Question

1. What is electronic data interchange? What are its major applications in commerce?
2. What are vertical disintegration? Please provide an example for each.

Answer 1

1. The Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents between business partners in a standard electronic format.
By switching from a paper-based exchange of business document to an electronic one, companies enjoy significant advantages such as reduced expense, increased processing speed, reduced errors, and enhanced business partners ties.

EDI is one of the most important subsets of electronic commerce — the use of computer and telecommunications technologies to enable the exchange of information between two parties during a business transaction. All electronic commerce has the purpose of automating business processes. Some transactions can be fully paperless and transfer data from one program to another. EDI comes under the form of electronic commerce by strict definition. Many transactions related to electronic commerce are often paperless but require manual involvement. Examples are Internet transactions involving manual entering of data by one party.

Another example of paperless but manual electronic commerce is e-mail. Often businesses claim to be doing EDI while they are actually doing a manual-to-computer transaction such as entering electronic orders. Another type of electronic commerce is focused on connecting physical media with computers and the processes of telecommunication. Examples of this third category are fax (paper plus telecommunications) transmission and processes involving information collected by bar coding, optical character recognition, and radio frequency tagging.

2. Vertical disintegration refers to a particular method of industrial production organization. In contrast to vertical integration, where manufacturing takes place within a single company, vertical disintegration means that various diseases of size or scope have split a production process into separate entities, each conducting a specific sub-set of activities required to produce a finished product.

Filmed entertainment was once highly organized vertically into a studio structure, whereby a few large studios managed everything from production to theatrical presentation. The industry was divided into small pieces after the Second World War, each specializing in different tasks within the division of labor needed to manufacture and view a finished piece of filmed entertainments. Hollywood was extremely disintegrated vertically, with specialist companies performing only such functions, such as recording, special effects, trailers etc. Later in the 20th century, divestiture of the Bell System had a similar impact on a bigger industry.