Brick And Mortar Travel Agency Supply Chain Information Technology Essay

Introduction

At the dawn of the internet evolution in the 1990s, myriads of businesses began realizing the huge opportunities that the internet presented to them. They knew the internet could help them re-engineer processes, lower costs, increase profits, up efficiency and effectiveness simultaneously, and raise the bar of customer service, all at the same time. One industry that was quick to ride on the internet bandwagon was travel and tourism, where airline companies had been relying heavily on a network of travel agents to act as a conduit between them and the travelers. With the internet, businesses engaged in travel and tourism began to directly touch base with their clients at real-time, low costs, and with much personal touch. Thus, it can be said that these businesses transitioned from a business-to-business (B2B) brick-and-mortar model to consumers-to-business (C2B) e-commerce model. Many travel agents had to level up their operations in order to survive the shift towards C2B and away from B2B. Years after these brick-and-mortar travel agencies caught on the e-commerce bandwagon, however, critical issues about their optimum performance remain.

This paper will therefore discuss the strengths, weaknesses, opportunities, and threats that travel agents possess in a C2B environment. It will explore which strengths must be maintained in order to survive succeeding waves of changes and remain at the crest, which weaknesses must be dealt with to stem decline, which opportunities must be tapped to grow their businesses sustainably, and which threats must be confronted to avoid being sank by competition. This paper will conclude with a set of recommendations on what can be done to leverage the internet as a powerful medium for travel and tourism businesses.

Brick and Mortar Travel Agency Supply Chain

Online information site wisegeek.com defined brick-and-mortar companies as those that operate out of a physical building, where owners must invest to rent an office space, purchase supplies and fixtures, and pay for expenses needed to keep the business operational (“What is Bricks and Mortar?,” 2010). The site said that brick-and-mortar are traditional companies that have faced fierce competition since the 1990s, when the internet started to boom, from online companies that are based on the internet and which run businesses for a fraction of the traditional costs (“What is Bricks and Mortar?,” 2010). The site contrasted brick-and-mortar companies with those online to illustrate the pros and cons of the two business models. Below is a tabular summary of the comparison:

Comparison of Brick-and-Mortar and Online Companies

Brick-and-Mortar Companies

Online Companies

Customer Trust

Has an advantage of visibility. Clients may think that a business with investments in buildings, employees, and goods are less likely to be fly-by-night.

Can face questions about integrity. Clients may think that these companies are transitory and can simply turn their backs on them by refusing to answer phone calls, e-mails, and other media for channeling complaints.

Owner Risk

Poses significant risk for the owners as businesses require planning, tri-media marketing, and cash-flow to pay for everyday expenses as well as capital outlay.

Poses minimal risk for the owners as much of the traditional costs of running a business are not accrued.

Competition

High start-up costs and high turnover rates as companies struggle to stay afloat amid the competition from online as well as other brick-and-mortar companies.

Low start-up costs but high turnover rates if companies cannot find their niche.

To describe the processes of a brick-and-mortar company, it is necessary to look at its supply chain. Mamaghani (2009) in Impact of E-commerce on Travel and Tourism: a Historical Analysis described the roles of travel agents, clients, and airlines before the move towards the new medium of the internet. The author said that during the pre-computerized period, travel agents advised clients on travel destinations, provided marketing materials, and acted as an intermediary in the complicated process of arranging travel bookings. Because they were the proverbial middlemen, travel agents were complacent and not keen on leveling up their services to cater to all clients (Mamaghani, 2009). According to Mamaghani (2009):

The travel market became segmented as travel agents increasingly targeted corporate customers. Travel agents were able to provide value-added services like negotiation of bulk fares and arranging complex itineraries… There were two waves of information technology that have had a major impact on the industry. The first of these is the development of the direct reservation systems, such as the American Airlines SABRE system. The second is the development of online sales channels via the Internet.

Travelers Online Marketing

In the article “Will the Web Replace Your Travel Agent?” published in the Medical Economics, author Murray (1996) said that the internet has increasingly become the better alternative to a travel agent for several reasons: web can alert people about travel and destinations that might have escaped agents’ radar either because they are obscure or do not offer commissions, many travel websites offer extras you won’t discover elsewhere, and that the web is increasingly replacing trip marketing materials that can be updated real-time on the internet (Murray, 1996).

