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Examine E-commerce

opportunities of Small and Medium


Enterprises (SMEs) in the Kingdom
of Saudi Arabia (KSA)

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Abstract
Although the Kingdom of Saudi Arabia has the largest and fastest growing Information
and Communication Technologies (ICT) sector in the Arab region, growth in ecommerce activities yet to improve. It has been seen that retailers of KSA do not tend to
keep pace with the worlds online growing. The authors have conducted research to
identify and explore the opportunities of ecommerce in small and medium enterprises
(SME) in Saudi Arabia. The objective is to analyse ecommerce adoption in SME sector
for both Retailers perspective and Consumers perspective, to understand the benefits
realized through e-commerce adoption in B2B area and B2C area, to factors hindering
the adoption of e-commerce in KSA and explaining integrating DOI and TOE to study
the determinants of e-commerce adoption
This dissertation consists six chapters. The researcher included background, rational,
research aims and objectives with motives to choose this research area into the chapter
one. Previous research or secondary data about the ecommerce in the field of SME in
KSA has been analysed in Literature Review chapter to find out the research gap. In the
next chapter, the author explored the methodology which is applied in this dissertation.
In the fourth chapter, author has analysed result of primarily collected by case study and
questionnaire analysis.
Sequentially, the chapter five includes discussion of the findings with the compare and
contrast of different writers view. Recommendation and future research is also included
in this chapter. Finally, in the chapter Six, the researcher has drawn conclusion of the
entire research.

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Statement of Authenticity
The rules and regulations of the (Name of the University) with regard to the similarity
are known to me by the grace of going through about it. I am certifying that this
dissertation is accomplished by me. All the analysis I have conducted to research about
the opportunities of ecommerce in SME in Saudi Arabia and this research is free from
any unauthorized work.
I am assuring that this dissertation consists of 12,000 words (approximately).

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Acknowledgement
Studying the opportunities of ecommerce in SME in Kingdom of Saudi Arabia was a
chance to utilize my attained and join together knowledge appropriately. To study this
area I had to take help from different people surrounding me. When I was to conduct a
survey, respondents and students helped me. I would like say thanks for them.
Surely, I have to thank my supervisor Mr. (Name of the Supervisor) for helping me
completed the dissertation. I could not think about it without his support. During the
study he reviewed my research and if any mistake found, he give it back to me to
correct. With a view to make a flawless dissertation his help cannot be forgotten. Thus I
thank him very much. In addition, I am thanking all the faculty members who helped me.
In the time of conducting my research, my family members also helped complete it.
They also deserve thankful words from me. My friends are not beyond my mind. They
helped me too. That is why I would like to remember them here. I took help from them to
design strategy, setting aims and objectives. Finally, I am grateful to all those who
contributed to my research.
My family members also supported me. I must pronounce thankful words for them.
Rather, my friends also supported me to conduct this research. Including them I am
grateful to all of them those who assisted me directly or indirectly.

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Table of Contents
Abstract...................................................................................................................... ii
Statement of Authenticity.......................................................................................... iii
Acknowledgement..................................................................................................... iv
List of Tables................................................................................................................ vii
List of Abbreviation................................................................................................... vii
Chapter: one................................................................................................................... 1
Introduction.................................................................................................................... 1
1.1.

Background of the study...................................................................................1

1.2.

Rationale of the research..................................................................................1

1.3. Importance of the Study...................................................................................... 2


1.3.

Aim and objectives............................................................................................ 3

1.4.

Research question............................................................................................. 3

1.5.

Motivation for Choosing the Subject Area.........................................................3

1.6.

Structure of this research.................................................................................. 4

Chapter: Two............................................................................................................... 5
Literature Review....................................................................................................... 5
2.0 Introduction.......................................................................................................... 5
2.1 Overview on the SME sector in the Kingdom of Saudi Arabia............................5
2.3 E Commerce adoption in SME sector: Retailers perspective..............................7
2.4 E- Commerce adoption in SME sector: Consumers perspective........................8
2.6 Benefits realized through e-commerce adoption.............................................10
2.6.1 Benefits of e-commerce adoption in B2B area..........................................10
2.6.2 Benefits of e-commerce adoption in B2C area..........................................12
2.7 Factors hindering the adoption of e-commerce in KSA.................................15
2.9 Integrating DOI and TOE to study the determinants of e-commerce adoption 18
2.10 Chapter Summary......................................................................................... 20
Chapter: Three.......................................................................................................... 21
Research Methodology............................................................................................. 21

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3.1.

Introduction..................................................................................................... 21

3.2.

Research Design............................................................................................... 21

3.4.

Research Strategy........................................................................................ 23

3.5.

Research choices......................................................................................... 23

3.6.

Data Collection Methods.............................................................................. 24

3.7.

Research Ethics............................................................................................ 25

3.8.

Data analysis............................................................................................... 25

3.9.

Chapter Summary........................................................................................ 26

Chapter: Four............................................................................................................ 27
Findings and analysis............................................................................................... 27
4.1. Introduction.................................................................................................... 27
4.1. Questionnaire analysis................................................................................... 27
4.2. Case analysis.................................................................................................. 34
4.2.1. Case no- 01: TAK MACARON.....................................................................34
4.2.2. Case analysis 2- TABAN ELECTRIC............................................................37
4.3. Chapter Summary.......................................................................................... 40
Chapter: Five............................................................................................................ 41
Discussion of the findings......................................................................................... 41
5.1. Introduction:................................................................................................... 41
5.2. Discussion...................................................................................................... 41
5.3. Chapter Summary.......................................................................................... 46
Chapter: Six.............................................................................................................. 47
Recommendations and Conclusions.........................................................................47
6.1. Introduction:................................................................................................... 47
6.2. Recommendations:......................................................................................... 47
6.3. Future Research Scope................................................................................... 49
6.4. Conclusion...................................................................................................... 50
References:............................................................................................................... 52

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Table of Figures
Figure 1: Barriers of Ecommerce in KSA (Love et al, 2001)............................................22
Figure 2: Barriers to e-commerce adoption (Love et al., 2001)......................................25
Figure 3: benefits of new technology........................................................................25
Figure 4: Research Design, Source: (Saunder et al., 2007, p. 132)...........................28
Figure 5: qualitative and quantitative research differentiable factors, Source: (Farzin,
2010)........................................................................................................................ 30
Figure 6: Pie chart of adoption of the company survey data....................................34
Figure 7: Bar chart of data of how long it needed to implement..............................35
Figure 8: Cause of not integrating ecommerce.........................................................36
Figure 9: Pie chart of collected data to know who want to benefit business.............37
Figure 10: Respondents reply against the question about the benefits of ecommerce
................................................................................................................................. 37
Figure 11: Bar chart shows the barriers to adoption.................................................38
Figure 12: Column chart of showing influential factors of integration......................39
Figure 13: chart of benefits that owners get after adoption.....................................40

List of Table
Table 1: Benefits realized by B2B area (Aleid et al. (2009)............................................20
Table 2: Benefits realized by B2C area (Chopra and Mieghem (2000)...............................22

List of Abbreviation
B2B= Business to Business
C2C= Consumer to Consumer
CITC = Communications and Information Technology
CITC= Communication and Information Technology Commission
DOI= Diffusion of Innovation
EC= E-Commerce
FAQ = Frequently Asked Questions
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GDP= Gross Domestic Product


KACST = King Abdul Aziz City of Science and Technology
KSA= Kingdom of Saudi Arabia
SCB = Saudi Credit Bank
SIDF = Saudi Industrial Development Fund
SME= Small and Medium enterprises
SMEDEC = SMEs Development Centre in the Kingdom
SR= Saudi Riyal
TOE= Technology-Organization-environment

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Chapter: one
Introduction
1.1. Background of the study
Saudi Arabia, at present era, possesses an exceptional and convergent combination of social
conservatism and technological advancement. Now, it has changed itself into that position from a
deserted, isolated land within 50 years or so. It has conducted some epoch making approaches to
achieve this which make technology blend with societal conditions and avoid probable conflict
in between (Adolphs et al, 2010). In fact, the rapidly increasing usage of global internet and its
intrusion into the deep of the society has been the main problem restraining these approaches. As
the country is widening more easy access to internet and increasing this opportunity in education,
government and trade, these approaches are advancing further. In recent times Alt and Klein
(2011) stated that, Saudi govt. is expressing interest in e-commerce for increasing local, national
and international businesses. It has set out special constructional regulations for online
transactions. This new era has redefined approximately every aspect of commerce. For example,
companies are now more efficient in handling faster transactions as they facilitate their company
with recent and advanced technology (Chen and Ku, 2011). This report focuses on e-commerce
adopted by SMEs in retailers and consumers point of view, profits through the adoption of ecommerce in B2B and B2C sectors, several types of e-commerce applications, facts that disturb
the adoption of e-commerce in KSA, phases of adoption by SMEs and DOI and TOE to deduct
the factors affecting e-commerce adoption.

