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eMarketplaces
The opportunities for ABN AMRO at
eMarketplaces
The opportunities for ABN AMRO at eMarketplaces
By:
Hilco van Dijk Studentnumber: 0935085
Supervision by Dr. A.Visser Drs. H.C. Stek
Faculty for management and organisation University of Groningen
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the author.
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i). Preface
This survey is carried out during a 7 months internship with the ABN AMRO bank; one of the leading Dutch banks in Europe. The internship and its survey is the finishing part of a study at the Faculty for Management and Organisation (Industrial Engineering and Management Science) at the Dutch University of Groningen.
For myself it has been worth much more than the results of the survey itself. For me these 7 months (and the round off afterwards) where an on-going apprenticeship. I was very lucky to have great support from people around. Within ABN AMRO my near colleagues Paul Jessup and Jeroen Slaats were not just good friends, but also very good coaches.
From the university-side the continuous coaching and support by dr.A.Visser was
indispensable. Without his continual optimism this survey probably wouldn’t be finished at all!
I also want to express my thanks to co-corrector drs. H.C.Stek for all this constructive comments on this report.
And last, but definitely not least, I want to thank my family and friends for their support and patience in particular the last years of my study.
In multiple respects it was a memorable experience…
Hilco van Dijk, January 2005
ii). Management Summary
(in brief)
The reason to this survey is that the eCommerce Strategy Department is continuously searching for the ‘killer application’ for ABN AMRO in de world of eCommerce.
Although the department is successful in its yield for high-quality trends-analysis in eCommerce, there is still not yet a banking service developed by this department, which is both operational and flourishing.
Therefore the management of the eCommerce Strategy Department asked for a survey to deliver an answer to the following, challenging question:
To give an answer to this question a more specific scope is defined, because the request above is far to big and generic. Within this scope the survey is carried out and delivers 8 conclusions and 7 recommendations. Besides that some recommendations for further survey are added.
According to the first informal talks with the people of the eCommerce Strategy Department and the presence at several meetings, a more specific scope is formulated:
Therefore the re-formulated question to answer is:
The survey is carried out with the input of a combination of sources of information and consult. At first the 7 months stay at the department, the present knowledge and the unrestricted access to all the available information including the regular meetings etc…
Secondly a great deal of desk research is done on both, information inside ABN AMRO and outside the bank. At last and probably most important great number of experts are
interviewed; experts in The Netherlands as well as in Germany, Britain and the United States.
After a thorough analysis of all this information the following conclusions could be drawn:
¾ Banking services at eMarketplaces don’t differ from ‘traditional banking services’.
¾ ‘Commodity market’ is an indicator for opportunities for banking services at eMarketplaces.
¾ ‘Price quotation as major goal of an eMarketplace’ is an indicator for opportunities for banking services at eMarketplaces.
“What are opportunities for ABN AMRO at eMarketplaces?”
“Advise the management of the WCS eCommerce Strategy Team on opportunities for ABN AMRO, to facilitate the business-to-business trade for the Automotive industry
at eMarketplaces with regard to credit risk and price risk.”
“Which opportunities exist for ABN AMRO, to facilitate the business-to-business trade for the Automotive industry at eMarketplaces with regard to credit risk and price
risk.”
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¾ ‘High velocity of transaction’ is an indicator for opportunities for banking services at eMarketplaces.
¾ Identity Risk is a major issue in eMarketplaces transactions and banks are preferred as Trusted Third Party.
¾ Banks who participate in eMarketplaces are to be considered as less ‘objective’.
Based on these conclusions, the following recommendations are described:
¾ Make a strategic decision whether the e-services (banking services for eMarketplaces in particular) need to be developed differently from the ‘old economy’ services.
¾ Define commodity-business branches to start the development of e-services with.
¾ Define some markets where price-quotation is the main issue.
¾ Define some markets where ‘high velocity of transaction’ is a characteristic
¾ Focus on the development of a Trusted Third Party role for ABN AMRO
¾ Do not participate in eMarketplaces as an investor
¾ Develop new services for the eMarketplaces in co-operation with other banks
¾ Give priority to development of new banking service by ‘listening’ to the customers, rather than driven by new technology.
Recommendations for next survey:
¾ Make an analysis for the consequences of the conclusion: “Banking services for eMarketplaces don’t differ from ‘traditional banking services’. “
¾ Carry out further survey to make clear which ‘traditional banking services’ can be converted to banking services for eMarketplaces.
¾ Carry out further survey to discover the possibilities for ABN AMRO to act as an Trusted Third Party in the financial settlement at eMarketplaces.
¾ Keep in touch with the wholesale market. Keep customer-driven.
