1.3.4 DISTRIBUTION Flashcards
what is distribution
the process of making a product or service available for the consumer or business user who needs it
whats a distribution channel
chain of businesses or intermediaries which a service or good passes through until it reaches the final buyer
whats the first channel
manufacturers -> consumer
whats the second channel
manufacturer -> retailer -> consumer
whats the third channel
manufacturer -> warehouse -> retailer -> consumer
whats the fourth channel
manufacturer-> agent -> warehouse -> retailer -> consumer
advantages of using direct distribution
-businesses have greater control including branding and pricing
-by eliminating intermediaries companies can retain larger shares of the profits
- enhances stronger relationships with customers and loyalty
- companies can respond quicker to market changes and customer demand
disadvantages of using direct distribution
- can lead to higher operational costs
- may restrict companies ability to reach a broader audience
- increased responsibility
- can stretch resources thin leading to potential inefficiencies
advantages of using indirect distribution
- allows access to a broader audience by leveraging relationships of intermediaries
- reduced operational burden as they can offload responsibilities
- intermediaries often have EOS which can lower distribution costs
- enhanced customer access
disadvantages of using indirect distribution
- involving intermediaries can reduce profit margins
- companies have less control which can lead to inconsistency
- can result in slower responses to market changes as a business may need to coordinate with multiple intermediaries
what are factors that determine distribution
- lead time
- cost of delivery
- if the item is perishable
- distance to customer
- physical or digital good
- price of product
