"Disintermediation involves removing intermediaries such as marketers or brokerages that formerly linked a business to its customers and reintermediation requires the creation of new intermediaries between customers and suppliers providing services such as supplier search and product evaluation" [Chaffey, Dave 2009]
The purpose of this analysis is to investigate disintermediation and reintermediation by E-business. The internet causes a global affect on all types of organizations, many organizations use intermediaries for syndication of their products. These intermediaries can be eliminated at any point because of the internet; this is because of the ability of offering the assistance on the internet right to consumers, which in exchange can save costs for many suppliers. This technique of elimination is known as disintermediation. Travel firms are an intermediary in the travel distribution route and can be taken away by customers scheduling seat tickets online and getting vacation information through the supplier on the internet rather than going through them.
New intermediaries may also be created into a suppliers distributional channel by the internet, this is because of the intermediary which already is out there forming a fresh intermediary which in turn gets the product or service to the finish user. This technique is referred to as reintermediation. Travel businesses can add new intermediaries such as a web based method for the agency which provides the customer with offerings via the internet.
The main concentration area of the report is dependant on the impact of this topic upon the travel industry. The importance of disintermediation and reintermediation by E-business in the travel industry is discussed in the statement, which includes allowed an perception to the impact of the topic on business organisation such as travel businesses. There are a variety of critical issues and issues related to the topic which have been identified with reference to past research which includes been completed. Gleam lot of empirical research that is relevant to the topic of disintermediation and reintermediation. Both reintermediation and disintermediation are a result of the vast development within ecommerce.
Importance of Disintermediation and Reintermediation by E-Business
"The introduction of new systems within e-commerce has made it possible for different ways of interaction between players in market" (Whinston, Stahl and Choi, 1997). The internet is having an impact on organizations in several industries, in a good way as well as a negative way. The travel industry is an industry highly affected by e-business, especially disintermediation and reintermediation. Traditional travel syndication programs such as travel organizations have been substituted by a "new generation of virtual travel ventures", which are based on a pioneering business model (yeung & law, 2004).
Two main types of happenings can occur by e-business which is disintermediation and reintermediation. Both occasions are important things to consider for organizations as they can both change the nature of the exchange process. Disintermediation and reintermediation are important issues in resource chain management within the industry as they both have an impact on the intermediaries in the supply chain. Disintermediation minimizes intermediaries of the supply string and reintermediation provides new elements to the supply chain. Both happenings are also an important concern for organizations in the travel industry such as travel organizations and tour providers.
According to Clemons et al. (2000), outlines a number of reasons for the keen fascination with the disintermediation process:
Control- Travel firms take an independent approach to serve the eye of customers. Their main aim is seen as get together customer requirements and the eye of the agency rather than the interest and key matter of the organisation whose products these are distributing.
Power- Travel agencies are an information control point in the distribution channel therefore has increasing power within the marketplace and also influencing customer perceptions.
Cost- Travel companies are no more representations of low priced syndication within the air travel sector.
Impact of Disintermediation and Reintermediation by E- business on business organisations
Key trends in the travel industry have altered over the past years; this radical transformation has changed the type and the value of information within the industry, which includes had a direct effect on the role of travel businesses within the industry.
Disintermediation and reintermediation have a significant impact on business organizations such as travel businesses, which exist primarily as intermediaries between suppliers of travel services. The role of travel firms is to provide customers with not physical products but with information. Due to the huge common of the internet, many airlines and other travel agents have started to sell directly to passengers. As a result of this, airlines no longer need to pay fee to travel agencies for tickets which were booked through them. It has disintermediated several travel businesses and they have finally resorted to charging fees because of their services and broadening the opportunity of services. It's important for travel agencies to comprehend these implications and conform their business operations in order to meet customer requirements. Airlines provide customers with the service of arranging 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 total travel package that may be booked online. A huge amount of business to business data exchange via the internet has been applied in the travel industry as a reintermediation service which allows value added sites to provide an efficient n effective service to the end customer. (Palmer, Adrian and McCole, Patrick 1999).