CONTENTS
i). Preface ... 3
ii). Management Summary... 4
CONTENTS ... 6
1. Introduction and Survey Objective ... 8
1.1. Introduction ... 8
1.2. Survey Objectives by the ABN AMRO management... 8
1.3. Outline of this Survey report ... 9
2. ABN AMRO and its context ... 11
2.1. Introduction ... 11
2.2. History and ‘illustration’ of ABN AMRO ... 11
2.3. Context of ABN AMRO ... 15
2.4. Summary ... 19
3. Problem Definition ... 20
3.1. Introduction ... 20
3.2. Survey Objective ... 20
3.3. Survey Question ... 21
3.4. Subquestions... 22
3.5. Summary ... 23
4. Theoretical Framework and Conceptual model ... 24
4.1. Introduction ... 24
4.2. Classification of the survey ... 24
4.3. Survey Methods... 25
4.4. Sub questions... 27
4.5. Conceptual model... 29
4.6. Summary ... 29
5. Survey... 30
5.1. Introduction ... 30
5.2. Electronic Commerce ... 30
5.3. eMarketplaces... 37
5.4. Banking services ... 44
5.5. Risks ... 45
5.6. The industry sector of Automotive... 47
5.7. Known eMarketplaces of the Automotive Industry and the present market players 48 5.8. Risks at eMarketplace-trading... 50
5.9. Summary ... 52
6. Analysis ... 53
6.1. Introduction ... 53
6.2. Summarised Findings ... 53
6.3. SWOT... 56
6.4. Summary ... 59
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7. Conclusions of the Survey... 60
7.1. Introduction ... 60
7.2. Conclusions of the Survey... 60
7.3. Summary ... 62
8. Recommendations ... 63
8.1. Introduction ... 63
8.2. Recommendations ... 63
8.3. Recommendations for next Survey ... 65
8.4. Summary ... 66
9. List of Literature... 67
9.1. Literature ... 67
9.2. Articles ... 67
9.3. ABN AMRO Documentation... 68
10. List of models and figures ... 69
11. Appendices ... 70
References ... 71
1. Introduction and Survey Objective 1.1. Introduction
This first chapter will introduce the subject of this survey. Paragraph 1.2. gives a closer look in the motives of the ABN AMRO bank management to start this survey. Where as the last paragraph will explain how this report has to be read. This means, what the structure is and what the relation is between the successive chapters.
1.2. Survey Objectives by the ABN AMRO management
The survey is initiated by the management of the ABN AMRO bank. More precisely, by the management team of the WCS eCommerce Strategy Department (WCS means Wholesale Customer Services). More detailed information about ABN AMRO is described in chapter 2.
The reason to this survey is that the eCommerce Strategy Department is continuously searching for the ‘killer application’ for ABN AMRO in de world of eCommerce.
Although the department is successful in its yield for high-quality trends-analysis in eCommerce, there is still not yet a banking service developed by this department which is both operational and flourishing.
Therefore the management of the eCommerce Strategy Department asked for a survey to deliver an answer to the following, challenging question:
“What are opportunities for ABN AMRO at eMarketplaces?”
Is this question never asked before, could one asked oneself? Of course exactly this description is a main objective for every employee within the eCommerce Strategy department. However the reality from the past year-and-a-half (as long as the department exists) makes clear that the daily business is guided by external propositions or internal brainstorm session. Never before this question was subject to a systematic survey.
The way in which this survey objective by the management of ABN AMRO eventually generated this Survey report is described in the next paragraph.
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1.3. Outline of this Survey report
This paragraph will shortly describe the outline of the survey report, explaining the mutual relations between the chapters.
Let’s first start with a framework where all chapters are represented, see the figure below:
Figure A. Outline of the Survey Report
Wat we see in the framework are actually two parallel flows, the first is called ‘ABN AMRO’, the second is called ‘The Survey’.
Chapter 1 and 2 give a description about the situation at the point where the survey will start.
It defines a scope in which the survey is carried out by giving a clear view about the reason the survey is started, the literal instructions the management gave and a more extended description of the context. The context in this case is the ABN AMRO bank and the department of eCommerce Strategy in particular.
So the first two chapters give an clear view of the situation, pose a question and then ‘wait’
for an answer to this question.
Then the second flow starts. The role of chapter 3 is the make clear what will be part of the survey and what isn’t. This will be done by re-defining the management question and define a clear, unequivocal survey question. To give an answer to the survey question it is split up in smaller and more detailed questions, the so-called sub questions. Once all these sub questions will be answered, the re-defined question (unequivocal) will also be answered.
Chapter 4 describes how these sub questions will be answered. What ‘tools’ do we need to for each of these sub questions to get the most reliable answer to this question? That’s the ‘red line of Chapter 4!
1.Introduction and Survey Objective 2. ABN AMRO and
its context
3. Problem Definition
4. Theoretical Framework and Conceptual model
5. Survey
8.
Recommendations
6. Summarized Findings and Analysis 7. Conclustions of the
Survey
9. List of Literature
10. List of Models and Figures
11. Glossary
12. Appendices The Past
The Present
The Future
ABN AMRO The Survey
Chapter 5 reflect the whole process of what is done to gets the right answer to the sub question. For example, what a description of the use of a chosen ‘tool’, an interview, what where the interview questions, who where the interviewees and what where their answers?
This exercise is done for every sub question separately.
Chapter 6 gives an overview of the findings done, by analysing the separate answers to the sub questions.
