IMPACT OF E-COMMERCE ON THE GROWTH OF SMES IN SOMALIA
By Mohamed Ahmed Hussein
CHAPTER ONE
1.0 Introduction
This Chapter focuses on the background of the study, statement of the problem, purpose of the
study, specific objectives, research questions, scope of the study, the significance of the study
and the Conceptual Framework.
1.1 Background to the Study
E-commerce development has created tremendous changes in the business sector globally
(Zulkifli 2001). E-commerce has made it easier for customers to shop extensively, anywhere,
anytime and still get the same service as they would in the brick and mortar shops without
incurring an extra cost. Paperless transactions are now preferable to the traditional paper
transaction as a result of the extensive adoption of E-commerce in the industrialized world,
where the need for the consumers to visit physical shops/businesses to execute purchases is not
necessary (Mansor and Abidin 2010). Many organizations worldwide are implementing E-
commerce and making tangible benefits. However, many people and organizations interpret
E-commerce in different ways. According to Zillur and Bhattachryya (2002), the term
“E-commerce” emerged when organizations discovered the benefits of using the internet to
conduct business, most notably in the service sector as it can improve the customer-supplier
relationship.
Electronic commerce (e-business) has transformed business processes in a number of
organisations and will continue to do so in future (AL-Qirim, 2007). It has not only transformed
the way they sell, purchase or deal with their customers and suppliers but also changed the
business perspective from “production excellence” to “customer intimacy” (MacGregor &
Vrazalic, 2005) and from being “agent of seller” to being “agent of buyer” (Achrol & Kotler,
1999), and the business focus from physical goods alone to a service, information and
intelligence focus (Rayport & Jaworski, 2001).
SMEs make substantial contributions to national economies (Jutla, Bodorik, & Dhaliqal, 2002);
(Poon & Swatman, 1999) and are estimated to account for 80 per cent of global economic
growth (Jutla, Bodorik, & Dhaliqal, 2002). SMEs are considered as major economic players and
a potent source of national, regional and local economic growth (Taylor & Murphy, 2004).
SMEs are often regarded as vital for the growth and innovation of dynamic economies as they
help to diversify economies. SMEs sector accounts for 60-70 per cent of jobs in most developed
and developing countries, and for most of the new jobs created, several countries in Africa have
prioritised their investment in SMEs (Iddris, 2012).
(Taylor & Murphy, 2004) argue that the adoption of e-business by SMEs is a crucial driver of
economic growth, since these companies are big buyers, big sellers, big innovators and big
employers. It is underlined that many such companies have invested in the digital world, mostly
by building websites and using e-mail services.
A number of scholars hold the view that innovations have positive impact on business
operations and bring with them substantial benefits. Some of the benefits widely associated with
innovations include the following: improvement in operational efficiency, access to a wider
range of markets, greater potential for partnership with suppliers, improved customer services,
accessibility and flexibility in administration, and partnership among others (Vaithianathan,
2010). Unfortunately, Small and Medium-sized Enterprises (SMEs) in Africa are lagging behind
most of the world’s economies in tapping into the possibilities linked to the emerging
technologies and have, in effect, failed to realise the full potential benefits of e- Commerce.
1.2 Statement of the Problem
The use of e-commercial enterprise applications remains distinctly low (12.6%) in Somalia
Division despite the efforts in holding conferences to permit SMEs benefit knowledge,
connections and tools needed to achieve success and raise capital or investment they want to
propel their enterprise growth, it has now not been smooth for SMEs to undertake e-commercial
enterprise partly due to the continuous exchange of e-business era and the varying wishes of
nearby and worldwide businesses. In addition, the fee of acquiring e-commercial enterprise
infrastructure is excessive for plenty SMEs in particular in developing economies. (Molla &
Licker, 2005) cited that the expertise of what drives e- enterprise among businesses, particularly
in developing countries, is limited through the absence of rigorous research. This increases the
question of why adoption initiatives aren't greater a success and if e- Commerce adoption
remains low, SMEs will no longer be able to gain a competitive advantage in the market both
domestically and internationally.
1.3 General Objective
The main objective of the study is to find out the impact of e-commerce on the growth of SMES
in Somalia.
1.4 Specific Objectives
i. To Examine E-Commerce adoption within SMEs in in Somalia.
ii. To identify the benefits of E-Commerce adoption within SMEs in in Somalia.
iii. To examine the Barriers to E-Commerce adoption within SMEs in in Somalia.
iv.
1.5 Research Questions
i. What is the level of E-Commerce adoption within SMEs in in Somalia?
ii. What are the benefits of E-Commerce adoption within SMEs in in Somalia?
iii. What are the Barriers to E-Commerce adoption within SMEs in in Somalia?
1.6 Scope of the study
1.6.1 Geographical scope
The study will target Small and Medium enterprises in Somalia
1.6.2 Content scope
The study will focus on level of E-Commerce adoption within SMEs in in Somalia, the benefits
of E-Commerce adoption within SMEs in in Somalia and the Barriers to E-Commerce adoption
within SMEs in in Somalia.
1.6.3 Time scope
The study will focus on the period from 2010-2019, the estimated duration for this study is Four
Months from March-July 2020.
1.7 Significance of the Study
The research will also help academicians in related fields to use the research findings as
reference in dealing with issues relevant to e-Commerce adoption by SMEs as the study will set
grounds for further research on the subject and other related topics.
An understanding of the determinants of e- Commerce adoption is critical in designing policies
and interventions that will help providers to deliver appropriate innovations that will more
attractive to potential users in the SME sector.
The research is intended to create general awareness to the public about the existence of the
determinants of e- Commerce adoption and the advantages that come along with this practice.
1.8 Conceptual Framework
Independent Dependent
SMEs Growth
E-commerce
Timeliness
Business to Business (B2B)
Expansion of Business
Business to Consumer (B2C)
Profitability
Consumer to Consumer (C2C)
Consumer to Business (C2B)
Intervening Variable
Age
Organizational philosophy
Transparency
Figure 1.1: conceptual framework
The conceptual framework in figure 1.1 presents the relationship between the Independent
variable (E-Commerce) and the dependent variable (performance of SMEs). The illustration
depicts that E-commerce models such as business to business (B2B), business to consumer
(B2C), consumer to consumer (C2C), and consumer to business (C2B) could perhaps influence
the performance of an organization through the effective timeliness of the organizations
operations, expansion of businesses, and increase in the business’s profits. However, other
extrinsic variables are external to the study such as the education level of employees which
might hinder effective usage of E-commerce if they lack ICT skills, the people operating in
organizations are more conservative, and the organizational philosophy can also be a deterrent to
change. Lastly, E-commerce relies on transparency which might be lacking thus causing
incompatibilities and influencing the results when ascertaining the relationship between the
variables. In this regard, the influence of the moderating variables must be gauged and controlled
by eliminating them to ensure that the variables under investigation are not manipulated.
