What is the effect of global distribution networks on the final selling price of a product?

What is the effect of global distribution networks on the final selling price of a product?

• A. They increase the final selling price
• B. They decrease the final selling price
• C. They have no impact on price
• D. They reduce advertising costs

Answer: (A)

Global distribution networks add costs from production to the customer: transportation, warehousing, customs duties, insurance, and margins taken by intermediaries like distributors and retailers. Those added costs are typically embedded in the final price the consumer pays, so expanding reach often pushes the selling price higher in many markets. While distribution efficiency can lower unit costs through scale, the net effect discussed here is that the final price tends to rise due to the additional logistics and channel costs. Advertising costs aren’t automatically reduced by distribution networks; they are separate cost components that can vary independently.

Global distribution networks add costs from production to the customer: transportation, warehousing, customs duties, insurance, and margins taken by intermediaries like distributors and retailers. Those added costs are typically embedded in the final price the consumer pays, so expanding reach often pushes the selling price higher in many markets. While distribution efficiency can lower unit costs through scale, the net effect discussed here is that the final price tends to rise due to the additional logistics and channel costs. Advertising costs aren’t automatically reduced by distribution networks; they are separate cost components that can vary independently.