Which, at last, lead to the conclusions in Chapter 7; the end of the second flow. We had a management question, and re-defined it by placing it in a restricted scope and after choosing the right way to do did, gave an answer to this re-defined question.
Back again to the first flow, ABN AMRO. ABN AMRO had a problem, based on the past.
The survey gives an theoretical answer how such a problem should be solved at present.
Chapter 8 makes the step back from this theoretical solution to the original problem: Knowing how the problem should be solved, what can be recommended to ABN AMRO to ‘do’ or
‘change’ or any activity whatsoever. What does this knowledge mean for ABN AMRO?
The recommendations in Chapter 8 will, after being implemented in the future (outside the scope of the survey) solve the problem of ABN AMRO.
Chapters 9 to11 give background information that is useful as additional information or as detailed explanation.
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2. ABN AMRO and its context 2.1. Introduction
This Chapter will give a more detailed insight in the organization of ABN AMRO. In paragraph 2.2. will first be dealt with the organization of the entire organization. After that the focus will be on the eCommerce Strategy Department, the department subject to this survey.
2.2. History and ‘illustration’ of ABN AMRO
ABN AMRO
The roots of ABN AMRO bank reach back to the early 19th century, when in 1824 the
‘Nederlandse HandelsMaatschappij’ (Dutch Trade Association) was created. After merging with the ‘Twenste Bank’ in 1964 and acquiring the ‘Hollandse Bank Unie’ in 1968 the
‘Algemene Bank Nederland (ABN) was created. In 1991 they merged with the Amsterdam- Rotterdam Bank (AMRO), which created the ABN AMRO bank, as we know it now.
ABN AMRO’s mission is to create maximum economic value for the shareholders through a constant relationship focus on the financial services needs of the chosen client segments and a strict adherence to the financial targets. Since the 1st of January 2001 the bank is operating in three principal customer segments, whereby the objective is to maximize the value of each of these businesses as well as the synergies between them. ABN AMRO’s main objective is to be the worldwide front-runner in value-added banking. The bank is a fully integrated global bank, offering a complete range of products and services to financial institutions through all of its offices.
ABN AMRO bank is a global leader in banking services because of its unrivalled
international network. With offices throughout Asia Pacific, Europe, the Middle East, North and South America and a few major African countries, ABN AMRO bank wants to meet the needs of its customers throughout the world.
As mentioned above, ABN AMRO chose to split up her activities in three principal customer segments. First the Wholesale Clients, which contains all the customer relations with business clients, Product development and a support department.
The second segment is Consumer & Commercial Clients, which contains all the retail banks (the bank for you and me, around the corner) including all those activities abroad.
The Third segment is the Private Clients & Asset Management, which includes all the asset management activities for both: business clients and wealthy private clients.
All the remaining activities are part of the ‘overall organization ‘. See figure B. for an overview of the segments within ABN AMRO.
Specials interest in this survey will be for the segment for Wholesale Clients. In this segment, within the sub segment for Product development, the eCommerce Strategy Department is located, which is subject to this survey. The next paragraph will deal about this department in particular.
ABN AMRO Bank N.V.
Telecom, Media, Technology
Automotive, Consumer, Diversified Industries Integrated Energy, Chemicals, Pharmaceuticals Financial Institutions
Client Relationship Management
Public Sector Loan Products
Global Financial Markets Corporate Finance Equities
Global Transaction Services Private Equity
Products
eCommerce
Technology, Operations, Property Services Risk, Compliance, Finance, Legal, Audit Human Resources
Wholesale Clients
Support
Communication Verenigde Staten
Brazilië Nederland
New Growth Markets
Operations Projects
Chief Financial Officer Human Resources Consumer &
Commercial Clients
Support
Communication Domestic Private Clients Private Clients
International Private Clients Asset Management Asset Management
Trust
Chief Financial Officer / Chief Operating Officer eBusiness / Product Development
Human Resources Private
Clients &
Asset Management
Support
Communications Corporate Development
Corporate Communications Group Audit
Group Finance Group Risk Management Group Human Resources Corporate Affairs Group ICT Raad van
Bestuur
Corporate Centre
EU Liaison Office
Figure B. Organisation-chart of ABN AMRO bank
13 Department of WCS eCommerce Strategy
The department of WCS eCommerce is divided in four different focus-areas, where ‘Legal’
and ‘Communications’ are staff-positions held by two persons.
The area of ‘Resources’, about 30 people, is merely an investment department with a clear focus on participating in promising initiatives in the eCommerce. In a concept called the
‘@ccelarator’ ABN AMRO participates in these projects. Main objective is to learn from these new initiatives and to make sure that ABN AMRO will always be involved in to be developed new bank-related services.
The Last area, Strategy, is spread out in three teams located in Asia, the United States and Europe, which is located in Amsterdam.
Figure C. Organisation-chart of ABN AMRO WCS eCommerce Department
The eCommerce Department is co-ordinating and facilitating a variety of global eCommerce initiatives in which ABN ABMO is currently involved. So far, most of the initiatives have focused on we-enabling the existing products and services.
The solutions, which are currently being focussed on, can be represented in the following figure.
