The International Business Times (2010) and Scuffham (2010), rate Thomas cook as “Europe’s second biggest travel firm”.Thomas cook travel company was established in 2007 and it has its headquarters in Peterborough, England. It was formed after the merger between Thomas Cook AG and My Travel Group Incorporated. The company has an employee base of 31,000 in its Middle East, Asian and European offices which mostly comprises of tour operators and intermediaries.
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An intermediary in E-commerce refers to someone who acts as a link between the company and the consumers and is charged with the fundamental role of marketing their parent organization (Sarkar et al., 1995). The intermediaries can be traditional or modern where the traditional intermediaries are middlemen who do all of the work on behalf of the client while modern intermediaries incorporate the use of E commerce and websites. Consequently, when we talk of disintermediation, it generally refers to the cutting out or replacement of that mediation role played by the intermediaries/middlemen (Miller and Choi, 2003).
The increasing use of modern intermediaries is slowly rendering the work of a traditional intermediary to be obsolete. There have been heated debates from critics who are for and against disintermediation. Some critics have argued that disintermediation allows the customer to do things their way while others view it as the end of customer service and the work of a travel agent in the travel industry. It would therefore be misrepresentative to entirely criticize or support it. This is the reason why the data collection and analysis techniques used in this study ensured that both sides are concisely analyzed (Johnston & Vitale 1988).
Background, Purpose and Objectives/Aims of the research
Background and Purpose of the Research
The purpose of the research report is to find out what Thomas Cook Tour Operators can do regarding disintermediation, in order to assure a high customer loyalty and to attract new customers to its business. Thomas Cook mostly uses traditional intermediaries or middlemen to perform its business but their role is threatened with the continued emergence of E commerce or modern intermediaries.
Over the recent past, there has been a downward spiral in the use of intermediaries (sometimes called middlemen) for marketing purposes in E-commerce as it was sometimes back (Giaglis et al., 1999). Pinto (2000) and Benassi (1999) had already forecasted this and, according to them, factors like the inception of new technology as well as the sky-rocketing use of the internet are among the key factors that have led to disintermediation.
Numerous researches have been conducted by various scholars in highlighting many aspects of disintermediation—especially with respect to E-commerce. And in as much as immense progress has been made based on those countless researches; most of them have been conducted from a general viewpoint and not specifically pinpointing the exact issues on the ground (Burton and Mooney, 1998). As a result, much of the essential information that we direly need has been blown along the way; and the little that remains faces the threat of extinction based on the highly dynamic online world of E-Commerce (Lopez and Vanhaverbeke, 2010).
Many companies in the retail and service industry like Thomas Cook are faced with the challenge of disintermediation as a result of E commerce and modern intermediaries. The problem lies in ensuring that the middleman is not rendered useless while the company embraces Ecommerce. It is in getting a solution to the above challenge that I developed the following objectives.
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Objectives/Aim of the research
The main aim of conducting the research will be to look at the aspect of disintermediation and how it has affected the role of intermediaries in the service and travel industry with particular focus on Thomas Cook. This will involve looking at the dynamics of disintermediation, E commerce and the modern intermediaries.
The main objectives of the research are:
- To look at the aspect of disintermediation in the travel industry with a particular focus on the Thomas Cook travel company.
- To examine the effects of disintermediation to the company in terms of positive or negative impacts of this concept to the customers that uses Thomas Cook or any other company for their holiday and travel reservations.
- To offer continuity of the previously documented researches while laying a foundation for future studies.
Review of Related Literature
The business model incorporated by Thomas Cook is to provide world-class travel services for its customers who are interested in travel advice by employing the use of qualified tour agents and operators. The business strategy is meant to ensure that Thomas Cook becomes a leading travel provider of financial services as well as booking services for holiday and travel packages (Thomas Cook, 2010).
The business strategy is however threatened with the introduction of E commerce and modern intermediaries which would render the work of all the 31,000 employees of Thomas Cook obsolete. The company had to involve the use of modern intermediaries so as not to loose its customers to competing companies. By doing so Thomas Cook practiced disintermediation eliminating the need for its middlemen or tour operators. To further understand the problem of disintermediation, a literature review is necessary.
There exists a common notion amongst scholars that disintermediation is a result of the emergence of E-commerce. The term has been discussed in academic literature but under a different name like functional shiftability as described by Blackwell in his 1997 work (Sampson and Fawcett, 2001). A number of authors who have written on disintermediation in the media have viewed it to be an occurrence that cannot be avoided thereby making it important. Hammer and Adams (2000; 1999 cited by Sampson and Fawcett, 2001) note that disintermediation is not possible because of the irreplaceable value supply chain members (intermediaries) add to delivering a product.
