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Stratey for Bitcoin startup stepping to Asia
Company project for
Name: Meng Yuan Student nr: 11352906
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Content
Abstract
Introduction of bitcoin and blockchain
The challenges and opportunities in cross-border payment
The opportunities and challenges of applying bitcoin as cross-border
payment intermediate
The introduction of company and business intents
Framework and theory application
Business strategy
Value discipline
CAGE model
AIDA framework
(Expected) Managerial Recommendations/Implications
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Abstract:
Recently bitcoin has become a popular topic especially in 2017. The trading price increased 256.5%1 since the beginning of this year. Meanwhile, the application of bitcoin besides trading and investing is brought to the table. The company project is for a Fintech startup called Kable, which is supported by Bit4Coin. BV. It is a B2B platform for international transaction with bitcoin. My supervisor in the company is Christopher
Demetrius(https://www.linkedin.com/in/christopherdemetrius/) who worked in PwC for eight years and now the CFO in Kable. Generally, Kable hope to better step into Asian market considering the trading volume between Asia and Europe. However, since none of team member is from Asia, besides they have little knowledge or experience about how to start doing business with Asian. The goal of this article is to provide them a academic perspective in B2B marketing, business strategy and value proposition. Ideally, company could apply the analysis of study into real business. In this article, I will discuss main issues in accordance, 1) the introduction of bitcoin and blockchain; 2) the challenges and opportunities in cross-border payment are; 3) the advantage and disadvantages of applying bitcoin as cross-border payment intermediatry; 4) the introduction of company and business intents; 5) framwork and theory application(10-element strategy , value discipline, CAGE, AIDA); 6) two real business case for that company to expand business in Asia; 7) managerial recommendations and implication; 8) limitation and conclusion of this report.
Introduction of bitcoin and blockchain
Bitcoin has come a long way since its inception on Jan 3rd, 2009. The metadata of the first bitcoin transaction, initiated by Satoshi Nakamoto, contains the headline of the Times newspaper of that day, "Chancellor on brink of second bailout for banks". While banks have still been cautious in their acceptance of bitcoin, the term "blockchain" recently has gained a lot of attention. "Blockchain" subsumes various concepts and meanings. In Don Tapscott’s TED talk about “How the blockchain is changing money and business “2 He discussed 5 applications of blockchain. The first is protecting rights through immutable records such as land titles or ownership rights. The second is creating a true sharing economy. Imaging an Airbnb guest could review all credit history of a house owner, the house renting market will be transparent and more trustful. The third one is recapturing our identities like enabling citizens to own or monetize their own data. The fourth is ensuring compensation for the
1 Record on 23,July,2017 https://www.coinbase.com/dashboard
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creators of value. For example, a novel writer could require everyone who intend to read his book to pay him directly, rather than through press company or other intermediate. The last application is remittance. With the virtual currency based on blockchain, payment parties don’t need the financial agency to process. Decentralized distribution systems make sure the payment especially cross-border payment would be undertaken efficiently. In this article, I will focus on the last area which is cross-border payment service.
I. The challenges and opportunities in cross-border payment
The current process for cross-border payments is complicated and relies on correspondent banks (intermediate) before reaching the ultimate beneficiary’s account. The banking system works similar to the telephone system before IP-technology was used: For every call, you had to have a separate "line", connecting countries and carriers. International transfers work similarly, for every transfer, a transfer route via correspondent banks needs to be established. While the transfer information is sent via Swift, balances are settled via bank accounts the correspondent banks keep for each other, each with limits and risk management in place (chart-1).
Chart-1
The number of banks required in the correspondent banking model (with each bank charging a part of fee), is the first explanation why cross-border payments are more expensive3 than domestic payments. However, assessing the particular charges incurred throughout the correspondent payment cycle almost impossible for clients, due to a lack of auditability and transparency. The entire process includes a combination of open as well as ‘hidden fee’.
3 non-public bilateral agreements are concluded between each correspondent banking pair. Each bank in turn
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For corporates, all-in international transfer costs amount to 1% to 3% of the payment, while SMEs and individuals can often pay up to 10% in total4. However, client perception is often that transaction fees quoted by wholesale banks seem not very high. Advertised fees for business transfers outside of the Single Euro Payments Area (SEPA) are only approximately 0.20% of the transfer amount (0.10% for the sending bank and another 0.10% for the
receiving bank), with most banks quoting a minimum fee of €10-€14 and a maximum fee of up to €1505. What the quoted fees do not include are steep foreign currency conversion spreads. Especially when payments take a few days, it is hard for senders or recipients of payments to understand what the fair foreign currency exchange rate (FX rate) would have been, and how much 'hidden fee' was added.
An internal Santander memo leaked to Guardian Money states that Santander made €585 million from money transfers – equal to nearly a tenth of its 2016 global profit of €6.2 billion. What the documents expose is that the bulk of the profits comes from the FX margin, rather than the fees directly charged. The FX margin is the difference between the rate at which banks buy a currency and sell that currency to customers. The memo highlights that the bank's revenues in this area are at risk of collapsing from €585 million to €95 million (a fall of 84%) if it charged as little as new money transfer rivals. The Guardian article shows that Santander made €290 million from its FX margin, i.e. 80% more than the €163 million that the bank earns from the standard fee. It also reveals that the bank's revenue stream from
“correspondent banking” is worth €132 million.
The market is valued at more than half a trillion dollars and is expected to grow further. Goldman Sachs estimates that the banking industry’s total revenue from international money transfers is around 30bn USD. (i.e., only 94% is run by banks). As for the European Union, in 2009 the European Parliament mandated that bank fees charged in respect of cross-border payments in euro (up to €50,000) to other Member States shall equal the charges for
corresponding national payments. However, given that the regulation does not cover charges for currency conversion, businesses can still be charged fees for non-euro transactions. If only the high bank fees would at the same time allow for fast transaction time. Quite to the contrary, as McKinsey states in its 2015 report on global payments, the high cost does not translate to high speed. Foreign currency cross-border payments typically take three to five
4 Data collected from ING, ABN AMRO, Rabo bank, SMBC China and bank insiders 5 ibis
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working days to complete. The McKinsey report highlights that around 60% of B2B payments require time-consuming manual input, from completing transaction forms to document verification.
To understand the status quo of cross-border payment on the ground, I initiated a survey for companies which is engaging in international business and dealing with cross-border payment (out of SEPA). The object of this questionnaire is to learn Corporate Experience with
Financial Services. I witness several interesting points:
1) 80% of responds reported they using EUR or USD, also small portion mentioned CNY, GBP and KES
2) The volume of international payments vary, it ranges from less than EUR 10 to more than
EUR 1M. One possible reason is that some company don’t step in the business with non-SEPA area.
