ISSUES AND BARRIERS AFFECTING THE DEVELOPMENT OF E-

COMMERCE ON SMALL AND MEDIUM ENTERPRISES (SMEs) IN

DEVELOPING COUNTRIES: A NIGERIAN PERSPECTIVE.

A STUDY SUBMITTED IN PARTIAL FULFILMENT

OF THE REQUIREMENTS FOR

THE DEGREE OF

MASTER OF SCIENCE IN INFORMATION SYSTEMS

AT

THE UNIVERSITY OF SHEFFIELD

BY

AYOKUNLE ILESANMI

September, 2007

1

Abstract

Research indicates that e-commerce offers a promising and exiting way for organizations

to meet various challenges of an ever-changing environment in these present days.

However, few available studies relating to SMEs in developing countries reveal that

majority of these businesses always lag behind or are in doubt about adopting e-

commerce technology despite advantages, opportunities and their effectiveness.

Literature, i.e. books and academic related materials also reveal many significant reasons

towards SMEs lagging behind. The various factors identified that cause this can be

broadly classified as internal barriers and external barriers. Internal Barriers are the

barriers which are caused within the businesses and can be eliminated by the business

itself, while External Barriers are the barriers caused outside these businesses or from the

society and can be addressed either by government intervention or making available

adequate measures for success from the collaboration of these SMEs. This dissertation

then presents the issues and barriers to the adoption of e-commerce, which is written from

the collection of available literature and a discussion from the results of a survey

conducted in the study. In addition to the barriers facing SMEs, this research also will

identify the supports required by SMEs in developing countries using Nigeria as a case

study. The methodology and current trends found in the area of research are also

discussed broadly.

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ACKNOWLEDGEMENTS

First, I would like to thank Almighty God for guidance, good understanding and wisdom

throughout the project.

Secondly, I would also like to thank all the respondents to the survey, without their

contributions and cooperation this research would not have been possible. Our

respondents were from SMEs in Ibadan, Nigeria who gave us valuable insight into the

state sector of the economy. The views and conclusions in this dissertation, however, are

the authors who accept full responsibility.

I sincerely thank the dissertation’s supervisor, Dr.Angela Lin for her support, guidance

and encouragement throughout the project. Her contributions helped in the formulation of

the research. I am most grateful to her.

I would also like to thank my parents Professor and Mrs. Abiodun Ilesanmi for their

financial support and words of encouragement throughout the project.

Finally, special thanks to Eyitayo Akindele who contributed by moral support and critical

comment on my work, my siblings Tomi, Dayo, Dipo,Taiwo and Kehinde for the

different support and love they gave me when I was carrying out the research. I knew I

could rely on your supports.

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LIST OF FIGURES AND TABLES

TABLES

I. Forms of e-commerce………………………………………………..16

II. Unique features of e-commerce……………………………………...18

III. Reasons SMEs are using websites in Nigeria………………………..57

IV. Benefits of e-commerce in developing countries…………………….59

V. Internal Barriers to the adoption of e-commerce……………………..65

VI. External Barriers to the adoption of e-commerce…………………….67

VII. Internal support required by SMEs to use e-commerce……………..68

VIII.External support required by SMEs to use e-commerce…………….69

FIGURES

I. SMEs contribution to GDP and employment………………………...21

II. Respondents by firms size……………………………………………51

III. Respondents by business sector……………………………………... 52

IV. Respondents by geographical range of business……………………...53

V. Number of SMEs using computers…………………………………...54

VI. Level of e-commerce adoption in Nigeria……………………………55

VII. Method of developing and maintaining websites in Nigeria………...56

VIII. Benefits on widening of geographical reach………………………..61

IX. Benefits on improving supply chains…………………………………62

X. Benefits on the increase in profits for SMEs…………………………..63

XI. Reason for not adopting e-commerce in Nigeria……………………..64

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TABLE OF CONTENTS

Abstract……………………………………………………………………..2

Acknowledgement………………………………………………………….3

List of Figures and Tables………………………………………………….4

Table of Contents…………………………………………………………..5

CHAPTER 1. INTRODUCTION

1.1 Importance of e-commerce……………………………………...8 1.2 Importance of SMEs…………………………………………….9 1.3 Research aims…………………………………………………..11 1.4 Statement of Problems………………………………………….12 1.5 Organisation of Dissertation……………………………………13

CHAPTER 2.LITERATURE REVIEW

2.1 Definition of e-commerce……………………………………….15

2.1.1 Characteristics of e-commerce………………………..17

2.2 Definition of Small and Medium sized Enterprises……………..19

2.3 E-commerce and SMEs………………………………………....22

2.3.1Benefits of e-commerce on SMEs……………………...23

2.3.2 E-commerce adoption barriers for SMEs……………...28

2.4 Trends of e-commerce adoption in countries…………………..33

2.5 Trends in developed and developing countries………………...34

2.6 E-commerce trends in Nigeria………………………………….37

CHAPTER 3. RESEARCH METHODOLOGY

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3.1 Research Approach…………………………………………..43

3.2 Data Collection………………………………………………44

3.3 Questionnaire Design………………………………………...46

3.4 Anonymity…………………………………………………...48

3.5 Limitations and Problems……………………………………48

CHAPTER 4. RESEARCH FINDINS AND DISCUSSION

4.1 Respondents by firms size…………………………………...50 4.2 Respondents by business sector……………………………..51 4.3 Respondents by geographical range of business……………..52 4.4 Are SMEs using e-commerce in Nigeria?..............................53

4.4.1 General use of computer…………………………53

4.4.2 Do firms have established website?.......................54

4.4.3 How are the websites developed and maintained?.55

4.4.4 Are firms using e-commerce?.................................56

4.5 What factors persuade firms to use e-commerce?.....................58

4.5.1 Benefits of using e-commerce in Nigeria………….58

4.5.2 Benefits of e-commerce on SMEs in

developing countries……………………………….58

4.5.3 Expanding geographical reach of SMEs……………60

4.5.4 Supply chains of Industries…………………………61

4.5.5 Increase in profitability……………………………..62

4.6 What are the barriers faced by SMEs in adopting e-commerce...63

4.6.1 Why don’t SMEs adopt e-commerce?........................63

4.6.2Main barriers in adopting e-commerce………………64

4.7 Support needed for e-commerce adoption………………………68

4.7.1 What are the supports required for SMEs?...................68

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CHAPTER5. CONCLUSION

5.1 Direction for future research……………………………………72

BIBLIOGRAPHY……………………………………………...73

APPENDIX I…………………………………………………..82

APPENDIX II………………………………………………….83

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1. INTRODUCTION

1.1 Importance of e-commerce

The enormous growing developments of Information and Communication Technology

have fuelled the birth of e-commerce into the society all over the world. The term e-

commerce has been defined by different researchers. Lawrence et al (2003) defined e-

commerce as the buying and selling of information, products and services via computers,

telecommunication networks and streamlined work processes. According to Rayport and

Jaworski (2003), the authors defined e-commerce as “a technology-mediated exchanges

between parties (individuals or organizations) as well as the electronically based intra or

inter organizational activities that facilitate such exchanges”. This is unarguably the basis

of many success stories for many organizations whereby adopting e-commerce provides a

front-end tradition for these organizations making new products, services more reachable

and marketable all around the globe (Davies et al, 2001). While clearly, e-commerce has

the potential to become a source of competitive advantage to every sector in the economy

of a country because of its cost effective way of accessing customers globally. (Almeida

et al, 2006; Schmid et al, 2001) have all shown that e-commerce brings with it a radical

change in the way organizations do business.

Companies adopt different forms of e-commerce to meet their needs. To discuss a few;

Business to Business (B2B) is a form of e-commerce which involves buying and selling

of information and services over the internet among businesses or business partners

(Walsh, 2001), Business to Customers (B2C) is one which describes online trading or

auctions, it is the interaction between businesses and customers in some way, one of the

8

best example of this type of e-commerce is Amazon.com(Walsh, 2001), Customer to

Customer(C2C) is another type of e-commerce transaction that only involves a customer

transacting with another customer through a third party, an example of this is ebay.com,

this type of e-commerce is commonly referred to as Peer-to-Peer. Other forms include

Business to Government (B2G), Customer to Business (C2B), and Government to

Government (G2G) (Lawrence et al, 2003).

Therefore, e-commerce adoption is found to have had a significant role in its contribution

to the national economy in terms of the wealth creation and the number of jobs created in

developed and developing countries (Payne, 2001).

1.2 Importance of SMEs

In developing countries, Small Medium Enterprise (SMEs) is particularly considered as

the driving force of their economy (Bada, 2002). In the United Kingdom (UK) ,The

Companies Act 1985(Accounts of Small and Medium sized Enterprises and Audit

Exemption) (Regulations), 2004 defined SMEs as “a small company that has a turnover

of not more than 5.6 million pounds, a balance sheet total of not more than 2.8 million

pounds and not more than 50 employees and a medium-sized company which should

have a turnover of not more than 22.8 million pounds, a balance sheet total of not more

than 11.4 million pounds and not more than 250 employees”.

Timmons (1999) reports that in the United States of America, two third of new jobs in the

private sector have originated from small firms over the past twenty five years. In

countries such as Indonesia, India and Taiwan, SMEs contribute over 40 per cent to GDP

9

growth of their respective countries; therefore SMEs are generally acclaimed as the

engine of growth all over the world (Alos and Bamiro, 2005).

Furthermore, about 60 per cent of the workforce in Nigeria is employed in the SME sub-

sector; the Federal Government of Nigeria appreciates the potential contributions of

SMEs to the overall task of accelerating its job creation, economic empowerment and

poverty alleviation programmes (Ovia, 2007). But with the prospects of SMEs in Nigeria

which is their ability to foster economic growth, ability to develop local technology and

generate employment, current trends shows that they can not utilize e-commerce in their

businesses; this is widely posed with threats and factors such as illiteracy amongst

managers and workers, lack of standard technical infrastructure, corruption, ignorance,

poverty and security (Humphrey et al, 2003).

