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Factors Affecting the Adoption of E-Commerce among Small Medium Enterprises (SMEs) In Africa. MBA Thesis / Dissertation in Information sytems Ecomerce in africa by julius ssekazinga noble dissertation

Factors Affecting the Adoption of E-Commerce among Small Medium Enterprises (SMEs) In Africa. MBA Thesis / Dissertation in Information sytems Ecomerce in africa by julius ssekazinga noble dissertation

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Factors Affecting the Adoption of E-Commerce among Small Medium Enterprises (SMEs) In Africa - Ssekazinga

  1. 1. Factors Affecting the Adoption of E-Commerce among Small Medium Enterprises (SMEs) In Tanzania: An Interpretive Study of Arusha By Julius Noble Ssekazinga November, 2015 The work contained within this document has been submitted by the student in partial fulfillment of the requirement of their course and award
  2. 2. ii FACTORS AFFECTING THE ADOPTION OF E-COMMERCE AMONG SMALL MEDIUM ENTERPRISES (SMES) IN TANZANIA: AN INTERPRETIVE STUDY OF ARUSHA Author: Julius Noble Ssekazinga Student ID: 6134819 Course Title: Masters of Business Administration in Information Technology Module: Dissertation (MBAITM) Date: 28th September, 2015 A Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Masters of Business Administration in Information Technology Management of Coventry University
  3. 3. iii CERTIFICATION I, the undersigned certify that I have read and hereby recommend for acceptance by Coventry University the dissertation entitled: Factors Affecting The Adoption Of E-Commerce Among Small Medium Enterprises (SMEs) in Tanzania _in fulfillment of the requirements for the degree of Masters of Business Administration/MSc-ITM in Information Technology Management offered in collaboration between Institute of Accountancy Arusha and Coventry University. ……………………………………………………. Mr. Kavuta (Supervisor) Date: ………………………………
  4. 4. iv DECLARATION I, Julius Noble Ssekazinga, declare that this dissertation is my own original work and that it has not been presented and will not be presented to any university for similar or any other degree award. Signature………………………………………… Date…………………………………
  5. 5. v COPYRIGHT © Copyright This paper should not be reproduced by any means, in full or in part, except for short extract in a fair dealing, for research or private study, critical scholarly review or discourse with an acknowledgement. No part of this dissertation may be reproduced, stored in any retrieval system, or transmitted in any form or by any means without prior written permission of the author or Coventry University.
  6. 6. vi ACKNOWLEDGEMENTS The research would like to be grateful to all the past studies that made any input in one way or the other. I wish to acknowledge all the parties that made this research a great success. This work would never be done on its own. I am grateful to my Supervisor Mr. Kavuta for the helpful review and support that he provided throughout this Study. I am grateful to my lecturers, fellow students and the administration of the MBA-IT program for rendering an inspirational proficiency to share knowledge. Special gratitude goes to Lawrence Mukwaya for the Support and encouragement throughout. Helen Hillary and Maxwell Ndeoya your love and Support was remarkable and greatly appreciated and God Bless you all. I am thankful to the owners / Managers of SMEs that gave an opportunity to interact with them and collect information for my research. Exceeding all, I am thankful and fully obliged to God Almighty for offering me breath and unceasing health to allow me to reach this point. TO GOD BE THE GLORY
  7. 7. vii DEDICATION This study is dedicated to my Family Mum and Dad, Brothers and Sisters Cissy, Francis, Aloysius and Denis for the love, support and encouragement always. Everything is possible. God Bless You All.
  8. 8. viii LIST OF ABBREVIATIONS ATM Automatic Teller Machine E-COMMERCE Electronic Commerce EDI Electronic Data Interchange EFT Electronic Funds Transfer GDP Gross Domestic Product ICT Information Communication Technology IT Information Technology ITT Information and Technology Telecommunication OECD Organization for Economic Co-operation Development SMES Small and Medium Enterprises SPSS Statistical package for Social Sciences TAM Technology Acceptance Model TCRA Tanzania Communications Regulatory Authority WTO World Tourism Organization WWW World Wide Web
  9. 9. ix ABSTRACT The initiation of e-commerce offers considerable opportunities for large and small businesses across to enlarge their customer base enter new products and justify their businesses by competing in the global markets. Tanzanian SMEs have generally been slow to adopt and evaluate electronic commerce. SMEs performance in Tanzania face a great challenge of how to adopt and use ICT related technologies particularly e-commerce technology. The study discovered that the variable knowledge of benefits derived from e-commerce and infrastructure would enable businesses to actively pursue e-commerce. Additionally Tanzania Communications Regulatory Authority (TCRA) should put in place policies that regulate ecommerce businesses. Cost of e-commerce implementation within the business and technical skills and IT knowledge amongst owners and employees would additionally encourage businesses in venturing into e-commerce. The findings show that, lack of ecommerce regulation, security anxieties, infrastructure issues, organization culture, lack of ICT skills training, slow internet speed, leadership ecommerce perception and lack of ICT Skilled personnel are major factors affecting e-commerce adoption among SMEs in Tanzania. Using the survey research design, the respondents were owners and managers selected from the Municipal Council of Arusha City and the survey ensured that information gathering was comprehensive. Interviews were also used for the investigation of factors affecting the adoption of e-commerce among SMES in Tanzania The researcher suggested that ecommerce regulating policies should be put in place by the government. When it comes to the payment means, bank should avail cards that support online transactions. The knowledge of benefits of ecommerce tools would drive an increase and sustainable adoption of e-commerce among the SMEs sector in the country. Therefore, there is need for further research to be done on other regions of Tanzania where the infrastructure may differ since Arusha is a semi-urban, the factors silently differ in rural regions this will give greater insights on the easier and faster adoption of e-commerce for greater growth of the SME sector in Tanzania.
  10. 10. x TABLE OF CONTENTS CERTIFICATION .....................................................................................................iii DECLARATION.......................................................................................................iv COPYRIGHT............................................................................................................v ACKNOWLEDGEMENTS .........................................................................................vi DEDICATION ........................................................................................................vii LIST OF ABBREVIATIONS .....................................................................................viii ABSTRACT.............................................................................................................ix LIST OF TABLE .....................................................................................................xiii LIST OF FIGURES..................................................................................................xiv CHAPTER ONE: OVERVIEW .................................................................................... 1 1.1. Background of the Study.....................................................................................1 1.1.1. Small and Medium Enterprises (SMEs) in Arusha........................................2 1.1.2. Adoption of E-Commerce amongst SMEs....................................................3 1.2. Statement of Problem - The Rationale ...............................................................4 1.3. Scope of the Study ..............................................................................................5 1.4. The Research Questions......................................................................................6 1.5. Objectives of the study .......................................................................................6 1.6. Significance of the Study.....................................................................................6 1.7. Structure of the Research...................................................................................7 CHAPTER TWO: LITERATURE REVIEW .................................................................... 8 2.1. Introduction ........................................................................................................8 2.2. E-Commerce........................................................................................................9 2.3. E-Commerce Benefits .......................................................................................12 2.4. Adoption of E-commerce..................................................................................14 2.5. Reviewing E-commerce Adoption Factors in SMEs ..........................................16 2.5.1 Individual Factors........................................................................................16 2.5.2 Organizational Factors................................................................................18 2.5.3 Technological Factors .................................................................................21 2.5.4 Environmental Factors................................................................................22 2.6. Factors and challenges Influencing Adoption of E-commerce .........................23 2.6.1. Resources of the Enterprise.......................................................................24 2.6.2. Awareness of Benefits ...............................................................................24 2.6.3. Leadership Style.........................................................................................25 2.6.4. Influence of Infrastructure.........................................................................26 2.6.5. Cost of Implementation.............................................................................27
  11. 11. xi 2.6.6. Competition ...............................................................................................28 2.6.7. Technical Skills amongst Owners and Employees .....................................29 2.7. Challenges of E-Commerce...............................................................................30 2.8. Conceptual Framework.....................................................................................31 CHAPTER THREE: RESEARCH METHODOLOGY .......................................................33 3.1. Research Design................................................................................................33 3.2. Target Population .............................................................................................33 3.3. Sample Design...................................................................................................33 3.4. Data Collection..................................................................................................34 3.5. Documentary Review........................................................................................35 3.6. Data Analysis and Presentation ........................................................................35 CHAPTER FOUR: FINDINGS AND DISCUSSIONS......................................................36 4.1. Introduction ......................................................................................................36 4.2. General Information .........................................................................................36 4.2.1. Gender of the Respondents.......................................................................36 4.2.2. Age of the Respondents.............................................................................37 4.2.3. Management Level ....................................................................................37 4.2.4. Experience in Business...............................................................................38 4.2.5. Qualifications Levels ..................................................................................38 4.2.6. Use of E-Commerce, Internet and Other IT Tools .....................................40 4.3. Factors Hindering E-commerce Adoption.........................................................40 4.3.1. Lack of E-commerce Regulation ................................................................40 4.3.2. Skilled ICT Personnel..................................................................................41 4.3.3. Leadership Characteristics and Perception of E-commerce Adoption......41 4.3.4. Availability and Slow Speed of the Internet ..............................................42 4.3.5. Security Concerns ......................................................................................42 4.3.6. Access to Payment Facilities......................................................................42 4.3.7. Organizational Culture...............................................................................42 4.4. Factors Influencing Adoption of E-Commerce..................................................43 4.4.1. Benefits knowledge of E-Commerce in a Business....................................43 4.4.2. Infrastructure Issues ..................................................................................45 4.4.3. Cost of E-Commerce Implementation .......................................................47 4.5. e-Commerce Frequency of usage among SMEs ...............................................51 CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS....................................53 5.1. Introduction ......................................................................................................53