Magrath (1993) and Strirtz (2008) note that despite the role of traditional business intermediaries being slowly overtaken by advancements in technologies; middlemen still play a very important role in organizations today. So in as much as most current technologies tend to be faster, easy to use and are easily available, the personal touch that is found in intermediaries can never be replaced (Benjamin and Wigand 1995). In addition, Frerecks (2007) observes that in spite of the large percentages of people who are computer literate and are able to access the internet; there is another important cluster of consumers who essentially rely on intermediaries.
The advent of the Internet with particular focus to E-commerce has however threatened to make intermediaries extinct. According to Blesik et al (2009) booking a travel itinerary today is a process that is done by the customer at the comfort of his/her home. All they have to do is access websites such as trip advisor to find out more on travel and holidays.
Once they choose their destination, they can book their flights through the SABRE website (Hopper, 1990) which allows customers to directly book to whichever airline they choose to fly with. This has created a situation of disintermediation in the travel industry which is essentially a problem for Thomas Cook if it is to retain its employees and achieve profitability (Blesik et al, 2009).
The aspect of re-intermediation has also arisen in the work of Blesik et al (2009). It is seen to be opposite effect of strong disintermediation. Re-intermediation is the reintroduction of middlemen or intermediaries to conduct business on behalf of customers. E-commerce has led to disintermediation as a way of cutting down operating costs. Re-intermediation has emerged to deal with the problems that occurred with the use of disintermediation. Such problems as customer service issues as well as disintermediated retailers and suppliers led to the introduction of re-intermediation because of the huge amount of resources that were needed to deal with pre and post sale problems.
Design of the Study
According to knowledge base (2006) research design basically is the “glue that holds the research project together.” It is therefore fundamental that the choice of design is one that ultimately fits in the operations of the organization it is aimed at. In doing an analysis for the design of a particular research, one must chiefly look at two things; Firstly, you have to talk about the research strategy used then go on to the methods, once you are through with that, you go to the second stage that involves the collection of data.
Research strategy and method
According to Ciccanteli and Magidson (2006), there are numerous strategies that can be used in conducting researches. The use of scientifically oriented strategies has repeatedly increased the probability of getting accurate, verifiable, quality and timely results. It is for this reason that the research strategy and method that I used in this method was scientific in nature because it will be able to address several issues at one.
The strategy incorporated the use of both quantitative and qualitative analysis of data so as to establish the exact relationship between the factors that have led to the disintermediation in Thomas Cook as well as be able to show the effects it has on the travel company. Principally, the qualitative method mainly focused on establishing trends, similarities and differences which were very important on the analysis stage. As for the quantitative strategy, I used it to quantify effects and establish the challenges that were arising.
From here, I was able to get possible solutions for the underlying problems that I was tackling in the question with regards to Thomas cook and the issue of disintermediation. In many instances, the viability of a research strategy or scientific method is based on whether the study eventually fulfills its objectives. So it would be quite untimely to ultimately say that the research strategy I used was the best, however, I attest to the fact that through the use of the scientific methods of qualitative and quantitative analysis, it was very easy to draw out the final conclusions from the resulting data.
Sources of Data
In essence, there are normally two basic methods of data collection i.e. primary data collection method and the secondary data collection methods. Both of these are further divided into many other smaller methods. The primary method basically deals with an individual or group of people collecting information by themselves. This information is collected in the form of conducting respondent surveys, discussions, questionnaires, or one on one interviews. Secondary method on the other hand profits from the information collected by other people or research done by other scholars (Edwards, 1994).
In the case of Thomas Cook, I chose the secondary method as my method for data collection because getting data straight from the employees of the company was utterly difficult. Basically, the company policies of Thomas Cook do not easily allow for their workers to divulge company information to anyone who is not an employee of Thomas Cook. Secondary data was the most viable option because there are numerous articles, case studies, books, already made surveys and other internet sources that were full of information about Thomas Cook, E-commerce and disintermediation that was needed. The data that I searched for was based on the intermediaries, disintermediation, challenges they face and possible solutions with relation to Thomas cook (Heijden 1996).
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Data Analysis, Research Findings and Data Presentation
There are many methods that can be used to conduct data analysis but the method chosen by the researcher should depend on the type of data that has been collected. The data collected for this research was mostly qualitative in nature and the most suitable data analysis techniques that can be used to analyze the collected information will be the constant comparison or grounded theory and the content analysis technique of data analysis.
The constant comparison or grounded theory analysis method involves comparing information that has been collected from the various sources of information to highlight consistencies in disintermediation data and how disintermediation has affected the role of intermediaries working for Thomas Cook. The content analysis method of data analysis involves looking at the information contained in the secondary sources with relation to disintermediation, the meaning and definition of disintermediation, and how this concept has affected the travel industry and Thomas Cook’s operations.
