Power Usage In Marketing Channels Given The Conditions Of Power Advantage Versus Power Disadvantage.

Transcription

1 Power Usage In Marketing Channels Given The Conditions Of Power Advantage Versus Power Disadvantage. Guijun Zhuang, Xi an Jiaotong University Neil Herndon, Herndon & Cheung Nan Zhou, The City University of Hong Kong Abstract This study investigated the impact of channel members power on their uses of power in two distinct conditions: in power advantage and in power disadvantage. The study found that channel members power has a positive impact on their uses of noncoercive power regardless of their relative position in channel dyads; their uses of coercive power are sensitive negatively to their own power in the condition that they are in power advantage, and sensitive negatively to the target members power in the condition that they are in power disadvantage. It also finds that the predictions of deterrence theory are partially supported in both the case of power advantage and power disadvantage, while no evidence supports the predictions of conflict spiral theory in either case. One contribution of this study is that the research method and research findings provide a possible explanation for the inconsistent or contradictory empirical findings on the relationship between power and exercises of power. Keywords: power advantage; power disadvantage; deterrence theory; conflict spiral theory Background Power and exercises of power in marketing channels (hereafter channels) has been frequently studied (for a review see Frazier, 1999; Gaski, 1984). They are thought by some to be the centerpiece of channel management (Johnson et al., 1993) and one of the most important control and communication mechanisms in channels (Kim, 2000; Weitz and Jap, 1995). Research suggests that in channels power could be strategically used, and strategic uses of power could make differences in interfirm relationships and distribution efficiency (c.f., Frazier and Summers, 1984; Gaski and Nevin, 1985; Rawwas, Vitell, and Barnes, 1997). Given its importance, researchers have explored the relationship between power and uses of power in channels from various viewpoints, including the relationship between a firm s power and its uses of power (e.g., Gaski and Nevin, 1985; Hunt and Nevin, 1974), the relationship between a partner s power over a firm and the firm s exercises of power (Frazier, Gill, and Kale, 1989; Frazier and Rody, 1991), and the relationship between bilateral power (total power and power imbalance) and a firm s uses of power (c.f., Anderson and Narus, 1990; Ganesan, 1993; Gundlach and Cadotte, 1994; Kumar, Scheer, and Steenkamp, 1998). Researchers have obtained informative, but inconsistent, empirical findings. For example, Frazier and Summers (1986), Frazier and Rody (1991), and Ganesan (1993) found a channel member s power was negatively related to its uses of coercive influence strategies, while Roering (1977), Dwyer and Walker (1981), Kale (1986), and Frazier, Gill, and Kale (1989) observed the opposite result. Most of these studies found a positive relationship between one s power and one s exercises of noncoercive power (e.g., Frazier and Rody, 1991; Frazier and Summers, 1986; Ganesan, 1993; Gaski and Nevin, 1985; Hunt and Nevin, 1974). ANZMAC 2005 Conference: Marketing Issues in Asia 83

2 The relative position of a member in a channel dyad, i.e., in power advantage or in power disadvantage, may play a role in the member s decision about its power behaviors according to Frazier and Rody (1991). They categorized the studies supporting the positive relationship between one s power and uses of coercive influence strategies as those conducted in the setting of high level of the target member s dependence and low level of interfirm cooperation. They categorized the studies supporting the negative relationship as those conducted in the setting of balanced dependence structure, more specifically, high level of the target member s dependence and high level of interfirm cooperation or moderate level of the target member s dependence and moderate level of interfirm cooperation. Their categorization implies that in the setting of imbalanced power structure (implied by asymmetric dependence), the more powerful the firm engaged in using power (source member hereafter) is relative to the firm targeted (target member hereafter), the more likely the source member will use coercive power to influence the target member. In the setting of balanced power structure (implied by symmetric dependence), the more powerful the source member, the less likely the source will influence the target with coercive strategies. Do the relative power positions in channel dyads lead channel members to exercise their power in different ways? Or more specifically, do the members in power advantage use their power differently from those in power disadvantage as their power increases or decreases? This is the question that this study addresses. Although suggested and examined by Frazier and Rody (1991) and Kumar, Scheer, and Steenkamp (1998), the question has not yet been fully answered. Social psychologists (Emerson, 1962; Molm, 1997) and channel researchers (Ganesan, 1993; Kumar, Scheer, and Steenkamp, 1998) recognized that power in a dyad can be viewed in terms of absolute strength, i.e., level of power (level of unilateral power and level of bilateral or total power), and in terms of relative strength, i.e., power imbalance (taking balanced power as a special case of power imbalance where power imbalance is equal to zero). Power imbalance (PWimb) is the difference between the two unilateral powers (Ganesan, 1993; Kumar, Scheer, and Steenkamp, 1998; Molm, 1997). It could be bigger than, equal to, or smaller than, zero. PWimb = 0 indicates a balanced power structure and PWimb 0 indicates an imbalanced power structure. In the imbalanced condition, one is in the position of power advantage when more powerful than the partner, and in the position of power disadvantage when less powerful than the partner (Kumar, Scheer, and Steenkamp, 1998). Power can be exercised in several different ways as suggested by those who operationalized power usage as exercises of power bases (Brown, Lusch, and Nicholson, 1995; Etgar, 1978; Gaski, 1986; Gaski and Nevin, 1985; Kumar, Scheer, and Steenkamp, 1998) and those who operationalized power usage as influence strategies (Frazier and Rody, 1991; Frazier and Summers, 1984, 1986; Gundlach and Cadotte, 1994; Kale, 1986). The first group of researchers, following French and Raven s (1959) classic typology, classified power bases into reward power, coercive power, legitimate power, referent power, expert power, and information power. The second group of researchers categorized influence strategies into information exchanges, recommendations, requests, promises, threats, and legalistic actions. Nevertheless, the two groups agree on a fundamental dichotomy: exercises of coercive power and exercises of noncoercive power. The present study follows the fundamental dichotomy and separately examines how coercive power and noncoercive power are exercised by a source member in power advantage or in power disadvantage. ANZMAC 2005 Conference: Marketing Issues in Asia 84