  12. 12. xii 5.2. Summary of Findings.........................................................................................53 5.3. Conclusions .......................................................................................................54 5.4. Recommendations............................................................................................55 5.4. Limitations of the Study....................................................................................55 5.5. Further Research...............................................................................................56 5.6. Policy Implications ............................................................................................56 CHAPTER SIX: CRITICAL EVALUATION OF THE STUDY............................................57 6.1. Introduction ......................................................................................................57 6.2. Experiences faced during the Study. ................................................................57 6.2.1. Positive Experience....................................................................................57 6.2.2. Negative Experience. .................................................................................57 6.3 Project management techniques.......................................................................57 REFERENCES: .......................................................................................................59 APPENDICES ........................................................................................................63 Appendix I: INTERVIEW GUIDE SAMPLE ..................................................................63 Appendix II: QUESTIONNAIRE SAMPLE....................................................................64 Appendix III: BREAKDOWN SCHEDULE ....................................................................69
  13. 13. xiii LIST OF TABLE Table 4. 1 Gender and knowledge on benefits of E-commerce.......................................44 Table 4. 2 Education Level and Knowledge on Benefits of E-Commerce .......................44 Table 4. 3 Infrastructure and Electronic Commerce.......................................................46 Table 4. 4 Infrastructure for Successful Application of E-Commerce in Business..........46 Table 4. 5 Education and Infrastructure for E-Commerce Adoption...............................47 Table 4. 6 Costs Associated With Application of E-Commerce in Business...................47 Table 4. 7 Cost of Use of E-Commerce and Other ICT Tools..........................................48 Table 4. 8 Gender and E-commerce Implementation Cost .............................................49 Table 4. 9 Education and E-commerce Implementation cost..........................................50 Table 4. 10 Use of E-Commerce Tools...........................................................................51
  14. 14. xiv LIST OF FIGURES Figure 2. 1. Export Performance of selected Goods and Services 2012 -2015..................8 Figure 2. 2 Conceptual Framework................................................................................32 Figure 4. 1 Respondents' Gender ..................................................................................36 Figure 4. 2 Age of the Respondents ..............................................................................37 Figure 4. 3 Experience in the Business..........................................................................38 Figure 4. 4 Management Qualifications..........................................................................39 Figure 4. 5 Use of E-Commerce, Internet and Other ICT Tools.......................................40 Figure 4. 6 Benefits of Application of E-Commerce in Business....................................43
  15. 15. 1 CHAPTER ONE: OVERVIEW 1.1. Background of the Study Internet Commencement has delivered a window of dormant for small firms and entrepreneurs to creatively involve in new value creating activities. Internet is increasingly extensively accepted that it is important for business to encirclement e-commerce and to adopt Internet technologies and apparatuses. According to Fink & Disterer (2006), e-Commerce is defined as any economic or business activity that uses Information Communication Technology (ICT) based applications to enable the buying and selling of products and services and to facilitate the transaction of business activities between and among businesses, individuals, governments or other organizations. This includes using ICTs to strengthen a company’s internal operations, such as procurement, logistics and human resource and contracts management, communication functions, information and data administration and to facilitate the flow of products between businesses and consumers, e.g. promotion, ordering, payment, distribution, and searching for suppliers (McIvor & Humphreys, 2004). E-commerce is a great way of conducting business and presents many opportunities for and consumers companies. However despite the advantages that its powerful technologies and practices offer, it has not been adopted as projected and has not stretched to its full potential in Tanzania. With the initiation of Internet technology and its swift growth during the last few years, e-commerce has become an accumulative reality. Although e-commerce still comprises a small part of many country’s economies, it is seen by many as an opportunity to condense cost and improve productivity. This is accurate as various economies are shifting themselves into knowledge-based economies, where information and innovation are competitive instruments (Chan and Al-Hawamdeh, 2002). They are strained to adopt new and more innovative ways of maximizing the use of information technology and the Internet in their business actions. Dropping cost, improving productivity and enhancing customer support are some of the key competitive factors in any prosperous
  16. 16. 2 enterprise. Geographical locations and size of functions are no longer important factors, as small companies are now able to sell their products and shrive on the Internet and penetrate new markets in a very short time. Nevertheless, Eikebrokk & Olsen, D. H. (2007), argue that most of the studies on ecommerce adoption evaluation and benefits realization that have been done to-date have been carried out in large organizations. According to Macharia (2009), there is limited systematic research into the effects and challenges enterprises face in adopting ecommerce in developing countries and in particular the SMEs in Tanzania. Hence this study sought to explore the factors that affect adoption of electronic commerce among SMEs in Tanzania, through a survey of SMEs in Arusha. 1.1.1. Small and Medium Enterprises (SMEs) in Arusha Republic of Tanzania defines according to employment size, sector and capital investment. Small-enterprises are those with 5 to 49 workers, while “Medium enterprises” have from 50 to 99 workers or employees. 2012 Censuses indicate that small-enterprises comprise the lion's share of enterprises in Tanzania, while there are a few medium enterprises. The number of employees engaged by the enterprises is the more commonly used unit of measurement of the size of a business than the turnover, the degree of formality or legitimacy of the enterprise; capital investment; and degree of skills per worker. (Tanzania SME Development Policy, 2002) Jeffcoate et al., (2002) elaborates that SMEs are said to face a "liability of smallness." Because of their size and resource limitations, they are unable to develop new technologies or to make vital changes in existing ones. Still, there is evidence that SMEs have the potential to initiate minor technological innovations to suit their circumstances. According to O'Dwyer, Gilmore and Carson, (2009), for SMEs to fully develop and use this potential, they need specific policy measures to ensure that technology services and infrastructure are provided. Further, research and development institutions that are publicly funded should be encouraged to target the technology needs of SMEs. Previous studies have indicated that significant benefits are achieved by those SMEs that adopt and use e- commerce in their organizations. However, such benefits have not been hugely realized in SMEs in developing economies like Tanzania owing to the slow adoption of e-commerce.
  17. 17. 3 Consequently, this paper sought to establish the positive relationship that exists between costs of e-commerce implementation, Information Technology (IT) skills and training, with SMEs e- commerce adoption. 1.1.2. Adoption of E-Commerce amongst SMEs Adoption of e-commerce refers to the use of internet technology in business operations. Although small businesses may not have the money and expertise to build a sophisticated web presence, the adoption of e-commerce is important for their on- going survival. E-commerce improves the ability of small businesses to compete with larger organizations, enables the small business to operate on an international scale and e-commerce provide a cost-effective way for small organizations to market their business, launch new products, improve communications, gather information and identify potential business partners. According to Marjolein C. J. Caniëls (2015) Internet use amongst SMEs may take many forms, from simply using the web to purchase supplies to developing a website to sell products and services. Ing-Long Wu and Shwu-Ming Wu, (2015) a hierarchy of levels of e- commerce employment could be helpful for analyzing the uptake of e-commerce in SMEs. According to Jones and Leonard, (2007) it is useful to differentiate between distinct e- commerce activities, such as i. Exchanging: swapping information between and amongst customers, partners or suppliers; ii. Publicizing: advertising and marketing goods and/or services is made by traditional means; iii. Transacting: as in ‘interacting’ but payment takes place online. Integrating – sales and purchases are fully integrated into one, online operation. The distinctions in the hierarchy of levels in e-commerce uptake are particularly important for the small business sector. Unfortunately, according to Shwu-Ming Wu, (2015), it is not well understood how SMEs can improve their performance with the use of Internet and associated technologies. However, as a successful company grows rapidly, it will become increasingly aware of the need to improve and extend its performance. SMEs' adoption of ICT (Information Communication Technology) does develop, and these changes are made as the strategic focus of the business changes.
