1 Prentice Hall, 2002

Learning Objectives
Understand how broker-based services are performed online
Describe online travel tourism services and their benefits
Discuss the impact of EC on the travel industry
Describe the online job market, its drivers and benefits
Describe the electronic real estate and online insurance markets
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Learning Objectives (cont.)
Understand how stock trading and global exchanges work online and their benefits
Discuss cyberbanking, its drivers and capabilities
Discuss implementation and other important issues of online financial services and its future
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Learning Objectives (cont.)
Describe online publishing
Describe online knowledge dissemination and distance learning
Discuss disintermediation and reintermediation
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Opening Vignette:
Ordering Journals Electronically
How a large university automated the purchasing of magazines and journals, saving $365,000/year
Direct E-Marketing: Buyer-to-seller; orders and payments
Market maker charges $5/transaction vs. about $32 (conventional agents)
Ordering time reduced by up to 80%
Rowe.com—Internet IPO that survived the stock market in the industry
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Broker-Based Services
Brokers work as intermediaries between buyers and sellers
Agents basically make the markets
Agents provide many services
Most of the value-added tasks of brokers can be automated
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Broker-Based Services (cont.)
Major electronic agent-based services
Travel
Employment
Real estate
Stocks
Electronic auctions
At-home banking
Insurance
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Broker-Based Services (cont.)
Service Industries vs. Manufacturing and
Product Retailing
Service Industries
Pure EC: substantially reduced cost
Bank and brokerage houses
Possible digitation of the entire process
Travel and real estate agents
Viewing an online video clip or seeing photos of a hotel or a house for sale
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Broker-Based Services (cont.)
Service Industries vs. Manufacturing and
Product Retailing (cont.)
Manufacturing and product retailing
Physical delivery cost may be high
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Travel and Tourism Services
Any experienced traveler knows that good planning and shopping around can save money
The Internet is an ideal place to plan, explore, and arrange almost any trip
Travel-related information available at many sites including:
Expedia.com
Travelocity.com
Travelweb.com
Trip.com
Asiatravel.com
Priceline.com
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(cont.)
Services provided:
Information and booking of airlines, hotels, cars, and even golf courses
Fare comparisons
360 degree video tours of top destinations
Electronic Travel magazine
Converting 200 currencies
Providing maps
Pictures of major attractions
Information about entertainment and ticket purchasing
(ticketmaster.com)
Tips provided by people that experienced certain situations (like a visa problem)
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Travel and Tourism Services (cont.)
Services provided:
Special discount information
Chat rooms and bulletin boards
Shopping for travel accessories and books
Experts’ options
Frequent flier deals
Restaurant reviews
Current status of flights
(real time)
Driving directions in the
US
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Travel news
Fare tracker (free e-mail alerts on low fares)
Major international news
Worldwide business and places locator
Special interest vacations
Bed and breakfast recommendations
E-mail to intermediary
Weather watch
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Travel and Tourism Services (cont.)
Auctions, bids, and special sales
American airlines (aa.com) auctions tickets during low-volume seasons
Cathay (cathaypacific.com) auctions tickets on competitive routes
Aer Lingus (aerlingus.ie) auctions tickets that expire in 1 or 2 weeks
Priceline (priceline.com) asks consumers to specify the price they are willing to pay
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Travel and Tourism Services (cont.)
Special services
Wireless services
Direct marketing
Alliances and consortia
Other services
Interactive kiosks in hotels
Internet access in hotels
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Travel and Tourism Services (cont.)
Benefits
Free information is tremendous
Free information is accessible anytime
Substantial discounts
Limitations
Not all people use the
Internet
It may take a long time to find what you want
People are still reluctant to provide credit card numbers
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Travel and Tourism Services (cont.)
Corporate Travel: New Business Model
The Impact of EC on the Travel Industry
Porter’s framework of competitive advantage
(the five forces)
Focus:
Environment
Competitive responses
Firm’s strategy
The industry is clearly transformed
Taking away some functions traditionally performed by travel agents
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Travel and Tourism Services (cont.)
Impacts on the industry
Multimedia helps customers understand the products
Offering of lower-cost trips
Providing a more personalized service
Saving money in a paperless environment
Increasing the convenience of getting information at home
Supporting a customer-focused strategy (such as targeted advertisement and integration of products); push information to customers
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Travel and Tourism Services (cont.)
Travel agencies, as we know them today, will disappear
Only their complex value-added activities will not be automated
These complex activities will be performed by a new breed of intermediaries
Survival strategy
Minor improvements due to process changes
BPR with significant improvements
Organizational transformation
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Figure 10-2
The Travel Industry Chain
Source : Block and Segev “The Impact of Electronic Commerce on the Travel Industry” Proceedings, HICSS 31, Hawaii
© 1997 IEEE.
