place

IGCSE BUSINESS STUDIES

PLACE

After deciding on the product and right price, the business has to get the product to the consumer. The product or service has to be available where and when customers want to buy. Where consumers can buy the product will affect how well it will sell. If the product is not available where customers want to buy it, and they have to go searching in different shops, then they may give up and buy a competitors product. It is very easy for a business to get the place wrong and therefore lose sales.

CHANNELS OF DISTRIBUTION

Not only do businesses have to decide where to sell their products, but they must also decide how to get their products to the consumer. That is, what CHANNEL OF DISTRIBUTION to use. Large expensive products like a house or a yacht will usually be sold by the producer directly to the consumer. If the product is low cost and a regular purchase (for example a can of coke) it would be difficult for both the manufacturer and the consumer to deal with each other directly. Therefore these types of products are sold via retailers and wholesalers. Fill in the missing words from the diagram below using the example on page 286 of your textbook.

Now you have seen how goods can get from the producer to the consumer via various ‘middle-men’, complete the table below with some additional notes on the subject.

Created by Gail Sharratt 1 Kuwait English School


Channel of distribution Explanation

Producer - consumer

Producer – retailer - consumer

Producer – wholesaler – retailer - consumer

Producer – agent – wholesaler – retailer -

consumer

TASK

On lined A4 paper, make notes on the role of wholesalers and selecting the channel of distribution to use from page 288 – 290 in your textbook and add these to your workbook.

TASK

Complete Activity 21.3 on page 291 of your textbook on lined paper and add to your workbook.

METHODS OF DISTRIBUTION

The method of distribution, that is, the type of transport that the manufacturer uses to deliver the products to the market, varies depending on the product being delivered and the value of the product. Distribution needs to be efficient and to make sure that shops do not lose sales because the product is



not available and the shelves are empty. Therefore the method of transport used must be carefully selected to ensure the product arrives at the shop on time and in good condition.

Road haulage

Lorries and vans are the most versatile form of transport to use as they can go anywhere at any time (road use is not affected by train timetables etc). It is relatively cheap and fast. Some businesses have their own lorries, whilst others use specialist businesses who transport the products for them (called haulage firms).

If a business uses its own lorry it can put the name of the firm on the side – which is free advertising. To buy the lorries a business can take out a loan or it could lease them. If the business has its own lorries then it will have to pay for maintenance, running costs and repairs. When the lorries are not being used these costs still have to be paid. Therefore, if they are not going to be in use all of the time then it might be cheaper to hire them when they are needed.

Railways

These are suitable for long distance transport and are often cheaper than road transport over long distances. It is faster than by road over a direct route. However, once the freight has reached its final destination, it often still has to be transported by road to its final destination, the factory of the shop may not be near a station!

Canal and river

This is quite a slow way to transport products but it is cheap. It is particularly cheap for large, heavy products, which would be expensive to transport by road or rail. A suitable canal or river has to be available and going where the business needs to deliver its products. This is not always the possible. Also, it is no use if the delivery is urgent.

Sea freight

This is used mainly for international trade and carries a lot of different types of products around the world. Today many of these products are carried in containers. These are large metal boxes into which products are packed and then loaded onto ships (or trains or lorries) ready for transport. The containers make it quick and easy, and therefore cheap, to load and unload the ships as large cranes can pick up a container and move it precisely into position.

Airfreight

This is used for small expensive goods, or products that are perishable and will deteriorate quickly. This is a very expensive form of transport but is also a very quick way of transporting products.



Pipelines

These are used to transport liquids or gas over a long distance. For example, they are used for pumping oil over long distances from the oil fields to the oil refinery or the docks. This is much cheaper than pumping crude oil into tankers and then transporting it by road to the coast. Roads are not always available and a pipeline can take the most direct route.

TASK

For each of the following products state the type of transport that would be most appropriate and explain your choice.

Product Method Explanation

Cocoa beans from the plantation to the chocolate factory in another country

Fresh cut flowers from the farm to the retailer in

another country

Crude oil from the oil field to the refinery

Logs from the forests to the saw mills


place

Documents