  18. 18. 4 Implementation of Internet technologies in small businesses has been slow. Many small businesses resist using Internet technologies and instead continue to use printed materials to market themselves and use more traditional means to search for information and communicate with others. It would be more difficult for a small business owner/manager to envisage the benefits associated with using Internet technologies without being fair with the Internet and World Wide Web (WWW). SMEs owners/managers are unlikely to adopt sophisticated Internet technologies if they are not familiar with more basic ones. Once a small business has adopted use of the Internet on the adoption of entry-level, they can get familiar and comfortable with the Internet and in time, move on to the adoption of more sophisticated Internet technologies like e- commerce. Entry-level technologies can provide tangible benefits to small business users. Despite the commonly accepted advantages of Internet, there is lack of any established criteria for measuring the use of internet-based e-commerce. 1.2. Statement of Problem - The Rationale Comprehending that digital technology has become a key factor of economic growth; e- commerce has become one of the key interests for businesses. It is noted e-commerce use in SMEs is still at its infancy despite the benefits indicated by different studies. This is because there has been an explosion on technology in the recent past and business realize that they stand to gain a lot if they maximized the use of ICT tools. E- Commerce is therefore important to business in that the ICT tools will assist the SMEs to improve their productivity as this provides an avenue in which business can market their businesses, launch new products, improve communication and gather information. This study therefore sought to build on the knowledge on rate of adoption and frequency of use of e-commerce amongst SMEs. Arusha SMEs have over the years increased in numbers and incidentally some firms have adopted the use of e-commerce in running their business and it is still not quite clear why others have not adopted or are yet to adopt the same. Thus this study tried to explore and find out what factors and challenges face SMEs’ adoption of e-commerce in Arusha town. The SMEs operations cut across almost all sectors of the economy, and sustain a high percentage of households in Tanzania. The SMEs also contribute to long-run industrial growth by producing an increasing number of firms that grow up and out of the small sector and in turn
  19. 19. 5 contribute immensely to the growth of the GDP of the country. It has been observed that SMEs' activities form a breeding ground for businesses and employees, and provide one of the most prolific sources of employment. This study therefore unearthed some of the factors influencing adoption of e-commerce and consequently would be useful for the government and academicians in coming up with strategic policies and procedures. 1.3. Scope of the Study The scope of this study involves the adoption and utilization of ICT to enable the buying and selling of commodities and the exchange of information that brings business value to SMEs in Arusha. Thus, any electronic transaction that involves the Internet and e-mail, with or without the web, does constitute e-commerce in this study. Other than using personal computers for business transactions, participants in e-commerce may employ various other devices and ICT applications (Ngai & Wat, 2002) that are mobile, thus encompassing mobile commerce. Although most e-commerce transactions usually revolve around the website, other transactions may be generated by an individual or corporate client through other media such as social networking sites, blogs, and other platforms, from any location on the globe. The scope of e-commerce in this study extends the description given by Jain & Jain (2011) in the Indian context which ‘consists of transactions for which Internet acts as a medium for contracting or making payment or for consuming the service/product by the end user.’ Furthermore, they state that three alternate combinations of these activities include: a) paying online and consuming online, b) paying offline but consuming online, and c) Contracting and paying online but consuming offline. This study incorporates the use of email and the Web as a means of enhancing business communication through features such as marketing, ordering or payment processes. Thus emphasis is placed on the means of achieving business value through e-commerce than the technology that facilitates the process, although in some cases it becomes useful to explain the ICT that facilitates e-commerce to be able to classify the type of e-commerce being used, such as mobile commerce.
  20. 20. 6 1.4. The Research Questions Objective of this study is to explain contextual factors affecting SME e-commerce adoption in a Tanzania basing on the few studies and theories done on developing countries. 1. How frequently is e-commerce adopted and influenced among SMEs in Tanzania? 2. What Factors and Challenges affect the adoption of e-commerce among SMEs in Tanzania? 3. What are managerial characteristics and perceptions of e-commerce adoption in Tanzania? 1.5. Objectives of the study The objectives of the study were as follows: (i.) To assess the frequency usage of e-commerce among SMEs in Tanzania (ii.) To Identify the challenges the factors and that influence adoption of e-commerce among SMEs in Tanzania (iii.) To determine how managerial perceptions, resources, infrastructure and eduction level influence adoption of e-commerce among SMEs in Tanzania 1.6. Significance of the Study The growth of SMEs in Tanzania is increasing and the Government could use the study to create favorable policies to ensure that the growth of the SMEs Sector and increased use of technology. Through identifying the major facilitators and inhibitors, this study may help government and industry bodies to provide appropriate information and support and thus enhance e-commerce technology adoption by small businesses. The study will be a reference point for stakeholders in the technology industry. The study would guide them on the factors and challenges that influence technology adoption and will help the stakeholders understand what measures and strategies they need to adopt to ensure that SMEs will be able to easily use the technology presented to them. Further to this they would be able to customize the technology to suit the demand of SMEs in Tanzania The study will be of importance to the owners-managers of SMEs in Tanzania, as it would help them understand the factors that influence the adoption of electronic commerce and how they can overcome the barriers. It can also guide them in the strategies they should adopt in relation to technology based on the trends in the industry. This is also useful to other
  21. 21. 7 researchers who are interested in SMEs and adoption of Internet technologies, intellectuals and the general community. 1.7. Structure of the Research A snapshot of the chapters and sections that are covered in this research is provided below. Chapter 1 Introduction and Rationale: This chapter provides the introduction to the research and the problem area. It introduces the reader to the research context by discussing pertinent issues regarding SMEs and e-commerce adoption in the global world as well as in developing countries. Chapter 2 Literature Review: This chapter sets out to review related literature on e-commerce adoption in SMEs. Picking up from the first chapter that defined the research questions and objectives, the first sub-section in chapter 2 provides a brief history of e-commerce and also lays the foundation for the classification of SMEs, the potential benefits of engaging in e- commerce. Chapter 3 Research Methodology: the research was carried out as a survey design using target population, research design and sample design. Chapter 4 Findings this chapter discusses the findings of the research. Firstly, a summary of findings for presented SMEs. This is followed by a discussion on the several factors, their manner of impact and how they emerge in each of the selected SMEs. The interaction of factors is discussed and how they influence the level of e-commerce adoption in the selected SMEs. Chapter 5 Conclusions: This is the last chapter in the thesis. It provides a summary of the major research findings based on the research questions. A section on the research contribution is provided reflecting on aspects of research and practice Chapter 6 Critical Evaluation of the Study: This section gives the depth and critical analysis on what happened when doing the research.
  22. 22. 8 CHAPTER TWO: LITERATURE REVIEW 2.1. Introduction Tanzania’s economic performances in the last ten years were highlighted, with an average yearly GDP growth of 6.8%, something that has attracted international capitals doubling the Foreign Direct Investment (FDI) net inflows to the country from USD 935 million in 2005, to USD 1,872 million in 2014 according to the World Bank (WB). Tanzania economy is developing economy with agriculture and Tourism being the chief economic activity. Most of the people in Tanzania work in the agricultural sector. Some practice subsistence farming, while a very small number practice large-scale farming. For those who practice small scale farming, their source of income is mainly from the sale of the farm produce. Some are in small businesses like selling of agricultural goods in market places while others trade in livestock and selling of milk and art and crafts business, which targets mostly tourists. Figure 2. 1. Export Performance of selected Goods and Services 2012 -2015 Tanzania has also launched the Tourism Destination Portal, an online tourism promotional tool aiming at connecting the Small and Medium Tourism Enterprises (SME’s) in the country, with the international tourism markets and supported by the United Nations Development Programme (UNDP) which currently manages 35 projects and a budget of USD 44 million in the country. (Tirabassi, 2015)
  23. 23. 9 2.2. E-Commerce The origin of Internet was in 1969 as a Department of Defense experiment that involved networking four computers to facilitate communications in the event of a nuclear war (Martin & Matlay, 2001). Until about 1993, the Internet remained an obscure computer network with few commercial applications. By 2003, Internet users numbered 390 million worldwide because the growth was facilitated by the introduction of technology that provided access to World Wide Web (Barkakati and Maurer, 2010). Internet has four functions; communication, information, entertainment and electronic commerce which is composed of electronic exchanges, extranets and private exchanges, electronic storefronts, online ticketing and auctions (Thanasankit, 2003). Tourism is ranked among the world‟s largest industry, with a global GDP of 11%, and also the largest on- line industry (Roger, 2012). Africa, with its great wealth and unique resorts, can benefit from the ever-increasing population of the Internet particularly in the USA and Western Europe where most of the tourists to Tanzania come from (WTO, 2001). O'Dwyer, Gilmore and Carson, (2009) undertook a survey to find the nature and extent of electronic commerce adoption by tourism organizations from South Africa, Kenya, Tanzania and Uganda, which are all popular tourist destinations in Eastern and Southern Africa. According to Simpson and Docherty (2004), e-commerce is the paperless exchange of business information using electronic data interchange (EDI), e-mail, electronic bulletin boards, fax transmissions, and electronic funds transfer. E-commerce involves the buying and selling of products and services by businesses and consumers through an electronic medium. Simpson adds that E-commerce is widely considered the buying and selling of products over the internet. The Internet has created a new economic ecosystem, the e- commerce marketplace, and it has become the virtual main street of the world. It provides a quick and convenient way of exchanging goods and services both regionally and globally; e- commerce has boomed. E-commerce has developed over the years and will continue to shift and change the future. The term ‘electronic commerce’ was coined in the early 1990s when Internet became commercialized and users began flocking to participate in the World Wide Web (WWW). E- commerce applications were then rapidly expanded. Turban et al.,(2006) narrated more that taking things that your company is already doing in person, through the mail, or over the telephone, and doing those things in a new place i.e. on the Internet . Turban et al (2006) aslo
  24. 24. 10 found out that although e-commerce is still a relatively new term within the society, it actually has been around for several decades. According to Bauknecht, Madria and Pernul (2000), The first e-commerce application, Electronic Funds Transfer (EFT), was developed in the early 1970s to allow funds to be routed electronically between financial institutions. As an extension to EFT, Automatic Teller Machine (ATM) was introduced in the early 1980s, to enable financial transactions to be carried out over a computer network (Dyerson and Barnes, 2008). Then Electronic Data Interchange (EDI) was developed later in 1980s to enable a wider application of e- commerce across industries. It allows structured business documents to be exchanged electronically between different computer systems without human intervention (Bauknecht, Madria and Pernul, 2000). In 1990s, the Internet was commercialized and the term e-commerce was introduced. With the availability of the Internet and the popularity of the World Wide Web to access the Internet, e-commerce has grown significantly in the last few years. According to Kula and Tatoglu (2003), the concept of e-commerce is all about using the Internet to do business better and faster. It is about giving customers controlled access to your computer systems and letting people serve themselves. It is about committing your company to a serious online effort and integrating your Web site with the heart of your business. The Internet’s role in business can be compared to that of the telephone. It is a way for people to communicate with each other. It is also a way for a consumer to communicate with a company’s computer systems without human intervention. The opportunities and situations in which online business is possible are limitless. Turban et al. (2006 ) revealed that e-commerce is not only limited to buying and selling over the Internet, but it is also concerned with transferring or exchanging products/services and information via computer networks, including the Internet, Extranet and Intranet. E-commerce is important for an economy’s growth because it assists businesses with many levels of current business transactions, as well as creating new online business opportunities that are global in nature. According to Jeffcoate, Chappell and Feindt (2002), businesses can do things with e- commerce that would be prohibitively expensive or logistically difficult to do through older channels of commerce.