The slow pace of e-commerce diffusion in the SME sector has led to a variety of studies,

both at an academic level as well as through government initiatives. These studies have

concentrated on barriers to adoption, benefits derived through e-commerce adoption and

problems encountered by SMEs in their move towards e-commerce adoption. In general,

SMEs contribute more than 90 percent of the total number of organizations in most

developed and developing countries, and make provision of about 70 percent in job

creation (UNCTAD, 2006).

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1.3 Research aims

This research was aimed to evaluate the current issues and trends of e-commerce for

SME in developing economies because it is important for us to know the importance

which e-commerce plays in our society and organizations. The overall aim of the study is

then to investigate the current issues and barriers of e-commerce adoption faced by SMEs

in Nigeria.

In order to achieve the aim of this study, objectives of the study are set and must be met.

These are as follows,

• An analysis of global trends in e-commerce and why it is important for economic

developments.

• Quantifiable benefits in which adoption of e-commerce by SMEs can foster

economic developments in developing countries.

• The level of e-commerce readiness in Nigeria.

• Nature of ICT use and level of ICT human resources in SMEs in Nigeria.

• Identifying the gaps and barriers that affect the prospects of e-commerce

development on SMEs in Nigeria.

• Documents steps to be taken by SMEs towards adoption of e-commerce and

actions to be taken by the government in creating and enabling e-Commerce in

Nigeria.

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1.4 Statement of Problems

Access to the web in developing countries was primarily restricted to e-mail

communication and many people in developing countries thus continue to view the

internet and its application as simply a medium for e-mail communication, faxing and

majorly web surfing making a good number of a country’s population not fully aware of

other web-based applications. UNCTAD, 2006 reports that these trends are particularly

common in Africa.

Electronic commerce (e-commerce) generally provides new ways and opportunities for

organizations to broaden their participation into new national and international markets.

There are lots of SMEs adopting the technology at the moment all around the world,

however the adoption of the technology are paraded with many benefits, of these

numerous benefits includes market changes, customer expansion, creation of wealth, job

opportunities, ability to be reachable worldwide, system and organizational efficiencies to

mention a few. However, there are still lots of problems and obstacles for SMEs in

adopting e-commerce in their businesses because they are small and lack full resources

like lack of funds, inadequate infrastructures and a persistent poor security measures

(Davis et al, 2001).

A good number of related researches have focused mainly on multinational and larger

organizations as regards their suitability to the technology. It is then of interest to

investigate the issues and barriers associated with smaller organizations’ (SMEs) in the

adoption of e-commerce and also to find out on a general view from organizations what

support they will need to remove this barriers.

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1.5 Organization of Dissertation

Chapter1(Introduction): This chapter looks into the importance of e-commerce and

SMEs in brief, followed by a statement of problems and how the dissertation is organized

and the contents of each chapter.

Chapter2 (Literature Review): The chapter looks into the analysis of the global trends

of e-commerce and why it is important for economic developments, then it identifies the

benefits associated with the adoption of e-commerce by SMEs and how they can foster

economic developments in developing countries and ends with the identification of

barriers of e-commerce in these developing countries and the general e-commerce trend

in Nigeria. These were drawn from books and journals on e-commerce trends

Chapter3 (Research Methodology): The chapter discusses the research methods used in

the dissertation, how the survey questionnaires were designed and administered followed

by an overview of the limitations of the survey.

Chapter4 (Research findings and Discussion): This chapter of the dissertation will the

in-depth discussion of the results and key findings from the survey conducted in the study

and are discussed broadly with existing literature.

13

Chapter5 (Conclusion): This chapter discusses in summary what the perceived benefits

of e-commerce adoption, barriers associated with the technology and also a summary of

the support needed from external bodies .i.e. government agencies to make e-commerce

in these organizations a reality. The dissertation then ends with an indication on a

direction for further research.

Bibliography: This includes in alphabetical order the list of related e-commerce books,

academic journal, working paper series and all past dissertation consulted used in the

research.

Appendices: This presents the cover letter and the questionnaires used in the survey.

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2. LITERATURE REVIEW

The body of this chapter will encompass three of the main dissertation objectives. They

are: (1) Analysis of the global trends in e-commerce and why it is important for economic

developments (2) Identification of benefits associated with the adoption of e-commerce

by SMEs and how they can foster economic developments in developing countries (3)

Identification of barriers to e-commerce in these developing countries and the general e-

commerce trend in Nigeria. This literature was drawn from current and diverse range of

sources .i.e. books from renowned authors on e-commerce, academic journals, working

papers, relevant past dissertations and news papers where appropriate. The following

sections and their individual sub-sections will address these issues in depth.

2.1 Definition of e-commerce

Electronic commerce (e-commerce) has been defined by many researchers in recent times

coming up with different definitions. Laudon and Laudon (2007) defines it as the process

of buying and selling goods and services electronically involving transactions using the

Internet, networks, and other digital technologies, Kalakota and Whinston (1997:3)

defines e-commerce as “the delivering of information, products/services, or payment via

telephone lines, computer networks, or any other means”, Rayport and Jaworski (2003:4)

in a summary concludes that “e-commerce can be defined as technology-mediated

exchanges between parties (individuals or organizations) as well as the electronically

based intra- or inter-organizational activities that facilitates such exchanges”. For the

purpose of this study, e-commerce is simply defined as doing business electronically

15

(Timmers, 1999). This confirms that e-commerce entails the electronic interactions that

enable and facilitates the exchange of goods and services.

With different organisational adoption mode of e-commerce to suit its business needs, e-

commerce can then be classified as follows;

Business-to-Business (B2B) which targets sales primarily among other businesses,

Business-to-Customer (B2C) which means sales primarily targeting individual

customers/consumers, Customer-to-Customer (C2C) this means primarily offering of

goods and services to assist consumers to interact, Business-to-Government (B2G)

involves organisations’ selling goods and services to local and national government and

the Hybrid which combines the B2B and B2C models (Pearlson and Saunders 2006).

Source: (Tassabehji, 2003:19)

TABLE 1. Forms of E-commerce

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2.1.1 Characteristics of e-commerce

The advance of e-commerce provides it with the suitability for business fostering and

value creation, described by Pearlson and Saunders (2006) as the backbone for business

where transactions happens instantly over communication medium without paperwork.

There are some unique features of e-commerce technology that enhance companies and

transform the traditional way of doing business and they are: ubiquity, global reach,

universal Standard, richness, interactivity, information density and

personality/customisation (Laudon and Laudon, 2007).

TableII summarises the features of e-commerce and business significances associated

with each feature.

FEATURES BUSINESS SIGNIFICANT

Ubiquity- Internet web is available

everywhere.

The market place is extended beyond

traditional boundaries and is removed

from a temporal and geographical

location

Global Reach-The technology reaches

across national boundaries, round the earth.

Commerce is enabled across cultural and

national boundaries seamlessly and

without modification

Universal Standards- There is one set of

technology standards, namely Internet

With one set of technical standards across

the globe, disparate computer systems can

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standards. easily communicate with each other.

Richness- Video, audio, and text messages

are possible

Video, audio, and text marketing

messages are integrated into a single

marketing message and customer

experience

Interactivity- The technology works

through interaction with the user.

Consumers are engaged in a dialogue that

dynamically adjusts the experience to the

individual, and makes the consumer a co-

participant in the process of delivering

goods to the market.

Information Density- The technology

reduces information costs and raises quality.

Information processing, storage, and

communication costs drop dramatically,

while currency, accuracy, and timeliness

improve greatly. Information becomes

plentiful, cheap, and accurate.

Personalisation/Customisation- The

technology allows personalised allows

personalised messages to be delivered to

individuals as well as groups.

Personalisation of marketing messages

and customisation of products and

services are based on individual

characteristics.

Source (Laudon and Laudon 2007: 394)

TABLE II. Unique features of E-commerce

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Ubiquity in e-commerce allows customers to perform transactions almost from anywhere in

the global sphere, Global reach describes the expansion of transaction over cross national

boundaries as it is more convenient that the traditional way of doing business also

enhancing reaching out to more customers worldwide, Universal standards explains the

ability of e-commerce to pursue a general standard of merchandise with maintaining these

products at lower prices, Richness makes markets through information provided more

powerful selling and commercial environments, Interactivity explains the ability of e-

commerce to help effective communication between merchant and customers by a cheap

and faster means, Information Density in e-commerce makes possible the location of

relevant product information faster, Personalization/Customization in e-commerce helps

businesses to tailor the advance technology to suit their business and to provide

customized product and services for individuals (Laudon and Laudon 2007). All these

ascertain that e-commerce has changed the traditional way of doing business across the

globe.

2.2 Definition of Small and Medium sized Enterprises

Small and medium sized enterprises (SMEs) have been defined by many bodies and

researchers over the years. In the United Kingdom (UK) ,The Companies Act

1985(Accounts of Small and Medium sized Enterprises and Audit Exemption)

(Regulations) 2004 defined SMEs as “a small company that has a turnover of not more

than 5.6 million pounds, a balance sheet total of not more than 2.8 million pounds and not

more than 50 employees and a medium-sized company which should have a turnover of

not more than 22.8 million pounds, a balance sheet total of not more than 11.4 million

pounds and not more than 250 employees”. In the United States, a definition set up by the

19

Small Business Administration (SBA) Size Standard Office (2002) defines SMEs as

industries with the follows;

• 500 employees for most manufacturing and mining industries

• 100 employees for wholesale trade industries

• $6 million of annual receipts for most retail and service industries

• $28.5 million of annual receipts for most general and heavy construction

industries

• $12 million of receipts for all special trade contractors

• $0.75 million of receipts for most agricultural industries

Also, the European Union Commission (2003) defines SMEs as follows:

• Micro enterprises: employs fewer than 10 people and have an annual turnover not

exceeding EURO 2 million, or an annual balance-sheet total not exceeding EURO

2 million.

