ADVANCE RESEARCH METHODOLOGIES:

ASSIGNMENT NO: 1
RESEARCH TOPIC:
IMPACT OF HIGH INFLATION RATE ON DISTRIBUTION COST OF FMCGS
INDUSTRIES:

STUDENTS OF MBA 4TH:

NAME OF GROUP MEMBERS:

DANIYAL KHANI

FAYSAL AYUB

HASNAIN

FIZA AKHTER

SUBMITTED TO:
Dr. ATIF AZIZ

DATE: 13-10-2019
RESEARCH TOPIC:
Why distribution cost increases in times of economic crisis in FMCGS industries
(high inflation rate).

Theoretical FRAME WORK:

(y) (x)
Dependent variable Independent variable

FUEL

DISTRIBUTION COST
LABOUR

RENTAL VEHICLES

INFLATION:
A consistent trend is increase of commodities. Inflation is an economic term that refers to an
environment of generally rising prices of goods and services within a particular economy. As
general prices rise, the purchasing power of the consumer decreases. The measure of inflation
over time is referred to as the inflation rate. In common terminology, many people may refer to
inflation as "the cost of living."
For example: prices for many consumer goods are double that of 20 years ago. When you hear
your grandparents recall, "A movie and a bag of popcorn only cost $1.00 when I was your age,"
they are making an observation about inflation--the cost of goods and services--over time.

MEASUREMENT OF INFLATION:
Calculate the inflation on three ways:

 Consumer price index

 Sensitive price index
 Weighted price index

INFLATION RATE:
The rate at which prices increase over time, resulting in a fall in the purchasing value of money.
“The average inflation rate over the decade was 2.9 per cent".

INFLATION RATE IN PAKISTAN:

Pakistan: Inflation: percent change in the Consumer Price Index:
For that indicator, The World Bank provides data for Pakistan from 1960 to 2018.
The average value for Pakistan during that period was 8 percent with a minimum of -0.5
percent in 1962 and a maximum of 26.7 percent in 1974. See the global rankings for that
indicator or use the country comparator to compare trends over time.
Pakistan’s annual inflation rate increased to 12.55 percent in September of 2019 from 11.63
percent in the previous month. It was the highest inflation rate since June of 2011, as prices
advanced faster for food & non-alcoholic beverages (13.35 percent vs 10.68 percent in August);
housing & utilities (12.75 percent vs 12.70 percent); clothing & footwear (8.68 percent vs 8.51
percent); furniture & household equipment (11.33 percent vs 10.66 percent) and miscellaneous
goods & services (14.51 percent vs 14.42 percent). On the other hand, prices slowed for
transport (14.28 percent vs 15.26 percent); education (5.21 percent vs 7.05 percent) and
communication (8.97 percent vs 8.98 percent). On a monthly basis, consumer prices increased
0.75 percent, following a 1.38 percent rise in the previous month. Inflation Rate in Pakistan
averaged 7.77 percent from 1957 until 2019, reaching an all time high of 37.81 percent in
December of 1973 and a record low of -10.32 percent in February of 1959.
DISTRIBUTION COST:
Distribution costs (also known as “Distribution Expenses”) are usually defined
as the costs incurred to deliver the product from the production unit to the end user. Handling
cost of inventory at all points for example production place, storehouse, sales point is part of
distribution cost. Packing costs are also part of distribution costs. Distribution managerial cost
such as the salary expense of distribution manager and his/her office expenses are also part of
distribution costs.

DISTRIBUTION COST ANALYSIS:

More and more firms are using some form of contribution accounting
to determine the profitability of products, channel units, and market segments. Such a method
assigns first all variable marketing and production costs to a product. Variable production costs
are direct labor and materials. The variable marketing costs are due to credit, shipping, sales
commissions, merchandising and advertising. Some firms go further and allocate certain fixed
joint costs, but this should only be done when one can find a logical relationship between the
assigned expenditure and the product sales.

Since the response to marketing effort will vary by customer and by product, marketing
managers must decide how their marketing efforts will be allocated among customers and
products. Thus, marketing managers must have knowledge of each major account, including its
potential by product. They must also know if they are getting a greater or lesser share of an
account’s potential, and whether they have been applying increasing or decreasing amounts of
marketing effort to the account. Through ex post facto types of analyses or through
experiments managers can estimate the likely results of applying additional marketing efforts
to accounts of certain sizes, given the share of the account’s potential that has already been
obtained by the firm. For example, one company determined that with accounts representing
$100,000 and more annual potential, it was most unlikely that they could obtain better than a
30 percent share regardless of the nature and magnitude of the inputs.

IMPACT OF FUEL ON DISTRIBUTION COST:

Oil price increases are generally thought to increase inflation and reduce economic growth. In
terms of inflation, oil prices directly affect the prices of goods made with petroleum products….
Increases in oil prices can depress the supply of other goods because they increase the costs of
producing them.
IMPACT OF LABOUR ON DISTRIBUTION COST:
If the labor market is a competitive one in which wages are determined by demand and
supply, increasing the wages requires either increasing the demand for labor or reducing the
supply. Increasing demand for labor requires increasing the marginal product of labor or
raising the price of the good produced by labor.

IMPACT OF RENTAL VEHICLES ON DISTRIBUTION COST:

In general, rental vehicles projects that improve overall accessibility (i.e., they improve
businesses ability to provide goods and services, and people’s ability to access education,
employment and services) and reduce transportation costs (including travel time, vehicle
operating costs, road and parking facility costs.)