The Impact of E-commerce Adoption on Management Strategy in Gulf Corporation Council Countries Enterprises - Research Proposal Example

? Topic. Exploring the impact of e-commerce adoption on management strategy in Gulf Cooperation Council (GCC) Enterprises: A Study of Saudi Arabian Small and Medium Sized Enterprises. Abstract and Background. The Kingdom of Saudi Arabia has been gradually moving away from its long term dependence on oil related income in recent years, and has turned to its small and medium sized enterprise sector to look for growth and development that will sustain the economy well into the future. The groundwork for this phase has already been done, since the Kingdom has negociated entryto the WTO and is steadily reforming and updating the legal system, banking rules and employment law in readiness for more participation in global market places. E-commerce has just begun to have a presence in the last few years but it is still uncertain how far it will be permitted to permeate Saudi Arabian business life. This study traces the adoption of e-commerce in SMEs in Saudi Arabia and explores what impact this phenomenon is having on management strategy. A survey of 50 managers is conducted in order to identify what has changed in their strategic thinking over the last ten years, and this is analysed in the context of GCC development potential in the next ten years. Aim. The aim of this research is to explore the impact of e-commerce on management strategy in Saudi Arabia SMEs. In particular the project will attempt to find out how far managers are reacting to the changes in the business environment that e-commerce brings, and how far they are themselves trying to drive that change or even avoid that change. Objective of the Research. The research has three objectives : To trace how far e-commerce has developed in Saudi Arabia up to December 2011. To find out what Saudi SME managers think about e-commerce at the present time To identify what impact, if any, e-commerce is now having on Saudi SME managers’ strategies for the future. Literature Review. There are several reasons why the situation in Saudi Arabia requires considerable innovation in the second decade of the twenty first century. After the boom years of oil production settled into a phase of consolidation, the country experienced an unexpected population boom which put pressure upon the employment market. Per capita income had been $17,000 in the mid 1980s but it had dropped to only $8,200 in 2003. (Looney 2004)The old rentier state dynamics are sorely tested when such a huge change occurs, and this one reason why considerable investment is now being made in the SME sector. The Gulf Cooperation Council (GCC) consists of 6 Arab countries: Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the United Arab Emirates and is well connected with other Arab countries in the Middle East and North Africa (MENA) region. It also enjoys good relations with the United States, and plays a pivotal role in international diplomacy. Saudi Arabia is one of the more conservative members of this group, and takes a leading role in religious and cultural affairs due to its stewardship of key religious sites including Mecca Studies on the economy of Saudi Arabia have noted that there is an imbalance in the workforce, with a tendency for private businesses to recruit staff from outside the Kingdom, especially in high technology or specialized fields, leaving the domestic workforce ill-equipped to adapt to the changing workplace requirements. Education facilities and worker expectations are not yet well matched to the needs of the private sector. An interesting dilemma that is beginning to affect the economy is the growing number of well educated women who are now able and willing to take part in the development of the Saudi economy. E-commerce has been a part of international business for around two decades, but it has still not penetrated into all geographical areas of the world, and into all layers of society. People tend to think of the term “e-commerce” as meaning just the process of buying and selling goods online, but in fact it covers a far wider range of systems and processes than just the sales function. There are various types of e-commerce, and these can be summarized as business to consumer selling (B2C); business to business selling (B2B); business processes that support buying and selling activities; consumer to consumer buying and selling (C2C), and business to government (B2G) selling. (Schneider, 2010, p. 7). This definition is drawn widely to encompass all the types of activity that come under the label of e-commerce. What these all have in common is that they take place using the internet or world wide web. Equipment used to access these processes can be static or mobile, public or personal and the transactions can take place locally, nationally and internationally. There are several components to the conducting of e-commerce, and these include the initial communication with the customer, usually over the internet, the actual process of making a payment, and then the delivery of the goods or services to the customer. This is true of business to customer as well as business to business types of e-commerce. Problems can emerge at each of these three stages. E-commerce is most prevalent, and also most studied, in Western Capitalist economies, with some transitional and even third world economies now beginning to catch up. In the Arab world Morocco leads the way in e-commerce adoption, with Saudi Arabia following behind in second place. (Sait et al, 2004, p. 56) A recent study noted that in 2005 there were at least 2.2 million internet users in Saudi Arabia which represents a penetration of only 10% (Alfuraih, 2008, p. 177) but the figures are likely to rise year on year as prices for connection are being lowered, and as the postal and payments systems begin to catch up with the demand for internet buying and selling. There are moves in Egypt to open up the country for more e-commerce, and to provide infrastructure through public-private partnership, although here too, there are problems in the infrastructure which hold back development. (Kamel and Hussein, 2001, p, 125) A more recent study of 300 mobile phone users in Oman concluded that 24% of respondents had experience of buying goods and services on the internet and that 66% would even be willing to try this using their mobile phone. (Manochehri and AlHinai, 2008, p. 