Disintermediation

Disintermediation or cutting out the middleman is one of the factors that has emerged as a result of the introduction of E-Business. Businesses that have traditionally operated via an agency layer between the suppliers and the buyers have found that E-Business allows them to communicate directly with their clients and to provide the service directly to them. Since the agency and their percentage have been removed from the transaction, there is scope to reduce costs and pass them onto the customer, thus becoming more competitive. In some cases, it may be possible to raise prices, cut out the agent and still offer reduced prices to the customer. This is a win-win scenario for all parties to the transaction with the exception of the agent, who is now disenfranchised. One of the main sectors in the service industry that this scenario applies to is the travel industry e.g. Ryanair.

Reintermediation

However, while there has been loss of business for a lot of agents due to Disintermediation, there has also been a new market created for value added businesses which combine services from a number of suppliers, using the Internet to achieve what would have been difficult if not impossible in the traditional business world. An example of this is those businesses that are buying up excess capacity on commercial airlines at vastly reduced prices, and offering these flights for sale or auction on their website e.g. Lastminute.com

Rationalisation

Although not a popular decision with Trade Unions and those who are downsized, E-Business can offer certain businesses the chance to maintain or increase their market share whilst being able to offload loss making or less efficient parts of their business. This can allow the business to remain commercially viable in the face of ever increasing competition both at home and abroad.

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