Figure D. Focus Area’s of the WCS eCommerce Department
Supply Chain
The first objective is to anticipate to changes, which affect the existing supply chains. To this, ABN AMRO identifies two developments that affect supply chains significantly. First the eMarketplaces en second eProcurement. And as a third development within ‘Supply Chain’
one develops integrated cross-product solutions that address the needs of all parties in the supply chain.
eMarketplace
Apart from offering its traditional product range, ABN AMRO focuses on providing
eMarketplaces with strong client support and new products and services. The include security and trust, new payment and settlement functionality and efficient trading support engines capable of helping the corporate customers manage their activities in this new environment.
eProcurement
This means the focus on an efficient procurement for companies, public sector entities and individuals. eProcurement is most valuable in the procurement of non-strategic goods and services.
B2E
This is a Bank-to-Employee portal project to facilitate all the employee within the ABN AMRO bank (and in the future as a product to customers or even other companies) by offering easy access to information as well as essential tool and resources.
Affordable Finance and Administration
This initiative focuses merely on products like micro-payments and electronic ways to invoice and pay. By acting as in intermediary, ABN AMRO will offer an effective solution to existing web-based trading.
eMarketplace Supply Chain B2E eProcurement Affordable Finance &
Admin.
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2.3. Context of ABN AMRO
Internet and Banking
In recent years, Internet became common property and influenced business in many ways.
The influence of the Internet and the financial sector was and is prominent at the exchanges.
For example, in October 1998 the Nasdaq-index1 rated 1419 and because of the flourishing prospects of the Internet the Nasdaq rated 5048 in May 2000 2. As a reverse to the medal the non-internet-related companies became out of favour. One even hesitated about the survival of the traditional marketplayers in the financial sector and thought that virtual banks3 could sweep the traditional banks away within ten years.4
Meanwhile the tone has changed. It turned out to be not so easy to develop successful business without the back-office of an established company. Many internet-initiatives stopped or got big financial problems because their revenues stayed behind.
In the same period the Nasdaq declined from 5048 to 1830 in March 2001. The confidence in the future of the traditional banks nowadays is much stronger.
Although the future of the internet was not what some hoped it would be on short terms, it would be wrong to underestimate the role of internet in the financial world. Probably the financial world could be affected most by the internet. Because the financial world consists mainly of information-flows, the internet offers an ability for great improvements in efficiency and the so-called ‘richness’ and ‘reach’ of Information exchange in the relationship between banks and their clients.
Several financial services were increasingly affected by the internet.
First, the online broker-services, probably the fastest growing financial service on the internet. It was pioneered by Charles Schwab5 and E*Trade6 in the US, but also by several players in Europe. ABN AMRO has developed its Online Investor, to keep up with the online broker-services.
Second, specific banking services as the online offering of bear speculation products and mortgage loans. However the successes of these services are still quite modest.
The third area of financial services on the internet is online payments, a growing part of the online banking business, but still hindered by additional costs and a lack of trust.
Until now, it turned out that internet-only banks will not survive; clients still need the ability to walk into a ‘bricks-and-mortar’ bank-office to ask for advice.
ABN AMRO already developed several services for their clients using the internet. For the consumer market for example:
• ABN AMRO Online Investor, an online broker service, including business news, analysis, exchange rates etc.
• Online payments application, for the consumer to do their payments at home, online. In the future more services will be added to this application.
• ABN AMRO is surveying the development of a personal finance portal, integrating all the existing online services.7
• A recent agreement with Yodlee, an ‘account aggregation service provider’ gives figure to ABN AMRO’s ‘aggregator’-business model.
• In short terms mobile services, based on WAP-technology8, will be available; a lack of standardization causes a later implementation of these services.
And for the businessmarket:9
• ABN AMRO is one of the eight founding partners of Identrus, an international co- operation network of topbanks, creating in international infrastructure for digital identification.
• Dealstation, a foreign exchange trading tool, providing real time rates.
• Global Financial Markets Web Portal, a personal digital portal integrating several ABN AMRO services.
• e*Exchange Directory, an online overview of 2,000 exchange sites in 46 industries.
Of course these initiative are not the end; ABN AMRO continuously tries to enlarge her service on the internet.
Banks can offer all these products for the internet-market according several strategies and methods. ABN AMRO distinguishes five different ‘business models’ which banks can opt for, to do business via the internet:10
just another channel
The ‘just another channel’ model offers the same services online as you do without using the internet (offline). This is a rather defensive strategy.
broad internet-only bank
This model can be created by transforming the existing bank into an internet-only bank, or by creating one as a subsidiary. However some of these initiatives are already cancelled. Bank One sold its WingspanBank.com and Citibank, Chase and Bank of Montreal integrating their internet-subsidiary within their companies.
specialized internet-only bank
This model develops a strong brand for a specific range of services. However this option will not fit the existing huge banks, because they want to keep offering a broad range of services.
hybrid bank
This option means both, a strong offline bank and a strong effort to be a really internet- accessible bank, using the existing successful back-office.
aggregator
An aggregator acts as an intermediary bringing together the financial products of various banks. Troubles rise considering the revenues and the independence, because the intermediary is also a bank itself.