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Travel and Tourism Services (cont.)
Intelligent agents
Step 1: turn on PC and enter
Desired destination
Dates
Available budget
Special requirements
Desired entertainment
Step 2: computer dispatches an intelliget agen that “shops around”
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Travel and Tourism Services (cont.)
Intelligent agents (cont.)
Step 3: agent attempts to match your requirements with what is available, negotiates with vendors
Step 4: agent returns within minutes with suitable alternatives, modifies as per your wishes, books the vacation
Voice communication with agent
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The Employment Placement:
Deficiencies of Manual Market
Job markets
Employers are looking for employees with specific skills, and individuals are looking for jobs
Very volatile market
Moved to the Internet
Millions of job seekers, hundreds of thousands of jobs
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The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market
Cost—classified ads are expensive
Life cycle—the life of the ads is only days or weeks
Place—most ads are local; nationwide and international ads are more expensive
Minimum information—because of the high cost, the information provided is minimal
Search—Time consuming for individuals to find all relevant newspapers
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The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market
(cont.)
Finding applicants— during pre-Internet era, job seekers did not place ads about their availability making it difficult for companies to find employees with special skills
Matching— it was difficult to match candidates to open jobs, supply and demand
Lost and dated material— some applications or letters of response tended to get lost, or arrive late
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The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market (cont.)
Speed— c ommunication by mail and processing of a large number of applications is slow; employers lose good employees, the applicant had taken another job being afraid to wait too long
Comparisons— difficult for job seekers to compare monetary value of available positions
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The Employment Placement:
Deficiencies of Manual Market (cont.)
The Internet Job Market
The Internet offers a perfect environment; it is especially effective for technology-oriented jobs
Job seekers
Job offerers
Recruiting firms
Government agencies and institutions
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The Employment Placement:
Deficiencies of Manual Market (cont.)
The Advantage of the Electronic Job Market
For job seekers
Find very detailed and timely information on a large number of jobs world-wide
Quickly communicate with potential employers
Post resumes for largevolume distribution
Search for jobs quickly from any place at any time
Obtain several support services at no cost
Find employer profile & industry guides
(valuereports.Com)
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The Employment Placement:
Deficiencies of Manual Market (cont.)
The Advantage of the Electronic Job Market
For employers
Advertise to a large number of job seekers
Save on advertisement costs
Lower the cost of processing (using electronic application forms)
Provide greater (‘equal opportunity’) for job seekers
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Find highly skilled employees
Conduct tests quickly, online
Change and update ads quickly
Fill up positions rapidly
Interviewing from distance
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The Employment Placement:
Deficiencies of Manual Market (cont.)
The Limitations of Electronic Job Markets
Many people do not use the Internet
Security
Privacy
Lack of face-to-face contact
Examples of online job services
Locating jobs
Writing and posting resumes
Career planning
Newsgroups
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The Employment Placement:
Deficiencies of Manual Market (cont.)
Examples of career services on the Internet
Recruiters online network
StaffNET
Global employment network
Employment opportunities
Intranet job market
Intelligent agents
Intelligent agents for job seekers (jobsleuth.com)
Intelligent agents for employers (resumix.com)
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Figure 10-3
The Virtual Job Employment Agent
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Real Estate
You can view many properties on the screen
You can sort and organize properties
You can find detailed information about the properties
You can search, compare and apply for loans
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Real Estate (cont.)
Real Estate Applications
International Real Estate Directory and News is the most comprehensive Web site ired.com
National listing of real estate properties cyberhomes.com
Commercial real estate directory comspace.com
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Real Estate (cont.)
Real Estate Applications
Mortgage comparisons, calculations, and other financing information; mortgage application eloan.com
Searching residential real estate in multiple databases
Homescout.com (now homegain.com)
Real estate related maps are available on mapquest.com
Automating the closing of real estate transactions, which is overwhelmed by paperwork datatrac.com
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Real Estate (cont.)
Real Estate Applications
The National Association of Realtors, realtor.com
has links to property listings in all major US cities
To find how much house you can afford, consult: replace.com
Mortgage brokers can pass on loan applications over the Net and receive bids from lenders that want to issue the mortgages
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Real Estate (cont.)
Real Estate Applications
To find mortgage interest rates online use:
Lendingtree.com
Eloan.com
Homeside.com.au
Insurance—auto, home life, health at substantial discount
Insureate.com
Order.com
Quotesmith.com
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Investing and Trading Stocks Online
Online stock trading
Costs between $7 and $29 per transaction (vs.