• Small enterprises: employs fewer than 50 people and have either an annual

turnover not exceeding EURO 10 million, or an annual balance-sheet total not

exceeding EURO10 million.

• Medium-sized enterprises: employs fewer than 250 people and has either an

annual turnover not exceeding EURO 50 million, or an annual balance-sheet total

not exceeding EURO 43 million.

In Nigeria, Small and Medium Industries and Equity Investment Scheme (SMIEIS)

defines SMEs as any enterprise with a maximum asset base of N200 million excluding

land and working capital and with the total number of staff employed not less than 10 or

20

more than 300 (Akabueze, 2002). In the United Kingdom, SMEs are seen as the driving

force behind job creation and wealth creation, and the future of the economy relies

heavily on ensuring SMEs improve their competitiveness by improving their

performances. In a report on SMEs facts, figures and trends from Bradford University, it

was stated that 44 percent of UK SMEs export goods and products all over Europe, 58

percent of all UK employment is brought about by SMEs

The SME sector which plays a significant role in its contribution to the national economy

in terms of the wealth creation and the number of labour employed (Rashid et al, 2001).

In Alampay (2007), a research has shown that as at July, 2006 almost 140 million SMEs

in 130 countries employed 65 percent of the labour force as shown in Figure1 below

Source: (Alampay, 2007)

FIGURE 1. SMEs contribution to GDP and employment

Buttressing this point, the OECD (2004) statistics shows that SMEs generate a significant

contribution to the total employment in most countries thereby representing the main

source of newly created jobs functioning as the engine of economic growth and

performance.

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2.3 E-commerce and SMEs

The adoption of e-commerce on companies has been very influential to many countries

economy, as it is described as one of the main forces in their economic growth and job

creation (Kalanje, 2002). E-commerce has indeed been beneficial to Small and medium

sized enterprises in so many ways. Dedrick and Kraemer (2000) in their research

confirmed that Taiwanese SMEs hired a total of 7 million people which accounted for 80

percent of the employment generated.

E-commerce also offers the opportunity to small and medium-sized enterprises to take on

and compete with larger enterprises. Small companies, despite their size can also have a

global presence through their Internet website which is a cost-effective medium to

expand the organizations network and provide immediate awareness in the markets

serving as a means for competition in the global marketplace. Kalanje (2002) also stated

that ICTs rapid pace of change combined with its developments in international trade

have resulted to the opening of a wide range of opportunities and challenges for SMEs as

they are now able to reach potential customers in distant market which a decade ago was

a dream. Therefore e-commerce adoption is a key concept that will help businesses to be

more competitive in the marketplace where new competitors will use the technology to

carve a niche in the market, lower transaction costs and enhance competition through

cheaper communication and information. (Alemayehu, 2005; Warkentin, 2002; Chaffey,

2004).

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2.3.1 Benefits of e-commerce on SMEs

Davies et al (2001) relates the benefits of electronic networks to e-commerce strategies

benefits from cost advantages, increased control over forward and backward linkages to

their suppliers and distribution partners as well as considerably improved opportunities

for customer services.

In more light, many authors have over emphasized the benefits of e-commerce on

businesses in developing countries stating their ability of enabling easy access to global

market, adequate and efficient market research, removal of business intermediaries,

reduced transaction costs and value creation.(Almeida et al,2006; Kapurubandara and

Lawson, 2006; Moodley, 2003;Alemayehu,2005;Turban et al, 2004).

Moodley (2003) stated some of the benefits of e-commerce on SMEs and listed them as

follows;

• Controlling business cost

This explains a beneficial advantage from an aspect of lowering transaction and

overall business expenses to an appropriate and optimum level of sales execution,

procurement and distribution. Proponents then argue that the use of e-commerce

reduce organizational cost significantly because of its transparent business

capability’s nature (Alemayehu, 2005). Tassabehji (2003) further confirms that

electronic commerce is also beneficial in the decrease of the entire operation of an

organization i.e. cost of creating, distributing and retrieving paper based

information. Furthermore, in developing countries businesses through the use of

23

e-commerce are then able to reduce cost of conducting large amount of work,

people and machines in all the relevant phases of their organizational systems

(Wigand, 1997). In conclusion, e-commerce adoption by organizations in

developing countries are most likely to reduce the transaction costs businesses

acquire when participating in international trade and exchange services, thereby

fostering selling of products and services with a competitive edge.

• Connecting to market through greater geographical reach

Another benefit of e-commerce is its ability to foster business processes over

national boundaries thus eliminating national intermediaries. This is an important

aspect of e-commerce as there is a general competition in businesses and markets

in reaching out beyond national borders(Alemayehu, 2005).According to

Tassabehji (2003), the author stated that e-commerce helps to have access to a

borderless market place where customers can be reached globally thus allowing

organizations that adopt it reach their goals. With increased globalization of

goods, services, information and market reach across the globe, access to global

markets are usually a dominative factor of businesses in developing countries

(Wigand, 1997). The Internet goes beyond physical boundaries, and although it

can be argued that geographic boundaries continue to have their importance

because some transactions involve the physical delivery of goods sometimes

across borders (Zott and Donlevy, 2000). ICT networks and infrastructures are

then of great benefits as they have the potential to make geographical constraints

less cumbersome thus providing a better worldwide reach to markets and market

information (Dedrick and Kraemer, 2000). Therefore, it is proposed that by e-

24

commerce adoption, businesses in developing countries irrespective of size and

location can overcome these geographical barriers to buying and selling of goods

and services globally, thus enabling a wider and better business horizon.

• Value creation

This refers to the value created for all participating parties in e-commerce; this is

usually made up of the customers, supplier and firms as regards product and

services. Customers through the help of e-commerce are able to conduct

transactions 24 hours a day, make price selection by visiting different websites

and choose a wide range of options on delivering of goods and services i.e. ability

to track and view progress of packages to be delivered(Tassabehji, 2003).

Organizations, and through e-commerce will be more accurate and able to reduce

intermediaries between firms and customers, thus improving value creation at all

ends (Zott and Donlevy, 2000). By adopting network applications and electronic

commerce, organizations can internalize activities that in the past have been

performed by intermediaries such as wholesalers, retailers, agents (Alemayehu,

2005). He stated that when these are removed information and business processes

will then be of reach and very rich. By Richness a researcher explains that

information flowing in both directions is greater, deeper and faster than they are

in a traditional market. Reach is then explained as the ability to connect with a

large number of players or products i.e. connecting to numerous suppliers,

consumers, vendors, and indirectly, competitors and providers of complementary

services (Zott and Donlevy, 2000). With this, technology empowers all parties

involved with knowledge and there is high potential to reduce any asymmetry of

25

information between buyers and sellers. In relation to developing countries,

businesses depend on intermediaries to actualize their organizational goals in

reaching out to consumers and target audience thus adding to the overall

organizational value creation (Alos and Bamiro, 2005).

As described above, e-commerce enables producers and consumers to lessen some

of these intermediaries and all the cost associated with them. This can allow

producers in developing countries to market their products directly to clients and

disintermediate appropriately i.e. overcoming biases of middle men thus

increasing organizational productivity thereby benefiting customers as turnovers

in businesses created will reduce prices for customers.

• Production gains and system efficiencies

In this, e-commerce helps in improving business process thereby attracting new

customers to the organization and also offering automated work processes and

enabling adequate system efficiencies and inter-firm linkages. Turban et al (2004)

further explains it as its ability to reduce supply chain inefficiencies such as

excessive inventories, elimination of inefficiencies and delivery delays.

Researchers conclude that the use of electronic networks and related

infrastructures on businesses can reduce transaction costs significantly (Almeida

et al, 2006; Cloete et al, 2002). On a wider context, Zott and Donlevy (2000)

maintains that organizations that make use of e-commerce in their organizational

processes increase business and transaction efficiencies thus creating a potential

to create value for all parties involved in the transaction. Alemayehu (2005)

26

confirmed in his paper saying “by exploiting the lower transaction costs

associated with e-commerce, companies are able to enhance competition through

cheaper communication and information”. This then leads to efficient

strengthening of the supply chain, provision of a large array of products and

services and reduction of the asymmetry of information amongst major business

players (Zott and Donlevy, 2000). Therefore it is of no doubt that e-commerce can

foster businesses to increase efficiencies in conducting their activities.

In relation to developing countries, it has been found that businesses and

organizations acquire a lot of expenses in production and coordination of

economic activities because of inefficient systems of the overall value chain in

their work processes (Alemayehu, 2005). Also in the paper, the writer maintained

that “high costs normally add to the market price of products and affect the

competitiveness of most developing countries' products in the global market

environment”.

In summary, Alemayehu (2005) also in his paper described that the opportunities of voice

over the internet (VOIP) and other technological advances of e-commerce had began to

reveal real opportunities to businesses in developing countries as they begin to adopt

them in their various business activities to reach their goals. It is then widely accepted

that e-commerce contributes to the advancement of businesses in developing countries

(UNCTAD, 2004).

27

2.3.2 E-commerce adoption barriers for SMEs

The adoption of business-to-business e-commerce in developing countries differs greatly

from developed countries. Developing countries often lack the necessary financial, legal,

and physical infrastructures for the development of e-commerce as they often have

different cultures and business philosophies, which limit the applicability and

transferability of the e-commerce models(Macgregor and Vrazalic, 2005; Tassabehji,

2003; Alemayehu, 2005).

The use of appropriate information and communication technologies (ICT) is a basic

requirement to participate in e-commerce. Today the internet is the basic platform for

transaction of e-commerce (Kalanje, 2002).

