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Intermediaries and Cybermediaries

This document discusses the roles and types of intermediaries. It defines intermediaries as organizations that facilitate transactions between two other parties in a supply chain by adding value. The main roles of intermediaries are to reduce discrepancies and costs, and facilitate information for buyers and sellers. The two major categories are virtual intermediaries that do not own products, and aggregators that may own but do not produce goods. As intermediaries move online, they are called cybermediaries. The document also discusses how intermediaries can be disintermediated or re-intermediated by direct consumer business models online. It argues that intermediaries will still play a role by focusing on value-added services like search efficiencies, transaction processing, logistics, demand

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386 views15 pages

Intermediaries and Cybermediaries

This document discusses the roles and types of intermediaries. It defines intermediaries as organizations that facilitate transactions between two other parties in a supply chain by adding value. The main roles of intermediaries are to reduce discrepancies and costs, and facilitate information for buyers and sellers. The two major categories are virtual intermediaries that do not own products, and aggregators that may own but do not produce goods. As intermediaries move online, they are called cybermediaries. The document also discusses how intermediaries can be disintermediated or re-intermediated by direct consumer business models online. It argues that intermediaries will still play a role by focusing on value-added services like search efficiencies, transaction processing, logistics, demand

Uploaded by

deepu0787
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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PRESENTED TO: PRESENTED BY:

TIMIRA SHUKLA MEENAKSHI SHUKLA


BM09108
 Intermediation- a business process that lies between and
facilitates (adds value to) the points in a value chain.
 Intermediaries-interdependent organizations involved in the
process of making a product or service available for use or
consumption.
 Often provides services rather than a product.

 The role of an intermediary is to:

a) To adjust the discrepancy of assortment.


b) To minimize the distribution costs.
c) Facilitate the searching process of both buyers and sellers by
structuring the information network.
Two major categories of intermediaries are:

 Virtuals: who do not take ownership of products


and services.
 Aggregators: who may own, but do not produce or
even assemble the goods and services themselves.

When an intermediary offers its services over the Web,


it is called cybermediary.
 Disintermediation: The elimination of
intermediaries in the supply chain, also
referred to as "cutting out the middlemen.”

 Re-intermediation: electronic re-insertion into


the role of intermediator in a firm’s value chain
(Delta.com allowed customers to go directly to
its web site to buy electronic tickets, taking
over the job of brokers via a direct connection.
 This is a direct-to-consumer business model, or
possibly a shared infrastructure model, as in the case
of Orbitz)

 A firm that offers intermediary services over


the Web, is a cybermediary. This may
disintermediate agents.
 Since purchases and transactions that are least costly
are preferable to customers, esp. for commodity
goods and services,

 All other things being equal, the value chain with


the fewest intermediaries will have the lowest price.

 However, there are additional costs:


 intermediaries have their own cost structure.
 consumers incur costs when searching for goods/services
they with to purchase.

 Thus consumers must weigh a cost tradeoff between


searching for the cheapest commodity price and
paying extra to use an intermediary.
 Low cost cybermediaries will be increasingly
used for simple, high frequency transactions.
 The future of traditional intermediaries’
depends on their focusing on value-added
products & services.
 E.g., travel agents are likely to increasingly
concentrate on frequent, complex transactions, such as
package tours and corporate travel negotiations.
 In general, physical intermediaries will continue
to play a role in providing products and services
that require more information and analysis than
can be conducted through a Web site.
 These value-added roles for intermediaries can
be grouped into five areas.
Search efficiencies and Use knowledge of how Expedia.com
information to procure items & eBay.com
management services; create trading
floor for buyers and
sellers

Routinizing and Handle complex Ibm.com


guaranteeing transactions; insure Amex.com
transactions payments and shipments

Logistics Delivery of goods, Ups.com


locally or globally

Aggregating demand/ Gather orders & Priceline.com


negotiating prices negotiate prices with ETNs like Covisint
client(s)

Creating packages Break bulk through Dell.com


large-volume purchases,
and reassemble into
 Search Efficiencies and Information Management:
 Intermediaries fulfill a valuable function when they know
more about markets than most buyers and sellers.
Customers are willing to pay extra for this knowledge.

 Routinizing and Guaranteeing Transactions:


 Transactional activities are often outsourced to banks and
credit card companies. These activities can be taken over by
cybermediaries, since NE economies favor this.
 Intermediaries could also ensure there is no default, known
as “securitizing the transaction”. The ‘insurance policy’ for
each end of the transaction is a value-added that buyer and
seller would be willing to pay extra for.
 Logistics:
 Logistic firms currently provide online tracking
services so that customers can monitor the processing
and delivery of their orders.
 Firms like UPS organize the links for the whole supply
chain for Dell Computer, gathering together the
monitors from Sony, workstations from Dell, and
other peripherals from other suppliers and then
deliver them to the ultimate customer.

 Aggregating Demand/ Negotiating Prices:


 Relating to buyers and sellers in a many-to-many
relationship, some intermediaries represent the
interests of numerous entities by coalescing demand
and negotiating prices. The reverse auction model
used by www.priceline.com exemplifies this approach.
 Creating Packages:
 Intermediaries can purchase goods in large volumes
and offer these for sale in assortments that would be
extremely costly for buyers to put together on their
own.
 In such cases, the value-added by intermediaries can
successfully compete with less flexible
cybermediaries.
 An example would be a personalized travel package,
combining airfare, tours, vehicle rentals, and cruises
offered to tourists by firms like Rosenbluth Travel (
www.rosenbluth.com).
 Companies like Yahoo and Amazon are
described as cyberspace “portals” and “content
aggregators”
 Their true business models are complex
hybrids and include being intermediaries and
making direct-to-consumer sales.
 Again the main idea is replacing physical
processes with information processes.
 If Yahoo was a retailer like Wal-Mart, its
distribution system, etc., would have to be
huge.
 Instead it handles these processes through its
Web-based and information-based systems. Its
market niche in the economy is based on this.
Negotiating prices using power of client volumes or access to customer
demand-priceline.com

Using specialized knowledge to procure items/services (search efficiencies)-


Barnes&Noble. com; Expedia

Breaking bulk- Walmart.com

Making transactions routine-IBM.com

Creating assortments for customers-Dell.com, amazon.com

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