Because of the many advantages that being online bring to a C2B company, Fred Mawer (2005) said that the people who rely on travel agents alone will soon be a minority. He said that there are specific advantages to booking travels online: financial – the internet reduces overheads for companies and many charge less for online bookings, availability – ability to find thousands of choices in a minute, and details – good websites provide more detailed and clearer information than any other source (Mawer, 2005). Author Carl Gibeily (2002) wrote online traveling has been the only way to fly not just in the United States but also in the Middle East and other parts of the globe.

Expensive Advertisement for Brick-and-Mortar Companies

One of the traditional costs that brick-and-mortar companies incur is advertising. According to traveladvertising.com, an online community for travel agents, there are three categories of advertising that agents must use to reach out to their clients or potential clients. These forms of advertising include print advertising for magazines, newspapers, leaflets, poster campaigns advertising; media advertising for TV and radio; and new media advertising for the internet (traveladvertising.com, n.d.). Brick-and-mortar companies, because they do not have online presence, concentrate their resources on funding print and media advertising, thus, depriving them of the immense benefits of new media advertising. Descriptions of each category by traveladvertsiing.com are contained in a tabular summary below:

Cost-Benefit Analysis of Advertising for Travel Agents

Print

Media

New Media

Targeted towards a specific readership

Limited shelf life

Limited exposure

Costly especially when placed in premium publications that target a specific audience

Targeted at a large population and wide geography

Target population cannot be narrowed down as ad will be exposed to diverse people with varied income levels

Costly and cannot be afforded by small-scale agents with no national or international presence

Targeted at a very large population across countries

Target population can be narrowed down by providing contents that are relevant to the audience

Relatively inexpensive as costs include ad design, website development, and system maintenance

Pros and Cons of C2B

According to William Sieglein (2000), C2B businesses that allow people to shop online provides flexibility, better prices and more selections for consumers but presents a great concern for security. He said that the exchange of personal information such as credit card number, home address and phone numbers pose threats in purchasing products off the World Wide Web. As information travels through the internet, it may be intercepted, stolen and used for identity theft.

To provide a secured business environment online, C2B companies must ensure that that sensitive information that consumers provide online will be powerfully protected from unauthorized parties. Companies selling products online must assure consumers that the information is stored on their secure, well-configured safe zone of their network. These zones, most often referred to as demilitarized zone, should have secured firewall configurations. Strong access controls should also be in place, and this includes user identification and authentication. Server hardening, data storage encryption, and intrusion detections must likewise be practiced persistently.

What can be the repercussions of not protecting your C2B business environments? A handful of adverse effects that can impinge on the growth of a company both on the short and long term. First, reputation of the company would be dragged into the mud. Reputation is a valuable resource of online companies. If a company is deemed to be engaging in deceitful transactions or is unable to block possible deceitful transactions in its website, then consumers can easily and rather swiftly stay clear of the website. Consumers can rapidly spread news about their bad experiences with the company to thousands of other consumers and potential consumers online via social networking sites and consumer feedback mechanisms. These happenings will subsequently result in lessened patronage for the site.

Second, the company can be embroiled in a lengthy dispute settlement or costly legal battle whenever complaints about the security features of its site pop up. Dispute settlement and court cases will of course drain the company of precious resources. It can also tarnish the company’s name in case that the proceedings conclude that the company’s systems were not fail-safe.

Third, leaks in the security features of a C2B can channel confidential information to competitors, allowing them an inside look into the company’s processes and giving them the chance to spoil operations to their advantage. As a consequence, companies will have to shed money to shed money to contain the damage, investigate the incident, fortify security measures, and pursue legal actions against parties found to have breached the company’s protection measures.

Because the internet is a public place that is easily accessible by many people, C2B companies must provide their consumers several options to protect their identity and other personal information while transacting in the company’s website. According to Dholakia, Dholakia, and Mundorf (2002), consumers may control the amount of information they make public on the internet by using four strategies: identifiability, confidentiality, anonymity/pseudonimity, and secrecy. The strategies are described in detail below:

4 Consumer Strategies for Protecting Their Identities Online

Accuracy of Personal Information Externalized

Amount of Personal Information Externalized

High

Low

High

Identifiability

Consumer is willing to disclose all personal information with accuracy.