1.2. Rationale of the research


E-commerce and B2B are now two important and successful tool to increase the e-commerce
market by Clicks-Pure-Play or Clicks-and-Bricks-Mixed-Play. The adoption of e-commerce in
Saudi Arabia will be demonstrated in this chapter. Retail sector is considered among the most
vital and dynamic sectors of this country (Sun et al, 2010). It comes at the fourth position in

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Saudi Arabia after oil, banking, and telecommunication sector. Retail sales volume of this
country in 2009 was recorded 55 billion and assumed to arise up to 97 billion within 2014.
Realizing that important fact, according to Schiederig et al (2012), banks are now delivering epayment gateway solutions and broadband sector is coming to light with the help of telecom
companies as well as CITC (Communication and Information Technology Commission). It has
undertaken mutually helping strategies among relevant parties as such government agencies,
media players, telecom operators, and educational bodies of the country so that it can arise an
economy especially e-commerce based on broadband. It is matter of fact that no issued research
hasnt been done yet on it. Thats why researcher decides it to take as the rationale to research.

1.3. Importance of the Study


Internet plays a role here in changing the society and economics into a knowledge based by the
great combination of internet and modern information and communication technologies. It is
affecting the world economy. Countries of Europe, America and more western countries are
investing in various sectors substantially to establish full forced internet facility as they realize its
importance. According to Sarkis (2012), many spaces for vendors and customers have been
opened by internet where almost every product can be found online for trading. Carlson et al.
(2000) stated that useful data can be sourced by customer tracking technology which helps to
know more about their likes and dislikes. As a result, this detailed customer profile makes
creating newer products easier which is the key to meet buyers need. Harmon and Moolenkamp
(2012), narrated that through that type of product is beside our hand which were never available
before. The products have no physical form in manufacture and use but they initially exist into
small pieces. Thats why they area called digital products.

A very important role is played in the society and economy by Small and Medium Enterprises
(SME). About 18% of total gross domestic product comes from this sector and it removes
unemployment of over 1.8 million people in Saudi Arabia. There is a strong potential for the
SMEs to help the economic growth with the help of this arising facility of internet and ecommerce. But for that they have to utilize technology in their business. Government has

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introduced new regulations and various initiatives to make a helping condition for growth of ecommerce like development of infrastructure and regulations. Taking advantage and entering
into e-commerce for sustainable development have been a threat for SMEs. Despite it is realized
that e-commerce is told to have a long lasting effect on global market, only a few research work
has been done on the opportunities of e-commerce for Small and Medium Enterprises in
countries like Saudi Arabia.

1.3. Aim and objectives


To assess Small and Medium Enterprises (SMEs) in the Kingdom of Saudi Arabia (KSA) and
their successes

Objectives

To analyse E-commerce adoption in SME sector for both retailers perspective and

consumers perspective.
To understand the benefits realized through e-commerce adoption in B2B area and B2C

area.
To identify the factors hindering the adoption of e-commerce in KSA.
To explain integrating DOI and TOE to study the determinants of e-commerce adoption.

1.4. Research question


What are the opportunities in kingdom of Saudi Arabia in e-commerce that small and medium
enterprises (SME) may enjoy?

1.5. Motivation for Choosing the Subject Area


Researchers choose the subject area for following reasons

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E-commerce captures a strong position in Saudi economics and retail businesses and it is
very modern and creative as well. So, researcher desires to study with e-commerce in

SMEs.
The main hindrance of adopting e-commerce is the lacking of trust and faith in several
aspects of electronic market places. Another problem has been identified as SMEs are
afraid of dealing their businesses globally due to cross cultural contexts, possibility of
being deceived and lack of knowledge about modern technologies and this has been the

reason for researcher to impose the potentials and usefulness of this technology.
SMEs find it difficult to keep pace with recent technologies frequently even they fail to
perform their role in the development of new market places. Researcher exposes some
measures to easily capture the benefits of e-commerce in SMEs in Saudi Arabia.

Another problem is the lack of a critical mass among customers, suppliers, and business partners.
Until sufficient numbers of their main local customers or suppliers participate in online
commerce activities, there is little incentive for individual SMEs to become engaged in ecommerce themselves.

1.6. Structure of this research


There are six chapters in this research. The first chapter broadly describes background, the
rationale, importance and motivation to choose this area of the research. The second chapter will
discuss similarities and controversies among various literatures related e-commerce in SME in
KSA. The third chapter will demonstrate discussion will be about the Research Methodology.
Similarly, the fourth chapter, the collected data will be analysed using different analysis tools. In
the fifth chapter, the researcher will discuss on the findings that author has gotten from the
analysis of the collected data. Finally, the sixth and the last chapter will conclude this dissertation
with giving some recommendations and future research scope.

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Chapter: Two
Literature Review
2.0 Introduction
In order to cope with todays challenging environment, SMEs have to be competitive and
resilient. SMEs should strengthen their capability and competitiveness continuously to provide
high quality products and services at reasonable and competitive price to the customers.
According to Rahman and Akhter (2010), all the previous studies on SMEs in the Kingdom of
Saudi Arabia revealed that there are poor promotion and distribution channel, poor quality of
products that make the overall poor performance of SMEs. The adoption of e-commerce in
SMEs in KSA is encouraging but it has been facing many obstacles also. This chapter will cover
the overview on the SME sector in the Kingdom of Saudi Arabia, the relationship between SME
and e-commerce, different types of e-commerce applications and technologies for SMEs,
benefits realized through e-commerce adoption and the main obstacles in adopting e-commerce
in SME sector in KSA.

2.1 Overview on the SME sector in the Kingdom of Saudi


Arabia
Deif (2011) reported that 92 per cent of the businesses in Saudi Arabia are involved in SME
sector which employs more than 80 per cent of the employment in the kingdom. But the Saudi
SME sector contributes 33 per cent of the total GDP.

Saudi industrial development fund defines SME in terms of monetary value that is a firm whose
annual sales do not exceed 20 million SR are considered as SME. However, the Small and
Medium Enterprises Development Centre at the Eastern Province Chamber of Commerce and
Industry measures the size of the firms in terms of number of employees. Firms comprising of
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not more than 20 employees are considered as small enterprises (Eu-Gcc Chamber Forum, 2010)
While firms having 20-100 workers are defined as medium enterprise. On the other hand, the
Saudi Arabian General Investment Authority classifies SME as the firms with less than 60
employees are small enterprises while firms with less than 100 workers are considered as
medium enterprises.

Moreover, the Saudi government has listed 20 sectors comprising of manufacturing and services
those are suitable for small and medium enterprises in order to make them privatized. Industrial
cities services, Banks, Municipality's services, Educational services, and Social services are the
most important among the listed sectors reported by Al-Saleh A. (2012).

Saudi Industrial Development Fund (SIDF) has recently established special fund to support
SMEs named as Credit Guarantee scheme with capital of SR 200 Million ( 53 million). 50% of
the funds is contributed by Saudi Government and the other 50% is funded by the Saudi local
banks.

The principal activity of Saudi credit bank (SCB) is to provide social loan to the low income
Saudi people.im order to motivate Saudi citizens to establish and run their own business the
Saudi credit bank (SCB) has also initiated a new loan program as giving loan to luminous
drivers.

Nabil (2011) also argued that Eastern province in Saudi has launched the 1st SMEs development
centre in the Kingdom (SMEDEC). It launched its operation on 17 March 2001 with a view to
cultivate entrepreneurship in the kingdom of Saudi Arabia, broaden consultant, technical,
technological, legal and information assistance to the Chambers Members. The chamber also
has an objective to train SME administrative and technical personnel to cope with competitive
market and increase the capacity of the sector.

There are lots of articles published by Al-Ektisad, an Arabic monthly magazine on the
importance of SMEs, internet for SMEs, a website for SMEs, the role of SMEs in mitigating
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unemployment. It also published several articles on pricing the products, tips for maximizing
sales, time management for SMEs, SMEs financing funds and SMEs loan financing funds.

2.3 E Commerce adoption in SME sector: Retailers


perspective
The kingdom of Saudi Arabia has launched internet service in March 1998 as per ministerial
decree no. 163. King Abdul Aziz city for science and technology supervises the internet service
in Saudi Arabia reported in KACST, 2006.

Idris, 2007 argued that Saudi Arabia is suffering from the shortage of skilled and expert Saudi
workers in some fields like electronics, computing, software and telecommunication that may
lead to lower use of updated technology in businesses.

However, According to Internet World Stats, 2010, the number of internet users in Saudi Arabia
climb to 9.8 million in 2010 from 1 million in 2001. The main contributors to the rapid growth
are increased public awareness, broadband availability reduced cost of personal computer and
internet access. In addition to(Communications and Information Technology Commission, 2010)
the availability of local content of Arabic language sites and e-services such as online banking, ecommerce, and e-government applications contribute to the growth in internet users in Saudi
Arabia.

A survey conducted by internet services unit in 2006 on consumers from a Saudi Arabia Internet
services unit showed that 56% of the consumers are buying through foreign market sites while
only 8 % are purchasing through Arabic sites. This is because Saudi consumers feel low
confidence on Saudi marketing sites.

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Several studies on online trading field in Saudi Arabia (AlGhamdi et al., 2011) found that SMEs
in Saudi Arabia are not aware that their businesses can be enhanced by using information
technology.

Many studies (Bahaddad et al., 2012) mentioned that the shortage of information technology
infrastructures is the main reason for the backwardness of the application of information system
in Saudi Arabia. It also hampers the implementation of updated technology in SMEs in Saudi
Arabia (Zhu et al, 2012). Moreover, the size of the company and its financial position also
influence the SMEs decision to adopt and use online shopping.

