a) What is transportation by pipeline?
b) Explain five benefits of transport by air.
c) State four factors to be considered by a producer in choosing an effective channel of distribution
Explanation
(a) Transportation by pipeline is a means of moving liquid and gases from one place to another.
(b) Benefits of transport by air:
- Air transport is the fastest means of transportation.
- The danger of damage to delicate, fragile and perishable goods is reduced to the barest minimum.
- It requires less handling of goods, thereby reducing incidence of pilfering.
- The rate of accidents is minimal.
- It is a more comfortable means of transportation, hence suitable for long journeys.
- The cost of insuring goods conveyed by air is reduced because of the shorter time the insurance company is at risk.
- It costs nothing to provide/maintain air routes.
- Markets are extended as distant markets are easily reached.
(c) Factors to consider in choosing an effective channel of distribution:
- Nature of the product: perishable goods need shorter channels of distribution.
- Competitor’s channels: producers should consider channels used by other producers.
- Cost of the channel: the cost of using a particular channel of distribution should be considered.
- Market size: the number of potential customers will affect the choice of the channel used.
- Financial resources of the producer: the stronger the producer is financially, the lesser the need is for middlemen, hence the need for a short channel.
- Geographical concentration of customers: if customers are concentrated in a particular area, a short channel is required. If customers are widely scattered, a longer channel will be preferred.
- Size of the order: the size of the order will be considered in choosing a channel of distribution.
- Unit value of a product: expensive goods require direct distribution to customers.