3 The relationship between one s power and one s exercises of coercive power is more complex than that of noncoercive power. The deterrence effect and the conflict spiral effect (Lawler, 1986; Lawler, Ford, and Blegen, 1988) may both appear in the relationship. According to Lawler (1986), both bilateral deterrence theory and conflict spiral theory were developed to explain the relationship between power and use of punitive tactics in dyadic relationships. Bilateral deterrence theory is primarily based on loss avoidance, whereas conflict spiral theory is based on the presumption that a firm will exploit whatever it can to pursue its goals. Based on different assumptions, the two theories predict the relationship between capability and exercises of punitive tactics contradictorily. For example, holding B s power constant, deterrence theory, through A s expectation of attack by B, predicts a negative relationship between A s power and A s uses of punitive tactics, while conflict spiral theory, through A s temptation, predicts a positive relationship between A s power and A s uses of punitive tactics. In the case of a channel dyad, with the increase of the source member s power and the target member s power held constant, bilateral deterrence theory will expect a reduction of the source s exercises of coercive power due to its decreased expectation of attack or resistance by the target. This is the result of the target s perception of the source s increased power and the target s increased fear of the source s penalty. However, conflict spiral theory will expect an increase of the source s uses of coercive power as a result of its increased temptation. Both the positive and negative relationship between one s power and uses of coercive power has been empirically demonstrated in channels. Roering (1977), Dwyer and Walker (1981), Kale (1986), and Frazier, Gill, and Kale (1989) found positive relationships, while Frazier and Summers (1986), Frazier and Rody (1991), and Ganesan (1993), found negative ones. This suggests that the deterrence effect and the conflict spiral effect might alternatively dominate the relationship, but it is not clear which and when one effect becomes dominant. There is evidence indicating that channel members exercises of coercive power vary as they are at different relative positions in channel dyads. Kumar, Scheer, and Steenkamp (1998) observed that a source member would increase use of punitive actions as the asymmetry in channel partners punitive capabilities increases when it was in power advantage; contrarily, it would decrease its uses of punitive actions as the asymmetry in channel partners punitive capabilities increases when it was in power disadvantage. In other words, the conflict spiral effect may dominate the source s exercises of coercive power when the source is in power advantage, while the bilateral deterrence effect may be stronger than the conflict spiral effect when the source is in power disadvantage. Methodology This research was conducted in the People s Republic of China (China hereafter). The dyadic relationship examined is between department stores and their suppliers. The power behaviors of the department stores were investigated based on the data reported by the suppliers. It is worth noting that we signify the suppliers as the target and the retailers as the source here, while in most of the previous studies, this relationship was reversed (e.g., Gaski and Nevin, 1985; Gassenheimer et al., 1994; Hunt and Nevin, 1974; Lusch, 1976). Our sample is the top 10 department stores (ranked by sales volume) in Xi an, the largest metropolitan city in Northwestern China. We selected these stores because they were thought ANZMAC 2005 Conference: Marketing Issues in Asia 85