A study by MacGregor in 2004 has shown that the service-oriented companies are advance in
online trading than manufacturing companies in Saudi Arabia .this is because service companies
do not face hindrances to shipping and delivery system while it is the main problem for
manufacturing industries.

Pirraglia and Saloni (2012) argued that electronic markets (e-Mall) provide greater degree of
cooperation and innovation than any other business models. This is the main challenge for many
SMEs in Saudi Arabia that have yet to adopt some basic online requirements. According to a
report of the Communications and Information Technology (CITC, 2010) in Saudi Arabia,
Broadband service, a basic online business requirement, is provided to only approximately 10%
of Saudi Arabia.

A survey by CITC, 2010 showed that that more than 88% of companies in Saudi Arabia do not
have the broadband service. However, the broadband service is now available in major cities in
Saudi Arabia. This issue may reduce SMEs performance in terms of internet uses due to the lack
of cooperation in dealing with online trading.

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2.4 E- Commerce adoption in SME sector: Consumers


perspective
Business-to-consumer (B2C) e-commerce in Saudi Arabia is growing rapidly because the
number customers using internet in respect of buying and selling products and services is
increasing. At present, all Saudi commercial banks have web sites which offer online banking
services resulted from the research conducted by King Abdul Aziz City of Science and
Technology (KACST).

Al-Somali S. A., 2011, mentioned that e-commerce is growing slowly in Saudi Arabia compared
to other countries in the region. This is because of relatively low usage of credit cards,
widespread fears of credit card fraud and a shortage of highly skilled ICT professionals.

According to a study by Robotis et al (2012) there is low usage of credit cards as a means of
payments in Saudi Arabia. At present, the ratio of debit card and credit card usage in the country
is 10:1. Wu (2012) reports three reasons behind it. The reasons are

Islam prohibits people to take or give financial interest and most credit cards work on
interest basis.
Most consumer prefer debit card to credit cards.
In case of dispute involving in credit card in Saudi Arabia, customers have to pay the
transaction cost first and then the dispute will be investigated

According to Chen and Chang (2012), in Saudi Arabia there is still no legislation for the
followings:

Intellectual property
Consumer protection
Contract law and dispute resolution
The basis of taxation and Zakah
Classification of e-commerce transactions,
Compliance and enforcement issues
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Economist Intelligence Unit stated that there is no legislation for e-commerce contract disputes
in Saudi Arabia. Moreover, since the internet access was legal, there is no publicized dispute to
set a measure for dispute resolution.

But, the kingdom has passed a number of laws regarding computer crime and stemming from the
basic principles stated in the Quran and hadith which are the constitution of Saudi Arabia
reported by Economist Intelligence Unit 2007.

Webster (2012) argued that a countrys postal and delivery services are an important part in the
e-commerce project. In fact, the postal service in Saudi Arabia is slow and inefficient. Further,
mail cannot be delivered directly to homes or offices but can only be delivered to mailboxes.

However, recently, Saudi post established a new service named Waselto deliver mail in time
directly to the home through latest technology called smart P.O boxes. e-commerce marcent will
be able to deliver goods to customer houses using this system. This will increase level of trust in
transaction system as a whole though ensuring the items ordered will go directly to the payees
registered address rather than the P.O. the customer is required to pay for the services.

2.6 Benefits realized through e-commerce adoption


Now-a-days, there is no doubt in the benefits of adopting e-commerce in SME sector which has
been proved several research and studies with empirical evidence. This section includes the
benefits of e-commerce in SME sector in the perspective of both Business-to-Business (B2B)
and Business to Customers (B2C).

2.6.1 Benefits of e-commerce adoption in B2B area


Procurement of products and services, which creates the highest cost among firm activities, is
considered the first and foremost task of any trading business, according to Alblas, A. and
Wortmann (2012) . Therefore, procurement needs a system to minimize the cost incurred and the
system is now-a-days, e-commerce. By the grace of e-commerce, the firm can create an enriched
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portal of their products and services and reach these to its targeted suppliers. And the suppliers
also get all the firms on web through their website. As a result, suppliers get more options
available for them and the bargaining power shifts actually from the business firma to the
suppliers. According to Alfieri (25012), the value chain of the business has become so open that
the suppliers can easily get all information like products core value, price and its unique selling
proposition through the website.

Internet based EDI system started in 1970s with a view to helping supply chain management
(Denizel et al, 2012). With the advancement of technology, the internet based EDI system has
been developed a lot and now day, it serves as a online supply chain management. As a result,
the activities of supply chain like production related information including price, online ordering,
purchasing and exchange of documents are being conducted through web-based application.

Smaller firms are doing well with the help of e-commerce. That the smaller firms using ecommerce technologies and application are getting closer to their customer and getting more
success than their competitors has been found in the research and studies (Seuring, 2013). Rogers
et al (2013) suggested four competitive advantages to the firms and the competitive advantage
from supply chain manage is one of them. In addition, e-commerce is the main catalyst of the
competitive advantage in supply chain management in this era.

Again, with the help of e-commerce, the firms are able to reduce some activities of the suppliers
for which the firms have to depend on the suppliers before for those activities to be done. As a
result, the bargaining power shifts from suppliers to the purchasing firms. Damanpour and
Schneider (2009) mentioned that procurement cost reduction by the e-commerce can be
measured through the improved procurement efficiency including cost savings in inventory
management.

According to Ilgin and Gupta (2010) the above-mentioned benefits realized from e-commerce
adoption from the perspective of Business-to-Business (B2B) can be summarized into three
categories. These are:

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The first category of benefit is the improved searching mechanism with the help of e-commerce,
which can reduce the searching cost as well as transaction cost. Moreover, it reduces the
purchasing cost with the help of bargaining power. The second category of benefit is the
improved order processing system such as electronic documentation and information handling
which reduces the manual labor cost. The third category of benefit is the cost savings through
better coordination between the purchasing firms and the suppliers with the help of the ecommerce technologies. Finally, the benefits realized by the firms from the perspective of
Business-to-Business (B2B) through e-commerce adoption can be shown in the table illustrated
below

Table 1: Benefits realized by B2B area (Shittu

Name of the categories


Inventory Management

Back-end Efficiency
Cost Reduction

and Baker, 2010)

Benefits realized
Reduced lead time
Lower inventory cost

Better and more accurate order processing


Reduced search cost
Reduced product price

2.6.2 Benefits of e-commerce adoption in B2C area


Bai et al. (2011) found that the adoption of e-commerce provides a unique facility to reach their
customers with the help of the borderless nature of internet. Internet based e-commerce
application offers the opportunity for the Small and Medium Enterprises (SMEs) to operate their
business in a global manner irrespective of their size and investment. This opportunity creates a
platform for the Small and Medium Enterprises (SMEs) to compete with the large scale
enterprises without incurring high cost.
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E-commerce facilitates the SMEs in the field of marketing and promotional activities. With the
help of e-commerce applications, SMEs are able to promote their products and services to the
customers in an effective and efficient way. This strategy of marketing and promotion of SMEs
through e-commerce reduces huge cost to the firm comparative to their competitor firms using
conventional way of marketing (Al-Hosni et al. 2010). E-commerce technologies and
applications help the SMEs to shape their marketing strategies comprising Database marketing,
Interaction marketing and Network marketing. Now-a-days, web marketing as well as social
media marketing is a competitive advantage tools for the company-not only SMEs but also large
scale companies. As a result, the selling strategy can easily be implemented with the improved
and efficient marketing tools through e-commerce applications and there creates a strong
relationship between the firms and the customers for long time, which can leverage the success
of the SMEs (Sarkis and Yoo, 2011). Market research is such a kind of task of the organization,
which requires intensive and rigorous procedure and technological support, and large
organization only can support the huge cost of market research to investigate the customers and
themselves. But with the advent of the e-commerce technologies and applications, Small and
Medium Enterprises (SMEs) also now-a-days can conduct market research with very affordable
cost and make decision to go forward and expansion of their products and services (Zhu et al,
2012).

Wiel (2012) examined that the total solution package of e-commerce technologies and
applications can facilitate the quicker response and solution the customers need. As a result, the
firm can keep pace with the changing demand and requirements of the market. Firms are able to
get management that is more organized with the efficient handling of customers feedback and
long term customer relationship. In another research, Seebode et al. (2012) found that web tools
such as website and FAQ (Frequently Asked Questions) tool provides very low cost solution to
make the customers happy with their interest for Small and Medium Enterprises (SMEs).

Luchs et al (2012) studied about the benefits of e-commerce adoption and gave a comprehensive
analysis on the benefits realized from e-commerce adoption from the perspective of cost and
revenues. Firstly, e-commerce tools and applications facilitate the firms to make direct selling to
their targeted customers through streamline marketing management and online information
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dissemination. Secondly, E-commerce provides online nature of negotiation between the firms
and the customers, which allow them to discuss the products, quality, price, transportation,
documentation, terms and conditions. Thirdly, e-commerce allows the firms to reach their
potential customers irrespective geographic location and time barriers. Finally, E-commerce
helps the firms to reduce their order processing and transaction costs.

