Question

How would you defend intermediaries to someone who said that eliminating them would save consumers millions of dollars?

Answer 1

Solution

An intermediary is nothing but a mediator between two or more parties working to bring an agreement ot negotiation between 2 parties on a subject matter.

Too many intermediaries are not good for an economy as the consumers have to pay additional costs for the goods they purchase.

Banking on this,some people may even think that intermediaries should be eliminated.But it is not correct.Even though the consumers have to pay higher prices for goods due to their existence,they are good for many reasons like they function as a bridge between the consumers and manufacturers by:

1.Providing transactional support in the entire suply chain process.

2.Provide logistic support during the entire supply chain process

3.Access /Forecast the demand,taste and collect the feedback from the consumers and convey the same to the manufacturers;based on which the manufacturers can take the important decisions related to production.

4.Provide support in the form of stocking and sorting the goods.

So,even though manufacturers can elimanate the intermediaries and take up these additonal functions,they cannot do that because there are specialized in one function i.e.,production .They would rather concentrate on that function inorder to improve their profitability rather than to concentrate on these support functions.

Conclusion: Intermediaries cannot /should not be completely eliminated as they may save millions of dollars for consumers.It is because they perform many support fuctions in the market ecosystem.But too much of intermediation leads to higher prices.Intermediaries should also be regulated.

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