ABN AMRO tries to confirm her own internet-strategy to the hybrid bank model because of the strong confidence in the existing back-office.
In a short space of time a lot of changes have taken place in the banking branch as well as within ABN AMRO. These developments lead to the need of more information for WCS eCommerce to keep informed about the new developments and even more about what the role of WCS eCommerce can or will be within these developments.
The next three recent developments generated a need for more information.11
• On-Going competition of traditional competing Bankers
• Growing competition of non-traditional Bankers
• On-Going transforming of ABN AMRO in a hybrid bank12
17 Recent developments within Banking
On-Going Competition of traditional competing Bankers
In first place, ABN AMRO is not the only bank striving to gain market share in the online financial services market. The main traditional competitors of ABN AMRO, large banks like Deutsche Bank, CitiGroup etc., are also working on ‘new’ eCommerce activities13.
Deutsche Bank for example, offers Moneyshelf.com, a finance marketplace for various kinds of consumer services like account aggregation, loans and insurances. A second example is Brokerage 24, a 24 hours a day, seven days a week trading facility.
For the business market Deutsche Bank initiated DB business direct, online corporate desktop for information and services like cash management, foreign exchange and identification; and for example DB marketplaces, a services for the customers of marketplaces to do online invoicing, identification etc.
CitiGroup is offering the same kind of services for ‘web delivery platform’, ‘B2B communities & marketplaces’ and ‘payments and settlement solutions’. 14
So ABN AMRO is not initiating something new, but just wants to keep up with the competition and therefore has to join this new ‘trend’ in banking opportunities.
Actually, ABN AMRO not only wants ‘to keep up’, but rather be a ‘preferred’ financial service provider. A clear announcement about that, is made by Mr.Collee, member of the board with regard to ABN AMRO’s agreement with Aucxis:15
“This partnership fits perfectly with our overall corporate strategy to position ABN AMRO as the preferred financial service provider in the B2B eMarketplace.” 16
In order to do so, ABN AMRO needs to know what its competitors are doing at the moment concerning electronic business and business-to-business (B2B) electronic marketplaces17 (eMarketplaces)18 in particular.
Growing Competition of non-traditional Bankers
Second factor to mention is the new trend of non-banking companies to start traditional online banking activities.
Dutch Market
In the Netherlands, the home market of ABN AMRO, a growing number of initiatives with regard to financial services are exploited by non-banking companies.
Plain examples are Shell and Ahold, who intend to establish simple banking activities within their existing customer scope.
Shell, using its well-known brand, started an initiative together with Aegon to sell insurances at filling-stations. 19
Ahold initiate banking-accounts facilities at their check-out points20 and started also an internet home banking company to enlarge their banking-facilities.21
Worldwide
Outside the Dutch borders already further developed initiatives can be seen of non-banking companies who more and more act like real banks. US General Electric’s division GE Capital for example, actually a non-core-business division, has assets of more than US $345 billion and has become a global, diversified financial services company 22 for insurance, lending or
investments for the consumer market23 or for the Small-and-Medium Enterprises-market24 for payroll-, lease- products etc.
GE Capital even facilitates the biggest companies with loans, equity or refinance.25
Sony, well-known because of their electronics, will start an internet bank, joining a growing number of other corporations that entered the banking sector since the Japanese government eased regulations in the financial services industry.26
The growing number of non-traditional banking companies offering financial services gives rise to a demand for further survey about the financial activities of non-traditional banking companies concerning electronic business and B2B eMarketplaces in particular.
Recent developments within ABN AMRO
On-Going transforming of ABN AMRO in a hybrid bank
Third, the enormous hype the internet caused last years also affected the way banks approach their customers. ABN AMRO’s own vision on the future started the development for a more hybrid bank. This option means both, a strong offline bank and a strong effort to be a really internet-accessible bank, using the existing successful back-office.
Two quotes from the annual report: 27
“ECommerce is changing business faster than any other trend. Because financial transactions and information are so well suited to the digital age, banks must be especially alert to the challenges of commerce conducted electronically, whether over private networks or the Internet, whether business to business or business to consumer.
ABN AMRO has already invested heavily in eCommerce, across many countries and lines of business. But it became evident in 1999 that our eCommerce investment and strategy required closer attention at corporate level. Internal studies concluded that the bank required an offensive eCommerce strategy.”
The quote above shows the intention of ABN AMRO to enlarge their efforts to create services for their clients online. And further…
“Major initiatives to which we have committed so far include the launch of an Internet e-broker service as part of the positioning of e-banking in our focus areas (Europe, the US Midwest and Brazil). In the business-to-business segment, the bank will launch a service targeted at Small- and Medium-Sized Enterprises (SMEs) internationally. The service is intended to lower trade barriers to these companies by opening up global supplier and buyer information. SMEs will receive additional support from other initiatives in which ABN AMRO is participating, such as Identrus, which deals with financial and identification issues SMEs have to address when trading internationally. Investment in eCommerce can be riskier than investment in more established sectors. But returns can be correspondingly higher. We will demonstrate our confidence in the future of this exciting trend by increasing the number of corporate investments that the bank makes in eCommerce firms. This will be done for financial as well as for strategic reasons.”
