Designing long term oriented policies to build strong Manufacturer-Dealers relationships

Designing long term oriented policies to build strong Manufacturer-Dealers relationships: a system dynamics approach

Autori: Enzo Bivona, Francesco Ceresia

In today’s economy all manufacturers need to pay attention on how to build strong and long-term relationships with their dealers’ chain. In fact, it has been demonstrated that short term policies aimed to provide dealers immediate benefits (e.g., price discounts) may prevent the development of long term and fruitful relationships. Also supporting dealers in promoting manufacturers’ products has been proved as a sustainable strategy in the long run.
Another implication of manufacturers bounded policies refers to their inclination to reinvest significant amounts of their sales revenues in advertising and product portfolio improvement, without taking into account the need to invest in dealers’ human resources, to make their strategies sustainable. Such weaknesses have been proved to be a crucial cause of failure in high-tech industries, where business internal and external actors are expected to quicker share the key-success factors underlying innovative and revolutionary product offer.
Based of the above remarks, this paper aims to demonstrate the usefulness of a system dynamics approach in involving both manufacturers and dealers in strategic reasoning. Such an approach is likely to overcome communication boundaries arising from an inclination to maximise short term personal results.
Empirical evidence arising from a research project conducted by the authors with a manufacturer operating in a hightech industry, shows that using system dynamics as a methodology to support communication and learning may act as a significant lever to design successfully long term oriented policies. Such policies ought to increase dealers’ skills and motivation, and improve potential customers’ awareness of product benefits, at the same time.

Paper presentato: 23rd International System Dynamics Conference in Boston, Massachusetts – July 17 – 21, 2005