Executive Summary

Aalsmeer Flower Auction is an organization that deals with flowers auction market. The

marketplace is located in Netherlands. They have planned to establish online auction market due

to the some threat that threatened their comfortable position. These threats are identify using

Porters five forces analysis. Business and information requirement are also look into, to know

what are the business requirement and information requirement for the online auction market.

After getting to know the business requirement and the information requirement, system

development was evaluate to know which method is appropriate for AFA. Waterfall system

development methodology was chosen as appropriate for AFA due to the business and

information requirement of AFA. Effectiveness of the new system developed was consider on

the organization, management and the employee.

1. Introduction

Aalsmeer Flower Auction (AFA) is an auction house that offer global growers, wholesalers and

exporters a central marketplace in which to trade flowers and plants. New developments in

auction market threatened their comfort ability position, firstly, the need for emergence of

alternative, electronically driven flower markets. Secondly, Retailers asked for fresher products,

more varieties, smaller quantities and multiple deliveries each week. And lastly, merger and

acquisitions among retailers increased their size and power. After studying the case, using the

porter’s five forces, it is realized that AFA has some strength to overcome all these threats. By

this the report suggest to Aalsmeer Flower Auction (AFA) the need to restructure the

organization of the flower market by forming alliance with other business to enable them to have

wider market range.

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2. Business and information requirement

2.1. Business Analysis and requirement

Porter assumes that any organization is subject to five forces from its direct business

environment (Porter, 2001). The impact of each force will be analyzed and discussed from

Aalsmeer Flower Auction’s perspective.

Suppliers

Buyers

Figure 1: Porters five forces model

2.1.1. Competitors

Competitors are rivals within an industry (Siegel 2009). The way the competition in flower

market is going is likely to drive AFA out of the market if they did not respond to the change in

the market. This is a threat that requires quick response, it is understood from the case that, there

is already an alternative way of marketing flowers and that is the electronic flower market; this is

high threat to AFA.

2.1.2. Threat of new entrants

The threat of entry by new competitors is relatively small; due to the capital requirement and the

internet as a new market channel, lowers the entry barriers for new competitors. The only threat

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Competitors Substitutes Substitutes New entrants New entrants

is likely to come from small auctions specialized in niche markets. The threat of new entrants is

low.

2.1.3. Substitutes

The products sold are flowers and potted plants, which are common goods. The product is

reasonably stable but there is a threat of substitutes. The threat is on the service side as a

consequence of the rise of internet usage. The threat of substitute in terms of how to market the

product is high.

2.1.4. Buyer Power

With the mergers and acquisitions among retailers, its increase the size and power of buyers.

Now buyers can gain economic of scale and can have influence in fixing the price for the

flowers. The buyer’s power threat is high due to the mergers and acquisitions among retailers.

2.1.5. Supplier Power

Growers are the suppliers of flowers in AFA. It is clear from the case that they also prefer

electronic way of selling. Their power is high and they preferring electronic way of selling is a

threat which is equally high.

2.2. Information Analysis and Requirement

To develop information system for business survival strategy, AFA needs to understand its

capability (in terms of cost) and the ability (in term of knowledge) to have a new information

system. AFA needs to know the information requirement to set up an electronic auction market.

2.2.1. Feasibility study

AFA needs information about how much it cost to have an electronic auction market. This will

helps AFA to prepare budget and also help during system evaluation to control. Cost is also very

important in cost- benefit analysis to know if the benefits outweigh the cost.

2.2.2. Hardware requirement3

AFA needs information about hardware requirement to establish electronic commerce.

Hardware consists of computer equipment used to perform input, processing and output activities

(Wingfield, Nick, 2007).

2.2.3. Software

AFA needs a computer program that governs the operation of the computer. These programs

allow a computer to process payroll, send bills to customers and provide managers with

information to increase profits, reduce costs, and provide better customer service which is the

main objective of AFA.

2.2.4. End-user (buyers, suppliers and employees)

AFA needs information about the end –users. Its needs to consider whether they have the

appropriate skill and experience to use the system to be develop.

2.2.5. Security

The system that will be built by AFA must be secure and users must have trust in using the

system. Online trading involves the use of credit cards as means of payment, buyers and

suppliers must be rest assured that their cards are safe and cannot be hack by fraudster (Liu,

Zhuang, Zhang 2007).

2.2.6. Transparency of bid prices and bidder information

AFA must make sure that the system is build in source a way that bid price is open and can be

assess by register members only and bidder’s information is secured(Liu, Zhuang, Zhang 2007).

2.2.7. Fairness and instantaneity of the system

AFA need information about network problem since they are planning to go online. The network

problem is a key issue for the online trading business (Liu, Zhuang, Zhang 2007).

2.2.8. Priority of system completion

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AFA needs information about when the whole system will be completed. Usually it takes a

longer period for a system to be completed but some systems are completed stage by stage, and

they may not wait until the whole system to be completed (Liu, Zhuang, Zhang 2007).