This quote shows some examples of precise areas where ABN AMRO wants to be an active market player.
19 The board defines the strategic (first quote) and more specific the tactical management
(second quote). In according with these statements the departments of ABN AMRO have to determine their operational management.
In line with the strategic plans of the board of ABN AMRO, WCS ECommerce Strategy defined a mission statement:
Mission Statement WCS eCommerce Strategy: 28
“The ECommerce Strategy Team of WCS will work with e-Strategy Solutions Teams, Business Units, and the Accelerator to set the ECommerce for WCS, define alliance partners and translate it into actionable initiatives that will create economic value, while maintaining close links with the other SBU’s.”29
Summarizing, both the ABN AMRO strategy and the mission statement, it can be said that the WCS eCommerce Strategy Team has to define actionable initiatives that will create economic value. Therefore a demand for more information about opportunities for ABN AMRO with regard to B2B eCommerce has risen. This directly leads to a demand for survey.
2.4. Summary
This chapter described in brief what kind of company the ABN AMRO BANK is and about its context; for example about the recent developments in which all banks are involved in at the moment and the consequences to that. Also the recent role of the internet is illustrated.
Secondly this chapter gave specific information about the organisation of ABN AMRO and where the department of eCommerce Strategy is localised in this.
The next chapter deals with the exact problem definition of this survey and the way to get an answer to these questions.
3. Problem Definition 3.1. Introduction
In the previous chapters we discussed about the context of the problem. This chapter will deal about the Problem Definition. First of all the request of the management of ABN AMRO will be explained. This is called the survey objective. This objective is the reason we do this survey.
Second, the survey objective is ‘translated’ in a survey question. The answer to the survey question will lead to recommendations to the survey objective.
The problem will be solved according to De Leeuw. This theory explains us that a survey question has to be split up in several sub question. Once each of these sub questions is answered, the answer to the survey question is completed.
3.2. Survey Objective
Scope of survey project
The scope of electronic commerce is unlimited in itself; the survey will therefore deal with electronic commerce worldwide, without any geographical borders, limited to the areas of interest by ABN AMRO concern-wide and to the preferred industry sector(s) as defined by WCS eCommerce Strategy Team.
The results of the survey will be available for WCS eCommerce to be helpful to give structure to the knowledge they already have and developments of new insights.
Business objective
The objective of WCS eCommerce with regard to this survey is to define the opportunities for them within the industry sectors of Automotive at eMarketplaces, because…
• The department is only concerned with business-to-business eCommerce30, the
‘opportunities’ have to be focussed on electronic business-to-business trading.
• First, eMarketplaces are a new phenomenon and second, a great deal of the on-hand projects is about eMarketplaces, so a special interest of the WCS ECommerce Strategy Team concerns this subject.
• Several survey institutes predict an enormous turnover-boost for eMarketplaces within a few years.[Kafka, May 2000; Gartzen, November 2000]
• ‘Opportunities’ would be too open defined, a mere specific area of survey is chosen. First a focus on ‘opportunities with regard to price risk31’ is chosen, because a dynamic price model is a specific characteristic for eMarketplaces;
• Second, a focus on ‘opportunities with regard to counterparty risk32, because this kind of risk is especially important at eCommerce, including eMarketplaces.
21 Because the scope of eMarketplaces is very extensive, a first focus on the Automotive market
has been made. The automotive market is most progressive in the development of eMarketplaces and therefore new insights will be discovered here in first place.
Survey Objective
3.3. Survey Question
The survey objective above can be ‘translated’ in a specific survey question. This is the question, which has to be answered in this survey. The conclusion to this question will lead to recommendations to the survey objective of the ABN AMRO management.
Survey Question
The survey question will be formulated:
Advise WCS ECommerce Strategy Team on opportunities for ABN AMRO, to facilitate the business-to-business trade for the Automotive industry at eMarketplaces with regard to credit risk and price risk.
Which opportunities exist for ABN AMRO, to facilitate the business-to-business trade for the Automotive industry at eMarketplaces with regard to credit risk and price risk.
3.4. Subquestions
As mentioned before, the survey question will be answered by using the theory of De Leeuw.
This theory supposes a survey question can be answered by splitting up the question in several sub questions. Answering all these individual sub questions will lead to the answer of the survey question in total.
According to this the following sub questions are defined:
First there are a few questions concerning definitions, in the broadest sense of the word 'definition'. There meant to clear and precise the scope of the survey. After these first questions, a few questions are defined about mutual relations between these definitions.
1. What is electronic commerce?
This is the first general, but very important question. Electronic commerce is a word which is used in many way’s, in many meanings. Most of the time the author of an article or book gives it a total different meaning or just one that fits at that very moment.
For this reason the first question will deal about electronic commerce. To explain what electronic commerce is and also what it isn’t! It will create a scope in which the rest of this survey will fit!
2. What are eMarketplaces?
There are many different definitions about eMarketplaces and many explanations for the same definition. Therefore it is important to have a broad overview of the common definition to compare them and make a statement about the definition what will be used in this survey.
