Chain of Distribution - Business Studies Form 3 Notes

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  • The paths that that goods or services follows from the producers to the consumers.


  • These are traders that are engaged in distributing goods and services between the producers and consumers.

Expenses Incurred by Wholesalers when they Buy Goods from Producers.

  • Actual cost of buying the goods.
  • Transport cost.
  • Storage costs.
  • Insurance cost.
  • Salaries and wages.
  • Packing and blending.

Channels of Distribution for Various Products

Distribution of Imported Goods

  1. Foreign producer to local consumer.
  2. Foreign producer to agent to wholesalers to retailers to local consumer.
  3. Foreign producer local agents/importers to local consumer.
  4. Foreign producers to wholesaler then to retailer and finally local consumer.
  5. Foreign producer to local retailer then to local consumer.
  6. Foreign producer to wholesalers to local consumers.
  7. Foreign producer to manufactures representatives to wholesaler to retailers to local consumer.

Distribution of Locally Manufactured Goods

  1. Local Manufacturers sell direct to consumers.
  2. Local manufacturers through wholesalers through retailers to consumers.
  3. Local manufacturers through wholesalers directly to consumers.
  4. Local manufacturers through retailers to consumers.
  5. Local manufacturers through government agent through wholesaler to retailers to consumers.
  6. Local manufacturers through government agent through wholesaler and directly consumers.
  7. Local manufacturers through government agent through wholesaler and directly consumer.

Distribution of Local Agriculture Produce.

  1. Farmer (producer) to local cooperative then to marketing board to wholesalers to retailers and finally to consumers.
  2. Farmer (producer) to retailers and directly to consumers.
  3. Farmer (producer) may sell directly to consumers.
  4. Farmer (producer) through wholesaler to retailer then consumers.
  5. Farmer (producer) through marketing board through wholesalers to retailers and finally to consumers.
  6. Farmer (producer) through marketing board through retailers and finally to consumers.

Roles Played by Intermediaries in the Distribution Chain.

  1. Reducing transaction between producers and consumers.
    - They reduce the number of transaction between many producers and consumers and also assist the producers in searching for and communicating with prospective customers.
  2. Breaking bulk
    - They buy in large quantities and sell in small quantities breaking the bulk as required by their customers.
  3. Accumulating bulk
    - Some buy small quantities of the same product from many small producers and then offering the large amount gathered to buyers who may be wanting large quantities.
  4. Risk taking
    - By taking the possession of goods from producers they assume all the risks associated with the movement of such products from the producers to the consumers.
  5. Provide finance
    - When intermediaries take the goods immediately they are produced, they relieve the producers from finances needed to sell the goods directly to consumers.
  6. Transport and storage
    - The intermediaries transport and stores the goods in their warehouses until the demand arises.
  7. Availing goods to consumers
    - Intermediaries avail goods at places conveniently accessible to consumers. They also ensure steady supply of goods by carrying out warehousing.
  8. Product promotion
    - They promote the product by passing relevant information to consumers about the product.

Factors Influencing the Choice of Distribution Channel

  1. The nature of goods
    - Where perishable a direct channel to consumers is more preferred because delays may result into losses.
  2. Size of the market
    - Where the market is large it may require longer channels to reach consumers while if the consumers are concentrated in one area, it requires shorter channel.
  3. Costs
    - Where the cost of marketing and distribution are high manufacturers will dispose goods through intermediaries.
  4. Lack of facilities / skills
    - Where the produces lacks facilities to help in distribution he will call upon intermediaries to help them reach consumers.
  5. Government policy.
    - If the government policy prohibits /required use of a certain channel then it has to be followed.
  6. Nature of market
    - Depending on consumer‟s preferences / taste it may require a personal attention of the producer.
  7. Competition.
    - Where competition is high manufacture may have to be closer to the consumer.
  8. Technical goods
    - Technical goods need to be sold direct to consumer in order to provide necessary information.

Past KCSE Questions on the Topic

Paper 1

  1. Outline four benefits that customers get from small – scale retailers. (4 mks)
  2. Highlight four benefits that accrue to a customer who buys directly from a manufacturer (4 mks)
  3. Name four channels the a manufacturer would use to distribute his goods to the customer (4 mks)
  4. Highlight four factors that should be considered in choosing a method of distributing agricultural produce (4 mks)
  5. Give disadvantages of long chain of distribution of goods to a buyer (4 mks)
  6. State four benefits to a large consumer who buys directly from the producer. (4 mks)
  7. Outline four benefits to a large consumer who buys directly from the producer. (4 mks)
  8. Highlight four circumstances under which a manufacturer may prefer to sell goods directly to the consumers (4 mks)

Paper 2

  1. Describe five circumstances under which a producer would sell his goods to his consumers (10 mks)
  2. Zango manufacturers who have been selling their products directly as retailers have decided to distribute the products through wholesalers. Explain five benefits that Zango manufacturers may get from these new arrangements. (10 mks)
  3. Describe five channels that can be used to distribute locally manufactured goods (10 mks)
  4. Explain four factors that may be considered in determining the appropriate channel for distributing goods (10 mks)
  5. Discuss circumstances under which a wholesaler becomes essential in the chain of distribution (10 mks)
  6. Explain the channel of distribution for imported goods (10 mks)
  7. Kabu manufacturers have decided to distribute their goods through wholesalers. Discuss five benefits that would account to Kabu manufacturers (10 mks)
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