2.2.9. Maintenance of system

Maintenance of the system is important information AFA needs to know. To build system is one

thing and to maintain is another thing. Cost of maintenance needs to be considered and the

availability of the system engineer (Liu, Zhuang, Zhang 2007).

2.3. Proposed information strategy

In response to the threats discovered that are likely to affect the in house flower auction market.

A WEB-AUCTION SYSTEM through the use of a website is proposing as information strategy.

A web-auction system is a system where by auction market can be practice online. A web

auction is a way to connect buyers and sellers. Web auction sites are a place where businesses

are growing their markets or reaching customers for a low cost per transaction. Web auctions are

transforming the customer-supplier relationship.

One of the most popular auction sites is eBay, which often has millions of auctions occurring at

the same time. (Stair and Reynolds 2010).

3.0. System development methodology

System development methodologies are based on basic software engineering models, such as

waterfall model, and spirals model (Metropolis et al., 1980; Budde et al., 1984; Walt Scacchi,

2001; Ricky Don Preuninger, 2006). Important pros and cons are discussed below:

Waterfall Methodology Spiral Methodology

This is the most common and classic of life

cycle models, also referred to as a linear-

sequential life cycle model.  It is very simple

to understand and use.  In a waterfall model,

The spiral model is similar to the incremental

model, with more emphases placed on risk

analysis.  The spiral model has four phases:

Planning, Risk Analysis, Engineering and

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each phase must be completed in its entirety

before the next phase can begin.  At the end

of each phase, a review takes place to

determine if the project is on the right path

and whether or not to continue or discard the

project.  Unlike what I mentioned in the

general model, phases do not overlap in a

waterfall model

Evaluation.  A software project repeatedly

passes through these phases in iterations

(called Spirals in this model).  The baseline

spiral, starting in the planning phase,

requirements is gathered and risk is

assessed.  Each subsequent spiral builds on

the baseline spiral.

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Advantages Advantages

Simple and easy to use. High amount of risk analysis

Easy to manage due to the rigidity of the

model – each phase has specific deliverables

and a review process.

Good for large and mission-critical projects.

Phases are processed and completed one at a

time.

Software is produced early in the software

life cycle.

Works well for smaller projects where

requirements are very well understood.

Disadvantages Disadvantages

Adjusting scope during the life cycle can kill

a project

Can be a costly model to use.

No working software is produced until late

during the life cycle.

Risk analysis requires highly specific

expertise.

Poor model for long and ongoing projects. Project’s success is highly dependent on the

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risk analysis phase.

Poor model where requirements are at a

moderate to high risk of changing.

Doesn’t work well for smaller projects.

Based on the pros and cons of the two methodologies discussed above, the situation where either

of the two methodologies is most appropriate will be deduce and the most relevant to the case

will be chosen for AFA as the most appropriate methodology.

3.1. Waterfall – situation where most appropriate

3.1.1. Project is for development of transaction-oriented system.

AFA is an auction house where buying and selling is taking place. Sellers bring their flowers for

buyers to see and bid for it. They require a system that will facilitate this market online.

Waterfall is most appropriate for development of transaction- oriented system (Kellen 2008).

3.1.2. Project has clear objectives and solution

The objectives of AFA is clear and known and the solution to achieve these are objectives are

been discussed above in the business and information requirement. Waterfall is most appropriate

for project that has clear objectives and solution (Kellen 2008).

3.1.3. Project requirements can be stated unambiguously and comprehensively

Project requirement is clear and that is to open a website that allow suppliers to display their

flowers and buyers can visit the site to browse and search for varieties of flowers and flowers

pots, bid for the flowers and make payment online so AFA can have their commission as a

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mediator. Kellen (2008) argue that waterfall is most appropriate in a situation where project

requirement is stated unambiguously and comprehensively.

3.1.4. Team members may be inexperienced

Electronic auction market is new to AFA. AFA decided to go online due to the threats to the

business. Therefore electronic way of bringing buyers and sellers together is new to them. There

is possibility that AFA team members are inexperience about online auction. Waterfall

methodology of system development is most appropriate in a situation where team members are

inexperienced (Kellen 2008).

3.1.5. Resources need to be conserved.

As discussed in the information requirement above that AFA need information requirement

about the security of the system. The proposed system for AFA (WEB-AUCTION SYSTEM

through a website) needs to be secure due to the kind of information that will be passing through

the system. For example user’s personal information and their financial details need to be

protected. Waterfall is most appropriate in a situation where resources need to be conserved

(kellen 2008).

3.2. Spiral - situation where most appropriate

3.2.1. Risk avoidance is a high priority.

Electronic commerce is new to AFA which has its own inherent risk associated with it. Spiral

laid more emphasis on risk analysis. Spiral methodology of system development is most

appropriate in a situation where the risk avoidance is give high priority (kellen 2008).

3.2.2. Minimizing resource consumption is not an absolute priority

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AFA want to reduce cost as possible as they can, this is one of their objective to reduce

transaction cost. Resources incur to develop a system is part of their transaction cost. Spiral is

most appropriate where minimizing resource consumption is not an absolute priority (kellen

2008). This mean spiral encourage waste.