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3) In regard of international financial service, most of the companies mentioned ’cross-border payment service’ and ‘bank accounts in foreign countries’. Some other options are trade finance (including loan, guarantee, letter of guarantee).
4) When asking if companies are clear about the fee charge for cross-border money transfer service. 40% claim unclear at all. The data shows it’s not easy for some business to understand the fee charge composition from banks.
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5) When asking about the inconvenience they confront when using bank service, most of them say the high fee charge and inefficiency. Two biggest pain point of bank clients. Kable is there to solve such issue.
6) However, although companies are not satisfied with current bank service, they are still staying with the bank, I also ask the reason behind that. Most of them mention because they have a long-term relationship with the existing bank, besides some also concern they haven’t find a suitable platform to replace.
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In a conclusion, companies are not satisfied with the current banks’ service, but there are considerations stop them from pursuing the cross-border payment at another platform. These reasons are the current challenges for Kable to expand business however it all the time is changing
II. The opportunities and challenges of applying bitcoin as cross-border payment intermediate
From the analysis of survey I can see the opportunities of a disruptive non-bank payment service like bitcoin. Several pain points could be solved by using bitcoin.
First is transparency. As we all know one of the main features of distributed system is transparency.Changes to public blockchains are publicly viewable by all parties creating transparency, and all transactions are immutable, meaning they cannot be altered or deleted.6 For example, I transfer 2 bitcoin to my friend’s bitcoin address (similar as your bank account number). As soon as I send it, I broadcast the ‘sending news’ to the whole blockchain net. The miners in this blockchain will confirm if this transaction is true or false. During this time, the transaction will receive at least 2 confirmations7. After the transaction received enough confirmation to prove it’s an authentic rather than double spending transaction, my friend will receive the bitcoin with a subtle transferring fee. Meanwhile, the whole process will be permanently recorded in the blockchain public ledgers which is immutable. In a word, every
6‘Blockchain technology: 9 benefits & 7 challenges’, Deloitte,
https://www2.deloitte.com/nl/nl/pages/innovatie/artikelen/blockchain-technology-9-benefits-and-7-challenges.html 7 The definition of confirmation: https://en.bitcoin.it/wiki/Confirmation
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transaction in the bitcoin blockchain is recorded without being interfered by human beings. At the same time, we could always check the process of the transaction.
The second advantage is faster speed. Contrary to the traditional banks’ cross-border transaction, which takes more than 3 days in average. The money transfer process could be done within 20 minutes. Even with currency exchange included, all process could be
completed within 1 hour. Imaging someone in America sends US dollar from America, after 1 hour another person in China could receive the money in Chinese Yuan. The amazing speed is never yet achieved by the SWIFT system with thousands of corresponding banks involved. The third advantage is cost effective. In the previous paragraph we knew that all-in
international transfer costs amount to 1% to 3% of the payment, while SMEs and individuals can often pay up to 10% in total. However, this fee excludes the 'hidden fee' part, which is foreign exchange rate. One of the banks' main profit source is FX trading. In reality, the cross-border payment is expensive through corresponding bank system. However, if we process it with blockchain system, the commission fee is only 0.5%~1%, which is the reward for miners to confirm the transaction. It is a huge competitive advantage for bitcoin.
While several opportunities emerge, the drawbacks still exist. The biggest issue is regulation. Although bitcoin is legal and widely known in Europe, it some Asia countries, it is still in a grey area or even illegal. For instance, China currently is a capital / foreign currency
restriction country. Resident who intends to send the money out of China will experience severe checking. At the same time, companies that is doing exporting also need specific FX trading document issued by bank to gain tax reduction. Banks are almost the only office financial intermediates for corporate finance. While in the consumer market there are a few popular payment service like Wechat pay or Alipay, they are also under strict scrutiny. Bitcoin trading is not illegal in China, however the regulation is still missing in the current institution.
The second issue is privacy. Blockchains vary giving by the algorithm designed. Some blockchain like bitcoin is public ledger, everyone is accessible to such chain and could
witness all the transactions. Technically everyone could see the transfer details and trace back to specific party (although it takes some effort). Some blockchain like Ripple8 is called alliance chain. Only the exclusive members are accessible to such chain, it’s safer while compromising the transparency character.
8https://ripple.com/
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The third one is volatility. Bitcoin price is not like stock price, which has daily limitation. The price of bitcoin can go up or down to 100% in extreme case. The volatility of price may worry the clients. For instance, if they pay 2300 EUR can get 1 bitcoin. One day after, 2300 EUR may only equal to 0.8 bitcoin. However, it can be solved if we process the whole transaction within couple of minutes, the volatility exposure could be covered in above 90% percent. The only issue for Kable is to assure client about the volatility risk.
III. The introduction of company and business intents
The platform I work on the project is Kable, which severs cross-border payment faster, cheaper and secure with bitcoin. Although it is a Fintech startup existing far one year, it sees the pain-point of business who is undertaking cross-border payment (out of SEPA9). Kable itself is supported by Bit4Coin (https://bit4coin.net/). It is a bitcoin voucher purchasing website. Their main customers are end-consumers. Management team see the opportunity of applying bitcoin into B2B business, they started to create Kable, which focuses on B2B aspect. Their motivation is to serve international business with effortless and faster payment. Asia, especially China is largest exporting market. Considering the great potential Asia inherent, Kable intends to first step into Asian market. However, Asia in every dimension, is much different than Europe. In order to tap business in Asia, Kable have to carefully choose appropriate strategies to book success. In the following part, I will discuss the strategies we intend to use considering the international business character. Meanwhile, I will also present the real business case during my work with the company.
IV. Framework and theory application
In this section I will illustrate some theory and framework I regard is valuable for Kable to execute during their operation. First is 10-element business strategy analysis from
Kraaijenbrink J. Assessing the 10 factors in Kable’s current situation could help them see the resources, external market and customers’ needs more clearly and objectively. Compared with other strategy analysis such as Porter five force, 10-element aseeseesment from Kraaijenbrink J is more practical and considerate. Second is the value discipline model from Michael Treacy and Fred Wiersema, Kable can understand in different phases which value they can offer to customers. Third is CAGE framework about international business. Culture, administrative, geographic and economic distance are 4 types of distance company may bear in mind when
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they expand businss abroad. Since Kable is born in cross-border business, it is very significant for them to know how the distance impact their business. Lastly is AIDA framework which is a marketing guideline for Attention, Interest, Desire and Action. Ultimately leading to
customers’ purchasing action. Since Kable is at the starting phase, they need more customers to boost the growth.
