Analysis of Aalsmeer Flower Auction and its Information Systems.

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EXECUTIVE SUMMARY

Aalsmeer Flower Auction (AFA) is the world's leading flower and plant auction which provides a central market place for growers, wholesalers, exporters and retailers to meet and negotiate trade deals on a large scale.

As the IT consultant, the candidate would attempt to write a management consultancy report so as to identify the following:

  • Analysis of AFA’s internal and external operations inclusive of their information requirements, recommend a suitable information strategy which would strength their current value chain, achieve their business objectives and ensure competitive advantage in the industry.
  • Furthermore, systems theory and systems development would be discussed briefly and an appropriate methodology would be chosen. The candidate would also identify and develop a new information system which would help Aalsmeer cope with a changing environment.
  • In addition to this, the candidate would go on to explain the impact and effectiveness of the new information system and how it would affect the organization, management and employees.


CHAPTER 1: ANALYSIS OF AALSMEER FLOWER AUCTION (AFA)

1.0 INTRODUCTION

Aalsmeer Flower Auction (AFA) is the world's leading flower and plant auction which provides a central market place for growers, wholesalers, exporters and retailers to meet and negotiate trade deals on a large scale. The Aalsmeer, Netherlands, facility processes nearly 20 million flowers and more than 2.4 million plants and garden plants each day. Aalsmeer uses a clock-based system of descending bids, also known as the Dutch auction.

1.1 RELATIONSHIP BETWEEN BUSINESS STRATEGY AND IT/IS STRATEGY

Johnson and Scholes (2001) define “an organizational strategy” as:”The direction and scope of an organisation over the long term: which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the requirements of markets and to fulfill stakeholders’ expectations.”  

It is vital to note that successful firms have a powerful business strategy that influences both organisational and IS strategy. The IS strategy is affected by changes in a firm’s business and its organisational strategy. The IS strategy must be compatible with the business strategy and also with the overall corporate strategy and other functional areas of the organisation.

It is essential for a company to have IT/IS strategy for a number of important reasons:

  • IT/IS involves high costs and is critical to the success of many organisations.
  • IT/IS is now used as part of the business strategy in the battle for competitive advantage.
  • IT affects all levels of management as it span many or all functional areas of a business.
  • IT involves many stakeholders, not just management, and not just within the organisation.
  • IT requires effective management, as this can make a real difference to successful IT use.

In order to identify and analyse the business and information systems requirements of the board of the Aalsmeer Flower Auction an evaluation of the present business and existing information systems had to be done.

INTERNAL ENVIRONMENT

The organisation’s capabilities and competencies makes up the internal environment of an organisation.

1.2 VALUE CHAIN

A value chain is a series of activities that a company will use in order for an overall business process to take place. Michael Porter developed the ‘Value Chain’ which combines two series of different activities, each under a different heading; ‘Primary Activities’ and ‘Support Activities’.   For example, in the case of AFA, ‘Primary Activities’ would include the way in which goods are transported into the auction in order to be sold, the various systems put in place in which bidders can bid and pay for goods, ways in which the goods would be delivered, and the customer care service provided by the auction before, during and after the sales process. These are all examples of ‘Primary Activities’ as they are all actions that are directly involved in the production, sale, and delivery of the product.

The auction’s ‘Support Activities’ would include having a strong infrastructure upon which the auction was based, including ways of looking after staff, making sure the company is as technologically advanced to keep up with competition, and ensuring that the staff that is employed by the company is as highly trained and efficient as possible.   Support activities increase the efficiency of the company, which aids the primary activities, although they are not directly linked to the production of the product.  If both sections of the Value Chain are managed in an effective way, then business efficiency should be high and therefore be able to provide a better level of service for the customers.

To identify the series of value- generating activities of AFA a value chain (Porter. 1985) is done.

Figure 1 showing Michael Porter's Value Chain

Table 1 reflects on AFA's Current Value Chain

From the Value Chain Analysis (Refer to Table 1) it is evident that AFA offers sophisticated logistic capabilities such as transport, delivery, storage, quality inspection and security services to growers. For buyers AFA offer packaging and transport, product quality information and growers’ reputation rating.  The value chain shows the need for improve information systems which would essentially enhanced the procurements and all other functional areas of AFA.

The Value Chain was originally dominated by growers who were able to sell what they produced in a steadily growing market. The auction was able to determine how to conduct business and took a fairly passive role. However, three developments threatened AFA comfortable position which was:

  • The emergence of alternative, electronically driven flower markets,
  • The auction met the needs of growers, but not those of retailers,
  • Mergers and acquisitions among retailers increased their size and power and growers became more professional, which led to a more formal way of doing business and interest in new ways of selling.
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1.3 PORTER’S GENERIC STRATEGIES

Michael Porter described three generic strategies open to firms. (Refer to Figure 2) These are overall cost leadership, differentiation and focus. Aalsmeer Flower Auction adapted strategies which are examined in the diagram shown below:

Figure 2 depicting Michael Porter's Generic Strategies

EXTERNAL ENVIRONMENT

The external environment of the firm reveals the strategic opportunities and threats but powerful strategies are also dependant on the internal strategic capability of the organization which can provide sustainable competitive advantage. (Johnson et al 2005).

External environment basic depends on:-

   * Market definition and size

   * Market growth

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