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INFLUENCE OF E-COMMERCE ON THE PERFORMANCE OF SMES IN IMO STATE

CHAPTER ONE

INTRODUCTION

1.1  Background to the Study

Globally, the invention and development of data technologies has improved daily living and also changed the scope and dynamics of the business world. This has made things that were once thought impossible become possible. Furthermore, it has made business processes that were once strenuous and complex become easy and more efficient. It has further enhanced the visibility of businesses and improved consumers, accessibility to goods and services being offered like never before. This development has turned the world into a ‘global village’ where trade can take place between two parties geographically distant from each other. This particular feature is known as e-commerce. Likewise, Nigeria has not been left out of growing e-commerce trends as many companies in Nigeria have capitalized on the growth of information technology to improve their visibility and accessibility.

In the same vein, Nigerian Small and Medium Enterprises have been able to capitalize on ecommerce to improve their business functions and make themselves visible to consumers despite having few resources. This has made e-commerce to be seen as a modern day ‘industrial revolution’ (King, 2016) The word ‘e-commerce’ is a combination of two words electronic and commerce (Lair, 2014). Hassan and Muljadi (2015) stressed that although e-commerce was a concept introduced over 40 years ago the research interest in it is only recent. Miva (2011) described e-commerce as the buying and selling of goods or services through the internet.  Furthermore, Kareem, Owomoyela and Oyebamiji (2014) described e-commerce as the use of communications technology particularly the internet to buy, sell and market goods and services to customers. Tang, Powell, Worlock and Bingham (2000) concurred by describing as the manner by which business is conducted with the assistance of telecommunication itself and telecommunication tools. Furthermore, Hassan and Muljadi (2015) also defined e-commerce as activities that look to enable arm’s length transactions between firms and individuals.

According to OECD (2015) it is the invention of a new kind of commercial world in an electronic environment. In the today’s world, e-commerce continues to grow with new technologies and inventions which has improved its functionality and efficiency. A major advantage that e-commerce has in contrast to a traditional business is that it can be assessed at anytime and it has a worldwide reach (Chen & Zhang, 2015). Okeke, Ezeaghaego and Oboreh (2016) opined that the e-commerce has its influence over many aspects of the world market either directly or indirectly. According to them this has removed the limitations of the accessibility of information and ensure that it can be reached anywhere by anyone accessing the Internet. Furthermore, Kareem et al (2014) opined that the advent of e-commerce has opened new opportunities to retailers as it has reduced the importance of location and improved their reach to consumers that are in need of their services. Major companies in the world today have capitalized on the use of e-commerce to improve their profitability and business performance. Companies like Amazon, Alibaba and Walmart have become large corporations due to the integration of ecommerce into their business models (Ledley, 2014). Therefore, they have been able to expand their market share from their local market to global markets. Nigeria has also been experiencing growth in the use of e-commerce by businesses as various online businesses are growing.

The rapid growth of information technology in Nigeria has boosted the activities of e-commerce. It has made it possible for people around the country to shop at the comfort of their homes through emailing, online order, texting and calling. Major companies that have thrived on the use of e-commerce include Jumia and Konga who have been the forerunners of e-commerce in Nigeria (Okeke et al, 2016). Furthermore, Okeke et al (2016) noted that e-commerce has also afforded opportunities to Small and Medium Scale enterprises to improve their business functions and experience rapid growth. SMEs like Yudala, Hello Foods and Uber have experienced rapid growth due to the fact that they adopted business models that involved e-commerce. However, despite the evidence from these companies the adoption of e-commerce among SMEs remains low. This is concerning because according to Kareem et al (2014) SMEs are vital to the development of the economy and as such, opportunities such as e-commerce that can aid their growth and development should be seized upon. Therefore, this study will aim to find out the influence of e-commerce on the performance of small scale enterprises.