Research then shows that larger organizations i.e. multinationals are the ones that benefit

from e-commerce adoption while small organizations and businesses are seen to lag

behind because of a vast majority of barriers associated to it (Van Toorn et al, 2006).

As described by Van Toorn et al (2006) in a conference paper, the researchers identified

some of the barriers to e-commerce adoption and are divided into internal or external

barriers and are stated as follow;

Internal Barriers - Security, Lack of technical Knowledge, Owners characteristics.

External Barriers - Lack of government support.

These barriers are further addressed below;

28

• Lack of technical knowledge

This is always a situation where there is a lack of expertise and professional knowledge in

an organization as people are not always aware of technical developments as regards

adopting e-commerce in SMEs. Kalanje (2002) concludes that the main barriers to the

use of ICT and e-commerce in businesses are the lack of knowledge about the advantages

of the technology and what value it could add to their business.

In developing countries, lack of technical knowledge and specialized know-how are

obvious barriers which prevent businesses from implementing e-commerce systems.

SMEs that intend and want to reach new clients in the business-to-consumer field have to

undertake extensive marketing efforts and build a relatively good website. The low

personnel of network and internet specialists in the labor market only make this difficult

for SMEs to achieve as these are rampant problems to both internal and external to these

organizations. In a recent report, South Africa which is a developing country has put in

place policies to facilitate its employer’s access to the international market for computer

specialists (UNCTAD, 2006). This has been done to help the nation boost its lack of

technical specialist and in turn add to the values needed by organizations in the country.

• Security

This explains a lack of adequate security measures in the adoption of e-commerce; some

organizations are not fully established not to say have full security infrastructures

exclusive to their businesses. Tagliavini et al (2001) confirms the reason for SMEs not

using e-commerce is due to the security problems attributed to e-commerce adoption.

29

Tassabehji (2003) found that lack of sufficient security systems, reliability, standards and

communication protocols are major complaints about websites holding vital information.

Internet security problems has been found to take different forms, ranging from spam,

viruses, fraud, privacy infringement, harassment, and denial of service and unauthorized

entry into corporate or personal computers and networks (UNCTAD,2006).

In developing countries, concerns regarding security of data transfer and danger of fraud

are heavy fundamental decision on a large number of organizations in a country’s

population and economy not adopting e-commerce (Alos and Bamiro, 2005; Cloete,

2001).

Developing countries in general are the leading victims of attacks against government

online systems, although such attacks are less frequent than those against businesses

(UNCTAD, 2006). In Nigeria, the major factor affecting the development of e-commerce

has been the perception of poor security issues associated with payment methods and

network reliance, showing that business associates in Nigeria still worry about

transmitting their credit card information over the internet making security a unique

problem in the country (Folorunso et al, 2006).

Therefore, measures which build trust in the internet as a medium for transactions are

urgently needed in developing countries (Ajayi, 2003). In Nigeria, the Government has

done pioneering work with the starting up of regulatory bodies to look into the overall

problems affecting SMEs with security as a prime factor to tackle.

30

Finally, UNCTAD’s e-commerce report, 2004 recommends that priorities in this area

should include identification of risks and critical vulnerabilities, reinforcement of

international and cross-border cooperation, promoting education and best practices.

• Owners Characteristics

The adoption of e-commerce is also reliant on its acceptance by business owners, Cloete

(2001) in his research said “If business owners do not perceive the technology to be

useful, nor understand its potential, then he/she will be reluctant to adopt it”. This is a

very popular reason for not adopting e-commerce in businesses as the level of computer

literacy of the owner and a lack of knowledge of how to use the technology will result in

the business being less unlikely to adopt e-commerce.

For most businesses in developing countries, they generally operate on a hierarchical

basis of operation and chain of command comes from top to the bottom. In this view,

owners of businesses i.e. individuals with power and authority to make strategic decisions

for an organization, once they feel e-commerce is unsuitable to their business they will

rather not adopt it (Ajayi, 2003). However, acceptance and involvement of top

management in organizations of businesses has always been the turning point for various

organizations in developed country (UNCTAD, 2004)

Top management supports have been identified as very crucial in the acquisition and

diffusion of innovation in businesses in developing countries (Kalakota and Whinston,

1997). With the limited nature of organizational resources and the many uncompleted

projects in SMEs, top management support will ensure that e-commerce projects will get

the required resources and capabilities.

31

E-commerce, once properly attended to can influence the organization’s competitive

position as well as its business relationships, therefore it is important that top

management and owners get involved in order to gain a good understanding of the issues

surrounding e-commerce (El-Nawawy and Ismail, 1999).

• Lack of Government Support

Because SMEs are small medium organizations unlike the larger multinationals

organizations, they will need government support to reach a competitive edge with these

large organizations. National government must set up different agencies to look into the

various problems with SMEs in countries.

Governments can provide an enabling environment in which e-commerce can realize its

full potential. They can help address the problems and challenges of awareness,

infrastructure underdevelopment (Payne, 2001)

El-Nawawy and Ismail (1999) in their research on e-commerce adoption by SMEs found

that the most important factors contributing to the non-adoption of electronic commerce

in Egypt are the limited awareness of the technology, poor telecommunication

infrastructures and most importantly poor government funding. The study, also suggests

that e-commerce if adopted by SMEs could enable the country in gaining more open

economy and will increase its competitive advantage worldwide.

In developed economies, governments have been able to prioritize the improvement of

infrastructure and the upgrading of skills necessary to participate effectively in the

restructuring of e-commerce adoptions in these countries (UNCTAD, 2006). The report

also shows that business-to-business e-commerce has grown rapidly, from about 300

32

billion dollars in 2004 to around 500 billion dollars by 2005 and these figures are

expected to be doubled afterward.

China, a developing economy has been able to make a significant growth in overcoming

the barriers to establishing e-commerce in businesses (Dedrick and Kraemer, 2000),

stating that adequate government support and policies put in place has been able to record

a significant growth of e-commerce adoption in their SMEs.

2.4 Trends of e-commerce adoption on SMEs in countries

“National strategies need to concentrate on real e-issues facing small firms, so that they

can benefit from information and communications technologies”

(Peters, 2003)

Trends in e-commerce in countries are different and face different challenges because no

two countries have the same level of infrastructures and manpower to facilitate the

adoption on an equal basis. UNCTAD, 2004 report confirms that “E-business continues

to grow vigorously in developed countries, but divergences are surfacing among

developing countries”. According to the Economic Intelligence Unit (2006) (EIU), areas

ranked high for e-commerce are the North America and Western Europe because of the

availability of well developed technical infrastructures. On the other end, areas like

Africa, Middle East and Latin America are considered still to be lagging behind because

quality and availability of these infrastructures has not been put in place by appropriate

bodies (Almeida et al, 2006). The Information Economy Report, 2006 says “there are

33

large differences between developed countries, where broadband is growing rapidly, and

developing countries, where dial-up Internet connections are still prevalent and networks

and internetwork connections are very poor. It was also mentioned that in developed

countries, broadband users increased by almost 15 percent as at half way of the year 2005

reaching 158 million. Internet enables companies to engage in more sophisticated e-

business processes and to deliver a greater range of products and services through the

Web, thus maximizing the benefits of information and communication technology

(ICT).In this dissertation, countries will be sub-divided into developed and developing

countries.

2.5 Trends in Developed countries and Developing countries

Developed countries are countries that have an advanced economy and are dominated by

tertiary sectors of the industry which can be classified under the translation of a high

income per capita and Human Development Index (UNCTAD, 2006). E-commerce

continues to grow rapidly in developed countries. In 2004, the highest proportion was in

business-to-business with 93 percent of all e-commerce in the United States (UNCTAD,

2006). It is therefore estimated that broadband can contribute hundreds of billions of

dollars per annum to the Gross Domestic Products (GDP) of developed countries over the

next few years. At the heart of these restructuring process was the development of

entrepreneurship and competitiveness, areas where SMEs are key actors. Indeed, SMEs

are considered to be the backbone of the business economy, accounting for more than 99

percent of all enterprises, two thirds of employment and more than half of the value

added generated in both the developed and developing countries (OECD, 2006). In

addition, SMEs are also thought to stimulate the competitive dynamics of the economy,

34

forcing other companies to increase their efficiencies and innovations (European

Commission, 2003). Japan, a developed country has had a boost in its national economy

via its corporate sector .i.e. range of businesses and industries with strong profitability

gains. OECD (2006) report shows that 99.7 percent of enterprises in Japan are SMEs and

70.2 percent of employments are brought about by them. The explosive growth of the

wireless market has continued to make Japan the world leader in adopting the new

technology and government policies setup towards Internet and electronic commerce

have now become easy and within reach (Dedrick and Kraemer, 2000). On the other

hand, developing countries defined by UNCTAD, 2006 “are countries that have a

relatively low standard of living, an undeveloped industrial base, and a moderate to low

Human Development Index (HDI) score, characterized by low per capita income, abrupt

poverty, illiteracy, and low capital formation”. In developing countries e-commerce poses

the advantages of reduced information search costs and transactions costs thus improving

efficiency of operations, reducing time for payment and credit details processing.

Currently, e-mail is the most common and predominant use of the Internet in developing

countries leaving out a lot of benefits (UNCTAD, 2004). As regards trends of SMEs

adopting e-commerce in developing countries, many firms use the Internet to

communicate with suppliers and customers only as a channel for maintaining business

relationships. Currently, the Internet is often used by SMEs in developing countries

mostly for communication (Cloete, 2001).The adoptions of e-commerce in these

countries as described by researchers are barred by the lack of access to general IT

technical know-how, telecommunications and supplementing infrastructures at a

reasonable cost. In China, Dedrick and Kraemer (2000) suggests that amidst a

35

considerable interest of e-commerce in China with a significant growth, there are also

significant barriers to establishing e-commerce in businesses. This includes inadequate

number of computers in schools and in the educational sector, high cost of Internet

access, and a lack of online payment processes. El-Nawawy and Ismail (1999) in their

research on e-commerce adoption by SMEs found that the most important factors

contributing to the non-adoption of electronic commerce in Egypt are the limited

awareness of the technology, lack of computer education in academic organizations,

unavailability of electronic commerce infrastructure, poor telecommunication

infrastructures, inefficient legal system and poor government funding. The study, also

suggests that e-commerce if adopted by SMEs could enable the country in gaining more

open economy and will increase its competitive advantage worldwide. Such an

opportunity holds a lot of future economic developments for Egypt like providing new

opportunities for penetrating international trade markets, especially for small and medium

organizations to promote themselves globally.

