parties. They emphasize the desirability of win-win (Filley, 1975), synergistic (Craig & Craig, 1974), or integrative (Thomas, 1974) outcomes for the two parties. Using Sheppard's taxonomy of process intervention by managers, mediation works best for such scenarios, when the manager controls the interaction between the parties but allows them to make their own decision. Trust also features in the negotiation process; trust refers to each party's belief that the other would reciprocate collaborative attempts.

In operationalizing the process of conflict resolution, Dant and Schul (1992) principally draw on the research of March and Simon (1958), who defined organizational reactions to conflict by four different processes: problem solving, persuasion, bargaining, and politics. This categorization is a parsimonious system for capturing behavioral modes of conflict resolution (Sheth, 1973) and has been used in several conflict resolution studies within marketing (e.g., Butaney, 1989; Lambert, Boughton & Banville, 1986).

When problem solving is evident, the participants to the dispute are seen as a priori sharing common objectives and involving themselves in an integrative process of identifying a solution that satisfies both parties' decision criteria. Though not prerequisite here, trust and cooperation between the parties is likely to be evident (Clopton, 1984). In problem solving, focal activities include the assembling of information...

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