Summary of realized benefits of e-commerce adoption from the perspective of Business to


Customers (B2C)

Name of categories

Benefits realized

Market expansion

Prospect to increase market share


Better access to wider range of customers
New sources of revenues
Better access to information
Faster time to market

Customer service

Better support and service through CRM


Better interaction with customers
Better understanding of customers needs and
Preferences
Faster response time to enquiry

Back-end efficiency

Improved operational efficiency

Cost reduction

Lower information dissemination costs customers


Lower marketing costs
Table 2: Benefits realized by B2C area (Eppinger, 2011)

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2.7 Factors hindering the adoption of e-commerce in KSA


There are many reasons behind the slow motion of the adoption of e-commerce in the Kingdom
of Saudi Arabia. The study of Bayo-Moriones and Lera-Lo pez (2007) revealed that these
hinders are caused because of lack of understanding and awareness about the e-commerce
applications and technologies and the benefits of using these applications and technologies,
security concern, huge initial set up cost, lack of legal and governmental system and lack of
products and services suitable for e-commerce.
Extent of
E-commerce adoption

Barriers

Technical Barriers

Financial Barriers

Organizational
Barriers

Barriers

Environmental
Barriers

Barriers

Behavioral Barriers

Governmental
Barriers

Figure 1: Barriers of Ecommerce in KSA (Esslinger, 2011)

Wiesenthal (2012) mentioned the technical barriers, which are related to the required
technologies for the required task of the organization, lack of knowledge and training to operate
those technologies, security and authentication complexity of the technologies. These technical
problems can lead the organization especially Small and Medium Enterprises (SMEs) back in
using e-commerce applications and technologies. Indeed, many studies proved that the main
technical problem is the security risk that hinders e-commerce adoption in developing countries
like the Kingdom of Saudi Arabia.
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According to Marsillac (2012) financial hinders to adopting e-commerce in developing countries


are related to the uncertainty of the financial start-up cost, back up and financial return from this
investment. E-commerce adoption requires a lot of set up cost to initiate. Besides this, training
cost, market uncertainty about success and the investment risk are the financial barriers of ecommerce adoption.

Organizational barriers to e-commerce adoption are very common in Small and Medium
Enterprises (SMEs) sector. These barriers comprise of the lack of knowledge and understanding
of IT and technological aspect of e-commerce applications and technologies.

Again, According to Lo et al. (2013), governmental policy plays an important role in adopting ecommerce by SMEs. The government has to establish various policies like deregulation of
telecommunicat6ion sector and legislation of cyber law. Besides this, the government has to
promote the use of internet and e-commerce among the business sectors by providing incentives,
funding and training. That is why; government is considered is one of the main catalyst of ecommerce adoption in Small and Medium Enterprises sector. Conversely, if the government
cannot support and give effort to e-commerce adoption, the whole e-commerce system and
business society will be hindered.

Garson (2014) showed in a study that environmental factors are important in case of adoption of
e-commerce. Environmental factors especially organizational environment such as the state of
the infrastructure in the economy, mentality of the business people, literacy and knowledge about
IT and e-commerce in the business arena can encourage the adoption of e-commerce in the
business society as well as SME sector. Conversely, if these environmental factors are negative
to the e-commerce and IT, e-commerce adoption will be hindered. Again, Jun et al. (2003)
mentioned that organizational environmental factors such as the readiness of the business
partners and the business society could affect the e-commerce adoption. If the business society
and trading partners are not ready to cope with the e-commerce technologies, then it will be
difficult for the firms to adopt its e-commerce applications and technologies.

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C
H
A
N
G
e

Knowledge

The behavioural hinders of e-commerce adoption are related to the factors with the attitude of the
people in the organization about the e-commerce and internet. Tough the e-commerce
Uncertainty
applications and technologies change the life style and business style of the people, some are
reluctant to cope with the changing era of technology to maintain their work routines and work
habits with the help of e-commerce applications and technologies (Uruea, 2014). Again, the
adoption of e-commerce applications and technologies require intensive and rigorous training
course and practice of the employees in the organization. That is why; the people not love
challenge in work do not want to adopt e-commerce applications and technologies in their
business area. The diagram presented below can show all the barriers to e-commerce adoption.

Figure 2: Barriers to e-commerce adoption

(Bizer et al, 2014)

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2.9 Integrating DOI and TOE to study the determinants of


e-commerce adoption
There are several studies the adoption of information technology innovation. Rogers(1983)
developed a theory called innovation diffusion theory that is essential to study the determinants
that facilitates or hinders technology adoption and diffusion. The theory mentioned that five
factors such as; relative advantages, compatibility. Complexity, observability and trailability
determine the adoption rate of innovation and ease of implementation.

Deif (2011) developed a framework called the Technology-Organization-Environment (TOE)


framework. The theory explains three contexts that a firm can use to determine the ways to take
the benefits of new technology.

Technological context

Nature of the available technology in the industry that


determines the ability of the firm to move on
innovation initiative

Organizational context

An organization features such as size. Centralization,


formalization, quality of human resources and
organizational structure

Environmental context

Organizations, its competitors, resource suppliers.ans


government

Figure 3: benefits of new technology (Rahman and Akhter, 2010)

Pirraglia and Saloni (2012) argued that the theory on the diffusion of innovation (DOI) and the
technology-Organization-environment (TOE) framework is considered as appropriate theoretical
foundation for studying e-commerce in organizations after a thorough investigation in the
literature on information system innovation. In fact, the Technology-Organization-Environment
(TOE) framework and the diffusion of innovation (DOI) theory provide a reasonable and strong
theoretical development for studying technological innovation.

Page | 18

Moreover, Robotis et al., (2012) mentioned that integrating Technology-OrganizationEnvironment (TOE) contexts help strengthen what has been generally ignored in the DOI theory,
such as the organizational circumstances of a potential adopter and its macro environment.

In fact, the adopting organization needs not only to understand the technological personality and
the cost of the technology but also to be able to identify what business activities are likely to be
benefited from the application of the technology.

Webster (2012) argued that organizational province is important because plans for any changes
made without including organizational determinants normally would have unforeseen and
usually negative consequences.

2.10 Chapter Summary


In conclusion, it is to be said that there is a ground for the adoption of e-commerce applications
and technologies for the Small and Medium Enterprises (SMEs) in the Kingdom of Saudi Arabia
and the necessity and the demand of it is increasing from both the perspective of retailers and
consumers. The applications and technologies of e-commerce can uphold the innovation and
products or services of SMEs in KSA to such a place so that KSA can be a business hub for the
Middle East as well as whole world through the Business-to-Business (B2B) and Business to
Consumers (B2C) approach. Nonetheless, there has been some obstacles and hinders that deter
the adoption of e-commerce applications and technologies for SMEs in KSA. If the Kingdom of
Saudi Arabia (KSA) can turn the obstacles and hinders to possibilities, here will come a realm
where e-commerce will lead the SMEs as well as the whole business society.

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Chapter: Three
Research Methodology
3.1.

Introduction

This chapter will focus on research methodology. Questions raised above will be answered while
proceeding further to this chapter. This chapter will also show the way of research, the most and
widely used methods and which methods are preferred by the professional researchers for their
work. Collection of data is necessary for research work. Information related to e-commerce in
SMEs in Saudi economics will be presented with common methods of data collection.
Information relating to research and methods of research are shown in this chapter.

3.2.

Research Design

According to Churchill (1979), researchers are helped from literature review by the primary and
secondary data that are collected. There are certain steps that have to be maintained while
making a research design. Each step of the design possesses a certain period of time and that
should have been done within given time.

It is clear from figure that realizing convenience of each; researcher uses different types of
methods for completing research. Many methods have been observed and it is deduced that
experimental method is efficient and workable than others. This method of research is also called
the method of choice. It is the most scientific and most widely used method. Denzin and Lincoln
(2000) agreed on that note that every method except the experimental are all non-experimental,
their bases are theoretical while every research cant conducted on the basis of theory. They are
not proper methods for all kinds of research and conditions of the research arent considered

Page | 20

using these methods. So, researcher took the experimental method of research as a best
alternative.

Experimental method seeks a load of experiment in laboratory. So it doesnt relate much to the
practical data collection or analyze or other usual research works. This is considered the core
demerit of this scientific method. Harrison (2012) emphasized on the factor cause precedes
effects. It is helpful for the researchers since it can clarify the fact that what will occur if this is
the cause.

Philosoph
y

Approach
es

Strategy

Phenom
enology

Deducti
ve

Case
study
and
Survey

Choice

Quantitativ
e

Data
Collectio
n
Questionna
ire

Data
Analysis
case
study
and
survey
analysis

Figure 4: Research Design, Source: (Saunder et al., 2007, p. 132)

3.3.

Research Approaches

There are various types of research approaches as such: deductive, non-empirical, qualitative,
quantitative and empirical approach which is conducted to properly complete the research.
Researcher here adopts the deductive approach to evaluate the potential of e-commerce in SMEs
in Saudi Arabia. A study in which a conceptual and theoretical structure is developed which is
then tested by empirical observation; thus particular instances are deduced from general
inferences (Hussey and Hussey 1997, p. 19). Proving the statement given by non-empirical
approach by any valid data isnt necessary. Interview, telephone, physical visit etc work as
medium of qualitative data collection. Statistics and amount of outcomes from research work as
a focus in quantitative research approach. On the other hand, qualitative approach put importance
in direct and personal meetings with the sample of population. Researcher desires to determine
the marketers thinking about the Hajj and its economic sides through deductive approach. This

Page | 21

research approach enables the researcher to seek a clear concept of economic aspects of the Hajj
but it is not that much helpful for advance research. For keeping pace with the conditions and
operating further research for changing situations, empirical approach most suitable Hajj
management. Laiamputtong (2009) expressed that it is empirical approach which can recognize
the changing situations, can cope up with the situations and it is also able to produce a good
feedback for the researcher.