1. Business strategy
When talking about strategy, generally there are corporate strategy and business strategy. Corporate strategy leans group company to gain unit synthesize. Business level strategy is strategy at the level of business units and small to medium-sized firms. Typically it concerns organizations with a limited portfolio of products and services and that are run as single businesses.10
A business strategy is a unique way of sustainable value creation (<the strategy handbook>, Jereon), To see how an organization can offer a unique way of sustainable value creation, we need to look more in depth at the elements strategy is made up of. According to the <the strategy handbook>, I know a business strategy is consist of 10 elements. As illustrated in the chart below:
10Kraaijenbrink J. 2015. The Strategy Handbook. A practical and refreshing guide for making strategy work Part 1. Netherlands: Effectual
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Chart-211
The left side is Resources & Competences and Partners. We can treat those elements are internal resources that business could leverage. The right side is Customers & Needs and Competitors. Those elements are the factors in the market that business will confront. In the centre is the factor called the business’ value proposition, what kind of value. We could see how the business intend to create value. In the above grid, first is revenue model, the means that company deliver its value to customers. The second is risks & costs are linked with revenue model. Below the value proposition we find the organization that is doing all of this and that drives and supports the value proposition – represented by its values and goals and its organizational climate12, and last one is the external factor -trends & uncertainties.
11Kraaijenbrink J. 2015. The Strategy Handbook. A practical and refreshing guide for making strategy work Part 1. Netherlands: Effectual
Strategy Press: p24
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When we discuss about resources, it’s not only about monetary issue. Some intangible resources are even more significant than financial aspect. Mainly there are three kinds of resources: 1) Time & power related resources such as time, people , man-hours, freedom, authority and support. 2) Financial &material related resources such as money, machine-hours, space, materials, capacity and tools. 3) Intelligence and social related resources such as
information, advice, judgements, ideas, contacts and energy. For Kable, significant resources can be expressed as:
1) Location and support. Kable is based in Amsterdam, the Netherlands, which is one of the financial centre in Europe. Besides, the office of Kable is in a Fintech startup incubator. The administration of the building is committed to facilitating the development of fintech companies. Due to that, Kable is accessible to administrative service, training, consulting and material resource better with low cost or even free. As is known to all, startup requires a lot of initial investment in the early stage. Any supportive resource is valuable to
outperform competitors.
2) Freedom and autonomy. In most cases, startup will raise funds from external investors such as angel investors, financial institutions or other investment company. The pros is the funding allows the startup to initiate their project faster while the cons is their operation is influenced or even interfered by their investors. Management team may be not fully authorized to operate the company as they wish. However, Kable is an extraordinary case. Its fund is completely generated internally. The parent company-Bit4Coin is profitable enough to support Kable’s development. Kable’s management team is free to execute the strategy they set and fully autonomy. They will not be restricted by the external financial investors.
3) Most efficient way of working. Usually organization structure in a company is
complicated. In Kable, we stick to a flat structure. Management team are also partners. They directly participate in daily operation. Other team members are free to discuss anything with them. Although the whole team are work remotely. Some in Germany, some in Netherlands. The team host online meeting whenever it is necessary (from my observation they will have Skype meeting 2-3 times per day), besides that, team use slack, google sharing document and other social means to keep information updated with all team members in time.
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4) Intelligence from top consultancy company and other business service partners. Though Bit4coin is a startup with 4 years, it is one of few startups that McKinsey & Company selects as fintech startup clients. They support us at legal issue and strategy direction. Besides, two partners in Kable are from top Accounting firm and consultancy firm
respectively. In that way, Kable could leverage plenty of intelligence resource and related contacts.
5) Fastest way of funding transfer. This is our core competence. A core competence is a combination of resources, knowledge, skills, and capabilities that enables your organization
to perform one or more processes on a world-class level (or atleast very good). 13As I described in the prior chapter. Currently cross-border payment takes several days to deliver because of the corresponding bank system. While our service is the opposite. We could deliver the whole transfer within several hours. So it is the competence is based on the most advanced /smartest technology (resource) that valuable and inimitable compared with the service provided by other payment service companies.
• Partners
Partners of an organization varies. These are the people and organizations that you work with and that make your products or services more valuable. They can be strong-tied network like internal stakeholders as well as weak-tied network as bitcoin community. I will category the partners of Kable into the following types.
1) Business partners. Since Kable is engaging in international business, it’s natural for them to look for business partners in different countries rather than setting infrastructure by themselves. Entering mode of international business is the reason behind that. I will elaborate it in the following part. Till now, Kable have business partners in Philippine, Singapore, China and Australia. Those partners facilitate Kable’s business in 2 ways. First is to do the last-mile service for clients. Lots of European clients require payment to other countries. With Partners’ deep local knowledge and experience, we could serve clients’ need better and faster. Second is to lead new business opportunity from other countries. Besides partners from other countries to serve the payment service. Liquidity providers in Europe can also be a choice if Kable decide to hedge bitcoin. Adding bitcoin into
13 Ibis, p65
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investment portfolio will probably be an inevitable trend regarding the competitive development of blockchain technology. If Kable partners with a liquidity provider firm, they can gain first move advantage of being ‘bitcoin’ provider.
2) Commerce community. Within Benelux, there are also commerce/trade communities and associations from different countries. The member-list is valuable for Kable to step into more network and learn business culture in various countries. Kable attended Hongkong & Netherlands business events in Rotterdam. During the event, Kable had chance to know more contacts from companies which are doing cross-border business. Besides, Kable also join the membership of the Hague business club. Hopefully it can lead to more exposure opportunities. Meanwhile, CFO of Kable had chance to give presentation in a financial controller seminar this May. Numbers of financial managers (who is the key person of our potential clients) learnt about the business of Kable.
3) Corporate service support. In the early phase, corporate service support is essential for Kable. Thanks to B.Amsterdam, the biggest startup ecosystem in Europe. In regard of facilities, they have restaurants, co-working space, meeting rooms and even gyms. Besides, they also host numberless startup events, partnering with prestigious companies to support startup’s development. Generally speaking, B.Amsterdam acts as a semi-incubator for fintech startup like Kable. Besides B.Amsterdam, PwC and McKinsey & Company are also Kable’s strong support regarding legal and strategy issues.
4) Technology and regulation organization. As a bitcoin company, Kable maintain a close relationship with European blockchain association and other fintech union. In that way, they are accessible to latest information industry. Meanwhile, external regulation body is also important for Kable’s development. Since Kable is a payment service company, it is part of financial service, which is relay heavily on the rules of external authorities. For example, banks sometimes relocate their office to stay closer with central bank or finance regulation committee. The timing of information is very key.
