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COPYRIGHT 2004 American Society for Competitiveness
ABSTRACT
To gain competitive advantage in the Indian market by keeping their channel intermediaries motivated and performing, suppliers must use appropriate influence strategies. This study examines the patterns and consequences of suppliers' strategies to influence dealers in marketing channels in India. Suppliers in India are found to use indirect influence strategies more frequently than direct influence strategies toward their dealers. Of two possible indirect influence strategies, recommendations are used more often than information exchange. When direct influence strategies are applied by suppliers, promises are used most often, followed by requests, legal pleas, and threats. The effect of various influence strategies on dealer satisfaction is also investigated. It is found that recommendations and legal pleas have a positive impact on dealer satisfaction. Managerial implications of the findings are discussed.
INTRODUCTION
The Indian market has become increasingly attractive for global marketers in recent years. Despite the relatively low per capita income ($421) of the 1 billion strong population (Budhwar, 2001), there are about 203 million middle-class consumers in India, who belong to well-educated households with salaries worth more than $5,000 in local purchasing power (Ramachandran, 2000), an amount sufficient to sustain purchases of foreign consumer products. The economic liberalization policies undertaken by the Indian government since the early 1990s have created great opportunities for foreign businesses to tap the potential of the huge Indian market (Budhwar, 2001). As a result, foreign direct investment (FDI) flow to India increased from a paltry $103 million in 1990-91 to $5.1 billion in 2000-01 (Bajpai, 2002). Foreign marketers in diverse sectors, from automobiles and consumer electronics to soft drinks and fast food, have entered the Indian market and are competing with domestic marketers.
An essential requirement for marketing success in India is access to local channels of distribution. Most products sold in India use a three-tier distribution system: distributor, wholesaler, and dealer/retailer (Ramachandran, 2000). Most channel intermediaries are small and relatively unsophisticated operators, unlike the large chains commonly seen in the West. They are often family-run businesses bound in a cultural tradition where bargaining and negotiation are common business practices. To remain competitive in the attractive Indian market, foreign suppliers must be able to effectively manage their relationships with local intermediaries. The key to this would be using the right influence strategies which would help the supplier attain its business goals, but which would also keep the intermediaries satisfied, motivated, and performing.
Influence strategies are communications directed by a source firm toward a target firm with an intention to cause a change in the latter's behavior (Frazier & Summers, 1984). The vastly different cultural environment in India likely means that influence strategies commonly used in the West may not be effective in the Indian market and local adaptations need to be made. In this article, we report a study that examines the patterns of suppliers' strategies to influence Indian dealers and the consequences of using influence strategies in terms of achieving dealer satisfaction. The results would be of interest to foreign marketers seeking to enter the Indian market through local intermediaries.
CONCEPTUAL BACKGROUND
Taxonomy of Influence Strategies
Influence strategies are ways in which a firm (the source) attempts to control the actions of another firm (the target) with which it does business. Channel members use influence strategies to get their way with other channel members. Frazier and Summers (1984) proposed a taxonomy of influence strategies which has subsequently been widely accepted by researchers. Of six identified influence strategies, four (called direct influence strategies) involve a source's attempts to influence directly a target's behavior without attempting to change its perceptions. The other two strategies seek to alter the target's perception so that the desired behavior is seen as beneficial. These influence strategies are called indirect. The six influence strategies are described below.
Direct Influence Strategies
Request. The source simply asks the favor of the target to perform a certain task without implying any subsequent sanctions, positive or negative.
Promise. The source offers a specified reward (e.g., greater promotional allowances) to the target if the latter complies with the source's stated desires.
Threat. The source informs the target that failure to comply with its demands will result in negative sanctions (e.g., delayed service, termination of contract).
Legal Plea. The source expresses that the legal...
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