  25. 25. 11 A Website is naturally a 24-hour-a-day operation, unlike a traditional 8-to-5 company. It is much easier to keep a Web site up to date with all your company and product information than it is to do the same thing with print materials. The interactivity and completeness of an e- commerce Website can engage customers more directly, giving them a feeling of empowerment and control that is difficult to duplicate through other methods of doing business. Cloete et al., (2005), argues that businesses today are using e-commerce to open their doors to the entire world. People are getting more exposed to the world of instant response that e- commerce makes possible, they are starting to expect that kind of connection with more and more of the businesses with which they deal. For instance, people prefer booking their travel online rather than talking to a travel agent or buying their theatre tickets over the Internet rather than standing in line at a box office. These people welcome the ability to evaluate and buy products on their own schedules rather than on someone else's. Nevertheless, Bauknecht, Madria and Pernul (2000) reported that not every business will be able to take full advantage of e-commerce right away. Few companies have built their existing data systems with the idea that it would be necessary to give the outside world access to any part of those systems. Busy small companies may find it difficult to set aside the time necessary to define and implement e-commerce in a way that makes sense for the way they do business. Companies should keep the possibility of future electronic commerce plans in mind when they start new initiatives or products. In the business world, whether you are doing business online or in the real world, you have to have a product to sell or a service to offer and a place from which to do business. In the traditional world of commerce this can be a physical store or, in a more figurative sense, a catalogue or phone number. In the world of e-commerce the place from which you do business is your Web site. Poon and Swatman (1997) also acknowledged that technology is no longer an afterthought in formulating business strategy, but the actual cause and driver. E- commerce is about structural transformation i.e. revolution of the rules of business. The ability to streamline the structure and to influence and control the flow of information is dramatically more powerful and cost-effective than moving and manufacturing physical products. E- Commerce is enabling companies to listen to their customers and become the cheapest, the most familiar or the best.
  26. 26. 12 2.3. E-Commerce Benefits Molla, (2005) argues that the concept of e-commerce is fast becoming advantageous for both the business and consumer in today's fast moving and electronically-connected world. For many businesses, e-commerce is becoming the only option, as companies become more and more interested in expanding their operations online. E-commerce has many benefits and advantages not found in the typical brick and mortar location, and therefore, explains why so many businesses are flocking to the web. Datta, (2010) noted that e-commerce offers advantages that include the ability to expand into global markets with a minimum of expense, thus allowing firms to reach narrow market segments that are geographically scattered. Internet being a cost effective medium of delivery, the main advantage of online ecommerce is its cost efficiency. The reason behind this is that e-commerce decreases the cost of creating, processing, distributing, storing and retrieving paper-based information. High mailing and printing costs are also lowered or, in many cases, completely eliminated as the buyer most often pays for the shipping of the products that they buy. The cost of marketing of promotional material also drops radically. Another major advantage that most companies see is the increase in sales e-commerce brings, and increased sales typically mean increased profits as well. Additionally the advantage of moving a business online is that it allows the flexibility to target market segmentation, which in turn allows business to focus on a select group of customers, thus having a competitive advantage in giving them what they want and satisfying unique needs. (Utomo and Dodgson, 2001) This benefit ties in with the advantage of ‘customer customization,” in which the concept of 'built-to-order', allowing for inexpensive customization of products and services and provides a competitive advantage for companies who adapt this strategy. Molla, (2005) noted that e- commerce removes barriers of global trading due to the fact that the Internet is a zero-cost delivery channel, and thus, many products and services, which are generally delivered as a physical object or service, are now delivered virtually in the form of data. This removes barriers such as time, distance and of course cost. E-commerce marketing also allow for real-time communications and the interchange of data in the supply chain, making the supply chain more effective. By having better visibility across the supply chain, company inventory levels can be reduced, as supplies are more predictable.
  27. 27. 13 With lower inventory levels, costs can once again be automatically decreased (Jones and Leonard, (2007). It also allows information to flow freely between cooperating businesses, making it easier and simpler for organizations to share information. Janet Wylie, (2000) found that the cost savings and efficiencies from sharing and economies of scale can have a profound effect on the profitability of any online business. As a result this has led to the development of collaborative working practices around the world, as collaborating businesses manage, share, and enhance project work regardless of location. It is important to consider, however, that buyers or customers also benefit from doing their buying online. As sales opportunities expand for the business, they also increase the buying opportunities and power for the buyer. Belew and Elad, (2009) noted that many buyers choose to shop online as it provides them with an almost unlimited variety of choices from many different products and services from a wider variety of sellers Consumers also benefit from less expensive products and services as e-commerce allows customers to shop the convenience to shop from any location and at any given time of the day. E-commerce offers buyers maximum convenience. They can visit the web sites of multiple business round the clock a day to compare prices and make purchases, without having to leave their homes or offices from around the globe. In some cases, consumers can immediately obtain a product or service, such as an electronic book, a music file, or computer software, by downloading it over the Internet. Furnell and Karweni (1999) noted that for sellers, e-commerce offers a way to cut costs and expand their markets. They do not need to build, staff, or maintain a physical store or print and distribute mail order catalogues. Automated order tracking and billing systems cut additional labor costs, and if the product or service can be downloaded then e-commerce firms have no distribution costs involved. Since the products can be sold well over the global Internet, sellers have the potential to market their products or services globally and are not limited by the physical location of a store. Internet technologies also permit sellers to track the interests and preferences of their customers with the customer's permission and then use this information to build an ongoing relationship with the customer by customizing products and services to meet the customer's needs.
  28. 28. 14 According to El-Nawayi and Ismail (2006) the Internet is a huge resource center for any business information; suppliers, resellers, distributors, importers, exporters, products and services. Enterprises can get any kind of business information from all over the world right from their computers. The Internet achieved fast, secure and useful access of information. Today, information being a power in the business environment, the integration of ICTs and Electronic commerce is a crucial step for every developing nation. Reduced advertising cost is one of the major benefits E-commerce gives to enterprises. Websites serve 24 hours a day and 7 days a week all over the world. Besides, the cost of owning a website is much less compared to the benefits they provide (Kaynak et al., 2005). Udo (2001), notes that people buy and sell online in the simplest and easiest ways. Buyers have whatever they need right on their computers and sellers can reach their customers wherever they are just right from their tables. Besides, the process of buying and selling goods especially that of digital goods is a matter of minutes no matter where sellers or buyers are located. There are no middle men needed, no limit or border. The process will end between the seller and the buyer just in minutes saving much time and energy. E-commerce knows no boundaries. Geographical limits do not seem to exist. Enterprises can reach markets that can be found in their opposite corner of the world in no time. This is one feature of E-commerce; making our globe a very small village. Customers are treated well enough through enterprise websites. They can get whatever information they need, view products of their preference, compare prices, get in contact with vendors, and buy simple and easy. Hu and Plant (2001) argue that the adoption of E- commerce in the developing nations is becoming mandatory since the world is becoming a global village and for maximum benefits, local business are encouraged to link up with the international firms to expand their horizons. 2.4. Adoption of E-commerce According to Chan and Al-Hawamdeh (2002) define adoption as the up-take of something new, in this case new technology. Economic globalization and the development of information and communications technology are the two principal trends, which have dictated the shape of business and industry in the second half of the 20th century and beginning of the new millennium. According to Soliman and Youssef (2003) the level of adoption of Information
  29. 29. 15 and Telecommunication Technologies (ITT) for accessing the Web, and implementing “e- Commerce for Buying” and “e-Commerce for Selling” increases over the time. Obviously a much higher proportion of businesses are adopting the technologies for simply accessing the Web for e-Commerce. Some of the factors influencing a firm’s decision to adopt these technologies are: the price of ITT, firm size, network externalities, and learning externalities. At the same time there are different types of unobserved factors, at the regional, temporal and firm level, which influence a firm’s decision to adopt the technologies. Sambamurthy et al. (2003) found that implementing e-commerce applications to enable a competitive edge has become a core and important strategy in most contemporary corporations. Adoption of e- commerce plays a fundamental role in a firm's ability to enhance output. According to Agarwal and Sambamurthy (2002), contemporary firms are making significant investments in e-commerce to align business strategies, enable innovative functional operations and provide extended enterprise networks. These firms have adopted information technology to foster changes in managing customer relationships, manufacturing, procurement, the supply chain and all other key activities and to enhance their competitive capabilities. Firms implement information technology to enhance and/or enlarge the scope of their products and services. As many innovation activities involve adding new services, expanding existing ones and/or improving the service delivery process, the success of an organization hinges on how well it implements its service innovation to create new markets. According to Bowles and Wilson (2002), adoption of Ecommerce is the new way of doing business. It is highly changing and affecting the whole way of global business transactions. Nations need to integrate this technology in order to compete and secure their survival in the global market. In the course of integration of E-commerce there is a huge divide called the digital divide which divides the world nations into two categories. The first are the developed nations, with high E-commerce and ICT integration hence getting tremendous benefits from the global competition, and the others are the developing nations with low integration of E- commerce and loosing benefits of the global market competition.