5) Competitors. Competitors are also part of our ecosystem. Through learning from their experience, we could gain leapfrog. Our competitors are those payment service startups whether with or without blockchain technology. After carful checking, we think Remistry (http://www.remitsy.com/ ) a US based bitcoin payment company is our competitor. Others like Coinpip in Singapore and other scaled-up company such as Transferwise, A UK based payment service company with huge customer portfolio. On their website, they claim that they have 1 million clients all over the world.
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6) Other indirect partners. Other external stakeholders will be those organizations and individuals who have indirect impact on Kable. For instance, university can help them to recruit interns and provide a stage for them to give company presentation. Banks offer them the company account. Right now Kable doesn’t have any credit from the bank, however banks may become one of further funding providers.
Besides the above stakeholders (partners), in Kable’s ecosystem, other stakeholders like founders’ personal network, accounting firms, interest groups and social media will also exert impact on Kable’s business.
• Customers and Needs
After analysing Kable’s internal resouces and means, I will now focus on Kable’s external market. However good our product or service is, the simple truth is that no one will buy something if they believe they don’t need it. And we won't persuade anyone that they want or need to buy what we’re offering unless we clearly understand what it is our customers really want.14
Knowing and understanding customer needs is at the centre of every successful business, whether it sells directly to individuals or other businesses. Once we have this knowledge, we can use it to persuade potential and existing customers that buying from us is in their best interests.
I will go through a checklist to illustrate Kable’s customers and needs clearly 1) What common characteristics do Kable’s customer have?
A: They have cross-border payment needs frequently, however they are not satisfied with current service from banks no matter the cost is too high or the process is too slow. They can be freelancers who always receive payment from overseas, importers/exporters who are doing international business, group companies which have subsidiaries in foreign countries and even football clubs that intend to pay for the player shifting fee.
2) What people use or pay for the product/service and who makes or influences the buying decisions?
A: People pay for the trusting relationship with their payment service provider and the speed of the process. Their long-term business partners’ choice may influence their decision making. Besides, the counterparty’s decision also have impact on them.
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Entrepreneur may also be influenced by their preference, for example, risk-takers are more willing to approach a fintech company whiles risk-adverse may avoid doing so. 3) Which of their problems can or do you solve?
Business that is doing international business hope to move the funding faster with low fee charge. The painpoint for business current is that most of the financial institutions are taking advantage of customers. For example, if a company would like to transfer EUR5, 000 to SEPA area. First it has to use the FX trading service from bank, from which 1%-5%
‘conversion fee’ will be taken however it is hidden fee charge. Second, bank will transfer the converted EUR to SEPA area with SWIFT system. The process may take 3-8 days with remittance fee charge from every corresponding banks. The fee varies, ranging from EUR 10 to EUR 100 (approx). Customers can neither enjoy fast speed fund remittance nor coest-economic fee charge. With Kable’s service, the whole transferring and currency conversion can be done with in 1 hour, besides, all the transactions are immuable, which means no one can interfere the transaction. Lastly, clients are able to check the whole process at anytime. As blockchain is a public chain, all transactions on chain can be seen.
To better define our target customers and see value chain, I will stetch an empathy map. Empathy map
What does s/he think? 1) Cross-border payment
fee is too high. 2) S/he should enjoy fast
payment process if paid such high commission fee. 3) There is no other
choice except attending to banks.
What does s/he see and hear? 1) Banks are the only official
approach to do cross-border payment, they can only accept the service given by banks. 2) As a company, they are
unable to understand the complicated financial market. Only banks know the currency conversion rate.
What are her/his pains? 1) Companies lose
control of the fund in transit while outbound banks also unable to tell them.
2) Companies are confused by the composition of fee charge. No one could explain clearly the sourcing of the fee. 3) Most SME are
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They cannot have high quality service from banks.
What does s/he feel? 1) Cross-border payment
cost could be lowered. 2) Companies deserve
better payment service. 3) Companies want to in
charge of the whole payment process.
What does s/he say and do? We take companies' feeling as what they do. However, what they do is another story. They still choose to stick with banks to undertake their payment request. They have a still-mind that banks are the only trustworthy agent to process the payment. They however are unable to find a viable substitute product. So it’s better to stick to
something they are familiar with although it is far from satisfying.
What are his/her gain? 1) They don’t need to
understand the process. Bank staff will take care of everything without bothering them.
2) If there is any error in the process, banks will take the full
responsibility to mitigate the loss.
• Competitors
Knowing Kable’s competitors and the levels of competition is important. Through analysing them, we will undetstand how strong they are, what’s the background of them, what’s the salespoint of their product/service, what’s our competitive advantage over them.
I will use Porter’s five force framework to make a comprehensive analysis of Kable’s competitors.
Porter's five forces include three forces from 'horizontal' competition: the threat of substitute products or services, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers, which will illustrated as the chart below:
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- Industrial competitors: The importance of this force is the number of competitors and their ability to threaten Kable. The larger the number of competitors, along with the number of equivalent products and services they offer, dictates the power of Kable. Suppliers and buyers seek out a company's competition if they are unable to receive a suitable deal. In our case, Kable’s main competitor are those payment service companies with blockchain technology such as Wyres, Remistry and Ripple. Company like Ripple, which built a digital payments network for real-time financial transactions, is also the creator and biggest owner of Ripple XRP, a digital currency that has increased in value by 40 times this year15. The private blockchain facilitates their business. As privacy is the key concern of banks, with the guarantee of privacy, Ripple even turn the incubator-banks to their partner. However, if I look the payment service business in another perspective, besides those third-party payment provider (TPP), banks are still competitive incumbents. It can be argued that banks may still protect their interests by preventing or restricting non-banks’ access to the banks’ customers’ accounts. In the EU, this option is being at least partly eliminated by the Payments Service Directive 2 (PSD2). Indeed, one of the aims of the PSD2 regulation is to promote innovation by requiring incumbent payments providers (banks) to provide access to accounts to third-party payments providers (TPPs) for both payments initiation and information-gathering. Regulators, such as the UK Treasury, are advocating even farther-reaching efforts to open banking infrastructure access to digital innovators, via initiatives such as the Open Banking Standard16.