In South Africa another developing country, the encouragement of the development of

SMEs might help to elevate and improve the levels of skills in the country. This they

believe should contribute towards economic growth and assist in reducing poverty and

unemployment levels in general (Cloete, 2001).But achieving all these national benefits

of e-commerce has been widely barred by many constraints, Cloete et al (2002) in their

research came up with a number of factors that heavily influences e-commerce adoption

on SMEs amidst their glaring importance to the development of South Africa. The

adoption of e-commerce they stated was inhibited by lack of access to computers,

software, hardware and telecommunications at a reasonable cost, security and legal

36

issues. In addition they also mentioned that not many competitors and supply chain

partners used e-commerce causing unawareness of the technology in firms and

businesses. In a study of SMEs in Sri Lanka, it was stated that they are responsible for

over 60 percent of employment creation in the country and represents a major role in its

economic development capability (Kapurubandara and Lawson 2006) but the researchers

also found out key factors which limits the adoption of electronic commerce by SMEs in

Sri Lanka and were listed as lack of knowledge and awareness about the benefits of

electronic commerce, current unpreparedness of SMEs to adopt electronic commerce as

an important aspect of businesses to thrive, lack of IT products and services within and

outside the organizational context, language barrier, limited use of Internet banking and

web portals. In summary, developing countries trends in e-commerce adoption on SMEs

is still at an infant stage but statistics from the OECD (2006) shows that a significant

improvement has been made and the development of e-commerce in SMEs is still a

vision aflame.

2.6 E-commerce trends in Nigeria

Nigeria, the main country of study of this research, is situated in the Western part of

Africa neighbored by Niger Republic, The Republic of Benin, Chad and Cameroun. The

country boasts of a vibrant and growing economy based on petroleum crude oil, with

most incomes from agriculture and various forms of manufacturing (www.nigeria.com).

Internet usage in the country is still at a very low stage and therefore e-commerce is still

at a very infant stage but researchers state that there is an increased awareness and the

benefits of e-commerce in the country (Folorunso et al, 2006). Cyber cafe was a strange

37

word in the country in last 10 years, today cyber cafes exist in virtually every

neighborhood especially in the urban centers and gradually taking a turn in the rural

environment this is because cost of ICT is still relatively high for most individuals and

firms (Folorunso et al, 2006), the cyber cafes has thus significantly improved

accessibility to the Internet in Nigeria. In the telecommunication sector, a proper

adoption of e-commerce over the past five years has also helped new ventures with

offering telephone sales and services. The country has moved on from the

telecommunication state where there were only a few dial-up e-mail providers and

Internet service providers (ISPs) and when Nigerian Telecommunications Limited

(NITEL) was the only Telecommunications operator, these days were characterized by

slow Internet connections, poor electricity service, lack of infrastructure and an

unprogressive monopoly in the sector(Bada et al, 2006). Today, Nigeria has been ranked

as the fastest growing Telecommunications market according to a report by Business day

newspapers, 2005. In another address, Chief Cornelius Adebayo, the former Federal

Minister of Communications said that “the number of fixed lines which was about

700,000 in 2002 was doubled by the end of 2005, while the number of Mobile lines had

risen from about 1.56 million in 2002 to the present figure of about 20 million and still

counting. It is no wonder then that the Nigerian Mobile market has been rated as one of

the fastest growing in the world and it is projected that by the year 2010 it will be Africa

’s biggest mobile market”.

Another area where e-commerce has had a boom in Nigeria is the banking sector, At

present, the situation shows that there is a significant improvement of e-commerce in this

sector 90 percent of the banks in the country now offer different forms of electronic

38

banking services like telephone banking, ATM and electronic funds transfer (Ezeoha,

2005). Furthermore, Bada et al (2006) confirms that online, real-time banking systems

have now become common as customers are offered the flexibility of operating an

account in any branch of their bank’s network. The online service lets customers’ conduct

a variety of banking activities in any location of a particular bank.

SMEs which are governed by the Small and Medium Enterprises Development Agency

of Nigeria (SMEDAN) Act of 2003 to help in promoting and the development of Micro,

Small and Medium Enterprises (MSME) sector of the Nigerian Economy represents the

interests of these SMEs operating within the economy. They are believed to be vital to

the contribution of the nation’s economic growth as over 90 percent of companies in

Nigeria are classified as Small Medium Enterprises (Alos and Bamiro, 2005).

Furthermore, with about 60 per cent of the workforce in Nigeria employed in this sub-

sector, the Federal Government of Nigeria appreciates the potential contributions of

SMEs to the overall task of accelerating its job creation, economic empowerment and

poverty alleviation programmes. Olubamise and Awe (2007) confirms that the largest

investment on SMEs has been in the ICT adoption areas to maximize its benefits; the

writers described the popular Lagos Computer Village as a manifestation of the growing

ICT on SMEs in Nigeria.

But amidst of all these government regulations and checks to the proper e-commerce

adoption on SMEs in the country, a successful and proper adoption is still being hindered

by factors such as network reliability, authenticity, security, lack of government support,

39

privacy and confidentiality, cost of implementation and accessibility(Folorunso et al,

2006). These are further discussed below

• Network Reliability – This explains the ability to transfer confidential and critical

information over the internet, with this as an important aspect in the full

operational process of e-commerce in SMEs, Nigeria being a developing country

still suffer from good communication network, there are very few ISP’s and even

the available ones offers bad service and are expensive.

• Authenticity – Ability of goods and services displayed to meet a standard quality.

In Nigeria, the researcher describes a situation where many organizations and

businesses will put up quality goods on its website to attract customers but on

buying them they are always not up to standard i.e. consumers in Nigeria do not

always get value for their money.

• Security – By this the researcher explains increasing fear from customers as

regards identity fraud. In Nigeria, security of customer’s payment method is a

serious problem and poses a lot of threat to the development of e-commerce in

organizations. The Economist Intelligence Unit, 2006 stated that Nigeria is the

riskiest country for online transactions, so by this many Nigerians believe that

their credit card details are not safe over the internet.

• Lack of Government Support – On this issue, which is an external barrier to the

adoption of e-commerce on SMEs, the government has not made provision for

funding of SMEs or making sure adequate infrastructures are in place, but in

recent times Nigerian government has started to put regulatory agencies like

National Economic Empowerment and Development Strategy (NEEDS), The

40

National Information Technology Development Agency NITDA in the bid to

ensure that the country enormously taps from the many benefits the sub-sector has

to offer (Ovia , 2007).

• Privacy and Confidentiality – Many Nigerians are afraid to divulge their personal

information to businesses if necessary because a data protection act is not

enforceable and peoples information might just be readily available to anyone.

Therefore it is certain that e-commerce can not thrive with the absence of a good

and enforceable data protection act.

• Cost of Implementation – Many organizations believe that the cost of

implementing e-commerce is too high and the money can be diverted into other

profitable avenues than the benefits from implementing e-commerce.

• Accessibility – In the context of e-commerce, accessibility is the extent to which

the needed technology and infrastructures for e-commerce are readily available. In

Nigeria, inadequate infrastructures are a problem and the ease of accessibility to

the few ones by citizens is also poor.

(Alos and Bamiro, 2005) in their research identified steps to be taken to help the

nation achieve a cashless and e-commerce oriented society thereby helping with

poverty reduction and creation of jobs and thus achieving a global competitiveness

amongst firm. By this the researchers concluded will also help SMEs become more

market oriented, have the ability to reach information on market size, control prices

and productivity. Steps to be taken where then sub divided into internal and external

support. Internal support consists of : awareness building and education in ICT and e-

commerce in schools and communities, guidance in overcoming risks associated with

41

implementation in organizations, assistance with guidelines for appropriate hardware

and software for most firms, advice and direction for ICT and e-commerce adoption

processes. On External Support, the researchers maintained that improvement of

computer and Internet diffusion in the country is of upmost importance, adequate

provision of financial assistance to SMEs by regulatory bodies and banks,

improvement of national infrastructure, improvement of credit card penetration in the

country thereby making the country a cashless society, improving the collaboration

among SMEs and enforcing suitable software standards in all organization as to

maintain a standard architecture of the technology.

42

3. RESEARCH METHODOLOGY

This research is investigating the issues and effects of the adoption e-commerce on SMEs

in developing countries from the Nigerian Perspective. The purpose of this study is to

come up with a set of potential determinates that affect the adoption and set of potential

supporting activities to overcome the barriers encountered in these countries.

The goal of this study is to:

• Understand the barriers faced by the SMEs in adopting e-commerce in

developing countries.

• Determining the significance of the rate at which the adoption of e-commerce has

helped SMEs.

• Determining the significance step and supporting activities which will help

overcome these barriers.

This chapter then describes primarily the methodology intended to be used and an

appropriate justification of the choice of research approach used in actualizing the aims

and objectives of the dissertation.

3.1 Research approach

Research methods could generally be in the qualitative, quantitative or mixed approach.

The qualitative research methods are a type of research method that involves collection,

analyzing and interpreting of data by observing what people do and say (Burns, 2000).

