Published by MBA Skool Team, Last Updated: May 01, 2013
What is Distribution?
For a business, only manufacturing the product according the consumer demand is not sufficient. It has to reach the right customer at the right time in right amount. This objective is achieved through distribution function of a business. A business organisation can adopt distribution by itself or through intermediaries. The intermediaries may be individuals, viz. agents or other business organisations, viz. distributors, retailers, etc.
The whole set of intermediaries or interdependent entities executing the distribution function together constitute the ‘distribution channel’. Channel levels indicate the number of intermediaries between the manufacturer and the consumer, ranging from zero to as many as the channel mix or channel design uses.
Since the channel consist of interdependent entities whereby each wants to maximise own profit, channel conflicts (horizontal — among intermediaries at same level, or vertical — among intermediaries at different levels) are common. Thus distribution channel management is a crucial function of an organisation. Positive motivation techniques like offering deals, allowances, etc. to intermediaries and negative threats like curtailing margins, with-hold of product supply are commonly employed channel management tactics.
Distribution can be classified as:
Intensive (e.g. – FMCG products),
Selective (e.g. – refrigerators, televisions) and
Exclusive (e.g. – luxury products)
in the descending order of intermediaries a manufacturer wants to use as its distribution partner(s).
Hence, this concludes the definition of Distribution along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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