Project #95699 - Marketing

    1. Explain the types of channel conflict and the major sources of conflict:
    2. Channel member goals.
  • Perceptions of reality.
  • Perceived domains.
  1. Justify how conflict between channel members might be positively or negatively impacted by the quality of the relationship between them.
  2. Describe strategies to minimize the effects of negative channel conflict.
  3. Summarize techniques that could be used to resolve the channel conflict (incentives, et cetera).
  4. Provide a scenario when channel conflict can lead to increased value for a channel or a channel member. How does this happen?
  5. Assess when and why legal means (such as a lawsuit) might best be used in resolving channel conflict.
    1. Reflect upon your professional attributes and your potential to successfully resolve channel conflict and improve coordination among channel members.
    2. Consider the experiences that may have prepared you for marketing distribution channel management.
    • Consider new practices you have become aware of throughout this course.
    • Articulate your perceived strengths and opportunities for growth within this area.

Refer to the scoring guide for this assignment to ensure that you have met the grading criteria.

Assignment Requirements

Written communication: Write in a professional manner using APA style and formatting with correct grammar, usage, and mechanics.
Resources: At least 1–2 scholarly references should be provided. A reference list and citations are to be formatted according to APA style and formatting.
Length of paper: Write 2–3 double-spaced pages.
Font and font size: Use Times New Roman, 12-point or Arial, 10-point font.





Oakley is a California-based manufacturer of high-technology, high-design premium-priced sunglasses. Its biggest distribution channel customer is Sunglass Hut, a prominent retail chain whose specialty sunglasses stores offer excellent coverage in malls, airports, and business districts. Sunglass Hut’s trained salespeople counsel browsers as they shop a deep assortment (many brands and models) in a narrow category (sunglasses). The chain excels at converting lookers into buyers and finding prospects willing to pay a high price for technology, design, and innovation in a highly competitive product category.

In April 2001, Sunglass Hut was purchased by Luxottica Group, the world’s largest maker of eyewear. Luxottica manufactures many of Oakley’s competitors, including Ray-Ban, Armani, Bulgari, and Chanel. In a matter of months, Luxottica drastically reduced its Oakley orders. By August of the same year, Oakley was forced to issue an earnings warning that lowered its stock price. Oakley charged that Sunglass Hut engineered the sales decline by paying its floor salespeople higher commissions on Luxottica’s products. Indeed, a Luxottica spokesperson admitted, “Our idea is to increase the percentage of sales that will be Luxottica brands.” Oakley thus went to battle with its biggest customer, retaliating on multiple fronts:

  • It contacted Oakley customers by mail and Web with communications suggesting that Sunglass Hut salespeople were more interested in their commissions than in customers’ best interests, so they might want to shop elsewhere.
  • It launched a reward-based program to cultivate other retailers, using product exclusives, merchandise display fixtures, special point-of-sales materials, and marketing materials designed to drive traffic to these stores.
  • It convinced sporting goods stores (e.g., Champs, Foot Locker), department stores (e.g., Nordstrom), and optical stores to open or enlarge their sunglass counters, even adding “Oakley corners” within the stores. Effectively, Oakley created new retail competition for Sunglass Hut.
  • It accelerated its program to open its own stores that would sell the brand’s apparel, footwear, prescription glasses, and watches, along with its sunglasses.
  • In a direct attack on the parent company, Oakley sued Luxottica and its multiple manufacturing and retailing subsidiaries (e.g., Ray Ban, Lenscrafters, Sunglass Hut) for patent infringement, for making and selling selected lens colors. Oakley successfully secured a restraining order. This move was particularly interesting, because it had been common practice for distribution channels to reverse engineer their suppliers’ products, and then incorporate the features into their own house brands. Suppliers often tolerate such behavior as a cost of doing business, and Oakley may have done so—until Sunglass Hut reduced the benefits that made its tolerance worthwhile.

Sunglass Hut capitulated quickly. By November 2001, it had signed a new three-year agreement, restoring its status as Oakley’s biggest customer, and Oakley’s stock price rebounded. But the damage to the relationship was done. Oakley settled its lawsuit, but it also stated it would continue its channel diversification, determined never again to depend so much on one channel member.

This pledge turned out to be easier said than done. In the three years following the battle, many of Oakley’s new channels (e.g., Foot Locker) were badly hurt by the return of Sunglass Hut and withdrew their Oakley presence. Oakley management professed to be surprised; like many suppliers, they may have overestimated their brand’s appeal and believed that coverage, once gained, would remain stable. Oakley’s other businesses also have fluctuated, even as Luxottica continues to pursue its own interests. In 2003, it acquired OPSM, a prominent Australian sunglass retailer, and promptly reduced OPSM’s business with Oakley. And though Sunglass Hut’s business with Oakley is strong, it also has fluctuated.

Oakley’s communications to potential investors thus contain “safe harbor” disclaimers, warning of its “dependence on eyewear sales to Luxottica Group S.p.A., which, as a major competitor, could materially alter or terminate its relationship” with Oakley. Thus, “a major competitor” is, at the same time, Oakley’s largest distribution channel! Luxottica’s position as a manufacturer that has vertically integrated forward into distribution creates a divergence of goals that suggests Oakley will always be in conflict with its largest channel member.

Subject Business
Due By (Pacific Time) 11/27/2015 08:00 pm
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