1 Designing long term oriented policies to build strong Manufacturer-Dealers relationships: a system dynamics approach Enzo Bivona (*) , Francesco Ceresia (**) Abstract 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 high- tech 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. Introduction 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 (Liker and Choi 2004:3). Also supporting dealers in promoting manufacturers’ products has been proved as a sustainable strategy in the long run. These issues have been debated in the field of the Distribution Channel Management (Dwyer et al. 1987; Anderson and Narus 1990; Ganesan 1994; Yilmaz et al. 2004). In particular, researchers emphasised that manufacturers cannot ignore in designing long term growth-oriented policies, strategies aimed to increase dealers’ satisfaction. Furthermore, in order to successfully plan business growth, it has been remarked in literature the central role played by communication. In fact, researchers underlined that a failure in channel communication is likely to affect the relationship between organizations and its own dealer structure (Mohr and Nevin 1990; Stem and El-Ansary 1992). Such remarks suggest that in order to effectively build a long term oriented relationship with an own dealers’ chain, a manufacturer has to adopt a systemic approach aimed to foster market consensus on a side, and mutual benefits on the other side. In particular, in the innovative and revolutionary high-tech industry, manufacturers in order to achieve the desired sales revenues can not ignore the need to continuously promote activities aimed to both update dealers employees’ skills and motivation. This paper is the result of a research project conducted by the authors with a manufacturer operating in the high-tech industry. It is based on the hypothesis that in order to successfully support dealers, a manufacturer has to design long term oriented policies aimed to both build up a growing potential customers’ awareness of company product benefits on a side, and increase dealers employees’ skills and motivations on the other side. (*) Assistant Professor in Business Management, University of Palermo (Italy), PhD in Business Management, University of Catania (Italy), Master Phil in System Dynamics, University of Bergen (Norway), enzobivona@sciepol.unipa.it, Address: Via Maqueda, 324 - 90100 Palermo (Italy) (**) Assistant Professor in Work and Organisational Psychology, University of Palermo, PhD in Work and Organisational Psychology, University of Bologna (Italy), Master in Managing business growth through System Dynamics and Accounting Models, University of Palermo