Question

Mark A. Teer believes he has found a surefire way to save money. He advises his friends, "Buy direct from the manufacturer. Any time intermediaries get involved, you'll pay a higher price. After all, every intermediary involved in the marketing process must charge enough to earn a profit." Mark's advice:A. is entirely correct. Intermediaries must charge a high enough price for the activities they perform to earn a profit, so using intermediaries must result in a higher price.
B. is impractical, because in most markets the distribution process is so complex that it is impossible to determine who the actual producer really is.

C. is not valid in many cases. Intermediaries do add costs to products, but they also create value by performing marketing functions efficiently. In many cases the value they create more than offsets the costs they add.

D. is never true. Markets that make use of intermediaries can always provide goods at lower cost than those that rely on direct distribution.

Answer 1

Answer:

The answer is C:

This is not valid in many cases. Intermediaries do add costs to products, but they also create value by performing marketing functions efficiently. In many cases the value they create more than offsets the costs they add.

Explanation:

Intermediaries

• Firm or person (such as a broker or consultant) who acts as a mediator on a link between parties to a business deal, investment decision, negotiation, etc.
• In money markets, for example, banks act as intermediaries between depositors seeking interest income and borrowers seeking debt capital.

Intermediaries is an important part of the buying and selling function. They have several benefits:

• Provide Logistic Support.
• Intermediaries are engaged as they provide logistic support, i.e., they ensure smooth and effective physical distribution of goods.
• Provide transactional Functions.
• Burden Sharing, Cost and Time Saving.

Use of intermediaries, may result in higher price, but it offers value as well, as we may get the product sooner, than we directly order it from the manufacturer. We may need to pay more shipping cost, than buying the product from the intermediary, operating in the same location where we are.