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Study On Disintermediation And Reintermediation By E Business Management Essay

Disintermediation involves the removal of intermediaries such as marketers or brokerages that formerly associated a company to its customers and reintermediation includes the creation of new intermediaries between customers and suppliers providing services such as supplier search and product analysis [Chaffey, Dave 2009]

The reason for this research is to research disintermediation and reintermediation by E-business. The primary focus area of the report is based on the impact of this topic upon the travel industry. The importance of disintermediation and reintermediation by E-business in the travel industry is mentioned in the article, which includes allowed an understanding to the impact of this subject matter on business organisation such as travel businesses. There are a number of critical issues and obstacles related to the topic which have been identified with reference to past research which has been carried out. Both reintermediation and disintermediation are results of the powerful character of the internet.

Importance of Disintermediation and Reintermediation by E-Business

The introduction of new systems for electronic business on the internet makes possible various ways of interacting for all your players in market (Whinston, Stahl and Choi, 1997). The internet is having an impact on organizations in a number of industries, in a good way as well as a negative way. The travel industry can be an industry highly affected by e-business. The travel industry has undergone an activity of disintermediation and re-intermediation where in fact the traditional travel distribution channels made up of small travel agencies have been changed by a fresh generation of big virtual travel ventures based on progressive web business models and supported by advanced information technology (yeung & law, 2004).

Two main types of occurrences may appear by e-business which is disintermediation and reintermediation. Both incidents are important concerns for organizations as they can both change the type of the deal process. Disintermediation and reintermediation are important issues in supply chain management within the industry as they both influence the intermediaries in the resource chain. Disintermediation reduces intermediaries of any supply chain and reintermediation provides new elements to the supply chain. Both situations are also important account for organizations in the travel industry such as travel organizations and tour operators.

According to Clemons et al. (2000), the reason why for the eye in disintermediation are clear:

(i) Businesses have a higher degree of self-reliance than airlines would like, leading them to serve the passions of customers, or their own passions, as opposed to the interests of those whose products they may be distributing

(ii) Agencies and retailers have increasing power as the information control point in the syndication channel;

(iii) Airlines specifically have established that agencies no longer represent low cost syndication. Disintermediation-as a perspective or an outcome-does not originate entirely from the immediate bypass threats as a result of e-commerce

Impact of Disintermediation and Reintermediation by E- business on business organisations

Changes in the industry over the past years have dramatically altered the nature and value of information in the travel industry and therefore, the role of travel agencies.

Disintermediation and reintermediation have a significant impact on business organizations such as travel businesses, which exist generally as intermediaries between suppliers of travel services. The role of travel companies is to provide customers with not physical products but with information. Due to the huge widespread of the internet, many airlines and other travel agents have started to sell right to passengers. Because of this, airlines no more need to pay commission rate to travel agencies for tickets which were booked through them. This has disintermediated several travel companies and they have finally resorted to charging fees for his or her services and broadening the opportunity of services. Travel firms must understand these changes and adapt their business thought process to the needs of tomorrow's travelers. Airlines provide customers with the service of reservation and planning their travel through their websites, however, they are not as useful and global as intermediaries. Therefore they do not offer consumers the convenience for a full travel package that can be booked online. Re intermediation of services in the travel industry have been permitted by the extension of business-to-business information exchange via the internet and permitting value added sites to deliver convenience and useful service to the end customer (Palmer, Adrian and McCole, Patrick 1999).

Research carried out with a Delphi Panel 1997-1998 discusses the way the -panel forecast that major disintermediation and reintermediation will appear which there would be a sharp decrease in the amount of traditional travel companies five and a decade in the foreseeable future. The -panel also identified lots of strategic dangers and opportunities for the route participants. (D. J. McCubbrey and R. G. Taylor). A follow-up to the sooner Delphi analysis shows the actual vs predicted results; the panel estimated that the full total quantity of travel firm entities would drop from some 22, 806 in the US in 1997 to 17, 030 in 2002. The -panel also predicted that by 2002, traditional travel businesses would account for 58. 9% of the full total market talk about. However, in 2002 only 47% of air vacations in North America was booked through a normal travel organization (Holly & Michaels 2003), this indicated that the -panel underestimated the impact of online direct marketplaces and cybermediaries.