Businesses can acquire high degree identity knowledge on the consumer

Anonymity/Pseudonimity

Consumers disclose and fabricate all kinds of information that are supposedly about themselves on the internet

Consumers are avoiding identifiability and trust is not given to the C2B website

Website should not trust the information provided for by the consumer

Low

Confidentiality

Consumer gives little personal information with high accuracy

The site’s brand equity, reputations of the marketer, favorable endorsements and other elements may lead the consumer to trust the website

Secrecy

Consumers may share very little and potentially inaccurate personal information

The level of accuracy and willingness to share information online clearly pose some serious problems for C2B companies. For instance, consumers may use information of another person in entering into transactions. In this case, it is very important that C2B travel companies state in its sales terms of conditions what types of responsibilities, if any, it will own up to.

C2B Case Analysis: Priceline.com

Priceline.com Incorporated is a multinational company listed in NASDAQ that provides online travel services across Europe, North America, the Middle East, and Africa (priceline.com, n.d.). Its main purpose is to allow clients to save on airline tickets, hotel rooms, rental cars, vacation packages and cruises than any other Internet travel service (priceline.com, n.d.).

According to Chan, Lee, Dillon & Chang (2001, p.10), Priceline.com introduced to the world a novel online application called the demand collection system, which allows consumers to bid for the prices of unsold airline tickets by naming the price for which they want to buy the tickets. By pioneering this consumer-oriented, dynamic, and customized pricing system, Priceline.com reinvented traditional commerce that often imposed fixed prices on consumers.

The authors categorized the company as C2B in which “consumer specifies the requirements to a business, which provides a product that meets these requirements. These requirements could be as simple as an acceptable price, or could involve considerable customization of an existing standard product, or creation of a new product (p. 8). The business model of Priceline.com is different from others that are into consumer-to-consumer, business-to-business, and business-to-consumer. The following is a tabular summary of various online business models (Chan, Lee, Dillon & Chang, 2001, pp. 6-8).

Online Business Model Matrix

Business

Consumer

Business

B2B: TPN

Buyer and seller are business organizations.

Can be buyer-oriented, seller-oriented or a virtual marketplace.

B2C: Amazon

Seller is a business organization while the buyer is a consumer.

Emulates physical retailing and is often called electronic retailing.

Consumer

C2B: Priceline

Consumer is a seller while buyer is a business organization.

Consumers set out requirements to businesses, which then attempt to satisfy the requirements.

C2C: eBay

Seller and buyer are consumers.

Virtual communities are formed where members host auctions or bid for products.

Many things can be inferred from the business model of Priceline.com. First, the online travel service company performs the traditional roles of a travel agent. The huge difference between traditional travel agents and Priceline.com however is that the latter harnesses the huge potentials of the internet. Priceline.com uses the new media to deliver services in a much more efficient manner than a traditional travel agent and on a wider scale. Note that traditional agents are mere intermediaries who act as go-between, taking orders from consumers, presenting the orders to businesses, helping consumers decide on what to buy according to their budget and tastes by presenting varied options. Priceline.com does just that, yet in a much quicker manner.

Second, Priceline.com empowers the consumers and allows businesses to stay in touch with consumers’ desires. Traditional travel agents may opt to cater to only a few groups like corporate clients that are sure to give them a steady flow of huge income. They may choose to disregard small-time infrequent travelers. With Priceline.com, however, all kinds of consumers are entertained. By specifying travel requirements and details, consumers will get a response from various travel companies that can meet the requirements and details they specified. Consumers are also empowered because they can sway businesses to provide products and services according to specifications and demands. Businesses also become in tuned with consumers’ demands in this type of business model. Because they learn of consumers’ demand real-time, they can rapidly customize products and services to respond to their markets.

Third, Priceline.com presents enormous challenges in terms of technology. The company relies heavily on the internet in terms of providing services. Thus, it is imperative that it protects its systems against attacks, frauds, and phishing activities to safeguard the integrity of its operations as well as gain and keep the trust of its partners. Disruptions and downtimes caused by any technological problems will also cost Priceline.com. It should therefore continuously perform and maintain risk management programs.

Review of Literature

Internet

The advent of online business was made possible by one medium, the internet. The development of the internet started in the 1950s when the Defense Advanced Research Projects Agency, DARPA, was asked by the Department of Defense to develop a system to allow the United States to mount a counter attack in the event of a Soviet Union nuclear first strike (Boudreaux & Sloboda, 1999). By 1965, DARPA sponsored A Cooperative Net-work of Time Sharing Computers that became the predecessor of the internet. Over the years, scientists, researchers and hobbyists contributed their talents to the development of the internet to become the vast network that we have today (Boudreaux & Sloboda, 1999).