43

In the mixed approach, Johnson and Onwuegbuzie (2004:17) defines it as “the class of

research where the researcher mixes or combines quantitative and qualitative research

techniques, methods, approaches, concepts or language into a single study”. The research

method used in this research is based on the quantitative research methodology and it was

used to analyze the views and opinions of Small and Medium Enterprises in Nigeria,

which involved the use of questionnaires to explore the current trends of using e-

commerce on SMEs in developing countries .The methodology as described by Black

(1999) is a research methodology involving the use of structured questions

(questionnaires) where the response options have been predetermined and a large number

of respondents are involved. An inductive approach was then used in the research through

the problem statements to see what can be drawn from the data collected.

This method was particularly used because of its wide range of opportunities it posses as

to suit the aims and objectives of the research. The advantages are as follows;

• The use of a questionnaire is a good way of conducting the research as it helps in

reaching out to a large number of respondents and collecting a wide range of data,

in this case a large number of respondents are needed to fully identify the research

aims and objectives.

• Another advantage of this method is that it helps in collating reliable statistics as

to the issues and barriers of e-commerce in developing countries

• The research approach and method was also chosen because it is faster and cost

effective as the dissertation needed to be completed in a limited time of three(3)

months

44

However, the disadvantages of using the method are that the response rates are generally

low because respondent do not usually take their time to fill in the questionnaires and

might get it thrown away if not properly monitored. Also, another evident disadvantage

of the research method in the study is that it only permitted administration to a small

business region in Nigeria.

3.2 Data Collection

In this research, we consider that SMEs are enterprises with 10 to 250 employees.

Another criterion when the enterprises were selected was that they should not be

completely immature as regards the use of ICT and e-commerce in operation. An Internet

search was then done as a starting point to find out from a wide business range of

Nigerian SMEs, to meet the aims and objectives of the research, questionnaires were then

designed to investigate the internal and external barriers, as well as the steps and support

required by the organizations and their significance on the use of e-commerce in these

businesses. The recipients were then selected using a random systematic sampling

technique from a reputable business directory publication in Ibadan, Oyo State in Nigeria

and from the list of SMEs from Small and Medium Industries Investment Scheme

(SMIEIS), the regulating body in Nigeria for promoting Small and Medium Enterprises

(SME).

The questionnaires were administered by Mr. Kunle Atinwore, the Public Relations

Officer of the University College Hospital Ibadan, to client SMEs as it appeared to be the

fastest and cheapest way of getting result from these businesses other than personal

interviews given the time limit. A covering letter explaining the purposes of the study,

45

assuring anonymity of respondents and their organization, and providing instructions on

how to complete the questionnaire was also provided.

To meet the submission date, only 60 questionnaires were distributed. Questions in the

questionnaires look out for different adoption strategies and are categorized according to

the factors discussed in the research literature.

Out of a total of number of 60 questionnaires sent out that go with the study, only 40

were returned and used, making the response rate to be at a 66 percent.

3.3 Questionnaire Design

The design of questionnaire was based on the Chou (2003) questionnaire format, style,

and question types. The student used a semi-structured questionnaire combined with

open-ended questions in the study. The purpose of adopting the research questionnaire

type from Nigeria to Chou (2003) findings from Taiwanese SMEs was because in the

geographical area Taipei, Taiwan where the questionnaires were sent out to could be

compared to the region used in administering the questionnaire in Nigeria, Ibadan

parading the same population and business range, also the aims of the two studies are

somewhat similar and pursue the same objectives. Therefore, it was needed to keep the

major types of question from Chous’ dissertation to be compared with.

In addition, questions were also drawn from existing literature as to finding out if they are

SMEs, identifying the issues and barriers they had. The table below represents the nature

at which questionnaires were designed and its existing literature.

46

ITEMS QUESTIONS LITERATURE

Confirmation that the business is an

SME

1 to 5 Akabueze (2002),

European Union

Commission (2003)

Confirmation on whether adequate IT

skill are in place for the adoption of e-

commerce

6 to 10 Kalanje (2002)

The level of use of ICT's in these SMEs 11 to 17 Almeida et al (2006),

Cloete et al (2002).

Benefits of e-commerce and its profits

on SMEs

18 and 19 Almeida et al (2006),

Moodley (2003),

Alemayehu (2005), Turban

et al (2004).

Level at which SMEs are using e-

commerce in Nigeria

20 Folorunso et al (2006),

Bada et al (2006).

Issues and barriers affecting the use of

e-commerce in Nigeria

21 Folorunso et al (2006),

Bada et al (2006).

Steps to be taken to overcome these 22 Macgregor and Vrazalic

(2005), Tassabehji (2003)

47

barriers and supporting policies Alemayehu (2005).

3.4 Anonymity

Participants of the questionnaire would remain anonymous throughout the research as

required, responses they provide would be untraceable and unidentifiable to the

participant who provided them.

3.5 Limitations and Problems

The major aim of this study is to investigate the different perceived benefits of e-

commerce adoption on SMEs in developing countries and the barriers encountered by

these SMEs using the Nigerian Perspective. In this research, focus was only on SMEs in

Ibadan, the western part of Nigeria. Therefore, the first limitation faced by this study is

that the research findings of SMEs in the area might not be able to represent the correct

situation in the rest of the country. The problem is that the majority of SMEs in Nigeria

might face different problems from different sectors and business areas. There were also

limitations in this research as of the time allocated for the entire research of three months

was not quite enough for researching in depth.

Another limitation in the research on these Nigerian SMEs is that since questionnaires are

used to collect and investigate the problems faced by organizations, the major

disadvantage of this method is the inability to interact with respondents in order to ask

more detailed and in-depth questions to discover more information as the study permits.

This limitation could than cause a problem for this study as the inability to discover in-

48

depth influenced factor faced by SMEs, and to measure accurately the clear reasons for

each problems faced by SMEs in Nigeria.

49

4. RESEARCH FINDINGS AND DISCUSSION

This chapter of the dissertation will be an in-depth discussion of the review of the key

findings from survey conducted in the study and discussed broadly with existing

literature. Meanwhile, the chapter also explores the significant findings of the study and

aims to address the objectives of the study.

4.1 Respondents by organizational size

It can be seen from Figure II below that there were a few micro-firms with between 1-5

employees from the returned questionnaires, they only made up 10% of the total

response, the small firm with between 5-19 employees made up 25%, the medium-firms

which are classified into two groups (19- 199 and 200+) are represented as follows, in the

range of 19-199, employees accounted for 55% of the total firms and the range of 200+

accounted for only 10%. Of the 40 respondents, nearly 55% came from the small-firms

with between 19-199 employees.

50

FIGURE II. Respondents by firm size

As it can be seen from Figure II above, the majority of respondents were from the

Medium firm, the reason why the highest responding rates came from small and medium

firm could be due to the fact that the small and medium firms have more interest in this

research and have a basic understanding about e-commerce. They may posses a number

of professionals who may be interested in acquiring or implementing the technology in

their respective business activities.

4.2 Respondent by business sector

As shown in Figure III, the majority of the firms from the returned questionnaires were

from the retail sector, they accounted for nearly half of the returned questionnaires i.e.

35%. The number of manufacturing sector is then followed by the retail sectors, which

51

made up 18% of respondents. The wholesale sectors accounted for 15% of the

questionnaires, 12% from the services sectors, other services which include banking,

legal services etc made up a total of 20%.

FIGURE III. Respondents by business sector

4.3 Respondents by business Geographical range

As it can be seen from Figure IV, 29 of the respondents which made up half of the

responses traded and have their base inside Nigeria making a total of 72.5%. There are

just two firms which have their business operations extended to Africa and only two are

being able to operate world wide. Each of them made up only 5% of the returned

questionnaire. Of the total responses, only 17.5% extended its operation to the Western

52

part of Africa.

FIGURE IV. Respondents by the geographical range of business

4.4 Are SMEs using e-commerce in Nigeria?

4.4.1 General use of computers

From the respondents from Nigeria, all of the firms reported that they had computers.

This is a trend for the development of these organizations, because the computer had

already been the part of business operations. As Figure V shows, the medium-size firms

had much more computers than other size firms, and only one medium-size firm used less

than 10 computers when they operate their business. It indicated that the size of the firm

53

decided the number of computer they had but varied at times.

FIGURE V. Number of SMEs using computers

4.4.2 Do firms have established Websites?

From the respondents of Nigerian SMEs that returned the questionnaires, it was found

that some had a website and had adopted some form of e-commerce. In Figure VI below,

it can be seen that not all the organizations had websites or had adopted e-commerce.

From findings, there were only about 70% of SMEs that indicated they had websites and

had adopted some form of e-commerce, 30% of firms reported that they did not have a

website.

54

FIGURE VI. Level of e-commerce adoption in Nigeria

4.4.3 How are the websites developed and maintained?

From Figure VII below, it was also deduced that for majority of these SMEs, external

consultants were responsible for the development and the maintenance of e-commerce

strategies. In the survey, a minor percentage of 20% of the respondents confirmed that the

development of the technology was carried out by in-house consultants and in

maintenance only 32.5% was recorded. On the other hand, majority of the firms agreed

that the development and the maintenance of the technology was done by external

consultants making a rise in percentage to about 80% and 67.5% respectively.

55

FIGURE VII. Method of developing and maintaining websites in Nigeria

4.4.4 Are firms using e-commerce?

Although there was such a high proportion of SMEs using a website, this then does not

indicate that average SMEs in Nigeria are using e-commerce. The definition of e-

commerce used in this study and proposed by Timmers (1999) confirms that the use of e-

commerce must involve the buying and selling of business and transmitted over the web.

Therefore, firms with an established website do not necessarily mean that they are

adopting e-commerce. As seen from Table III below, there are different purposes of using

website by SMEs in Nigeria. Around 46% of SMEs in Nigeria are using Web site to

provide general information about their company and around 9% use it to provide

information about the products, 7% of SMEs use the website for placing orders from the

customer and another 4% use it for tracking sales online. Furthermore, 11% use the

website for customer feedback and 18% of firms use them for different other reason not

specified in the questionnaire. Generally, the rate of using full e-commerce by SMEs is

56

still low in Nigeria indicating that not all the SMEs have an established e-commerce

capability.

