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 Form 3 Business Studies: Chain of distribution online lessons

Factors influencing choice of a distribution channel.

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Answer Text:
Factors influencing choice of a distribution channel.
(i) Nature of goods.
- Certain goods need to be sold directly to the consumer e.g. perishables, bulky goods or industrial products.
(ii) Nature of the market.
- A wide market will require a longer channel.
(iii) Nature of completion.
- If competition is very stiff, producers may want to deal directly with the consumers so as to offer extra services and retain them for example, after sales services.
(iv) Government policy.
- The government may encourage the use of certain channels for some
products to safeguard consumers’ interests.
(v) Cost of the channel.
- The least expensive distribution channel, which ensures the goods reach the consumers at the right time, should be chosen.
(vi) Resources and the size of the firm.
- The size of the firm determines the size of its market and therefore the type of channels to be used.
- A small firm produces goods for a small market hence requires a short channel.
(vii) Expensive goods.
- Products of high value require fewer intermediaries.
(viii) Bulkiness and heavy goods.
- Bulky and heavy goods require shorter channels to reduce on the cost.