E-Commerce

The internet has created for businesses a level-playing field where the midgets can compete with the titans, where the start-ups can flourish for a fraction of a cost to challenge the old-timers. Indeed, the internet is a grand stage for entrepreneurs to showcase their bright ideas to the business world.

Joshi and Yermish (2000) mentioned five occurrences that have been shaping the Internet as a business world. These occurrences are facilitating the transition towards the new media in terms of offering and availing of products and services. The authors identified these occurrences as (1) the separation of the information about products and services from the physical products and services themselves, (2) products and services are becoming information-based, (3) internet bridges distance between consumers and business organizations, (4) internet is a medium for rapidly responding to consumers and markets, and (5) internet allows consumers to become agents of marketing (Joshi & Yermish, 2000). The following is a tabular summary of descriptions for each occurrence:

Occurrences that Have Made the Internet a Business World

Increased Separation of the Flow of Information

Information about products and services is distinct from actual products and services. Moreover, information travels to consumers and buyers faster than the provision of the physical orders themselves.

Increased Focus on Information Flows

Products and services are technologically intensive and may not be necessarily material objects. They may be delivered solely on the internet, from the internet or to the internet.

Reduced Distance

The third aspect to the new economy is the shrinking physical distances. In the new economy, proximity requirements have been almost totally removed as (in theory at least) everyone is connected with everyone else.

Rapid Response

Businesses are provided with real-time feedback from consumers while consumers get swift response from businesses. Rapid response allows businesses to be consumer-focused, service-oriented, and flexible as they are fed information about their performance and the competition’s operations in a fast manner.

Using the Customer as a Marketing Agent

Because internet is a medium where consumers can provide feedback and get response real-time, consumers may act as a marketing agent for a company. They can easily talk about favorable services and positive experiences they have had with a company and then go on sharing these experiences or talking about these services online, where thousands of people may be able to chance upon their insights.

Matthewson (2002, pp.45-46) sets out the steps in achieving best practices in online buying process where consumers go to the companies to buy goods and services: customer acquisition, segmentation and targeting, promotions, online ordering, order fulfillment and after-sales support, and up-sell and cross-sell. Although the internet is a powerful medium, harnessing it does not guarantee success. Brynjolfsson & Urban (2001, pp. 121-122) outlined practices that can make companies lead or lag in the industry. Some of the leading practices include focusing on matching appropriate technology to business strategy and customer requirements; ensuring that appropriate technology capability and capacity were internally in place or available through partnering; building technology platforms to support Internet, intranet, and extranet applications, with a view to reinforcing, improving, or changing the value propositions of their core business; early adoption of Web technologies to achieve a competitive advantage; and learning the technology in the context of developing an information or marketing strategy (Brynjolfsson & Urban, 2001, pp.121-122). Lagging IT practices include having the IT department responsible for e-business developments; having underfunded and undervalued IT and e-business developments; treating IT and Web-based technologies as a cost center rather than a profit center; and positioning the CIO as a specialist functional manager (pp. 121-122).

Travel Agent SWOT Analysis in C2B Model

In a C2B business environment, travel agents with online presence clearly possess a great deal of strengths. However, with competition from small-time and big-ticket players ever-present, travel agents must constantly be on the lookout. This is because on the online environment, other travel agents can easily duplicate their strengths, bank on their weaknesses, seize opportunities faster, and thwart threats more formidably, all in swift turn-around time.

Below is a tabular analysis of the SWOT of travel agents operating in an online business environment.

SWOT Analysis

Internal

External

Maximize

Strengths

The strengths of a travel agent in an online C2B model include abilities to rapidly communicate with consumers, get their travel requirements, deliver these requirements to businesses, receive feedback from consumers for services and products delivered, and create possibilities for future collaborations.

Opportunities

The opportunities would include the chance to cater to untapped segments of both the local and global marketplace.

Minimize

Weaknesses

The weaknesses would include the need to respond to consumers and businesses 24 hours a day and seven days a week at quick turn-around time.

Threats

The threats would of course include security concerns and competition from other C2B that continuously enter the industry.

Conclusion

Internet is a potent tool for surviving and competing in the travel industry. However, companies and agents must know how to use this medium to their advantage as the internet has its kinks that can spell big troubles. To stay afloat in the travel industry, agents and companies must bank on the strengths of the internet and develop strategic plans that would help them sustain operations both in the short and long term (Chopra. & Van Mieghem, 2000).