$10 - $35 in traditional brokerage)
No waiting on busy telephone lines
No oral communication, less chance for errors
Place orders from anywhere, any time, day or night
No biased broker to push you
Considerable amount of free information
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Trading Stocks Online (cont.)
Investment Information
For current financial news: cnn.com, hoovers.com, and bloomberg.com
For municipal bond pricing: bloomberg.com
For overall market information and many links: cyberinvest.com
For free Guru advice see: upside.com
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Trading Stocks Online (cont.)
Investment Information (cont.)
For stock screening and evaluation: multexinvestor.com and cnnfn.com
For articles from the Journal of the American
Association of Individual Investors: aaii.com
For reports the latest findings and pricing of IPOs hoovers.com/ipo
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Trading Stocks Online (cont.)
For chart lovers bigcharts.com
For mutual funds evaluation and other interesting investment information morningstar.com
For earning estimates and much more money.cnn.com/news/companies/firstcall/
For almost anything you need yahoo.com
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Trading Stocks Online (cont.)
Initial public offerings
(IPOs)
Spring Street Brewing
Offers initial and secondary securities trading over the
Internet
See ipo.com
Global stock exchanges— around-the-clock global trading
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Related markets
Financial derivatives
Commodities
Mutual funds
Individual investors and day trading
Electronic trading of interest rate derivatives
Swapswire.com
Forbes.com
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Electronic banking
Saves time and money for users
Offers an inexpensive alternative to branch banking
Application Case:
Cyberbanking at Wells
Fargo
Capabilities of home banking
Get current account balances any time
Obtain charge and credit card statements
Pay bills
Download account transactions
Transfer money between accounts
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International and multiple-currency banking
Some international retail purchasing can be done by credit card
Other transactions may require international banking support
Hong Kong Bank’s HEXAGON provides e-banking in Asia
Mark Twain Bank in the U.S. uses e-cash to support trading in 20 foreign currencies
Bank of America and other banks offer:
International capital raising
Cash management
Other services on an international level
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Implementation issues in banking and online stock trading
Securing financial transactions
Application case: Bank of America Online
Using the extranet
Banks provide large business customers with personalized service by allowing them access to the bank’s intranet
Access accounts
Historical transactions
Intranet-based decision-support applications
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Imaging systems—allow customers to view images of all:
Incoming checks
Invoices
Other related online correspondence
Pricing online vs. off-line services
Some banks offer free services (fee per check or transfer)
Some banks charge $5 to $10
Risks—especially in international banking
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Banking: 4 scenarios
Building alliances quickly with banks, software vendors, and information providers
Effective outsourcing without neglecting to build in-house skills (customer information systems)
Focusing on the profitable customers to provide broad channels for services and products
Keeping a central role in the payment environment
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The Future of Online Banking
Three core strategies to pursue
1. Customers Agents—banks unable to achieve economies of scale
Offer customers the widest possible choices
Include products from multiple sources
Provide the customers with integrated information services
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The Future of Online Banking (cont.)
Three core strategies to pursue (cont.)
2. Product Manufacturers—banks able to achieve economies of scale
Strengthen a trend that can already be seen in a number of product segments
In core processing services for small and medium-sized institutions
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The Future of Online Banking (cont.)
Three core strategies to pursue (cont.)
3. Integrated Players—banks with a strong brand and position from manufacturing to delivery
Many banks will adopt a hybrid strategy
Every player needs to make crucial decisions about which areas are strategically too risky:
To outsource
Which capabilities need to be built up in-house
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The Future of Online Banking (cont.)
Personal finance online
Bill paying and e-checks
Tracking bank accounts etc.
Portfolio management
Investment tracking
Quotes and prices (past and current)
Budget organization
Record keeping
Tax computations
Retirement goals, planning and budgeting
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Billing Online
Automatic transfer of mortgages
This method has existed for several years
The payer authorizes its bank to pay the mortgage, including tax escrow payments
Automatic transfer of funds to pay monthly utility bills
Since1997, the city of
Long Beach has allowed its customers to pay their gas and water bills from their bank accounts
Many utility companies worldwide provide this option
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Billing Online (cont.)
Paying bills from online banking account
Can be made into any bank account
Monthly rent and other bills paid directly into the payee’s bank accounts
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Billing Online (cont.)
A merchant-to-customer direct billing
A merchant posts bills on its Web site
Customers can view and pay their bill
Customers have to go to many Web sites to pay all their bills
Several utilities in Los Angeles allow customers to pay bills on the utilities’ Web site (20 cents per transaction )
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Billing Online (cont.)
