Electronic Commerce in Saudi Arabia - Case Study Example

Introduction There has been a steady rise in the number of commercial organizations that are adopting e-commerce systems. It is believed that in future the systems will become vital in increasing income in addition to being a means of competition. In Kingdom of Saudi Arabia (KSA) e-commerce is still being looked at as being an innovation in contrast to the situation in developed countries where e-commerce is fully incorporated in daily business activities. ( AlGhamdi R. and Drew S., 2011) Despite KSA boosting of having the largest and fastest growth in Information and Communication Technologies (ICT) sector in the entire Middle East region, the country’s progress in e-commerce has been rather slow. Presently a very small proportion of Saudi commercial organizations are actively involved in e-commerce these being predominantly medium and large companies involved in manufacturing with the nature of business being business to business. It is in this connection that the question which comes out is what hinders KSA retailers involving themselves in e-commerce. The enablers of e-commerce between business and consumers in the desire of the consumer desire for greater variety of goods and shopping with convenience; the desire of business to access new market and protect the already existing market; the ability of the consumer to purchase goods and services; the availability of internet service and government promotion( AlGhamdi R et al ,2012). Lack of in infrastructure as challenge to e-commerce KSA One of the major challenges facing adoption of e-commerce in Saudi Arabia is lack of infrastructure. The availability of the internet broadband and speed of the internet has been cited as the critical factors that determine the participation in e-commerce. Even though there has been massive investment in IT infrastructure Saudi Arabia has been ranked number 52 out of 72 countries that were listed a report assessing the e-readiness of countries where the ICT infrastructure of the countries were assessed as well as the ability of their governments, businesses and the people to make use of IT services. As much as the 41.6% household broadband and 41.0% internet user penetration rates of 2010 was a good comparison with those of other Middle East and North Africa countries, the rates remained very low when compared to those in developed countries (Al-Somali S., et al.2011). The usability and interactivity of the websites is also an infrastructural factor that affects the level of e-commerce in Saudi Arabia (Tsai et al., 2012; Chiou, W. C. et al, 2011). The availability of online payment system has also been identified as factors that affect e-commerce where online payment systems are few. Trust and security, the assurance level provided by online companies are other hindrance to development of e-commerce as people avoid making online transaction due to these factors. An extensive study on various aspects of internet was done in 2007 Saudi Arabia including e-commerce awareness and activity. The study revealed that 9% of commercial organization in the country most of whom being were medium and large companies in the manufacturing sector were reported to be participating in e-commerce while out of ten companies only four had websites (Mutlaq, 2013). While 43% of the customers indicated they were aware of e-commerce it was only 6% who had bought or sold products online, with the most common transaction being hotel booking and air travel tickets. According to CITC’s IT Report 2010 the level of e-commerce in Saudi Arabia was described as being in its early stages (Hasan L. et al 2011). Most of the retail chains in Saudi Arabia had not established online channel with only 8% of Saudi Arabia business making online sells. Culture and language effects on e-commerce One of the major cultural reasons that that has lead to poor reception of e-commerce in Saudi Arabia is the lack of human interaction in the process of e-commerce (Alotaibi M. and D. Rigas,2012). Most of the discussion surrounding overcoming this barrier has suggested designing of new systems, devices, making improvement on the already existing devices so that usability can be improved. This do not seem to be the solution in Saudi Arabia as missing real contact with people due to reliance on electronic means was not preferred in many circumstances including contacting business transaction. People in Saudi Arabia culture have a preference to direct face to face business rather than involve in virtual contact (AlGhamdi et al, 2011). The people insist that they were still humans and these could not be compromised by use of technology. In a study done in the respondents regarded e-commerce as western world invention which disregards kinship, and eliminated visiting of relatives and reducing this to chats and web cam use. This line of thinking is a clear illustration the role played by Saudi Arabia culture in shaping the way business is to be done more so the Islamic religion. The Quran and Sunna put emphasis on maintaining a sense of humanity (AlGhamdi et al, 2012). Most of the people that play the role of decision making in Saudi Arabia organizations are ages 50 years and above who in most case do not know how to use the computer (Aldraehim, 2012). Most of these people have the capability of overcoming these barriers, but they will deliberately not make effort to do so due to them fearing hidden consequences such as luck of interaction with fellow humans. As a result of this fear many employees in Saudi Arabia may not be willing to use e-service because of being afraid of missing out on the human sense of dealing with customers whom they equally need their interaction just as they do. The people other fear is that technology is likely to lead inflexible processes that does not factor in special need to the customers. A good example is in a situation where a customer may be missing a certain requirement a certain