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A level business theme 1 > 1.3.4 Distribution > Flashcards

1.3.4 Distribution Flashcards

1
Q

What is the distribution channel?

A

The route used to transport a product from the manufacturer / producer to the consumer

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2
Q

What is the main objective of distribution?

A

To make products available in the right place at the right time in the right quantities.

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3
Q

What are Short Distribution channels?

A

Where the producer sells either directly to the customer or through a retailer

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4
Q

What are Long Distribution channels?

A

Where there are more than one intermediary between the producer and the customer

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5
Q

What is each party in a distribution channel called?

A

Each party in a distribution channel is called an ‘intermediary’

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6
Q

What is the difference between a customer and a consumer?

A

A Customer is a person who pays for the product

A Consumer is a person who uses the product

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7
Q

What are the three distribution channels?

A

Producer Producer Producer

  ⬇️                               ⬇️                              ⬇️

Wholesaler Distributors/ ⬇️
Agents

  ⬇️                               ⬇️                              ⬇️

Retailer ⬇️ ⬇️

  ⬇️                               ⬇️                              ⬇️

Consumer Consumer Consumer

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8
Q

What is the traditional distribution channel?

A

The traditional channel is the Indirect Selling (Four stage channel) channel:

Manufacturer –> Wholesaler –> Retailer –> Consumer

Note: This is a traditional channel used often for groceries, e.g. by supermarkets.
However, because those at each stage of the distribution channel want to make a profit, it can
increase the cost to the consumer.

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9
Q

What is the modern distribution channel?

A

The modern distribution channel is the Indirect Selling (Three stage channel) channel.

Manufacturer –> Retailer –> Consumer

Note: This is a common distribution channel often for recreational items such as clothes, shoes, and
homeware. Retailers are usually in places that are convenient for the customer, such as shop
on the high street or out-of-town retail park.

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10
Q

What is the direct selling channel and when is it used?

A

Direct Selling (Two stage channel)

Manufacturer –> Consumer

Note: The internet has made it easier for producers to sell directly to the consumer.
Buying and selling on the internet is called e-commerce. This allows access to a worldwide
market.
Direct selling can be done through door-to-door sales, TV shopping, telephone sales, and
websites.

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11
Q

What are the advantages of direct selling?

A
  1. Intermediaries are not required

2. They are able to generate more profit

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12
Q

What are the disadvantages of direct selling?

A
  1. Some people object to direct mail and unwanted telephone calls
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13
Q

What are the purposes of distribution channels?

A
  1. Provide a link between production and consumption
  2. Help gather market information
  3. Communicate promotional offers
  4. Find and communicate with prospective buyers
  5. Physical distribution - transporting and storing
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14
Q

What is the retailers role/step in the distribution channel?

A

Retailers sell directly to the consumer.

Note: Retailer is the final step in the distribution chain before selling to consumer.
Focused on consumer markets.
Various kinds of retailers:
–> Multiples- Chains of shops owned by a single company
–> Specialist chains
–> Department stores
–> Convenience stores
–> Independent - A shop run by an owner
–> Franchises

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15
Q

What are the advantages of retail distribution?

A
  • Convenience for customer
  • Often UK-wide reach to customers
  • Retailer chooses the final price
  • Retailer holds the stock
  • After-sales support (e.g. returns)
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16
Q

What does the Manufacturer / Producer do?

A

Organisations that take raw materials or components and process them into finished or semi-produced goods.

17
Q

What is a Wholesaler?

A

A business that buys goods from manufactures in bulk and sells them in similar quantities to to retailers.

18
Q

What are the key decisions when deciding what type of distribution channel to use?

A
  1. Channel length - Direct or Indirect?
  2. Choice of intermediary
  3. Use just one or several channels?
  4. How to move the goods through the channel?
  5. Control over the channel
    - -> E.G. Who decides price, promotion, packaging?
19
Q

What affects the distribution decisions?

A
  1. Type of product
    - -> Characteristics of the product need to be taken into account
  2. Market
    - -> Needs to be convenient for customers
  3. Quantity and frequency
    - -> If only few low cost items being delivered hundreds of miles it would not be cost effective
  4. Geographical location
    –> How far is the target market from the business
    –> Regional markets are far more accessible than international markets
  5. Cost
    –> Expensive distribution method reduces the business’ profits. Business must ensure the
    method is cost effective
  6. Degree of control
    –> Businesses may want to protect their brand by limiting the spread of the product and
    keeping a tight control of where it is available and at what price
20
Q

What is Direct Distribution?

A

A channel where a producer and consumer deal directly with each other without the involvement of an intermediary

21
Q

What are some methods of direct channels?

A
  • Direct mailing
  • E-commerce
  • Telemarketing (Telephone selling)
22
Q

What is Indirect Distribution?

A

Involves the use of intermediaries between the producer and consumer

23
Q

What is Multi-Channel Distribution?

A

When a business uses more than one type of distribution channel

24
Q

What are the advantages of multi-channel distribution?

A
  • Allows more target market segments to be reached
  • Customers increasingly expect products to be available via more than one channel
  • Enables high revenues
25
Q

What are the disadvantages of multi-channel distribution?

A
  • Potential for channel ‘conflict’
    - -> E.G. competing with retailers by also selling direct
  • Can be complex to manage
  • Danger that pricing strategy can be confused
    - -> (In the eyes of the customer)
26
Q

What are some key changes in distribution to reflect social trends?

A
  • Online distribution
    - -> Online distribution is the streaming or downloading of media content via the internet.
  • Changing from a product to a service
    –> Traditional distribution channels and methods focused on getting physical products to the
    consumer
  • Sale of services via mobile devices
  • Widespread adoption of e-commerce by households
  • Ageing population with significant disposable income
  • Mass customisation reducing need for stock holding in distribution channels

A level business theme 1 (24 decks)

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