Flick (2011) categorized the research approaches into four kinds as such: descriptive, analytical,
exploratory and predictive. Esterby-Smith et al (2001) also agreed to use empirical approach to
research. As it is more scientific than others, collected and processed data through it can give
more effective and proper feedback to the researchers.

3.4. Research Strategy


With the aim to find out some opportunities, difficulties, barriers and others related hurdles or
chances a researcher needs to have some sorts of strategy plan to conduct a research. The use of
the word in different situation case study can be defined in different meaning as identified by
Knox (2010). But Yin (1994) argued that, case study is the difference between the real
environment and theoretical environment. To think about the reality it is the practical work which
we can start to think. To find out the subject matter case study is very much useful. A researcher
has to know a lot about the case in case of conducting a research study. Finally to deal with the
practical problems, the researcher will find out some plans and policies to solve the hurdles.

3.5. Research choices


Qualitative research is very much needed here to evaluate the economic opportunities of ecommerce in Saudi Arabia. Through the business research the whole environment will be learned
like the view of the customers as well as owners, opportunities and customer feedback, threats
etc. from the two method quantitative method will give the idea and statistical view of the
economy and qualitative method will give the insight about impact and benefit of e-commerce in
the economy.

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So, there are some rudimentary differences shown between qualitative and quantitative method.
In according to Babbie (2010) he pointed out that, to all the data numerically and then justifies it
based on the sample from the selected target market. He said that, to learn about the qualitative
method one has to evaluate the problem and prospects of a situation via emails, feedback and
interviews. The both method is also described by Anderson et al (2011). He described about the
both quantitative and qualitative function as fully numerical and theoretical respectively. Some
research technique which are applicable for qualitative and quantitative research suggested by
him.

Figure 5: qualitative and quantitative research differentiable factors, Source: (Farzin,


2010)

3.6. Data Collection Methods


There is no alternative of collecting data about the research to conduct the research and take
decisions regarding it. Data is the prominent factor and base of decision making. To take a
decision the researcher analyze, and interpret it to take a decision. Again to take any decision,
Harrison et al (2012) suggest that, data collections of primary and secondary nature are very
helpful. As Yeboah (2010) describe that, there are primary, secondary and both nature of data
Page | 23

exists. The basis of this research is opportunities lies in Saudi Arabia on the e-commerce factors.
The researcher needs to collect primary data. Primary data can be collected by different
telephone conservation, emails, and survey monkey to collect data from different Saudi business
owners. It will capitulate on the factor that, non-oil economy can be a growth factor for Saudi
Economy. The researchers have used different methods to aggregate information.

The questionnaire is considered the best in quantitative data collection. And all the questions in
the questionnaire must relate with the considering benefits of small business in Saudi Arabia. All
the questions must be answered by the small business owners and employees. The list of
problems and opportunities can be identified by the researcher by using quantitative method of
data collection. After making the survey, there may be several opportunities regarding Saudi
economy. The questionnaire must be answered by the business people along with some other
management people. On the contrary the author selected 3 other types of case study of different
companies. The author will identify the opportunities and threats, situation and structure with
management performance or shareholders interest.

On the analysis of data chapter 4 will be dedicated. With various diagrams the qualitative data
will be presented. After doing all sorts of this it will be easier to the researcher to understand and
take decision regarding the research questions.

3.7. Research Ethics


The researcher has filled the compulsory research forms. All along the research the teachers
guideline were maintained at optimum level. The feedback of the people and the way
interviewing the people were ethically maintained. According to Gomm (2008) it is the
researchers responsibility to keep information hidden and not to abuse them. People who gave
the feedback, protection must be given to them by the researcher that they will not be harmed.
The participants were fruitful and friendly and they kept the secret as secret.

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3.8. Data analysis


In chapter 4 the data has been analysed though to examine the data the figure presented here will
a lot the researcher. By the point of Sanger (2012) to operate various types of research the
researcher have to several theories used by different writers. The case study and questionnaire
analysis are the 2 most important approach used in this method of research. In figure 4 they are
shown effectively.

By using the different research elements or graphs can be presented. According to their category
the aggregated qualitative and quantitative data are presented in the case. Questionnaire is the
method of collecting secondary data was helpful to the researcher by the form of questionnaire.
The form of bar graphs, cross tabulation and pie chart helped the researcher to analyse and
summarize the data. This presentation helps to compare between the data of the graph very
easily.

3.9. Chapter Summary


This chapter totally dedicated on the method of research. And to help conduct the research the
researchers have chosen the best approach among them. The prime method of this research was
the Phenomenological Philosophy research. There was the application of different data
aggregation and collection. At the time of general research the non-empirical method were used
but when big decision involves the empirical methods were used. Several methods are used like
the exploratory, qualitative and quantitative, deduction method and other methods are used to do
the research. So in the next chapter the data analysis and data result will be shown thoroughly.

Page | 25

Chapter: Four
Findings and analysis
4.1. Introduction
From the collected questionnaire data author is going to analyse and present in this chapter.
Survey has been conducted by the researcher and collected data from 58 entrepreneurs, owners,
managers or employees of the SME business in the KSA. The questionnaire analysis and the
question asked at the survey helps the analyser to put his concentration on the set of the
questions in order to opportunities of adoption of ecommerce in SME in KSA. The participants
have provided various information and they helped a lot to the analysis of the research. Here
result analysis is being presented objectives by objectives. Again, case study has been conducted
to fulfil the objectives that are presented here.

4.1. Questionnaire analysis


Analysing E-Commerce adoption in SME sector for both Retailers perspective and
Consumers perspective

Page | 26

The first objective was to analyse e commerce adoption in SME sector. To fulfil the objective
some questions were asked. After knowing their introduction firstly asked about the adoption of
the company. Majority (25) of the participants replied they integrated e-commerce

Figure 6: Pie chart of adoption of the company survey data

Another question was asked to know how long it needed to implement. 27 (47% of all)
participants said that implementation took less than one year. On the other hand 7 participants
said they needed less than two years.

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Figure 7: Bar chart of data of how long it needed to implement

Researcher questioned why the company did not plan to adopt integrated e-commerce. They
think that they lack of security.

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Figure 8: Cause of not integrating ecommerce

Then they were asked to know the factors to be successful. They recommended that education
and training is the most influential factor. On the other ways they put less importance to the
timing.

To understand the benefits realized through e-commerce adoption in B2B area and B2C
area

To know the benefits and how to gain there were some questions too. These are like below.
Would you like to create a referral program? Answer was positive by 36 managers/owners and
negative told by 40% respondents.

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Figure 9: Pie chart of collected data to know who want to benefit business

Again a question was like that Do you think it as an advantage to reach customer? 64 % (37)
participants put tick to the positive answers.

Figure 10: Respondents reply against the question about the benefits of ecommerce

Page | 30

In your view, what do you think are the key benefits associated with E-commerce? 16
participants (28%) replied that it Increase sales and decrease cost. Very least number 7
participants said that it Increase the speed and accuracy with which business can obtain
information

Factors hindering the adoption of e-commerce in KSA

Question was asked about disadvantages or problems when using integrated e-commerce. They
highlighted difficulties in maintenance and upgrading. Very least number mentioned the cost.

Figure 11: Bar chart shows the barriers to adoption

After that researcher put question main challenges to implementing E-commerce in Saudi
Arabia. They mentioned that Lack of security equipment to deal with threat of credit card is the
challenges. And it came from 25 (43%) respondents. Out-dated business practices and business
mentality of some business organization was answered by only two respondents.

Explaining Integrating DOI and TOE to study the determinants of e-commerce adoption

Page | 31

Final objective was to explain integrating tools and study determinants of e-commerce adoption.
And asked to know what factors influence their choice when choosing integrated e-commerce
solutions. Budget was the answer of them by 21 participants then 14 respondents said it is
complexity of the solutions.

Figure 12: Column chart of showing influential factors of integration

To collect data on what benefits or improvements their company gain does after adopting
integrated e-commerce there was a question. 30% managers said they get the benefits of Faster
response time and again very few (almost 5) said about the reducing cost.

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Figure 13: chart of benefits that owners get after adoption

Finally they give information that they (31 respondents) will practice E-commerce in future
definitely. On the other hand 3 respondents were to shut down the service.

4.2. Case analysis


In this section an existing case on the ecommerce and SME has been presented.
Here the researcher chose two cases. Following lines are describing them.

4.2.1. Case no- 01: TAK MACARON


Facts about company and situation

The inception of the firm was in 1995 and then one year later it started its journey in production.
The firm is equipped with high tech machineries which come from Switzerland and Italy. Not
only the machineries are totally automatic but also the employees are well trained and educated.
On the upsurge demand of domestic market and related technology and of this booming demand
the firm laid its foundations. A very well-known supplier firm of this industries of machinery
represents one of the sister firms. Turkish products were in dominant in this market from the
establishment. The firms became able to replace the Turkish products due to some product
quality and quantity and then regaining the largest market share and became the market leader.
Page | 33

There are several motivation of the company among them are the growth, increasing competition
in the global market and other factors like the improvement of product quality as an impact of
production. In a sense the more rapidly they know about the market the more quickly they will
find an agent or distributor.