1.2  Statement of the Problem

Small and medium enterprises play very significant roles in the economic growth and development of countries. Furthermore, Onugu (2014) suggested that small and medium enterprises are a significant part of the nation’s economy as they are vital to creating employment opportunities in the country thereby creating wealth for middle class and reducing the economic burden on the country. According to Okeke et al (2016) they account for 60 percent to 70 percent of jobs created in both developed and developing countries all over the world. This has ensured that several countries in Africa prioritize their investment in small scale enterprises (Gordon, 2003). Therefore, their development and growth is vital to the development of the economy.

According to Raheem et al (2014) despite the fact that the adoption of E-commerce presents many chances for SMEs to grow in Nigeria, most SMEs seem reluctant to adopt e-commerce in Nigeria. According to Munair (2013) the major reason for the lack of adoption in Nigeria is its cost of adoption. According to Raheem et al (2014) a lot of SMEs in Nigeria cannot afford to integrate e-commerce into their operations due to their lack of accessibility to finances. According to Garba (2015) apart from the lack of adequate finance many SMEs are not willing to spend such a huge amount of money investing in e-commerce as they cannot assure that it enhances their growth. Furthermore, according to Nasir (2009) the infrastructural challenges in Nigeria have affected the smooth implementation of E-commerce in Nigeria.

According Lolade (2015) this has seen many e-commerce companies in Nigeria struggle to satisfy their customers. For instance, customers of Jumia, Konga, Hello Foods and Uberconstantly complain of the timing of their deliveries, or the timing of arrival time of the service. In Uber’s case many customers have complained of the late arrivals of drivers and unnecessary cancelation of trips (Lamido, 2014). Many times these delays are caused by the holdups due to bad roads and poor drainage systems (especially in Lagos). Furthermore, the challenge of access to good internet has slowed down many companies’ operations and ensured that they are not able to satisfy their customers appropriately. For instance, many indigenes in Imo state, precisely Owerri have many time complained about the lack of internet accessibility and poor connectivity that they experience. This has discouraged other SMEs from adopting e-commerce. In addition, there have been security challenges associated with the adoption of e-commerce in Nigeria, has such it has been difficult to implement e-commerce operations in Nigeria. As recently as September, an Uber driver was arrested in connection of the death of Gulder Ultimate Search Winner (2006) Jobarteh.

Furthermore, in August an Uber Driver was murdered by armed robbers in Lagos (Banjo, 2017). This has dented the image of the brand and forced other Uber customers and drivers to rethink the usage of the platform (Gbenga, 2014). This serves as a discouragement to SMEs and has added to their reluctance to adopt e-commerce. Therefore it is against this backdrop that this study will aim to investigate the effect of adoption of e-commerce on performance of SMEs in Imo State.

1.3  Objectives of the Study

The major objective of the study is to investigate the impact of the adoption E-commerce on the performance of SMEs in Imo state. The specific objectives are:

1. To determine the effect of e-commerce investment on the growth of Small and Medium Scale enterprises in Imo State.

2. To determine the effect of e-commerce infrastructural challenge on the customer satisfaction of Small and Medium Scale enterprises in Imo State.

3. To determine the effect of e-commerce security challenge on customer retention of Small and Medium scale enterprise in Imo State.

4. To evaluate the combined effect of e-commerce investment, e-commerce infrastructural challenge, ecommerce security on the performance of SMEs in Imo state.

1.4  Research Question

The research study aims to answer the following questions;

1. What is the effect of e-commerce investment on the growth of Small and Medium Scale enterprises in Imo State?

2. What is the effect of e-commerce infrastructural challenge on the customer satisfaction of Small and Medium Scale enterprises in Imo State?

3. What is the effect of e-commerce security challenge on customer retention of Small and Medium scale enterprise in Imo State?

4. What is the combined effect of e-commerce investment, e-commerce infrastructural challenge, ecommerce security on the performance of SMEs in Imo state?

1.5  Research Hypotheses

The research will aim to test the following hypotheses:

H01: There is no significant effect of e-commerce investment on the growth of Small and Medium Scale enterprises in Imo State

H02: There is no significant effect of e-commerce infrastructural challenge on the customer satisfaction of Small and Medium Scale enterprises in Imo State.

