Intermediation is the action of matching lenders with savings to borrowers who need money, usually through an agent or a third party.
Intermediation is a process that an institution or entity goes through, which eases the funding process between individuals or other economic institutions. They can be any partner, agent, distributor, reseller, consultant, or any other party with whom a company or an organization transacts business. Within a business relationship, an intermediary can perform different functions or tasks. Some of the tasks include carrying inventory, selling, physical distribution, after-sale service, and extending credit to customers.
These tasks, and the intermediary’s involvement, can take on different forms depending on the situation. It is important to note that the particular character of an intermediary lies in the fact that the role is not necessary for the business relationship. The seller and the buyer can choose to have one-on-one dealings and interactions with each other, taking over some or all of the tasks of the intermediary. Therefore, the intermediary does not necessarily accomplish any specific tasks while still relevant within the business relationship.
It implies that the role of the intermediary in a business relationship or intermediation can be more or less central, especially in cases where the seller and the buyer do not have direct contact with each other. The intermediary’s position can affect the quality of the business relationship while the other two parties are entirely dependent upon the intermediary’s accomplishment. In different situations, if the seller and the buyer collaborate directly, the intermediary may influence the business relationship. As a result, the intermediary plays an essential role in the business relationship due to specific tasks performed and the positive or negative impact on the business relationship.
Real-world Example of Intermediation
Intermediations are mostly done by intermediaries, which can be brokers and Real Estate. Real property or real estates are most times sold through intermediaries that are called brokers. The broker has all it takes to sell the property—the experience, resources, knowledge, and network that the seller or buyer might not have. Sometimes, the owner may sell between three to four properties during his lifetime, while the broker might have sold hundreds of properties.
Another example is with entertainers and agents. Agents often represent most celebrities. The agent simply acts to negotiate with the production companies. Since the agent knows about what is happening in the entertainment world, he then promotes his celebrity as the best and most appropriate choice for the role. The gents also screen opportunities before presenting those that fit with the actor.
Significance of Intermediation
- Intermediation is a crucial element of an organization’s product distribution channel to establish agreements.
- Intermediaries are a practicable component in the operations of a business.
- Good intermediaries provide access to customers that a company might not have the opportunity to serve.
- Intermediaries reduce the workload by manufacturers and customers in searching for their desired items.
Types of Intermediaries
Supply chain intermediaries include Merchant wholesalers, retailers, agents or brokers, franchises, and white label buyers. Merchant wholesalers buy a large number of products and sell them in bits to a network of customers.
- Retailers are organizations or companies that attract customers by selling different products.
- Agents or brokers are people or companies who need to take ownership of a product or service, but customers try to get the best price or value from a product or service.
Communication Intermediaries include:
- Attention brokers include places with people’s attention and will place messages in their content for a fee. It usually includes media companies and social media sites like Facebook, Kim Kardashian, etc.
- Directories are places people turn to when they do not know where to locate a product or solution to a particular problem. Google is an example.
- Influencers are individuals or companies that customers rely on to evaluate products or services and then make recommendations. Examples include Kylie Jenner, Customer Reports.
- Ad Networks, Brokers, or Marketing Agencies or organizations are agencies or organizations that distribute a message to many attention brokers. Examples are Omnicom, Google Ad works, etc.
- Hosts are companies that distribute and carry the messages of customers on their servers or location. Examples include YouTube, WordPress.com, etc.