  30. 30. 16 Zhu et al. (2003) noted that while Internet retail sales have increased tremendously in the past decade, they still represent a relatively small share of total retail sales. There are many retail firms that do not transact over the Internet yet. Better insight into entry determinants can help companies in improving their strategies and coping with the impact of new entry. Therefore, awareness of the industry evolutionary dynamics is important both for new entrants and incumbents. 2.5. Reviewing E-commerce Adoption Factors in SMEs E-commerce adoption factors can be described as those that motivate or inhibit the adoption of e-commerce (Cragg and King, 1993). This review adopts a four dimension framework for reviewing the factors affecting e-commerce adoption and use in SMEs that has been slightly modified from the Tornatzky and Fleischer (1990) model. According to Tornatzky and Fleischer, the process by which a firm adopts and implements technological innovations is influenced by the technological context, the organisational context, and the environmental context. Thus, the factors will be based on the organisational, environmental, technological, and individual dimensions. 2.5.1 Individual Factors Issues surrounding individual persons are an important aspect of the adoption of ICT and e- commerce in any organization. In SMEs, the position of individuals matters a lot as they are supposed to be generalist (Drew, 2003) in performing their functions. Most SME personnel are either in key managerial positions or are classified in a unit or function that performs a certain task or numerous tasks. Most SMEs are run by a manager who is usually an owner of the organization (Demirbas, Hussain, & Matlay, 2011). The following sub-sections describe owner/manager and other individual aspects affecting e-commerce adoption. 2.5.1.1 Owner/Manager Characteristics Literature continues to recognize the significance of the owner or manager in the adoption and use of ICT and e-commerce amongst SMEs (Caldeira and Ward, 2002; Charterjee et al., 2002; Looi, 2005; Stockdale & Standing, 2006; Bharati and Chaudhury, 2006). Owner/manager factors relate to executive decisions that the SME owner /manager must make, what financial commitments to take relating to the overall direction of the firm, acquisition of new e-commerce infrastructure, whether the SME must consider e-commerce adoption or not, their appreciation or non-appreciation of ICT and new technological developments, and the like. This could be expected since the owner and manager is the full driver of all business undertakings in the
  31. 31. 17 organisation (Riemenschneider et al., 2003). The challenge comes when the manager is reluctant to push for e-commerce developments. A vibrant SME owner and/or manager usually transform the SME objectives to grow the organisation further (Karakaya and Shea, 2008). Where the owner or manager of the small enterprise slumbers and does not appreciate the value of ICT innovation, there is stifled growth in the firm. Extant studies have further established that a combination of owner/manager perspectives and attitudes towards ICT adoption and use, play an important role in the development of internal ICT competencies, and provide an important contribution to the development of an environment that enables ICT adoption and use (Wilson et al., 2008; Caldeira and Ward, 2002; Cloete et al., 2002). 2.5.1.2 Level of Education It is also necessary that the owner/manager and other key personnel in SMEs attain an acceptable level of education in order to drive e-commerce activities in their firm. Research studies have found that one of the criteria for successful e-commerce adoption amongst SMEs is the level of education (Thong, 1999; Sarosa & Zowghi, 2003). A basic level of education such as General Certificate of Education (GCE) or its international equivalent is critical as it allows easy communication and appreciation of business terms in global business. Most SME owner/managers, especially in developing countries, are unable to communicate in international languages that give access to global markets. A general acceptable level of education would be a high school ordinary level certification, although higher business qualifications are better. 2.5.1.3 Level of ICT and E-commerce Knowledge Another individual factor is the level of ICT and e-commerce knowledge. It is expected that an acceptable level of ICT and e-commerce knowledge of the owner or key manager, and other key decision making personnel can assist the SME to adopt appropriate e-commerce activities in their business (Teo & Ranganathan, 2004; Meso, Musa & Mbarika, 2005; Looi, 2005). A higher level of appreciation of ICT and e-commerce principles by the owner or key manager will directly influence considerations for further e-commerce uptake in the business. Due to the availability of resources and ease of entry into the business sector, SMEs in 40 developed countries have a better knowledge of ICT than those in developing countries (Eriksson et al., 2008). In a comparative study of how SMEs in the US and Canada manage information technology (IT), Montazemi (2006) found that SMEs in US make better use of ICT and are better guided in managerial decisions-making. Karakaya and Shea (2008) depicted a high satisfaction of e-commerce initiatives in US companies which has resulted in expected levels of
  32. 32. 18 e-commerce success. In most developing countries, a low literacy level amongst SMEs is prevalent (Mollar and Licker, 2005a). This makes it difficult particularly for owner/managers to appreciate and comprehend ICT and e-commerce opportunities on the market. Some SME owner/managers lack the zeal and creativity to act beyond their environment (MacGregor, 2004; Lawson, Alcock, Cooper, & Burgess, 2003; Shemi and Magembe, 2002). In most cases, especially in developing countries, SME managers would do just the barest minimum to make themselves abreast with technology. Many who have complained about the cost of technology for e-commerce set-up have not explored other inexpensive ways of accessing global markets, such as open source software, short message service (SMS) facilities and other new generations of ICT (Scupola, 2010). Previous studies (Mutula & Van Brakel, 2007; Ssewanyana & Busler, 2007) emphasise the importance of ‘skilled ICT personnel’ within the organisation or from outsourcing firms to assist in deploying and using e-commerce. Wilson et al., (2008) found that skilled ICT personnel were crucial for e-commerce progression in the UK SMEs. They further argue that this factor is more important than financial ability. 2.5.1.4 Social and Cultural issues Researchers have stated the need to consider social and cultural factors in the adoption of e- commerce in developing country contexts (Vatanasakdakul et al., 2004). They further argue that social and cultural factors are often disregarded when e-commerce technology is transported from developed countries to developing countries where it is implemented. 2.5.2 Organizational Factors Organizational factors are those that are defined from the nature and characteristic of the firm itself, usually making it unique to the firm. A number of factors have been cited that hinder or motivate e-commerce adoption within the boundary of an organization. These are discussed in the following sub-sections: 2.5.2.1 Security and Privacy Concerns Issues of trust, security and privacy are amongst the most critical determinants to the success of e-commerce adoption for online consumers (Lawson et al., 2003; Humphrey et al., 2003). According to Choudhury (2008) security can be described in two categories: protection of transactional detail of the customers and privacy of the personal information of the
  33. 33. 19 respondents. Security concerns have allowed partial application of e-commerce where only electronic mails are accepted online without electronic payments (Burgess, Sellitto and Karanasios, 2009). In many developing countries, the Internet and the networking jargon are still being regarded as complex phenomena by many SMEs who may presume them to be predators for their data (Tan et al., 2007). The absence of an e-commerce regulatory framework is a drawback to SMEs should security be breached during e-commerce transactions. Most developing countries are yet to enact laws for e-commerce governance and any delays on this aspect means that e-commerce initiatives in SMEs are curtailed. Lawson et al., (2003) noted that most SMEs have no financial ability to secure their systems after viral attacks. 2.5.2.2 Financial Ability and Cost Implications Amongst the challenges that hinder development in e-commerce in SMEs is the issue of finance as it relates to the amount of financial resource that a firm can utilize for setting-up, buying necessary ICT for e-commerce implementation, consultancy fees and training personnel and maintenance of websites and other infrastructure (Lee et al, 2003). However, in a UK study by Simpson and Docherty (2004), it was found that cost was not an inhibitor to e- commerce adoption amongst SMEs. In most developing countries, SMEs have little or no financial resources to acquire ICT infrastructure or to venture into e-commerce initiatives (Burgess, Sellitto and Karanasios, 2009). 2.5.2.3 Size of the Organization According to it has been found that the size of the organization can influence the decision to adopt e-commerce (Bharati and Chaudhury, 2006). Larger businesses are known to have plenty of resources at their disposal, especially with supply chain management (SCM) systems (Burgess, Sellitto and Karanasios, 2009) that link with suppliers. A small firm will find it very challenging to acquire such a system due to the high cost of set up. In the US context, Bharati and Chaudhury (2006) studied the extent and nature of ICT adoption in SMEs in the Boston area. They found that firm size has a significant impact on what technologies are employed. Further, they found that simple technologies, including Web and accounting packages, were used widely across all firm sizes, whereas complex technologies such as Customer Relationship Management (CRM) and SCM were minimally employed. Recently, the impact of size has generally been found to be an insignificant influence on e-commerce adoption
  34. 34. 20 (Karakaya and Shea, 2008), possibly because the playing field has been levelled with better and easier logistics to deploy e-commerce systems. 2.5.2.4 Perceived benefits of ICT The perception of benefits to be derived from e-commerce adoption and use is another factor that is cited in literature (Chibelushi and Costello, 2009 ;). Most SMEs in developing countries are unaware of what technologies, including e-commerce, can be of benefit to them due to lack of education and sometimes ignorance. They often assert that perceiving the good of the technology before actually using it is rather difficult. Another barrier similar to this is the ‘negative mindset’ regarding the technological/regulatory environment (Burgess, Sellitto and Karanasios, 2009). 2.5.2.5 Organizational Culture Organisational culture has been identified in the literature as a key issue affecting the adoption and use of e-commerce SMEs (Montazemi, 2006; Thatcher et al., 2006; Tan et al., 2007). Hofstede’s (1984, 1993) work has been useful to describe the role of culture in IS/IT adoption research. Some cultural dimensions are described below: a) Power distance: The extent to which the members of a society accept that the power in organisations is distributed unequally. b) Uncertainty avoidance: The degree to which members of a society feel uncomfortable with uncertainty and ambiguity. c) Individualism versus collectivism: The extent to which a person sees herself as an individual rather than part of a group. d) Masculinity versus femininity: Preference for achievement, heroism, assertiveness and material success as opposed to feminism, which refers to a preference for relationships, caring and quality of life. e) Time orientation: The relative importance of the here and now versus the future. In their study in South African SMEs, Humphrey et al (2003) found that SME managers were more interested in establishing face to face business meetings than web-enabled business discussions. This corroborates earlier studies by Duncombe & Heeks (1999, 2002) who found that SMEs and rural micro-entrepreneurs in East Africa relied on informal, social and local information systems. Thatcher et al., (2006) found that Taiwanese culture had an influence on e-commerce adoption and that this was further differentiated depending on industry affiliations.