H03: There is no significant effect of e-commerce security challenge on customer retention of Small and Medium scale enterprise in Imo State

H04: There is no significant effect of e-commerce investment, e-commerce infrastructural challenge, ecommerce security on the performance of SMEs in Imo state

1.6  Operationalization of Research Variables

The variables adopted by this study are: E-commerce adoption and Business performance. The study will seek to investigate the effect of E-commerce adoption; the independent variable, on the dependent variable; business performance. The variables for this research are consequently operationalized as follows:

Y = f(X)

Y = Business Performance

X = E-commerce Adoption

where Y = Dependent variable

          X = Independent variable

y = f (x1, x2, x3…xn)

x1= E-commerce Investment

x2= E-commerce Infrastructural Challenge

x3= E-commerce Security Challenge

y = (y1, y2, y3)

y1= SME Growth

y2 = Customer Satisfaction

y3 =  Customer Retention

y= f(x1) __________________ (1)

y = f(x2) __________________ (2)

y = f(x3) __________________ (3)

The study will focus on equation (4) above.

Based on regression, we have

y1 = α0 + β1x1 + μ…. (1)

y2 = α0 + β2x2 + μ…. (2)

y3 = α0 + β3x3 + μ…. (3)

Where, α is the constant of the equation, β is the coefficient of X the independent variable where μ is the error or stochastic term in the equation.

1.7  Scope Of The Study

The study will focus on the effect e-commerce on the business performance of SMEs in Imo State. The population for the study will be the 1394 SMEs in Imo state. The sample of the study which was drawn using the Taro Yamane formula will be 311. The study will adopt the simple random sampling technique in the data collection. The geographical location of the study will be Owerri, Imo State. Finally, the study would be carried out between September 2017 and April 2018 (8 months).

1.8  Significance of Study

The research will be useful to the following people:

Management: It would further enlighten management of small scale business on ways which e-commerce can be exploited to achieve company growth, customer relation, profit maximization, customer satisfaction and so on.

Entrepreneurs: entrepreneurs who own existing business or want to start new businesses would be enlighten on ways to satisfy customers and maintain customer loyalty through the application of the findings of this study

Researchers: The study will contribute to the expansion of the existing knowledge in this area of study. It would also provide useful referencing points for future researchers in this line of study and a sound basis for intellectual exercise.

Government: The significance if ecommerce rubs on the government indirectly. Because the development of SMEs adds value to the national economy, ecommerce has been noted to be an opportunity if well exploited can act beneficial. So as the government is in charge of the economy, favor has been granted to the government by ecommerce influence.

1.9   Operational Definition of Terms

Small and medium scale enterprise: The Central Bank of Nigeria (1998), defined small scale enterprises as organizations with work size of 11-100 or an aggregate cost of not more than N50 million including working capital but rather barring the cost of land..

Goal achievement: It is a procedure of achieving a fancied outcome or achieving a coveted end points either individual or authoritative end point (Wilson, 2011).

Market growth: Showcase development can be characterized as an expansion in the interest for a specific item or administration overtime (Bedimo, 2015).

Service quality: An assessment that reflects the consumer’s insight on the dimension of service (Cole, 2014). Customer relation: It is a process of establishing and maintaining relationship with customers (Dugarry, 2015).

Customer satisfaction: The procedure by which an item benefit comes to or surpasses the client's desire and the client is fulfilled (Plesil, 2015).

E-commerce: These are commercial activities conducted via the internet (Newton, 2016).

Internet: According to James (2010) it is a global network providing various data and communication services, consisting of inter related networks using various protocols.

World Wide Web: This implies ‘the systematic interlink of hypertext documents that operate over the internet (Holley & Hunton, 2016).

Commerce: According to Gaurav (2011), commerce is a branch of business; it is concerned with the exchange of goods and services. It includes those activities which directly or indirectly facilitate that exchange.

Traditional business transactions: It is the type of business which focuses on transaction of goods and services in a manual way. This is the type of commercial activity in which the customer has to be present i.e go to the market and buy goods and services.

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