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What is the importance of middleman in business?

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mysha | Student, College Freshman | eNotes Newbie

Posted October 12, 2008 at 2:16 AM via web

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What is the importance of middleman in business?

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krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted April 22, 2009 at 4:58 PM (Answer #1)

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Middlemen in business refer to independent businesses that form the distribution channels through which a product passes on its way from a manufacturer to end user. Middlemen are of different types like wholesalers and retailers. Middlemen play a very important role in business which benefits end users as well as manufacturers.

Generally goods are manufactured in large quantities at a few centralized locations, to reap the advantages of economy of scale. However the end users are widely dispersed over large geographical areas. The goods manufactured must be transported from the manufacturing locations, and delivered to each retail customers, when and where they want. Using the services of middlemen the manufacturers distribute their product economically and quickly.

Distribution channel provides many benefits to customers also by making goods available to then at locations near them. Also they are able to buy products of many different manufacturers at one place.

The retailers may also provide advice and add on service to customers to help them choose the right product. A salesman in a shoe shop may advice its customer on the right type of shoes for different purposes like jogging, mountain climbing, and very cold climates. They also help the customers to try out the fit of the shoes.

The Middlemen supplements the resources of the manufacturers in many ways. They invest substantial amount of money in stocks, credit extended to customers, warehouse, offices, shops and other facilities used for distribution of products.

Perhaps the most important of these resources is the widely dispersed geographical presence. As compared to manufacturers, the distribution intermediaries are much more widely distributed. Even the biggest auto companies in the world have don’t have more than dozen or so final assembly plants, but dealers selling their automobile numbering thousands have their presence in many different countries.

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