3. What kinds of banking services are relevant with regard to business-to-business trade?
This question is meant to clearly define the scope of a bank in general. What is in business-to- business trade for a bank? What are the ‘normal’ banking services a bank normally offers to there customers?
4. Define Price risk and Credit risk and put them in their context within electronic transactions, within eMarketplaces in particular.
Preliminary survey pointed out that price risk and credit risk are two of the most common risk types a bank is dealing with. Therefore it very useful to make a connection between these risks and eMarketplaces in general. In which part of the trading-process within eMarketplaces do credit risk and price risk play an important role?
5. How does ABN AMRO define the industry sector of Automotive?
To limit the scope of the survey a choice has been made to focus first on just one branch of industry. In further studies a resemblance can be made with other branches. Preliminary survey made clear that the automotive industry is one of the most developed branches of industry in terms of online trading and mature eMarketplaces. Therefore the focus will be on the automotive branch.
23 But, what is exactly the automotive branch and how does ABN AMRO define this branch?
6. How do the eMarketplaces of Automotive look like, who are the market-players and what are the recent developments?
This question is meant to make an inventory of the existing online trading initiatives in the automotive branch and eMarketplaces in particular. Because the definitions of the key-items are cleared out in the questions above, a broad inventory can be made.
The generated list of initiatives and recent developments will provide a context to focus on.
This will be the context to take into account while developing new banking services for the eMarketplaces of the automotive industry.
7. When or where raises ‘price risk’ or ‘credit risk’ at eMarketplace-trading concerning the Automotive sector?
With reference to question 4, this specific question will make clear at which ‘places’ or area’s within the eMarketplaces for the automotive industry, price risk and credit risk do exist.
Opportunities for banking services to hedge from credit risk and price risk are assumed. Each of these opportunities should be a start to a survey for its profitability to ABN AMRO.
3.5. Summary
In this chapter the heart of this survey is cleared out, by clearly define the objective of this survey and translating this objective to a survey question to be answered. According the theory of De Leeuw, this survey question is been split up in smaller and less complicating sub questions. Once all these sub questions have been answered, the original survey question can also be answered.
The next chapter will give an overview of the way in which each of these questions will be answered.
4. Theoretical Framework and Conceptual model 4.1. Introduction
In continuation of the previous chapter all the sub questions will successively be explained in the way its will be answered. But before that the first paragraph will give an overview of the several classifications of survey.
All the references used in this survey are listed in a ‘List of Literature’, which can be found in chapter 9.
4.2. Classification of the survey
Classification of the survey
Before going into the description of the practical methods, a classification of the survey will be given according Emery and Cooper [Emery and Cooper, 1995, p115; Swanborn, 1996]
Successively the next characteristics will be dealt with:
a) method of data collection b) type of survey
c) time dimension d) topical scope e) survey environment a) method of data collection
The method of data collection can be classified as ‘survey’ mode instead of ‘observational study’. Where observational study means that the surveyor inspects the activities of a subject or the nature of some material without attempting to elicit responses from anyone. In the survey mode, the surveyor questions the subjects and collects their responses by personal or impersonal means. The data may result from interview or telephone conversations, reports etc. The data for this survey will be mainly extracted from written sources, both internal and external literature, a lot of articles and the internet (containing also the full text of various magazines and journals). Besides written sources, interviews also will be an important source of information. A more specific method of data collection will be explained for each of the used minor survey question separately.
In accordance with the wishes of ABN AMRO, interviews will not take place neither with competing companies nor customers, because of the confidentiality of the information and the possibility of damaging the image or disturbing the relationship with any party.
b) type of survey
The purpose of the survey is ‘descriptive’, because it is concerned with finding out who, what, where, when or how much something happens, according the definition by .[Baarda & De Goede, 1995, p78]: “Register and order systematically everything within a certain subject according a beforehand described method, not with the purpose of formulating hypotheses or developing a theory is called a descriptive survey”.
In according to this the degree of problem crystallization is more explorative with the objective to discover future survey tasks.
c) time dimension
The time dimension of the survey is cross-sectional, because the survey is carried out once and it represents a ‘snapshot’ of one point in time.
25 d) topical scope
The topical scope is more like a case study, because it emphasizes on a full contextual analysis of a subject with its conditions and their interrelations. Although case studies have been maligned as “scientifically worthless” because they do not meet minimal design requirements for comparison [Kerlinger, 1986, p295], they nonetheless have a significant scientific role. It has been observed that “important scientific propositions have the form of universals, and a universal can be falsified by a single counter-instance”[Kaplan, 1964, p.37].
A single, well-designed case study can provide a major challenge to a theory and provide a source of new hypotheses and constructs simultaneously.
e) survey environment
The survey environment is definitely not a laboratory environment. A field environment would be a better classification. A further distinction to geographical environment is not necessary, because of the global scope of both, the eMarketplaces and ABN AMRO.
In order to answer the questions raised during the survey, two kinds of methods are appropriate: desk survey and field survey. Desk survey means the use of existing data and existing reports [Baarda & De Goede, 1995]; field survey consists of the use of information the surveyor gathered.
