(a) Illustrate any four channels of distribution of manufactured goods. (b) Explain the statement the longer the channel, the higher the price. (c) Give fiv...

(a) Four channels of distribution of manufactured goods

• Channel 1: Manufacturer → Wholesaler → Retailer → Consumer (the traditional full channel).
• Channel 2: Manufacturer → Retailer → Consumer (used by large retailers such as multiple shops who buy in bulk).
• Channel 3: Manufacturer → Consumer (direct sale, for example factory outlets, mail order or industrial goods).
• Channel 4: Manufacturer → Agent/Broker → Wholesaler → Retailer → Consumer (used especially in foreign trade).

(b) "The longer the channel, the higher the price"

Each middleman in the chain of distribution buys the goods and resells them at a profit, adding his own margin to cover his costs and reward. The more middlemen (wholesaler, agent, retailer) that the goods pass through, the more times a profit margin and handling, transport and storage costs are added. These accumulated margins and expenses are ultimately passed on to the final consumer, so a long channel with many intermediaries results in a higher final selling price than a short or direct channel.

(c) Five reasons why small scale retail businesses may fail

• Shortage of capital: insufficient funds to buy adequate stock or sustain the business through difficult periods.
• Poor management: lack of business knowledge, poor record keeping and inability to control costs.
• Competition: pressure from larger retailers such as supermarkets and multiple shops who sell more cheaply.
• Granting of too much credit: selling on credit to customers who fail to pay ties down funds and causes bad debts.
• Poor location: siting the shop where there are too few customers reduces sales.

Other reasons include holding too much unsaleable stock and mixing business money with personal expenses.