In 1997, by forming cooperation with domestic and foreign agents they started their international
operation. By this policy there was some exportation in Arab neighbouring countries in the
Persian Gulf. In recent they use another agent for the use of other policies and determination of
chances. A very useful Website constructed by them and which brings favourable results to them
in business relationships.

Management Performance

Domestic market has gained the respect of top management and they give priority to the market.
So after the development in every sector and become the market leader the development
activities related to the increasing production capacity (400 tons per day), and as an alternative
for growth development exporting had taken into consideration. However to launch their
important international activities and seek out the opportunities they mainly rely on their agents
and market research and relationship with other businesses. In each market there are some agents
and businessmen who are considered to be the sources of information for market expansion. This
is not an end the firm also introduces some projects for market research which are either
dependent on their agents or others with whom the firms have better relationship for information
collection.

SWOT analyses

In the pasta industry the firm is fully equipped with their best performances. They have the
educated and technically trained employees. Furthermore, SWOT analysis of the company is
below

Page | 34

Strength: In the pasta industry the firm is fully equipped with their best performances. They
have the educated and technically trained employees. The firm reaches the top as a market leader
within a short span of time. The prime competitive advantage of the firm considered to be the
4Ps- product, price, place and Distribution. They have pasta with different flavors and shapes
according to the customer demand to distribute. To fulfill the demand of customers they have the
ISO and TUV certificates with all other necessary subjects. As an extra competitive advantage
the firm earned the food industry health certificates for Iran. Therefore to improve and
internalize the product the firm started the production of raw materials, flour, by importing and
installing several factories for the production of flour.

Weakness: According to the perception of the interviewees the normal national condition of a
country do not support export and exportation. The main obstacles of exportations are includes
the implicit rules and regulations with high rate of exchange and transportation cost and
ineptness in promoting the export activities. In spite of these kinds of export barriers no
restriction maintained for importing pasta.

Opportunities: Due to existence of several home producers and free import there was a very
intensive competition in the domestic market. But the knowledge of the firm about the market
with providing optimum combination of technology and product with good quality, innovation
and diversification helped it distinguish itself from the others.

Threats: Between the customer transaction and the network there was an issue of e-commerce
and security related issues. In traversing the website hackers can be a great threat to the firm as
they can gain access to the security concern of the firm. Another prominent threat to the ecommerce website is the malicious software and viruses. The virus can copy itself automatically
and can infect the internal system if it enters unintentionally or intentionally into the website.

Entrepreneurs (owner/manager) characteristics and motivations

Page | 35

Very knowledgeable person are considered as the founder and businessman of the firm and they
have depth of knowledge about the domestic and world market. They are considering and
established this firm to fulfill the upsurge need of a foreign producer- mainly the Turkish
producers. A sister concern which is producing carpet and another is the only agent of world
known machinery brand comes from Switzerland.

With a good knowledge and perception about the international activities, the interviewee is the
manager of export of the firm and also an educated woman passes B.Sc. in biology and B.A. in
management. She quoted that, though they have a better position in the domestic market but they
have to compete in the international market. The firm actually succeeds to develop its active
participation in the world market because of her robust characteristics and attitude mainly on the
region of Middle East and North Africa.

4.2.2. Case analysis 2- TABAN ELECTRIC


Brief history of the firm, its activities and position in the domestic market

The interviewee who is assign as the managing director, with some of his classmates he establish
this organization and become the popular founder in 1975. The firm at first started its business
focused on imported goods but at the later it develops its capability its production. When the
Islamic revolution happened in Iraq, there were very much concern on security and then the firm
started to give extra concern on security threats, anti-burglary systems- protection and thief
hunter. They were very fruitful. The issue of construction was set forth when the war stabilizes
and terminated. They were urging to change the product as suggested by the researchers and they
started to shift over door phones and construct the new production line in 1990. Four years ago
they had started to produce audio door phones and after that they go to produce in an extra
production line and producing video door phones by taking license from a Korean firm.

Management Performance

Page | 36

By contracting a license agreement with a Korean firm they started their operation in
international activity and gain the right to produce visual door phone rights from them. By
achieving this technology the firm not only dominating the domestic market but also expanding
its business into international market and seeks opportunity to penetrate the regional market with
local or global services. By the past successful experience against a foreign market against the
Chinese product the firm started to believe that they will be able to enter the foreign market
successfully. Their operation started from the neighbouring countries and regional markets. They
are considering many potentials market around it and by which Kuwait is more potential to
exportation.

Because of the low price of under license products than the original products, the entrepreneur
developed the belief that they can export the product to Korea. Though there is information
available about the market opportunity, the exporter has the belief to collect information from the
websites, available secondary data and several trade fairs and magazines. The prime eagerness of
the managing director is the presence of national pride and interest in production. According to
him Profit is the last motive and there are many opportunities rather than manufacturing in Iran.

Again the managing director believes that their firm should expand overseas. By participating in
international exhibition, different advertising campaign in magazines Yellow pages, taking
suggestion from various directories and provide technical brochure and catalogues to the
potential and actual customers. To build a good relationship with the customers they have also
build a website than can provide related and valuable information to them.

SWOT analysis

Through the form of licensing, direct and indirect exporting, technical agreements the firm has a
wider relationship with the global market. Both in the R and D and production department it has
70 employees who are working on it. The following lines will describe the SWOT analysis of the
firm

Page | 37

Strength: The three board members of the firm are very well experiences and they are University
graduates. These members of the firms are handling the decision making process. Their focus
always remains to the innovation and modification of products. Any investigation or suggestion
goes first to the R and D department and then pretest it in the market place for feasibility. But the
final decision are taken regarding the feedback taken from the market pretesting. Through the
form of licensing, direct and indirect exporting, technical agreements the firm has a wider
relationship with the global market. Both in the R and D and production department it has 70
employees who are working on it.

Weakness: The main problem about the firm in the international market is considered to be the
perception about Iran in the mind of consumer. They are extremely facing the origin of the
product disadvantages. So to overcome this disadvantage firm had agreed to export the product
without the indication or symbol of the country.

Opportunities: Because there are other company competing for it and import is free so the
competition is very intense with several other domestic producers. But they are considered to be
the dominant brand because of three things- quality, efficiency and after sales services. In the
domestic market sector they have been very successful. But in order to compete in the foreign
market they have to upgrade their machineries and for that they require heavy infrastructure
investment. In Europe and Japan they have very well-known competitors and at recent they are
targeting the neighboring countries for exportation. At the same time they are also testing their
exportation feasibility in European and Canadian market also, but unfortunately there is no
success in the bag of this company.

Threats: The founder who is an engineer has an attitude to follow the growth of company in the
view of modification and innovation of products. Their competitors in the domestic market are in
no existence because they provided better product then others and well accepted by the
consumers. They also reached in a licensing agreement with a Korean firm to introduce new
products in the market.

Page | 38

Therefore they are searching for cooperation with the competitors of it because they want
technical and supply support of their product under the shadow of a well-known brand and
ensure their active presence in world market extensively. Most of the time they are trying to
reach their customers by customization of the orders given by the customers, but it becomes
costly to the customer as well as the company because their manufacturing equipment is too old.
And that is the prime cause of their searching for cooperation with established well-known
brands.

Entrepreneurs (owner/manager) characteristics and motivations

As discussed earlier the company was established by the founder 30 years ago with his
classmates association and he is an electrical engineering graduate at that time. After that on the
basis of market knowledge and other experiences they have become successful in meeting the
market requirements.

4.3. Chapter Summary


This chapter has analysed the data that are collected from survey and the secondary data from
case studies. After that, the researcher will concentrate on the discussion of the findings from the
questionnaire and case study. Chapter five discussed the result with the compare and contrast of
different authors view.

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Chapter: Five
Discussion of the findings
5.1. Introduction:
As per the outcomes of the study of chapter four, this chapter will discuss data in order to fulfil
these research objectives. Here all these discussion are made objective by objectives.

5.2. Discussion

Discussion on E-Commerce adoption in SME sector


Chapter one of these studies has discussed about the implementation of ecommerce in SME
field. In chapter two, many experts such as Deif (2011), Zhu et al (2012), Pirraglia and Saloni
(2012) etc. described more about the implementation of ecommerce. Jeyaraj, Rottman, and
Lacity (2006) have described about two types of pressures of the adoption of ecommerce in SME
sector. The pressure from the customers and suppliers are known as external pressure and the
pressure from the competitors are known as competitive pressure. The suppliers and customers
are the trading partners of business. SMEs feeling the external pressure from the suppliers and
customers, because, they are using more updated technologies. That has forced the SMEs to be
the part of larger system. Scupola (2011) found that environment factors are dominant elements
of ecommerce adoption in Denmark and Australia. The consulting services about ICT and the
pressure of customers and suppliers were the main factors in e-commerce adoption.