  35. 35. 21 In the Chinese context, Martinsons (2008) describe an e-commerce scenario that is relationship-based, and culturally driven by a Chinese term, called ‘guanxi’. 2.5.3 Technological Factors Technological factors are those that are obtained from the nature and characteristic of the ICT that the SME employs or intends to use for e-commerce adoption (Scupola, 2009). These factors are discussed as follows: 2.5.3.1 Availability and Slow Speed of Internet In many developing countries, the availability of Internet in SMEs has greatly contributed to the delay in adopting e-commerce (Uzoka et al., 2007; Molla and Licker, 2005a; Magembe and Shemi, 2002). Further, the slow speed of Internet does not motivate or promote e-commerce adoption as well (Oreku et al., 2009; Mutula & Van Brakel, 2007). 2.5.3.2 Complexity of Technology The complexity of ICT can be considered a key factor affecting e-commerce adoption in SMEs. Some organisations have been sceptical to adopt e-commerce technology because of concerns about data management issues between the old and new ICT applications (Forman, 2005). 2.5.3.3 Lack of Payment Facilities The lack of payment facilities such as credit cards has prevented the completion of e- commerce transactions as reported by Mercer (2005) in Tanzania. 2.5.3.4 Lack of Reliable Power Supply Another situation affecting e-commerce adoption is the unreliable supply of power or electricity to operate ICT equipment. In Tanzania (Mercer, 2005) and Botswana (Magembe & Shemi, 2002), previous studies found that the lack of power or electricity prevented small businesses especially in rural areas from adoption e-commerce. 2.5.3.5 Language Barrier Previous studies have pointed out that language barrier deters many people in developing countries from participating in e-commerce (Vatanasakdakul et al., 2004). They further note that ICT and e-commerce applications are developed in the western countries with English as the main language of communication and so it is taken for granted that users in other parts of the world must automatically understand the language, which may not be applicable in other contexts.
  36. 36. 22 2.5.4 Environmental Factors The external environment of the SME organization also impacts some challenges to e- commerce adoption. It describes the realm of business engagement of the firm (Scupola, 2009). This describes factors such as government role; business partner affiliation and preferences; nature and characteristic of value chain; logistics and telecommunications infrastructure; economic and political instability; human-rights issues; business culture; macro- economic policies; natural disasters; floods; and earthquakes. A brief review of each of these follows: 2.5.4.1 Government Support The role of government in providing various forms of intervention has been cited as a catalyst for the development of e-commerce in SMEs (Thatcher et al., 2006; Martinsons, 2008). Government support can come in the form of facilitating policy for SME operations in the country, institutional support for providing financial and technological assistance, improving e- commerce infrastructure, and enacting favourable e-commerce laws (Scupola, 2003). Researchers (Dunt and Harper, 2002; Chan and Al-Hawamdeh, 2002, Martinsons, 2008) noted that developed countries’ ability to adopt and use e-commerce and e-business at advanced levels has been greatly enhanced by their government’s proactive role in providing the enabling infrastructure for e-commerce to thrive. Unfavourable government and regional policies stifle creativity among SMEs, threatening the existence of this sector in the economy. 2.5.4.2 Business Partner Affiliation Another factor that influences the adoption of e-commerce in SMEs is the business partner (Parker and Castleman, 2009) who may be suppliers or customers (Wilson et al., 2008). Business partner relationships are usually portrayed from the suppliers or customer’s perspectives. SMEs will usually want to develop and deepen a business relationship with the aim of establishing a long-lasting business partnership (Castleman, 2004). This idea works well if the business partner recognizes the strategic value and competitive advantage that this can bring to both organizations. 2.5.4.3 The Nature and Characteristic of Value Chain In the B2B market place, social relationships between buyers and sellers can open up room for e-commerce adoption or close opportunities for growth. The closed nature of industries like horticulture does not necessitate the need to undertake business on the open Internet, as all stakeholders are within a closed market system (Humphrey et al., 2003). Any decision to adopt
  37. 37. 23 e-commerce will have to be considered alongside other stakeholder’s position in the market system. 2.5.4.4 Economic and Political Instability and Human Rights Issues Economic and political instability prevents SMEs from freely trading in the country and their regional groupings due to several uncertainties. Related to this is the human rights situation that may hinder SMEs participation in e-commerce. 2.5.4.5 Business Culture The prevailing business culture in the SME environment has been cited as crucial for the development of e-commerce (Martinsons, 2008; Thong, 1999). This has been found to be different from country to country even amongst developed countries (Scupola, 2009). For example, most SME managers in East Africa in particular, can be said to have low uncertainty avoidance and low individualism, meaning that people can easily interact and share ideas with friends or relatives without much consideration of losing individual identity. 2.5.4.6 Macro-Economic Policies The presence of macro-economic policies in developed economies has been a catalyst for e- commerce growth (Martinsons, 2008; Molla and Licker, 2005a). In their study on the role of institutions in the diffusion of e-commerce, Molla, Taylor, & Licker (2006) found that during the early stages of e-commerce penetration, public and external institutions play ‘key roles in creating conducive conditions and in providing the impetus necessary for e-commerce to spread.’ In less developed economies, other forms of regulatory policies may have to be pursued to enable e-commerce adoption using various types of technologies to complement efforts made by their governments. 2.6. Factors and challenges Influencing Adoption of E-commerce E-commerce has become so convenient, that we don't spend much time thinking about the disadvantages of e-commerce. As the twenty-first century unfolds, the Internet and electronic commerce have become increasingly important to the business world (Maswera & Edwards, 2008). In particular, small to medium sized businesses (SMEs) can now overcome some of their major disadvantages, such as size, limited financial, technological and human resources, and limited exposure to the global marketplace, by adopting Internet technologies (Cooper & Burgess, 2000; Riquelme, 2002). There are a number of theoretical Models that seek to explain electronic commerce adoption by SMEs. The literature reviewed in this research include the
  38. 38. 24 Change Agency Theory (Mao & Palvia, 2008), the Stage Model, Internet Adoption Model (Mehrtens, Cragg and Mills (2001) on perceived benefits and organizational readiness Technology Acceptance Model (TAM) (Cooper & Burgess, 2000). Based on the theories, the study has independent variables elaborated below. 2.6.1. Resources of the Enterprise In an enterprise, the financial, human and technology resources such as computers, telephone lines, cables among others play a very important role in the adoption of new technologies (Rashid & Al-Qirim, 2001). In the case of SMEs in particular, even if the managers perceive the adoption of new technologies and electronic commerce as important, the enterprises often do not have sufficient resources to adopt them (Thong, 2001). This is a major obstacle to the integration of new technologies and electronic commerce in SMEs. Severe organizational constraints on financial, technological and human resources often cause businesses in developing countries to lag behind their counterparts in developed countries in using electronic commerce (Huy & Filiatrault 2006). 2.6.2. Awareness of Benefits Cloete et al. (2005) discovered that several studies have researched the benefits of the adoption of e-commerce in an organization. While the potential benefits have been established, a number of inhibitors to the adoption of these new business models still exist. For small and medium businesses the advantages of e-commerce adoption are often perceived to be applicable and few success stories are available to convince owners of such firms that e-commerce offer as real benefit to their organizations. Van Akkren and Cavaye (1999) unearthed that e-commerce and internet technologies could benefit an organization through improving the SMEs' ability to compete with larger organizations and operate on an international scale. They also found that e-commerce can deliver the tools to provide cost effective ways for SMEs to market themselves, launch new products, improve communication, gather information and identify potential business partners, the aim being to extend their capabilities to higher turnovers and larger markets. Conversely, according to Cloete et al. (2005), despite these potential benefits of e- commerce to an SME, there seem to be a perception by owners by of SMEs that there is a lack of business benefit, if the input is weighted against immediate returns. Due to the fact that the ownership of a decision making power in an MSE is held by just one or two people, adoption of
  39. 39. 25 e-commerce into such an organization is held heavily reliant on these people’s acceptance of a technology. These benefits are classified into ‘direct’ and ‘indirect benefits (Cloete et al. 2005). Direct benefits are quantifiable by using customers as a result of e-commerce implementation. Indirect benefits are not easily measured but rather have a positional effect on the business, for example customer loyalty and goodwill as a result of e-communication implementation. The authors found that perceived benefits formed a key reason why participants adopted and continued to use the Internet. They put forward a framework for perceived benefits related to Internet use based on the classification into short terms and long term, direct and indirect. Their findings indicated that small and medium businesses were not reaping significant short- term benefits from the internet. The Internet based e-commerce generates revenues by providing customers access to their accounts, transactions and orders. The level of satisfaction for those customers interacting electronically will undoubtedly rise. By receiving information about competition through the internet, it is possible to develop a competitive strategy much faster than using old-style methods. 2.6.3. Leadership Style Kraemer,(2006)conceptualizes leadership in terms of commitment at the top; thorough analysis of a company’s electronic commerce position where the company must evaluate its position regarding electronic commerce; significant financial investment which must make resources available and cultural transformation which must make sure the firm culture adapts. With those a firm begins developing and implementing electronic commerce initiative (Caldeira & Ward, 2003). In SMEs, it is the owner/manager who initiates, participates in project electronic commerce and establishes a clear goal for their ventures (Decker & Lorentz, 2004). To move forward owner/managers need to be enthusiastic, passionate and a firm believer of the benefits of electronic commerce and must be committed to considering as playing electronic commerce a significant role in the organization (Jones, 2004). Owner/Manager in SMEs needs to combine elements of both leadership and management in their role during the
