Middleman

Back to: ECONOMICS SS1

 

Welcome to class! 

In today’s class, we will be talking about the middleman. Enjoy the class!

Middleman

The middlemen are the wholesalers and the retailers who are in-between the producers and the consumers. They specialize in performing activities relating to purchase and sales of goods in the process of their flow from the manufacturers to the final consumers. The presence of the middlemen in the distributive trade cannot be overlooked as they play a vital role in linking the producers with the ultimate consumers for effective trading activities.

The argument for or survival of middlemen

Sometimes, middlemen form organizations that are influential enough to control prices. The middlemen have continued to wax stronger despite all the strong arguments for their elimination. The functions being performed by the middlemen to both the producers and ultimate consumers cannot be performed by either the manufacturers or the consumers. In spite of all these criticisms, it becomes clear that middlemen will continue to flourish because of the vital role they play in the distribution of goods between the producers and the final consumers.

The argument against or elimination of middlemen

The wholesaler is sometimes regarded as an unnecessary feature of the economics organization for the following reasons

1. High prices of goods: causes unnecessary price increase by adding to the cost of goods without directly adding value to it.
2. Creating an artificial scarcity of products by hoarding part of their goods to earn higher prices for themselves
3. Tax evasion: despite the fact that wholesaler earns a lot of profit, many of them evade tax.
4. Payment of low producer prices to farmers for their agricultural produce.
5. Disguised Unemployment: the presence of wholesaler encourages large scale disguised unemployment. They are usually under-employed
6. Existence of middlemen makes the chain of distribution of goods longer
7. The middlemen, sometimes, misinform the consumers
8. The middlemen can cause price fluctuation of goods in the market

Evaluation

1. Who are the middlemen?
2. Write a short note on the elimination of middlemen

Reasons that may warrant by-passing the middlemen

Some manufacturers by-pass the wholesaler and sell to a retailer for the following reasons

1. Where perishable goods are involved
2. The establishment of warehouses by producer
3. Indiscriminate increase in prices of goods and services
4. When good is branded
5. When consumers combined to buy in bulk
6. When the manufacturer open their retail stores
7. Their creation of artificial scarcity
8. Where the goods produced are highly technical or made to individual specifications

Problems of distributing and marketing of goods in West Africa

1. Poor and inadequate transportation facilities
2. Inadequate storage facilities
3. Too many middlemen
4. An administrative bottleneck in the collection and handling of goods
5. Inadequate credit facilities
6. Imperfect nature of the market due to inadequate information
7. The tendency to hoard goods in anticipation for higher prices
8. Inadequate infrastructural facilities
9. Inadequate dissemination of information

Efficient ways of distributing and marketing of goods in West Africa

1. Good and efficient transportation network
2. Provision of a good storage facility
3. Formation of consumer and wholesale co-operative societies
4. Goods rationing in case of essential commodities.
5. Provision of credit facilities to wholesale and retailers
6. Providing adequate information on the market situation
7. There should be legal action against hoarders
8. Establishment of more market places
9. Construction of good road network
10. Improvement in the communication system

Roles of government in distributive trade

The government at whatever level has a major role to play in the distribution of goods through the establishment of distributive agencies such as:

1. Establishment of the Nigeria National Supply Company (NNSC) Ltd
2. Marketing Board
3. The River Basin Authorities to encourage large production and distribution of agricultural produce
4. Provision of a good transport system
5. Provision of better storage facilities
6. Government agencies help to stabilize prices to check inflation
7. Government agencies help to prevent artificial scarcity of goods
8. Government agencies also play the role of price control
9. Establishment of a communication system

Evaluation

1. Why are the wholesalers and the retailers regarded as middlemen?
2. Explain the cogent reasons why middlemen should be eliminated in the distribution channels.

Reading assignment

1. Amplified and Simplified Economics for sss by Femi Longe page 144-146
2. Comprehensive Economics for SSS By. J.U. Anyaele chapter 12 pages 99- 100
3. New Approach Economics by K.U. Nnadi and A.B. Falodun chapter 8 pages 77, 81 – 85

General revision

1. What is a cooperative society?
2. Mention five types of cooperative.
3. Has the concept of opportunity cost any relevance to the economy of West Africa Countries?
4. Middlemen do encounter the problems in the process of carrying out their business. Discuss
5. Discuss the different types of agriculture system that is in West Africa

Theory

1. What functions do retailers perform for the manufacturer?
2. Discuss five problems encountered in the process of distribution of goods in Nigeria.

 

In our next class, we will be talking about Money.  We hope you enjoyed the class.

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