Theory question 108
Wholesale TradeCommerce 2 (answer any five questions)
(a) Illustrate any four channels of distribution of manufactured goods.
(b) Explain the statement 'the longer the channel, the higher the price'.
(c) Give five reasons why small scale retail businesses may fail.
Show the model answer
(a) Any four (drawn as arrow chains): manufacturer → wholesaler → retailer → consumer; manufacturer → retailer → consumer; manufacturer → consumer; manufacturer → agent → wholesaler → retailer → consumer; manufacturer → wholesaler → consumer.
(b) Each middleman in the channel adds his own costs (transport, storage, handling) and profit margin to the price he paid; the more middlemen there are, the more additions are made, so the final price paid by the consumer is higher than in a short channel.
(c) Any five: inadequate capital; poor management and lack of business knowledge; poor record keeping; too much credit/bad debts; bad location; competition from large-scale retailers; mixing personal and business money/drawings; poor choice of goods or overstocking; theft and pilferage; high costs such as rent and taxes.
In (b) mention that each middleman adds costs and profit.