4.3. Survey Methods
Survey Methods
This paragraph describes the methodology to be used, in order to retain a structured answer to the survey question.
Desk survey
During the desk survey various kinds of sources have been used to exclude or at least minimalise subjectivity. For gathering and researching the information, these sources have been used:
• University Library Groningen: to get more insight in the process of business survey in general and new service development in particular.
• Company library of ABN AMRO: for several bank-related books and journals to get more insight in risks for banks and several financial services
• Internal ABN AMRO document about all the projects now and in the past at the eCommerce department or from the ‘economics department’, a department doing industry survey continuously.
• Reports and documents of several consulting company’s like Gartner Group, Forrester Survey, PriceWaterhousCoopers, Deloitte, Mckinsey etc… Also reports from other worldwide banks.
• These reports were helpful to understand the trends, predictions for the future and to get more insight in recent developments in eMarketplaces and electronic B2B trade.
• ABN AMRO Intranet: for the latest news, shared documents/knowledge
• Internet/databanks: for the access to online, full text journals and magazines and for more advanced search methods
Field survey
Field survey aims at doing survey in a situation in reality with the condition that influencing this situation should be minimised. Of course, there are several kinds of field survey:
First, a distinction between observational survey and non-observational survey has to be made (as explained in ‘methods of data collection’). Second, several kinds of interviews can be distinguished (oral and written) [Saunders, 2000]:
Interviews may be highly formalised and structured, using standardised questions for each respondent, or they may be informal and unstructured conversations. In between there are intermediate positions. One typology that is commonly used is thus related to the level of formality and structure, whereby interviews may be categorised as one of:
• structured
• semi-structured
• unstructured
Another typology differentiates between:
• standardised
• non-standardised
Also can be made a distinction between:
• respondent
• informant
There is overlap between these different typologies, although consideration of each typology adds to an overall understanding of the nature of survey interviews.
Structured interviews use questionnaires based on a predetermined set of questions. This is possible because structured means that you know what information you need, so your questions can be predefined.
By comparison, semi-structured and unstructured interviews are less pre-defined or even not pre-defined at all. In semi-structured interviews, the surveyor will have a list of themes and questions to be covered although these may vary from interview to interview. This means that you may omit some questions in particular interviews, given the specific organisational context, which is encountered in relation to the survey topic. The order of questions may also be varied depending on the flow of the conversation.
Unstructured interviews do not have a defined format. There is no predetermined list of questions to work through and the interviewee is given the opportunity to talk freely about events, behaviour and beliefs in relation the topic area. Such an interview is also called an informant interview since it is the interviewee’s perceptions that guide the conduct of the interview. In comparison, a respondent interview is one where the interviewer directs the interview and the interviewee responds to the questions of the surveyor.
Standardised means that every interviewee gets the same set of questions, if possible with pre-coded answers. If questions vary from one interviewee to another, it is called non- standardised [Healey and Rawlinson, 1994].
With regard to this survey a few decisions are made about the way of data collection. First, oral interviews are preferred above written interviews (or questionnaires) since a certain level of social interaction is desirable to notice body language, increase the response and because the group of interviewees will be quite heterogeneous.
Second, semi-structured interviews are preferred since a standardised question list would exclude too much information, but an unstructured interview wouldn’t deliver enough subject focussed information.
27 A third note can be made by the choice to do interview personal or by phone. Earlier
mentioned reasons for noticing body language or even a simple technical reason of recording the interview gives motive to choose the personal interview, unless geographical obstructions force telephone interview.
Sometimes, unstructured interviews are called in-depth interviews [Saunders, Lewis &
Thornhill, 1997] but the meaning still keeps the same: explore in depth a general area in which one is interested. There is no pre-determined list of questions to work through in this situation, although one needs to have a clear idea about the aspects on wants to survey.
4.4. Sub questions
1. What is electronic commerce?
The first question is a question about basic knowledge, but there has been so much written about eCommerce last years in so many different ways that it is necessary to start with a clear description of what eCommerce means in the scope of this survey. The main resources for answering this question will be written sources mentioned under ‘desk survey’ before, like books, articles and websites.
2. What are eMarketplaces?
The second question is as elementary as the former; desk survey will also give an answer to this question; most will be published in articles and websites, partly in books. The combination of literature about eCommerce and marketplaces will be helpful to get a good picture of eMarketplaces.
3. What kinds of banking services are relevant with regard to business-to-business trade?
The third question will be important to get clear what the borders of the term ‘banking services’ are in the used context. The main source will be banking literature, which is broadly available (internal ABN AMRO library), and two additional interviews with ‘financial services’ ABN AMRO employees.
4. Define Price risk and Credit risk and put them in their context within electronic transactions, within eMarketplaces in particular.
The fourth question is about the different risks that are present at transactions between buyer and seller and at electronic transactions in particular. A broad description of the risks will be followed by an explanation why two of them will be dealt with emphatically. The answer for the fourth question can be found in literature both inside and outside the ABN AMRO bank.