- New entrants:A company's power is also affected by the force of new entrants into its market. The less money and time it costs for a competitor to enter a cross-border payment industry and be an effective competitor, the more a Kable's position may be significantly
15 https://www.cnbc.com/2017/05/26/bitcoin-rival-ripple-is-sitting-on-many-billions-of-dollars-of-xrp.html 16Mckinsey&Co, Global_payment_report 2016
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weakened. When I assess this industry, I found the capital requirement is not demanding if business intend to enter. Entrants who have capital to build their web infrastructure and invest in marketing, legal issue and bitcoin hedging, then they can start the business. - Substitutes: Competitor substitutions that can be used in place of a company's products or
services pose a threat. For example, If customers rely on a company to provide a cross-border service can be substituted with another product by performing the task
automatically, and if this substitution is fairly easy and low cost, then Kable’s power can be weakened. Currently in the market, cross-border payment products from Transferwise, Ingenico and Adyen etc are more advanced and seamless. Don’t mention Wechat Pay or Alipay, their infrastructure are more well-developed. If Kable cannot fully exploit the advantage of bitcoin to mitigate the infrastructure drawbacks especially the manually invoicing, it’s difficult to tell whether customers will turn to other payment substitutes. - Suppliers: This force addresses how easily suppliers can drive up the price of goods and
services. It is affected by the number of suppliers of key aspects of a good or service, how unique these aspects are and how much it would cost a company to switch from one supplier to another. The fewer number of suppliers, and the more a company depends upon a supplier, the more power a supplier holds. In Kable’s case, suppliers can be 1) Bitcoin exchange platform like coinbase, bitfinex and bitstamp; 2) Internet severs supplier; 3) Startup knowledge supplier. Among those suppliers, bitcoin suppliers have the biggest impact on our service. The price volatility will erode our profit greatly.
- Customers: The last force of competition is customers. It specifically deals with the ability that customers can drive prices down. It is affected by how many buyers, or customers, a company has, how significant each customer is and how much it would cost a customer to switch from one company to another. The larger and more powerful a client base, the more power it holds. In regard of switching cost, I find it’s easy for customers to switch from Kable’s platform to other cross-border services as no “walled garden” has been built by Kable.
• Value Proposition
The core of our strategy is Kable’s value proposition. It reflects what products, services, and added value Kable is able to offer and how this offer could communicate to their customers. Creating a value proposition is a part of business strategy. “Strategy is based on a
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differentiated customer value proposition. Satisfying customers is the source of sustainable value creation."17
Developing a value proposition is based on a review and analysis of the benefits, costs, and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. It is also a positioning of value, where Value = Benefits - Cost (cost includes economic risk).18 I will use Treacy & Wiersma’s Value discipline framwork to analyse.
2. Value discipline
In Value Disciplines Michael Treacy and Fred Wiersema made the assumption that an
organization will always excel in that which it is good at. This value position is determined by the opinion of external parties such as the organization’s customers and suppliers. Contrary to common sense, value proposition of an organization is not only determined by price but also by other factors such as the effort someone have to make to purchase the product/service. There are three types of value discipline, namely operational excellence, product leadership and customer intimacy.
- Operational Excellence
An organization that focuses on cost leadership will always aim at providing its customers with high quality products or services at competitive prices and ease of purchase.
The organization focuses internally on the streamlining of processes.
Making as few errors as possible, minimizing superfluous service, standardizing and increasing (economies of scale) are part of this procedure.
- Customer Intimacy
The organization feels that its customers are the most important aspect of its organization. It is continuously working to meet the customer’s requirements and delivers mainly tailor-made work and one-on-one solutions in which the organization focuses on a long-term customer relationship. Obtaining a once-only (large)
17 Kaplan, pg. 10
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transaction is subordinated to creating a long-lasting intimacy bond. Many
organizations often use an intensive Customer Relations Management (CRM) system.
- Product Leadership
An organization that focuses on product leadership will always strive for product development and product innovation and want to be market leader of the specific product and/ or service (state-of-the-art products). They strive to create a continuous stream of innovation that is in demand with both loyal and new buyers. The
organization invests much in Research & Development as well as has a flexible structure and stimulates the performance and creativity of its employees.
The new and innovative products are often ‘better, smaller, faster, trendier and cheaper’ than their previous products. Examples of leading companies are: Apple, Bang & Olufsen, Philips.
In Kable’s case, after careful discussion with management team, they decided to strive to be customer intimacy at this phase. Later Kable will target at operational excellence. In the next part I will illustate their real business case to see how they act as customer intimacy.
Besides value proposition discipline,we can also define Kable’s strategy through Simon Sinek’s golden circle theory. ‘People don't buy what you do; they buy why you do it. The goal is not to do business with everybody who needs what you have. The goal is to do business with people who believe what you believe. In fact, people will do the things that prove what they believe. The reason that person bought the iPhone in the first six hours, stood in line for six hours, was because of what they believed about the world, and how they wanted
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everybody to see them: they were first. People don't buy what you do; they buy why you do it. ’19 Kable is a great example to inspire those pioneers who believe decentralized monetary system, who consider currency can not be controlled by a central authority, rather currency is freedom and universal applicable and who value transparent trading. Inspiring those people with ‘why’ question could motivate them to 1) use Kable’s service, 2) even be Kable’s advocators.
• Revenue model
With the first five elements I have covered those parts of strategy that reveal how Kable creates value. This sixth element reflects what Kable gets in return for this, from whom, and in what form. Although customers might be the first I think of when it concerns payment, look at others as well. Basically, anyone who benefits from what Kable is offering is a possible candidate for paying Kable.
Besides, a company’s revenue model needs to match the value proposition. This means that if a company offers low value, it can’t charge a high price. But it also means that if company creates high value, price should be consistant with the service. By asking for too low a price, company will confuse the customers.
To assess the current revenue model, I will use the following checklist. 1) Where does Kable revenue come from?
A: Kable’s revenue is from clients who is using Kable’s cross-border service. They call it commission fee. However the fee is still much lower than that in banks.
2) Which people or organizations pay?
A: Organizations especially small business who is doing international trading (out of SEPA) and have a long-term demand of cross-border payment needs. They are not satisfied with their current financial service and eager to find a substitute.
3) For what do they pay?
A: They are paying for the payment service provided by the bank. The ultimate feature they pay for is the speed, low cost and efficiency, Which banks are unable to offer to small business right now. Payments, therefore, combine high daily relevance for consumers with
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increasing relevance for technology providers. It is no coincidence that payments economics are concentrated in the relationship’s end points, where the respective players own consumer and merchant relationships. Banks can therefore no longer afford to take consumers’ attention for granted. They must now compete for the business of providing and processing payments services, if they are to defend and maintain access to the large associated profit pools.20 4) How much do they pay?
A: Usually Kable charges 0.5% to 1% of the commission fee, which is much lower compared with banks’ fee charge. However the fee varies depending on the bitcoin price against
different currencies.
After reviewing the current revenue model, I will take a look of potential new business model through asking the questions
-Can you change how customers pay, when, or for what?
A: Yes, one of the possible ways of changing is to set up multi-level service. Kable differentiates the service by process timing. For example, the usual standard time is T+2 days.However Kable could start to provide the premium service like T+0 day or T+1 day service with higher fee charge.