Using an intermediary
A third party consolidates all bills related to each customer in one site in a standard format
Collects a certain commission
Makes it convenient to complete transactions
E
*
Trade and Intuit
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Billing Online (cont.)
ISPs services
Trying to sell customized solutions
Do not have adequate billing platforms
See moneymain.com
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Online Publishing
The electronic delivery of newspapers, magazines, news, and other information through the Internet
Online Publishing Today and Tomorrow
Today— mainly used for disseminating information and for conducting sales transactions interactively
Tomorrow— include more customized material that the reader will receive free, or will pay for
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Online Publishing (cont.)
Publishing Modes
Newspapers
Magazines
News
Textbooks
Music
Artwork
Video clips
Movies
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Online Publishing (cont.)
Publishing Methods
Online archive: digital archive (library catalogs, bibliographic databases)
New medium: extra comprehensiveness to issue or topic
Publishing intermediation: online directory for news services
Dynamic or just-in-time: create content in real-time and transmit on the fly
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Online Publishing (cont.)
Content providers and distributors
Challenges moving into areas with lessdeveloped infrastructures
Issues of intellectual property is a consideration
Akamai.com
Digisle.com
Edgix.com
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Online Publishing (cont.)
Publishing music, videos, and games
Major issue is payment of intellectual property fees
People-to-people (P2P) model—people swap files
3 rd -party organizer may be in violation of copyright laws (Napster)
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Online Publishing (cont.)
Digital delivery of documents—secure environment
U.S. Postal Service, UPS, E-parcel.com
Encryption
Software for digital signature
Authentication
Notarization
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Online Publishing (cont.)
Edutainment—combination of:
Education
Entertainment
Games
Goal: encourage students to become active learners
Managerial issues
Educational games delivered as CD-ROMs
Distance-learning format
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Online Publishing (cont.)
Electronic books
Frequent updates possible
Contain up-to-the-minute information
Special eBook device necessary to view books
See:
Wizap.com
Ebookconnections.com
Netlibrary.com
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Knowledge Dissemination
Virtual teaching and online universities
Distance learning and virtual universities
Many universities offer limited courses and degrees, but use innovative teaching methods and multimedia support
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Knowledge Dissemination (cont.)
Virtual teaching and online universities (cont.)
MBA program in Hong Kong
Lectures delivered on interactive TV (iTV), now on the Web
Students decide what and when they
“attend” the lecture
Lecture, support material exercises, etc., provided on the Web
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Source : Hamalainen et al., “Electronic Marketing for Learning: Education Brokerages on the Internet,”
Communications of the ACM, June 1996. Hamalainen et al. © 1996 ACM, Inc. Reprinted with permission.
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Knowledge Dissemination (cont.)
Online advice and consulting
Medical advice—provide consultation with top experts
Management consulting—provide accumulated expertise from knowledge bases
Legal advice—delivery of legal consultation services to business has considerable prospects
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Knowledge Dissemination (cont.)
Online advice and consulting (cont.)
Financial advice— offer extensive financial advice
Other service online
Healthcare
Matchmaking
Electronic stamps
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Disintermediation and
Reintermediation
Change the role of agents to:
Assists in comparison shopping from multiple sources
Providing total solutions by combining services from several vendors
Providing certifications and trusted third party control and evaluation systems
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Disintermediation and
Reintermediation (cont.)
Issues impacting future of intermediaries
The success of intelligent agents
Travel intelligent agents
Agents that support job matching
Agents that interpret resumes
The more intelligent the software agents become, the less human agents will be needed
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Disintermediation and
Reintermediation (cont.)
Issues impacting future of intermediaries
(cont.)
Customer attitudes and behavior are important
Good experience with online agencies means fewer customers use human agents
Insurance purchasing
Stock purchasing
Virtual travel agencies
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Disintermediation and
Reintermediation (cont.)
New roles of electronic marketing intermediaries
To extend what we are familiar with in physical markets to the virtual world (e.g., search services and electronic malls)
To extend payment clearing functions into the
Internet (e.g., electronic cash and digital credit card services)
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Disintermediation and
Reintermediation (cont.)
Disintermediation in B2B
Exchanges decrease number of calls a sales rep pays on purchasing managers
Reengineering marketing and sales organizations is necessary
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Disintermediation and
Reintermediation (cont.)
Cybermediation
Electronic intermediary (rowe.com)
Affects most market functions
Hypermediation—human/electronic intermediation; may profit greatly from EC
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Managerial Issues
Effectiveness of out-of-town recruitment
Privacy may be in danger
International legal issues may impact services more than products
Ethical issues are prevalent in services
The intermediaries and their roles are changing
Alliances for online initiatives are spreading rapidly
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