Value of Reintermediation & Countermediation

Internet evolution is seen as a tool for Disintermediation which is the removal of intermediaries in a supply chain, when it has only established the creation of new intermediaries between customers and suppliers providing services such as supplier search and product evaluation phenomena of Reinter mediation. Counter-mediation is the tactics to take advantage of reinter mediation like an established company creating a new intermediary. Organizations adopting business aimed at enhancing its competitiveness, by electronically deploying mediated information exchange between or within businesses, and beyond while E-commerce is a subset of E-Business as is only an exchange between an organization and its external stakeholders.

[Chaffey, Dave 2009] The purpose of this essay is to investigate why to Reinter mediation and Counter mediation are now more valuable than Disintermediation.

The main focus area of the report is the impact of this topic upon organization using E-business has it examines the role of intermediaries in the context of electronic commerce, Organisations adopting business see internet as a way to get rid of intermediaries.

The concept was that by allowing consumers to buy product directly from the internet the supply chain would be shortened, structural change of the physical market place into an electronically paved way for the new institution of intermediaries. Many industries have seen traditional intermediaries’ models make way for new intermediaries like Amazon, iTunes, Simple, Mint, Goggle wallet, PayPal and others, In the grasp for control, some manufacturers has established counter-mediation.

There are a number of critical issues, and challenges related to this topic been identified with reference to past research, been carried out.

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“Disintermediation, Reinter mediation and Counter- mediation” are results of the dynamic nature of the internet. Therefore emergence of new technologies for electronic commerce on the internet makes possible different ways of interacting for all the players in a market (Whinston, Stahl and Choi, 1997). Products and services that could not be offered before these technologies became pervasive today offer and sometimes require new roles that intermediaries has not taken on previously. The internet had an impact on organizations in a number of industries, in a positive way as well as a negative way. Highly affected industries by e—business undergo disintermediation and reintermediation leading to some organisation adopting counter mediation move.

There are indeed strong economic incentives for both producers and consumers to drive intermediaries out of the value chain, intermediaries has been known to add significant cost to value chain (Benjamin and Wigand 1995), thus suppressing the profit margin of producers while at the same time resulting in higher final prices for consumers. An internet-based market has no physical presence rather an electronic marketplace an advantage many organizations used to exclude intermediaries. These create an increase in profit for the manufacturer and allowed the consumer to have purchasing power due to market transparency. Complications effect inefficiencies in the distribution chain, such as a decrease in the time-lapse between production and delivery. Making the manufacturer the distributor they encountering a broad range supply issues and making the intermediaries become their new competitors.

Furthermore, Disintermediation will only cause customer disaffection as it does not give customers the value added services required for most products but only brings short – term gain as of lower prices. Products like air conditioning: customer need help to determine how much air-conditioning he or she requires, which system to buy, and what related products, are needed. Who is going to provide all this value? Certainly not the manufacturer, which has no local presence and may not have the needed skills. Frazier (1999) argues that the internet can be used as a complete distribution channel for certain products and services like newspaper, asset brokerage or travel. But the limitation to use the internet as a complete distribution channel occur when products prices vary around the globe, trademarks right are spread between different companies and producers use a highly selective or exclusive distribution channel.

Disintermediation in industries such as healthcare and cars has effect customer disaffection as the answers from the internet does not provide the value-added services required Negative effect being the reliability or the integrity of the sources which is either old or outdated, or simply inaccurate. At a close look, it is not possible to achieve full disintermediation for certain goods and services like physical products such as wines, beer, professional services such as lawyers, radiologist. For Companies like Cisco Systems and Dell disintermediation has been successfully using it to bring a level of success by using ercommerce to offer customers option of customizing products during the order process (Kraemer et,al.2000) to customer specification, a service foresee as difficult if intermediaries get involved. Although internet predicts disintermediation, e-commerce gave birth to reinter mediation, through many companies for who acting as intermediaries, is their primary focus like eBay, eiLoan. Who not only act for business to consumer but also business to business. Research has predicted high number of new intermediary and counter-mediaries.

Logistics function provides by intermediaries such as processing of returns; extension of credit, aggregation of products from as shown in many cases with manufacturers finding it difficult, efficiently to combine their core competence with these new functions, Profit foresees in direct selling dimmed by the high cost of shipping many small orders, massive customer services, presales and post sales issues. Limiting a firm availability to internet channels forces producers to compete with the rest of the internet “for customer’s attention” King (1999) suggest that higher profit margins and access to variable, customer information are the main drivers, so producers need to be dully represented by the intermediaries on net. Taking the airline industry, where disintermediation occur, due to the huge widespread of the internet.

Airlines provides customers with direct services through booking from their website reliving them of the cost of commission paid before to travelling agencies. Which later turn out, not as informative and global as the intermediaries, therefore, not offering customers the convenience for a global complete travel package. Research carried out by Delphi Panel 1997 4998 show a sharp reduction in traditional agencies 5 to 10 years from then while a follow up research by DJ McCubbrrey, and RG Taylor estimated a 58% which only amounted to 47% in 2002. The National survey has shown that consumers use the internet as a communication to traditional travel agencies -Reinter mediation, The grasp of control over intermediaries turns to create new intermediaries of their own like Opodo owned by nine of the Europe’s leading airlines bringing Counteremediation.

The main issue with “disintermediation, reintermediation and counter-mediation” are that suppliers feels they no longer need the intermediaries as in the traditional method and that using e-commerce has obviously brought about change as consumers have now discovered that they can search for information they need online with search engines such as goggle. Technology not only minimizes transaction costs, lowering uncertainty, but also sharing market information and aiding in the distribution channel done efficiency by the use of new intermediaries. Create a platform for business-to-business that want to educate consumers more but only dealt with intermediaries. Amway global used the internet for the training of their intermediaries, not for direct selling, but made information available for consumers.

Businesses should understand that the internet can be used as a tool rather than as a threat through collecting, researching information and accessing links to new business partners, suppliers and services Overall, traditional intermediaries need to sustain their position by reinter-mediating and refocus their business strategies, in the emerging market place. Research carried out has shown that the advent of the internet has only brought about opportunities for establishing of new intermediaries Consumers have shown that the internet serve as an intermediary to dig up information. Effect of “disintermediation, reinter mediation and counteremediation” felt in several industries, managers and lT practitioners should not fail to anticipate the impact that e-business can have on traditional models, and, therefore, relies on research carried out, to show them different industries with which technology trends out.

In Summary, reintermediation and counter-mediation can be seen as a positive impact in different suppliers cannot be easily taken over by manufacturers industries with few exceptions. Manufacturers can focus on their core competencies thereby leaving the intermediaries to deal with other aspects of the business. Making Disintermediation less relevant as the cost associated with it is high than if suppliers has invest in reinter-mediation and counter-mediation. Finally it is important to point out research has shown that reinter mediation is a powerful force in structuring the distribution channels in most industries, development of the internet is more likely to lead to reinter mediation and counter-mediation rather than disintermediation.