There are lots of potential strategies businesses can choose for disintermediation and Reintermediation. New internet centered competitors may use a number of strategies to attain competitive advantage in the brief run, and keep maintaining competitive parity over time. However, there are very few strategies that will provide sustainable competitive edge. Instead, competitive success will depend on how well these internet intermediaries can use their first mover advantages as new entrants to gain a head begin in the incumbents, and then leverage these strategies for longer term increases. (Chircu and Kauffman 1999)

A national mail review was also conducted to investigate the plausibility of the disintermediation hypothesis in travel by attracting on consumer intention data. The data exposed that consumers plan to abandon traditional travel companies as they would like to have a more direct procedure- disintermediation. Plus the other half of the consumers who participated in the review suggested that they make an online search as a communicational route to traditional travel organizations- reintermediation (Anckar, Costs 2003).

Critical issues or difficulties related to Disintermediation and Reintermediation by E-business

Many scholars and industry experts have looked upon the supposition of elimination of middleman with strong scepticism, but most would probably concur that traditional traditional travel businesses are, if not threatened by the new choices proposed by the internet, at least face with a need to refocus (Anckar, Bill 2003).

Traditionally, the travel industry centered on the travel organization sales channel. Travel firms allowed customers to acquire travel seat tickets or gather vacation information through the agencies. The use of e-commerce has definitely caused this to improve as customers have now discovered that they can search travel areas and even purchase flight tickets online. Popular sites such as Expedia, Travelocity and Preview Travel offer point and click leads to the customer's office or home.

The main concern with the disintermediation and reintermediation is the fact suppliers feel they no longer need intermediaries to sell their products. Direct marketing on the internet by suppliers is disintermediating traditional intermediaries' business. Using it to build up and tighten supply chain connections can reduce costs and bring top quality travel products to the marketplace. This technology can also contribute to minimizing business deal costs, lowering doubt, writing market information and aiding in syndication route efficiency. Providing personal computers that assimilate travel business with suppliers, marketers, and retailers is the crucial first rung on the ladder towards developing a successful e-commerce business design (Loborec, Vesna 2008). Now suppliers count on GDS systems (Global Distribution Systems) for connecting their products to visit agencies networks, which permit them to distribute to the final consumer.

Travel agencies may use the internet as a tool rather than discovering it as a hazard by collecting and researching information and accessing links to home based business companions, suppliers and services. I. T has become a vital competitive advantage for travel agencies, as they use ecommerce development ways of retain performance advantages. Therefore, e-commerce creates opportunities for the re-intermediation of the on-line travel company (Chiu, Paul, April 2006).

When deciding to reintermediate, there are several critical factors which have to be considered which may affect the outcome, such as: Tactical uncertainty, short term expectation and long-term result, discussion process and individual resistance.


Overall, traditional travel companies need to support their position on the market by reintermedating and refocusing their business strategies in the emerging market place. The study carried out offers a fresh perspective and understanding in to widespread of e-commerce. Future research should be carried out on the management strategic perspective of how companies can adjust to e-commerce, providing tactical options available to the firms. The consequences of disintermediation and reintermediation are being felt in several other industries, such as music, financial services and real estate. The music industry is also highly damaged by the introduction of information systems, for example retail music stores such as HMV's are finding revenue channels for music cds being low. The primary reason for this is that consumer can get them cheaper online, such as iTunes and Netflix. Companies in these kind of traditional channels would have been well offered if they seen developments in other sectors. Failure to anticipate the impact that e-business can have on traditional models shouldn't be lost by professionals and IT practitioners in any industry. Therefore this relies on research to be completed which can show technology fads in every types on market sectors, so businesses can develop progressive ideas to grow their products and provide customers with satisfaction.

In synopsis, disintermediation and reintermediation is seen as a positive impact as well as a negative impact with regards to the kind of industry the intermediaries are working in. the travel syndication chain has typically been heavily reliant on middleman, the travel industry has been hypothesized to be one of the primary sectors to see disintermediation on a big scale as a result of e-commerce. Internet travel services such as e-mail booking services are promoters of reintermediation and online do it yourself reservation systems are promoters of disintermediation.

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