  40. 40. 26 entire implementation cycle of implementing electronic commerce in their ventures (Rashid & Al-Qirim, 2001). 2.6.4. Influence of Infrastructure Understanding technology infrastructure and thus understanding what is and is not achievable is essential to formulating SME’s vision and strategy (Wang & Cheung, 2004). The capital infrastructure relates to how to secure funding for an electronic business and subsequently value that business (WTO, 2001). The media infrastructure is an important issue for all electronic commerce managers because the Internet is a mass communication platform (Daniel, Wilson, & Myers, 2002). According to Mirchandani & Motwani, (2001), there may be a case for promotional interventions at a national level as national infrastructure. The infrastructure of a country positively influences the adoption of new technologies (Ling, 2001; Chieochan et al., 2000). In countries with good technological support and a sound infrastructure, adoption is more marked (Tan & Teo, 2000). E-commerce is still in an early stage and a number of related issues are not yet solved like security, privacy, data protection, and encryption, copyright and intellectual property. The constantly evolving policies and rules governing the Internet and its operations will affect the future of global e-commerce. Given the enormous economic opportunities at stake for all companies across the world, developing countries should be involved as equal partners in the development of the growing body of Internet governance (Davis and McCarthy, 2002). Hartman and Walsh (2004), argues that the development of a web presence requires sophisticated technology and a supporting infrastructure. e-business requires an extensive infrastructure that must be designed and maintained properly to ensure reliable performance, particularly as customer expectations of reliable, on-demand access becomes the norm. They further defined infrastructure as consisting of an Internet connection, internal networks, computer hardware and power and data backup system. Failure of any of these systems takes the e-business offline. Intranets Development and linking into extranets will allow small firms to exploit the business benefits of Information and Communication Technology (ICT), (Janet Wylie, 2000). They noted
  41. 41. 27 that small organizations may be less likely to be exposed to unproven technology, unlike larger organizations. However, the personal computer has made computing accessible to business of all sizes. Further to this, they also noted that technical advances have made computers more powerful and less expensive. According to Aljifri, Pons and Collins (2003), the infrastructure is the backbone or supporting complexes that are in place to promote implementation, communication and usage of networks. A resilient infrastructure is needed for e-commerce to flourish. Unfortunately, developing countries like Tanzania typically lack a good communication infrastructure. A flexible, manageable and maintainable integrated IT infrastructure can lead to differentiation and therefore competitive advantage. Existing IT infrastructure of an organization is a factor that affects the introduction of EAI, as the needs of the infrastructure often stimulate the process for adoption integration (Puschmann and Alt, 2001). The Economic Recovery Strategy Paper 2003, as cited in Republic of Tanzania Sessional Paper No 2 (2005) has identified poor infrastructure as a critical factor that constraints profitable business in Tanzania. Infrastructural problems include inaccessibility to land, workspace, feeder roads, electricity and other utilities. Limited access to electricity by SMEs is compounded by the fact that the SMEs are expected to obtain an approval from local authorize before a connection can be made. In addition, energy costs in Tanzania are extremely high and have a negative impact on all businesses, large and small scale alike. This constraint limits SMEs' technologies capacity thereby adversely affecting the competitiveness of their products and services (Tanzania SMEs Development Policy 2002). 2.6.5. Cost of Implementation Janet Wylie, (2000) argues that a major constraint for small firms in the area of e-business may be their inability to make the necessary investment to take advantage of the new concepts and ICT. They may have to rely on outside consultants, which are problematic, as most small firms cannot afford to employ private consultants. SMEs have special needs because of their limited resources in terms of personnel, finance, and knowledge pertaining to management, marketing, commercialization, or information technology. Some smaller supplier businesses have suffered because large customers have started buying online on a global basis resulting in downward and sometimes unsustainable price pressures. It is now critical for smaller suppliers to compete internationally or regionally and they often lack
  42. 42. 28 knowledge and expertise about international trade issued and foreign markets (Dawn, Bodorik and Dhaliwal, 2002) Costs of implementation of e-business can be a serious barrier for SMEs. Although limited resources are a distinguishing characteristic of SMEs and thus a barrier for them to compete in the global e-business sector, there are also many counter- balancing advantages as well. An obvious advantage is that SMEs are usually more entrepreneurial and willing to experiment and innovate in terms of business models and operations than larger organizations with established hierarchies. Thus, government initiatives aimed at increasing the e-business readiness of SMEs can result in a higher level of national competitiveness in this crucial sector (Dawn et al., 2002). The cost of setting up an e-business includes preliminary planning, procuring hardware and/ or software tools (installation, training and subsequent reorganization, continuous maintenance, servicing costs and telecommunication charges. Kaynak et al. (2005) noted that SMEs are highly concerned with the start up costs of developing e-commerce in-house. They found that there are four basic components of the cost involved with e-commerce as significant impediments to e-commerce adoption of SMEs. These include connection cost to the Internet, the cost of adequate hardware/software, set up and maintenance costs. MacGregor and Vrazalic (2005) found out that high costs as a barrier to the adoption of e- commerce by SMEs arises from the fact that small businesses faces difficulties obtaining finance, unlike their larger counterparts. According to Agarwal and Prasad (2000), the associated high risk of IT investment could discourage some owner/manager to adopt IT for their company. 2.6.6. Competition A number of authors have studied the possible influence of the intensity of competition on the adoption of new technologies or of electronic commerce (Iacovou et al., 1995; Robertson & Gatignon, 2000). By contrast, Thong (1999) found out that competition influences the adoption of new technologies or electronic commerce very little in small enterprises, while Premkumar and Roberts (1999) findings were contrary; that the pressure of competition is a factor that
  43. 43. 29 influences adoption. Intensity of competition can be measured by the number of competitors and the policies of adoption of electronic commerce in these enterprises. Finally, Lertwongsatien and Wongpinunwatana (2003) have found that there is a relationship between the intensity of competition in an industry and the degree of adoption of electronic commerce. According to Kinyanjui and McCormick (2002) ensuring competition and entry opportunities for other market players, particularly smaller ones, must be an ongoing policy priority. Auger, BarNir and Gallaugher (2003) observe that while Internet commerce provides SMEs with opportunities to participate in new supply chains and markets, they may compete and conflict with established channels and established market structures. There may be explicit or implicit pressures from leading firms to maintain existing channel structures and networks or to refrain from participating in new channels (Chong, 2006). Competition authorities need to monitor possible anti-competitive behavior as the electronic marketplace evolves. Technological factors also come into play (Dixon, Thompsons & McAllister, 2002). 2.6.7. Technical Skills amongst Owners and Employees Janet Wylie, (2000) noted that there are a wide range of Internet applications that SMEs have at their disposal. However, whether they are actually using them fully to gain competitive advantage is not clear. Lack of resources and skill in both the technical and business areas, makes the introduction of e-business unworkable in its current format. Simpson and Docherty (2004) found that ignorance surrounding technology is fuelling concerns about security, costs and legislation. Lawson, Alcock, Cooper and Buegess (2003) notes that diffusion of new technology can take decades, and involves more than simply reproducing distributing the technology. Indeed making full use of new technologies will rely on the IT skills for staff within the organization. Intense competition and rapid technological developments are accelerating the change in skill requirements across almost all industries. The ability to learn continually and update skills is becoming more and more important (McCole, Marrow, Ponsonby and Kelly, 2001). One of the key aspects of SMEs must consider when embracing technological advances is the need to develop skills and competencies, technological changes demand a new set of skills. Rapid movements require that companies possess skilled and competent employees to function, let alone compete.