5) Technology is moving on very fast in the region and there is evidently a potential market waiting there for those businesses which have the vision to develop suitable marketing and sales strategies to match. Thanks to recent successful efforts to join the WTO, Saudi Arabia has prioritized infrastructure developments that enhance conditions for conducting business with other countries. (Wahba, and Mohhieldin, 1998) It has been reported, for example, that 60% of Saudi managers “believe that membership in the WTO leads to a better business environment and most participants are optimistic that the future of business, for the next ten years is extremely bright.” (Ali, 2004, p. 230) Although it is still rather early to analyze outcomes of the WTO accession process, there is potential for Saudi Arabia to enter new markets, and to challenge protectionism that has in the past kept its enterprises out of certain areas. (Ramady, 2010, p. 320). One area that has aroused much criticism from international observers has been the strategic decision to rely less on foreign workers and encourage more Saudi nationals to take up jobs, using the Saudization process. This may well have a negative impact on e-commerce strategies, since Saudi nationals are likely to have less experience with e-commerce theory and practice than many international workers, especially in high technology businesses. Tensions are also present between some Saudi Saudi legal and governance procedures and the international norms which are proposed, but not always followed, by predominantly Western free market economies. A process of privatization has begun in Saudi Arabia, but there is still a long way to go before the private sector can develop freely and on a level playing field with the public sector so that private investment can be increased to fund further growth. (Fasano and Iqbal, 2003) The present study seeks to investigate how well managers are geared up to facing the challenge of e-commerce and how this new phenomenon has influenced their strategic planning for a future that looks to be very different from the experiences of the last few decades. Methodology. The literature review which has been outlined above will be expanded to include more up to date statistical data on the current e-business practices in Saudi Arabia. A mixed method questionnaire (Cresswell, 2009) with combining quantitative and qualitative sections will be designed to measure the views of Saudi managers on e-commerce. Participants will be invited by the author using contacts and networks of business owners. Target sample is at least 50 completed questionnaires, with an age range of 25years to 60 years, and covering both urban and rural locations. Participants will be asked what they see as the advantages of e-commerce for their business, and also what they see as its disadvantages, along with any blocks and barriers to the further expansion of e-commerce in their particular sector. Quantitative information will be gathered on the number of processes and quantity of sales affected by e-commerce, and what the trends on this front have been over the last ten years. There will be some open questions and some space for participants to summarize in their own words how they think e-commerce has changed their strategy, and what changes they would like to see in the Saudi environment to make it easier to reach their strategic goals. It is expected also that some participants will report less enthusiasm for e-commerce and reasons for this will also be explored. Overall the study should provide some evidence to show how much real change is happening, and some basis for recommendations to policy makers and business planners in Saudi Arabia. Contribution to Knowledge. The empirical data from the questionnaires will bring new information about the situation in Saudi Arabian SMEs at the end of 2011. There are a number of risks emerging in the Gulf region, connected with political unrest and geo-political tensions involving Iran, Iraq and the Israel/Palestine question, and it will be interesting to see whether the Saudi business community sees a positive scenario for operating e-commerce activities in the next ten years. Time scale/ research planning. November 2011: research outline completed. December 2011: literature review expanded, questionnaire designed. Ethics approved. January 2012: Pilot study of questionnaire with 5 respondents. February 2012: Pilot study analysed. Questionnaire revised and issued to respondents. March 2012: Questionnaire analysed. Data drawn up into graphs. April 2012: Discussion written up. May 2012: Conclusion written. Whole dissertation checked over and revised. Completion. Bibliography. Al-Alawi, A.I. Customer Relationship Management in the Kingdom of Bahrain. Issues in Information Systems 5 (2), (2004) pp. 380-386. Alfuraih, Saleh I. “E-commerce and E-commerce Fraud in Saudi-Arabia: A Case Study.” 2008 International Conference on Information Security and Assurance. Available at: http://ipac.kacst.edu.sa/eDoc/eBook/3510.pdf Ali, Abbas. Business and Management Environment in Saudi Arabia. London and New York: Routledge, 2009. Cresswell, John W. Research Design: Qualitative, Quantitative and Mixed Methods Approaches. 2nd edition. London: Sage, 2009. Fasano, Ugo and Iqbal, Zubair. “GCC Countries: From Oil Dependence to Diversification. International Monetary Fund, 2003. Available at: http://www.imf.org/external/pubs/ft/med/2003/eng/fasano/index.htm GCC Website. Available at: http://www.gcc-sg.org/eng/ Hertog, Steffen. “Segmented Clientelism: The Political Economy of Saudi Economic Reform Efforts” in Paul Aarts and Gerd Nonneman (Eds.), Saudi Arabia in the Balance. London; C. Hurst & Co, 2005, pp. 111-144. Kamel, Sherif and Hussein, Maha. “ The development of e-commerce: the emerging virtual context within Egypt.” Logistics Information Management 14 (12), pp. 119-126. Looney, Robert. “Development Strategies for Saudi Arabia: Escaping the Rentier State Syndrome. Strategic Insights 3 (3), (2004). Available online at: http://www.nps.edu/Academics/centers/ccc/publications/OnlineJournal/2004/mar/looneyMar04.html Manochehri, Nick-Naser and AlHinai, Yousuf Salim. “Mobile-Phone Users’ Attitudes Towards Mobile Commerce and Services in the Gulf Cooperation Council Countries: Case Study. IEEE (2008), pp. 1-6. Metz, H.C. (Ed.) Saudi Arabia: A Country study. Washington GPO for the Library of Congress, 1992. 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