3.2.3. A high degree of accuracy is essential

Spiral might end up incorporate waterfall, prototyping incremental methodologies as special

cases in the framework, and provide guidance as to which combination of these models best fits

a given software iteration, based upon the type of project risk. This makes it to be more

expensive due to the combination of other methodologies. AFA does not to adopt a methodology

that is expensive. Spiral methodology is most appropriate where high degree of accuracy is

essential (kellen 2008).

3.2.4. Project manager is highly skilled and experienced

AFA is new to e – commerce; managers will have little or no experience regarding system

development. Spiral is good as system methodology where Project manager is highly skilled and

experienced (kellen 2008).

Based on evaluation of where most appropriate the two methodologies can be adopt and in

relevance to the business and information requirement discussed above it is concluded that

waterfall is most appropriate method to be use by AFA. Take for example:

3.3.1. It is not expensive

AFA want to reduce its transaction cost and will adopt a system that supports its objective.

3.3.2. It does not require highly skilled term members

Term members at AFA are not familiar with electronic auction, so they have no experience about

e-commerce.

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4.0. The impact and Effectiveness of new information system

The impact and the effectiveness of the new system can be perceived in the following three

ways:

4.1. Organization effectiveness.

AFA will be able to achieve its business objective by switching to an e- commerce system. E-

commerce will enable innovation, redefine the value chain, reduce transaction costs, strengthen

the link with wholesalers and retailers, and finally increase market share.

4.1.1. Innovation

AFA develops a website that allows sellers to displays their product via internet and buyers to

browse the site to buy the products. It is a new way of doing business as far as AFA is concern.

Now AFA can be reach from any part of the world in as much as there is internet. This will

increase the market share of AFA.

4.1.2. Redefine the value chain

AFA will need to redefine the value chain within the organization, with invention of the new

system by removing the non value added chain activities and add value added activities in the

organization. Activities like pushing flowers cart round the auction house is no more useful and

can be eliminated, by removing non value added activities AFA will able to reduce transaction

cost.

4.1.3. Reduce transaction costs

This is one of the important objectives of AFA. It is true that switching to e- commerce would

eliminate some costs originally incurred in the transaction of flower by AFA, such as cost incur

in storing the flowers and space. With e-commerce AFA does not need very big space to transact

flowers and the flowers does not need to be kept in AFA warehouse. However, in the short run

the costs incur in the development of the system might quite be high. AFA needs to do costs

benefit analysis to know if the benefit outweigh the costs incur before implementing the e-

commerce.

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Increased and more detailed information about varieties of flowers, delivery dates and current

status can increase customer loyalty. In addition, the ability to consistently meet buyers’ desired

delivery dates with more varieties and fresher products, and small quantities eliminates any

incentive for buyers to seek other sources of supply.

4.2. Management effectiveness

4.2.1. Speed the flow of goods and information

Management of organization is responsible for making decision for the organization. Now

that AFA is organizing the auction via e-commerce, the flow of information is accelerated

because electronic connections and communications are already established. As a result,

information can flow easily, directly, and rapidly from buyer to seller.

4.2.2. Market forecast

By switching to e- commerce, AFA will be able to study the trend of the auction market and

this will enable for market forecast that predicts high demand for which type of flower

people order for most, by this AFA will need to source for this kind of flowers that is of high

demand. Wal-Mart, For example, uses information about certain regions of the country and

specific situations to increase needed inventory levels of certain products and improve

overall profitability (Stair and Reynolds 2010).

4.2.3. Quick decision making

AFA will needs to be making decision regarding the kind of flowers to display on their site and

other decisions as regard the whole organization. With the aid of electronic market decision can

be make easily and fast.

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4.3. Employee effectiveness

People can be the most important element of e-commerce. They make difference between

success and failure for most organization. E-commerce needs people who have knowledge about

information technology. Information systems personnel include all people who manage, run,

program and maintain the system. AFA needs skilled people like this to run the organization now

that they are adopting e-commerce. However, to the employees in AFA since this a new way of

trading there is possibility that they do not have the required knowledge about e-commerce. AFA

will needs to employed competent staff that run the organization perfectly.

In addition to the elimination of some activities that are non value added, AFA will also retrench

some staff, that services are no longer required.

5.0. Conclusion

Buyers and suppliers will also benefit from the new information system. Buyers have the

opportunity of browsing and searching for varieties of flowers online and bid for their favorite.

Suppliers do not to transport their flowers to the auction house any longer, pictures of flowers

and flower plants can be display via the internet. AFA still maintain their role as market

mediator.

6.0. Recommendation

It is highly recommended that AFA should establish a website that support online auction

market. They should make sure that the site is as much as possible be user friendly to attract

customers (suppliers and buyers). They should make sure that the site is fast and secure to

increase the trust customers will have for them. As for the traditional auction house they should

still maintain it on small scale.

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