Page 582 - Business Principles and Management

Chapter 21 • Product Development and Distribution

their customers want. It is not unusual for businesses in a distribution channel
to have conflicts with each other. One way for channels to work together more
effectively is for a large business in the channel to take responsibility for plan-
ning, coordination, and communication. The business organizes the channel so
that each participant benefits and helps the other businesses perform their func-
tions successfully. An administered channel is one in which one organization
takes a leadership position to benefit all channel members.
Cooperation is difficult among businesses that operate at different levels of
a channel and have very different responsibilities. Some very large businesses
attempt to solve that problem through channel integration. Channel integration
occurs when one business owns the organizations at other levels of the channel.
A manufacturer may purchase the businesses that provide wholesaling or retail-
ing functions. A large retailer may decide to buy a wholesaler or even several
small manufacturing businesses. Each business can still perform the specific
functions needed for a successful channel, but having one owner for all businesses
avoids the conflicts that occur in other channels.

CHECKPOINT

List three factors businesses must consider when developing
a channel of distribution.

21.2 Assessment

UNDERSTAND MANAGEMENT CONCEPTS
Circle the best answer for each of the following questions.
1. The routes products follow while moving from producer to consumer,
including all related activities and participating organizations, are
called
a. routes of distribution
b. methods of distribution
c. channels of distribution
d. the marketing route
2. When producers sell directly to the ultimate consumer they are using:
a. direct distribution
b. indirect distribution
c. indirect marketing
d. Internet marketing

THINK CRITICALLY
Answer the following questions as completely as possible.
3. Explain how economic discrepancies are related to economic utility.
4. Describe the differences between direct and
indirect channels.

thomsonedu.com/school/bpmxtra

569