Long Type Questions - Enterprise Marketing, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. Explain the important factors affecting the choice of channels of distribution by the manufacturer ?  (TBQ) (6 marks)
Ans.
(i) Goodwill : A manufacturer enjoying good reputation need not depend on the middlemen as he can open his own branches easily.
(ii) Desire to control the channel of distribution : A manufacturer who wants to control the channel of distribution should approach the consumers directly.
(iii) Financial strength : A company having strong financial base can open its own channels. On the other hand, financially weak companies would depend upon middlemen.

Q2. Explain the different channels of distribution. (6 marks)
Ans. Channels of distribution are broadly divided into four types. These are :
(i) Producer - customer (Direct channel-zero level) : This is the simplest and shortest channel in which no middlemen is involved and producers directly sell their products to the consumers. It is fast and economical channel of distribution. Under it, the producer or entrepreneur performs all the marketing activities himself and has full control over distribution. A producer may sell directly to consumers through door-to-door sales persons, direct mail or through his own retail stores. Big firms adopt this channel to cut distribution costs and to sell industrial products of high value. Small producers and producers of perishable commodities also sell directly to local consumers.
Producer → Customer
(ii) Producer-retailer-customer (Indirect-one level) : This channel of distribution involves only one middlemen called “retailer”. Under it, the producer sells his/her product to big retailers (or retailers who buy goods in large quantities) who inturn sell to the ultimate consumers. This channel relieves the manufacturer from burden of selling the goods himself and at the same time gives him control over the process of distribution. This is often suited for distribution of consumer durables and products of high value.
Producer → Retailer → Customer
(iii) Producer - wholesaler - retailer - customer (Two level) : This is the most common and traditional channel of distribution. Under it, two middlemen, i.e., wholesalers and retailers are involved. Here, the producers sells his product to wholesalers, who inturn sell it to retailers. And, retailers finally sell the product to the ultimate consumers. This channel is suitable for producers who have limited finance, narrow product line and need expert services and promotional support of wholesalers. This is mostly used for the products with widely scattered market.
Producer → Wholesaler → Retailer → Customer
(iv) Producer - agent - wholesaler - retailer - customer (Three level) : This is the longest channel of distribution in which three middleman are involved. This is used when the producer wants to be fully relieved of the problem of distribution and thus hands over his entire output to the selling agents. The agents distribute the product among a few wholesalers. Every wholesaler distributes the product among a number of retailers who finally sell it to the ultimate consumers. This channel is suitable for wider distribution of various industrial products.
Producer → Agent → Wholesaler → Retailer → Customer

Q3. Explain the factors affecting the choice of channels of distribution related to product. (6 marks)
Ans. When a manufacturer selects some channel of distribution he should take care of such factors which are related to the quality and nature of the product. They are as follows :
(i) Unit value of the product : When the product is very costly it is best to use a small distribution channel. For example, industrial machinery or gold ornaments are very costly products that is why for their distribution small distribution channel is used. On the other hand, for less costly products long distribution channel is used.
(ii) Standardised or customised product : Standardised products are those for which cost is pre-determined and there is no scope for alteration. To sell this long distribution channel is used. On the other hand, customised products are those which are made according to the discretion of the customer and also there is no scope for alteration, for example furniture. For such products face-to-face interaction between the manufacturer and the consumer is essential. So for these direct sales is a good option.
(iii) Perishability : A manufacturer should choose minimum or no middlemen as channel of distribution for such an item or product which is of a highly perishable in nature. On the contrary, a long distribution channel can be selected for durable goods.
(iv) Technical nature : If a product is of technical nature, then it is better to supply it directly to the consumer. This will help the user to know the necessary technicalities of the product.

Q4. What consideration related to market should be taken into account while selecting the channel of distribution. (5 marks)
Ans. Consideration related to market are as follows :
(i) Number of buyers : If the number of buyers is large then it is better to take the services of middlemen for the distribution of the goods. On the contrary, the distribution should be done by the manufacturer directly if the number of buyers is less.
(ii) Type of buyers : Buyers can be of two types : General buyers and industrial buyers. If more buyers of the product belong to the general category then there can be more middlemen. But in case of industrial buyers there can be fewer middlemen.
(iii) Buying habits : A manufacturer should take the services of middlemen if his financial position does not permit him to sell goods on credit to those consumers who are in the habit of purchasing goods on credit.
(iv) Buying quantity : It is useful for the manufacturer to rely on the services of middlemen if the goods are bought in smaller quantity.
(v) Size of market : If the market area of the product is scattered fairly, then the producer must take the help of middlemen.

Q5. Explain the functions of distribution channels. (6 marks)
Ans. Following are the functions of the distribution channels :
(i) Sorting/Grading : Middlemen procure goods from various manufacturers and they do sorting like repacking them according to quality, size or price.
(ii) Accumulation : Middlemen maintain a large stock of goods so that there is smooth supply of goods without any delay.
(iii) Variety/Assortment : Middlemen maintain variety of goods. They procure goods from various manufacturers and assemble them at one place so that consumer can fulfill his requirement by visiting one place only.
(iv) Promotion : Middlemen use some sales promotion tools to attract the customers. Example : discounts, contest, etc.
(v) Negotiation : Middlemen negotiate with manufacturer as well as with customers on price, quality, etc. They help in transfer of ownership.
(vi) Risk Taking : Middlemen maintain large stock of goods. They transport goods from one place to another. When goods are with them in stock or when these are transported from one place to another, the middlemen bear the risk of spoilage or damage of goods.

Q6. Explain the competitive and environmental factors which affect the choice of a channel of distribution. (6 marks)
Ans. Competitive factors : The type of channel selected by competitor also affects the selection of channel. A company way select the same channel as selected by the competitor or may prefer not to select the same channel. For example, competitor may prefer buying its product from big retail houses and the businessmen may prefer door-to-door selling by salesman.
Environmental factors : These include trade policy, economic policy, etc. These also affect the choice of channel of distribution. For example, in a depressed economy shorter channels are preferred to distribute goods in an economical way.