The data collected was from 40 sources of information which included journals, surveys, websites and articles. There were variations in-terms of the line of thinking used by the authors, but all of them tended to agree that there has been an exponential increase in disintermediation based on the escalating number of companies embracing modern intermediaries and E commerce activities which has seen the cutting down of the middleman or the intermediary (Miller and Choi, 2003).
Constant comparison analysis was conducted on Dewan et al. (1999); OECD (1999); Clemons and Row (1998) and Magrath (1993) whose works indicated that in spite of the decreasing numbers of traditional middlemen; consumer behaviors and trends depict that many customers still love being attended to by the middlemen rather than the modern intermediaries.
Constant comparison analysis was also conducted on data collected from FTN (2010); Kleine and O’Keefe (1999); Heijden (1996); Malone et al. (1987) and Porter (1985) who also gave insights on the factors affecting online consumer behaviors and how companies can strengthen or increase customer base. Additionally, Alexander (2010) opines that companies who have a hybrid system that blends the traditional intermediaries with the modern ones have more successes in E-commerce as opposed to those who stick to one approach.
A content analysis was conducted on Sampson and Fawcett (2001) who noted that disintermediation was as a result of the proliferation of internet websites and E commerce activities which reduced the role of the intermediary or middleman. The advent of the Internet with particular focus on E-commerce has threatened the role of the middleman. With regards to Thomas Cook tour operators, the introduction of online booking systems has threatened the role of the tour agent or intermediary.
A grounded theoretical analysis of Benjamin and Wigand (1995), Magrath (1993) and Strirtz (2008) highlighted the fact that middlemen were still seen to play an important role in the travel industry despite the continued growth of E commerce and modern intermediaries. As much as the current technology and innovations in the market were easier ad faster to use, the personal touch of intermediaries was irreplaceable. A content analysis of Frerecks (2007) highlighted that in spite of the large numbers of people who were computer literate and are able to access the internet; there was another important cluster of consumers who essentially relied on intermediaries to perform basic services such as booking of holidays for them.
A content analysis on Blesik et al (2009) highlighted the aspect of re-intermediation was re-introducing middlemen into the service industry so that they can perform business services for potential customers. Re-intermediation was introduced to deal with the problems or challenges that arose from disintermediation or from the use of modern intermediaries. Some of the problems of disintermediation as identified from the content analysis were the pre and post sale issues, customer complaints and poor customer service.
From the data analysis, I was able to deduce that the emergence of E-commerce has greatly inhibited the continuity of middlemen. In order to catch up with the latest technology, most companies have resolved to replace middlemen with computers and websites. This is further evident in other aspects of E-commerce like the stock market and insurance companies where the work of brokers is slowly being outfaced (FTN, 2010). Nevertheless, Rosenthal (n.d.) notes that analysts should stop misrepresenting information by making it look like there is a battle between intermediaries and technology.
The key issue in every business is success and achieving profitability, so whichever route a company takes (whether it is middlemen or new age intermediaries); it should not be a big deal so long as it eventually leads to success. In Thomas cook for example, the management’s decision to incorporate new technology in further accentuating its marketing activities received a lot of criticism—especially from the people who lost their jobs. Thomas Cook developed a website feature that enabled customers to book hotels or flights for themselves without the use of tour agents (Accenture, 2010).
Additionally, I found that most of the researchers equated the downward spiral of middlemen to the following factors. FTN (2010) observes that since most middlemen discovered that they played an important role in giving the company its image, some of them resorted to tarnishing a company’s name in the event they lost their jobs. Another reason put forward by Giaglis et al (1999) was that because of the high competition, some intermediaries began engaging in unethical activities like lying so as to appeal more to the clients and get business for the company—which greatly inhibited objectivity.
Research findings on Accenture (2010) noted that the commission-pay basis given to middlemen was an incentive to engage in unlawful behavior such as leaking confidential information to competitors so that they can gain more commissions. Another finding was that; based on the wideness of the online market, products are more likely to get sold here as opposed to the offline market (Bailey and Bakos, 1996).This is mainly facilitated by the fact that online markets are not stringent on identifications (McEachern, and O’Keefe, 1997).
However, Marcussen (1999) is quick to defend intermediaries by saying that the online world lacks the personalized services that are hugely offered by most traditional intermediaries. Miller and Choi (2003) support Marcussen’s view by saying that the online market is essentially virtual thus not being able to answer some personalized questions that the customer might have. Again, Miller and Choi (2003) also note that not all people are able to access the internet yet some of those people may be potentially good clients.
The qualitative data in the research paper was presented in a simple and clear way that is easy to understand. The research information has incorporated the use of theoretical work on the topic of disintermediation and how this topic has affected the role of travel intermediaries in Thomas Cook. The information has also been presented in a narrative and comparative way based on the techniques used in the data analysis stage.
