Question

Vehicle Ltd. is an automobile manufacturer in India. It makes one million cars every year and has a sales network of company approved retailers who sell cars across cities.

Identify and briefly explain the type of channel of distribution adopted by the company. State any two factors that are considered while choosing the channel of distribution.

Answer 1

Vehicle Ltd. has opted for a one-level distribution channel that includes only a single intermediary, namely retailers. The following factors were taken into account while selecting this distribution channel:

1. This distribution channel lowers the cost of selling cars to final consumers, as Vehicle Ltd. requires less investment.
2. Retailing helps in expanding the geographical reach of the company.
3. It is most appropriate for high-value consumer durables such as cars manufactured by Vehicle Ltd.
4. It also helps in reducing inventory and stock-holding costs.