Though the SMEs have limited resources, they are finding the way of using ICT and other ecommerce models to adopt the e-commerce. It is very necessary to survive in the competitive
situation, because, many researchers have shown the importance of e-commerce in SME sector.
For any innovation it is important to have an efficient CEO (Chief Executive Officer), who is
attentive and courageous to his job and must have the quality of maintaining the activities of the
firm. In addition, the CEO will be able to think, decide, make hypothesis, and adjust with the
changing environment of the SME sector. Many experts have told about some other reasons that
are not actual reason of adopting e-commerce in SME field, but Robotis (2012) claimed that UK
SMEs are adopting e-commerce for increasing the sales volume.
Page | 40

Webster (2012) focused on the external pressure as the main cause of e-commerce. New
customers have new expectations about the value of the products. Again, their demands vary
from the previous customers. In addition, they want products in lowest cost.

Alblas and Wortmann (2012) stated that there are four stages of adopting e-commerce for SMEs
in UK. The stages are: developers, communicators, web presence, and transactors. In the first
stage, the developers should enable the websites and email. In second stage, the communicators
will communicate with the suppliers and customers by using email and other electronic ways of
communication. And in third stage, there will be the facilities of purchasing and ordering in the
web presence. In addition, the last stage ensure the ordering and payment system through
internet. There are some opposite thinking about the stages of e-commerce adoption, because,
any firm can avoid one of the stages. Alfieri (2012) has defined the infrastructure of the country
and influence of the government as important factors that need to consider when adopting the ecommerce in SMEs.

To understand the benefits through e-commerce adoption


There are various types of benefits that can be gained through using the internet. And, there is
lack of using standard business model. So, we used the term perceived benefits for the benefits
that are achieved through using internet. It is very difficult to find out the value of perceived
benefits, so, it is in theoretical form now. If anyone wants to consume a product or service, then
he/she need to follow some stages. The customers will search the information of all the related
products, will examine the entire alternative, will fix the price, and will look at the delivery and
after sales services. It is impossible for us to find out the numerical values of the perceived
benefits of using internet because no one has described the numerical analysis of the benefits.
But, we tried to collect the feedback from the owners who have achieved benefits by using
internet in past. And, what they think about future or how they can get benefits in future through
internet.

Page | 41

The maximum participants of this research have told that they are using and adopting the internet
because they get the perceived benefits. In addition, Denizel et al. (2010) claimed perceived
benefits as the core reason of adopting EDI in SMEs. In this research, we have categorized the
perceived benefits as direct and indirect. There are some benefits which are easily measurable in
numerical figure, which are known as direct perceived benefits. On the other hand, indirect
benefits are those benefits which are not easily measurable and predictable in numeric figure.
This classification was done by using the example of Seuring(2013).

The perceived benefits can also categorized as short term and long term benefits. The benefits
that can be achieved within few months are known as short term benefits. On the other hand, the
benefits that take too much time to achieve can be termed at long term benefits. Those benefits
are classified on the basis of business development rate of using the internet. The short term
benefits of using internet are less. By surveying the participants we got the information that the
immediate return of the investment is very less or sometimes it is zero. In addition, it becomes
difficult to overcome the connection cost through the short term benefits.

The feedback of the respondent firms regarding the use of internet was that they can use the
internet only to get order or purchase decision from the customers. This is the only way how
internet can add value to their SME business. From the answers of respondents we understood
that they use the internet only to communicate between the customers and them. They dont have
any other use of internet so; internet was used as the alternative of telephone and fax services.
The respondents who were little a bit positive about the direct or short term benefits also
confirmed that the direct benefits are less and they got benefits because of impact of a situation.
They want to continue using the internet because of having long term indirect benefits from
internet. In addition, they think internet as less costly than others which are used to know about
the global market. Business development through internet is the main reason of their connection
with internet. Furthermore, they believe that those who dont have presence of internet that who
has no email address or website, will suffer a lot as an important disadvantage.

Discussion on factors hindering the adoption of e-commerce in KSA

Page | 42

The enterprises do not focus on the number of users of internet rather these enterprises focus to
adopt internet in doing business. It is the same case for all the enterprises whether it varies from
region to region or in the size whether the enterprise it small or medium.

It is similar with other research that the SMEs need to face some barriers to use the internet in
doing business. Lack of security and privacy is considered as one of the major barriers of using
internet in this research. There are some other barriers such as the lower speed of internet, slow
transaction, lack of knowledge about internet, lack of ICT skills, and lack of skills of doing
business. These barriers are shown as major barrier in other studies and have given low priority
in security and privacy. Generally, the area where manufacturing activities are done need more
security and privacy.

Consultancy fees are considered as the second largest barriers in using internet. According to
Rogers (2012) this result is also fixed for foreign research. In addition, it was an issue of
discussion in every region. Though the government is looking at the issue, but it is not enough
for the manufacturing industry. So, there are lack of government supervision and facilities, which
are third largest barrier.

The organizations who are respondents told about some more problems along with privacy and
security problem which are needed to solve to do business through internet. Some other
important problems can be the consultancy fees, lack of knowledge about online business, IT
expertise, and lack of understanding of business systems. By considering the functions of stage
three, it should be confirmed that the website is well designed by expert. And, the website will
have to be easy to use for the customers. In addition, it is critical to ensure the standard of
function, navigation, and continuous development.

By discussing with two organizations, the researchers have found that the consultants cost vary a
lot. Two websites with same features can cost 10000 to 1000. For example, a consultant has
billed 40000 for a website with some particular features. In next year, the same consultant has
billed 6000 for a website with same features. So, there is always suspicion in the mind of the
business man, which is one kind of barriers for the business.
Page | 43

According to manager (male, 40-49 years, medium organization in other manufacturing, SE


Melboune), It is difficult to find out the perfect IT specialist who can design the website by
knowing about their business. Again, 120 per hour is very costly for them to engage in contract
with consultants. The quality of consultants depends on the fact that how much consultants know
about the computer. On the other hand, director (male, 30-39 years small organization in other
manufacturing, SE Melbourne) compared with smoke and mirror effects. The field of IT is very
large. So, the consultants are learning new things about the IT fields with the high fees of the
customers.

All the respondents of the research has confirmed that the manufacturing industry do not know
about the available ways or resources to do business in online. No one has made them aware of
those facts. So, these have become the common beliefs of the small and medium enterprises as
well as these do not vary in different regions. The enterprises do not aware of those facts, so it
has become one of the major barriers of adopting e-commerce in their business.

Integrating DOI and TOE to study the determinants of e-commerce adoption

Finding out the factors, elements, process, and models that are related with the adoption of ecommerce in SME business was one of the major objectives of the research. After analysing the
collected data, this part of the study describes about the results. This study has found that, the
seven factors of total eleven factors have major impact on the process of adopting the ecommerce in SMEs (Denizel, 2010). The most influential factors that have impact on the
adoption of e-commerce are support of the government, nature of competition, financial
condition, organizational functionality and continuity, adaptability and mission of the
organization, structure of IT, relative advantage. These factors are from the independent variables
of adopting the e-commerce. Wiel (2012) debated that, to understand about new innovative
technologies, it is important to have good technological knowledge among the employees. Again,
the knowledge of technologies should pass from one to other within the organization. This helps
an organization to adopt a new technology easily. The SMEs of Jordan should train the
employees to learn about the technologies. The firms should encourage the employees because it
will develop their knowledge which will help them to achieve the ability of adopting new
Page | 44

technologies. It is common that elements of TOE are influential. By analysing the study of Ilgin
and Gupta (2010) and this study, it can be concluded that TOE factors always play an important
role in the adoption process of e-commerce.

Relative advantage is very much important factors in adopting a new technological adoption,
which was also confirmed by some previous studies. The researchers have identified the
importance of adopting the use of internet in SMEs and wanted to make sure that, the SMEs will
understand about the importance. The adoption of internet will help the firms to provide the
services more quickly and perfectly to the customers. And, it will help to make good
communication between the customers and suppliers. There will be no bureaucracy which will
make the firm as a successful one. At the same time Shittu and Baker (2010) argued that lots of
things of e-commerce adoption depend on the infrastructure of IT. The previous studies also
found the same results by researching on the adoption of e-commerce. As there is lack of IT
infrastructure, the common firms are finding less interest in adopting e-commerce in comparison
with the technological developed firms. Sarkis and Yoo (2012) stated that, mission of a business
firms plays an important role in deciding whether the firm will go in e-business or not. At the
same time, business consistency and involvement has large influence in adopting the ecommerce in business. Briefly, it can be said that the culture and the information system of the
firm has most influence on the e-commerce adoption process. Along with previous studies this
study showed that, financial factors are very important for the e-commerce development and
adoption. A firm will not able to adopt e-commerce, if the firm suffers from financial crisis.

5.3. Chapter Summary


This chapter has discussed about the findings of the result the following chapter will recommend
the study, explore the future research scope and finally the chapter concludes the whole research.

Page | 45

Chapter: Six
Recommendations and Conclusions
6.1. Introduction:
Within this chapter the author would like to present some recommendations on the study and
then say something about the future research scope. This will reveal the future opportunity or
field to study again. Finally the researcher concludes the study.

6.2. Recommendations:
E-Commerce adoption in SME sector

Among many other things, the target area of E-commerce is consider to be frequent and adequate
use of internet, infrastructure modification, more and more emphasis on broadband internet
access with low cost in mind.

Customers as well as business should be the primary and significant focus for the Ecommerce awareness campaigns. The criticism regarding the reliability and security is
heating up day by day. So, a central certification authority must be considered with public

key infrastructure (PKI) encryption system.


