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.

2. Business and information requirement

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 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

Competitors
New
Substitutes
entrants

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

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).
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 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

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

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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 The spiral model is similar to the incremental
cycle models, also referred to as a linear- model, with more emphases placed on risk
sequential life cycle model. It is very simple analysis. The spiral model has four phases:
to understand and use. In a waterfall model, Planning, Risk Analysis, Engineering and
each phase must be completed in its entirety Evaluation. A software project repeatedly
before the next phase can begin. At the end passes through these phases in iterations
of each phase, a review takes place to (called Spirals in this model). The baseline
determine if the project is on the right path spiral, starting in the planning phase,
and whether or not to continue or discard the requirements is gathered and risk is
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project. Unlike what I mentioned in the assessed. Each subsequent spiral builds on
general model, phases do not overlap in a the baseline spiral.
waterfall model
.

Advantages Advantages

Simple and easy to use. High amount of risk analysis

Easy to manage due to the rigidity of the Good for large and mission-critical projects.
model – each phase has specific deliverables
and a review process.

Phases are processed and completed one at a Software is produced early in the software
time. life cycle.

Works well for smaller projects where

requirements are very well understood.

Disadvantages Disadvantages

Adjusting scope during the life cycle can kill Can be a costly model to use.
a project

No working software is produced until late Risk analysis requires highly specific
during the life cycle. expertise.

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

Poor model where requirements are at a Doesn’t work well for smaller projects.
moderate to high risk of changing.

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.

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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
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.

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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

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).

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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.

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.

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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.

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
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 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.

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
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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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