ALL SAINT’S SECONDARY SCHOOL, OYIGBO
CLASS: JSS 2
SUBJECT: BUSINESS STUDIES
WHAT IS DISTRIBUTION?
The passing of goods from different channels to the final consumer is known as distribution.
FACTORS TO BE CONSIDERED BEFORE CHOOSING A CHANNEL OF DISTRIBUTION
1, Location Of Customers: If customers are scattered in many areas of the country, the longer the channel the better. But if customers are not many, shorter channel might be considered.
2, Size Of Order: If consumers buy in large quantities, the producer may decide to skip the middleman.
3, Nature Of Product: The nature of product helps you to choose a better channel. If a product is expensive or perishable, shorter channel is better, e.g the sale of aeroplane is always i.e, from the manufacturer to the consumers.
4, Financial Strength Of The Producer: If a producer is financially strong, he can use his own outlet to distribute his goods, otherwise, longer channel will be used.
5, To Control Retail Price: Producers who may not need a big margin may prefer a shorter channel.
TYPES OF DISTRIBUTION
There are two types of channel of distribution namely- Direct Channel of Distribution and Indirect Channel of Distribution.
Direct channel of distribution is when the producers bypass the middlemen and sells directly to the consumers, i.e, from the Manufacturer — Consumers.
E.g, when goods are expensive or highly perishable, direct channel is used. The channel is also known as two-way channel.
Indirect Channel Of Distribution is when middlemen are involved in moving goods from the producers to consumers.
E.g 1. Producer — Retailer — Consumer.
E.g 2. Producer — Wholesaler — Retailer — consumer
This is the traditional method of channel of distribution. It is commonly used by producers especially when goods are widely used and consumers are scattered.
- What is the next step after production?
- When a product is expensive, what channel will be used?
- Recommend a channel for a producer who manufacturers perishable goods.
- True or False: Production is finished when the manufacturer stores the goods in his warehouse.
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