Conclusions and Recommendations
The purpose and aim of conducting this research was to look at the aspect of disintermediation and how it has affected the role of intermediaries in the service and travel industry with particular focus on Thomas Cook. The research findings have shown that the introduction of E-commerce has greatly affected the travel industry because it has led to the disintermediation of operations in travel agencies and company’s such as Thomas Cook. Conclusions that can be derived from the research have shown that intermediation is a fundamental tool in the service industry whether it is traditional intermediation or modern intermediation.
The research findings have also shown that the roles of intermediaries while being threatened by disintermediation have continued to remain relevant in the current economic and technological climate. Many consumers who are Internet and computer savvy still prefer to use the traditional intermediary to perform most of the work on their behalf. According to the research results, this can mostly be attributed to the vast experience, knowledge, information and skills that the traditional intermediaries i.e. Thomas Cook have on the travel industry.
The research findings have also shown that both the traditional and modern intermediaries have their own faults and strengths that need to be seen as complimenting the other. Companies that have used both the modern and traditional intermediaries have been able to achieve more success in their business operations than those that have been struggling to separate the two inseparable forms of intermediation. The research work has also shown that it is possible to exercise self service in booking without the use of travel agents or travel intermediaries. The use of modern intermediaries can therefore be a beneficial as well as a non beneficial means of service delivery for service companies such as Thomas Cook.
Thomas Cook: Consultant’s Recommendations
To deal with the current situation of disintermediation, Thomson Cook has had to incorporate online intermediaries to ensure it does not loose out on business. The company has a vast website, ThomasCook.com that contains a wide range of information about their services. It provides the customer with a list of hotels and resorts that they deal with as well as their rates. The website also shows which airlines the company deals with as well as any offers on package holidays or discounts on hotel bookings and airfare prices. The Thomas Cook website has a page that allows the customer to book a holiday for themselves without the use of any intermediary.
Thomas Cook can also use both the traditional and modern intermediaries to ensure that it stays in business as well as become more competitive. Thomas Cook will therefore have to ensure that there are swift operations between the traditional and modern intermediaries; by automating the tasks performed by travel agents. This will make travel agents to become E-commerce intermediaries where they use both the traditional methods of travel business as well as online services.
The travel agents will not only conduct business in the traditional way but also use the online function of E-Commerce. An example is when a client uses a travel agent from the company to book a holiday for them. The agent can use the Internet to gain information about various travel prices and hotel rates. After consulting the customer on the best offer, the agent books the hotel through the internet website or over the phone. The agent therefore uses his traditional knowledge as well as technological capability.
Other than using E-commerce intermediaries, Thomas Cook travel agency should also incorporate the use of tourism portals to make the most use of both the traditional and modern intermediaries. These portals offer similar services to those offered by the classical intermediaries. The tourism portals are referred to as cybermediaries as they provide the customer with various destinations they can visit as well as information from various travel agencies.
Apart from conducting E-commerce activities, Thomas Cook can increase its networking circles to ensure that is has a sustainable customer base. Increasing the networking circles will involve providing excellent customer care services such as carrying out customer follow ups before, during and after the holiday. The company could also reward its loyal employees by giving them free holidays at the best hotels. Another recommendation is that Thomas Cook can observe the present situation in the travel industry market and decide which option to take. This can be done by observing how other travel companies have responded to modern intermediaries or Ecommerce and what strategies they have incorporated to ensure that they do not run out of business.
Validity and Reliability
The validation and reliability section of a research report is important as it authenticates the sources of information that were used to collect and analyze data. The validation of research information is important as it ensures the data contained in the research is of a credible and reliable nature. Data reliability is the degree to the information collected from the research work can be used for future studies. For information to be considered as valid and reliable, it has to be consistent in its findings and have information that can be depended on by other researchers. The information collected in this research is valid and reliable as the sources that were used to gain more information on the topic under research were authentic and genuine.
Having completed the study, it is important to note that, to a great extent; the study was successful. This is because most of the data analyzed was able to answer the business question “What Can Thomas Cook Tour Operator Do, Regarding Disintermediation, In Order To Assure a High Customer Loyalty and to Attract New Customers?” On the flipside, it is inherent to note that in spite of the immense success of the study; there were a few limitations that impeded ultimate actualization of the study as was purposed. These limitations include:
The research essentially relied on secondary information which made it quite difficult to know what primarily happened since most of them only highlighted important points. Additionally, verifying some of the secondary information was relatively challenging since the research was conducted a long time ago. Moreover, some of the documented surveys used in this research tended to have close ended questions which limited the information that their respondents gave.
Finally, it is inherent to state that despite the fact that this research was focal-pointed on Thomas cook, the results can be applied in any E-commerce in either the travel, business or non for profit organization since the patterns of operations tend to be similar.
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