A producer chooses to sell its goods to a wholesaler rather than to a retailer - OCR - GCSE Business - Question 8 - 2021 - Paper 1
Question 8
A producer chooses to sell its goods to a wholesaler rather than to a retailer.
Which of the following is an advantage to the producer of including a wholesaler in ... show full transcript
Worked Solution & Example Answer:A producer chooses to sell its goods to a wholesaler rather than to a retailer - OCR - GCSE Business - Question 8 - 2021 - Paper 1
Step 1
The producer is likely to be able to charge higher prices
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Answer
This option suggests that by working with a wholesaler, the producer can set higher prices. However, this is typically not the case since wholesalers often buy in bulk, leading to lower prices for consumers.
Step 2
The producer will have a wider span of control
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Answer
This implies more oversight over distribution. However, involving a wholesaler usually means less direct control over how products are sold to retailers.
Step 3
The producer will have less competition
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Answer
This option is misleading because the presence of wholesalers does not inherently reduce competition. Competition may still exist among various producers.
Step 4
The producer’s storage costs are likely to be lower
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Answer
This option is correct. By selling to a wholesaler, the producer can reduce their storage costs since the wholesaler can handle inventory management and storage, which alleviates the burden from the producer.