In regard of the payment timing, the fee of premium service can be paid partially in advance. Through this way, Kable could lock part of revenue earlier.
Another possbile way to change the payment is to expand business along the value chain. For example, some small business owner in Europe may find it difficult to look for a reliable supplier in China giving the language barrier. Kable have native Chinese speaker staff, they can facilitate the clients to do 1) price analysis; 2) supplier selection; 3) communication and negotiation; 4) shipment arrangement. Generally speaking, Kable acts as an agent for those companies and then naturally hire Kable as PSP.
-Who benefits but doesn’t pay yet or not enough? Can you let them pay?
A: some companies are interested in Kable’s service, Kable give them training and set pre-infrastructure without any fee charge.
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If Kable could provide well-round service not only payment but also consultancy service, or even partner with POS machine company or fraud-detecting system company to share the whole value chain.
The ration behind that is walled-garden or called closed-platform, which is a software system where the carrier or service provider has control over applications, content, and media, and restricts convenient access to non-approved applications or content. This is in contrast to an open platform, where consumers generally have unrestricted access to applications and content.
-Can you make your revenue less dependent on your efforts?
A: Ultimately, every business wish to gain passive or semi-passive income so they don’t need to input much effort on operation, rather they can focus on marketing or R&D to improve their product/service. There are several ways to contribute less effort for the fixed amount of revenue. In my opinion, the most important way is to computerize their operation process. Currently, Kable’s whole transaction is completed by manual, although it is not a problem when the transaction volume is not that large. When Kable expands the business, it will be difficult to keep on process everything manually. It will japadise the quality of Kable’s service since the FX business rely on accuracy and right timing. If Kable’s transaction can be done automatically or even partialy automatically, the management team could leave more effort for marketing and strategy to achieve more progress.
Besides, a useful way is to let our customers be our partners. Sharing the interest with existing customers. To create “affliation program” which means to fee per new customer that is
brought in by current customers. In this way, Kable could have more partners to work together in a short time by relying on others’ network rather than only Kable’s sole resource. -What revenue streams should be dropped? Which ones are too complicated or don’t bring enough?
A: Currently every revenue stream is important for Kalbe. For a startup, the most important thing is surviving. No matter where the stream come from, Kable should catch it as much as possible. One of the key indications for startup is the growth rate.A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups
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follows from growth.21At least for one year, Kable should try everything to gain revenue rather than considering the burden process of paperwork.
• Risk & Cost
The next element to analyse is risk and cost. Every strategy come with revenue as well as risk & cost. In order to make a more in-depth insights in to where costs and revenues are made, I will link them to the key activities of the organization.
1) List of all primary and secondary activities of Kable. Primary activities are those that contribute directly to Kable’s products/services. Secondary activities are Kable’s overheads.
For Kable, the primary activities are as following: a) Purchasing and selling bitcoin on bitcoin platform; b) Processing transaction for customers; c) Looking for business partners in Asian countries.; d) Developing new types of service/product; e) Marketing and
customer service; f) Learning the business culture and business laws in different countries. The secondary activities are: a) Paying the rent of office; b) Arranging payroll, accounting and legal service; c) Office supplement purchasing.
2) Map out the percentage of Kable total number of hours spent or of the total costs each activity is responsible for. This shows us where Kable spend your time and money. The following pie chart is time contribution for primary activities according to my observation.
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From the pie chart, we can see 30% of Kable’s working hour is to process transaction for customers. 20% contributes to the purchasing and selling of bitcoin. Another 20% to
marketing and customer service. 15% to looking for business partners in Asian and learning the business and laws in differnt countries respectively.
However, all purchasing/selling bitcoin and process transactions are the main operation revenue. Other primary activities may lead potential revenue in the future but now mainly are the cost of Kable. For example, the fee of attending business events, to join an Asian business club and recreation treatment to potential clients. Those primary activities need to be
reviewed periodically to avoid wasted effort.
Generally speaking, Kable’s cost are attributed to administration overhead and daily operation. While the administration overhead is small portion of whole cost, Kable still need to use lean / six sigma method to minimize waste. During this phase, the money/time spend in markeing is disproportable to the revenue achieved.
• Values & goals
Value and goals are crucial in any strategy. These reflect what is important for the
organization and where it should go in the future. Without it, an organzation might easily drift or stagnation. It might be noble such as solving poverty in the world or only numberical ratio like 10% growth rate.
20% 30% 15% 20% 15%
Time Contribution
Purchasing and selling bitcoin on bitcoin platform
Processing transaction for customers
Looking for business partners in Asian countries
Marketing and customer service
Learning the business culture and business laws in different countries
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After discussing with Kable’s management team, we defined several values and goals for Kable.
1) Remain small and personal: Kable currently doesn’t have any external investors. Although Kable needs capital in different ways, management team will to make any business
strategy by themselves rather than being forced to grow faster and bigger as investors wish.
2) Have a strong international presence. As Kable is in the international payment service, it’s important for this organization to have employees who can speak local language Kable does business with. In the real case, Kable had 2 interns who are native Chinese speakers. It helped Kable to find a Chinese partner and talk with Chinese supplier. Besides, Kable also actively attend Asian business event and join business club. All of the above facilitate Kable to gain international insight and have strong ‘Asian’ presence.
3) Stay efficient and sustainable. Kable is aiming to solve the inefficiency problem of legacy banks. It doesn’t only mean their product itself, but also their operating efficiency. Kable will prioritize the lean management learning.
• Organizational climate
As Kable is a startup company, the structure is very simple and clear. Three shareholders are also the co-founders. CEO, CFO and CTO. Each is specilised in different area, CEO is the original founder of Kable, he will do the final decision for Kable’s every movement, however equal discussion is appreciated within the team . Interns are based in Amsterdam, woking together with CFO. Everyday, management team will have Skype meetings for several times. Kable keeps simple and informal organization culture. Communication is very efficient without misunderstanding.
• Trends and Uncertainty
The last factor I analyse is the trends and uncertainty in this industry and its impact on Kable. Digital currency is invented for couple of years, however the regulation is still far from completed. Additionally, every country has its own laws regarding the digital currency. With the cryptocurrency trading boosting, regulating digital currency is on the discussion. Europe is seeking to further tighten its grip on digital currencies including bitcoin. Previously, the European Commission has only proposed strict rules for digital currency exchange platforms
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and custodian wallet providers. Recently, the European Parliament proposed additional amendments meant to regulate digital currency businesses, adding a multitude of business categories, specifically disallowing anonymity.22
The regulation will have a large impact on Kable’s business. If European Commission forbidden the trading of bitcoin or set strict KYC process, Kable’s efficiency will be jeopardized.
