DISTRIBUTION

The channel of distribution or trade channel refers to the route the product takes on
the way from the manufacturer or producer to the ultimate consumer. The simplest
form of distribution is direct sale. For example, a grower sells produce directly to a
consumer at a roadside stand. However, most often the channel of distribution
involves middlemen. Middlemen are people who take possession of merchandise
and take title to it or arrange for transfer of ownership. The reason middlemen are
needed is that a particular customer or consumer desires many products, which
come from many manufacturers, and it is impossible for the consumer to purchase
every product from the producer. For example, in offices, pencils, paper, desks,
chairs, lamps, cabinets, and many other products are used. Each of these products
may be manufactured in a different part of the country. The office purchasing agent
needs to be able to purchase different quantities of these items at one place that is
convenient for him.

The job of the middleman is to collect the different products from the various
manufacturers, and then to divide them into amounts which the customers require.
The middleman gives the products place utility by delivering to transporting them
to where they are needed. Two types of middlemen are merchant middlemen, who
actually take title to the merchandise, and agent middlemen, who arrange for the
transfer of title between manufacturer and wholesaler. An example of merchant
middleman might be a person who owns a warehouse, buys large quantities of
goods from manufacturers, and then distributes them to companies who purchase
smaller quantities of goods from manufacturers, and then distributes them to com-
panies who purchase smaller quantities. An example of an agent middleman would
be a broker who earns a commission by putting buyer and seller in contact with
one another.

The channel of distribution selected for consumer products sold on the retail market
depends upon the type of product. Some items are considered convenience goods.
They are generally products which have a low price and can be found at several
convenient locations. Examples are chewing gum, cigarettes, and soft drinks. One
generally goes to the closest place to buy these kinds of products. In this case,
convenience is utility. Convenience goods are found at supermarkets, convenience
stores, and even in vending machines. These goods must be widely distributed.
They may, therefore, go through several middlemen before they arrive at the place
where the consumer purchases them.

Other consumer products are classified as shopping goods. These are the products
which generally cost more than convenience goods require more considering in for
price and duality than do convenience goods. A customer shopping for evaluation
set or other major home appliance would probably consider several different
products and shop at several different locations to compare quality and circle before
making a decision about a purchase.

Glossary
channel (n) : Jalur
ultimate (adj) : pokok
roadside (n) : pinggir jalan
merchandise (n) : barang dagangan
middleman (n) : makelar, perantara
wholesaler (n) : tengkulak
warehouse (n) : gudang
convenience (n) : kesesuaian, kecocokkan
vending machine(n) : mesin otomatis
home appliance (n) : perlengkapan, alat rumah tangga

A. COMPREHENSION QUESTIONS
Answer the following questions clearly.
1. What is the channel of distribution?
2. What do you know about middleman?
3. Why is middleman necessary for distribution?
4. What are the specific activities of middleman?
5. How is merchant middleman different from agent middleman?
6. What influences the channel of distribution on the retail market?
7. What do you know about convenience goods?
8. What are the difference between convenience goods and shopping goods?

This exercise is designed to increase vocabulary and reading

comprehension. Select the answer that best completes the
meaning of the sentence.

1. A grower selling fruit at a roadside stand is an example of ___________

a. a middleman
b. a convenience goods
c. producer selling directly to consumer
d. manufacturer selling directly to middleman

2. A middleman who takes title to the merchandise és an example of _________

a. a merchant middleman c. a distributor
b. an agent middleman d. a customer

3. The purchasing agent at an office probably __________

a. deals directly with pencil manufacturers
b. acts as a middleman
c. orders through a local office supply store
d. a salesman

4. A stock broker or real estate broker would be an example of _________

a. a person who receives title to certain investments
b. a person who deals with both buyer and seller
c. a person who buys large quantities of real estate and stock
d. a salesman

5. The best channel of distribution depends on __________

a. the type of product
b. the price of the product
c. where the product will be sold
d. all of these

6. The cost of distribution for convenience goods is probably ___________

a. higher than tor shopping goods
b. not important for the consumer
c. not a factor in the sales price
d. part of the commission

B. VOCABULARY BUILDING
Match the words in the left column with the definition in the right
column.
1. bring to market a. company that grants a franchise
2. ultimate consumer b. fee paid for making a sale
3. Take possession of c. available for sale at many locations
4. take title to d. deliver to the customer
5. commission e. owning the retail outlet, the distributor and maybe even the
producers
6. widely distributed f. able to be seen
7. place utility g. costs other than costs of the period of the
product, such as rent, electricity, management
8. personal selling h. legal permission to operate certain business
9. on display i. explaining the features of a product to a potential costumer
10. overhead j. increased value due to location
11. high volume k. to become the legal owner
12. franchise or license l. person who buys something for his own use
13. parent company m. large company which owns smaller companies
14. franchiser n. large amounts of merchandise being bought and sold quickly
15. vertically integrated o. a large chain of authority and management
16. bureaucracy p. to hold and have physical control over

C. STRUCTURAL REVIEW: Combining Sentences

Study the following sentences.
Middlemen are people.
People take position of merchandise.
Middlemen are people who take position of merchandise.

The manager will begin work next month.

The manager was appointed last week.
The manager who was appointed last week will begin work next month.

Combine these sentences by using who like the example above.

1. He may wish to discuss the scheme with others.
The others have been interested in it for some time.
2. The economics expert took six month to present his report.
The experts were chosen to investigate the matter.
3. The government appointed a special commission of industrial experts.
These experts would meet regularly to plan production targets.
4. Those employees were satisfied with the working condition.
The employees were not engaged but the sentences become less formal.
5. These employees were not satisfied with the working conditions.
The employees were engaged on a day -to-day basis.
In the sentences below replace which with that. When you have done
this, rewrite all the sentences without either which or that. The meaning
remains the same but the sentences become less formal.

1. The goods which they wanted were essential minerals.

2. The schools and hospitals which they provide are essential.
3. The goods which he buys are valuable.
4. The money which the people earned bought many commodities.
5. The goods and services which people produce are very useful.

Combine these pairs of sentences using which.

Example:
That is the garage.
ln that garage the new car is kept.
That is the garage in which the new car is kept.

1. Economics is a science. In that science everything must be studied in an

objective way.
2. The USSR has a system. In that system central planning is very important.
3. The USA has an economy. In that economy government planning is limited
to quite a small area.
4. Marxism proposes a special economic system. In that system collective
needs are more important than individual needs.
5. The British have a certain way of life. In that way of life private enterprise
and private ownership of property are very important.
Combine these pairs of sentences, using that and changing will to
would.
Example:
He told me something. The prices will change.
They told me that prices would change.

1. They told him something. The committee will meet next.

2. The economists expected something. The prices will fluctuate considerably.
3. The government anticipated something. The workers will demand higher wages.
4. The management decided something. The new factory will be located in different
city.
5. The development committee arranged something. The meeting will be held
at regular intervals over the next two years.