  44. 44. 30 The lack of technical skills amongst owner-managers of SMEs places a heavy reliance on external advice and support; however reliance on external advice does not necessarily have to be from experts (Simpson and Docherty, 2004). Taylor and Murphy (2004) found that many SMEs lack the necessary IT skill base to engage with the digital economy. Some may have ICT enthusiasts as owner-managers, but the majority of firms do not. They noted that the lack of staff to implement IT is a separate aspect of this same restraint. It may be difficult or too expensive for an MSE to hire people with the necessary technical expertise to pursue an IT strategy. The constrains limiting the availability and accessibility of relevant technology to SMEs are further compounded by the general low investment in research and Development (Tanzania Sessional Paper No.2, 2005). 2.7. Challenges of E-Commerce According to Bowles and Wilson (2002), it has taken e-commerce a few years to get established. It also took customers a few years to feel safe about typing in their credit card information and also there wasn't always an alternative means of paying if one didn't have a credit card. In most developing countries, there is lack of proper infrastructure in place and accessibility to the internet for majority of the people. Thus this poses a huge obstacle since customers in some cases have to travel large distances to gain any access to the internet. Agarwal and Prasad (2000) found that non-standardized protocols for certain processes, insufficient telecommunications bandwidth and ever- evolving software tools, are some of the technical issues that contain e-Commerce from being a seamlessly integrated component of the contemporary organizational IT systems. Simpson and Docherty (2004) emphasize that whereas technical limitations are completely resolvable, non-technical issues including people’s resistance to change and lack of trust for faceless and paperless transactions, is bound to take its due time before it completely erodes. There are tangible privacy and security issues that keep people on guard as they face a dilemma each time they need to divulge highly personal information online as and when they transact online.
  45. 45. 31 E-commerce poses a threat of a customer overspending on credit cards, especially if the client is not careful and does not manage their finances well. Therefore e-commerce requires discipline of the customer to avoid running into debt (Taylor and Murphy, 2004). Online furniture businesses, for example, have failed for the most part because customers want to test the comfort of an expensive product before they purchase it. Many people also consider shopping a social experience. For instance, they may enjoy going to a store or a shopping mall with friends or family, an experience that they cannot duplicate online (Blackburn and Athayde, 2000). Barr and Milner (2002) noted that e-commerce lacks the touch and feel aesthetics that come with it. This can especially be of concern when what we are buying carries a significant price tag. An image on the computer screen can't always capture the true look of any product and certainly not the feel. It isn't at all unusual to order a product and find the color just isn't what we were expecting. One can't also try on the product or service before ordering it either. Chan and Al-Hawamdeh (2002) found that products vary in sizes. This can be especially troublesome with personal products items like clothing. Lawson and Kapurbandara (2006), identified that SMEs are not often keen on ICT adoption when internal and external barriers, related to infrastructure, legal, political, social and cultural factors, come their way. Barriers include: lack of skills, lack of awareness about possible return on ICT spending, little support and policies for SMEs from the government, lack of suitable software standards and low internet penetration. 2.8. Conceptual Framework According to Viitakangas (2006), conceptual framework explains either graphically, or narrative, the main things to be studied, taking into consideration the main factors, constructs or variables, and the presumed relationships among them. A conceptual framework was developed to capture elements from extant e-commerce adoption literature that are defined in the research question. Data collected from selected SMEs was analyzed to present the findings based on the research questions.
  46. 46. 32 Figure 2. 2 Conceptual Framework Factors Affecting e- commerce Adoption in Tanzania Research Question 1 Research Question 2 Research Question 3 Literature Review Research Implementation E-commerce influence and Usage Reviewing e-commerce Adoptions factors E-commerce adoption Challenges Managerial e-commerce perception Influence of Leadership style, Infrastructure, Implementation Findings,Summaries,DiscussionsandConclusion
  47. 47. 33 CHAPTER THREE: RESEARCH METHODOLOGY 3.1. Research Design Research design is the blueprint that enables the investigator to come up with solutions to problems and guides him in the various stages of the research (Nachmias & Nachamias, 2004). The research used survey research design as it was helpful in indicating trends in attitudes and behaviors and enable generalization of the findings of the research study to be done (Kuter & Yilmaz, 2001). This design was considered appropriate for this research because it saves time, expenses and the amount of quality information yielded is valid, while interviewer bias is reduced because participants complete identically worded self-reported measures (Mellenbergh & Hand, 2008). And since the data set is smaller it is possible to ensure homogeneity and to improve the accuracy and quality of the data. This is mainly because the research covered various SMEs in Arusha Town, and the survey ensured that information gathering was comprehensive. 3.2. Target Population According to Cooper and Schindler (2001), population is the total collection of elements, which the researcher wishes to make inferences. The target population of the study comprised all Small and Medium Enterprises in Arusha town. A population is defined as a complete set of individuals, cases or objects with some common observable characteristics (Mugenda, 2003). Dencombe (2007) defines a population frame as “an objective list of the population from which the researcher can make his or her selection.” A population frame must thus contain an up-to- date list of all those that comprise the target population. The survey defined SME’s as enterprises employing between 5-99 workers. According to Arusha City Municipal Council, a total of 1,141 SMEs are registered in Arusha. These SMEs included Crafts Shops, beauty shops, general shops, entertainment establishments, grocers, chemists and computer shops amongst others. 3.3. Sample Design The study used simple random sampling procedure to select a sample that represents the entire population. Simple random sampling is a probabilistic sampling technique which ensures each subject, object or respondents to have an equal chance of representation (Tillé, 2006). A
  48. 48. 34 simple random sample is used when a population is heterogeneous making it the most appropriate sample to come up with the target sample. For small populations, the general rule-of-thumb is that one needs to have at least 30 respondents but for bigger populations, a representative depends on the mode of selection and according to Clark (2007) a sample of 10% is representative. The sample frame for the study was the list of 1,012 registered as per list from Municipal of Arusha City. A sample frame as a list that includes every member of the population from which a sample is to be taken (Moore and Shah, 2014). A sample size of 105 SMEs was selected to participate in the study. The researcher used Simple Random Sampling technique in the survey. 3.4. Data Collection Questionnaires, incorporating both open-ended and closed-ended questions items and interview Questions were used to gather the study’s data. According to Clark,( 2007), the questionnaire is conveniently used because it is cheaper and quicker to administer, it is above researcher’s effect and variability, and is highly convenient for the respondents as they could fill them during free times or when workloads are manageable. The instruments incorporated Likert scales to measure perception, attitude, values and behavior. The questionnaires were self-administered. The main respondents of the questionnaire and Interviews were either the owners or managers of the business. Primary data was collected through interviews and using self-administered questionnaires (by drop and pick’ method upon completion). Each respondent was given a questionnaire, requested to fill it in and then collected immediately or after a few hours as agreed upon. The questionnaire generally constituted of Likert scale and was sub-divided into several sections as follows; general information, e-commerce applications and factors Affecting and influencing adoption of e-commerce. The section on factors influencing adoption of e- commerce was broken down into knowledge of benefits derived from e- commerce, infrastructure, cost of e-commerce implantation and IT skills and training.
  49. 49. 35 3.5. Documentary Review The research collected data from relevant reviews, journals, articles and earlier studies on the same area in order to enough information and proof of the factors affecting the adoption of ecommerce. 3.6. Data Analysis and Presentation Quantitative data was edited to eliminate inconsistencies, summarized and coded for easy classification in order to facilitate tabulation and interpretation descriptive statistics was used in describing the sample data in such a way as to portray the typical respondent and to reveal the general response pattern. These statistics were generated with an aid of the computer software, Statistical Package for Social Sciences (SPSS) which offers extensive data handling capability and numerous statistical analysis routines that can analyze small to very large data statistics (Altman, Gill and McDonald, 2004). According to Clark, (2007) the graphs and diagrams are used to summarize the information based on the subject at hand. Data analysis was done on the basis of the three study objectives which were to determine the factors that affect and influence adoption of e- commerce; and to determine the frequency of use of e-commerce by SMEs in Arusha, Tanzania.
  50. 50. 36 CHAPTER FOUR: FINDINGS AND DISCUSSIONS 4.1. Introduction This chapter contains the findings of the study and discussions on the findings. The data obtained from the research instruments was analyzed by use of SPSS and was then presented in form of tables and figures date July to September 2015. The study sought to investigate the factors that affect adoption and frequency of use of e-commerce by small and medium enterprises in Arusha, Tanzania. The target population consisted of 1,012 enterprises, out of which a sample of 105 traders was selected and 67 responses were received which represented a 63.8% response rate. According to Clark, (2007) a sample size of at least 10% or 20% of the population is considered reasonable for the findings of the study to be valid. 4.2. General Information Demographics regarding the enterprises studied are presented in this section. The profile of the respondents, which included; position or ownership in the business, gender, age, the number of years having worked in the business, level of education and business qualification were surveyed. The forms of the enterprises under study and their utilization of e-commerce in their business transactions were studied. 4.2.1. Gender of the Respondents Sex of the respondents was investigated. Figure 4. 1 Respondents' Gender
  51. 51. 37 Figure 4.1 indicates that most of the respondents were male. 45 Male (67%) and 22 Female respondents participates (33%) 4.2.2. Age of the Respondents Findings show that young people between 22-30 years adapt to technology than the older generation, and the vacillating nature of the industry demands constant interest of the users. Figure 4. 2 Age of the Respondents Figure.4.2 shows that most of the respondents were between the ages of 22 to 30 years and other age bands had an almost equal illustration in the respondents sampled. 4.2.3. Management Level The respondents were spread into 3 different levels of Management these were upper level, middle level and low level managers. Majority of the respondents were in the middle and upper management with 43.3% and 36.7% response respectively whereas 16.7% were in the lower level management. This means that the responses represent the levels of management in the SMEs. This is important in this study due to the electronic adoption for different purposes across the different levels of management of an organization. This is in line with (Du Plessi and Boon, 2004) who states that electronic commerce managers must be responsible for web design and digital content. 0 10 20 30 40 50 60 Below 21 years 22 – 30 years 31 – 40 years 41 – 50 years Frequency Percent

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