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Outline the factors a business should consider when choosing a suitable Channel of Distribution - Leaving Cert Business - Question 7(A) - 2012

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Question 7(A)

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Outline the factors a business should consider when choosing a suitable Channel of Distribution. Provide examples to illustrate your answer.

Worked Solution & Example Answer:Outline the factors a business should consider when choosing a suitable Channel of Distribution - Leaving Cert Business - Question 7(A) - 2012

Step 1

Cost

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Answer

Cost is a primary factor when selecting a channel of distribution. Businesses must evaluate the costs associated with each channel, as higher costs may result in increased consumer prices. For example, a company like Ryanair carefully considers distribution costs when using travel agents, as they aim to minimize expenses to remain competitive.

Step 2

Type of good/durability

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Answer

The nature of the product also influences distribution choices. For instance, perishable goods (like flowers) must reach consumers quickly and may therefore necessitate direct distribution to retailers to ensure quality. In contrast, durable goods such as furniture can be sold through wholesalers, allowing for broader market access.

Step 3

Market size

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Answer

The size of the target market is crucial. If a business aims to serve a large market, it might consider using a wholesale model to efficiently distribute products. For example, a retailer of bulk items might rely on warehouse clubs to reach consumers substantially.

Step 4

E-business

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Answer

With the rise of e-business, companies have new avenues for distribution. Businesses can use e-commerce platforms to accept and fulfill orders efficiently. For instance, a consumer can place an order through a company’s website, and the goods can be delivered directly to the consumer's doorstep, bypassing traditional retail channels.

Step 5

Technological developments

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Answer

Advancements in technology have transformed distribution methods. Businesses can interact directly with consumers through the internet, utilizing services like online banking and mobile apps for transactions. For example, services that allow customers to purchase insurance online or transfer funds are rapidly replacing traditional face-to-face interactions.

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