Sartaj Electricals Limited: Managing Distributor's Conflict

Abstract

Sartaj Electricals Limited (SEL), one of the leading consumer appliances company in India, growing business in international market, has setup its office in UAE.in 2005. The company has looked at the huge potential for water heater markets and with the help of three distributors, it was able to consolidate its position in Instant and Domestic range of water heaters, whereas it was trying to increase its presence in the Industrial Water heater segment, which had the highest growth potential and profitability. Recently, some distribution problems have begun to emerge. SEL felt that it was losing major control over the market and its distributors. Delta Food Industries, which was the customer of Al-Huraiz Enterprises, SEL’s most important distributor in UAE, has approached SEL about selling water heaters directly to them at lower prices than they had been getting from Al-Huraiz. In return the company would place a huge order with SEL, including a large number of industrial water heaters. SEL was excited about the opportunity because the Delta account would provide SEL with more control over its market and it would be a great reference account for promoting SEL to other customers. But Al-Huraiz was strongly opposed because it didn't want SEL taking over a customer that it had developed. All three distributors were very concerned that this was the thin edge of the wedge, and SEL would soon go directly to other Industrial customers. The three were forging an alliance to back up Al-Huraiz stand against SEL. Al-Huraiz was threatening to leave SEL. The firm wanted both the Industrial account and happy distributors. The case discusses that how SEL is managing this conflict with its distributors. Further, case focuses on issues related to goal congruence issues between the manufacturer and the distributor. Case also discusses the role of power in channel management, channel issues in broader strategic context, along with product line management, pricing and implementation issues.