Purpose Number of

SMEs

Contains information about company 25

Contains information about the company's product 5

Allow buyers to place orders online 4

Enables tracking of sales order status 4

For customers feedback on product and services 6

Others 10

TABLE III. Reasons SMEs are using websites in Nigeria

57

4.5 What factors persuade firms to use E-commerce?

4.5.1 What are the benefits of using e-commerce in Nigeria?

Most SMEs in Nigeria reported production gains, system efficiencies and the provision of

unlimited service to customers as the most significant factors for using the technology.

To back the opinions, existing literature also found these factors to be very important

benefits for the adoption of e-commerce (Alemayehu, 2005; Warkentin, 2002; Chaffey,

2004). In a survey conducted by Folorunso et al (2006) the stated factors were also

addressed as key benefits of using e-commerce in the research.

However, respondents cited the opportunity in expanding their geographical reach thus

extending their customers and the increase in the customer services, ability to decrease

cost and increase sales were also not left out as they seem to also be important, but on the

other hand, the least important perceived factor in the benefits of e-commerce for Nigeria

SMEs was the benefits relating provision of job creation. Respondent didn’t really seem

to agree that the adoption of e-commerce is anyway directly related to job opportunities.

4.5.2 What are the benefits of e-commerce on SMEs in developing countries?

As regards developing countries, Table IV displays eight of the major findings for

benefits in adopting e-commerce in these countries. Overall, respondents replied that they

agree that reasons for adopting e-commerce in developing countries are the perceived

benefits to increase business profits by expansion. In another survey on SMEs and

developing countries, Alemayehu (2005) concludes that the ability to be reachable

58

worldwide and the creation and effectiveness of supply chain of industries were the two

main major benefits of SMEs adoption of e-commerce in developing countries, and these

factors are seen to be vital as they have turned out to be very important by participant

SMEs in the study.

FACTORS N Mean Std.

Deviation

Job Creation 40 3.9750 0.65974

Creation of Wealth 40 3.3750 1.12518

Leads to lower and better communication

services

40 3.8500 0.65584

Enables organizations more reachable 40 4.0750 0.86380

Improves the level of ICT usage in general 40 4.0000 0.87706

Improves standard of living 40 3.2750 1.14051

Provision of a cashless society 40 3.8750 0.46340

Supply chain of industries 40 4.0000 0.82275

N= Number of organizations

TABLE IV. Benefits of e-commerce in developing countries

59

On the other hand, improving standard of living in the country was the least important

benefit of adopting e-commerce, a lot of respondents therefore “strongly disagreed” that

the improvement of standard of living is particularly associated with e-commerce in

developing countries.

In general, SMEs perceive that e-commerce technology plays a significant role in

increasing profits and extending the market size.

4.5.3 Expanding the geographical reach of SMEs

From Figure VIII, it can be seen that there are significant number of firms in Nigeria that

found that they could explore new market i.e. expanding their geographical reach by

using e-commerce. Over half of the respondent s from each sector reported that they got

the opportunity to expand their businesses. Generally, SMEs in wholesale and retail

sector confirms that exploring new market is an important e-commerce adoption reason.

60

FIGURE VIII. Benefits on widening of geographical reach

4.5.4 Supply chains of industries

From the research findings, it shows that the one of key important factor cited by SMEs

is the improvement of supply chain of industries. This was a significant opportunity of e-

commerce perceived in the country. In Nigeria, over 80% of SMEs cited that they adopt

e-commerce mainly because they can cut the cost and become more efficient. This factor

has been addressed as an important benefit of e-commerce by a number of authors

(Alemayehu, 2005; Tassabehji, 2003; Cloete et al, 2002). Meanwhile, the internet is

usually available as the opportunity for smaller firms to become global because it helps to

reduce transaction costs (Kalanje, 2002). Therefore, it is evidence that the opportunity to

reduce transaction by using e-commerce is an important adopting motivation for SMEs in

developing countries.

61

It is thus evidence that most SMEs in Nigeria expected an opportunity to reduce the

transaction cost in using e-commerce and the reduction in customer service expense.

FIGURE IX. Benefits on the improvement of supply chains on SMEs

4.5.5 Increase in profitability

From Figure X, about 30 per cent of SMEs that did not adopt e-commerce in operations

have their annual turnover at N500, 000 or less in Nigeria .For other SMEs, most of them

that have adopted e-commerce showed a significant increase in their turnover, it can be

seen that 70% of total respondents had a boost in their turnover. However, it is concluded

that most of the SMEs were satisfied with using e-commerce.

62

FIGURE X. Benefits on the increase in profits for SMEs

Despite all these benefits, it is then significant to understand what barriers prevent

majority of SMEs in using e-commerce to achieve the desired results in their respective

businesses.

4.6 What are the barriers faced by SMEs in adopting e-commerce?

4.6.1 Why SMEs adopt e-commerce

In Figure XI below, inability of firms to adopt e-commerce is barred by many reasons in

Nigeria. In the survey, 38 of the total respondents identified the lack of funds as the major

barrier to e-commerce adoption in their businesses, followed by the earlier stated reason

on the lack of development and maintenance skills necessary to support it. Another

reason weighted as a barrier was that it was perceived to be unnecessary in some

63

businesses. A total of 22 respondents notified this issue as a barrier and finally other

barriers not stated was a totaled to a number of 18.

0 10 20 30 40

Lack of funds

Not necessary for business

Lack of IT skills fordeveloping

Lack of necessary infrastructures

Others

FIGURE XI. Reasons for not adopting e-commerce in Nigeria

4.6.2 What are the main barriers in adopting e-commerce?

Based on the 40 questionnaires that were returned, Table V identifies the internal barriers

of e-commerce adoption. Table VI then shows the external barriers, divided into cultural,

infrastructure, political, social, legal and regulatory barriers, Respondents were asked to

indicate their agreement with each factor by ticking an option of the scale (strongly

disagree to strongly agree). The results shown returned are displayed below

64

FACTORS N Mean

Employees lack required skills 40 2.00

The company lacks skills 40 2.15

Lack of funding of internal projects 40 2.85

Lack of time to initiate the project 40 1.92

E-commerce not suited to products and services 40 2.65

E-commerce not suited to the conduction of business 40 1.77

E-commerce not suited to our customers 40 2.22

Security concerns with payment over the internet 40 2.85

N= Number of organizations

TABLE V. Internal barriers to the adoption of e-commerce

It can be seen that a vast number of significant barriers faced by Nigerian SMEs are also

the problems with successes in e-commerce technology. These factors have been

addressed and divided into two categories, they are the internal and external barriers

(Macgregor and Vrazalic, 2005; Tassabehji, 2003; Alemayehu, 2005).

Internal barriers such as concerns over security measures with e-commerce required and

the lack of funds to finance the implementation of the technology are the highest voted

barriers holding back SMEs from adopting e-commerce technologies. In Nigeria, poor

online method and business transactions still make a lot of people worry about the safety

65

of their bank and personal details when transmitting them over the network medium, and

unless online merchant introduce some kind of security measure and then assuring the

masses that their details are safe this barrier may never be eliminated. On the other hand,

e-commerce not being suited to the way businesses are conducted appears to be the least

inhibiting factor in the adoption of the technology.

FACTORS N Mean

Cultural barriers

-Online sales not popular

37

3.19

Infrastructure barriers

-Inadequate speed and quality of infrastructures

-Low internet penetration in the country

38

39

3.72

3.69

Political barriers

-Unstable economic climate in the country

-Changing government regulations

36

36

3.48

3.47

Social barriers

-Lack of information on e-commerce

35

3.63

66

Legal and Regulatory barriers

-Little support from government

-Inadequate legal framework

-No simple procedures and guidelines

38

35

33

3.42

3.32

3.37

N=Number of organizations

TABLE VI. External Barriers to the adoption of e-commerce

From the above table, the most important external barrier to the adoption of e-commerce

is the inadequate speed and quality of infrastructures in the nation, low penetration of the

internet and the gross lack of information on e-commerce, these issues have also been

widely discussed and confined as the major threats to adoption of e-commerce in

literatures(Humphrey et al, 2003;Alos and Bamiro, 2005).On the other hand political

barriers like frequent changes in government regulations and instability of the economic

situation of the nation seem to poise no threat to the adoption of the technology as a

major proportion of the respondents “strongly disagreed” the are major barriers.

Overall, SMEs agree that they are affected with so many barriers both internal and

external, as to whether internal or external, they confirmed they all obstruct the

possibility of the adoption of the technology. In summary, it was therefore suggested that

preventive measures could be put in place to overcome the issues and barriers tabulated

above as various organizations from the survey seemed to agree that these internal and

external barriers could be resolved.

67

4.7 Support needed for e-commerce adoption

4.7.1 What are the supports required for SMEs

Steps needed to make SMEs able to adopt e-commerce in their various business sectors in

developing countries are sub-divided into the internal and external support in this

dissertation.

FACTORS Mean N

Awareness building and education in ICT and e-commerce 3.93 36

Guidance in overcoming risks associated with implementation 3.72 39

Assistance with guidelines for appropriate hardware ad software 3.61 33

Advice and direction for ICT and e-commerce 3.52 31

N= Number of SMEs

TABLE VII. Internal supports required for SMEs to use e-commerce

From the above table, the main step needed to be taken internally to these SMEs is the

awareness building of ICT and e-commerce, which was seen to have been the most voted

for in the survey. (Alamayehu, 2005; Zott and Donlevy, 2000) in their literature confirms

that awareness of ICT and e-commerce is needed for e-commerce to be successful. On

the other end, advice on e-commerce as seen is not necessarily an important measure to

be taken to enable e-commerce on SMEs.