If the setup is successful that will ensure the proper evidence along with integrity and
confidentiality. The non-repudiation service for business turning to E-commerce will also
be ensured through that process. Another important term called legislative framework can

be set up to maintain the ongoing online privacy and security.


Regular controlling, monitoring of progress and internal flexibility for rapid decision will
be required to achieve the mentioned goals as well as human skill and resources
development. To make the E-commerce more dynamic and effective along with the

Page | 46

prospectus of these goals, a steering committee can be set up with official individuals
from both private and government sector to monitor the progression and implementation.

To understand the benefits realized through e-commerce adoption

Integrity can be one of the most remarkable tools for the succession of E-commerce. However,
some recommendations is given that may be useful for the enhancement or advantage of the
business.

This study found the remarkable outcome in the online sales in last few years. So, now
the primary target of the businesses is to ensure the simplicity of accessibility and

convenience included in the E-commerce business.


It is generally perceived that the online payment system is much more complicated and
diversified as well. But E-commerce recently amplified about the simplicity of payment
system. This derive the interest of large scale of customer including past customer and
buyers who though the payment system is complex. Now, as it is easy payment system

more and more customer of small business gets more customers than before.
Another most important recommendation for E-commerce business is to ensure rapid
transaction system which will attract the buyers and seller of E-commerce. Moreover,
sometimes the online merchants face some difficulties and complexity regarding their
payment system and have to wait for a long time like for 30 days or more. E-commerce
makes things so easy in case of payment system that only takes a few minutes and only 23 days to get the cash in merchants bank accounts.

Factors hindering the adoption of e-commerce in KSA

Some hindrances are addressed for the failure of the E-commerce. Factors like reliability,
privacy, security, standard

issues

etc.

blocking

the

proper

implementation.

Some

recommendations are given to improve the situation.

Page | 47

There should be a significant and quick change in the software developing firm.
Development of network bandwidth in some states may be not possible because of the

inadequate telecommunication. So improvement is must in this section.


Highly qualified and dedicated experts on E-commerce software or website should be

hired to maintain the E-commerce updated and successful.


Ensuring Privacy and security is the synonym of success in E-commerce. So the business
owners should consider that issue.

Government in some states may not be motivated to focus on this sector regarding the
telecommunication service and promoting regional cooperation. So owners should note those
areas where government initiatives are poor or even none.

6.3. Future Research Scope


Conceptual model on SMEs E-commerce is only focused in this study. But the report should
make scope for future research. There may be a lot of research issues regarding these criteria in
the future. For example, it is difficult to identify the consideration including legitimacy changes
from the consideration including competition. Questions can be arise to see how the different
style of innovation can be on objective organizational context including size, strategy, resource
base or subjective conclusion by the decision maker at the organizational level. In order to find
out the role of decision maker in a SMEs innovation adoption several more study has to be
implemented.

o Several researches can be done on the effect of change in the determinants of both
organization and environment and also their effects on the decision making process in the
organization, ranking system of firms regarding the different influential factors.
o Moreover, since the reasons for differences in organization and industry characteristics
and also adoption of different factor are unknown in previous studies the outcome
became different and inconsistent as well. So, proper design regarding study and
appropriate methodology should be used in order to resolve this inconsistency among
studies.

Page | 48

o Implementation of stage-based business to business (B2B) E-commerce may be a scope


for study in the future as none of the present study focus on that. It is important because
there is enough report on the innovation adoption and information system on B2B but
there is no research on the implementation of stage-based B2B E-commerce and this is
significant as the in the implementation of B2B E-commerce the factors can be varied at
different stages (adoption, internal diffusion, external diffusion etc. stages).

Although several studies on the adoption of B2B E-commerce are done, inconsistency and
different outcome is observed among those studies is identified. This occurs as because the
common set of factors were not tested at all, use of diversity of contextual variables etc. so, the
future study can be on this criteria to make the study regarding the adoption of B2B E-commerce
more successful and consistent.

6.4. Conclusion
First chapter states the concept of the E-commerce as well as SME with detailed analysis of
specific targets, objective, significant, rationale, and structure of the research. In the literature
review section the objective are shown. In the objective section there is analysis regarding the Ecommerce adoption in the SME sector for retailer and customer perspective along with the
advantages of E-commerce adoption. The hindrances behind the adoption of E-commerce, DOI
and TOE to study the determinants of E-commerce adoption regarding the integration are also
discussed in the objective section. In the methodology section, result analysis and the steps of
research is stated.

Data of research was analysed using different analysis tool in the chapter four and in chapter five
there is elaborate discussion on research outcomes that was perceived by the author from the
research data. In this chapter there is comparison between several authors and writer about their
reviews. However, in this study researcher made some recommendation stating the factors that
can be useful on adoption of E-commerce and SME in KSA. Researchers also found that the
existent strategies and initiatives of KSA government are consistent with the opportunities of E-

Page | 49

commerce and SME in that region. There is also detailed discussion on the hindrances and
factors behind success of E-commerce in this study.

If KSA adopt and maintain the E-commerce successfully it will lead them to the western
competition in case of online and technology. Even though the KSA will be new to the Ecommerce world but if their capabilities and skills matched with the requirement of competitive
E-commerce then they will be successful in other several areas. Finally, the author concludes the
research by recommending more deep study on E-commerce and SME business.

Page | 50

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Appendix: 01: Survey Questionnaire with data


The following questions are for academic purposes only and assist us in
understanding and analysing the information your answers. Your answers will
help us identify the opportunities of e-commerce in small and medium
enterprises in Saudi Arabia. The details you give will be treated in
confidentially, and will not be used for marketing or passed to any other
organisation.
Participants Information
Your name

Post

Organization :

Analysing E-Commerce adoption in SME sector for both Retailers


perspective and Consumers perspective
1. Your company Has previously adopted:
a. Electronic-commerce (17)
b. Integrated e-commerce (25)
c. No electronic commerce technologies (16)
2. How long did it take to implement it?
a. Less than six months (14)
b. Less than one year (27)
c. Less than two years (7)
d. Longer than two years (10)
3. Why didnt your company plan to adopt integrated e-commerce?
a. Not necessary (8)
b. Too expensive (10)
c. Having little knowledge about integrated e-commerce (7)
d. Lack of IT skills (7)
e. Too complicated (9)
f. Difficult to choose integration solutions or vendor (6)
g. Lack of security (11)
4. What factors do you think are important for the successful adoption of
integrated e-commerce?
a. Education and training (11)
Page | 55

b.
c.
d.
e.
f.
g.
h.
i.
j.

Management support (9)


Change management (5)
Enough budget (7)
Timing (3)
Planning and scheduling (10)
Choosing correct integration solution (5)
Services offered by the technology or software vendor (4)
IT skills (4)
Others (please specify)

To understand the benefits realized through e-commerce adoption in


B2B area and B2C area
5. Would you like to create a referral program?

6.

7.

8.
9.

a. Yes (36)
b. No (22)
Cost of implementing E-commerce is not a problem in Saudi Arabia
a. Strongly disagree (5)
b. Disagree (7)
c. Neutral (11)
d. Agree (25)
e. Strongly agree (10)
Are you interested in integrating a blog/CMS (content management
system)?
a. Yes (34)
b. No (24)
Do you think it as an advantage to reach customer?
a. Yes (37)
b. No (21)
In your view, what do you think are the key benefits associated with Ecommerce?
a. Increase sales and decrease cost (16)
b. Increase purchasing opportunity for buyer (9)
c. Increase the speed and accuracy with which business can obtain
information (7)
d. Facilitate new type of competition (11)
e. Enable organization to educate customers and prospect (15)

To discuss types of E commerce applications needed by SME and


Factors hindering the adoption of e-commerce in KSA
10. What disadvantages or problems do you find when using integrated ecommerce? *
a. High cost (5)
Page | 56

b. Complexity (16)
c. Not flexible (9)
d. Difficulties in maintenance and upgrading (26)
e. Others (2)
11. What do you think would be the main challenges to implementing Ecommerce in Saudi Arabia?
a. Lack of security equipment to deal with threat of credit card (25)
b. Low personal income of citizens (11)
c. True and cost of implementation (5)
d. Low computer literacy level (15)
e. Out-dated business practices and business mentality of some
business organization (2)
12. Did you experience any of the following problems when you first
installed and started using the Internet?
Considerab
Some problem No problem
le problem
Difficulty getting
equipment

connected

using

Equipment more costly than expected


Deciding which ISP / comparing cost,
service
Deciding on equipment specification
Lack of information / advice / support on
how to set up etc
No problems experienced

18

31

16

33

30

19

18

10

30

25

15

18

18

31

Explaining Integrating DOI and TOE to study the determinants of ecommerce adoption
13. What factors influence your choice when choosing integrated ecommerce solutions?
a. Budget (21)
b. Complexity of the solutions (14)
c. Time needed to implement it (6)
d. Legacy systems (9)
e. Others (8)
Page | 57

14. What benefits or improvements does your company gain after adopting
integrated e-commerce? *
a. Faster response time (17)
b. Improved efficiency (9)
c. Improved accuracy (4)
d. Reduced cost (5)
e. Improved customer service (12)
f. Enhanced capacity (10)
g. No improvements or benefits (3)
15. The likelihood that I will practice E-commerce in future is
a. Definitely not (3)
b. Probably not (11)
c. Probably yes (13)
d. Definitely yes (31)

Page | 58