Besides, as Kable is doing international business. The regulations outside of European Union also matters. For example, in Japan, bitcoin transaction is acknowledged. While in China, bitcoin and other digital currency transaction is still in grey area in China. Kable should all the time keep an eye on the regulation progress to prepare solutions for different situations.
Another uncertain factor is the technology development. Right now banks are unable to do cross-border remittance fast and the restriction of existing SWIFT infrastructure. If the technology develops and SWIFT system is capable to do international money transfer faster, then the advantage of Kable will be largely eliminated.
From economic perspective, bitcoin industry is in a growing phase, more and more people come to learn the blockchain technology and how it benefits them. The more people decide to use bitcoin, the higher the price would probably be.
Overall, although there are uncertainty and risk for Kable, but the opportunities are also immense.
After 10 elements analysis (resource & competence, partner, customer & needs, competitor, value proposition, revenue model, cost, value & goal, organization climate, and risk & uncertainty), we have a clear idea of Kable and its business.
While it is doing international business, we also will use CAGE model to special assess its situation when they embark to Asia.
3. CAGE model
CAGE model generally identifies 4 types of distance between two different countries: cultural, administrative, geographic, and economic. The types of distance influence different
businesses in different ways. Geographic distance, for instance, affects the costs of
transportation and communications, so it is of particular importance to companies that deal
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with heavy or bulky products, or whose operations require a high degree of coordination among highly dispersed people or activities. Cultural distance, by contrast, affects consumers’ product preferences. It is a crucial consideration for any consumer goods or media company, but it is much less important for a cement or steel business. Each of these dimensions of distance encompasses many different factors, some of which are readily apparent; others are quite subtle. 23
Cultural, Administrative, Geographic and Economic differences or distances between
countries that companies should address when crafting international strategies. It may also be used to understand patterns of trade, capital, information, and people flows. The framework was developed by Pankaj Ghemawat, a professor at the University of Navarra - IESE Business School in Barcelona, Spain.
I will assess each distance and how Kable relates to it.
Culture distance: for Kable, languages, social norms and social network are the biggest culture barriers. First, obviously if Kable intends to do business in the largest market in Asia, which is China, they need employee who is native mandarin speaker or even some important dialect like Cantonese. Only less than 1% population in China can truly communicate in English with foreigners.24 Besides, when discussing the business with Chinese, they need to consider the different approaches. For example, Dutch people may more straightforward
23Ghemawat, P. (2001) Distance Still Matters: The Hard Reality of Global Expansion. Harvard Business Review, September: 137-147.
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about their opinion while Chinese people usually are reluctant to say no even they decide to reject. This kind of difference may drive management team crazy if they don’t understand the business psychology. Lastly, although Chinese people are willing to do business with
foreigners, they still remain closed with Chinese communities. Most of Chinese business is based on relationship, we call it ‘Guanxi’. Chinese may consider it even important than partners’ past performance. It will be a challenge for Kable to be part of Chinese business club. If I use Geert Hofstede’s culture dimension to compare ‘Netherlands’ Vs ‘China’. A special attention paid to ‘Uncertainty Avoidance’. At 30 China has a low score on Uncertainty Avoidance. Truth may be relative though in the immediate social circles there is concern for Truth with a capital T and rules (but not necessarily laws) abound. None the less, adherence to laws and rules may be flexible to suit the actual situation and pragmatism is a fact of life. The Chinese are comfortable with ambiguity; the Chinese language is full of ambiguous meanings that can be difficult for Western people to follow. Chinese are adaptable and entrepreneurial. 25 This assessment also confirmed my previous analysis.
Administrative distance:Countries can also create administrative and political distance through unilateral measures. Indeed, policies of individual governments pose the most common barriers to cross-border competition. A survey of members of the American
Chamber of Commerce in China flagged market-access restrictions, high taxes, and customs
25https://geert-hofstede.com/china.html
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duties as the biggest barriers to profitability in China. The level of state involvement in the economy continues to be high, with severe economic strains imposed by loss-making state-owned enterprises and technically insolvent state-state-owned banks. Corruption, too, is a fairly significant problem. In 2000, Transparency International ranked the country 63rd out of 90, with a rating of one indicating the least perceived corruption. Considerations such as these led Standard & Poor’s to assign China a political risk ranking of five in 2000, with six being the worst possible score.26
For Kable to expand business in Asia. The government policies is a big barrier for them to understand. Especially in China, its capital is under control. Foreign capital will be under strict scrutiny. It is not easy for Kable to deal with Chinese authority and receive all licence to do business in China.
Geographic distance: In general, the farther you are from a country, the harder it will be to conduct business in that country. Other attributes that must be considered include the physical size of the country, average within-country distances to borders, access to waterways and the ocean, and topography. Man-made geographic attributes also must be taken into account— most notably, a country’s transportation and communications infrastructures. Beyond physical products, intangible goods and service are also affected by geographic distance. 27For
example, cross-border capital flow. It’s easier and faster from Hongkong to mainland China than from European Union to mainland China. In the real business case, when Kable on behalf of client to ask for sample shipment from China to Europe, it also takes a long time to deliver.
Economics distance: The wealth or income of consumers is the most important economic attribute that creates distance between countries, and it has a marked effect on the levels of trade and the types of partners a country trades with. In this dimension, the distance is not so far between two areas. China, Japan and south-east Asia are active in financial investment and innovation. In addition, Kable’s service is not optical goods trading, financial service will not be directly influenced by the changes of economics in the foreseeable future.
26Ghemawat, P. (2001) Distance Still Matters: The Hard Reality of Global Expansion. Harvard Business Review, September: 137-147.
27Ghemawat, P. (2001) Distance Still Matters: The Hard Reality of Global Expansion. Harvard Business Review, September: 137-147.
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In conclusion, since Kable is born to do international business rather than gradually
expanding into other countries, CAGE distance is the theory they have to bear in mind all the time.
The final literature I will apply is AIDA framework. It is to guide Kable at their marketing and advertising strategy.
4. AIDA Framework
AIDA is an acronym that stands for Attention, Interest, Desire and Action. The AIDA model is widely used in marketing and advertising to describe the steps or stages that occur from the time when a consumer first becomes aware of a product or brand through to when the
consumer trials a product or makes a purchase decision. Given that many consumers become aware of brands via advertising or marketing communications, the AIDA model helps to explain how an advertisement or marketing communications message engages and involves consumers in brand choice. In essence, the AIDA model proposes that advertising messages need to accomplish a number of tasks in order to move the consumer through a series of sequential steps from brand awareness through to action (purchase and consumption).28 The AIDA model is just one of a class of models known as hierarchy of effects models or hierarchical models, all of which imply that consumers move through a series of steps or stages when they make purchase decisions. These models are linear, sequential models built on an assumption that consumers move through a series of cognitive (thinking) and affective (feeling) stages culminating in a behavioral stage (doing e.g. purchase or trial) stage.
