Question

Discuss how a manufacturer selling directly to its end-user customers can create conflict with its other distribution partners.

Answer 1

Now a days companies do use this strategy, i.e. sell product to consumer through retailer and directly to the consumer also. But this creates a lot of conflict in the following manner:

When you sell your product through a distribution partner, it is your responsibility to maintain the interest of the distribution partner. The price at which the distribution partner sells to the customer is inclusive of the profit margin of the distribution partner. That way the selling price of the distribution partner is higher. While, the selling price of the manufacturer is lower since the middle man (distributor) is not involved. So, it is natural that the customer will buy from the manufacturer. In that case the distributor is unable to sell the product to the customer, as long as the manufacturer is supplying product at low price to the end-user.