68

FACTORS Mean N

Improve internet and computer diffusion in the country 3.96 38

Provision of financial assistance to SMEs 3.94 39

Improvement of national infrastructures 3.91 38

Improvement of credit card penetration in the country 3.89 36

Government and industry associations to take leadership and

promotion role

3.85 37

Improving collaboration among SMEs 3.79 37

Enforcing suitable software standards 3.71 36

N= Number of SMEs

TABLE VIII. External supports required for SMEs to use e-commerce

Priority with external support activities, particularly legal and regulatory, low

infrastructures, low penetration and the lack of e-commerce awareness demands direct

intervention from the government for solutions to make e-commerce a reality in the

country.

69

5. CONCLUSION

The adoption of e-commerce technology is one that is necessary in any business

operation and for any size for SMEs or organizations especially in obtaining a

competitive advantage and being able to compete with larger multinational organizations.

From chapter 2 and chapter 4 of this dissertation, it can be confirmed that from the

literature review and the research findings that e-commerce not only serves on benefits

and opportunities for SMEs, it also brings a number of barriers for SMEs if they are

willing to adopt the technology successfully.

In the first instance, the most important e-commerce benefit perceived by SMEs in

Nigeria was productivity gains, system efficiencies, expansion of their geographical reach

and the provision of supply chains of industries. These were the major reason that

persuaded SMEs in the adoption of e-commerce from the survey. Generally, ability to

decrease costs and increase sales was the other major important factors which persuade

SMEs to use e-commerce. Obviously, issues over security measures required for e-

commerce and the lack of funds to finance the implementation of the technology are the

highest voted barriers holding back SMEs from adopting e-commerce. The major barrier

faced by SMEs in Nigeria was the security issue. It was concluded that due to the online

security problem, customers are lacking confidence to purchase products over the internet

as they are constantly afraid to release their payment card details due to fraud and related

security issues. However, a full understanding about what e-commerce is may also act as

a hindrance to the technology as so many people do not understand the architecture both

internal and external of these SMEs and organizations, making them unable to implement

e-commerce fully all because of these stated reasons.

70

Similarly, infrastructural barriers were another important problem faced by SMEs in

Nigeria, these barriers stated as external barriers were a lack of adequate quality, speed

and availability of technical infrastructures, a low internet penetration in the country and

lack of IT skills in the organizations.

On the support needed to help these SMEs to be able to successfully adopt e-commerce,

the literature and survey seemed to focus on similar areas, it was concluded that for

SMEs to progress with this technology, they will be needing support in general for the

low infrastructures, low penetration and the lack of e-commerce awareness, all these

factors demands direct intervention from the government for solutions to make e-

commerce a reality in the Nigeria and perhaps developing country.

In conclusion, it was found in the study and literature review that not many SMEs adopt

e-commerce. Even those who adopt e-commerce are only doing the basics. A significant

number of their websites do not allow customer’s to pay through the internet or directly

make provision to products and services online.The major barriers faced by SMEs were

security problems, lack of funds and lack of technical expertise to develop the

technology, the barriers from the study could also be checked if appropriate government

policies are in place for technical and infrastructural advancement, provision of funds for

smaller organizations and proper a diffusion and education on e-commerce.

71

5.1 Directions for future research

This study has a number of setbacks because of unavailability of time and resources.

First, the sample population to be analysed was small as the total data collected was from

only 40 SMEs in Nigeria. These limitations could lead to uncompleted and misleading

results.

Also, because to this limitation it is recommended that a larger study could be conducted

in future research. The more in-depth data can be collected and analysed from a survey

sample population of SMEs in Nigeria the more detail factors of what are the major

barriers faced by SMEs, and a detailed explanation and suggestions on the support

required to eradicate these barriers could be carried out.

WORD COUNT: 15,725

72

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List of Websites

www.nigeria.com

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APPENDIX 1

July 10, 2007

Dear Sir/Madam,

I am presently completing a master’s degree in Information Systems at the University of

Sheffield. For my dissertation, I am conducting a research on the issues and barriers affecting the

development of e-commerce on SMEs in developing countries. More specifically, I will be

looking into the level of e-commerce readiness in Nigeria, nature of ICT use and level of ICT

human resources on SMEs in Nigeria, I will also be identifying the gaps and barriers that affect

the prospects of e-commerce development on SMEs in Nigeria and finally identify steps to be

taken by SMEs towards the adoption of e-commerce in Nigeria.

It would be much appreciated if you could help by completing the enclosed questionnaire. The

data supplied will be used to identify current and future E-commerce needs relevant to SMEs in

Nigeria. Your response will be treated as confidential; results will be collated and presented

anonymously. I would also be delighted to provide you with an executive summary of the

analysis once completed.

Thank you in advance for taking time and effort in completing the questionnaire. If you have

any questions, feel free to contact me.

Yours sincerely,

ILESANMI, Ayokunle

University of Sheffield

MSc, Information Systems

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APPENDIX II

NOTE: Mark X where applicable

1. Name of your Organization -------------------------------------------------------------------------

2. How many people work in your organization?

o 1-5 ----------

o 5-19 ----------

o 19-199 ----------

o 200+ ----------

3. What is your organization’s annual turnover?

o <N500, 000 -------------------

o N500, 000-N1,500,000 -------------------

o N1,500,000-N3,000,000 -------------------

o > N3,000,000 -------------------

4. What is your business sector?

o Wholesale --------------------

o Retail --------------------

o Manufacturing --------------------

o Services --------------------

o Others, please specify --------------------

5. What is the geographical range of your business?

o Nigeria -----------------

o West Africa -----------------

o Africa -----------------

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o Worldwide -----------------

6. Have you heard about E-commerce before?

o Yes ---------

o No ---------

7. Does your company have computers?

o Yes ----------

o No ----------

8. How many computers are there in your company?

o Less than 10 ---------------

o 10 to 20 ---------------

o 20 to 40 ---------------

o Above 40 ---------------

9. Are computers in your company networked?

o Yes ----------------

o No -----------------

10. Does your company have an IT department/division?

o Yes ----------

o No ----------

11. Does your company have a website?

o Yes ---------

o No ----------

If YES, for how long, ---------- years

If NO, why don't you have a website?

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- Lack of funds ----------------

- Not necessary for business needs ----------------

- Lack of IT skills for developing and maintaining it ----------------

- Lack of necessary infrastructures to develop e-commerce systems ------------------

- Others, please specify -------------------------------------------------------------------------

12. What does your website do?

o Contains information about the company -----------

o Contains information about the company’s product -----------

o Allow buyers to place orders online -----------

o Enables tracking of sales order status -----------

o Use it for customers feedback on products and services -----------

o Other’s please specify ---------------------------------------------------

13. How was your organization’s website developed?

o In-house -----------

o External consultants -----------

14. Who maintains the website?

o In-house -----------

o External consultants -----------

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15. Does it cost you a lot to maintain the company’s website?

o Yes -----------

o No ----------

16. Has the website increased your business opportunities?

o Yes ---------

o No ---------

17. What share of transaction in your organization is done electronically?

0% --------------------

1 – 5% ---------------------

5 – 20% ----------------------

20 – 40% ----------------------

40 – 50% ----------------------

50% above ---------------------

18. In your view, what do you think are the key benefits associated with e-commerce?

o Increase sales ---------------

o Decrease cost ---------------

o Increase purchasing opportunity for the consumer ---------------

o Increase in response speed ---------------

o Facilitate new competition ---------------

o 24 hour service to customers ----------------

o Expansion of customer base ----------------

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o Job creation ----------------

o Production gains and system efficiencies -----------------

o Serves customers better -----------------

19. Please provide your views on the benefits that e-commerce adoption on SMEs has on the

economy of developing countries

FACTORS Strongly

Disagree

Disagree Neutral Agree Strongly

Agree

Job Creation/employment

opportunities

Creation of wealth

Leads to lower and better

communication services

Enables organizations more

reachable globally

Improves the level of ICT

usage in general

Improves standard of living

Provision of a cashless

society

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Supply chains of industries

20. How would you rate the level at which SMEs uses e-commerce in their business

processes in Nigeria?

In percentage ---------

21. We would like to know your views on issues and barriers affecting the adoption of e-

commerce on SMEs in Nigeria?

FACTORS Strongly

Disagree

Disagree Neutral Agree Strongly

Agree

Internal Barriers:

Employees lack required skills

The company lack skill

The company lacks funding to

finance the project

The company lacks time to

initiate the project

E-commerce not suited to

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products and services

E-commerce not suited to

products and services

E-commerce not suited to way

business is conducted

E-commerce not suited to our

customers and suppliers

Security concerns with payments

over the Internet

External Barriers:

Cultural Barriers

Online sales not popular

Infrastructure Barriers

Inadequate speed and quality of

infrastructure

Low Internet penetration in the

country

Political Barriers

Unstable economic climate in the

country

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Changing regulations with each

government change

Social Barriers

Lack of information on e-

commerce

Senior management in other

sector lack ICT knowledge

Legal and Regulatory Barriers

Little support and policies for

SMEs from government and

industry associations

Inadequate legal framework for

businesses using e-commerce

No simple procedures and

guidelines

22. We would also like to know your views on the steps needed to be taken for proper e-

commerce adoption on SMEs in Nigeria

FACTORS Strongly

Disagree

Disagree Neutral Agree Strongly

Agree

90

Internal Support:

Awareness building and

education in ICT and e-commerce

Guidance in overcoming risks

associated with implementation

Assistance with guidelines for

appropriate hardware and

software

Advice and direction for ICT and

e-commerce

External Support:

Improve computer and Internet

diffusion in the country

Provide financial assistance to

SMEs

Improve national infrastructure

Improve credit card penetration in

the country

Government and industry

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associations to take leadership

and promotion

Role

Improve collaboration among

SMEs

Enforce suitable software

standards

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