business process due to certain reasons beyond their control thus the customers’ transaction may not be executed by the system unless all the requirements have been met. This may not be the case where an employee is involved and not the system with the possibility of the customer being exempted from the requirement due to their critical situation. Nepotism also contributes much to this situation where the Saudis would prefer trading with their relatives. This means that the customer may not eager to participate in e-commerce even if such system is more efficient as long as long as the services or products are not being offered by kinsmen (Aldraehim et al, 2012). Overcoming the challenges In terms of infrastructure the government needs to encourage foreign investors in the country who can assist in infrastructural development by providing friendly investment times. There is need to have policies that will protects the consumers and businesses from fraud when e-transactions are made. In order for this challenge to be over it is important for government to enlighten the people, more so the older generation on the need to embrace new technology in order to avoid their business collapsing or become more profitable. The government should empower young people and women so that they can be able to start their own businesses without depending on older men who are 50 years and above. There is need to invest in education with technical subjects being offered at tertiary level so that there will be enough local personnel in ICT sector. This will ensure that use of e-commerce is not seen as a threat to Saudi culture but as a means of ensuring high productivity. There is also need to have user friendly websites that will encourage people to make on line transaction. Conclusion While culture and language have been seen to be a major factor that hinder the development of e-commerce in Saudi Arabia it is clear that in the near future these force is going to be overcome. The use of e-commerce is going to be very convenient to the people while saving the government a lot of revenue as high efficiency will be achieved. Corruption will be reduced considerably because of e-commerce. On the other hand more effort needs to be made by the government in order for e-commerce to become a reality. This includes legislation to ensure consumers and business people are protected from fraud. The importance of welcoming foreign investors in Saudi Arabia has also been seen to be important in ensuring infrastructural development. Investing in technical education has been pointed out as the only way to ensure enough manpower that can spear head e-commerce development. Description of topic The paper has looked into the level of e-commerce use in Saudi Arabia. Lack of infrastructure and cultural and language are the two factors that have been pointed out as hindrance to e-commerce development. The solutions to overcoming the hindrances have also been given. Changes in the last 3 years In the last three years there has been improvement in e-commerce where use of smart phones has been increased. There has been increased web advertisement of businesses with many companies developing their own websites. Properties of sale can be accessed on line and the seller contacted over the phone so that arrangements are made for the parties to meet and strike a business deal. Projecting the future of e-commerce in next 5 years The next five years there is expected to be growth in e-commerce in Saudi Arabia in conformation with what is happening in the rest of the world. This is because there is a continued increase in use of internet together with the improvement in quality and the speed of services with the youth being the leaders in use of the devices. In many countries the governments are finding it convenient to adapt to e-commerce in payment of services like water, electricity, and other services through electronic means. The other trend is use of mobile money transfer which has proved to be very efficient and convenient. This trend is common even in many third world countries in Africa. The services are known to be cheaper and safe with use of electronic money transfer saving government money in terms of printing money and also reduced cost of transferring money physically as there is no need to offer security during the transfer and no use of vehicles and personnel. In the current world which is considered to be a global village Things are likely to change a lot to take advantage of the availability of technology and e-commerce is expected to advance. In terms of education e-learning is expected to be integrated into leaning system and this will make the society to be saturated by technology use. The government will put into place legislation so that the rights of concerned parties are addressed and confidence in e-commerce participation will be used. In these period we there most companies will be having their websites and people will be able to access information about the companies easily. There is going to be alliances between marketing and selling sites where search engines like yahoo and Matoub so that the sites will be promoted in exchange of ad spaces with businesses and news websites which will be expected to attract new customers with cost of advertising being eliminated. References Aldraehim, M et al (2012). Cultural Impact on E-Service Use in Saudi Arabia:The Role of Nepotism International Journal for Infonomics (IJI), Volume 5, Issue 1. AlGhamdi R. and Drew S.(2011). Seven key drivers to online retailing in KSA . In P. Kommers and P. Isaías (Eds.), Proceedings of the IADIS International Conference on e-Society 2011 (p237-244). Avila, Spain:IADIS, 2011   AlGhamdi R., et al (2011).Government initiatives: The missing key for e-commerce growth in KSA.Presented at ICCBS2011(International Conference on e-Commerce, e-Business and e-Service) , Paris, France. AlGhamdi R et al (2012). 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