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In Kable’s case, they are in the B2B section, their marketing strategy is different than retail business.
However, the core idea is the same. First, to raise the awareness, Kable can have more
exposures in seminars and commerce events, let more institutions learn their service. Besides, they can also create a business report for existing clients, letting them spread the report and gain discount. Second is to gain interests. Kable has its own website, however it can be more attractive. Meanwhile, weekly newsletter is a good way to keep potential clients posted about their latest progress. Another approach to attract more clients is do more digital marketing: posting on LinkedIn, Facebook and Twitter. After raising their interests, Kable need to know more about potential clients’ need. That is the third step: desire. Through meeting with clients, Kable can define clients’ specified need and prepare a customized brochures/ white papers for them. After all, making sure clients find Kable’s service can solve their problem. Finally, do everything to let client forms a purchase intention, engages in trial or makes a purchase. Kable could use customer leading discount or 50% off for new client strategy.
In conclusion, Kable could apply AIDA framework to guide their marketing strategy and finally lead a purchasing action.
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In this part I will describe two real business cases during my work with Kable. First one is their experience to find Asian business partners, another one is their attempt to provide extra service (other revenue stream) for client.
Case 1: Looking for appropriate business partners in Asia. Since most of Kable's current clients have the requirement to remit to mainland China, Kable started with seeking a money trading partner.
Several requirement they defined for the partner: a) They need to have profound knowledge about bitcoin and digital currencies, in this way they won’t be surprised to use digital currency as intermediate. b) They are experienced with trading bitcoin with domestic and international traders. c) Their English is proficient enough to avoid any communication d) Preferably they areendorsed by some reputable institutions e) They have a well-rounded network in Chinese block chain industry.
Kable managed to find one. Management team did the Skype interview with trader. There was several pros and cons about this trader. The advantage is he has network with Chinese
banking regulation and he is very experienced in bitcoin trading world. Through him, Kable learnt a lot about Chinese recent process of encrypto currency regulating. However the pitfalls are more, first his trading price is not so preferable, second he intends to have large trading volume which Kable can’t satisfy at the moment. Actually when Kable process the real transaction, we can see the trader’s reaction is really slow possibly because Kable’s volume is too small.
From this case we can see Kable is considering with CAGE mind. It will be difficult for Kable to initiate a representative office in China by themselves. The smart way is to find a business partner who have local knowledge especially about the rules and regulations in China. we can say this partner is acting as Kable’s China guider. However this partner also cannot 100% solve Kable’s last mile deliver as every company have specifc remittance rule, for example, one Chinese company only want the funding sent through a company bank account however the trader is unable to do that. It triggered Kable to find another partner. However alll of these is valuable learning process.
Case 2: Facilitating a German client to find a Chinese ribbon supplier. On one hand from revenue model perspective, this can be an new value-added service of Kable, on the other hand, to help client solve the related painpoint within the whole trading chain is a means to
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illustrate customer intimacy. To help European company to find a suitable product supplier in China since there are tons of factories in mainland China. But in the real case, it is not easy for Kable to find a suitable supplier based on x reasons. First, since Kable’s employee are not in the ribbon industry, it took plenty of time for them to learning the industry through talking with different suppliers. Second, Kable has to back and forth negotiate and communicate the requirement from client and meanwhile cross-check the pictures sent from suppliers. Third, lacking of the expertise knowledge in international shipment makes Kable difficult to do a accruate price analysis.
Generally speaking, this new revenue stream may lead to some income, but it will consume disproportionately time from Kable’s employee. Howver from value discipline perspective, customer may appreciate Kable’s effort and lead to new business in the future.
VI. (Expected) Managerial Recommendations/Implications
After discussing with management team in company, we agree to achieve the following target from this project. First, gaining potential customer insight via questionnaire distribution and data analysis. Second, mapping marketing strategy to obtain more purchasing action, which I will use ADIA model to analyze. Last, from the culture difference perspective, Kable also intend to learn more about Asian business culture, I will apply CAGE framework to Kable’s real business.
Management team in Kable is happy with the theory application, especially the AIDA in their marketing strategy and CAGE framework application during their negotiating with Asian partner.
Several recommendations from management team:
1) 10-element analysis helps them to assess the resource and all the important factor they have current. However, they hope they can compare with other competitor or best practice. 2) CAGE model is useful and could elaborate more. They are keen to learn more difference
in business culture, besides since Asia is large. The analysis would be better if I can differentiate different area such as Southeast Asia (Thailand, Malaysia, Vietnam), East Asia (Japan, Korea, China). In the culture distance, I mentioned the culture is very different in two regions. In business area, for example, during the first time of business meeting, both parties will exchange the business cards. In Netherlands, people will just
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present casually with one hand and quickly put in pocket. However in China and Japan, people need to present their name card with both hands, and take others’ card with both hands, then read the name and title on the card carefully lastly put into their card box. If you are too casual, people will think you don’t respect them. This kind of detail happen a lot in business circle.
VII. Conclusion and Limitations of the model and framework
Kable is a new Fintech startup supported by Bit4Coin. BV. It is a B2B platform for
international transaction with bitcoin. The limitation of using AIDA and CAGE framework is the industry factor. Since digital currency is not one of traditional industry even not literally financial industry. The models are all based on the industry we know. AIDA is more for retail industry. If bitcoin become a durable goods like gold, then CAGE framework may not
Page 39 References
[1] Ghemawat, P. (2001) Distance Still Matters: The Hard Reality of Global Expansion. Harvard Business Review, September: 137-147.
[2] Booms, B. and Bitner, M. J. "Marketing Strategies and Organizational Structures for Service Firms" in James H. Donnelly and William R. George, (eds), Marketing of Services, Chicago: American
Marketing Association, 47-51.
[3] Mckinsy&Co report <Payments: On the crest of the Fintech Wave> 2016
[4] Demetrios Vakratsas and Tim Ambler, "How Advertising Works: What Do We Really Know?" Journal of MarketingVol. 63, No. 1, 1999, pp. 26-43 DOI: 10.2307/125199
[5] Cases about Redefining Global Strategy, Pankaj Ghemawat and Jordan Siegel, Harvard Business Review Press, 2011, Chapter 2
[6] https://discovery.rsm.nl/articles/detail/235-european-project-managers-can-do-better-business-in-china/
[7] Kraaijenbrink J. 2015. The Strategy Handbook. A practical and refreshing guide for making strategy work Part 1. Netherlands: Effectual Strategy Press: p24