4 to exhibit more varieties of power imbalance than smaller department stores, a condition important to our study (Ganesan, 1993). Six of the 10 stores, with annual sales volumes of 3.7 million to 80 million RMB, agreed to participate in the survey. These stores operate locally and independently and have no additional retail outlets within or outside of the City. We focused on sales representatives in three divisions, i.e., electrical appliances, clothing and apparel, and cosmetics, because more sales representatives of suppliers are involved in these three divisions than any other divisions. Altogether, 352 questionnaires were distributed and 227 questionnaires were collected. This yields a response rate of 64.5%. Of the copies collected, 201 questionnaires were usable, yielding a useable response rate of 57.1%. An Analysis of Variance procedure was used to test for differences across the three divisions. No significant differences were found in the respondents' perceptions of retailer's power, supplier's power, retailer's exercises of coercive power, and retailer's noncoercive exercises of power (p>0.05). This implies there is considerable agreement across these divisions on the variables, and that it is appropriate to combine them for further analysis. There are statistical differences across stores on these variables, which form the basis for the main analysis. The questionnaire included six Likert-type scales and ten questions. The measures, adapted from previous research studies, were translated from English to Chinese using a translation/back-translation procedure to ensure equivalence. The instruments to measure retailer s power and supplier s power were adapted from Gaski and Nevin (1985) and Gaski (1988). The Cronbach s alphas for the final measures are and , respectively. We operationalized retailer s exercises of power in terms of power bases using an instrument adapted from Rawwas, Vitell, and Barnes (1997). The Cronbach s alphas for the two final scales are and , respectively. To assess the validity of each measure, we checked the reliability, unidimensionality, convergent validity, and discriminant validity. The Cronbach s alphas for all the final measures employed are above 0.7, an acceptable value for reliability (Bagozzi, 1994). Unidimensionality of the measures is suggested by both the eigenvalue test (the eigenvalue is fixed at one) and the scree test showing that only one underlying factor for each of the measures was present when applying exploratory factor analysis on each of the four measures (Churchill, 1979). All factor loadings are significant at p<0.001, demonstrating convergent validity for each of the measures (Anderson and Gerbing, 1988; Hair et al., 1995). The absolute values of all factor intercorrelations are significantly below one, indicating discriminant validity of the constructs (Anderson and Gerbing, 1988; Hair et al., 1995). Multiple linear regression was employed in the data analysis. Discussion The study found that channel members power has a positive impact on their uses of noncoercive power regardless of their relative position in channel dyads; their uses of coercive power are sensitive (negatively) to their own power in the condition that they are in power advantage, and sensitive (negatively) to the target members power in the condition that they are in power disadvantage. It also finds that the predictions of deterrence theory are partially supported in both the case of power advantage and power disadvantage, while no evidence from this study supports the predictions of conflict spiral theory in either case. This suggests that the deterrence effect plays the dominant role in channels though the source ANZMAC 2005 Conference: Marketing Issues in Asia 86

5 member s uses of coercive power are sensitive to different actors in different situations. One contribution of this study is that the research method and research findings provide a possible explanation for the inconsistent or contradictory empirical findings on the relationship between power and exercises of power. It appears that the relative position of channel members in channel dyads indeed plays a role in their deciding on exercises of coercive power. Therefore, it is inferable that research studies, if conducted in different settings in terms of power structure, are likely to obtain inconsistent or even contradictory results. This is likely to be one of the major reasons for the divergent findings of the previous studies. Thus, apart from the different effects of unilateral power in the two conditions, the effects of power imbalance should be checked against the effects of unilateral power in dyadic relationships, otherwise the results may be misleading. The study findings may also provide insights for channel managers. The study found that the effects of channel power on exercises of power were structure-dependent, i.e., a channel member may act or react differently in different relative power positions in supplier-retailer dyads. Based on this and the positive relationship between uses of coercive (or aggressive) power and perceived conflict (c.f., Gaski, 1984; Gaski and Nevin, 1985; Lusch, 1976; Skinner, Gassenheimer, and Kelley, 1992) and on both the direct and indirect (through conflict and cooperation) influence of exercises of power on long-term channel relationships, channel climate, channel performance, and channel members satisfaction (c.f., Frazier and Summers, 1986; Gaski and Nevin, 1985; Mehta, Larsen, and Rosenbloom, 1996; Rawwas, Vitell, and Barnes, 1997; Skinner, Gassenheimer, and Kelley, 1992; Strutton, Pelton, and Lumpkin, 1993), more effective influence strategies are available for channel managers based on their positions relative to their partners. For instance, for a channel manager in power advantage, the best way to use coercive power may be to have the power recognized by channel members, and then to restrain its use. This is suggested by the finding that the retailer s uses of coercive power were negatively associated with the retailer s power when the retailer was in power advantage. Using coercive power in this way, the channel manager may avoid the negative costs of power usage and produce less channel conflict. For the channel manager in power disadvantage, it is necessary to pay more attention to his/her partner s power rather than to his/her own power when considering the use of coercive power. This is implied by the finding that the retailer s uses of coercive power were negatively associated exclusively with the supplier s power when the retailer was in power disadvantage. In this condition, it is unwise for the channel manager to use coercive power based only on his/her own power or needs. As in most research, there are some limitations. Data are gathered from one side of the channel dyads, namely the side of suppliers. Future studies might be more informative if data from both sides of the dyad are compared. Though the sales representatives of the suppliers are well informed about their boundary-spanning relationship between their firms and the named retailers, they are not the final decision-makers. Examining supplier s perceptions of the effects of power on exercises of power with similar data reported by the suppliers' major decision-makers would likely provide additional understandings about the relationships under study. And, since this study was conducted in the setting of department stores in China, questions of generalizability remain both with respect to channels other than department stores and countries other than China. ANZMAC 2005 Conference: Marketing Issues in Asia 87

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