Rosenbloom states that although large manufacturers enjoy economies of scale in production, it is unlikely that they will benefit from such economies of scale when it comes to providing services such as distribution. Kraemer suggests that market conditions are a key factor to be considered, i.
This would be a very expensive and complicated service to offer if intermediaries were involved. Resultantly, a new manufacturer, PCs Limited, entered the market in selling computers directly to consumers through magazine advertisements Dell, It seems that the critical issues surrounding disintermediation are a strong enough deterrent for manufacturers at this time.
Using this model, Dell has differentiated itself from the competition and become a clear market leader in the PC industry. The result could be that it costs the manufacturer more to fulfil the role of the intermediary than the intermediary was charging in the first place.
A prime example of such a radical transformation is in the travel industry, which was also one of the first industries to experience internet-influenced disintermediation.
A similar situation exists in the insurance industry, as the ability to purchase insurance online has eliminated the need for sales agents. While disintermediation removes elements form the supply chain, reintermediation adds new elements to the supply chain.
However beyond transferring power, disintermediation also comprises a transferal of the various roles intermediaries play in the distribution chain. Hence, they provide additional services to the customers by facilitating online transactions, as for customers might be inconvenient and inefficient to go to different providers directly for information or comparisons or even to search information on several Websites; in this way, only by using one of this Websites can give to customer different details about bookings while the data privacy is protected.
It is partly for this reason that travel trends show online travel agencies are a growing business field. Companies need to carefully consider the financial impact of cutting out intermediaries before doing so. Online financial transaction agents e.
For instance in becoming a distributer, the manufacturer becomes a primary competitor of the former intermediaries, thus sabotaging relationships with retailers and other channel partners who may previously have helped build the company.
When considering factors such as market conditions, core competencies and the value added to products by intermediaries, it is clear to see that major obstacles stand in the way of complete disintermediation taking place in many industries. Re-intermediation, also called cybermediation, is an alternative for the traditional high street players, who need to adapt to the technology or even who need to be replaced by new business models Anckar, Services such as supplier search, product evaluation Chaffey, and price comparison websites are proving very attractive to customers therefore firms whose products are not included on these sites or on the sites of leading online retailers such as Amazon are at a disadvantage.
Direct sellers and buyers connect with each other because of the platform created by the virtual marketplace vendor. Here, a database-driven portal offers a range of products and services that are not held as inventory by the intermediary.
For example, a consumer will research cars online, be directed to their local dealer for further information, test drive the car at the dealer, order a customized car online from the manufacturer, and pick it up from the dealership, who will hen continue to service it over its lifespan and trade it in for a new vehicle in a few years time.
How does travel disintermediation work. The myth of disintermediation. This may be considered a new form of disintermediation. Impact of Internet-related disintermediation upon various industries[ edit ] It has been argued that the Internet modifies the supply chain due to market transparency.
Resultantly, a new manufacturer, PCs Limited, entered the market in selling computers directly to consumers through magazine advertisements Dell, Dell computers or travel industry where travel agencies once advised where to travel, offered travel and tour packages.
The disintermediation of intermediaries whose cost become greater than the value sees the reduction of inefficiencies in its supply chain such as a decrease in the time lapse between production and delivery and resultantly increase profit for manufacturers.
Furthermore, without middlemen adding additional charges for their services, the final price of the product decreases for the end-consumer — and so potentially increases product demand.
It could even be argued that the manufacturer would be selling a different product altogether which could have significant effects on demand. Consequently, the addition of new intermediaries of increasing value is just as common as the elimination of intermediaries of decreasing value.
There is quid pro quo for the vendor for the use of the platform, else it would make no business sense to create such a platform. Crossby et al, In the study by Gharavi H. Similar to disintermediation, reintermediation can bring positive or negative impacts to the business, often depending on the type of industry the intermediaries operate in.
Reintermediation has a significant impact on certain organizations such as travel agencies, which thrive as suppliers of travel services. Travel industry was the first to experience disintermediation due to the varieties of products given by the Internet for customers.
Consequently, the role of the travel agent, who is the main intermediary in the travel distribution chain, has been threatened (Bloch and Segev, ; Opperman, ; Potzl, ). Re intermediation of services in the travel industry have been made possible by the expansion of business-to-business information exchange via the internet and enabling value added networks to deliver convenience and efficient service to the end user.
This paper examines disintermediation issues and situation and argues that in practice disintermediation, despite becoming increasingly intense, it will just require travel agents to acclimatize rather than to be removed from the tourism value chain. Costs: Although disintermediation has the potential to reduce a firm’s costs, Van der Heijden () suggests that the ‘economies of intermediation’ are often overlooked.
Companies need to carefully consider the financial impact of cutting out intermediaries before doing so. Re-intermediation is the process of adding intermediaries to the supply chain. It occurs when pre-existing intermediaries offer a new value proposition and re-enter with a new function or when offer innovative value-adding services.The disintermediation and re intermediation of travel