Research completed by a Delphi Panel 1997-1998 discusses how panel predict that disintermediation and reintermediation will be extensively incorporated into the travel industry and a reduction in the amount of travel businesses which operate in the sector will occur in five-ten years in the foreseeable future. They also discussed key strategic dangers and opportunities for channel participants which is often encountered. (D. J. McCubbrey and R. G. Taylor). A follow up to the earlier Delphi analysis shows the genuine vs forecasted results; the panel estimated that the total amount of travel company entities would drop from some 22, 806 in america in 1997 to 17, 030 in 2002. The panel also predicted that by 2002, traditional travel organizations would take into account 58. 9% of the full total market talk about. However, in 2002 only 47% of air journeys in North America was booked through a traditional travel organization (Holly & Michaels 2003), this suggested that the -panel underestimated the impact of online immediate markets and cybermediaries.
A national email study was also conducted to research the plausibility of the disintermediation hypothesis in travel by sketching on consumer intent data. The info disclosed that consumers intend to forego traditional travel companies as they would like to have a more direct methodology- disintermediation. And the other half of the consumers who participated in the survey suggested that they make an online search as a communicational route to traditional travel organizations- reintermediation (Anckar, Monthly bill 2003).
Critical issues or difficulties related to Disintermediation and Reintermediation by E-business
There a wide range of issues and problems mixed up in disintermediation and reintermediation process. A lot of studies have been carried out on the topic of travel agencies involved in this process, many conclude that the agencies are a target point for reduction in there industry because of the emerging opportunities that are made available from the internet. (Anckar, Expenses 2003)
A key concern travel companies are faced with is the offering of these services on offer to customers via the internet. The clients are at a far more beneficial position if they're to go straight through to the dealer, which in cases like this will be the travel websites such as Expedia, Travelocity and Preview Travel. These organisations permit the customer to get getaway information and e book tickets online at a realistic price and get rid of the process of ending up in a travel agency in person.
Another key concern that disintermediation and reintermediation boosts is that the need of the intermediary is no longer required by suppliers who utilize them as channel to sell their products. Suppliers are able to sell right to their customers and this can lower their costs and invite them to provide a wider variance of offerings on the internet. the removal of the middleman in the syndication channel can not only lower transactional cost but will also permit the sharing of market information. Loborec and Vesna 2008, conclude that personal computers which allow the integration of travel businesses with suppliers, marketers, and merchants is the "crucial first step towards creating a successful e-commerce business design".
When deciding to add new elements to the distribution channel, there are several critical factors which have to be considered which might affect the results, such as: Strategic uncertainty, short term expectation and permanent result, discussion process and specific resistance.
Conclusion
Overall, traditional travel agencies need to preserve their position on the market by reintermedating and refocusing their business strategies in the emerging market place. The investigation carried out offers a new perspective and insight in to wide-spread of e-commerce. Future research should be carried out over a management strategic point of view of how companies can adapt to e-commerce, providing tactical possibilities to the businesses. The effects of disintermediation and reintermediation are being sensed in several other sectors, such as music, financial services and real real estate. The music industry is also highly affected by the development of information technologies, for example retail music stores such as HMV's are finding revenue streams for music cds being low. The primary reason for this is the fact consumer can get them cheaper online, such as iTunes and Netflix. Organizations in these kind of traditional channels could have been well dished up if they found styles in other industries. Failure to anticipate the impact that e-business can have on traditional models shouldn't be lost by managers and IT professionals in any industry. Therefore this relies on research to be completed which can show technology tendencies in every types on sectors, so firms can develop impressive ideas to develop their products and offer customers with satisfaction.
In overview, disintermediation and reintermediation can be seen as an optimistic impact as well as a negative impact depending on kind of industry the intermediaries are working in. the travel syndication chain has traditionally been heavily dependent on middleman, the travel industry has been hypothesized to be among the first sectors to see disintermediation on a big scale consequently of e-commerce. Internet travel services such as e-mail arranging services are promoters of reintermediation and online self arranging systems are promoters of disintermediation.
